Flood Insurance

Gavin Shuker Excerpts

Tuesday 26th March 2013 Commons Chamber

[Gavin Shuker (Luton South) (Lab/Co-op)]

Thank you, Mr Deputy Speaker, for calling me to speak in this important debate. It has been a good debate, and I congratulate the hon. Member for Esher and Walton (Mr Raab) on securing it and the Backbench Business Committee on giving it the importance it deserves.

We have heard several fantastic speeches and many comments that were true for Members on both sides of the House. My hon. Friend the hon. Member for West Lancashire (Rosie Cooper) made a strong argument about the link between flood defences and flood insurance, while the hon. Member for Oxford West and Abingdon (Nicola Blackwood) raised concerns on behalf of the 1,627 of her constituents who will be particularly affected if flood insurance is not available. To her point about drainage, I would add that there are six provisions in the Flood and Water Management Act 2010 that have not yet been enacted and which I invite the Government to implement.

My hon. Friend the Member for Kingston upon Hull North (Diana Johnson), who is a dogged campaigner for her constituents, has made endless attempts to establish the true state of the negotiations and made a powerful argument, while the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith) talked about the devastating effects of flooding in his community and made a strong point about how the increasing unpredictability of recent flood events are causing us to ask fundamental questions about the nature of risk.

My hon. Friend the Member for Wansbeck (Ian Lavery) made a powerful speech about his constituency and his constituents in Morpeth, where nearly 1,000 properties were devastated in those terrible scenes. The hon. Member for York Outer (Julian Sturdy) mentioned the village of Leyburn and the problems faced by residents there. He rightly asked a question that I will go on to ask: would it not be terrible if those constituents came together to manage their flood risk but were let down by the Government and the insurance industry in getting a deal?

Hon. Members across the House will, I am sure, agree with comments made by the hon. Member for South East Cornwall (Sheryll Murray) about the tragic event in Looe last week, and our condolences go out to the families of those concerned. There are other issues elsewhere in Cornwall, and the hon. Member for St Austell and Newquay (Stephen Gilbert) spoke about the inevitable unwinding of the cross-subsidy in the system, should we move to a free market position.

The hon. Member for Cardiff North (Jonathan Evans) made a powerful speech about the lack of urgency and care from this Government, and he put it best when he said that they must get their act together, and soon—a point I will go on to make. The hon. Member for Portsmouth North (Penny Mordaunt) drew on matters relating to planning and deliberate flooding, reminding us that we must view this issue in the round. Finally, the hon. Member for Tiverton and Honiton (Neil Parish)—a constituency that has seen more water than most in the past 12 months—drew on the key issue of affordability and reminded the House that we are discussing a not-for-profit scheme.

Ninety-six days are all that stand between today’s near-universal coverage for flood damage and an unfettered free market that will leave tens of thousands of people with homes that are uninsurable, unmortgageable and unsellable—96 days, and the clock is ticking.

I am disappointed that the Minister for Government Policy, the right hon. Member for West Dorset (Mr Letwin), is unable to be with us today as it is clear that he is leading on negotiations. I am sure that his services as a Government troubleshooter are needed elsewhere, but whatever measure of success the Government apply, so far the process leading to whatever deal we will get has been a failure—a failure of competence, ambition and ideology, and a failure of the Prime Minister.

Hon. Members might remember the Prime Minister’s comments during the extensive flooding of November last year:

“I’m sure we will do a deal…We are in negotiations at the moment…We need to take a tough approach frankly and it’s important insurance companies do what they are meant to, which is provide insurance to households and we are going to make sure that happens.”

Just to make it perfectly clear, he said: “I am personally involved.” That was last year, yet 200,000 high-risk homes could find themselves without insurance in 96 days.

In government we negotiated a wide-ranging agreement to ensure near universal access to flooding insurance. The limitations to that scheme have been made clear, which is why in 2008 we agreed, alongside the insurance industry, that a successor deal would be needed. This Government, however, have had three years but they have squandered them. They had an insurance industry willing to negotiate to find a solution, and I made it clear that the Opposition will take a responsible approach and support any deal to ensure affordable and available insurance. The Government had the resources of the Department for Environment, Food and Rural Affairs, the Cabinet Office, and even of No. 10 Downing street, yet with 96 days to go there is still no deal.

The consequences of that are stark. Nick Starling from the Association of British Insurers warned that the only alternative to a deal with the Government

“is a free market, meaning up to 200,000 people will find insurance unavailable or unaffordable.”.

Ian Crowder of AA Insurance has stated:

“We are concerned insurance premiums will spiral out of control if no agreement is reached between the ABI and the Government.”,

and Paul Broadhead of the Building Societies Association warned chillingly:

“Failure to reach agreement could also have an effect on mortgage lending in high risk areas”.

The National Flood Forum stated:

“Government needs to accept its responsibilities of protecting its citizens by making a decision. Failure to make a proposal will put thousands of people at risk”.

In short, if the Government fail to get a deal, nearly 200,000 households could find themselves without insurance, unable to sell, and with their properties revalued sharply downwards. That could place them in negative equity and create tranches of property blight across the constituencies we represent. In other words, the stakes could not be higher.

Given those consequences, it is even more worrying that the Government seem unable to admit that they are struggling. In a letter to me of 19 April 2012, the Minister stated:

“I cannot comment on the timing of any future announcements on this issue but have committed to providing a further update this spring”

For the sake of clarity, that was spring 2012. No response. In response to my written question of 18 June 2012, the Minister said that the Government were

“at an advanced stage in intensive negotiations with the industry on alternative arrangements for when the Statement of Principles expires.”—[Official Report, 18 June 2012; Vol. 546, c. 738W.]

In her written ministerial statement of 11 July 2012, the former Secretary of State, the right hon. Member for Meriden (Mrs Spelman), said:

“Intensive discussions with the insurance industry are continuing and we will announce further details in due course.”—[Official Report, 11 July 2012; Vol. 548, c. 30WS.]

Last November, Lord De Mauley said in the other place:

“We are in intense but constructive negotiations with the industry and further announcements will be made in due course”.—[Official Report, House of Lords, 1 November 2012; Vol. 740, c. 644.]

When asked a question by my hon. Friend the Member for Nottingham South (Lilian Greenwood) in January, the Minister said:

“We want to protect those on low incomes in flood-risk areas, and we think we have a method of doing that. We are at an advanced stage in negotiations; I will come to the House shortly, I hope, with details.”—[Official Report, 24 January 2013; Vol. 557, c. 445.]

Come the next set of DEFRA questions in March, the Minister responded to another question asked by my hon. Friend by saying:

“Constructive negotiations continue with the insurance industry, at the highest levels of Government, on a range of approaches that could succeed the current statement of principles.”—[Official Report, 7 March 2013; Vol. 1109, c. 559.]

This situation would be comical if it were not so serious. This is the mañana Department of a mañana Government—always tomorrow and no help for today.

Even if an agreement could be reached, it would require primary legislation. The Minister should admit what we now know to be true—that this will not be in place for 30 June. The 570,000 properties to which this motion applies and the 570,000 families that could find their homes uninsurable, unmortgageable and unsellable are calling for certainty, but there is none.

What is the plan? To deny the risk and the social responsibility that any Government bear would deny one of the most basic laws of political gravity, which is that catastrophic risk resides with us all. When catastrophic floods devastate streets, towns and communities, we rightly expect the Government to be there to help us pick up the pieces. That is what is so short-sighted about the Government’s response to getting a deal done on flood insurance.

As the Minister has previously made clear, there is only one deal on the table. The alternative is a free market that will allow insurers to leave the market for high-risk properties and that will unwind a long-standing settlement that flood insurance should be available as part of every policy.

Climate change is making flooding more prevalent and less predictable, and the UK climate change risk assessment cites it as the No. 1 threat that we need to adapt to. I have made it clear that the Opposition seek to be helpful and constructive in securing a deal that protects home owners, businesses and communities vulnerable to the risk of flooding. Despite our constructive approach, Ministers have refused to brief this House or involve the Opposition in the discussions. As each week passes, it is becoming harder to defend a situation in which Ministers appear to be drifting without giving any indication of when a deal will be concluded.

This Government must get a grip. They have 96 days and the clock is ticking.

--- Later in debate ---

[Richard Benyon]

If I can, I will try to give way in a moment.

We have recently announced a flood resilience community pathfinder scheme for Cornwall and a number of other parts of the country. In my hon. Friend’s case, £476,000 will be spent in Cornwall.

The hon. Member for Luton South (Gavin Shuker) said that the statement of principles was universal insurance.

[Gavin Shuker]

indicated dissent.

[Richard Benyon]

Perhaps that is not what the hon. Gentleman said. The statement of principles is not universal —not by a long chalk—which is part of the problem. Everything he said in his quote from the Prime Minister is absolutely right, and I thank him for pointing it out.

When Conservatives were in opposition in 2008, it was agreed that a successor to the statement of principles would be required. The previous Government agreed that a market could emerge after the end of the agreement. The statement of principles says that there will be no need for specific agreements after June 2013. All hon. Members disagree with that and believe that we need a follow-up.

My hon. Friend the Member for Esher and Walton, to whom I want to give time to make a winding-up speech, asked about the Government’s view of a flood mutual, which is an important question. We are looking very closely at the proposal, which is a possible alternative to “Flood Re”. We are working closely with those who are making that proposal.