Water Bill

Debate between Lord Ashton of Hyde and Baroness Northover

Tuesday 11th February 2014 Lords Chamber

[Lord Ashton of Hyde]

My Lords, perhaps I may ask the noble Lord whether the requirements should be imposed before the regulations that bring the Flood Re scheme into effect, or whether he is talking only about subsequent regulations. If that task has to be undertaken at the beginning, it might imperil the start of Flood Re.

[Baroness Northover]

My Lords, I am grateful to the noble Lord, Lord Whitty, for drawing attention to his wish to ensure that that the policies set out in the legislation respond to the demands that climate change may bring in future—in particular, by including a formal role for the Committee on Climate Change. I was not entirely sure whether the noble Lord, Lord Krebs, accepted that formal role.

We fully agree that climate change and adaptation to it are vital. The noble Lord, Lord Whitty, added the additional factor of population growth. He rightly challenges us on the uncertainty of the future and we are very much aware of the need to plan for the future in this regard.

The Committee on Climate Change and, in this respect, its Adaptation Sub-Committee play a very important role in providing independent advice to the Government. The information and analysis provided since the committee’s inception have helped to shape the debate on climate change. Although the evidence of climate change is becoming increasingly compelling, it is clear that we need to do more to understand and plan for its impacts. This is a challenging task, given how interrelated and unpredictable those effects are. We have seen how variable the jet stream has been over the past few years, for example, and how it has brought us drought and flood.

Although, clearly, dealing with the current devastating flooding is the immediate absolute priority, we also need to reflect on our management of flood risk and assess our preparedness for climate change. The Government published the UK’s first national adaptation programme report in July 2013, which sets out the action that we propose to take. There is great expertise in this country, not least in your Lordships’ Chamber, which we can access and are accessing, as well as learning lessons from elsewhere.

Specifically in relation to Flood Re, I assure noble Lords that climate change projections were considered alongside other risk factors during the design of the policy and that the effects of climate change will continue to be considered during future levy-setting discussions. I remind your Lordships that in the memorandum of understanding with the industry that has been used to craft the Bill—I mentioned it in relation to a previous group—we have recognised the importance of the programme of flood defence and have committed to a specified amount of expenditure for 2015-16. However, we believe that advising on the scope and financial parameters for the transitional Flood Re scheme is a role for the insurance industry and would be outside the current remit of the Committee on Climate Change.

To clarify, the number of policies that would be eligible for Flood Re is based solely on the cost of the flood risk component of any policy, which is set by the insurers. This assessment of flood risk will indeed change over time, as the noble Lord, Lord Whitty, acknowledged, and it would not be possible for the Committee on Climate Change to provide any estimates without detailed knowledge of industry pricing models. Similarly, the value of the levy required and the likelihood of the need of any additional contribution by insurers is based on a number of financial parameters that could change year on year. Those include the level of premiums received, the cost of reinsurance and the amount of levy collected.

The Government and the Association of British Insurers have worked hard to determine the value of the levy required and the likelihood of the need for additional contributions, based on industry data and assumptions that were subject to independent review by Professor Stephen Diacon. In addition, extensive modelling, using a model that was quality-assured by the Government Actuary’s Department, has been carried out by the Government using there data, as part of both the pre-consultation and post-consultation impact assessments.

Looking forward, the Environment Agency will continue to collect and analyse data on flood risk, which will feed into the Government’s ongoing assessment of the scheme. In addition, as Flood Re is directly accountable to Parliament, detailed audited information about Flood Re’s ongoing operation will be reported to Parliament regularly.

I turn now to the proposed role of the Committee on Climate Change in advising the Secretary of State on setting the target number in relation to the flood insurance obligation. Clause 58 gives the Secretary of State the power periodically to set a target for the proportion of properties on a register of properties at greater flood risk that relevant insurers are collectively required to issue with insurance policies. The register, to be created by the Environment Agency and its counterparts in the devolved Administrations, will be based on the flood risk maps published by those bodies.

The number of properties indicated as subject to flood risk may change with time, as a consequence of climate change or through better information and mapping. The Secretary of State would set an overall target for the number of registered properties that the industry as a whole needs to cover. In setting this target, the Secretary of State would consider evidence on existing take-up rates of insurance and other relevant data. This could include advice from the Committee on Climate Change, should the Secretary of State wish.

The setting of the target number is a decision regarding the appropriate breadth of support that should be given by this financial support mechanism. Again, we believe that advising on the target number would be outside the committee’s current remit and, for reasons discussed in relation to Flood Re, would not be the most appropriate use of its resources or expertise.

Although, for the reasons that I have set out, we do not feel able to accept these specific amendments, I would like to return for a moment to the wider spirit behind them. We absolutely recognise that climate change is a most important consideration for the management of future flood risk and we value the expertise of the Committee on Climate Change. We are pleased that the independent Adaptation Sub-Committee will be publishing a revised climate change risk assessment report in summer 2016. We will consider that evidence and any implications for flood risk management carefully once the report is received.

Noble Lords know about various measures that we are putting in place to reduce the risks of flooding and coastal erosion, so I will not expand on that right now. I hope that the noble Lord will have been reassured by what I have had to say, setting what we are doing here in the context of our deep understanding of the potential implications of climate change and the unpredictability of measuring it into the future. I hope that he will withdraw the amendment.