Farming: Carbon Emissions
Lord Krebs Excerpts(5 years, 9 months ago)
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Lord Gardiner of Kimble
The noble Lord is absolutely right about another key strand of work, which is reducing the extraordinarily high amount of food waste produced by many households. That is happening with retailers through WRAP and the Courtauld commitment, but we need to change how we conduct ourselves and reduce food waste, because it is highly inefficient unnecessarily to produce food.
Lord Krebs (CB)
My Lords, the Minister will be aware of the climate change committee’s 2018 progress report to Parliament, in which it states that not enough progress has been made in reducing emission from agriculture and land use in comparison with other sectors of the economy. It particularly highlights the failure of voluntary measures to achieve reductions. Does he therefore agree that in future, if we are to move towards net zero in agriculture, there will have to be more mandatory legislation to encourage farmers to comply?
Environment Plan
Lord Krebs Excerpts(5 years, 12 months ago)
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Lord Gardiner of Kimble
My Lords, the noble Baroness indicates the work that is going on with 100 experts from Defra and arm’s-length bodies on the framework, including the Natural Capital Committee, so that we have indicators from the plan that ensure both transparency and accountability. This will come forward as draft legislation, and I cannot pre-empt that, but there will obviously be pre-legislative scrutiny, and I very much hope that noble Lords will engage in that. That is precisely what we should be doing, because we want to advance the environment—the whole basis of the 25-year environment plan—and put it on a statutory basis.
Lord Krebs (CB)
My Lords, I understand, and hear very often, that this Government have a commitment to protect the environment and, indeed, to leave it in a better state than they found it. Can the Minister explain how he reconciles this ambition with the fact that the budget for the body charged with protecting habitats and species in England, Natural England, has been slashed by 45% during the last five years? According to its chairman, Andrew Sells, Natural England is now gagged by Defra so that it cannot make independent statements to the press. In case this is seen as part of overall austerity, I remind noble Lords that Defra has increased its own headcount by 1,300 staff.
Lord Gardiner of Kimble
My Lords, the 25-year environment plan will involve: environmental land management; an environmental net gain principle; a resources and waste strategy coming forward; a clean air strategy coming forward; a review of national parks already in place; and we are reducing plastic waste. These are just some examples of the Government’s intent, the strongest possible intent, that we shall be the first generation to enhance the environment. As for Natural England, it does a very good job. All public bodies have had to ensure that we find enough money for essential services during a very difficult time after 2008, and that has borne fruit. That is how the vulnerable, at a very difficult time, were cared for.
Environment: 25-year Plan
Lord Krebs Excerpts(6 years, 9 months ago)
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Lord Krebs (CB)
My Lords, I declare my interests as a member of the advisory board of the Energy and Climate Intelligence Unit, I work for the Wellcome Trust on its programme on environment and health, and I am a former member of the Committee on Climate Change. I welcome this long-awaited 25-year plan. It has not been quite 25 years in the making but it has been quite a long time. I congratulate the Government on their breadth of ambition and their long-term view.
As the plan records, some aspects of our environment, such as our beaches and some of our water bodies, have improved in recent decades. As has already been said, this is in large part a result of EU legislation. Nevertheless, there is a lot to be done. Only one-fifth of English water bodies are in good condition and only one-third of our sites of special scientific interest are in favourable ecological condition, and this proportion is declining. Only 4% of upland peat is in favourable ecological condition.
In relation to biodiversity, the plan reports some success stories on page 21. Indeed, there are some success stories, in part due to the excellent work of organisations such as the RSPB, the Wildfowl & Wetlands Trust, and the Wildlife Trusts. But these are still the exception rather than the rule. The RSPB’s State of Nature 2016 report states that 56% of the 8,000 species recorded have declined in the past few decades and more than one in 10 is in danger of extinction. Although many of the steepest declines occurred in the late 20th century, the trends have, with rather few exceptions, not stopped or been reversed. Shockingly, the report concludes that the UK ranks 189th of countries in the world for the preservation of its biodiversity. This is in spite of the fact that previous Governments have had targets for reducing or reversing wildlife declines.
So will it be different this time? At the moment we cannot tell, but if noble Lords look at the 25-year plan they will see that the actions to tackle biodiversity and habitat loss include “learn lessons”, “consider”, “investigate” and “evaluate”, none of which sounds too promising. But, as has already been mentioned, the plan also states that there will be a set of metrics by which progress in all areas can be measured. Can the Minister confirm that these metrics will be outcome-focused and quantifiable, with timescales and clearly identified owners?
Equally important is the question of who will establish and report on the metrics. The plan says:
“We will develop a set of metrics … We will report on progress annually”.
It is really important to understand who “we” is. I hope it is not the Government measuring and reporting on their own progress. As other noble Lords have already said, it would be far better to have a fully independent statutory body, analogous to the Committee on Climate Change, reporting to Parliament on progress in implementing the plan. Does the Minister agree that the public, Parliament and environmental groups would have more confidence in the implementation of the plan if there were an independent body, set up under a new environment Act, charged with reporting to Parliament on progress?
Although the plan is published by Defra, it will require commitment from across government and many other bodies to implement it. I shall take two examples from across government. Page 35 states that all newbuilds will be climate resilient and energy efficient yet, in the Housing and Planning Act 2016, the Government refused to incorporate measures such as zero-carbon homes and sustainable urban drainage systems that would help to guarantee that. Will the Minister reassure us that the Ministry of Housing, Communities and Local Government is now fully committed to those requirements?
My other example relates to chapter 3, which correctly identifies the link between environmental and human health, but in only a very limited way. Is the Department of Health and Social Care fully signed up to the plan? I offer the advice of the Wellcome Trust, which has a major research programme on environment and health, if the Minister and his officials would like to take it up.
Finally, I turn to scientific evidence. Plans to enhance the environment should be based on the best available science. A recent review by the University of Cambridge showed that many of the current agri-environment schemes have little evidence to show that they work, and that other measures would be more effective in protecting and enhancing biodiversity. The same report concludes that the approximately £1 million spent in the UK on bat gantries, meant to protect bats from flying into traffic, has been a waste of money because they do not work. In this crowded and heavily exploited island, combining the protection of nature with maintaining livelihoods is a delicate balancing act, and good science is needed to ensure that we achieve the right balance. Research by the Natural Environment Research Council on shell-fisheries and shore-birds has shown how the interests of the shell-fish industry and of conservation can be satisfied if there is proper research to underpin decision-making. Can the Minister assure us that the implementation of the plan will be based on scientific evidence and that Government are prepared to invest in the necessary research to ensure that all actions, whoever carries them out, bring real benefits to our environment?
Brexit: Agriculture and Farm Animal Welfare (European Union Committee Report)
Lord Krebs Excerpts(7 years, 1 month ago)
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Lord Krebs (CB)
My Lords, I thank the chairman of the Select Committee of which I am a member for the skilful way in which he chaired our meetings and drew these two reports to powerful and important conclusions.
In my short speech, I want to talk about two questions which lie at the heart of what we have been debating this evening. First: what is the Government’s plan for feeding the nation with affordable, safe and nutritious food after Brexit? We have not had a food policy for decades, but in the light of what we have heard this evening, it seems that there is a case for the Government having a plan. Secondly—a point that we have heard a lot about—what kind of future land use policy and farming industry do the Government want?
First, a few comments about feeding the nation, and particularly about the price of food. We heard conflicting views about this, and it would be nice to have some clarification from the Minister of the Government’s view. The major food retailers and the British Retail Consortium estimate that a no deal Brexit could add about 10% to food prices, and today’s report from the Resolution Foundation echoes that conclusion. Even with a deal, if it was a hard Brexit outside the single market, there could be significant tariff and non-tariff barriers, which would add substantially to the price of food.
To the poorest people in our country, this could be the difference between being able or unable to feed their families. The lowest decile income group already spends more than 17% of its weekly income on food and non-alcoholic beverages, according to the Office for National Statistics, and research at Oxford University for the Trussell Trust has revealed that three quarters of the 1.1 million users of food banks go hungry several times a year. Undernourishment is not just a third world problem; shockingly, it is right here in the UK, one of the richest countries in the world. Therefore, have the Government estimated the impact of Brexit on food prices in a no deal or an outside-the-single-market case and, if so, what is the answer? What, in particular, is the Government’s estimate of the impact of any price changes on the poorest people in this country?
I will not say anything about food standards and safety, other than to ask the Minister what plans there are for replacing the role of EFSA after Brexit? What about the future of farming and land use? As your Lordships have already heard, the Secretary of State for Transport offered the view on Sunday that, in response to a no deal outcome or an outcome in which there are significant tariffs, farmers in the UK would step in to fill the gap by growing more food, a comment that the chair of British Summer Fruits described as, “Tripe that beggars belief”. It is an interesting idea, but I would welcome some clarification from the Minister on his department’s analysis of how any increase in production of food would be achieved. Would it involve more intensification of farming or turning over more land to farming, bearing in mind, as we have already heard, that more than 70% of the land surface in this country is already farmed, and much of the remaining land surface is populated by towns, cities and villages? Can an increase in production by UK farmers be reconciled with protection and enhancement of habitats and endangered species that will enable the Government to fulfil their promise of leaving the environment in a better state than they found it, bearing in mind that the more primary production and the more of the sun’s energy that we take for our own consumption the less there is for the rest of nature? We cannot have it both ways. Perhaps the Minister can also add which particular kinds of food would the farmers in this country grow more of if they were to increase their production?
We heard a lot about the role of non-tariff barriers in relation to animal welfare and I do not propose to repeat that, other than to say that our farmers are in favour of maintaining high standards but, given the upward pressure on food prices that could result from Brexit, there may be a downward pressure for us to import cheaper products from overseas.
As the noble Lord, Lord Teverson, said in his introductory remarks, and as others including the noble Lord, Lord Curry, and the noble Baroness, Lady Miller, have said, we are in some ways faced with a fork in the road for the future of agriculture and land use. One future is characterised by free trade, low tariff and non-tariff barriers and cheap food, with a race to the bottom on welfare and other standards. In that future, many farmers would be unable to compete and there would be a real opportunity to reclaim the countryside for wildlife and conservation. So, perhaps that is the Government’s plan.
The other future is one in which tariff and non-tariff barriers are maintained to protect standards for consumers as well as to protect our farmers. This, as we have heard from many noble Lords, is likely to be associated with more expensive food. There may, of course, be a third, middle way which I have not thought of, and I very much hope that the Minister will be able to share with us his department’s current thinking on these matters.
Brexit: Environment and Climate Change
Lord Krebs Excerpts(7 years, 8 months ago)
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Lord Krebs (CB)
My Lords, I join other noble Lords in thanking the noble Lord, Lord Teverson, for his excellent chairmanship of our committee. I am a member of the EU sub-committee whose report we are debating today. I pay tribute to our specialist adviser and our committee clerk. As my noble friend Lord Trees once commented, the committee clerk, in effect, writes a PhD thesis every week. She has an extraordinary facility.
As the noble Lord, Lord Teverson, has already hinted, I will say a few words about climate change and in doing so I declare an interest in that for eight years I was a member of the Climate Change Committee and chaired the Adaptation Sub-Committee. I stepped down from those roles at the end of January this year.
Noble Lords will be familiar with the Climate Change Act 2008 which passed through this House with all-party support. It commits us as a nation to reducing our greenhouse gas emissions to at least 80% below 1990 levels by 2050. As noble Lords will know, the role of the Climate Change Committee is to advise the Government on the cost-effective path to 2050 through a series of five-yearly carbon budgets and to report to Parliament annually on the progress that the Government have made towards those budgets. The first five carbon budgets have been legislated for, taking us up to the early 2030s.
In its 2016 annual report, the Climate Change Committee stated that so far the Government are on track to meet their legally binding commitments. Emissions in 2015 were 38% below 1990 levels. This appears to be a good news story, and in some ways it is, but the good news has been achieved by a mixture of genuine progress through, for example, investment in offshore wind. The UK now has 40% of the world’s offshore wind capacity, making us the global leader. It is also partly through plucking the low-hanging fruit and in part as the result of the by-products of changes in the country that are not to do with climate change policy, such as the decrease in livestock farming and the offshoring of some heavy industries.
However, when we look to the future, the picture is not quite as rosy. In order to continue to meet the legislated carbon budgets into the 2020s and beyond, significant new policies will be required. According to the Climate Change Committee, by the mid-2020s, about half of the required emissions reductions do not yet have any policies in place to achieve them. Furthermore—this brings me to Brexit—many of the existing and future policies are dependent on European legislation. The Climate Change Committee estimates that more than half of the policy space through the 2020s is dependent on EU legislation. I shall outline some of the key areas: energy-efficient product standards for household appliances, buildings and so on; vehicle fuel efficiency standards; controls on waste and F-gases; policy on biofuels; investment in R&D to develop the technologies to transition us to a low-carbon economy; the EU Emissions Trading System, which allows us to meet some of our emissions reduction targets by buying allowances, and the EU electricity market, which enables us to purchase electricity at the best price on any particular day.
Brexit will pose substantial challenges for this country in meeting its legally binding climate targets through the 2020s and beyond. I hope that in his response, the Minister will give us some indication of how the Government intend to meet this challenge. One answer might be that the great repeal Bill will ensure that all the relevant EU legislation is translated into UK law, but as we have heard, the Secretary of State for Defra has indicated that around a third of the legislation which relates to the environment cannot be translated in a straightforward manner. We also heard evidence from an expert in environmental law, Professor Richard Macrory—about whom we have heard quite a bit in the debate and with whom I play tennis in Oxford; I declare another interest—who noted that the words “as far as practicable” have been used by the Secretary of State and could be an escape clause. I look forward to the Minister reassuring us on these points.
More generally, can the Minister tell us how far his department—along with others because climate change policy cuts across departments—has got in deciding how the Government will meet their legally binding targets post Brexit? Will we retain the same environmental standards for products? Will we remain in the EU ETS? Will we replace lost EU funding for R&D? Will we continue to retain strict controls on waste? One can imagine pressure from some industry players to lower standards, so it would be useful to hear that the Government are committed to adhering to their own climate targets and that they will be completely clear about standards so that there is a level playing field both within the UK and between the UK and the European Union.
I turn finally to the UK’s position as a global leader on climate action. We were the first country in the world to pass a law requiring us to reduce our greenhouse gas emissions. As a result, we have been seen as a leader both in Europe and globally. A number of witnesses told us that our influencing role as a global leader could be weakened after Brexit because we will no longer be part of the EU negotiating bloc for international treaties. The Minister, Dr Jesse Norman, told us that he intended the UK to remain a global leader, but that it was premature to speculate how this might be achieved. I wonder whether it is still too premature or whether the Minister might tell us how government thinking has developed in the intervening months.
At the previous President of the United States said:
“We are the first generation to feel the effect of climate change and the last generation who can do something about it”.
We should be proud of the fact that the UK has been a leader in formulating policies to do something about it. Brexit will pose new challenges for us. I seek reassurance that the Government are ready and willing to meet these challenges.
Brexit: Fisheries (EUC Report)
Lord Krebs Excerpts(7 years, 10 months ago)
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Lord Krebs (CB)
My Lords, I join other noble Lords in thanking the noble Lord, Lord Teverson, for his excellent chairmanship of our committee, and our committee clerk and policy analyst for their outstanding drafting skills and ability to synthesise the evidence that we heard. I will spend a few minutes talking about international trade, which, as the noble Lord mentioned in his introduction, was one of the themes of this inquiry, along with access to territorial waters and allocation of quotas.
First, however, I want to set the scene by talking about what we actually do with fish: namely, eat it. A large proportion of fish that is caught is for human consumption. Given my past as the former chairman of the Food Standards Agency, I cannot resist talking for a few moments about diet and health and fish. I am tempted to pose a quiz question to noble Lords, which I posed to my wife and daughter over the weekend: how many fish and chip meals are eaten per annum in this country from fish and chip takeaway shops? My wife and daughter both guessed around 5 million to 10 million. The answer is 380 million meals a year, according to the Sea Fish Industry Authority, from the 10,500 fish and chip shops in the UK.
In spite of that apparently large figure, it is nevertheless true that most people in this country do not eat the recommended amount of fish, which is two portions of fish a week, one of which should be oily. I said that many times when I was chairman of the Food Standards Agency; it just rolls of the tongue without having to use the brain at all. In fact, three-quarters of adults in this country do not even know what the guidelines are. Although there are a large number of fish and chip meals eaten, and 97% of households buy some kind of seafood, only a quarter of the population eats the recommended amount. The average intake is only one portion per week, 140 grams. Among younger consumers —18 to 24 year-olds—a third of them are not even aware of what an oily fish is. As a nation, therefore, we should be doubling our fish consumption, although this is not the current trend. There was a steady increase in per capita consumption from the mid-1970s up until 2008, but for some reason the financial crash coincided with a crash in fish consumption, which has gone down by 14% since 2008.
I am leading up to international trade; noble Lords should not worry. Suppose we were all to eat more fish, where would the fish come from? There is a problem, which we have heard about eloquently from the noble Lord, Lord Teverson, and from the noble Viscounts, Lord Hanworth and Lord Ridley, of sustainability. The figures I will quote are slightly different from those of the noble Viscount, Lord Ridley, but not seriously. Daniel Pauly, the fisheries biologist, estimates that about a third of the world’s fish stocks are seriously overexploited, a third are close to overexploitation, and a third are still being exploited at sustainable levels. As we have already heard from other noble Lords, an important part of European fisheries policy over recent decades—not necessarily totally successfully—has been to try to reduce over- exploitation. After Brexit, it is really an imperative, as others have already said, that we in this country manage our fish stocks sustainably. If consumption were to increase, where would the extra fish come from?
That brings me to the question of trade. Let me give a few facts. Some 70% of the seafood that we eat is imported, with cod, salmon, tuna and prawns or shrimps occupying the top slots in the league table by value. The top four countries from which we import are Iceland, China, Germany and Canada, with 32% of our imports coming from the European Union. At the same time, we export about three quarters of the fish caught by UK fishers or grown in fish farms, with salmon, langoustine—Dublin Bay prawns or scampi, depending on what you prefer to call them—scallops and mackerel topping the value league. France, the USA, Spain and Ireland are the top destination countries. Two-thirds of our exports go to the European Union. In short, international trade is vital to the UK fishing industry, both for fishers who catch and fishers who farm fish.
The fish processing industry is, in terms of turnover, an order of magnitude larger than the fish catching and farming industries and relies heavily on imports from third countries, such as Norway, Iceland, the USA, Russia and Canada. The UK is able to access key species of fish from third countries at low or even zero tariffs because the EU has negotiated so-called autonomous tariff quotas with third countries. The UK Seafood Industry Alliance told us:
“A future relationship with the EU must maintain existing market access and our ability to import zero or reduced tariff supplies from both EU and non-EU countries”.
Does the Minister agree with this statement and can he reassure us that, in the Brexit negotiations, meeting this requirement will be a priority of the Government in order to sustain the fishing industry in this country?
Defra told us that, if the UK fails to negotiate a special trade deal with the EU, it would trade under WTO rules. For the top five fish products that we export to the EU, the tariffs would range from 2% to 20%. At the same time, EU countries would face tariffs in exporting to the UK. Will the Minister tell us what assessment his department has made of the likely impact of such tariffs both on the viability of the fishing industry and on per capita consumption, because presumably the price of fish would go up?
It was particularly instructive for me to hear the evidence from Norway and Iceland, which are both members of the European Economic Area and therefore in the single market for most purposes. Even under that relationship with the EU, these countries face substantial tariff barriers, ranging from 2% to 25% on some species. These tariff barriers were seen as a serious obstacle to trade, as were the export quotas. Perhaps it is an irony that the Norwegian witness, Mr Vidar Landmark, told us that Norway had not managed to negotiate tariff-free access for salmon to the EU. He said:
“We have not managed to do that largely due to the Scottish producers”.
Those producers have argued strongly against Norway having access. I imagine that Norway will be delighted to be able to compete with Scotland on a level playing field after Brexit, if the UK does not manage to negotiate a special trade deal.
Fishing industry witnesses were divided on whether the loss of preferential access to EU markets would be bad overall for the UK. Fishing for Leave told us that fish destined for the EU would be channelled into the domestic market or into exports to third countries. On the other hand, the Seafood Industry Alliance said that UK consumers were resistant to changing their eating habits to match the fish caught by the UK fleet. We also heard that negotiating trade deals with third countries after Brexit will be a long and complicated process.
From the evidence we heard, it would seem that international trade, both with the EU and with third countries, will be essential for the future health of the UK seafood industry. In a helpful evidence session, the Fisheries Minister, George Eustice, told us that his officials are analysing the most appropriate options for the UK post Brexit. Can the Minister give us an update on current thinking within his department? Does the department’s position align with that of Fishing for Leave, which thinks that there is a great opportunity, or that of the Seafood Industry Alliance, which thinks that there will be real challenges?
Finally, I come to the question of trade-offs in negotiations. A number of our witnesses told us that the Brexit negotiations may require balancing the benefits of trading access against quota shares and access by other countries to our waters, which really underlines what we heard from other noble Lords: the complexity of the Brexit negotiations. I look forward to the Minister’s responses.
Food Waste
Lord Krebs Excerpts(7 years, 11 months ago)
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Lord Gardiner of Kimble
My Lords, the Courtauld Commitment 2025 is a very positive step. In the UK each year, there are 10 million tonnes of food and drink waste, around 70% of which is from households, and 1.9 million tonnes of food waste from households goes to landfill, compared with 2,000 tonnes from manufacturing. We need to work with WRAP and with industry and consumers to remedy this unacceptable situation. WRAP’s Love Food, Hate Waste campaign is directed towards consumers and is a key priority.
Lord Krebs (CB)
My Lords, my wife is a trustee of the Oxford food bank, which collects fresh food from wholesalers and retailers 365 days a year to distribute to local charities. Is the Minister aware that many of the supermarkets in Oxford are reluctant to provide food to the Oxford food bank? Instead they send it to landfill as waste, simply because it is too much trouble to hand it over to the army of volunteers who would like to come and collect it. Is there anything that the Government could do to encourage supermarkets to help organisations such as the Oxford food bank?
Lord Gardiner of Kimble
My Lords, the first thing I would say is that I very much appreciate the valuable work that FareShare, Company Shop and the Oxford food bank are doing. It is absolutely essential that good surplus food does not go to waste but is directed in the waste hierarchy first for human consumption and then, if it is not fit for that, for animal consumption. The waste hierarchy is very important. I will take up the Oxford issue, because 95% of all supermarkets are engaged in the Courtauld Commitment, and part of that is precisely directed to the redistribution of food.
Water Bill
Lord Krebs Excerpts(10 years, 7 months ago)
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Baroness Parminter
My Lords, the noble Lord, Lord Krebs, and I return again to the issue of the use of any surplus reserves for Flood Re. I will not repeat the arguments we advanced in Committee and on Report. I feel that the House is clear that our aim is to ensure that any significant surplus funds can be used by Flood Re to encourage householders to adapt to the impacts of climate change and flooding, and so manage down risk.
I am grateful to the Minister for meeting the noble Lord, Lords Krebs, and me last week to discuss the matter again. We accept that decisions cannot be made now—pinning down in legislation what level of reserves should be built up and what should happen to them. However, we need clarity about the decision-making process that will condition what happens to surplus funds. Will the Minister confirm that Flood Re will have to draw up a strategy to manage surplus funds and that it will be published? Equally, we seek confirmation that the approach of “invest to save” is not ruled out if significant surpluses are built up. By this I mean spending on property-level protection where the economics of that approach show that it delivers the best value for money in managing down risk. Given that it has been shown that such an approach delivers a benefit of at least £5 for each £1 invested, it is too important an approach to discount. It could make a decisive difference to individual householders and their protection. It will also benefit the insurance industry by reducing the level of overall claims. It is, therefore, in the interests of a smooth transition at the end of the process of Flood Re. To that end, I beg to move.
Lord Krebs (CB)
My Lords, I, too, thank the Minister for meeting the noble Baroness, Lady Parminter, and me to discuss this amendment. I do not wish to say anything at length but I shall make a couple of simple points. If we accept that Flood Re, according to the Government’s own figures, will build up a reserve, we can ask what this surplus might be used for. It could be used for future discounting of policy charges; it could be saved up for—excuse the pun—a rainy day when the call on insurance may be greater than anticipated; or, as our amendment suggests, it could be used to manage down future risk. As the noble Baroness, Lady Parminter, said, this is in effect a proposal that Flood Re should invest to save, to reduce both its own future costs by encouraging household-level protection measures and to help those householders to exit at the end of the period of operation of Flood Re.
According to the work of the Adaptation Sub-Committee of the Committee on Climate Change, which I chair, about 190,000 properties could benefit from property-level protection. It would seem reasonable that some of the money that accrues as a surplus in Flood Re should, given the returns on investment to which the noble Baroness has already alluded, be used to help some or, I hope, eventually, all of these 190,000 properties to become more resilient.
Lord Curry of Kirkharle (CB)
My Lords, I have some concerns about the amendment. If I can describe the noble Baroness, Lady Parminter, and the noble Lord, Lord Krebs, as friends, I hesitate to object to their amendment, but I have concerns. I declare an interest in that I was, until two years ago, a chair of an insurance company.
My concerns are around the following issues. First, as a policyholder contributing to the funds that will be accumulated to create Flood Re, I am concerned that some of my contributions will be used to create resilience measures—which are, I assume, measures to reduce the risk of flooding—for a select group of properties. That is not why we will contribute the funds.
Water Bill
Lord Krebs Excerpts(10 years, 7 months ago)
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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.
Baroness Parminter (LD)
My Lords, the aim of Flood Re is to provide affordable insurance for flooding and to transition to risk-reflective pricing. If a surplus of funds were built up, that could help to manage flood risk down by encouraging householders to adapt to the impacts of climate change and flooding.
Funding for Flood Re will be via a levy, set as part of the five-yearly review by government. The Bill makes clear what would happen if there was a deficit—namely, a further levy on the insurance companies—but it does not make clear what would happen if a significant surplus built up. In Committee I outlined the potential, on the basis of the Government’s own figures, that at the end of year 1 it could have at least £100 million in reserves. In the early years, the aim would be to build this figure up to meet potential claims. The maximum reserves that Flood Re should need in any one year, after paying for reinsurance and administration, is an amount equal to the reinsurance policy threshold. This is due to be £250 million. If there is a sizeable flood during the lifetime of Flood Re it will need to pay the first £250 million, with the rest paid for by a claim on the reinsurance policy. It will then need to build up the reserve again the following year.
Ministers and insurers may well want to build up a slightly higher reserve in order to protect against a possible deficit if there are two bad years in a row, so there may be no surplus, as my noble friend Lord Cathcart rightly pointed out in Committee. Over the lifetime of the scheme, though, there may be a build-up of reserves if there are fewer claims than anticipated. Given that the ABI is now saying that the number of households it expects to be underwritten by Flood Re is 350,000 rather than the original figure of 500,000, which was the basis of the Government’s impact assessment, that is certainly possible. The ABI made it quite clear to me that its intention was for any surplus to be returned to ABI members. We need to ensure that Flood Re does not inadvertently lead to insurers profiteering from excess levy income being returned to them. It may not be passed back to customers automatically but could lead to a reduction in the future levy on bills. It would be better for the levy to be reduced in advance if a reasonable reserve has already been built up or, better still, for the excess to be spent on managing down the flood risk. I am envisaging paying not for flood defences but for things like grants to low-income households for home flood protection measures. I would not want to pin down in detail in this legislation what levels of surplus of reserves Flood Re should be able to build up or what will happen in those circumstances but a marker needs to be put down that, if significant reserves are secured, such reserves may be used to incentivise Flood Re policyholders to fund household resilience measures.
This amendment, which I am glad to say has the support of the noble Lord, Lord Krebs, allows this issue to be explored by the Government and Flood Re administrators during their five-yearly review of the scheme. It gives flexibility but encourages managing down flood risk if, and only if, significant surpluses are built up. I beg to move.
Lord Krebs
My Lords, as the noble Baroness, Lady Parminter, has said, this amendment is concerned with the possible surplus or cash reserves that Flood Re might build up. We have to recognise that although Flood Re is being designed as an integral part of the insurance industry it will be a public body spending public money and will operate on a not-for-profit basis. The noble Baroness, Lady Parminter, has indicated and the Government’s own figures suggest that there might be reserves of more than £100 million after one year. If that surplus exceeds the amount that is required to cover claims in any one year—again, the noble Baroness indicated a figure of £250 million—it would seem perfectly reasonable for that money to be used to manage down Flood Re’s own exposure to future claims and it could do so in a highly cost-effective way. This is about value for money. One estimate is that £4,000 spent on a property could prevent a number of claims on Flood Re averaging £45,000 a time, so the return on investment is going to be enormous.
The adaptation sub-committee which I chair has estimated that there are 190,000 properties in England where fitting flood-protection measures would be cost-effective, but progress in fitting them at household level has been very slow. In fact, the rate of uptake would need to increase by a factor of 20 to fit all such measures within the lifetime of Flood Re. This amendment recognises the potential to do more to protect high-risk households and the opportunity that the surplus reserves might represent. Investing in resilience now would leave high-risk households better able to afford flood insurance once Flood Re has withdrawn and, rather than adding to the cost of the levy, investing in this way promises to help minimise the costs of Flood Re over the lifetime of the policy.
Lord Campbell-Savours
The noble Lord referred to 140,000 properties. How would they be prioritised? How would they be selected to be subject to the benefit of this measure?
Lord Krebs
The figure I mentioned was in fact 190,000 properties. I do not have the detail of how they would be prioritised, but over the lifetime of Flood Re it is hoped that all 190,000 could be fitted with household protection measures that would increase their resilience against future flood risk.
As I was saying, investing the surplus from Flood Re would help to minimise its costs over the lifetime of the policy. To achieve that, Flood Re will have to invest in flood protection to reduce future claims. As this amendment indicates, guidance is needed on whether and how surpluses might be used and under what circumstances investment in household resilience should be pursued. So it is not prescriptive; it is just saying that guidance should be included. I think that perhaps answers the noble Lord’s question.
Lord Campbell-Savours
My Lords, I am taken a bit by surprise by this amendment. I had not intended to speak at all but as the noble Lord was developing his arguments I began to realise what the value of this could be. I have a letter here from Keswick Flood Action Group which I referred to in Committee. It makes recommendations on the question of the reinstatement of homes and resilience. I want to read on to the record what it says because most of my contributions on this Bill up to now, certainly in Committee, have drawn on information that has been brought to me by people who have been flooded, because very often they know more than anyone else. Lynne Jones, chair of Keswick Flood Action Group, says that the Government should,
“pass legislation so that insurance companies are required to reinstate homes in a flood resilient/resistant way. Insurance companies, quite rightly, will not pay for ‘betterment’ but these days they have to reinstate with insulation to regulatory standards, even if no insulation was present before, because they are required to do so by law. So why can’t flood measures be treated in the same way?”.
She goes on to make a very simple proposition which, when I think of the flooded properties that I surveyed when I was an MP, seems to me quite logical:
“For example dropping the electrics down from the first floor so raised sockets rather than rewiring from ground up; replacing wood floors with solid waterproof concrete etc”.
Then she goes on to suggest that the Government,
“provide people with independent advice on property reinstatement, maybe via Local Authorities’ Buildings Regulations Officers”.
If there is a surplus, why not consider spending some of it in this sort of area? She goes on to say:
“What people need is knowledgeable counsel from somebody who isn’t going to profit from the works. Flood victims are the target for every rogue trader under the sun post-flood and not everyone knows what products are available/would most suit their needs. Such decisions come at a time when they are exhausted, stressed and suffering financial hardship, they are truly at their most vulnerable”.
As I said, when I was an MP and also afterwards I visited homes where people had been flooded and we know there is tremendous distress. If there are these surpluses, perhaps we should ask whether they can be deployed as part of the process of advising people so that the rogue traders do not go in and do the work and rip people off. That is a far more professional approach. The simple idea of feeding electric wiring upstairs as against downstairs seems absolutely elementary. I wonder how many properties have been done up with grants from government and bills paid by insurance companies over recent years where those very simple, remedial steps to dealing with problems in particular homes have not been taken.
In many ways I think this is a very interesting amendment. I had not really thought of the surpluses. We do not want to waste money but surely it can be used in such a way as to promote the policy of developing actions for resilience.
Water Bill
Lord Krebs Excerpts(10 years, 9 months ago)
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Lord Campbell-Savours (Lab)
My Lords, I, too, am very interested in this amendment, which has been drawn to the attention of people who live in my former constituency, in particular in the town of Keswick, which noble Lords may recall was the victim of substantial flooding a few years back.
I received a letter from Mrs Lynne Jones, the chair of Keswick Flood Action Group, one of the bodies that was established following the floods some years ago. I will read her letter to the House, because it comes from the front of the battle against flooding, from people on the ground who have to deal with this every day. She writes:
“My particular concern has always been that there is no encouragement or independent advice to reinstate properties in a more flood-resistant, resilient manner after a flood. It can be considered as betterment. Insurance companies have to reinstate properties with insulation which satisfies government legislation, whether there was insulation before or not. However, there is no requirement to consider solid waterproof floors as opposed to floorboards or a rewire from the first floor down, or the many other measures which can make flood recovery that bit less stressful, prolonged and expensive should the worst happen”.
In other words, people on the front line in this battle against flooding are now considering to what extent this scheme can be adapted in a way that incentivises investment not just in the solution of the immediate problem but in remedial measures which can affect claims in the future.
Lord Krebs (CB)
My Lords, I support the amendment in the name of the noble Baroness, Lady Parminter. As will be apparent, the amendments that I will bring forward shortly are in the same vein. They reflect the points I made in a letter to the Secretary of State on 22 November 2013, in which I said:
“The Flood Re scheme offers the opportunity to strengthen incentives for the uptake of household flood protection measures but it is currently not designed to do this. The consequence is that Flood Re costs will be higher than they need to be, at the expense of householders funding the programme through the industry levy”.
I declare an interest as the chairman of the adaptation sub-committee of the Committee on Climate Change.
As this discussion has made clear, there is a real opportunity here and this is a helpful and supportive proposal. I will shortly describe my amendment, which would redesign Flood Re to help it, as has been said, to do two things: to provide cover for householders at risk and, at the same time, help to reduce those risks over the years ahead, so that when Flood Re comes to an end householders do not drop off a cliff after 25 years.
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.
Baroness Parminter
My Lords, briefly, I support my noble friend Lord Shipley on this important amendment. We are rightly spending the majority of our time today discussing a financial vehicle to deliver affordable flood insurance, but the planning system has a vital role in making our country more resilient for the future. On the potential effects of cuts in local authority budgets on their ability to undertake their important planning functions, which my noble friend mentioned, I add that a review in 24 months’ time is sensible, given that in the intervening 24 months there will be further significant cuts to the Environment Agency’s budget, with an expected cut of more than 550 staff.
Given the scenes we have seen in recent days, it would be only too easy for people, rightly, to make the case that we must protect front-line staff in the Environment Agency. However, it is equally important to look appropriately at people in the back room who are working hard on the consultations on significant planning applications for developments of more than 10 houses or one hectare. Equally, it is important that the national flood management strategy, which the EA devised in 2011, is carried forward.
I add my support. The timeline that my noble friend Lord Shipley has suggested of 24 months is apposite given the need to review some of the resource constraints that both local authorities and the Environment Agency will face in the forthcoming months.
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 Krebs
In the case of the Environment Agency lodging an objection, in what proportion of cases was it informed of the outcome? In the review that the adaptation sub-committee carried out in 2012, we found that in nearly a third of instances where the Environment Agency had been consulted, it did not know the outcome because it had not been informed. Has that figure changed?
Baroness Northover
I hope to get an inspired answer any second in order to be able to tell the noble Lord. If I do not get inspired, I will write to him.
I remind noble Lords that the Environment Agency is already required, under Section 18 of the Flood and Water Management Act, to report on the delivery of the national flood and coastal erosion risk management strategy for England. These reports must include information on all sources of flood risk and coastal erosion, and cover the work of all of the relevant accountable authorities. To reassure the noble Earl, Lord Lytton, the Environment Agency helps to provide the national overview that he seeks.
My noble friend Lord Shipley suggested that we need to know better whether properties built since 2009 are flooding or making others flood. One of the benefits of the memorandum of understanding between the Government and insurers last year, which I will come on to in the next group, is that for the first time we will have access to claims from flooding. This information will be used by the Environment Agency and its equivalents to target flood risk investment and could be used to inform policy development. In this context, I also note what the noble Lord, Lord Krebs, said about his data sets. Clearly, the more information we have, the better. I am sure that those data sets will be of interest both to Defra and to the Environment Agency.
Let me see whether I am inspired by the note I have been handed.
Where the outcome is not known, which is what the noble Lord, Lord Krebs, is talking about, the agency is satisfied that there is no significant difference in the outcomes between those cases reported and those not reported by authorities. I hope that that reassures the noble Lord. It is, of course, important that all these areas continue to be probed, because everybody needs to be reassured that that is, indeed, the case.
Coming back to the assessments that are taking place, high-level reports are produced annually, with more detailed reports provided to coincide with the six-year cycle of the flood risk regulations. Further interim reports may be produced as directed by the Government to support policy decisions such as future government spending reviews. The Government also conduct regular reviews of the effectiveness of policy delivery. For example, a review of the impact of the new partnership approach to flood risk management funding has just concluded. There are also two reviews of flood risk management in progress at the moment and one at a scoping stage. I listened to the comparison by the noble Lord, Lord Campbell-Savours, of the situations in Abingdon and Keswick. My noble friend Lord Younger, who was in his place a moment ago, noted this with interest and passed me a very interesting comment, but I hear what the noble Lord said and I will make sure that his suggestion is fed through to the relevant authorities.
Coming back to the general reviews, in addition to those I mentioned, my right honourable friend Oliver Letwin MP is leading a review of the lessons learned from the recent flooding, particularly the tidal surge, and the other review is looking at the resilience of key infrastructure to major coastal flooding. Both of these are expected to complete in the spring. Defra is also scoping an evaluation of the effectiveness of the Flood and Water Management Act 2010, which I hope will reassure my noble friend and which will initially focus on local flood risk management. Under the Act, lead local flood authorities and other risk management authorities have a duty to co-operate with each other, as he noted, to ensure that constructive and active engagement takes place and helps to build local relationships between relevant authorities within and across operational boundaries. We noted what he said about Northumberland and Somerset. Work on this evaluation is anticipated to start later this year. We therefore feel that proposed new paragraphs (b) and (c) of this amendment would duplicate existing planned work.
I hope that my noble friend is reassured by what I have said and that he will be content to withdraw his amendment.
Lord Krebs
My Lords, I am grateful to the noble Lord, Lord Whitty, for suggesting an additional task for the Adaptation Sub-Committee of the Committee on Climate Change. While recognising that that is a task that we could carry out, I just say that one important corollary would be that the committee would need access to the relevant data from Flood Re, Defra and the insurance industry. Given access to that information, the committee could, as the noble Lord suggests, provide an independent assessment for the Government, which I think would be helpful in seeing how Flood Re is progressing.
Lord Ashton of Hyde
My Lords, perhaps I may ask the noble Lord whether the requirements should be imposed before the regulations that bring the Flood Re scheme into effect, or whether he is talking only about subsequent regulations. If that task has to be undertaken at the beginning, it might imperil the start of Flood Re.
Lord Krebs
“(e) the need to build awareness of local flood risk amongst beneficiaries of the FR Scheme,(f) the need to inform beneficiaries of the FR Scheme of the need to achieve transition to risk-reflective prices as mentioned in paragraph (d).”
Lord Krebs
My Lords, in speaking to this amendment I will also speak to the other amendments standing in my name. I can be brief because the issues raised in the first of these amendments, and indeed in the second, have already been thoroughly explored by the noble Baroness, Lady Parminter, in her amendment.
Amendments 156C and 156D are really about information for householders. I find it hard to see why one would object to giving householders information that will help them now and in the future. The first part of Amendment 156C simply asks that Flood Re should build awareness among householders of their own flood risk. Earlier this afternoon we heard the noble Lord, Lord Crickhowell, alluding to a Defra website where information could be garnered, but the fact remains, from surveys of householders, that many of them are unaware that they are living in a flood risk area, and Flood Re has been designed to be invisible to the households concerned. As currently cast it will not give them any source of information. It is important that we incorporate in the Bill the requirement for the Flood Re administrator to give households information about their risk.
The other part of this, in the addition of proposed new paragraph (f) at the end of line 25, is to again alert householders who might be affected to the fact that Flood Re is not a permanent arrangement, and that there will be a transition. The transition is over a long period—over 25 years, as we are now familiar with—but it is important that householders over that 25-year period take action if they are at risk, to reduce their risk. Therefore it is important for households to have transparent information about the nature of the transition to risk-reflective prices that will arise at the end of Flood Re. It is hard to object to giving consumers information.
I now move to Amendment 156D, the second of my amendments. Again, I can be brief about this. It requires Flood Re to be explicit about the plan for transition, and to publish a transition plan so that the householder concerned will know what to expect—otherwise there will not be clarity for households. Difficult decisions to gradually withdraw the benefits of the scheme may continually be postponed, because it is always difficult to tell householders that they are going to lose a certain benefit that would arise through the coverage of Flood Re. In order to avoid confusion it is important that the Bill sets out a requirement to give a plan for the future, and therefore prevent Flood Re becoming a permanent and growing burden on the costs of insurance paid by other policyholders. So the transition must take place at the end of the 25-year period, and my Amendment 156D seeks to ensure that a plan for the transition is published, so that we can have more confidence that it will take place, and when it will take place.
Lord De Mauley
My Lords, I concur with the noble Lord, Lord Krebs, in Amendment 156C that it is important that householders whose policies are ceded to Flood Re are aware both of the flood risk in their vicinity and of the transitional nature of the scheme. Knowing about flood risk is vital so that households can take simple steps, such as signing up to free flood warnings, as well as investigating longer-term options for managing their flood risk, and can understand the likely impact on their future premiums of the withdrawal of the subsidy from which they are benefiting.
We will work with insurers and Flood Re to support people at flood risk to plan for and adjust to risk-based pricing. I hope that noble Lords will be reassured to know that we have agreed with the ABI that insurers will be required to provide information to customers about their flood risk, Flood Re and the actions that they can take to manage this, both when a property is ceded to Flood Re and at the point of a claim. Of course, raising awareness of flood risk remains primarily a matter for risk management authorities, such as the Environment Agency, so it will be important to ensure that any action by insurers on behalf of Flood Re complements their work.
Turning to Amendment 156D, I understand that by changing the phrasing of the power in Clause 54(3) from “may” to “shall”, the notion that Flood Re is a transitional measure is strengthened. I point to the Government’s stated policy objective in the June 2013 public consultation that,
“there should be a gradual transition towards more risk-reflective prices”,
and to the existing provisions in subsection (2) of the clause, which may require the administrator to have regard to the transitional nature of the scheme in discharging its functions. We have been clear that there should be a gradual transition to more risk-reflective prices and that we are committed to ensuring that the scheme retains incentives for flood risk to be managed. The Government will not designate the scheme until we are satisfied with the industry’s proposals. As I have already said today, the regulations designating the scheme will be subject to public consultation and we are currently considering the recommendation of the Delegated Powers Committee that regulations made under this clause should be subject to the affirmative procedure. While I recognise that the shift from a permissive power to a firm expectation could be claimed to underscore Flood Re’s duties in this regard, I believe that there is sufficient clarity in Flood Re’s role to manage the transition to risk-reflective pricing and for that to be achieved through the current drafting of the Bill.
Turning to Amendment 156E, from my noble friend Lady Parminter, I can confirm that it is, as she said, our firm intention that the policy will be reviewed every five years by the Government. This review will assess the level at which the levy and the eligibility thresholds are set to ensure that the policy objectives of Flood Re continue to be delivered, including the transition to risk-reflective pricing. The plan will be a public document and Parliament will be able to use existing powers to call Flood Re’s staff to answer any questions. On the point made by the noble Lord, Lord Whitty, in the case that Flood Re’s finances are out of kilter or the scheme is not operating effectively, that review will be brought forward. We are working with the ABI to define this process. The amount of the levy and the thresholds will be set out in secondary legislation. We intend those instruments to have a review period, always accepting that they might be reviewed early if circumstances require it. In addition, as I have just said, we are taking a power to make Flood Re’s responsible officer directly accountable to Parliament for the scheme’s value for money and for propriety and regularity. There are powers to require Flood Re’s audited accounts to be laid before Parliament and provided to the Comptroller and Auditor-General to examine and compare against Flood Re’s published transition plan.
I now turn to Amendment 156F, which would require the Flood Re scheme administrator to set out how it intends to manage the transition to risk-reflective pricing by investing in flood risk mitigation measures. Actions taken by households, communities, businesses and Government to reduce flood risk are the best and most cost-effective way to secure affordable insurance for households at risk of flooding in the long term, and I recognise the noble Lord’s intention to see this reflected in the Bill. As I said earlier, Flood Re will have a duty to have regard to the need both to act in the public interest and to ensure economy, efficiency and effectiveness in the discharge of its functions. It may well be that the Flood Re administrator decides in due course that investments of the sort that the noble Lord would like to see present an appropriate means of complying with these requirements where there is a clear case for doing so. Nothing in the Bill precludes this. However, we think that it is important for Flood Re to retain flexibility in the way that it discharges its public-interest duty and plans for transition, in order to ensure that it is in a position to balance these requirements against its core obligations as a reinsurer. Accordingly, we do not think that it would be appropriate to mandate Flood Re to subsidise flood risk mitigation measures.
Finally, Amendment 156G would limit the maximum proportion of the cost of a claim that an insurer could reclaim from the Flood Re scheme to a specific amount, as part of the Flood Re scheme’s management of transition to risk-reflective pricing. I understand that the intention is that this would restore an element of risk-reflective pricing to insurance policies in Flood Re. This could create a financial incentive for households and insurers to put in place the necessary measures to manage their flood risk. However, price is one, but not the only, signal to households for achieving that and our proposals for ensuring that households have the necessary information to make informed choices about managing their risk should also act to drive resilient behaviours. While superficially attractive, sharing an element of the risk between Flood Re and households would also have the effect of creating a more complex system to administer, thereby adding to the overall costs of the scheme. Having listened to what I have said, I hope that the noble Lord will be prepared to withdraw his amendment.
Lord Krebs
My Lords, I thank the Minister for those comments in response. Above all, my amendments are about trying to put risk communication and management at the heart of Flood Re; we have heard that in relation to previous amendments earlier this afternoon. I am pleased to hear from the Minister that this is indeed the Government’s intention. I look forward with great interest to seeing how that develops through to the next stage of the Bill.
I also thank other noble Lords who have taken part in discussion of these amendments. On the frank feedback of the noble Lord, Lord Whitty, on my lecturing skills, in Oxford we normally do that anonymously. This was non-anonymous feedback on my lecturing skills in explaining risk sharing; I will take that away and consider it for the future. In the mean time, however, I beg leave to withdraw the amendment.