Water Bill

Earl of Lytton Excerpts

Tuesday 11th February 2014 Lords Chamber

[Earl Cathcart (Con)]

My Lords, I am very nervous about these amendments, probing as they are. Flood Re has one aim: to provide flood insurance for those people who cannot buy it at the moment. The first year or two will be very difficult until it has built up its reserves, provided that there are not too many claims in those early years. However, I am very nervous about the suggestion that Flood Re ought to spend money on flood-resilient activities. What happens in 10 years’ time if we have another horrendous year of rain—floods all over the place—and these households go to Flood Re and say, “I’ve now got a claim, will you pay it?”. What happens if Flood Re replies, “I’m so sorry, I have paid it all out on building a dam here and there”? I do not think it is the right answer to get Flood Re to pay money out other than for genuine flood claims.

[The Earl of Lytton (CB)]

My Lords, I have a great interest in this group of amendments. I certainly understand the geometry that lies behind it, particularly that outlined by the noble Lord, Lord Campbell-Savours. I probably follow the noble Earl, Lord Cathcart, in this. As I understand it, Flood Re will have significant start-up costs. Also, the Environment Agency’s investigation and collation of information from the hazard risk assessments, which it is charged with carrying out, will be a draw-down on the Flood Re fund. That means that, in the early years, there may be significant sums taken out of the pot. I understand that the intention is that the Government should put in plan B configurations to deal with that eventuality. However, given the sporadic and capricious nature of severe flooding, we do not have any time to waste in putting measures together to improve resilience and protect properties where they can be protected.

I have a technical interest in this: I am a practising chartered surveyor and property valuer. I am also involved in the parish and town council sector, as is well known. I can see the rationale behind an early start for communities and individual property owners coming together to create robust schemes. We need to do that as soon as the present flood waters have died down, as I hope they will. Time is of the essence, because we do not know when the next flood will come. There is a conundrum between the build up of the pot of Flood Re on the one hand and spending funds on resilience and protection on the other. In a later group of amendments, I will say a bit more about Flood Re, which is intended to cover a very limited and narrow range of circumstances. I will explain why I think a larger problem of an entirely different magnitude is lurking here.

We need to make a start. On the basis that the economy is improving, this is exactly the time when these investments need to be made. I will be very interested to hear what the Minister has to say about the pot, how it will be funded and how we get the early years’ work put in place. Like the noble Earl, Lord Cathcart, I obviously would not want to see the pot devoted to one large project to the exclusion of all others. I am sure that would not be the case. If we do not get this right, the credibility of FR is likely to falter. I think that is something on which the Minister can elaborate.

[Lord Crickhowell (Con)]

My Lords, one of the great advantages of modern technology is that you can discover something you did not know anything about while a debate is taking place. As this debate started, I chose to look at a Defra website on obtaining flood insurance in high-risk areas. At the top of the main page, a number of participants are indicated: BIBA, the Environment Agency, Which?, ABI, the National Flood Forum and Defra. Flood Re does not appear there yet. Can the Minister say how far the department has already gone down the road that is suggested here? This website, which contains a great deal of other valuable information on the steps you could, and should, be taking, already exists. Presumably, at some point Flood Re will be fitted into the whole arrangement. My only anxiety about the Flood Re participation is that indicated by my noble friend—namely, that against the present background, I only hope that there is a surplus in the early years because the fact is that we could have a situation whereby, far from having a surplus in the early years, we have a substantial loss. However, as there is a website and as a good deal of advice is being given by the department—I think it is rather good advice—perhaps my noble friend will indicate what the department’s overall approach is and how he sees Flood Re fitting into what is already going on.

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[Lord Campbell-Savours]

My Lords, I will speak to Amendment 160, in the name of my noble friends Lord Whitty and Lord Grantchester. I intend to speak on a number of amendments so I must declare an interest. I have a leasehold interest, with my wife, in a band G home on the Thames built on the flood plain. My flat is not threatened by flooding. My home has therefore never been evacuated and I have never made an insurance claim on a property I own. Nevertheless, I feel that I have an interest to declare while speaking on an issue that affects tens of thousands of home owners who similarly live in the vicinity of the Thames, many of whom are now being evacuated.

I start by congratulating the Government on introducing this scheme, which I understand was the subject of some very difficult negotiations with the insurance industry. I want to refer to a particular group of home owners, of which I am not one, who come under council tax band H. Council tax band H is pretty expensive property, as we know, and the flooding over the past few days has probably affected thousands of these properties up and down the River Thames between Chertsey and just south of Maidenhead, near Windsor. These home owners will be very worried about what is going to happen. They are excluded from this scheme. Not only do they have the problem of how to resolve their immediate difficulty of dealing with the flooding and the consequences for their homes, but they will also be worried about the longer term financial implications, in the event that their premiums are substantially increased—which they will be. I know that from my own experience in the Lake District, which I mentioned during my previous intervention. For most of my life, I lived there in the town of Keswick, which was subject to flooding. Many people there found it impossible to get insurance from insurance companies following the floods that took place some years ago.

There is going to be a real problem for these people. Many in the Thames Valley are not included in this scheme because their properties fall into band H. It is not that the Government need to interfere with this scheme. I understand its merits and it has been very sensitively negotiated. We very much support it. However, heads have got to be banged together to find a way of resolving the problem of many of these people who live in band H property.

People may ask what I am doing defending people living in band H properties from the Labour Benches. The reason is simple: many people who live in band H properties did not buy them as band H properties. They bought them when they were much cheaper, and when their incomes may well have been quite modest. Property price inflation in London and in the south of England has placed many people in this position. Even the way that the mansion tax is being construed may affect people who have quite small incomes. I am in favour of the mansion tax, but maybe the way that it is to be calibrated raises the same questions. People on low incomes who find themselves living in expensive properties—I am not one of them, as I said—have to be considered in these matters. I hope that the Government, even as late as this in the Bill, might on Third Reading at least make some statement as to what provision might be made for them, notwithstanding what the Bill provides on Flood Re.

[The Earl of Lytton]

My Lords, it is probably appropriate that I follow the noble Lord, Lord Campbell-Savours. I have to admit that I live in a band H property, but it is not in London and I am glad to say that it is built on a hill. My Amendments 160ZA and 161D are in this group. I shall be brief, because there is another larger issue that I want to address.

I tabled Amendment 160ZA to see whether I could flush out the rationale behind the exclusion of certain categories of property from FR, but also because there seemed to be a reluctance to consider both sides of the coin in terms of what is in and what is out of the safety net. What is in identifies and underlines what is out. It cannot be otherwise. The fact of exclusion does not mean that other insurers will not provide some cover, but it does, as the noble Lord, Lord Campbell-Savours, said, have consequences. I have certainly received correspondence suggesting some very significant rises in free market premiums based not so much on the immediate severe risk but on that broader category of material risk that will be flagged up and will lie between those that have no risk whatsoever and those that are protected by the FR safety net. It is in the public interest that any scheme report under Amendment 160 should look beyond the narrow scope of FR inclusions and also look at wider exclusions.

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[Lord Krebs]

My Lords, I too support the amendment of the noble Lord, Lord Shipley. I have already declared an interest as the chairman of the adaptation sub-committee of the Committee on Climate Change. The sub-committee has a useful data set that could be brought to bear were this review to happen. It has developed a set of indicators, which are published, for the resilience of planning decisions in relation to present and future risks from flooding, particularly from future impacts of climate change. For example, it has looked at the implementation of SUDS, at the implementation of household measures that could provide protection at the individual property level and at planning decisions to develop in the flood plain. As has already been said by the noble Lord, development in the flood plain has been going ahead faster than development elsewhere, but this is not necessarily a bad thing. If the properties are appropriately protected, either by community-level measures or by individual household measures, the risks can be managed. The sub-committee has a data set and a set of indicators that could be useful were the Government minded to accept the amendment moved by the noble Lord, Lord Shipley.

[The Earl of Lytton]

My Lords, I welcome the opportunity to debate this important point. I declare a professional interest in aspects of planning. The question of planning policy and its co-runner, which it informs, development control, raises some important issues on the ground. These need to go beyond the question of new-build developments alone. I do not know whether the noble Lord, Lord Shipley, intended to address just new-build developments but if he did, perhaps I could digress into the area of what we do about some of the existing building stock, which I flagged up at Second Reading. I alluded then to the desirability of making conditions concerning the containing of surface water run-off within existing individual properties, as opposed to just allowing each to discharge it on to the next property downstream.

I wondered whether this might be made retroactive to a degree, perhaps by requiring extensions and alterations to existing properties to incorporate, in appropriate circumstances, a surface water attenuation scheme. I do not believe that this is a general requirement but there are precedents. For instance, if you renew the roof covering of your house, you are often obliged to upgrade the insulation of the roof of your property. There is an analogy there. Surface water attenuation on a per property basis could also be combined not only with water conservation, but with habitat-friendly outcomes. The same thing could apply to the principle of reducing vulnerability of the property itself—a point made earlier by the noble Baroness, Lady Parminter—in connection with quite ordinary adaptations that can be put in place to prevent properties being so severely affected by flooding, should it happen. There is also the question of community-based schemes to protect groups of buildings. I referred to the Lower Don Valley scheme, but there are others.

One of the things that has come out—sorry, that is probably a bad term—or rather, has arisen recently is the question of making foul drainage systems safer, so that if flooding does happen, flood water does not turn into a solution of dilute sewage, adding health hazards to all the other problems of clean-up. That requires special measures, not least because shared sewer pipes that are on private property but are ultimately connected to a public sewer are now the responsibility of the statutory sewage undertaker. I have this terrible feeling that they have no idea of the routes, the condition or the materials of half of these pipes for which they have now inherited responsibility. They have my sympathy in that respect.

The noble Lord, Lord Krebs, referred to building on flood plains. My only point there is that protecting properties so that they are themselves secure against flooding is one thing. Transferring risks to properties elsewhere is self-defeating. My difficulty is that I am not sure that a holistic approach is taken to dealing with the totality of flood plains. Often, these may be in more than one local planning authority area, so there may be problems of co-ordination. With regard to that, the noble Lord, Lord Shipley, referred to the competence and capacity of local government and the noble Baroness, Lady Parminter, referred to reductions in Environment Agency budgets that might affect its ability to have this overarching, integrated view. I worry about that. It is vital that the sort of report that the noble Lord, Lord Shipley, has in mind covers all these aspects. If we start leaving bits out, we shall be no further forward in a few years’ time than we are now.

I draw attention to the catchment area management plan referred to by the noble Lord, Lord Campbell-Savours. I have some experience of this, not all of it edifying. In at least one instance, I found that half the catchment area concerned, the upstream half, was missing from the plan. The only fact that I could ascertain was that the owner of the missing part was the National Trust. I am unsure what conclusions I should draw from that, but if you have a catchment management plan, the boundary of it has to be drawn along the watershed. No other boundary is possible. The simple arithmetic that was drummed into me, probably from O-level geography onwards, has not escaped me. Making up rules to suit as one goes along will not wash. I am sorry for that terminology as well.

Some time ago, I attended a professional lecture on restoring part of southern Exmoor to a peat bog so that it would hold more water and release it more slowly into the River Barle and the River Exe systems. It had something to do with pumping and repumping water back into Wimbleball reservoir, which I shall not go into. I nicknamed the scheme the “Exmoor sponge”. I do not think anyone else has used that term. There is nothing wrong with such projects, but if they do not have durable management structures that are proof against misuse for commercial objectives, neglect because of spending cuts, simply being forgotten, or participant landowners deciding that there are better land uses that they would rather adopt, they will fail. There need to be more durable ways of dealing with these things. That is the sum total of the points that I wish to make. The last of them probably goes a bit beyond the amendment proposed by the noble Lord, Lord Shipley, but it was worth mentioning in the context of what was said by the noble Lord, Lord Campbell-Savours.

[Lord Grantchester (Lab)]

My Lords, the amendment would set up a review of recent outcomes of planning policy in terms of flood risk for new developments. It has received widespread support around the Committee.

The noble Lord, Lord Moynihan, has already highlighted how the market will change following recent events. In view of the terrible situation that has resulted from recent weather events in Somerset and the Thames Valley, which may well trigger a wide-ranging review of flood risk policy, it makes sense to ask why there has been more building on low-lying and flood risk areas in the past four years, even allowing for the guidance to which the Minister has already referred today. There has been plenty of notice since 2007 that not all property in areas that might be developed would be eligible for flood insurance. Recent floods have highlighted that there may be errors in the guidance. Nor have successful protection measures been achieved.

Why has planning allowed development to take place against a background of increased perception of flooding potential following the floods in 2007 and in 2012? As the Government, the Environment Agency and planning authorities—indeed, the whole country—will be reassessing flood defences and expenditure, a review of where we are now would make eminent sense.

I was struck by the comments of the noble Lord, Lord Shipley, on the cumulative development effect, which would be worth of the attention of the Environment Agency. The amendment has also prompted some interesting suggestions from my noble friend Lord Campbell-Savours, so it is worthy of further assessment by the Government.

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[Baroness Parminter]

My Lords, I added my name to Amendment 156D of the noble Lord, Lord Krebs, and my related probing Amendment 156E has been grouped with it.

At present, the Bill states that the Secretary of State has the option to bring in a review process for Flood Re, but provides no detail. The first amendment, as the noble Lord pointed out, requires the scheme administrator to publish a plan to achieve a transition to risk-reflective pricing.

My second amendment would require Flood Re to publish the intended framework for reviews, outlining the decisions that needed to be made at each review point. Why is that important? The Government’s consultation document on Flood Re specified that reviews will be held in order that there should be a gradual transition to risk-reflective pricing. Discussions have centred on reviews every five years and the impact assessment for flood risk is based on that hypothesis, but there is nothing in the legislation to confirm that this will be so.

Getting a commitment to a five-yearly review is critical. Flood Re is designed by the Government to expire in 20 to 25 years’ time, with review points where decisions can be taken to reduce the benefit of the pool to claimants and the levy to all policyholders. If a linear approach is taken, this might result in a 20% drop in the levy, and the benefits, every five years. The potential problems are that the reviews could be more frequent, or never. The Treasury could require the transition period to be shortened, thus not allowing the necessary flood risk management investment to take place, or it could set the percentage drop in the levy to be higher in the earlier period. The reason why it might do so would be that under OECD rules the levy is considered to be a tax. Removing it early would reduce the percentage tax burden on the state.

The issue, though, is not just when the reviews take place but what information they provide so that the Government and parliamentarians have the necessary information to make informed decisions. As such, it would seem important to define the critical parameters in the review in some detail at the outset, understanding exactly what areas beyond affordability and accessibility will be judged to see whether or not the scheme is effective. I hope therefore that the Minister will put on record the Government’s intentions in this regard so that we can have reassurances that the scheme will achieve the outcomes that we all want.

[The Earl of Lytton]

My Lords, I particularly welcome Amendment 156C, moved so eloquently by the noble Lord, Lord Krebs, as it enables me to raise a series of allied issues. The first is that, Flood Re or no Flood Re, we are all on notice that the cross-subsidy of flood risk needs to be replaced by individual risk assessments. The reason for that is our better geographical knowledge and the unsustainability of the continued mutualisation of risk in those circumstances. I have absolutely no argument with that.

One issue of concern is the data produced by the Environment Agency. Obviously, those data are very important for the industry and for consultants, but they are equally important for individuals because, if we are moving to individual assessment, we must have some means of identifying the individual impact on a per property basis. I referred earlier today to my discussions with Philip Wilbourn, a very eminent environmental surveyor and valuer from the north of England. He allowed me to circulate an e-mail to a number of noble Lords setting out his views, which I have done, but there is a particular bit that I would like to repeat. He refers to,

“the data published by the various agencies, including the Environment Agency”.

Bear in mind that this is someone who carries out evaluations and does assessments on individual properties or groups of properties for a variety of different purposes.

In his e-mail, Philip Wilbourn says that he cannot use the data for commercial purposes because he is prohibited from doing so. Then he says that there is no online ordering service to acquire data for reporting purposes, and he is forced to acquire it from GroundSure or Landmark, two of the authorised resellers, at what he describes as high cost. He says:

“The data reported by commercial companies often varies depending upon the royalty return”,

which seems to be quite the wrong trigger for objective data. He tells me that the costs cannot be absorbed by residential valuers and that the banks, for which these valuations are produced, will not allow such data as a disbursement for the reports that are sent to them. His e-mail continues:

“When data is ordered direct from the EA, it can take three weeks to be sent through depending on the region”,

and he says that he has tested that.

The scale of resolution on the Environment Agency website is 1:5,000, which does not enable a particularly accurate identification on a per property basis. The Scottish Environment Protection Agency’s website fares rather worse because the scale there is 1:25,000, so individual property analysis by the home owner is clearly going to be difficult. These are the data that are supplied to insurers to make decisions.

Of course, what happens? It gets boiled down to a postcode approach—the “postcode lottery” of which we constantly hear many examples. He says:

“The problem with postcodes is that many home owners/businesses may be paying more than they should”,

and he gives an example of a postcode—in I do not know what part of the country, but it is obviously an urban area—which is neatly bisected by a blue-ink line of flood risk.

There is a particular issue here as to whether the data that are produced by this public agency, for public consumption and for the benefit of society as a whole, will be available at reasonable cost—let us not say that it should be free—for the home owner and individual consumer. That is the question that I pose in the context of this amendment.

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[Lord Shipley]

My Lords, I said earlier this afternoon that I strongly supported the Flood Re scheme. Again, I thank the Association of British Insurers, individual insurance companies, Defra and Ministers, and congratulate them on their achievement, which is a much needed reform that will give comfort to householders at risk.

However, I want to probe in this amendment the issue of the cut-off date of January 2009 and, in particular, those houses bought before the cut-off at the end of 2008 but not built or occupied until 2009 or after. This amendment uses the date later than 2009, which is simply intended to probe the Government’s intentions. I support a cut-off date—there must be one for the scheme to operate effectively—but the question is whether it must be 1 January 2009 or whether it could be later.

The reason why properties have been excluded from Flood Re from January 2009 is that they were excluded from the 2008 statement of principles. However, I read the Defra briefing, which says that,

“2009 is the most appropriate date based on our current understanding of flood risk”.

Does that imply that the understanding might change because of developments since the statement of principles was established in 2008? This doubt is also important because the proposals in the Bill do not take account of surface water flood risk where information was not publicly available until December 2012, or of changing weather patterns that alter our understanding of what “high risk” is.

The essence of this amendment is: given that houses granted planning permission before 2009 but built afterwards would not covered by Flood Re, there is a case for saying that post-2009 households should be allowed to enter Flood Re where flood risk has genuinely changed since 2009 due to changing weather; where developments are affected by surface water but the risk was not taken into account as it was not understood in 2009; or where contracts had been signed before 2009 but the relevant property was not built until 2009 or later. This amendment tries to address those key questions. I very much look forward to hearing the Minister’s reasoning on this in his reply. I beg to move.

[The Earl of Lytton]

My Lords, we have discussed the substance of Amendment 160B already so I do not propose to move it. However, while I am on my feet, I will comment on Amendment 160A and the terms in which the noble Lord, Lord Shipley, moved it. I received a different narrative on this. The circumstances of the post-2009 cut-off, as explained to me, were that that was the time when Planning Policy Statement 25, in relation to construction on flood risk areas, came into being. As the story went, therefore, everybody was on notice that that was an issue, so that was the cut-off point. However, it occurs to me that the noble Lord, Lord Shipley, has raised rather an interesting issue.

It is fair to say that the end of summer 2008 was when the wheels came off the banking system and, with it, the property development system. If anybody had a planning consent that he was hoping to implement in 2008, he would have found that there was no money or funding to implement it—nothing would be forthcoming. Many of these schemes were put on ice. Indeed, there was a government recommendation—I do not know if you can call it an instruction—to the local planning authorities that they should look favourably on extending the three-year life of these. As I am sure noble Lords are aware, detailed planning consent has a three-year life, so it would have run out and would have had to be reapplied for. Due to the circumstances of having to reapply—maybe there are a new lot of regulations and so on—you can run into a whole raft of cost, time and delay.

The idea was that those things should be perpetuated, and with very good reason. They underpinned balance sheets, loans and all sorts of things. If they were to be effectively prejudiced by the loss of a planning consent, so that you had a property with either no verifiable development value or a lower development value, that had repercussions for precisely the sort of reasons I outlined earlier this afternoon in another context. So it is perfectly possible that a planning consent that was negotiated on the basis of rules in 2006 or 2007 would not have got going by the end of 2008 or 2009, and would have had to be preserved. The houses would not have been constructed until some time later, but the circumstances relating to that consent would have related to the antecedent circumstances at the time of granting of planning consent. I can see that there is an issue here.

I am always a bit frightened by development land values anywhere. I am even more frightened when things go wrong and people start reaching for their lawyers. What are they going to start looking at? Will they say, “The house is now constructed, it was built on what might be called an old technology basis pre-2008, and, lo and behold, it has flooded”? If they are excluded, it may have a material effect on the value. Who will they look to for recompense—the local authority or the fact that Planning Policy Statement 25 did not apply, or should have applied in some other form? This makes me think of the time-honoured American superfund arrangements, where most of the money went not to environmental clean-up but into the pockets of lawyers trying to attach liability. I do not wish to see that sort of thing happening here. Some careful thought has to go into the date and where the cut-off should be. I know it is not easy. I am happy to believe that the account of the reasons and circumstances given by the noble Lord, Lord Shipley, is the correct one, but I am slightly surprised that it seems to be a little at variance with the one that I have. I would be very interested to hear what the Minister has to say about this.

[Baroness Bakewell of Hardington Mandeville]

We have had a good debate on this issue, so I will be brief. I am concerned, like others, at the exclusions from Flood Re. My concerns are that many households may have no idea that their property is in a high-risk area or that they are excluded from Flood Re. Like the noble Earl, Lord Lytton, I am interested to hear from the Minister how many properties were built before 2008 but were not occupied until 2009 or after. The people living in these properties may well get a nasty shock when they realise that they are not able to do anything about it.

My concern with Amendment 160A is that all classes of people, whether they are freeholders, leaseholders or the owner of a commonhold tenancy, should be treated equally. Other noble Lords have covered this area in detail. If properties are on the flood plain, whether they are 200 or five years old and whether they are owned or rented, they should be able to access affordable flood insurance. Anything less is invidious. There will be households where a newly married couple have taken on the leasehold of a property, raised their children, lived in it all their working life and now seek to retire there. When they first took up occupancy of the dwelling, there would have been no hint of it ever flooding. However, with changes in the jetstream and continuous and persistent rainfall year on year, they now find that they and their neighbours are suffering from flooding. Are these residents now to be excluded from Flood Re? The Bill is not clear on who the person with the “qualifying interest” is. Will the Minister clarify this situation?