Tree Pests and Diseases
Earl of Lytton Excerpts(4 years, 10 months ago)
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The Earl of Lytton (CB)
My Lords, I congratulate the noble and learned Lord, Lord Hope, and the noble Earl, Lord Kinnoull, on securing this debate. I give due credit to the Library briefing that has been produced. I have learned a great deal already from the contributions that have already been made during the course of this debate, as we have some real experts in this field, unlike me.
Like many of your Lordships, I am a woodland owner, with some acres of mainly broadleaf woodland in Sussex and a little in west Somerset, much of it, I am afraid, bypassed by any sort of modern, post-war management. That causes me a small amount of regret but also in some respects relief at not having had to deal with the changing policies that have occasioned what we have had to deal with.
My early education in trees was, needless to say, at the hands of my father, who was a lifelong military man. He said that there were two sorts of trees in the military vocabulary: one was called a fir and the other a bushy top. As a cheeky youngster, I pointed to a mature Scots pine and said, “What’s that?” and was told to shut up.
I will devote my comments to ash dieback—Chalara fraxinea. It is a substantial component of my own woodlands, and that, along with grey squirrels and the predation of at least three species of deer, are the chief problems we face. Trying to spot the early signs of infection is a real art, and I have consulted a number of experts on this. Every tree tells its own tale of the habitat it occupies, the availability of nutrients, the consistency of water supply, competition through overcrowding, the beneficial fungi and detrimental ones, not to mention the birds and bugs. So, spotting an ash tree where crown growth is starting to die back and become what my tree surgeon refers to as “clumpy”, and distinguishing that from a natural style of growth because of the circumstances in which the tree is growing is a difficult task. I therefore welcome the developments in identifying resistant specimens, wish that a speedy rollout, and hope that that can be readily used in a cost-effective manner in the field.
I note that various estimates have been made of the number of ash trees at risk. When I asked the forestry consultant for the Exmoor National Park, he said, “Our working assumption is 95% of the ash population lost”, and I have heard that elsewhere. However, the immediate existential danger posed by this disease is the biggest worry: as the noble Earl, Lord Cork and Orrery, pointed out, the increased brittleness of the tree structure as the disease progresses, the dangers of sudden limb fall and the propensity to spontaneous fracture during felling lead to a form of Venn-diagram approach in which intersecting circles of risk link the trees not only to public rights of way and highways but to railways, power lines, buildings, homes, watercourses, fences and livestock. On steep and fragile slopes such as those I used to encounter on Exmoor, tree work may involve other risks, one recent instance tragically taking the life of a young man close to where I used to farm. I do not see massive harvesting machines as the answer either, let alone on steep slopes. I have seen the results of their use in damage to soils and the sheer wreckage that accompanies what is left behind. I could not bear to see my bluebell woods suffer that fate. Therefore, time-consuming and expensive selective felling remains the only option.
Such considerations also affect charities, public and local authorities as well as private owners. In areas where public access is tolerated, even if it is not exercised as of right, these risks are highly relevant. My involvement with the Rights of Way Review Committee tells me that the public expect their rural leisure walks to be risk free. However, increasingly, that cannot always be guaranteed, and seemingly to erect warning notices is knowingly to admit to an identifiable danger. To let trees fall down on their own, even where it is ostensibly safe to do so, presents its own hazards, as those who had to deal with the outcomes of the 1987 storm and the higgledy-piggledy, dangerous heaps of tangled trees would well understand. So it is not surprising that removing risks wherever possible may involve felling trees that might survive the disease. I hope that the Government have that in focus.
Although the loss of so many fine trees is a sadness, I also see it as an opportunity, in my case for creating a more species-diverse woodland. I echo the points made by other noble Lords about the need for a degree of flexibility and inventiveness on this. I am no climate scientist, but I understand that planting more trees is one way of fixing CO2. I hope that, for non-durable timber such as ash, we can do slightly better than leaving the butts to lie and rot or be burnt in biomass generators, and find long-term uses, such as in construction. However, I acknowledge the benefit of ash logs as a fuel in my domestic wood-burner.
My final point has been made by other noble Lords and it is this. Woodland management and regeneration as a result of disease and pests are very costly and long-term exercises. As others have said, I too am at an age where I am, more than ever, aware that what I do to woodland is for future generations and not for my purposes. But there needs to be a stable, long-term public and fiscal policy towards woodland ownership and management, so that investment works and future owners do not face the conundrum that caused my forebears to fell some of the best and largest trees to defray estate duty or to raise working capital depleted by taxation. Here I am with the noble Baroness, Lady Fookes, in thinking that there needs to be a better look at how taxation works. We need smarter ways of working.
I have one comment on grey squirrels to pass to the noble Earl, Lord Kinnoull: they seem to like sycamores. They love the sugars in their bark. I wonder whether one could plant them as a sort of natural bait to try to round up the little pesky blighters. I look forward to what the Minister says with great interest.
Deregulation Bill
Earl of Lytton Excerpts(10 years, 2 months ago)
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The Earl of Lytton (CB)
My Lords, like other noble Lords, I have interests to declare as a landowner with rights of way over my land, as a veteran of the Countryside and Rights of Way Act open access provisions and as a chartered surveyor who occasionally has to deal with people who are affected by rights of way problems—both public and private rights of way. I am also the chairman of the Rights of Way Review Committee, which is the parallel body that brings together a large number of different interests of landowners and users. The Minister’s own department is represented on it. I pay tribute to the professionalism that goes into that, which I know is also a hallmark of the stakeholder working group. For one more day I am also president of the National Association of Local Councils, a CLA member and a vice-president of the LGA. That completes my declarations of interest.
A huge amount of consensus has been teased out between the parties, but it serves to underline some sharp philosophical differences on either side and one must try to recognise that. The consensus, such as it is, depends hugely on the Government continuing to commit to a 2026 cut-off date on the one hand and to the resourcing of the investigation of unrecorded ways on the other. There is no consensus if the Government do not commit or they falter between now and that end date. The entire thing could easily fall apart. A lot of personal commitment and reputational capital is tied up in this.
The noble Lord, Lord Greaves, referred to resources. Yes, indeed. In local government terms, this is one of those services that is regularly being bled dry because it is not a priority commitment in the context of unparalleled spending cuts. Would that the cost and uncertainty and sheer bother that is occasioned to owners of land on the one hand and the resources and activity that is put in by rights of way groups on the other—and the demands made on the public purse to try to broker these things—were actually put into the improvement of the fundamental rights of way system rather than going all round the houses trying to decide who was right and who was wrong.
The noble Lord, Lord Skelmersdale, introduced me some time ago to two people who had particular problems with the way in which public rights of way can impact so appallingly on individual property rights. They are not the only ones. I have met with others and tried to help professionally a third category. I know very well of an example of a couple who live on the Sussex Downs. A footpath runs immediately in front of their front door. Their garden lawn is in the front because the slope rises up behind them and there is effectively no private garden behind. They provided me with incontrovertible evidence, some of which I saw myself, of groups of walkers simply deciding that they would sit down on the green area that was the front lawn. I was also shown incontrovertible evidence of people peering in through the front window of this property. That is as unacceptable in my terms as someone who barricades land that is subject to lawful rights. They are both at the extremes, and those extremes must be excised from our deliberations. The more we can build that consensus in the middle, the less likely it is that those extremes will consider themselves at liberty to perpetrate some quite anti-social acts which are to the detriment of everybody—users and landowners alike.
At Second Reading I encouraged the Minister not to overlook the ongoing needs of the public rights of way system, and I am glad that the Bill contains many valuable measures. The Bill represents a snapshot in time—it had to be compiled at a particular date in order to get the material in there—yet dialogue within the stakeholder working group and the Rights of Way Review Committee is ongoing. The Country Land and Business Association told me—and the noble Lord, Lord Cameron, has repeated it—that several things agreed within the stakeholder working group are not reflected in the Bill. The implication I am getting from others is that these were not actually agreed and should not go in. I do not know the answer. The Minister and his valiant departmental staff—and they are valiant—must somehow decide who is right and who is wrong. I am not in a position to say.
I conclude by saying that if the stakeholder working group came out with measures that could reasonably be included in the Bill as a matter of agreement, there would be no reason not to accept them. I do not say that with regard to the specifics of the amendments of either the noble Lord, Lord Skelmersdale, or the noble Baroness, Lady Byford. It is just a general comment. If the next legislative opportunity is six, seven or eight years down the road, we will be well on the way to 2026, and I would be pretty worried about whether this was actually going to get done. Therefore, the entire premise of this whole set of provisions is jeopardised.
The Government have a pivotal role in this situation—that of an honest broker, assuming that they act as such and do not decide that this is in the “too hot to handle” box and do nothing, and assuming that resources are made available. There has to be a lasting settlement so that the parties on either side of the rights of way argument cease to be hostages to legal, administrative, legislative, political and financial fortune and we can look to a public rights of way system that is ultimately fit for the 21st century, rather than something that enriches consultants and lawyers.
Therefore, if the Minister’s department has, of necessity, been selective about what it has taken into the Bill from the stakeholder working group, the Minister might give us an explanation of that—or, if not, he might confirm that the Bill represents the composite nature of what needs to be in there. In that case, my view would be that no change is better than change that would put us on a slippery slope that would unseat and unsettle the consensus that we have already arrived at—a consensus which I firmly believe we can build on—and that we can progress matters to our mutual benefit across the piece.
Lord Judd
My Lords, I draw the Committee’s attention to the fact that I am a patron of Friends of the Lake District and vice-president of the Campaign for National Parks, but what I want to say now is very personal. If I have come to any conclusion working in those areas, it is that the management of the countryside and the enjoyment of it by the maximum possible number of people, which entails access, is best handled by what both the noble Lords, Lord Plumb and Lord Greaves, were emphasising: reasonableness and common sense. There has to be give and take, and compromise. What matters is that everyone sees clearly that it is about reaching sensible arrangements between people with their own needs for privacy, as I have. The coast-to-coast cycle track goes down a lane beside my house right by the window of one of my rooms—it is not a bathroom; it is a study—so I understand that there are issues in this area, but it is handled sensibly. It is a long-established lane going way back into history before most of the cottages and hamlets were built. Reaching consensus is therefore terribly important.
We have had a special working group working in this area and, as the noble Baroness, Lady Parminter, rightly said, we do not want to start unpicking it because we just do not know what that might lead to. The amendments that have been put forward have a lot in them to be taken very seriously. It is not at all a matter of dismissing them out of hand; rather, it is about listening to those arguments and seeing how we can meet them in that context of reasonableness and common sense. I say to those who have tabled these amendments in good faith—and I have a lot of respect for some of them—that, in the Scottish phrase in law, the case is not proven. However, it is a case that cannot just be dismissed; it should be taken seriously and, if it were ever to be pursued, it would be good if it had more hard statistical evidence at its disposal. It is not just about principles; it is about what, in quantitative terms, the effect of all this is and how big a problem it really is.
Water Bill
Earl of Lytton Excerpts(10 years, 8 months ago)
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The Earl of Lytton (CB)
My Lords, I had not intended to intervene on this amendment but what the noble Lord, Lord Campbell-Savours, has said compels me to do so. That is because of the point that I made during earlier stages of the Bill: the question of insurance cover, or the lack of it, is not a lone entity as it also concerns the other financial structures that occur around property purchase and finance. I refer, of course, to mortgage lending because the existential risk of damage that might be covered by insurance is also an existential risk that affects mortgage lenders, as I explained previously. Because of the risks of default, mortgage lenders themselves wish to refinance or reinsure through the markets and the entire process becomes, to a degree, self-censoring.
The Minister has allowed me to belabour him fairly mercilessly with this principle and I realise that it lies, to a large degree, outside the scope of the Bill. However, it just so happens that it is also in consequence of what inclusion or exclusion from a construct such as Flood Re happens to expose. I come to this from the background of my profession as a chartered surveyor. I suppose that I ought also to declare that although I do not think that I have a property that has either suffered from flooding or is necessarily likely to be included in Flood Re in the first place, like other noble Lords, I of course have policies of insurance on properties, so I declare that interest.
The Minister was sympathetic during the last meeting I had with him, and I am very grateful for that meeting and for the listening ear that I encountered there from the Minister and his officials. To some extent, all one can do on that is wait and see. However, as it stands, the amendment from the noble Lord, Lord Campbell-Savours, highlights the very significant potential increases in insurance premiums that might need to be paid because of properties falling outside Flood Re but none the less being at some material risk. I am afraid to say that that material risk is a bit like the length of a piece of string. I think we debated this in Committee and the discussion then, which involved the noble Baroness, Lady Parminter, the noble Lord, Lord Krebs, who is no longer in his place, and the noble Lord, Lord Campbell-Savours, was very much about the mapping of the risk areas and just what you could or could not deduce from that process.
A more individual risk assessment is itself a slightly dangerous construct; when you consider that the whole purpose of insurance is to have a pool that spreads the risk, you might ask how far you want to move to an individual risk assessment. As we move towards that, though, the danger is that you are then forced to look in more and more detail at the geophysical and hydrological factors that affect individual properties. We supposed in Committee that there might be rather a postcode lottery; I drew attention to the fact that I had been sent a piece of an Ordnance Survey sheet that showed Environment Agency blue ink cutting right through the middle of a linear-shaped postcode area, which was effectively one half of an urban street. That just goes to show that all sorts of properties that might not be at particular risk themselves will be caught by this.
My worry is that this unravels the other aspects in respect of the views of mortgage lenders. If insurance premiums go up fivefold, clearly that will affect ability to pay. That ability to pay is not so much the generality of repayment on a mortgage, and it certainly is not so much the generality of what happens in the leafy south-east, particularly within the M25; rather, the problem is the static and relatively constrained values in other parts of the country where the year-on-year increase in value does not provide that cushion to fund not only the possibility that there will be a default on the mortgage but also the damage that might be caused in the event of a flood, so you have a double-whammy situation. My fear is that it will impact most severely on those areas that are already in challenging, relatively flat and not particularly growth-rich areas of the country, and I think we all know that there are plenty of such areas.
It is therefore right that there should be a constant review, and I believe that the Minister intends that there should be a regular monitoring of what goes on and what the fallout might be from these various factors. I am hopeful that he will be able to say that constant attention will be paid to this issue. I am less clear about whether it requires the doctrinal imposition of some formal review, but the thrust of the noble Lord, Lord Campbell-Savours, is certainly important, for the very reasons that he gave and for the other unintended consequences that would potentially flow from the uninsurability of particular properties.
Water Bill
Earl of Lytton Excerpts(10 years, 9 months ago)
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Lord Whitty
My Lords, I, too, do not object to these amendments and I congratulate the Minister on getting through them in six minutes flat. Many of them will be substantial improvements to the Bill, particularly the ones which iron out a few things in relation to Ofwat in terms of the changing competitive regime. I very much welcome that. However, the noble Baroness will be aware that, in its second riposte, the Delegated Powers Committee said that it is not entirely satisfied with the provision for only the first instance of definition being by affirmative regulation. The Government will have to have an answer to that. In general, it is sensible for Ministers to swallow hard and accept all the recommendations of the Delegated Powers Committee, otherwise it ends in trouble down the line.
The only other thing I would ask about is Amendment 90T, which relates to hybridity. I do not really want to have a debate on hybridity now, but the Delegated Powers Committee raised the issue, and I am not sure that the Government’s response fully meets the point, because it effectively says that, whether it is hybrid or not, we are going to ignore it. I am not sure that is a satisfactory response, but if the Delegated Powers Committee will buy it, I will not object. Otherwise, we welcome these amendments.
The Earl of Lytton (CB)
My Lords, this is the first time that I have spoken at this stage of the Bill and I, too, must declare that I live in a band H property. However, I also have a professional interest in parts of the Bill by virtue of being a chartered surveyor. I certainly welcome the proposals for the affirmative resolution procedures outlined by the noble Baroness and agree that the disclosure of council tax information is necessary. However, I have one query, which relates to Amendment 90CD. Could the noble Baroness confirm that the normal process of disclosure will generally relate to the identity of the property and its council tax band rather than the identity of the chargepayer, the latter being something that is normally held by the billing authority? If I have missed some point about the disclosure, and where the identity of the individual can be discovered, perhaps she would put me out of my misery.
Baroness Northover
I hope I can put everybody out of their misery, which probably reflects the fact that I rattled through this in six minutes. First, I will take up the points made by my noble friend Lord Cathcart. We will come to a further discussion of reserves later, in which I am sure he will be interested. I make it clear that Amendment 90L is intended to ensure that employment contracts within the scheme are transferable, where otherwise they might not be. I reassure him that the amendment that he mentioned is not intended to enable the transfer of reserves that are required to be retained for prudential regulatory purposes. I hope that reassures the noble Earl on that particular point. I probably just went too fast on that one.
I am very grateful to the noble Lord, Lord Whitty, for his general support for these amendments. In response to the points he raised, I recognise fully, as a member of the Government, that the best thing to do when the Delegated Powers Committee comes forward with recommendations is to agree. However, he will also be aware that there are times when the affirmative procedure is used in the first instance and not thereafter because it is not anticipated that there will be significant changes later. I am sure that the noble Lord, Lord Whitty, will be very familiar with that pattern.
The noble Lord asked about hybridity. I will just go back to my original comments on that and then come to what I have been handed by way of inspiration. Amendment 90T addresses the risks that secondary legislation made at the end of the life of Flood Re could be seen as hybrid. The noble Lord thought that we had indicated in some way that we were just sweeping that aside—at least, I understood him to indicate that. I repeat that at the end of Flood Re we have every intention of carrying out a full consultation before making secondary legislation to ensure that any private interests are properly considered. I hope that the noble Lord is reassured on that point.
Perhaps I may write to the noble Earl, Lord Lytton, with further details on the point that he raised. I am sure that we can reassure him.
I am just checking to see whether I have covered everything. I trust that I have and am sure that noble Lords will make it very clear if I have not. I hope that, on that basis, they will accept the government amendments that I laid out at such speed.
The Earl of Lytton
“(6A) Regulations under subsection (5) shall provide that every policy which is subject to a levy for the purposes of the Flood Reinsurance Scheme shall be covered by the Flood Reinsurance Scheme.”
The Earl of Lytton
My Lords, I do not know whether I can rattle through this in quite such short a time as six minutes but I will do my best. I start by expressing appreciation to the many professionals and industry bodies who have been extremely open and frank with me about their views and insights. I am also very grateful to the Minister and his department for the correspondence and guidance that they have generated.
My starting point is that Flood Re is necessary and desirable, and I hope that nothing I say will be interpreted as damaging that. The objective of Amendment 89 is to enshrine fairness in the primary legislation by requiring that the subsequent regulations brought forward by the Secretary of State will ensure that all properties included in the calculation of the levy are eligible for the scheme. I will come back to that later. The objective of Amendment 90 is to ensure proportionality in the primary legislation by requiring that the regulations limit the possibility of unfair loading against any particular council tax band.
First, I shall set these amendments in the context of the wider issues. In Committee, I expressed grave concerns about the Government’s unwitting exposure of risks in the mortgage lending industry, a sector which, I pointed out, is influenced both by the availability at reasonable cost of perils insurance, including for flooding, and by its own independent assessment of risk. It is dangerous to assume that the potential for value write-downs is simple scaremongering or that lenders will necessarily just fall behind insurers’ lead. The situation is made worse by the express intention to move to individual risk assessment with insufficiently accurate, readily available or acceptably cheap data, either now or proposed, on which such individual risk could reasonably be assessed. It is clear from what the British Property Federation tells me that there is an issue here, and I feel that the Government could do more about it.
Either one has a risk pool and you do not ask too many detailed questions or there is an individual risk assessment with 1,000 variations. In the latter case, we can of course wait to see what happens to the at-risk properties that lie outside Flood Re. I am told that they can expect a significant hike in insurance premiums and I believe that we have started to see that happen. Of course, we do not know what the “at real risk” numbers are because Defra has not carried out an audit. The Environment Agency has different figures depending on whether coastal storm surge, fluvial, surface run-off, sewer surcharge or groundwater rise is involved, as well as indirect vulnerabilities such as property damage following disruption to services and access. Defra seems to select what suits its purposes, and in a sense I do not blame it for that. However, I am fairly unhappy about the whole of this part of the Bill, in particular, its evidence base and its unintended consequences, particularly when confidence in Flood Re is so vital, as I think it is.
I turn to some of the detail behind the amendments. The statement of principles said that it would ensure that home owners and small businesses would be protected. That was the public expectation. The Government claim that Flood Re is designed to cover the same categories of policyholder, but that is not how it appears. Leaving small and medium-sized enterprises apart, the Government need to explain and justify the exclusion of many homes and their rather convoluted way of defining them. It is that which I wish to address in particular.
The Defra note last week on the scope of Flood Re is evidence of the difficulties. The criteria are listed on page 2. Of the five criteria listed, three simply pose additional questions. As regards whether properties are insured in the name of an individual or in trust for an individual, how would one know? Whether properties are used for residential purposes may be a hotly debated matter given the number of people who work from home. The test of occupancy by the policyholder or immediate family also worries me. Under policies that are in scope, we note that contents insurance in the main is included but that stands in stark contrast to the insurance of the building fabric, which is on a different template. A lot of people with composite policies, especially some first-time buyers, might struggle to know the difference between the two. Buildings insurance policies in scope are covered on page 3 and it seems to me that things get into further complexity. The categorisation of owner-occupied homes provokes a raft of subsidiary questions. Who is insured? Who occupies? What are the family connections? For owner-occupied leaseholds you have to know whether the leaseholder is in actual occupation and what the insurance covenants state. These could be in a superior leasehold document or have just come about by subsequent lease variation or custom. The policy must cover three flats or fewer and the freeholder—in particular not being a head lessee I would ask your Lordships to note—must live in one of them. We have questions of numbers of units covered in the policy not being the same as the number of homes in the building and questions of how one might determine that. There is also the identity of persons, their relationships and the actual place of abode. Quite why the classification of homeowner hinges on the residence of the freeholder escapes me. I do not think that it will be seen as a fair test for this purpose. Once the presence of leasehold is established, the criteria create all sorts of further additional interests, but I will leave the noble Lords, Lord Grantchester and Lord Whitty, to expand on that.
When a top-floor maisonette gets split and combined with the roof space as an extra unit to make four, what then? Why should that change the status of all the others? Are leaseholders who share the freehold via a company formed for the purpose to be included? If so, how would one distinguish that from a next-door investment property? I do not accept the justification for the blanket exclusion of mixed residential and commercial blocks, in which I also include the one, two or three self-contained flats above the shop. I also feel that including these is not in any way insurmountable.
I turn now to the exclusion of council tax band H and I properties. I note that the Association of British Insurers’ briefing says that this was a ministerial decision. I simply point out that many people occupy modest London homes in band H while near-identical properties in the regions may be in much lower bands. The disparity has arisen because of the economic imbalance that has grown up over time. But, as the brokers Hiscox put to me, what conceivable difference would it make to the actuarial calculations of Flood Re to include them, especially if the maximum claim that could be made for higher-value properties was capped at some figure? What effects are anticipated from excluding large numbers of inner London homes? Further, since when has the registered address of a business been anything whatever to do with the place where the business is conducted or, for that matter, with the predominant use of the dwelling where it may happen to be registered?
I turn to the exclusion of properties built after 1 January 2009 which none the less, as with the other exclusions, form a component in the levy. In Committee, we debated Planning Policy Statement 25: Development and Flood Risk. That was published in March 2010. I am not clear why the earlier retroactive date was chosen, but I suggest that the process was less than open and transparent. Purchasers of homes in that category would have been unaware that they might have been excluded and will consider themselves, I suspect, unfairly penalised. Based on 2% of the estimate of completions since the end of 2008, there are probably about 30,000 of these properties as a rough estimate, 2% of which are at significant risk. But they should also be at particularly low risk in actuarial terms if local planning authorities, developers and planning inspectors have adhered to the principles of PPS 25. It would be much more appropriate to set a cut-off date of, say, Royal Assent.
The Earl of Lytton
My Lords, I thank the Minister for that comprehensive reply. I thank all noble Lords from around the House who have spoken. To the noble Baroness, Lady Parminter, the noble Lord, Lord Whitty, and the Minister, I say straightaway that I have no intention of putting them through the indignity of walking through the opposite Lobby to the one that I may go through. However, the area has been opened up for discussion, as I hoped it would be.
I start from the last point that the Minister made: he wants Flood Re to be as simple as possible. One of the points I was trying to get across is that the way in which the note from Defra sets it out was anything but as simple as possible. Indeed, the question arose as to exactly how one would paint the particular ins and outs by reference to that document. There it is: we have to make the bread with the dough that we have.
I think the Minister misunderstood me slightly, particularly in connection with business band H and post-2000 properties. That was not the main thrust of what I was trying to get across. The main thrust was picked up by the noble Lord, Lord Crickhowell, in the sense that it is that significant proportion of moderate-risk households—if I may term them that—that lie outside flood risk and therefore will be faced with individual risk assessment. However one wishes to divine the numbers in that regard, my take on it is that the number of those who lie just outside Flood Re but face an identifiably material risk is significantly greater than the number in Flood Re who will be protected. Therefore, on that basis, the safety net for the few might be seen as being at the expense of the security that once prevailed for a lot of people in the larger pool under the old statement of principles. I still think that that is an issue.
The Council of Mortgage Lenders refers consistently to its fears about affordability. The noble Lord, Lord Campbell-Savours, referred to a particular example. As he knows, I have a copy of the same letter. If you are on a limited income and having to juggle your finances and your insurance premiums go through the roof, your total repayments will rise to a critical level.
However, it would be wrong for me to go on at length. I will consider carefully what the Minister and all noble Lords have said. I am not sure that I am satisfied. Without wishing to use the somewhat threatening tones of the Terminator, I should say that I may well be back on this issue at subsequent stages of the Bill. However, in the mean time, I beg leave to withdraw the amendment.
Lord Krebs (CB)
My Lords, I thank the noble Lord, Lord Grantchester, for suggesting that my committee acquires an additional job. I do not wish to speak at length about it but simply say that, were we to be asked to carry out the role he outlined, it would fit well with our current statutory duties. We already collect and analyse data on the number of properties at flood risk and the time trends. If we were to carry out this role there would be a couple of provisos. We would need access to the data held by the Government, Flood Re and the wider insurance industry. There might also be some modest resource implications for the work carried out by the committee. With those provisos I certainly think that the committee could very well carry out the job, as outlined by the noble Lord, Lord Grantchester.
The Earl of Lytton
My Lords, I shall make a short contribution on this amendment. Noble Lords will remember that at Second Reading I made the point that there was no equivalent to a Cambridge Econometrics study into the numbers that lie behind this. For that reason alone, there is some merit in this amendment to look at the hard science so that we get away from what has been described to me, by somebody who will remain nameless, as voodoo numbers that have been floating around. The absence of the degree of expertise that is regularly produced by the committee of the noble Lord, Lord Krebs, has needlessly increased doubts and concerns that might otherwise not have been there. Therefore, this is quite a good idea, although I am less clear whether I shall follow the noble Lord if he decides to divide the House on this issue.
Earl Cathcart
My Lords, when a similar amendment was debated in Committee, I took it to be only a probing amendment. Now it has been tabled again today, I am bemused, or perhaps confused, about what the Committee on Climate Change can add to the work already being done. The insurance industry, together with the Government and their agencies, has already assessed the number of properties in known flood-risk areas, particularly the number of properties that might struggle to afford flood insurance in the open market. They have also assessed the level of premiums required by council tax band, and the contribution needed from every householder—£10.50—to ensure that Flood Re has sufficient funds net of reinsurance costs from year 1.
I have no doubt that Flood Re will continually assess and reassess its assumptions, but in any event a five-year review is built into the scheme to assess whether its assumptions still hold true. This five-year review will allow Flood Re, with the agreement of the Government, to make adjustments to the levies and contributions accordingly, and I am quite sure that different areas of flood risk will be added to the pot.
I cannot understand why the noble Lord, Lord Grantchester, is moving this amendment, which will require the Committee on Climate Change to duplicate the work already done by Flood Re and by the Government and their agencies. Where will the Committee on Climate Change get its information from? The noble Lord, Lord Krebs, says that the committee does some work in this area, but it would need access to data from Flood Re, the insurance industry and the Government and their agencies, such as the Environment Agency. I do not believe that getting the Committee on Climate Change involved will add anything but will be double-handling, expensive and unnecessary.
Lord Cameron of Dillington
I understand what the noble Lord is saying but the problem is that the tenant does not have an insurable interest. He cannot insure the property. No insurance company would accept his insurance of a property in which he is only a tenant.
The Earl of Lytton
My Lords, I too would have put my name to the amendment had I known about it in time. I apologise to the House and to the noble Lord, Lord Whitty, for not being in my place when he introduced it, but I understand a great deal about the background to it from previous discussions with him. Whatever we do with the cut-off point between what is in Flood Re and what is outside it, it is important that it is reliable, consistent, transparent and fair. The outcome must not be capricious or so asymmetric that people lose trust in it, because I am a believer that credibility is at the centre of Flood Re’s success.
One thing in particular stands in stark contrast with that. The commonhold units’ owners do not themselves own the fabric of the building: it is owned by the commonhold association. I asked myself, if there is a difference in personality, in legal entity, why is it that long leaseholders of the conventional sort in a similar building—with the freehold being the common parts and the fabric of the building owned by someone else—should not benefit? Why is there a blanket inclusion of commonhold but a blanket exclusion of leasehold? I find that difficult to understand, particularly because, under the Leasehold Reform, Housing and Urban Development Act, the intention was to try to get leasehold nearer to freehold, to remove the segregation between the freehold interest and the leasehold interest which for years has dogged the sector and allowed all sorts of abuses to occur and produced all sorts of disadvantage in funding, growth and reward for that investment.
It seems to me that the convenience of insurers is being put ahead of the public interest. There probably has to be a cut-off point somewhere in the system. It is not for me to speculate on what the actuarial approach would be to that, but it seems that where it is being placed at the moment defies objective analysis on the points of consistency and transparency that I mentioned. I am very inclined to support the amendment.
Lord De Mauley
My Lords, I am grateful for the opportunity provided by the noble Lord, Lord Whitty, to discuss the eligibility of leasehold and tenanted properties for Flood Re. In Committee, I said that we would take more time to look at the issue for lease- holders with the ABI and that we would provide further information on the scope of Flood Re.
We have developed with the ABI a briefing note that sets out the scope of Flood Re and covers proposed new subsection (1) in the noble Lord’s Amendment 89B. In summary, the note, which is available online, confirms that domestic contents policies will be available to all under Flood Re, regardless of whether properties are leasehold or freehold, rented or owner-occupied, except those properties in band H and those built from 1 January 2009.
Leasehold houses will also be in scope of Flood Re, provided that the leaseholder lives in the property and purchases the buildings insurance in his or her own name. Flats will be eligible, provided that there are not more than three flats in the building and that the freeholder, or one of those with a share of the freehold, lives in the building and takes out the cover. Setting the eligibility to a maximum of three flats reflects the general limit that the insurance market is willing to cover under a domestic or personal lines policy. There is already a competitive market for insurance for properties with four or more units, which we expect to continue. As I have already said, we and the ABI will monitor the market to ensure that that remains the case. We believe that a significant proportion of the leasehold sector will be in scope of Flood Re, but I should emphasise here that we expect most properties will not need to be in Flood Re and will find better prices through normal routes.
The noble Lord, Lord Whitty, suggests that that is all very complicated and does not go far enough. We have looked carefully at that with the ABI. Flood Re should be available only to those who need it. Indeed, in an earlier debate the noble Lord to some extent agreed with that. The ABI has assured us that the same systemic issues relating to availability and affordability do not exist for larger-scale leaseholders and commercial managing agents as in the domestic home insurance market.
The insurance industry has recently written to assure the Government that it does not expect there to be widespread issues over access to the insurance market for those parts of the leasehold sector which will be out of scope of Flood Re, which I am sure that noble Lords will agree is very welcome reassurance. The industry is clear that there is plenty of capacity to continue to provide insurance on a competitive basis.
I turn to the tenanted sector. As we discussed at some length in Committee, landlord insurance is out of scope for Flood Re for buildings cover. Landlord insurance is classified by the insurance industry as commercial. However, again, we have been assured by the industry that the majority of landlords will be able to find a more competitive rate outside Flood Re.
I emphasise that the proposed scope was not developed on the basis of cost: it is the nature of the policy which is key. The Government are clear that it would not be appropriate for landlords, who gain commercially from renting properties, to benefit from a subsidy on other households.
Water Bill
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Earl Cathcart (Con)
My Lords, I am very nervous about these amendments, probing as they are. Flood Re has one aim: to provide flood insurance for those people who cannot buy it at the moment. The first year or two will be very difficult until it has built up its reserves, provided that there are not too many claims in those early years. However, I am very nervous about the suggestion that Flood Re ought to spend money on flood-resilient activities. What happens in 10 years’ time if we have another horrendous year of rain—floods all over the place—and these households go to Flood Re and say, “I’ve now got a claim, will you pay it?”. What happens if Flood Re replies, “I’m so sorry, I have paid it all out on building a dam here and there”? I do not think it is the right answer to get Flood Re to pay money out other than for genuine flood claims.
The Earl of Lytton (CB)
My Lords, I have a great interest in this group of amendments. I certainly understand the geometry that lies behind it, particularly that outlined by the noble Lord, Lord Campbell-Savours. I probably follow the noble Earl, Lord Cathcart, in this. As I understand it, Flood Re will have significant start-up costs. Also, the Environment Agency’s investigation and collation of information from the hazard risk assessments, which it is charged with carrying out, will be a draw-down on the Flood Re fund. That means that, in the early years, there may be significant sums taken out of the pot. I understand that the intention is that the Government should put in plan B configurations to deal with that eventuality. However, given the sporadic and capricious nature of severe flooding, we do not have any time to waste in putting measures together to improve resilience and protect properties where they can be protected.
I have a technical interest in this: I am a practising chartered surveyor and property valuer. I am also involved in the parish and town council sector, as is well known. I can see the rationale behind an early start for communities and individual property owners coming together to create robust schemes. We need to do that as soon as the present flood waters have died down, as I hope they will. Time is of the essence, because we do not know when the next flood will come. There is a conundrum between the build up of the pot of Flood Re on the one hand and spending funds on resilience and protection on the other. In a later group of amendments, I will say a bit more about Flood Re, which is intended to cover a very limited and narrow range of circumstances. I will explain why I think a larger problem of an entirely different magnitude is lurking here.
We need to make a start. On the basis that the economy is improving, this is exactly the time when these investments need to be made. I will be very interested to hear what the Minister has to say about the pot, how it will be funded and how we get the early years’ work put in place. Like the noble Earl, Lord Cathcart, I obviously would not want to see the pot devoted to one large project to the exclusion of all others. I am sure that would not be the case. If we do not get this right, the credibility of FR is likely to falter. I think that is something on which the Minister can elaborate.
Lord Crickhowell (Con)
My Lords, one of the great advantages of modern technology is that you can discover something you did not know anything about while a debate is taking place. As this debate started, I chose to look at a Defra website on obtaining flood insurance in high-risk areas. At the top of the main page, a number of participants are indicated: BIBA, the Environment Agency, Which?, ABI, the National Flood Forum and Defra. Flood Re does not appear there yet. Can the Minister say how far the department has already gone down the road that is suggested here? This website, which contains a great deal of other valuable information on the steps you could, and should, be taking, already exists. Presumably, at some point Flood Re will be fitted into the whole arrangement. My only anxiety about the Flood Re participation is that indicated by my noble friend—namely, that against the present background, I only hope that there is a surplus in the early years because the fact is that we could have a situation whereby, far from having a surplus in the early years, we have a substantial loss. However, as there is a website and as a good deal of advice is being given by the department—I think it is rather good advice—perhaps my noble friend will indicate what the department’s overall approach is and how he sees Flood Re fitting into what is already going on.
Lord Campbell-Savours
My Lords, I will speak to Amendment 160, in the name of my noble friends Lord Whitty and Lord Grantchester. I intend to speak on a number of amendments so I must declare an interest. I have a leasehold interest, with my wife, in a band G home on the Thames built on the flood plain. My flat is not threatened by flooding. My home has therefore never been evacuated and I have never made an insurance claim on a property I own. Nevertheless, I feel that I have an interest to declare while speaking on an issue that affects tens of thousands of home owners who similarly live in the vicinity of the Thames, many of whom are now being evacuated.
I start by congratulating the Government on introducing this scheme, which I understand was the subject of some very difficult negotiations with the insurance industry. I want to refer to a particular group of home owners, of which I am not one, who come under council tax band H. Council tax band H is pretty expensive property, as we know, and the flooding over the past few days has probably affected thousands of these properties up and down the River Thames between Chertsey and just south of Maidenhead, near Windsor. These home owners will be very worried about what is going to happen. They are excluded from this scheme. Not only do they have the problem of how to resolve their immediate difficulty of dealing with the flooding and the consequences for their homes, but they will also be worried about the longer term financial implications, in the event that their premiums are substantially increased—which they will be. I know that from my own experience in the Lake District, which I mentioned during my previous intervention. For most of my life, I lived there in the town of Keswick, which was subject to flooding. Many people there found it impossible to get insurance from insurance companies following the floods that took place some years ago.
There is going to be a real problem for these people. Many in the Thames Valley are not included in this scheme because their properties fall into band H. It is not that the Government need to interfere with this scheme. I understand its merits and it has been very sensitively negotiated. We very much support it. However, heads have got to be banged together to find a way of resolving the problem of many of these people who live in band H property.
People may ask what I am doing defending people living in band H properties from the Labour Benches. The reason is simple: many people who live in band H properties did not buy them as band H properties. They bought them when they were much cheaper, and when their incomes may well have been quite modest. Property price inflation in London and in the south of England has placed many people in this position. Even the way that the mansion tax is being construed may affect people who have quite small incomes. I am in favour of the mansion tax, but maybe the way that it is to be calibrated raises the same questions. People on low incomes who find themselves living in expensive properties—I am not one of them, as I said—have to be considered in these matters. I hope that the Government, even as late as this in the Bill, might on Third Reading at least make some statement as to what provision might be made for them, notwithstanding what the Bill provides on Flood Re.
The Earl of Lytton
My Lords, it is probably appropriate that I follow the noble Lord, Lord Campbell-Savours. I have to admit that I live in a band H property, but it is not in London and I am glad to say that it is built on a hill. My Amendments 160ZA and 161D are in this group. I shall be brief, because there is another larger issue that I want to address.
I tabled Amendment 160ZA to see whether I could flush out the rationale behind the exclusion of certain categories of property from FR, but also because there seemed to be a reluctance to consider both sides of the coin in terms of what is in and what is out of the safety net. What is in identifies and underlines what is out. It cannot be otherwise. The fact of exclusion does not mean that other insurers will not provide some cover, but it does, as the noble Lord, Lord Campbell-Savours, said, have consequences. I have certainly received correspondence suggesting some very significant rises in free market premiums based not so much on the immediate severe risk but on that broader category of material risk that will be flagged up and will lie between those that have no risk whatsoever and those that are protected by the FR safety net. It is in the public interest that any scheme report under Amendment 160 should look beyond the narrow scope of FR inclusions and also look at wider exclusions.
Lord Krebs
My Lords, I too support the amendment of the noble Lord, Lord Shipley. I have already declared an interest as the chairman of the adaptation sub-committee of the Committee on Climate Change. The sub-committee has a useful data set that could be brought to bear were this review to happen. It has developed a set of indicators, which are published, for the resilience of planning decisions in relation to present and future risks from flooding, particularly from future impacts of climate change. For example, it has looked at the implementation of SUDS, at the implementation of household measures that could provide protection at the individual property level and at planning decisions to develop in the flood plain. As has already been said by the noble Lord, development in the flood plain has been going ahead faster than development elsewhere, but this is not necessarily a bad thing. If the properties are appropriately protected, either by community-level measures or by individual household measures, the risks can be managed. The sub-committee has a data set and a set of indicators that could be useful were the Government minded to accept the amendment moved by the noble Lord, Lord Shipley.
The Earl of Lytton
My Lords, I welcome the opportunity to debate this important point. I declare a professional interest in aspects of planning. The question of planning policy and its co-runner, which it informs, development control, raises some important issues on the ground. These need to go beyond the question of new-build developments alone. I do not know whether the noble Lord, Lord Shipley, intended to address just new-build developments but if he did, perhaps I could digress into the area of what we do about some of the existing building stock, which I flagged up at Second Reading. I alluded then to the desirability of making conditions concerning the containing of surface water run-off within existing individual properties, as opposed to just allowing each to discharge it on to the next property downstream.
I wondered whether this might be made retroactive to a degree, perhaps by requiring extensions and alterations to existing properties to incorporate, in appropriate circumstances, a surface water attenuation scheme. I do not believe that this is a general requirement but there are precedents. For instance, if you renew the roof covering of your house, you are often obliged to upgrade the insulation of the roof of your property. There is an analogy there. Surface water attenuation on a per property basis could also be combined not only with water conservation, but with habitat-friendly outcomes. The same thing could apply to the principle of reducing vulnerability of the property itself—a point made earlier by the noble Baroness, Lady Parminter—in connection with quite ordinary adaptations that can be put in place to prevent properties being so severely affected by flooding, should it happen. There is also the question of community-based schemes to protect groups of buildings. I referred to the Lower Don Valley scheme, but there are others.
One of the things that has come out—sorry, that is probably a bad term—or rather, has arisen recently is the question of making foul drainage systems safer, so that if flooding does happen, flood water does not turn into a solution of dilute sewage, adding health hazards to all the other problems of clean-up. That requires special measures, not least because shared sewer pipes that are on private property but are ultimately connected to a public sewer are now the responsibility of the statutory sewage undertaker. I have this terrible feeling that they have no idea of the routes, the condition or the materials of half of these pipes for which they have now inherited responsibility. They have my sympathy in that respect.
The noble Lord, Lord Krebs, referred to building on flood plains. My only point there is that protecting properties so that they are themselves secure against flooding is one thing. Transferring risks to properties elsewhere is self-defeating. My difficulty is that I am not sure that a holistic approach is taken to dealing with the totality of flood plains. Often, these may be in more than one local planning authority area, so there may be problems of co-ordination. With regard to that, the noble Lord, Lord Shipley, referred to the competence and capacity of local government and the noble Baroness, Lady Parminter, referred to reductions in Environment Agency budgets that might affect its ability to have this overarching, integrated view. I worry about that. It is vital that the sort of report that the noble Lord, Lord Shipley, has in mind covers all these aspects. If we start leaving bits out, we shall be no further forward in a few years’ time than we are now.
I draw attention to the catchment area management plan referred to by the noble Lord, Lord Campbell-Savours. I have some experience of this, not all of it edifying. In at least one instance, I found that half the catchment area concerned, the upstream half, was missing from the plan. The only fact that I could ascertain was that the owner of the missing part was the National Trust. I am unsure what conclusions I should draw from that, but if you have a catchment management plan, the boundary of it has to be drawn along the watershed. No other boundary is possible. The simple arithmetic that was drummed into me, probably from O-level geography onwards, has not escaped me. Making up rules to suit as one goes along will not wash. I am sorry for that terminology as well.
Some time ago, I attended a professional lecture on restoring part of southern Exmoor to a peat bog so that it would hold more water and release it more slowly into the River Barle and the River Exe systems. It had something to do with pumping and repumping water back into Wimbleball reservoir, which I shall not go into. I nicknamed the scheme the “Exmoor sponge”. I do not think anyone else has used that term. There is nothing wrong with such projects, but if they do not have durable management structures that are proof against misuse for commercial objectives, neglect because of spending cuts, simply being forgotten, or participant landowners deciding that there are better land uses that they would rather adopt, they will fail. There need to be more durable ways of dealing with these things. That is the sum total of the points that I wish to make. The last of them probably goes a bit beyond the amendment proposed by the noble Lord, Lord Shipley, but it was worth mentioning in the context of what was said by the noble Lord, Lord Campbell-Savours.
Lord Grantchester (Lab)
My Lords, the amendment would set up a review of recent outcomes of planning policy in terms of flood risk for new developments. It has received widespread support around the Committee.
The noble Lord, Lord Moynihan, has already highlighted how the market will change following recent events. In view of the terrible situation that has resulted from recent weather events in Somerset and the Thames Valley, which may well trigger a wide-ranging review of flood risk policy, it makes sense to ask why there has been more building on low-lying and flood risk areas in the past four years, even allowing for the guidance to which the Minister has already referred today. There has been plenty of notice since 2007 that not all property in areas that might be developed would be eligible for flood insurance. Recent floods have highlighted that there may be errors in the guidance. Nor have successful protection measures been achieved.
Why has planning allowed development to take place against a background of increased perception of flooding potential following the floods in 2007 and in 2012? As the Government, the Environment Agency and planning authorities—indeed, the whole country—will be reassessing flood defences and expenditure, a review of where we are now would make eminent sense.
I was struck by the comments of the noble Lord, Lord Shipley, on the cumulative development effect, which would be worth of the attention of the Environment Agency. The amendment has also prompted some interesting suggestions from my noble friend Lord Campbell-Savours, so it is worthy of further assessment by the Government.
Baroness Parminter
My Lords, I added my name to Amendment 156D of the noble Lord, Lord Krebs, and my related probing Amendment 156E has been grouped with it.
At present, the Bill states that the Secretary of State has the option to bring in a review process for Flood Re, but provides no detail. The first amendment, as the noble Lord pointed out, requires the scheme administrator to publish a plan to achieve a transition to risk-reflective pricing.
My second amendment would require Flood Re to publish the intended framework for reviews, outlining the decisions that needed to be made at each review point. Why is that important? The Government’s consultation document on Flood Re specified that reviews will be held in order that there should be a gradual transition to risk-reflective pricing. Discussions have centred on reviews every five years and the impact assessment for flood risk is based on that hypothesis, but there is nothing in the legislation to confirm that this will be so.
Getting a commitment to a five-yearly review is critical. Flood Re is designed by the Government to expire in 20 to 25 years’ time, with review points where decisions can be taken to reduce the benefit of the pool to claimants and the levy to all policyholders. If a linear approach is taken, this might result in a 20% drop in the levy, and the benefits, every five years. The potential problems are that the reviews could be more frequent, or never. The Treasury could require the transition period to be shortened, thus not allowing the necessary flood risk management investment to take place, or it could set the percentage drop in the levy to be higher in the earlier period. The reason why it might do so would be that under OECD rules the levy is considered to be a tax. Removing it early would reduce the percentage tax burden on the state.
The issue, though, is not just when the reviews take place but what information they provide so that the Government and parliamentarians have the necessary information to make informed decisions. As such, it would seem important to define the critical parameters in the review in some detail at the outset, understanding exactly what areas beyond affordability and accessibility will be judged to see whether or not the scheme is effective. I hope therefore that the Minister will put on record the Government’s intentions in this regard so that we can have reassurances that the scheme will achieve the outcomes that we all want.
The Earl of Lytton
My Lords, I particularly welcome Amendment 156C, moved so eloquently by the noble Lord, Lord Krebs, as it enables me to raise a series of allied issues. The first is that, Flood Re or no Flood Re, we are all on notice that the cross-subsidy of flood risk needs to be replaced by individual risk assessments. The reason for that is our better geographical knowledge and the unsustainability of the continued mutualisation of risk in those circumstances. I have absolutely no argument with that.
One issue of concern is the data produced by the Environment Agency. Obviously, those data are very important for the industry and for consultants, but they are equally important for individuals because, if we are moving to individual assessment, we must have some means of identifying the individual impact on a per property basis. I referred earlier today to my discussions with Philip Wilbourn, a very eminent environmental surveyor and valuer from the north of England. He allowed me to circulate an e-mail to a number of noble Lords setting out his views, which I have done, but there is a particular bit that I would like to repeat. He refers to,
“the data published by the various agencies, including the Environment Agency”.
Bear in mind that this is someone who carries out evaluations and does assessments on individual properties or groups of properties for a variety of different purposes.
In his e-mail, Philip Wilbourn says that he cannot use the data for commercial purposes because he is prohibited from doing so. Then he says that there is no online ordering service to acquire data for reporting purposes, and he is forced to acquire it from GroundSure or Landmark, two of the authorised resellers, at what he describes as high cost. He says:
“The data reported by commercial companies often varies depending upon the royalty return”,
which seems to be quite the wrong trigger for objective data. He tells me that the costs cannot be absorbed by residential valuers and that the banks, for which these valuations are produced, will not allow such data as a disbursement for the reports that are sent to them. His e-mail continues:
“When data is ordered direct from the EA, it can take three weeks to be sent through depending on the region”,
and he says that he has tested that.
The scale of resolution on the Environment Agency website is 1:5,000, which does not enable a particularly accurate identification on a per property basis. The Scottish Environment Protection Agency’s website fares rather worse because the scale there is 1:25,000, so individual property analysis by the home owner is clearly going to be difficult. These are the data that are supplied to insurers to make decisions.
Of course, what happens? It gets boiled down to a postcode approach—the “postcode lottery” of which we constantly hear many examples. He says:
“The problem with postcodes is that many home owners/businesses may be paying more than they should”,
and he gives an example of a postcode—in I do not know what part of the country, but it is obviously an urban area—which is neatly bisected by a blue-ink line of flood risk.
There is a particular issue here as to whether the data that are produced by this public agency, for public consumption and for the benefit of society as a whole, will be available at reasonable cost—let us not say that it should be free—for the home owner and individual consumer. That is the question that I pose in the context of this amendment.
Lord Shipley
My Lords, I said earlier this afternoon that I strongly supported the Flood Re scheme. Again, I thank the Association of British Insurers, individual insurance companies, Defra and Ministers, and congratulate them on their achievement, which is a much needed reform that will give comfort to householders at risk.
However, I want to probe in this amendment the issue of the cut-off date of January 2009 and, in particular, those houses bought before the cut-off at the end of 2008 but not built or occupied until 2009 or after. This amendment uses the date later than 2009, which is simply intended to probe the Government’s intentions. I support a cut-off date—there must be one for the scheme to operate effectively—but the question is whether it must be 1 January 2009 or whether it could be later.
The reason why properties have been excluded from Flood Re from January 2009 is that they were excluded from the 2008 statement of principles. However, I read the Defra briefing, which says that,
“2009 is the most appropriate date based on our current understanding of flood risk”.
Does that imply that the understanding might change because of developments since the statement of principles was established in 2008? This doubt is also important because the proposals in the Bill do not take account of surface water flood risk where information was not publicly available until December 2012, or of changing weather patterns that alter our understanding of what “high risk” is.
The essence of this amendment is: given that houses granted planning permission before 2009 but built afterwards would not covered by Flood Re, there is a case for saying that post-2009 households should be allowed to enter Flood Re where flood risk has genuinely changed since 2009 due to changing weather; where developments are affected by surface water but the risk was not taken into account as it was not understood in 2009; or where contracts had been signed before 2009 but the relevant property was not built until 2009 or later. This amendment tries to address those key questions. I very much look forward to hearing the Minister’s reasoning on this in his reply. I beg to move.
The Earl of Lytton
My Lords, we have discussed the substance of Amendment 160B already so I do not propose to move it. However, while I am on my feet, I will comment on Amendment 160A and the terms in which the noble Lord, Lord Shipley, moved it. I received a different narrative on this. The circumstances of the post-2009 cut-off, as explained to me, were that that was the time when Planning Policy Statement 25, in relation to construction on flood risk areas, came into being. As the story went, therefore, everybody was on notice that that was an issue, so that was the cut-off point. However, it occurs to me that the noble Lord, Lord Shipley, has raised rather an interesting issue.
It is fair to say that the end of summer 2008 was when the wheels came off the banking system and, with it, the property development system. If anybody had a planning consent that he was hoping to implement in 2008, he would have found that there was no money or funding to implement it—nothing would be forthcoming. Many of these schemes were put on ice. Indeed, there was a government recommendation—I do not know if you can call it an instruction—to the local planning authorities that they should look favourably on extending the three-year life of these. As I am sure noble Lords are aware, detailed planning consent has a three-year life, so it would have run out and would have had to be reapplied for. Due to the circumstances of having to reapply—maybe there are a new lot of regulations and so on—you can run into a whole raft of cost, time and delay.
The idea was that those things should be perpetuated, and with very good reason. They underpinned balance sheets, loans and all sorts of things. If they were to be effectively prejudiced by the loss of a planning consent, so that you had a property with either no verifiable development value or a lower development value, that had repercussions for precisely the sort of reasons I outlined earlier this afternoon in another context. So it is perfectly possible that a planning consent that was negotiated on the basis of rules in 2006 or 2007 would not have got going by the end of 2008 or 2009, and would have had to be preserved. The houses would not have been constructed until some time later, but the circumstances relating to that consent would have related to the antecedent circumstances at the time of granting of planning consent. I can see that there is an issue here.
I am always a bit frightened by development land values anywhere. I am even more frightened when things go wrong and people start reaching for their lawyers. What are they going to start looking at? Will they say, “The house is now constructed, it was built on what might be called an old technology basis pre-2008, and, lo and behold, it has flooded”? If they are excluded, it may have a material effect on the value. Who will they look to for recompense—the local authority or the fact that Planning Policy Statement 25 did not apply, or should have applied in some other form? This makes me think of the time-honoured American superfund arrangements, where most of the money went not to environmental clean-up but into the pockets of lawyers trying to attach liability. I do not wish to see that sort of thing happening here. Some careful thought has to go into the date and where the cut-off should be. I know it is not easy. I am happy to believe that the account of the reasons and circumstances given by the noble Lord, Lord Shipley, is the correct one, but I am slightly surprised that it seems to be a little at variance with the one that I have. I would be very interested to hear what the Minister has to say about this.
Baroness Bakewell of Hardington Mandeville
We have had a good debate on this issue, so I will be brief. I am concerned, like others, at the exclusions from Flood Re. My concerns are that many households may have no idea that their property is in a high-risk area or that they are excluded from Flood Re. Like the noble Earl, Lord Lytton, I am interested to hear from the Minister how many properties were built before 2008 but were not occupied until 2009 or after. The people living in these properties may well get a nasty shock when they realise that they are not able to do anything about it.
My concern with Amendment 160A is that all classes of people, whether they are freeholders, leaseholders or the owner of a commonhold tenancy, should be treated equally. Other noble Lords have covered this area in detail. If properties are on the flood plain, whether they are 200 or five years old and whether they are owned or rented, they should be able to access affordable flood insurance. Anything less is invidious. There will be households where a newly married couple have taken on the leasehold of a property, raised their children, lived in it all their working life and now seek to retire there. When they first took up occupancy of the dwelling, there would have been no hint of it ever flooding. However, with changes in the jetstream and continuous and persistent rainfall year on year, they now find that they and their neighbours are suffering from flooding. Are these residents now to be excluded from Flood Re? The Bill is not clear on who the person with the “qualifying interest” is. Will the Minister clarify this situation?
Water Bill
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Lord Shipley (LD)
My Lords, this is a probing amendment on the rights of tenants and the problems that can arise if there is no adequate buildings insurance in place. Reputable landlords will take out insurance as a matter of course. However, there is no compulsion for landlords to do that, and tenants can be particularly vulnerable if their landlords do not take out buildings insurance. They may not be covered for the cost of moving out or for temporary accommodation in the case of flood. Of course, it is understood that tenants must provide their own contents insurance. The amendment does not relate to contents insurance.
The amendment would give tenants the right to know all the facts about an insurance policy on the property that they are renting, including whether there is one at all. The solution to this problem is to make it mandatory for landlords to take up buildings insurance that includes flood risk insurance; to require landlords to tell a tenant if a property is on the register of premises subject to greater flood risk as defined in Clause 61; and to show a copy of the insurance policy to a tenant on request.
I fully understand that landlords will not benefit from the FR scheme. However, landlords pay income tax, and I understand that they would be able to offset the cost of insurance against income tax. I should be grateful for the Minister’s confirmation of that and to know whether, therefore, the Government could support an amendment on Report that protects the rights of tenants, as proposed in this amendment. I beg to move.
The Earl of Lytton (CB)
My Lords, I had not intended to make any comment on this, but perhaps I ought to. I have one or two problems with the amendment. First, it appears to refer to any type of property, so it could be residential or non-residential. It appears to cover any type of tenure. The definition of “relevant premises” includes,
“any part of premises occupied”,
which presumably includes the garden. The requirement is for the landlord to hold insurance regardless of risk.
I declare an interest in that I am a landlord of a residential property that is let. It is not itself at risk of flood, but a stream crosses part of the garden. That does not put the property itself at risk, but if it was perceived by an insurer on the basis of the postcode lottery principle that it was somehow at risk and that ratcheted up my insurance premium—which, of course, I should be delighted to cover for all normal risks—I see that there might be a needless requirement to cover for a risk that was not there.
I do not know how that provision sits, because the terminology for “landlord” is wide and the amendment would probably include other properties without any streams in the garden that I might happen to let on a holiday letting, or something like that. I can see that tenants need to be protected in some way, but let us look at what the protection might mean in practice. There is a flooding event; there is insurance cover. Let us say the interior—the inhabitable bit—of the premises is rendered incapable of occupation, not only because of the effect of the flood-water, but also because of the filth and everything else, causing damage to fittings, de-lamination of kitchen units and all the other horrors. It will need a thorough clean-out, with bits replacing, probably a renewed kitchen, and certainly redecoration and drying out. That takes time. The tenant is inevitably going to have to move out. He is going to move to somewhere else. The consequential losses presumably do not cover the loss of the tenants; they only cover the damage to the property. If it needs shoring up then that is a consequential loss.
So with the greatest respect to the noble Lord, Lord Shipley, I am not sure that this amendment achieves what it sets out to do. Maybe I have got hold of the wrong end of the stick, but the landlord’s insurance does not enure for the benefit of the tenant. If you look at a commercial lease, for instance, it normally has a cessor of rent clause which causes the rent to stop being payable at a point where damage occurs beyond a certain level, so the property is no longer fit for occupation. But if it is not reinstated within a certain period of time, the tenant has the option to move out and determine the lease. The tenant, in the mean time, whether it is a business that needs to continue its business occupation, or a tenant in residence who actually needs a roof over his head, is going to have to move, so I am unclear about the mechanics of how this would really work in practice, because I do not see that it protects the tenant.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)
My Lords, Amendment 161ZA from my noble friend Lord Shipley seeks to make it obligatory for landlords to hold buildings insurance, including cover for flood risk. I can confirm to him, in answer to his question, that the cost of insurance premiums can usually be offset against profits for tax purposes. I am sympathetic to the intention behind this amendment although I am not sure that this Bill is the right vehicle for this debate.
I note that while this amendment refers specifically to flood cover, buildings insurance includes protection against a range of perils including, for example, fire and theft. Although there is no legal requirement for property owners to take out insurance for their properties in the UK, owner-occupiers and landlords generally choose to do so in order to benefit from the financial protection that insurance offers. In addition, and importantly, most mortgage lenders specify buildings cover as a mandatory requirement for providing a mortgage on a property.
The Government agree that it is very sensible for landlords to take out insurance, but are conscious that the decision is a matter of individual choice, based on a commercial decision to protect an investment made in property. We are concerned that making insurance compulsory across the board could create a regulatory burden, which could deter investment in the private rented sector. I strongly encourage tenants always to check with a prospective landlord that appropriate cover is provided for the property.
If I might pause specifically on the issue of support for tenants in the event of a flood, we appreciate the concerns raised recently by the National Flood Forum and others that tenants of properties not covered by insurance might be left homeless following a flood. I note that some insurance policies have an “alternative accommodation” provision, but I would also like to assure noble Lords that, even if this is not the case, tenants do have protection. All local authorities are required to provide accommodation for households who are eligible for assistance, homeless through no fault of their own, and have a priority need for accommodation—into which category flood victims would clearly fall.
As part of its role in promoting flood awareness, the Environment Agency strongly encourages landlords to make a flood plan and to make their tenants aware of what to do in a flood. I also remind noble Lords that all residential contents policies will be eligible for cover through Flood Re, including tenants of rental properties, so long as they are not in properties built after 2009 or in band H or their equivalents. I ask that the amendment be withdrawn.
The Earl of Lytton
“Liability in nuisance for a riparian owner
The Secretary of State may by regulations make provision to limit the liability in nuisance for a riparian owner when the Environment Agency or relevant authority withdraws from maintenance of flood defences.”
The Earl of Lytton
My Lords, I tabled this amendment following discussions I had with the Country Land and Business Association, of which I am a long-standing member. It relates to what might be described as a legacy issue, to do with circumstances where infrastructure in relation to flood defence or amelioration, which currently might fall under the auspices of the Environment Agency, might at some juncture, through the operation of this Bill, and the redefinition of the Environment Agency’s functions, cease to be maintained by a government agency.
The question is: what happens with this infrastructure? It has obviously been put in there for the reason of protecting life and property, some of which may be agricultural, and other residential or other property. This amendment intends to probe what the Government’s intentions are in the circumstances in which such a situation might occur. The Minister may say that there is no question of the Environment Agency or the state abandoning those things to an uncertain fate. However, they might say, “It’s going to be down to local communities to deal with it”—and then what? How are these obligations to be transferred?
Baroness Northover
My Lords, far be it from me to judge upon acts of God or even the implications of the Equality Act.
I thank the noble Earl for his amendment, which I will address at a little length, as I think he would probably like to hear my comments. He speaks of instances where the Environment Agency might decide to withdraw from maintaining some flood management assets and suggests that this could create a challenging situation for landowners, residents and others affected. He will probably know that we are discussing those concerns with the Country Land and Business Association, to which he referred, and that my honourable friend the Parliamentary Under-Secretary of State met it on 23 January.
We share the noble Earl’s wish to reduce the possibility of litigation, which is an aspect that is implied by some of the concerns expressed by the noble Earl. That is why we are promoting the asset maintenance protocol published by the Environment Agency. We strongly believe that developing partnerships and working arrangements between local parties to guarantee future maintenance is the best way to prevent problems arising that could lead to claims of liability.
The Environment Agency and other authorities maintain many thousands of flood defence assets. The situation to which the noble Earl refers is not one which is affected by this Bill. He is picking up instances where the Environment Agency may decide that it is no longer going to support certain flood defences and the responsibility for that would fall to others. So I would separate this issue from the Bill, as the noble Lord, Lord Grantchester, sort of did.
The Environment Agency is looking to withdraw maintenance of some of these assets where maintenance is no longer economically justifiable or where the work may not have a high enough priority for central government funding over the longer term. Examples of such assets are embankments in rural areas that protect grazing land or small flow control structures such as gates or penstocks.
Understanding these concerns, the Environment Agency has published, and recently updated, a protocol explaining the processes it will follow. The agency is committed to bringing together landowners and other affected parties to make sure that they are clear on their respective roles and responsibilities and that they understand the range of options that may be available to them for future management of the assets and their likely costs, benefits and impacts. This may include options for continued maintenance of assets by local groups and options involving less or no maintenance. The agency will then work with all the interested parties to help them reach agreement on how the parties involved will take forward maintenance of the asset in the future. It is possible, for example, for the landowner on whose land a defence is situated to enter into an agreement to secure contributions from his neighbours towards the costs of maintenance and repairs.
We understand the noble Earl’s concerns about whether these agreements will be possible. However, it is important to remember that third parties are also expected to play their part. If third parties refuse to make reasonable contributions for the maintenance of a flood defence asset that is protecting their property, they could diminish the success of any future claims against the landowner.
The noble Earl has suggested regulations should be drawn up to set out what actions a landowner should take in order to meet any claims of liability. This would not be the simple clarification that the noble Earl might have been expecting. Such regulations would need to cover many types of assets, the type of location, as well as a list of all possible activities that might be appropriate for their maintenance. The regulations would need to address the range of impacts of flooding, ranging from a garden becoming waterlogged to flooding of many buildings and possible loss of life. Most importantly, the regulations would need to address such complications as a flood asset being owned by one or more landowners or a number of different beneficiaries of different means. Such regulations would be complex and, to be proportionate, would need to have an element of subjectivity to what a landowner would be required to do to avoid liability.
For that reason, we do not believe that such regulations could give significantly more certainty than the current case law. We firmly believe that use of the Environment Agency’s protocol gives all the parties involved a chance to ensure an outcome that reflects the particular situation and circumstances of each individual case, while avoiding the need for litigation between landowners. For these reasons I encourage the noble Earl to withdraw his amendment.
The Earl of Lytton
My Lords, at this hour of the night it is not my intention to press the amendment; as I said at the outset, it is a probing one. I am grateful to the Minister for her explanation. I am aware of the ongoing discussions and I appreciate that this matter sort of sits outside the Bill. I suppose that if I have a hook to hang it on, it is the situation where somebody might be protected by such works and finds they are no longer protected and unable to get full cover insurance. They then go looking for the next deep pocket in order to press a claim, so the geometry of the circumstances might change.
However, it is right that the matter should be discussed by the industries concerned. I would hope that the protocol would at least give some protection in the sense that, if one had done something in accordance with the protocol that was agreed between the parties, that would be a reasonable defence in law. However, I do not think that I can ask the noble Baroness to go into that sort of detail. I would like to reserve my position in case it is necessary for me to come back to this at a later stage of the Bill but, in the mean time, I beg leave to withdraw the amendment.
Water Bill
Earl of Lytton Excerpts(10 years, 11 months ago)
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The Earl of Lytton (CB)
My Lords, I rise with some trepidation because, although I can bring something to the discussion here on matters to do with the broad spectrum of water, I feel that I am a minnow in the presence of giants. I first thank the Minister for agreeing to meet me at very short notice today; I appreciate that very much.
I remind noble Lords of my interests as a landowner and member of the Country Land and Business Association, and president of the National Association of Local Councils and of one of its county associations. I am also a vice-president of the Local Government Association. More specifically, however, I am a practising chartered surveyor and a valuer, with a professional involvement in and some experience of risk and the effects of flooding; although in this particular instance I certainly defer to the noble Baroness, Lady Bakewell of Hartington Mandeville, and my noble friend Lord Cameron—who I see is not in his place—when it comes to matters to do with the appalling flooding we have seen on our television screens, particularly in association with the Somerset Levels. I add my sympathy to them, and to all others who have been appallingly affected by the flooding.
My first observation is that much of the Bill is left to regulation. So much, in fact, that the shape and dynamic of what we might ultimately be facilitating seems unclear. I can understand the desire to get paving legislation in place and discuss the detail later, but I am bound to say that it leaves me uncomfortable, particularly on matters to do with the flood reinsurance scheme. I would like to see some of those regulations brought forward.
My particular interest is of course in Parts 3 and 4 of the Bill. There are of course good and less good portions. Certainly, the possibility that through the Bill communities and property owners might increasingly work together to provide local flooding solutions is welcome. They need to be re-enfranchised. However, communities will need guidance, some powers and, above all, resources. Their efforts will need durability and continuity if they are to have any effect on perceived insurance risk, because diffuse and often voluntary activity is inevitably on the back foot in this respect.
Redefining the scope of the roles of the Environment Agency and Defra on flood defence is commendable and, in so far as there is to be any future investment, will be enormously welcome. However, a policy preference for conservation at the expense of basic flood protection must be revisited. When it comes to that, what about the legacy of flood defence infrastructure and responsibility for its future management? I refer, of course, to the system of levees, dykes, channels and so on, some of which have been in place for hundreds of years, which serve to protect land, homes, communication and service installations and, near my home in Sussex, a major international airport.
Understandably, people have put their trust in public stewardship, but in recent times watercourse management has been compromised by environmental objectives with failure to dredge, objections to spreading mud and silt on adjacent land, or cutting back vegetation. This needs to be rebalanced. Of course, environmental considerations are important, but so is the risk of flooding and the competence of these installations. Outside internal drainage board areas there is ignorance of the rural drainage network, its layout and capacity. There is a lack of any obvious responsibility for things such as roadside ditches or for preventing watercourses being compromised or destroyed.
The CLA expressed concerns to me that in many instances liability for flood defence infrastructure works may increasingly fall to the landowner by default. There are fears that this could arise simply by failure to maintain. The genesis of many of these works goes back to the fact that no private individual or group could effectively undertake to construct and maintain something on that scale. Of course landowners have responsibilities, but they cannot be open-ended. I shall press the Government to reflect on that in the Bill.
I also welcome the proposals for sustainable drainage systems. I regret that in many areas affected by overwhelming of sewers, no general requirement has been made to procure retroactive attenuation of runoff from pre-existing as well as new development. I look forward to seeing this addressed. I also welcome any moves to develop means of mitigating damage and reducing the vulnerability of existing at-risk property.
However, Part 4 probably concerns me the most. We have been living in a dream world in which reality has dawned as technology has closely identified areas of significant flood risk. I entirely understand the background and the need to move to move to the real market and actual risks, which is implicit in the Flood Re proposal. Remarkable though it is that it has taken so long to get to this point, the fact remains that universal cover for flood risk by an informal process of mutualisation is being broken up. Based on this we are told that the genie cannot go back into the bottle, and I agree with that. However, it is not known what other risks may be singled out in future. What about windy locations, or areas subject to possible landslips because they are on steep sites?
The issue is well illustrated on the Association of British Insurers’s own website. Like it, mortgage lenders are risk averse and expect borrowers to insure against all the “standard perils”, not least flooding in all its forms, including surface runoff. To the extent that properties are at any material flood risk but cannot insure, it is universally accepted that the lender’s requirement cannot be met and that this has consequences in terms of loan suitability.
The Government, to give them their due, have made a brave fist of quantifying the outcomes in their impact assessment, but the reality is that all such calculations are replete with highly sensitive variables which cannot be accurately quantified. Indeed, the impact assessment baseline assumptions are themselves questionable, let alone the “what-ifs” that arise under the various options. Precise numbers of properties at significant flood risk or actually affected by exclusion from Flood Re are a matter of speculation. I did not see much property valuer input to all this—I declare an interest again—and some of the justifications, such as that of insurance’s industry need to use automation, do not entirely convince me.
I worry that setting a limited range of property to be covered by Flood Re embeds in statute a form of market segregation of its own; the assumed continuation of risk bundling with other factors remaining constant cannot be guaranteed. My own belief is that we are in this situation precisely because trends in risk top-slicing, better knowledge and changing responses to risk are taking place.
The British Property Federation and the Council of Mortgage Lenders, with others, approached me with their concerns. They, too, operate on the basis that risks are bundled. They suggested that the limited coverage of Flood Re will by default take us into uncharted territory in terms of valuation impacts. This is complex and I am far from convinced that the market consequences have been fully explored by the Government.
Furthermore, despite the fallback provisions, I wonder about the Government’s agency cost recovery implications on the Flood Re fund. The list of exclusions is significant: much long leasehold and buy-to-let property, band H houses, all small businesses, homes built after 2009 and more will not come within Flood Re. It does not mean that they cannot get insurance of some sort. But all sorts of numbers of properties that would be most severely affected have been suggested. Whether or not they are excluded from Flood Re, the numbers that will thereby lose access to conventional loan finance—with or without an actual flood risk—is entirely unclear. We need to get to the bottom of that. It is the fact of exclusion that will start people worrying about their properties, especially when the statement of principles referred to maintaining,
“cover for domestic property and small business customers”.
We appear to have a form of partial retreat from that position. I regard that as unfortunate. Furthermore, I am not clear why second homes should be within the Flood Re scheme but band H properties are outside it. That seems wholly anomalous.
Evidence of value write-downs, though scant, I believe is none the less real. I recommend that the Government urgently look into this in more detail, together with lenders and property professionals, so that Flood Re does not result in adverse consequences on the rebound of what we may put in place under this Bill. That said, and in the absence of any better ideas, I am bound to admit that for all its imperfections and limitations Flood Re as a concept is the only solution currently on offer, and I support it on that basis. I wish there was something that would deal with the bits that it does not include. On that basis I can assure the Minister that he has my general support at this juncture, and I will do my best to work with him and his department to find ways through this complex issue, and to provide relief to those whom the scheme currently excludes.