Flood Defences

Earl of Kinnoull Excerpts

Thursday 1st December 2016 Lords Chamber

[Lord Spicer (Con)]

My Lords—

[The Earl of Kinnoull (CB)]

My Lords—

[The Lord Privy Seal (Baroness Evans of Bowes Park) (Con)]

My Lords, it is the turn of the Cross Benches.

[The Earl of Kinnoull]

My Lords, I am grateful. I declare my insurance and farming interests as set out in the register of the House. Does the Minister agree with me on two points? First, Flood Re is very much in its start-up phase—it began trading only in April this year, and 53,000 policies is, in insurance terms, not very many—and the concept will really be proven when the first claims are successfully settled and paid. Secondly, once that is done, however, it would be sensible for the Government to engage the relevant parties in conversation about extending the concept of Flood Re—which is different from Flood Re itself—to small businesses, which I think would be greatly to the benefit of this country.

[Lord Gardiner of Kimble]

My Lords, I am conscious of the noble Earl’s experience in the insurance industry, but it is fair to say that Flood Re is financed to cover up to £2.1 billion in claims. To give a sense of scale, that is seven times worse than the flooding in 2007. I hope that the BIBA product will advance further understanding of how best businesses, and small businesses in particular, can avail themselves of what the noble Earl described: a Flood Re-concept policy.

Agricultural Sector (EUC Report)

Earl of Kinnoull Excerpts

Tuesday 22nd November 2016 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, it is a pleasure to follow the noble Lord, Lord Teverson, who, as ever, was energetic and interesting. I declare my interests as set out in the register of the House, and in particular as a recipient of EU farm subsidy, both personally and as a trustee of the Blair Charitable Trust.

I also congratulate the noble Baroness, Lady Scott, her committee and their clerking staff on a very thought-provoking and excellent report. I note that all the issues teased out in the report are still very much live following the June vote. It is a wide-ranging report, but I shall make just three points tonight.

The first is in respect of recommendation 4, which would see a scheme that enables farmers,

“to save in times of plenty and withdraw in times of need”.

It was heartening to read in the Government’s response what I certainly interpreted as general enthusiasm, and certainly what seemed to be praise, for the Australian farm management deposits scheme, which goes a good deal further in providing support to protect farming than our own current tax averaging measures.

Of course, there is another volatile business operating in the UK, which has done so for hundreds of years, that is important to Britain and which has an excellent method of allowing participants to save in times of plenty: my own alma mater, Lloyd’s of London. The personal reserve funds system has been successfully in place for decades. I cannot help but think that something closer to this, rather than the tax averaging scheme, would be immensely beneficial to the farming community. It is well understood by the Revenue, and I dare say it is understood by one or two farmers as well. Can the Minister confirm that this analogous and successful situation will be considered when—and I quote from the Government’s response to the report—

“Going forward, the Government will work with industry to develop new arrangements for agricultural support”?

My second point relates to recommendations 7 to 9, which are all about new financial tools. I have spent a lifetime in the City surrounded by financial tools, and therefore I have a pretty clear idea about who often makes the money out of these tools. I am of course very worried about that. I therefore plead that any tools that are dreamed up are very simple. I must say that the vast majority of farm offices will be like ours—ours is in the kitchen and takes place usually on Sunday mornings; it is not well set up for analysis or a complicated financial tool. I certainly would be worried that these tools could be vehicles for egregious profit by the private sector. In other words, we do not want the lions of Goldman Sachs to eat the shepherds of Perthshire.

I observe that there are already two types of volatility to be addressed. The first is market volatility. I feel that the personal reserve scheme, similar to the Australian one and indeed our own Lloyd’s arrangements, would be a very good start for dealing with that. The other volatility relates to natural perils, which is a fancy way of saying storms and floods—another area I have spent a lifetime fiddling around in.

About 10 days ago, the Minister and I had a brief exchange about Flood Re, a new government-backed scheme that provides effective and cheap insurance to private home owners in flood-prone areas. The scheme only started in April this year, and the Minister has reported to the house that 53,000 policies have already been ceded to Flood Re. It is a collaborative system between the insurance industry and government. It is very interesting and, at this early stage, appears to have borne fruit. The noble Baroness, Lady Scott, touched on my second point, but would the Minister agree with me concerning Flood Re, and would he feel that this might be the basis of an approach for the farming community going forward to manage the natural perils risk?

My third and final point concerns recommendation 11. Here, the noble Baroness, Lady Byford, was ahead of me a bit. The recommendation concerns agricultural research. I note again the very warm statements in the Government’s response, and I commend them for that. I am a great believer in research.

This evening, there has been no mention of the forestry industry in the UK, with its more than 40,000 jobs, and adding, as it does, more than £1.7 billion to the UK economy every year. I should say that, only a few months ago, I would have had to declare an interest as a member of the council of the Royal Scottish Forestry Society, but I came off that just over a year ago. This industry, which I love, is greatly threatened by tree disease, pests and the grey squirrel. I have to declare another interest as the chairman of the United Kingdom Squirrel Accord, which consists of 34 UK bodies including the Governments, the main governmental bodies, and voluntary sector and private bodies, and is trying to deal with the squirrel problem. Trees between the ages of 10 and 40 are being killed off by grey squirrels ring-barking trees, and this affects up to 70% of plantations. This has effectively stopped forestry plantations of broad-leaf trees on a commercial basis in the south-east of England. The disease, pest and grey-squirrel issues are examples of issues that we can respond to through scientific research—something that I know the Minister is very well aware of and I have had many discussions with him about it.

So I close by asking the Minister whether he agrees with me about the importance of recommendation 11, and whether he would give some hope to the forestry industry that their case for research money to deal with their threats is under consideration.

Flooding: Defences

Earl of Kinnoull Excerpts

Tuesday 8th November 2016 Lords Chamber

[Lord Gardiner of Kimble]

My Lords, that is precisely why—as set out in the letter I wrote and the Environment Agency paper Winter Ready 2016—the Environment Agency is extending flooding-warning service to more communities and improving the range of digital services on GOV.UK, to help people take action to minimise the impact. I very much hope the noble Lord will think of going to the meeting on 29 November, when the Environment Agency and other departments will be in Parliament so that all these matters can be discussed in more detail.

[The Earl of Kinnoull (CB)]

My Lords, will the Minister provide the House with an update as to whether Flood Re, the insurance solution which can provide affordable insurance for homes, is a success in its first year of operation, and what plans the Government might have to extend Flood Re to small businesses?

[Lord Gardiner of Kimble]

My Lords, the first thing to say is that 53,000 home insurance policies are now backed by Flood Re. In fact, 40 insurers representing 90% of the market are now participating in Flood Re. I am very pleased that the insurance industry has responded so enthusiastically. We want to see how that works first. It seems to be extremely successful. It has meant that policyholders have reasonable premiums. We will certainly look at any future issues.

Farming: Impact of Brexit

Earl of Kinnoull Excerpts

Thursday 21st July 2016 Lords Chamber

[The Earl of Kinnoull (CB)]

My Lords, I declare my interests as set out in the register, particularly my own farming interests and as a trustee of the Blair Charitable Trust and its 70,000 acres. I too congratulate the Minister on his new appointment. Everyone that I speak to very much feels as I do: this is a case of round hole and round peg, and it is good news for the House. I also congratulate the noble Baroness, Lady McIntosh of Pickering, on yet again enabling us to debate rural and farming affairs. I say again that I do not think we do enough of that in this House. The balance is not quite right, and I urge the usual channels to seek to address that.

I was only going to make one point today: the necessity of an early and clear communication to, and reassurance of, the farming community, particularly post-Brexit, in respect of the subsidy regime and foreign seasonal labour, so ably already put by the noble Baroness. I thought, however, that it was worth reporting on some of the many discussions I have had in farmhouse kitchens—and, in one instance, on a cricket pitch—about what Brexit means for farming. I shall distil those discussions down to three main points.

The first discussion, which was on the cricket pitch, was with a soft-fruit farmer. His business is of course labour-intensive and capital-intensive; Perthshire soft-fruit farming benefits from perfect conditions. He in particular needs foreign seasonal labour, which tends to come from poorer EU countries. He puts them up on a full-board basis, as do many other people in the area, and the arrangement is very satisfactory to everyone. His business is going so well that he would like to invest in increasing it. That is quite expensive, as it costs around £20,000 an acre to put up polytunnels and produce satisfactory irrigation and so on. He would have to invest in the accommodation as well. However, he is not going to do that because at the moment he is not confident of the availability at similar cost of skilled EU labour in future.

The second conversation was with a gentleman who has a successful livestock business, both sheep and cattle. He was thinking of an investment in his cattle court of around £100,000. He was not going to proceed, either, because he was not confident that the subsidy regime would be there in the future, and if the subsidy was removed from his future cash flow the returns would be so thin as to not make the investment worth while. Therefore he was holding off. Those are both examples of what I call loss of opportunity.

My final example is more worrying, because it is an example of damaging the existing business. This discussion was with the manager of a successful mixed organic farming business. This manager, whom I have known for many decades, was sitting down to fill in the forms for the overdraft renewal for his business. He was particularly concerned about the three-year cash flow that has to be included in those forms because he did not know how to fill in the third year. He had also had a discussion with his relationship manager at his major clearing bank and was under the impression that the bank was out to reduce his overdraft limit because of the uncertainties surrounding the future cash flow. If that is bank policy, it means that a constraint on cash and overdraft facilities for successful farms—and this is a deeply successful farming business—are being put in place, which damages our industry and is particularly not welcome when farm prices at the farm gate are so disappointing.

In closing, I therefore ask something similar to that asked of the Minister by the noble Baroness. When does he feel it will be possible to give clear assurances to the farming community post-Brexit, first, on the foreign seasonal workers point, and secondly, on the subsidy regime?