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The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)
I congratulate the right hon. Member for Exeter (Mr Bradshaw) on securing the debate on a matter that is of great concern to his constituents. Nothing would please me more than to be able to protect the nearly 4,000 properties that are currently at risk in Exeter. I hope that we can make progress in the coming months and have a scheme in place as quickly as possible.
I am sympathetic to the need to improve the existing flood defences in Exeter. First, let me be clear on the record that flood and coastal erosion risk management is an absolute priority for the Department for Environment, Food and Rural Affairs. The Government are committed to protecting people and property from flooding and coastal erosion where it is sustainable and affordable to do so. The right hon. Gentleman raised the issue of spending. I want this to be a constructive debate that focuses on the needs of his constituents, but we are talking about a 6% difference in this spending round compared with the previous spending round. In the context of cuts to Departments such as DEFRA of approximately 30%, that shows the absolute priority that we are giving flood and coastal erosion risk management, coupled with the efficiencies being found in the Environment Agency budget to spend more on the front line and on the partnership funding, which I will come on to talk about and which will be important for the aspirations of his constituents.
Mr Bradshaw
I have no desire to turn the debate into political ping-pong, but Lord Smith, the chairman of the Environment Agency, talked about a cut in cash terms of approximately 27%. The figures for capital investment by DEFRA for flooding work between 2010-11, the last figure of Labour spend, and 2011-12, are £354 million down to £259 million—a 27% cut in anyone’s terms.
Richard Benyon
The right hon. Gentleman, who was a Minister in DEFRA, will understand that these things are done in spending rounds. Very few flood schemes go from conception to commissioning in one year, which is why we base it over a spending review period. The excellent chairman of the Environment Agency will confirm—our figures have been sent to the Public Accounts Committee—that there is a 6% difference. The last Chancellor in the previous Labour Government, of which the right hon. Gentleman was a member, announced shortly before the general election that there would be 50% capital cuts in budgets. I will be generous to the right hon. Gentleman and say that if his party had won the general election it would not have cut the capital budget by 50%, but it would certainly have cut it. I think that he would have also implemented all the recommendations of the Pitt review into those very damaging floods in 2007, part of which form the basis of the partnership funding system that we have introduced, and part of which resulted in the implementation of local flood risk management through lead local flood authorities. That is very important for communities such as his, and I hope that we can work together constructively in the coming months to achieve a result for those people.
It is the nature of flood and coastal defence investment that there are always more projects than national budgets can afford at any one time—there always have been and, sadly, always will be. Some 5.2 million homes are at risk from flooding and we want to protect as many of them as possible. Funding has always needed to be prioritised, and that would be the case even if capital budgets had not been reduced in the spending review.
As we have heard today, the Environment Agency is developing an option for Exeter that is expected to cost £25 million over its lifetime. Under the new partnership funding system, that might attract approximately £13 million funded by the general taxpayer. That leaves a shortfall of £12 million. Many schemes are funded totally by the taxpayer. What we have now in our partnership funding scheme is a totally transparent system. For years, communities such as the right hon. Gentleman’s wanted schemes like this to go ahead, always believing that total funding by the taxpayer would be available, but always just missing out and never knowing why—now they can see a transparent funding system.
The right hon. Gentleman talked about the “independent” Environment Agency. It is part of DEFRA; it is the Government in terms of spending flood money. The people in the Environment Agency are the experts. They have developed that transparent funding system on the lines of the recommendations of the Pitt review and have come up with the scoring for what can be achieved for his community.
Exeter is an excellent example of why we have had to change the funding approach and introduce the partnership funding scheme. The new approach follows recommendations made by Sir Michael Pitt’s review of the 2007 flooding, in which he said that local communities should be allowed and encouraged to invest in flood risk management measures so that more can be done and more schemes can be introduced. He also said that future investment plans should not simply assume that the cost of flood alleviation is met centrally. Those recommendations were accepted fully by the Government. If we had carried on with the old system, we would be placing an ever-increasing burden on the general taxpayer to meet the long-term costs of flood defence alone. Those costs are expected to rise considerably with our changing climate, as the right hon. Gentleman predicted in his speech.
The old system artificially constrained how much could be done in each town and city because Government funding has always been, and always will be, limited. The old system meant that schemes were either funded in full, or not at all, based on top-down decisions. Many worthwhile schemes, such as in Exeter, were knocked back for funding, in many cases without a realistic prospect of ever going forward. At a cost of £25 million, the Exeter scheme would have been in that category, doomed never to have had a high enough priority for full funding. Transparency and greater local involvement is at the heart of the new partnership funding system. Instead of meeting the full costs of a limited number of schemes, national funds are spread further in order to achieve more overall. Many schemes will continue to be fully funded, where value for taxpayers’ money is sufficiently strong.
In other cases, such as Exeter, national funding is available to part-fund the project. This approach creates space within the system for local and private contributions to help pay for the significant benefits to land, property, infrastructure and other assets realised when defences are built. There are potentially many sources of funding to tap in to, both public and private.
Last year, the community of Morpeth found itself in a similar position to Exeter. The proposed scheme in that area did not meet the old criteria for full funding, so it was deferred, potentially indefinitely. Under the new approach, the Government were able to meet around half of the costs of the scheme. Leadership was shown by Northumberland county council, meaning that the scheme is now fully funded and will proceed in the coming months, with half the money—coincidentally, up to £12 million—met from local sources. This example shows the power of the new system, and there are many others that I would like to point to; this is important in addressing one of the right hon. Gentleman’s points.
In south Derbyshire, Nestlé contributed £1.7 million to a £7 million scheme to protect 1,600 homes and further financial contributions have been made from industry and other means. In other areas, the planning system has been used to unlock schemes, whether through section 106 money or some other form of funding, rather like exception site housing schemes in rural communities. The income from those schemes goes to deal with flood and coastal erosion risk management. In respect of another scheme in York, York city council is finding the money to bring it above the line.
The new system has already helped secure £72 million of external funding for schemes in the next three years—more than 500% higher than during the previous spending period.
Richard Benyon
If the hon. Gentleman will let me finish this point.
Early indications suggest up to a third more schemes are likely to proceed than if we had kept up the old all-or-nothing system.
Richard Benyon
The county council provided funding from its capital budget. I am not going to sit at my desk—once the right hon. Gentleman’s—and try to dictate the balance of contributions from district or county councils, businesses or whatever. That is the purpose of implementing the Pitt recommendations. These should be local decisions.
There is at least clarity. If I made an exception and broke away from the clear rules that guide the scoring of schemes, I am sure that, given his previous position in DEFRA, the right hon. Gentleman would be the first to recognise that I would be called back to this Chamber, rightly, by hon. Members from all parties, asking, “Why have you made an exception? Why have you broken the clear guidelines that you have set to favour one scheme?”
I have huge sympathy for the right hon. Gentleman’s constituents. I want this scheme to go ahead.
Despite the economic situation, DEFRA plans to spend more than £2.17 billion on flood and coastal erosion risk management. The latest projections suggest that we are on course to exceed our target to protect 145,000 households by March 2015.
Ian Paisley (North Antrim) (DUP)
Will the Minister share those examples, principles and policies with the Northern Ireland Executive, because we obviously have coastal erosion and areas of flooding in Northern Ireland, which, frankly, the authorities have been dilatory in managing and dealing with? It would be worth while sharing with our own Government in Northern Ireland the examples that the Minister has shared with hon. Members, so that we can learn from them.
Richard Benyon
I am happy to share everything. There are no state secrets in what we are doing here. We just want more schemes to go ahead. I am happy to share examples with ministerial colleagues, the Northern Ireland Executive and anyone else who is interested.
We are learning and our learning curve is steep. I am impressed with how the Environment Agency has implemented this new scheme over this year. The fact that we are able to take on more than 60 new schemes in the indicative list for the coming year shows that it is working.
Let me answer some other points made by the right hon. Gentleman. He defined the statement of principles as ensuring that insurance was available to every household and used the words, “at reasonable rates”. Actually, that is inaccurate. The statement of principles does not influence pricing. It never did; that is part of the problem. Some 2,500 homes in my constituency were flooded in 2007, many of which can get insurance because of the statement of principles, but the high premiums and high excess charges are really testing some people.
Is there urgency about how we progress in our dealings with the insurance industry? Absolutely. Do we want an arrangement moving forward from 20 June 2013 that still ensures that insurance is widely available? Absolutely. We will make an announcement in the spring that will give a full year for new systems to be in place, providing clarity and ensuring that insurance is freely available. We hope that we will also be able to announce that there will continue to be some sort of pool arrangement for those in flood-risk areas who are on low incomes. That is important.
It is also important to note that partnership funding has weighting for communities where there are high levels of deprivation, because we recognise that there is a lack of capacity in many such areas to take forward schemes under partnership funding and there is a desperate need to resolve these issues so that some vulnerable people can be protected. Therefore there is a weighting in favour of such systems.
In the past, insurers have charged everyone in a pool system, so that constituents of the right hon. Gentleman, and mine, who do not live in areas of high flood risk are subsidising those who do. The statement of principles always was going to end in 2013, whoever was in Government. We are desperately keen to find a solution that takes things forward.
The Association of British Insurers, which is, rightly, a lobbying organisation on behalf of large financial institutions, says that it needs a Government subsidy—a taxpayer subsidy—for the insurance industry. That is not realistic, but we think that there is a way forward and that we can work with the industry and find a solution. I assure the right hon. Gentleman and all hon. Members that we are working to achieve that.
The right hon. Gentleman mentioned the Public Accounts Committee’s criticisms of the partnership funding scheme. I will make the same point that I made when those were published: we are implementing the recommendations of the Pitt inquiry, rightly instigated by the previous Government. Pitt made 92 recommendations, in a good report. We are implementing its recommendations on partnership funding and the local aspect—the creation of lead local flood authorities—giving local authorities the capacity to take forward flood and coastal erosion risk management. That is working well.
Will we review partnership funding? We are constantly reviewing it; we want to streamline this new concept and get it right, but as I said earlier, it is not for me to dictate whether a local council, a district council or any others provide that added element of the funding. It is wrong to say that we want hard-pressed council tax payers to dig deeper into their pockets. There are various ways in which this funding is found. Yes, sometimes local authorities step up to the mark, but that is by no means always so.
Under the latest capital programme, 22 schemes are going ahead in Devon and Cornwall this coming year, with a total of £5 million grant-in-aid funding during 2012-13, including the construction of improved flood defences in Braunton, Ottery St Mary, St Ives, Stoke Canon, Teignmouth and Truro, and a further 49 projects in Devon and Cornwall have indicative funding for 2013-14 or later, subject to confirmation of the outcomes, cost and partnership funding arrangements.
I recognise that this matter is important to the right hon. Gentleman and his constituents. I have had constructive conversations with colleagues from all parties, many of which have resulted in successful commencement or announcement of schemes, and I assure the right hon. Gentleman that I will continue to work with him to try to achieve a good result for the people of Exeter.