Deregulation Bill

Earl Cathcart Excerpts

Tuesday 3rd February 2015 Lords Chamber

[Lord Skelmersdale]

My Lords, as my noble friend Lady Byford said, my Amendment 12 has been grouped with her Amendment 7. Not surprisingly, the scene has moved on in the long period since Committee, when there was a surprising amount of support for the series of amendments in my name which had the effect of a presumption in favour of a diversion or stopping up of a footpath that passes through the curtilage of a residential building, including the gardens and driveways of premises. In other words, those amendments were somewhat more restrictive than that in the name of my noble friend, which I supported at the time and, as noble Lords can see from the Marshalled List, still do.

Since then, strange things have happened and I have had reports of odd decisions made by footpath officers in local authorities, the worst of which was the refusal to annul a recent order dedicating a footpath through someone’s dining room. The council in question refused point blank to change its decision. It may be—I am sure my noble friend could tell me—that the officers are not allowed to do this under current legislation but they most certainly are under this Bill. That is one good reason for the Bill. Another local authority insisted that footpaths going through a farmyard barn, which has been in existence since well before footpaths were regulated, should be shown on the definitive map. It is not unlikely, in the modern age, for barns to be converted into housing, with the full agreement of the local planning inspector. Nobody seems to check whether a footpath goes through the old farmyard and thus becomes, potentially, a major inconvenience to the owner of the barn conversion. There is something wrong, somewhere.

It was for these reasons that I moved my amendments in Committee. Because it was a Grand Committee I could not press them, although at the time I was sure I would have been justified in doing so, such was the support from all around the Committee. My noble friend Lord De Mauley was far from keen on my approach and wished to stick to the formula in the Bill—namely, the right for the householder to apply to the local authority and, if necessary, appeal to the Secretary of State. This was backed up by a meeting which he kindly hosted shortly after Christmas, to which my noble friend Lady Byford has already referred. At that meeting, it was explained that the scheme in the Bill would take time to bed down among local authorities and the rank and file green lobby. The department wanted time for this to happen, for the curious reason that the consultation on the agreement of the footpaths working group had not gone wide enough. One rather wonders why the working group existed in the first place, but it did and it agreed changes to the Bill which the Government have been so reluctant to approve that they just have not done it.

I hope that I am not taking my noble friend Lady Byford’s name in vain when I say that both she and I are suspicious as to whether the scheme in the Bill, backed up by guidance to local authorities, simply will not work, however thorough the consultation is. Amendment 7, to which I have put my name, asks, as my noble friend said, for the department to produce a report on whether the scheme has actually worked or not after two years. I have to say that I consider the amendment to be very mild, even though it presumes that legislation will follow if the report is negative, although it does not say so. That, of course, means primary legislation, and it will be some time before that becomes law, even if it gets approval from the business managers.

Amendment 12 allows the Secretary of State a fall-back position, whereby, if the proposals in the Bill are not followed by local authorities, the Secretary of State can lay regulations to make rules according to which a local authority shall make decisions regarding the scheme. This will have two distinct advantages. First, it will reduce the number of appeals, which are likely to be much higher than the department currently envisages, because I suspect that most aggrieved applicants will appeal against the local authority decision on the basis that the latter has not followed the guidance. At the same time, it will cut out vexatious appeals because everyone will know what the rules are. In the event that this amendment finds favour with your Lordships, it would be necessary to have a further one at Third Reading specifying that the regulations will be by affirmative instrument.

Returning to my basic point, it is quite wrong for footpaths to oppress home owners by taking away the enjoyment of their close property and, to that extent, the Bill, imperfect as it is, may help.

[Earl Cathcart (Con)]

My Lords, I spoke in Committee in support of the amendments in the name of my noble friend and I will do so again today.

I have three points. First, if you have a public right of way through your garden, you have lost your security, safety and privacy. Anyone can walk through your garden at any time of day or night. Their dogs may run loose, frightening your children, fouling your garden, chasing your pets and even killing your chickens or cats, but there is little or nothing you can do about it. You may be subject to theft or vandalism. Secondly, it costs several thousand pounds to divert a path, but it costs absolutely nothing to object to it. This increases the cost to the applicant dramatically, often beyond their reach. We should be trying to make it easier for the applicant. Thirdly, as my noble friend Lady Byford mentioned, the law as it currently stands does not allow home owners to apply for permission for gates or stiles. Without these, you cannot allow your pets to be left, or allow your children to play, unattended in your garden. This needs changing.

My honourable friend Tom Brake, speaking for the Government at Third Reading of this Bill, said:

“The Government acknowledge that for householders, farmers and others, an intrusive footpath can have a substantial impact on their quality of life or on their ability to run a business. We understand that while this is not a widespread problem, where it occurs it can cause severe difficulties, and in a significant number of cases people have been put through years of considerable inconvenience and stress”.—[Official Report, Commons, 23/6/14; col. 77.]

I could not agree more. I understand that, when the Bill was going through the other place, the Government were going to propose an amendment to rectify this but for some reason they did not. This House has a perfect opportunity to put that right.

My noble friend Lady Byford has also mentioned the concern that there is no presumption that the paths will be diverted away from gardens, houses and businesses. There should be. The Government say that there is guidance on this, but it is only guidance. Some councils comply with it, but too many do not. The answer is for the Government to put something in the Bill, and I hope that my noble friend will.

Deregulation Bill

Earl Cathcart Excerpts

Tuesday 28th October 2014 Grand Committee

[Lord Cameron of Dillington (CB)]

My Lords, I support these amendments but first I must declare an interest as a farmer and landowner, as an ex-chairman of the Countryside Agency and as an ex-president of the CLA. I really rose to support Amendments 17 and 18, in the name of the noble Baroness, Lady Byford. Both amendments seem to bring forward consistency and clarity; certainly, Amendment 17 does that while Amendment 18 creates greater flexibility and less red tape. I endorse the question that the noble Baroness put to the Minister as both these amendments were agreed by the stakeholder working group. The reason, as enunciated by the noble Baroness, Lady Parminter, is that we have fairly limited reform of the rights of way legislation in Clauses 21 to 27 because those were the only agreed reforms put forward by the stakeholder working group. However, these two amendments were also agreed. Why has Amendment 17 been rejected altogether, when it seems to be very consistent with a deregulatory Bill to bring consistency across the country?

Frankly, Amendment 18 has been gralloched—a good expression meaning to remove the guts of something, in this case the amendment put forward by the stakeholder working group. It has been limited to applying only to byways open to all traffic. The other reasons for erecting gates, which are well enunciated in proposed new subsection (2) of the amendment, seem perfectly reasonable and appropriate. As I say, they have been agreed by the stakeholder working group.

On the amendments put forward by the noble Lord, Lord Skelmersdale, I am on the side here of the noble Lord, Lord Rooker: I agree with their principles but they are a step too far. They ought to be thrown back to the new, reformed stakeholder working group for it to look at carefully and see where it can agree amendments about diversions or closures—preferably not closures but certainly diversions—so that they would be easier to make around domestic premises. That would be a very good idea.

[Earl Cathcart (Con)]

My Lords, I support these amendments, particularly the ones in the name of my noble friend Lady Byford. I do so because they go a little further than those of my noble friend Lord Skelmersdale, which would include only gardens and driveways. My noble friend Lady Byford’s amendments also reflect the recommendations of the stakeholder working party on this subject, as mentioned by the noble Lord, Lord Cameron.

Although the Government have issued guidance they have put nothing in the Bill, which I find odd. My honourable friend Tom Brake, speaking for the Government at Third Reading in the other place on 23 June, said:

“It is clear, however, that there has to be a change in the way in which both legislation and policy operate if people are to get a satisfactory hearing, and that is what the Government are doing in the Bill”.

He goes on to say that it,

“will be supplemented by guidance that will effectively act as a presumption to divert or extinguish public rights of way that pass through the gardens of family homes, working farmyards or commercial premises where privacy, safety or security are a problem”.—[Official Report, Commons, 23/6/14; cols. 77-78.]

Unfortunately, that is not what the Government are doing in the Bill because they have not put anything in it on this subject.

We have the guidance but we do not have the legislation, which is what my honourable friend said was needed. Guidance is only guidance; it is not obligatory. We need legislation in this Bill. I am sure that this omission by the Government may be an oversight so I hope that the Minister will accept my noble friend Lady Byford’s amendments, which reflect the working party’s recommendations. If the Minister cannot accept them today, I hope that he will agree to take them away and consider them further.

Water Bill

Earl Cathcart Excerpts

Monday 31st March 2014 Lords Chamber

[Baroness Northover (LD)]

My Lords, in moving government Amendment 88A, I wish to speak also to the rest of the government amendments in the group.

This group of amendments includes the government response to the Delegated Powers Committee on the flood insurance clauses. There are also a few minor changes, including some further transitional measures, to improve the Bill.

The first set of these amendments—Amendment 88D and Amendments 90C to 90G—is in response to the Delegated Powers Committee’s recommendations on the flood insurance measures. The Government take these points very seriously and have tabled amendments to take them into account. This includes using the affirmative resolution procedure for all regulations and placing some of the definitions in the Bill. Following the committee’s report on the amendments, we nevertheless take the view that Clauses 58 and 61 should remain affirmative on the first exercise only. The amendments also provide for some of the definitions to be amended by regulations.

We agree with the committee that the definitions are important and we take its point about defining them in the Bill. However, we remain of the view that the definitions of “flood”, “household premises” and “relevant insurer” are best set out in regulations, which are more flexible, should we need to change them over the lifetime of the measures. We hope that, by defining these terms in regulations that will be subject to the affirmative procedure, we have reassured noble Lords of our intention that Parliament is able to scrutinise these definitions fully in due course.

We thank the committee for recommending that the powers to share information on council tax data are subject to the affirmative procedure. However, to meet the commitment to establish Flood Re in 2015, we need to release the information immediately after Royal Assent, and have therefore decided to address the committee’s concerns by placing the powers in the Bill to ensure that Parliament can scrutinise them now. We hope that noble Lords understand the rationale for this, due to the challenging timetable to deliver Flood Re.

Although Amendments 90CA to 90CD provide for rather than mandate the release of council tax data in the Bill, I should make it clear that the Government are committed to doing so, and to do so swiftly following Royal Assent.

Insurers will be required to have in place appropriate but proportionate security measures for the protection of the data disclosed pursuant to this clause. As much of the data to be disclosed at this stage are already in the public domain, it has been agreed that the controls are sufficiently robust for additional criminal sanctions not to be required. However, the amendment also allows for the application of a criminal sanction at a later stage, should the Government need to regulate for the release of additional information. It is right that we have the powers to protect the release of further information in future, but the criminal sanction is not automatic and we will consider whether one is necessary, following consultation.

On Amendment 90A on Flood Re’s reserves, we have previously discussed amendments to the rules surrounding the scheme’s reserves, and will come on to discuss reserves later in this debate. Having consulted further, and to ensure that this power in Clause 53 cannot compromise the sound operation of Flood Re and its orderly management, we are tabling this small change to make clear that the scheme administrator’s consent is sought before making regulations in this area. This consent means that the scheme administrator is able to object to any prudentially unsound proposals, as well as to make representations as to the retention of some or all of the reserve. Consequently, there is no longer a need for a requirement to consult the Prudential Regulation Authority as well. I reassure noble Lords that both the Prudential Regulation Authority and the Financial Conduct Authority will continue to be closely consulted on this and all other regulations made in relation to the Flood Re scheme.

Amendment 88B covers the eligibility threshold and is intended to ensure that the legislation properly reflects the operation of the Flood Re scheme, and the way the insurance industry operates.

Amendment 90T addresses the risk that secondary legislation made at the end of the life of Flood Re could be seen as hybrid. We have every intention of carrying out a full consultation before making that secondary legislation to ensure that any private interests are properly considered.

Amendment 90L is intended to ensure that employment contracts within the scheme are transferrable, where they otherwise might not be. I reassure noble Lords that this amendment is not intended to enable the transfer of reserves required to be retained for prudential regulatory purposes.

In addition, the Government have also tabled a small set of minor and technical amendments to the Bill. We have also corrected an error in Schedule 3 to the Flood and Water Management Act 2010 to ensure that unused bond funds, called in by a SuDS approving body, can be returned to the right person.

Finally, Amendments 91B to 91D provide the Secretary of State with powers to introduce provisions to allow Ofwat to revoke existing water supply licences as part of the transition to the new water supply licensing regime. The power provides flexibility for Ofwat to allow existing licences to continue until new licences are available or until they are revoked on a specified day.

Amendment 91B enables the licence modification powers to work in such circumstances. The order can provide for more detailed arrangements to be set out in a scheme produced by Ofwat, subject to the requirements of the Secretary of State’s order. The order also provides for compensation to be payable to the holders of revoked licences. The measure of compensation may depend on various factors, including, for example, whether the licence holder qualifies to hold a new licence in the reformed water supply market.

The amendments also make transitional provisions for existing sewerage arrangements with incumbents that become licensable arrangements under the new sewerage licence. Compensation is payable if it is no longer possible for some sewerage arrangements to continue because a licence is required. Again, the qualification of the operator for a licence would be a relevant factor. Amendment 91C corrects a small error in paragraph 6 of the schedule. I hope that noble Lords will be happy to support these amendments.

[Earl Cathcart (Con)]

My Lords, this is the first time that I have spoken on this Bill on Report, so I should declare that I live in a band H property on my farm in Norfolk, I have a bore hole and I have spent about 30 years working and underwriting in the insurance industry. I am happy with these government amendments, but will the Minister clarify government Amendment 90L to Clause 70? I am afraid that I did not quite catch the Minister’s assurance about capital, so I am asking her to say it again, please. The current wording is far from ideal, in that it could potentially raise the possibility that Ministers could access Flood Re’s funds when the scheme is wound up, irrespective of their being needed for, for example, meeting regulatory run-off requirements.

I understand that Defra has said that an override to access Flood Re reserves is not the intention of the amendment to Clause 70. However, the concern is that in 20 or 25 years it could easily be interpreted as an opportunity to grab funds from Flood Re. Will the Minister make clear that the amendment is not intended to apply to Flood Re’s reserves or capital? That would be most useful.

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[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 De Mauley]

My Lords, I am grateful to the noble Lord, Lord Grantchester, for his amendment, which would give a formal advisory role to the Committee on Climate Change. I am also grateful to the noble Lord, Lord Krebs, for his offer of help. I absolutely agree with them on the importance of having impartial advice on the latest science, and we of course look to the committee to inform the debate on climate change.

It might be appropriate at this stage to say that I welcome the latest report from the Intergovernmental Panel on Climate Change, which is a valuable addition to the international understanding of climate change impacts and which underlines the need to adapt to changing global weather patterns. Adapting sooner will reduce the future costs of doing so. I should emphasise that, although the IPCC report did not focus on individual countries, it did identify three key risks from climate change for Europe, of which flooding was one and water security another. These findings align well with the United Kingdom’s own Climate Change Risk Assessment, published in 2012, which identified that the biggest challenges that the United Kingdom faces will be flooding and water shortage.

As I explained in Committee, I am not clear what the noble Lord, Lord Grantchester, thinks could be gained by requiring the Committee on Climate Change to assess the data provided by insurers, which will be primarily on the pricing of risk, based on the industry’s own sophisticated catastrophe modelling. The numbers of policies eligible for Flood Re will be based solely on the cost of the flood risk component of any policy, which is set by the insurers based on their assessment of the risk. This assessment will change over time and it would not be possible for the committee to provide any estimates without detailed knowledge of industry pricing models. Similarly, the value of the levy and the likelihood of any additional contribution by insurers is based on a number of financial parameters, such as the cost of reinsurance and the amount of levy collected, which will change year on year.

Given their extensive knowledge of the flood risk profile down to the local level, the Environment Agency and its equivalents in the devolved Administrations are the key advisers to government on flood risk and changing levels of risk over time. In England, the Environment Agency leads a dedicated climate-ready support service, conducts the long-term assessment of future investment needs and provides the national assessment of flood risk and flood mapping, which takes account of all types of risk.

If I understand the intention of the amendment correctly, the nub of the concern seems to be that the modelling used to assess the size of the Flood Re pool and the numbers supported needs to be robust and take into account changing risk. Flood Re’s finances also need to be resilient to the inherent variability of annual flood claims and to factor in changing risk over time. The core of this is making sure that Flood Re holds enough capital to be able to cover claims up to the limit of its liabilities. Under European Solvency II legislation, which governs the insurance sector and will be in force from 1 January 2016, all insurance firms will be required to hold enough capital to cover a one-in-200-year level of claims. Therefore, Flood Re will be required under EU law to hold capital reserves at a level equivalent to its liability.

To assess what level of capital is needed, insurers have detailed catastrophe models. The modelling to assess such events must be kept up to date and will reflect any changes in levels of insured risk. This will include changes as a result of climate change. As an authorised reinsurer operating under the requirements of Solvency II, Flood Re will be bound by these same requirements.

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[Earl Cathcart]

My Lords, I congratulate the noble Lord, Lord Whitty, on his use of De Mauley Street. I think it was clear what he was saying. It seems to me that if you have a property to let, as landlord you should buy the insurance. It might not just be the bog standard property and contents insurance that you buy: you will probably also buy owners’ liability insurance, public liability insurance and any other commercial insurance that you might buy as a landlord. That is one reason why they are excluded from Flood Re, because we are not talking like for like. The owner occupier in No. 2 De Mauley Street, for instance, will buy their own bog standard property and contents insurance. As a landlord you buy other things as well, which makes it a commercial risk.

I too read somewhere that to qualify for Flood Re, you had to live in the property. Therefore, I come to the amendment spoken to by the noble Lord, Lord Cameron, regarding which he said that 78% have one property, which they let. If the occupier has to buy the insurance, why does not the landlord get the occupier to buy the property and contents insurance, which would qualify it for Flood Re? If the landlord then wanted to buy his public liability or owners’ liability insurance, he could buy it as a separate policy. That might be one way in which a number of these cases can get into Flood Re.

[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.

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[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.

[Earl Cathcart]

My Lords, I am afraid I cannot support this amendment. To me it shows a misunderstanding of the role of insurance more generally and of Flood Re in particular, which must build up its funds from premiums to cover current and future losses smoothly. The scheme already has five-yearly reviews so that all assumptions can be reworked and contributions adjusted, either upwards or downwards. Diverting funds into the totally separate adventure of pre-emptive risk mitigation is not a function of insurance and nor should it be for Flood Re. The analogy is asking car insurers to invest in better road signs or road infrastructure. It might help mitigate the risks but it is not the role of the underwriting industry; it is the role of government, national or local.

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Moved by

[Earl Cathcart]

91: After Clause 73, insert the following new Clause—
“Internal drainage boards: apportionment of drainage expenses
(1) The Land Drainage Act 1991 is amended as follows.
(2) In section 37(5) (apportionment of drainage expenses), at end insert—
“(f) in the case of—the Secretary of State may by order define an equivalent measure for valuing the land”.”(i) any land to which none of the paragraphs (a) to (d) applies and it is not possible to calculate a value under paragraph (e)(ii) as the relevant rating lists no longer exist or cannot be located, or(ii) land to which one of paragraphs (a) to (c) does apply but for which the relevant rating lists no longer exist or cannot be located,the Secretary of State may by order define an equivalent measure for valuing the land”.”

[Earl Cathcart]

My Lords, my noble friend Lord Howard moved this amendment in Committee. Unfortunately, he cannot be here today and has asked me to move it again on his behalf.

As a farmer, I pay land drainage rates and, in a past life, I was a member of a Norfolk internal drainage board. Internal drainage boards get their funding from two sources: from farmers and agricultural landowners, for draining agricultural land—this is the land drainage rate; and from local authorities, for draining developed areas—this is the special levy. IDBs work out the special levy that they charge local authorities based on the value per hectare of the developed land. This is clearly set out in the Land Drainage Act 1991. This amendment does not change this calculation, which is clear, fair and transparent. IDBs need to know the value per hectare of developed land to calculate the special levy. However, the Land Drainage Act 1991 says that IDBs must work out the value per hectare of developed land from lists of rateable values of property compiled in 1990—25 years ago. Using these old lists of rateable values to work out the value per hectare of developed land is neither fair nor transparent as the IDB needs to have the lists. In many cases, the lists no longer exist. In addition, they are out of date and do not include anything built after 1990. As the lists are out of date, the variation of values in them may be wrong as relative property values between areas have changed since1990.

The only way to solve this problem is to change the Land Drainage Act through this amendment to give the Defra Secretary of State the power to set out another way of working out the value per hectare of developed land, so that IDBs do not have to use the old rateable value lists, if they have them.

The amendment is not prescriptive. We do not want to repeat the mistakes of the past by setting the way of working out the value per hectare of developed land in primary legislation. The amendment would rectify that mistake by taking the prescription out of the Land Drainage Act and instead giving discretion to Defra to set a method that is appropriate now, and to change it in the future if circumstances change. This is important as IDBs do vital work not just in protecting people, their homes and businesses and some of our best farm land, but also play a key role in keeping our power stations, ports, roads and railways working.

In addition to their usual maintenance costs, IDBs now face heavy bills to repair and rebuild defences, drainage ditches and pumping stations after the ravages of this winter, with its record rainfall and the biggest tidal surge in 60 years. Unless IDBs have a fair way of valuing developed land, they cannot set a fair special levy on local authorities, so they cannot raise the funds they need to do their vital work. This amendment will ensure that IDBs can get the funds to do their vital work, while also sorting out past mistakes by replacing prescriptive and out-of-date legislation with a simple discretionary power.

After my noble friend Lord Howard brought forward this amendment in Committee, my noble friend Lord De Mauley wrote to all 120-odd IDBs to ask whether this was a concern for them. When I met my noble friend Lord De Mauley and his officials last week, he said he could not conclude that it was an overwhelming concern as he had had only six responses from the IDBs. I do not know the timescale between the letter being sent out and our meeting, but I do not think it was that long. I do not know what the latest position is with regard to responses from the IDBs, but I do know that the Association of Drainage Authorities has written supporting the amendment. The CLA and the NFU have also written supporting the amendment.

The letter from the NFU adds another point that I have not raised yet. It states:

“The NFU … considers that there is a need for this change both for existing IDBs but also to enable the creation of new IDBs in areas where they don’t currently exist, we would therefore urge support of this amendment”.

It goes on:

“Such an amendment is especially important for areas where the Environment Agency is considering to withdraw from maintaining significant drainage assets. It is our view that in areas such as on the Pevensey Levels in East Sussex or within the Alt Crossens catchment in West Lancashire, to name but two, there is a strong need for IDBs to be established in order that existing water level management activity may continue and that the cost of that activity is shared equitably between the beneficiaries”.

I hope my noble friend will accept this amendment. Being more realistic, I hope that he does not reject it today, but rather agrees to take it away and look at it between now and Third Reading. If he then agrees that there is a hole that needs plugging, he can either accept the amendment or come back with his own. I beg to move.

[Lord Grantchester]

My Lords, during our debates in Committee, the amendment of the noble Lord, Lord Howard of Rising, and the noble Earl, Lord Cathcart, seemed purely a matter of practicality. The noble Earl should be congratulated on finding this shortfall in the relevant documents. The Minister wished to reserve the Government’s position pending further evidence. I merely rise to ask the Minister whether the position could be addressed by secondary legislation. That would allow Parliament to keep a watch on the situation and assess when and if it develops.

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I therefore urge my noble friend to withdraw his amendment. Following our continuing investigations with ADA, we would be happy to write to him and to my noble friend Lord Howard of Rising, who tabled an amendment in Committee, and notify them of the outcome and any course of action to be taken.

[Earl Cathcart]

My Lords, I thank the Minister for picking up the baton on this. From what she said, I can see this is not an easy one to take forward, but there seems to be a concern with some of the IDBs and I thank her for continuing to talk to ADA to see what the best course of action is. With that, I beg leave to withdraw the amendment.

Amendment 91 withdrawn.

Water Bill

Earl Cathcart Excerpts

Tuesday 11th February 2014 Lords Chamber

[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.

[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.

--- Later in debate ---

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I speak to Amendments 161B and 161C in this group. Although welcoming the introduction of Flood Re and accepting that it is essentially a scheme for domestic premises, I remain concerned about the exclusion of small businesses, especially in very rural areas. I refer specifically to those which are mixed hereditaments. The key question appears to be: what happens to mixed hereditaments in terms of qualifying for inclusion in Flood Re?

There are two scenarios for mixed hereditaments. The first is where the business element is deemed by the valuation to be de minimis. This means it forms such a small part of the overall hereditament that it appears only in a domestic list for council tax. The second is where the business element is more significant, and is therefore liable to both council tax and business rates. If the property does not appear in the waiting list for business rates as well as for council tax, the liable party may qualify for business rate relief. This could be small business rate relief, where it is their only business premises.

I understand that, currently, if the rateable value is less than £6,000 the relief received would be 100%. Rateable values between £6,000 and £12,000 receive relief on a sliding scale. This enhanced small business rate relief scheme has been extended until 31 March 2015, and not beyond that at the moment. The standard scheme allows a relief of 50%. In a rural settlement it might be the case that a village shop or post office is part of a mixed hereditament. In this case it would qualify for rural rate relief. Also, in a rural settlement, a pub with living accommodation above could qualify for rural rate relief on the pub element.

I am extremely concerned about excluding mixed hereditaments from access to Flood Re. This could have a dramatic impact, not just on the business owner but on those residents who use the business. If that business cannot get flood insurance it may remain unviable and may be forced to close prematurely if flooded. Where, for example, this is the last shop or post office in the village this could have a significant impact on the villagers.

[Earl Cathcart (Con)]

My Lords, I congratulate my noble friends Lord Moynihan and Lady Parminter on tabling Amendment 155, as it has given us a good chance to debate flood insurance for businesses, whether in Flood Re or in another mutual set up specifically. We are all under pressure to include small businesses under the Flood Re scheme. That is quite understandable. If I had a business in a flood risk area, I would want to insure it under the Flood Re scheme. I know that the Association of British Insurers and the Government looked at whether businesses could be included within the Flood Re scheme, but found that it threw up more problems than it solved. This is best illustrated with an example.

I am a free range egg producer on my farm in Norfolk, and when it came to buying insurance for the business, I was presented with a long shopping list of types of cover relevant to my business: property; business interruption; loss of profits; contractors “all risks”; terrorism and malicious attack; livestock, including theft, worrying, death after straying, accidental or malicious death; deterioration of stock, in my case probably due to bad feed or electrical failure; perils and fatal injury; livestock in transit; disease, in my case probably something like bird flu or salmonella; goods in transit; motor, for lorries, trucks, vans or cars; employers’ liability; public liability; product liability or environmental liability; legal and professional expenses.

The list goes on, but I hope that gives your Lordships a flavour of the range of commercial insurance on offer. I, of course, had to cherry pick the cover that was most relevant to me. For instance, I did not buy livestock or goods in transit cover, because this is the responsibility of third parties with whom I have a contract. Also, I have no vehicles in that business, so motor insurance was not an issue. However, salmonella is an issue for my business, but because the insurance is so costly I chose not buy it. I hope that I got that one right. I have to choose not only the type of cover that I think is appropriate to my business but how much cover to buy for each category, the cost and the level of excess necessary to reduce that cost. The excess across my shopping list varies from £100 to £20,000.

Although there are hundreds of egg producers up and down the country with identical businesses to mine, I very much doubt that there is another that has commercial insurance exactly the same as mine. They will all be different, and that is the problem: all businesses, whether a corner shop, a pub, a guest house, a property investment company, a hotel or guest house, a manufacturing company or an engineering firm, will buy commercial insurance to suit their particular circumstances. The whole point of a mutual, whether Flood Re or one geared specifically to small businesses, is that the conditions are common to all. The price, the excess, the cover and the conditions must be standardised. This can be done for homeowner insurance—it is pretty bog-standard—but sadly, as I have tried to illustrate, not for commercial insurance. You just cannot standardise it. If it were standardised, virtually all commercial members of that mutual would end up with a policy that did not give them the cover that they wanted.

It would be good if everything could be included in Flood Re, whether owner-occupied houses, rented homes or small businesses, but the line must be drawn somewhere. It has been agreed that those with homeowner insurance, buildings and contents, will be included and that commercial insurance will not be. If I had a property in a flood-risk zone that was deemed to have commercial insurance with it and was therefore excluded from the mutual, I would ask my broker to split my insurance cover into two separate policies: one for the bog-standard homeowner cover, buildings and contents, to ensure inclusion within the Flood Re scheme, and the other to include all elements that made my cover commercial, such as owner’s liability or public liability cover. That might be a way forward for many of those finding themselves excluded from the Flood Re scheme because of the commercial element of their policy.

Flood Re will help up to 500,000 homeowners who cannot currently buy flood cover, but I am sure that with a little bit of inventiveness, many, although I am afraid not all, small businesses, including buy-to-let and leasehold properties, can buy their insurance in such a way as to be included in the scheme.

[Lord Whitty]

My Lords, my noble friend and I have two amendments in this rather complicated group. The group as a whole is beginning to get us into the area of who should be in and who is out of Flood Re, and we have some groups of amendments later that touch on the same issue. Before the Bill leaves this House, we must be clear who is in, who is out, and why.

My Amendment 160 would require the Secretary of State to report on the numbers of properties in flood-risk areas that were eligible, and those that were not, for inclusion in Flood Re. It would include looking at the specific exclusion as it stands of council tax band H and post-2009 new build. The report would look at how much it would cost to bring them in and who would bear the cost if they were brought into Flood Re, in terms of both premiums and the effect on the non-risky properties’ cross-subsidy.

We all have some sympathy with those groups that are excluded. However, we must be careful, as this is a delicate arithmetic deal between the Government and the ABI. I understand that negotiations were hard and long. As far as businesses are concerned, it is obvious that this must be addressed somehow. We have all seen the effects of flooding in recent weeks and the past few years, on small businesses and farms, on the Cockermouth high street a year ago and on the seafronts at Dawlish and Aberystwyth in recent weeks. We also know that the businesses that are hit—the shops, boarding houses and small businesses—are key to the prosperity of those local economies. It must be frustrating for small businesses, and those advocating their case, like the federation, because they were covered in some way under the statement of principles under the old scheme. However, the old scheme was a different sort of scheme. It was a deal struck by the ABI, agreeing that it would continue to cover—even then, it was not offering new cover—small businesses as well as households if the Government committed themselves to a certain level of expenditure on flood defence.

This is a different sort of deal; it is actuarially based. While we have all received representations on behalf of businesses, the approach now has a different basis. Even so, it is complicated. Some micro-businesses operated out of the owner’s house could be covered because they pay council tax rather than business tax. However, others will not. There are good reasons for this. The noble Earl, Lord Cathcart, described the bespoke way in which businesses negotiate their insurance as distinct from the more generalised way in which households are covered. It is difficult to see how businesses could be included in Flood Re as it stands without serious reconfiguration of the whole arithmetic. Therefore, while I have sympathy, I would not go so far as to press the Government on this front. However, I am in favour of knowing more about this. Therefore I support the proposition of the noble Lord, Lord Moynihan, that we look at this and report on it and see whether that might lead us to some other form of provision in parallel with Flood Re.

Some of the other boundary issues are even more complicated, particularly in relation to leasehold properties and the issue of whether landlords and tenants are included. The noble Earl, Lord Lytton, has dealt with one element of this and others are dealt with later on. Some of the government literature refers to leasehold properties. However, in general, the ABI and the Government do not think that leasehold properties are included. The situation with single landlords and tenants is not clear, although commercial providers of leasehold property are not included. The differentiation here is more the nature of the insurance than the nature of the property. While the property may be defined as being in risk or not, in a landlord/tenant situation, the tenant probably takes out the contents insurance, which is covered, whereas building insurance, which is the landlord’s responsibility, is not covered. That is quite a complex position, and it would also be true for multiple leasehold property. A future mortgage on such property is dependent to some extent, as the noble Earl, Lord Lytton, said, on there being ongoing insurance on the property. Leaseholders and the owners of the property may be faced with a double whammy if they are not careful.

As I said, I am not in favour of widening the group at this time because of the delicate arithmetic involved. We must address some of these issues in the Bill but for the moment I cannot support the amendments proposed by the noble Earl, Lord Lytton, nor the proposals of the noble Baroness, Lady Bakewell of Hardington Mandeville, on mixed hereditaments. I am not sure whether Amendment 160A in the name of the noble Lord, Lord Shipley, which would effectively delete the exclusion of post-2009 properties, is in this group. That is in a rather different category because people have been building in high-risk areas when they have known that they were going to be excluded under the old agreement, let alone the new one. I therefore have less sympathy for that group than I might have for the others.

--- Later in debate ---

[Earl Cathcart]

My Lords, I will speak to Amendment 160A. I will be interested to hear the Minister’s response to the question asked by the noble Lord, Lord Shipley, but I shall speak to the amendment as it is written. The Flood Re scheme should be eligible for all houses built and occupied before its introduction.

We live in a blame society. Even now, the media are trying to pin the blame for the current flooding on someone. Is the worst rainfall for 200 or 300 years the fault of the Government, the Environment Agency or local government? It must be somebody’s fault.

With Amendment 160A, we are debating whether houses built after 1 January 2009 should be included in the Flood Re scheme. As was said earlier, PPS25 has made it quite clear that development should not take place in flood risk areas, and yet we all know that it still goes on. One has to ask why. Who is responsible for the houses built on flood risk areas when the rules are quite clear? Everyone is trying to pass the blame on to someone else—“It’s not my fault, guv”. Who is at fault? Is it the Government for not ensuring stricter adherence to PPS25? Is it the Environment Agency? That may be the case. Although 97% of applications that it objects to are refused, it looks at only 6.6% of the 450,000 applications, which is quite clearly not enough.

Is it the fault of local government planners? That is probably the case. One has to ask why they continue to pass applications on flood risk areas contrary to PPS25. Is it the fault of the owner for buying a home built after 1 January 2009 on a flood risk area? It probably is. Caveat emptor, or let the buyer beware: he should have known. If he did not, is it the fault of his conveyance lawyer when carrying out the searches? It raises the question of whether lawyers should be required, as a matter of course, to inform buyers if the house is on a flood risk area and, in this case, when it was built.

One can lay the blame on homes being built on flood-prone areas on any or all of the above but, as sure as eggs are eggs, it is not the fault of the insurance industry. Why should insurers pick up the tab? They have been quite clear on this. Indeed, they are the only ones who have drawn a line by saying that, if a home is built in a flood risk zone after 1 January 2009, under the statement of principles, flood cover will not be available and the property will not be eligible for the Flood Re scheme. Underwriters were quite clear that they did not want to encourage unwise and irresponsible development. Why should underwriters or contributors to the scheme pay for other people’s stupidity? The Government must decide whether PPS25 is to be adhered to or not.

[Lord Campbell-Savours]

My Lords, there is an element of confusion both outside and inside this House as to where the words which define the exclusion of leaseholders are to be found. I understand that Defra put out a notice in which it excluded leaseholders, but can the Minister tell us where this provision is made? The public are confused. The assumption when anyone reads this Bill that freeholders are included will be interpreted by flat-owners who have purchased their freehold but manage their blocks through leasehold companies—companies which have been established to manage the freehold, owned by the residents who have 999-year leases—to mean that they are also included. They will assume that because they are freeholders they are included. My understanding from my reading, although, as I say, I have not found the authoritative piece of literature, is that they are not included. In other words, people out there who believe they are included—freeholders of blocks of flats; not corporate interests but individual share-of-freehold owners—will think that they are included when they are not. That needs to be sorted out.

I cannot understand why they are excluded. Indeed, I would argue that they are probably less of a risk to insurance companies, even though they may well live in buildings on flood plains, because very often you find blocks of flats where no one is living on the bottom floor at all and the first flat in the block is on the first floor, above the area at risk of being flooded. If I am correct in what I am saying, will the Minister tell us why share-of-freehold owners in blocks of flats are being excluded when, in fact, they are freeholders and when, as I say, people reading the Bill will presume that they are included?

Water Bill

Earl Cathcart Excerpts

Tuesday 4th February 2014 Lords Chamber

[Lord Crickhowell]

My Lords, the noble Lord, Lord Cameron, asked if it was right to discuss the possibility of drought in the middle of floods. I can assure him that it is absolutely right. My experience in the NRA was that, whenever we had a flood it was almost immediately followed by a drought, and whenever we had a drought it was almost immediately followed by a flood. It was an almost invariable rule, so I am sure that he is right that we should be addressing these issues.

When speaking to my noble friend’s previous amendment, I said that the one area to which I might want to return was reform of the abstraction licensing regime. I spoke about it in some detail at Second Reading and I do not want to repeat what I said then. It was one of the central problems that we had to deal with in my time in the NRA.

I disagree with the noble Lord who has just spoken when he says that the Government should get this issue into the Bill and that it is very urgent. My understanding is that the Government are getting on with the kind of review and detailed discussions with just the sort of people that he suggested they should be meeting. However, they have pointed out that the issue is extremely complicated and cannot be rushed. While I, perhaps on the basis of experience, have always been one of the first to criticise the timescale on which some government departments operate, I have a good deal of sympathy with the need to take adequate time on this. This view was reinforced by the fact that at one of the briefing meetings, the representative of—I think—Anglia Water told us that it was undertaking fairly basic research into the resources available in the region. It was suddenly brought home to me that we do not know a great deal about the availability of ground water resources in many of our regions. We know how much water is going down the rivers, but we still need quite a lot of information before we have the kind of policy that we all want to see.

While we must get on with it, I am not sure it is right to think that we can put into this Bill the requirements that will follow the result of this important inquiry and examination. However, my noble friend Lady Parminter is right in thinking that there should be safeguards in the Bill so that when the results of the review come through, we can be certain that the necessary steps and measures are taken. I am not sure how that should be drafted or whether the noble Baroness has got the drafting quite right, but I sympathise with her desire to write safeguards into the Bill so that we are not left with a great gaping hole when we get the results of the very important review that is under way. I will therefore listen with great care and interest to what the Minister says in reply to this debate.

[Earl Cathcart (Con)]

My Lords, I declare that I farm in Norfolk, I live in a band H property, I have a bore hole for domestic use and I have spent about 30 years working and underwriting in the London insurance market.

I want to talk about two aspects. One is bringing all abstraction licences in line with today’s rules, conditions and requirements, and the other is abstraction charges.

At Second Reading I said that,

“it is cackhanded to be bringing in upstream competition in water trading before the existing water abstraction system has been reformed, given that the Environment Agency says that many rivers are already overabstracted and overlicensed”.—[Official Report, 27/1/2014; col. 1025.]

Just about everybody agrees that reform is sorely needed. The question is when it should take place. Many are impatient for reform, and I include myself, but the Government, in their handout, Upstream Competition and Abstraction Reform, say:

“We should not rush this: if we get it wrong, there will be real consequences for a range of business and industry, including farmers, food manufacturers and the power sector, as well as the environment”.

Quite so—they do not want to throw the baby out with the bathwater. The handout goes on to say that any abstraction reform will take place “in the early 2020s”. That could be 10 years away, which, to say the least, is disappointing.

Is there anything that we can put into this Bill that will help improve the current system? I believe that there is. My noble friend Lord Crickhowell mentioned Trevor Bishop, who is head of water resources at the Environment Agency. When he gave evidence to the Commons Committee, he said:

“Most of the damage due to over-abstraction is because the licences were passed a long time ago”.—[Official Report, Commons, Water Bill Committee, 3/12/13; col. 63.]

The older licences are still allowed to abstract, regardless of whether water is abundant or scarce, but there are restrictions on newer licences. The hands-off flow condition allows the Environment Agency to reduce or stop abstraction altogether if river and ground water levels fall, but this does not apply to the older licence holders—the vast majority of total abstractions. This puts newer licence holders and, indeed, the environment at a disadvantage. Surely, the first step should be to bring all licences up to date with modern requirements, especially the hands-off flow condition and, indeed, any other condition deemed necessary. I would like to see a provision in the Bill similar to the proposed new paragraph (c) in Amendment 74 in the previous group, which says that if the variation,

“cannot be achieved by agreement”,

the authority can vary the licence by order or terminate it. This would bring all licences in line, protect the environment and give flexibility to vary all licences as and when necessary. It would also bring this in now rather than waiting for 10 years

The next thing is abstraction charges. I looked at the Environment Agency website, which lists eight charging regions in England and one in Wales. There are two charges: the standard charge and the environmental improvement charge. The environmental improvement charge is different for water companies and for non-water companies, which I presume includes energy companies. The standard charges are not standard at all—they vary region to region. Of the eight regions in England, the Anglian and Northumbrian regions are charged the most, at about £28 per 1,000 cubic metres of water, while the north-west region is only charged about £12.50 per 1,000 cubic metres of water—less than half. Why is there this variation when it is called a standard charge? The Minister might say that the Anglian region, being in an environmentally sensitive area, attracts the highest charge in the country to cover the costs of managing the resources available. However, here I got muddled, because that is surely an environmental issue, and any extra charge ought to be levied under the environmental improvement charge, not the standard charge. Can the Minister explain?

I move on to the environmental improvement charge for non-water companies. Again, the Anglian region pays the most, at £13.71 per cubic metre of water, which is what one might expect, given that it is an environmentally sensitive area. The lowest environmental charge is 62p, for the Yorkshire region, while two regions—the Midlands and Northumbrian regions—pay no environmental improvement charge at all. Why? I do not understand the logic behind the charging and would like the Minister to explain.

Water Bill

Earl Cathcart Excerpts

Monday 27th January 2014 Lords Chamber

[Earl Cathcart (Con)]

My Lords, I congratulate the Government on bringing forward this Bill. We all take water for granted but we should not because it is our most precious resource. Until now, 95% of the water we get goes straight into the sea. I think that everyone welcomes making it a primary duty of Ofwat to secure the long-term resilience of water supply and sewerage systems. But should there not be a national policy statement for water? We already have one for waste water, so why not one for water supply—our most precious resource?

I will talk mainly on the Flood Re scheme, but before I do, I would like to make two points. First, the Government are trying to encourage landowners, such as farmers—I farm in Norfolk—to build reservoirs and then sell excess water to the water companies. At first, that seems a great idea, but I am sceptical about whether it will work as on-farm reservoirs will probably be too small to make any meaningful contribution. Even if they did, the quality of the water from the on-farm reservoirs may not be very good, as it may have high levels of nutrients, pesticides and metaldehyde. There may also be problems for farmers piping excess water from their reservoirs across other people's land to a treatment plant.

We need the water companies to build more large reservoirs themselves to store the necessary water. In the south-east of England, the last time a reservoir of any size was built was probably the Bewl Water reservoir, which holds 7 trillion gallons of water over a site of 1,200 acres. It was built in the early 1970s; 40 years ago. Since then, the population and number of houses in the south-east have risen dramatically and will no doubt continue to rise dramatically. It is alarming that the Office for National Statistics estimates that if the current trend persists, the population of this country could double over the next hundred years—a frightening thought. If we do not build more reservoirs to capture water in times of plenty, all that will happen in times of drought is that the water companies will continue to extract water from the rivers, which by then will themselves be gasping for water.

Secondly, I share the concerns of those who say that it is cackhanded to be bringing in upstream competition in water trading before the existing water abstraction system has been reformed, given that the Environment Agency says that many rivers are already overabstracted and overlicensed.

Moving on to Flood Re, I have been an insurance underwriter, including home owners’ business, and I have worked in the London insurance market for about 30 years. Hundreds of underwriting businesses make up the London insurance market and getting all those underwriters who write home owners’ business to make considerable compromises and agree willingly to this deal has no doubt been no mean feat. I have no doubt that negotiations have been very fragile and it has taken three years to get this far. The not-for-profit Flood Re mutual, which will be owned and managed by the industry, will offer flood insurance to the 500,000 home owners most at risk, with an excess of £250 and a premium of between £210 and £540, depending on council tax band.

The scheme helps to solve many of the current affordability problems, but there are a few exceptions. The first is that homes built after 2009 will not be covered. That is not a new exclusion. Every developer has known that under PPS25 homes should not be built in flood risk areas from that date. Underwriters were insistent that they did not want anything in the scheme that would encourage unwise or irresponsible development. Also, the Government emphasise that where the Environment Agency objects to a development on the grounds of flood risk, 97% of those risks are refused by planners, so that is good news. Or is it? Of the 455,000 planning applications, the Environment Agency looks at only 6.6%. Obviously, it cannot look at all of them, but 6.6% does seem worryingly low.

The second exclusion is small businesses, which buy commercial insurance that has a range of cover different from that of home owners: business interruption, loss of profits, different levels of stock cover and employer’s liability insurance, to name a few. The third exclusion is band H and I properties, on the basis that their owners should be able to afford the higher risk-reflective premiums, and be able to take the necessary actions to reduce their flood risk. Happily, my band H home is not in a flood risk area. Also, there is an understanding that genuinely uninsurable properties—properties that are continually flooding—should not be covered by Flood Re. However, it has not been possible to agree a definition, and I believe that negotiations are continuing.

Flood Re is a good scheme. It might not be perfect, and we could probably all pick holes in it, but it will offer flood insurance to the vast majority of home owners seeking it, at a relatively cheap premium and a low excess. However, I do have three concerns.

My first concern is our being tempted to pass amendments to this scheme with the best intentions that might render it unworkable. For instance, we might want to include small businesses in the scheme, because, after all, the Federation of Small Businesses reported that 20% of small businesses were affected by flooding in 2012. The Association of British Insurers and the Government looked at this and concluded that it threw up more problems than it solved, hence the agreed exclusion.

My second concern is that there is significant scope in this Bill for the Government to make secondary legislation. I do hope that this Government, or indeed, a subsequent Government, are not tempted to bring in any secondary legislation without first having consulted and agreed with the Association of British Insurers, so that any rules or refinements needed use Flood Re’s own procedures. We might then get the intended answer.

My third concern is the clauses relating to the flood insurance obligation. I understand that the Government feel that these are necessary in case Flood Re proves unworkable, but the obligation would be a very unusual measure that would effectively force a private insurance company to sell a product whether or not it wanted to do so. I hope the Minister can reassure the House that every effort will be made to get Flood Re up and running, so that the obligation will never be needed. I look forward to debating these and other matters in Committee.

Water: National Grid

Earl Cathcart Excerpts

Wednesday 28th March 2012 Lords Chamber

[Lord Taylor of Holbeach]

I know nothing of that proposal so I am not in a position to answer the noble Lord’s question. Reservoir capacity is important, of course, but even more important is the opportunity to connect up existing river resources and water resources so that they are available across water companies. That is the point that I wanted to make in response to my noble friend’s Question.

[Earl Cathcart]

My Lords, we pipe and store gas and oil around the country, so why not water? The Roman aqueducts did it 2,000 years ago. The Minister previously cited the difficulty in getting water uphill. Quite so, and no doubt the £30 billion or so cost of establishing a grid is also an issue. Why cannot we use wind turbines to push the water uphill? Is not the provision of water a far greater and essential benefit to one and all, rather than getting a few people to Birmingham a few minutes earlier? We should get our priorities right.

[Lord Taylor of Holbeach]

My Lords, it is possible to achieve both but it is not possible to make water flow uphill as my noble friend rightly points out. I would use the analogy that the amount of money that my noble friend is prepared to spend to put petrol in the tank of his motor car is a great deal more than he would be prepared to pay to fill his bath with water. Some of the difficulty comes from the fact that we as a country do not recognise the importance of water and value it enough.

EU: Sow Stalls Ban

Earl Cathcart Excerpts

Thursday 19th January 2012 Lords Chamber

[Lord Taylor of Holbeach]

As my noble friend will know, the framework of public procurement is complex and it is not easy to lay down criteria that are not covered by directives. However, following the sow stall ban, it will be possible to ensure that that is the case. At the Oxford farming conference recently it was said that 70 per cent of pig meat imported into this country would be illegal if produced here under our regime.

[Earl Cathcart]

I hope the Government’s response to the pig directive is more robust than their response to the egg directive. As an egg producer, I am appalled that the Government’s answer to the import of eggs produced in illegal battery cages is not to send the lorry back to the country of origin, not to fine the importer or impound their vehicle, not to destroy the illegal eggs, but to send the eggs for processing into food for sale in the United Kingdom. Why do the Government not see what a devastating effect this will have on the UK’s legal egg industry, which, frankly, is stunned by their feeble response? When we joined the Common Market in 1973, we were promised a level playing field. After nearly 40 years, is it not about time we got one—or might pigs fly?

Agriculture: Egg Industry

Earl Cathcart Excerpts

Monday 14th November 2011 Lords Chamber

[Earl Cathcart]

My Lords, I congratulate my noble friend on the timing of this debate. With EU civil servants failing to reach agreement on 28 October, this issue is to be discussed today and tomorrow at the meeting of the EU Ministers. Like my noble friend, my son has a free-range egg contract through Noble Foods, which takes place on my farm. With Brussels failing to reach agreement, UK egg producers fear that Britain will be subjected to a flood of cheap imports from countries breaking the law by still using illegal cages. While Commissioner Dalli says he will not postpone the introduction of this new legislation, he will not permit the destruction of illegal eggs. He has come up with a number of proposals to soften the blow for those countries which, unlike Britain, have failed to comply with the law. In effect, he will be postponing the introduction of the legislation.

It is important to appreciate the magnitude of the problem. There are expected to be 80 million illegal laying hens from 1 January 2012, laying between 20 and 25 billion illegal eggs a year. Italy will have a staggering 25 million illegal hens, France 9 million, Poland 17 million and Spain 20 million, which is about half its total laying hen population.

Let us look at some of Commissioner Dalli’s proposals. First, he wants on-farm inspections followed by legal proceedings. Call me cynical, but I cannot see the Italian or Spanish inspectors bothering. They have not in the past, so why now? Secondly, Dalli proposes that all illegal first-quality eggs must be processed into liquid or powder. This would be totally impractical. There is neither the processing capacity nor the market demand for the processing of nearly 25 billion illegal eggs a year. In Spain, currently about 15 per cent of eggs go into processing. How on earth is its processing going to be increased to 50 per cent of its total egg production within the next two months? It is just not going to happen. Thirdly, Dalli proposes that no more pullets are to be housed in illegal cages from 1 January. This is impractical; for example, many of the pullets to replace the 20 million Spanish hens in illegal cages from 1 January have already been reared, as they will be delivered when they are already 16 weeks old. Where else can all these birds go if not into illegal cages? I cannot see the Spanish destroying them.

Fourthly, Dalli proposes a final cut-off date of 31 July to comply. Unfortunately this date makes no sense, as the life cycle for laying hens is 14 months, not seven. Even if there was the will to comply with the directive and the money was available to finance the required changes, this timescale is not achievable. It takes at least six months to refit or build a poultry house and there is not the capacity or money in the EU to erect housing for 80 million laying hens in the next nine months. It is completely unrealistic. Fifthly, Dalli proposes that if illegal cages are to be used, the current stocking requirement of 550 square centimetres per hen must increase to 750 square centimetres to give each hen more room. For most illegal cages, this would mean removing two hens per cage. Can you imagine this really happening—that the foreign farmer will slaughter his surplus hens, hens that have been making him a perfectly good profit? I do not think so.

Dalli plans that these and other proposals will be implemented under a gentleman’s agreement. He does not propose any new legislation or regulations to enforce them. Can you see it? Once Dalli leaves the door ajar, the illegal egg producers will storm through it, entrenching large-scale illegal production in certain EU states and creating a deeply uneven playing field. UK producers would be at a permanent competitive disadvantage just like in the pig industry. Frankly, I do not believe that any gentleman’s agreement would be worth the paper it is written on.

Where now? What do we want the British Government to do? First, the concerns felt by the British egg industry need to be conveyed to Brussels as a matter of urgency: that Dalli’s proposals are unworkable and totally unsatisfactory as far as UK producers are concerned; that Britain will not import any illegal eggs, egg products or prepared food containing egg products after 1 January; and that Britain, along with other compliant countries, should insist that no illegal eggs or egg products can be exported from the country of origin, even for processing.

There is a chink of good news. Last Monday my honourable friend Jim Paice, speaking at the Egg and Poultry Industry conference, confirmed that anyone in the UK using eggs or egg products from illegal cages would be breaking the law. He went further by saying that it needed to be made clear to owners of branded food products that the law applies to their ingredients. He added that any company using eggs produced from illegal cages from 1 January would be breaking both the letter and the spirit of the law. Of course, this is most welcome, but what plans does Defra have to ensure that known importers of eggs or egg products from the continent are alerted to the change in the law—that the importation of eggs and egg products produced from banned cages from 1 January will be illegal? Will they be fined or threatened with closure if they persist? Treating like with like, if a UK egg producer still used illegal cages after 1 January he would be heavily fined and his business shut down. The same two questions apply to the owners of branded food products. Will the Minister alert them and will they be penalised if they break the law?

We joined the Common Market in 1973 thinking we would get a level playing field for trade. After 38 years, is it not about time we got one?

Draft United Kingdom Marine Policy Statement

Earl Cathcart Excerpts

Wednesday 15th December 2010 Grand Committee

[Earl Cathcart]

My Lords, I congratulate the Government on their progress in this matter. The marine policy statement will be critical for effective planning at all levels. Marine plans will then be developed under and guided by the marine policy statement. But marine plans are not forecast to be completed for all UK waters until at least 2020. This marine policy statement will therefore be particularly important in areas where no effective marine plans exist at the time decisions are being made in relation to marine licensing and regulating sea users. We therefore need a strong marine policy statement to guide decision-making across the UK waters.

I have a number of concerns with the document’s drafting, and any criticism should be taken in a constructive manner. First, it comprises simply a collection of existing sectoral policies and objectives and does not set any strategic direction or policy prioritisation or provide a clear steer for marine plan authorities or marine decision-makers. Secondly, it does not achieve its legislative purpose of clearly identifying policies which will ensure that the marine planning system contributes to the achievement of sustainable development. It fails to adopt strong sustainability by recognising that ultimately all economic and social activity is dependent on the natural environment, its resources and the ecosystem services it provides. The Government’s work on the Charting Progress 2 assessment of the state of our seas needs to be referred to more extensively in the marine policy statement. It clearly illustrates how our marine environment is being utilised at an unsustainable rate, with habitats and species generally in decline. Environmental limits based on strong science need to be clearly recognised in the marine policy statement.

Thirdly, there is also a problem specific to England. The aspirational nature of the marine policy statement, which includes only high-level policy statements and objectives to allow for UK-wide application, creates a gap between the marine policy statement and marine plans and decision-making. This should be filled by some form of national strategic planning, as is proposed in Scotland and Wales. Strategic planning benefits any planning system by providing a framework for cross-boundary co-ordination, harmonisation of standards, comprehensive assessment of environmental capacity and space for public discussion of these issues.

Fourthly, the way in which reasonable alternatives have been treated in the appraisal of sustainability of the marine policy statement is not satisfactory and is not in full compliance with the EU Strategic Environmental Assessment Directive and regulations. Only the marine policy statement and no marine policy statement alternatives have been fully addressed. In reality, the appraisal of sustainability has actually assessed only one option—that is, the marine policy statement as drafted. All reasonable alternatives should be fully—“fully” is the key word—and properly assessed in compliance with the EU Strategic Environmental Assessment Directive and regulations. I could elaborate on that but time does not permit me to do so.

The marine policy statement will be critical for effective planning at all levels. It should be a policy driver and set the direction for marine planning, which the current draft does not achieve. It is not, in my opinion, sufficiently prescriptive or robust.