Flood Insurance

Lord Benyon Excerpts

Tuesday 26th March 2013 Commons Chamber

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)]

I echo the plaudits given by Members on both sides of the House to my hon. Friend the Member for Esher and Walton (Mr Raab) for securing this debate and to the Backbench Business Committee for agreeing to it.

I say from the start that, yes, the Government are in arduous and urgent negotiations with the insurance industry. We recognise that the Government’s first and primary role is to tackle risk by building flood defences. We are doing that, and I will talk about it later. We must get a good deal for the taxpayer and policyholders and, frankly, a better deal than the statement of principles. Therefore, insurance must be available and affordable, without adding to bills. We are not yet in a position to make an announcement that we have a value for money, deliverable solution and one that is legal within the constraints of state aid, but I can assure hon. Members that we are working extremely hard to achieve that.

[Mr Gibb]

The Minister has been assiduous on this issue, and we are looking forward to seeing him in Pagham in my constituency in late April. Will he be able to make an announcement on this issue before 30 June?

[Richard Benyon]

I hope that we will be able to do so, and I will give more details on that later. I am looking forward to meeting my hon. Friend’s constituents and to understanding the daily threats that they live with.

Let us be clear: the availability and affordability of home insurance in flood-risk areas beyond the expiry of the statement of principles on 30 June are vital for hon. Members and the Government, and I firmly support the motion.

Flooding has a significant and long-lasting impact on local communities, which I have seen first hand in my constituency. The availability of home insurance in flood-risk areas provides important financial protection and peace of mind to such communities. The Government remain committed to ongoing negotiations with the insurance industry and others on what replaces the statement of principles agreement. We want to find a solution that ensures the availability and affordability of flood insurance and will endeavour to continue working with the industry towards that goal.

[Naomi Long]

rose—

[Ian Lavery]

rose—

[Richard Benyon]

I am really short of time, but I will respond to the point that I believe the hon. Gentleman wants to make. If I have time to give way at the end, I will do so.

As Ministers have repeatedly made clear, the main aim of our work has always been to reach an agreement whereby insurance bills remain affordable, without placing unacceptable and unsustainable costs on wider policyholders. The Government have been doing a lot to support the continued availability of affordable insurance. Reducing flood risk will always be the best and most sustainable solution. Despite difficult times, we are on track to spend more than £2.3 billion to deliver better protection from flooding and coastal erosion to more than 165,000 homes over the four years to 2015. Our new system of partnership funding has brought in an additional £148 million on top of that from external partners. Many hon. Members, including the hon. Member for Wansbeck (Ian Lavery), have benefited from that in their constituencies. I give full praise to him and his constituents for the leadership that they have shown.

The hon. Member for Kingston upon Hull North (Diana Johnson) asked why there was nothing in the Budget, but £120 million of investment was announced in the autumn statement. Many of those schemes are shovel-ready and proceeding, and they are a great comfort to constituents.

Despite last year being the second wettest on record, more than 200,000 homes were protected from flooding because of defences already in place. The Environment Agency’s flood warning service provided additional support; evidence is emerging that many houses avoid flooding because of the better flood warning system. We have estimated that, for every property that suffered flooding last year and in January, more than 25 homes were protected because of flood defences and maintenance work and because of the work of the Environment Agency, local authorities and other front-line responders. More than 200,000 householders are therefore benefiting from the Government’s continued investment in managing flood risk.

Many hon. Members are impatient for information on the Government’s discussions. I am impatient to share the details, but it would be quite wrong to go into too much detail.

I join my hon. Friend the Member for South East Cornwall (Sheryll Murray) in offering commiserations to her constituent and her family for their loss. I entirely agree with her that all available information must be made publicly available, so that we can get to the bottom of what precisely happened.

[Mr Andrew Smith]

Will the Minister give way?

[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.

[Mr Andrew Smith]

Will the Minister give way?

[Richard Benyon]

The right hon. Gentleman will have to be very brief.

[Mr Smith]

The Minister said earlier that he was impatient to share information with the House. Can he tell us what the Government’s sticking point—their fundamental problem—is with the “Flood Re” proposal?

[Richard Benyon]

I will come on to that.

My hon. Friend the Member for Cardiff North (Jonathan Evans) talked about flood insurance in the context of terrorism, but those are entirely different types of insurance. The pool model does work for some of them, but the “Flood Re” model would not work in this case, because it does not provide support for the cost of that cover. He made the point that “Flood Re” is a not-for-profit solution. Well, yes and no, in that the Government would pay through a levy—so householders are paying for it with an element of underwriting—but taking away risk from the most at risk is an advantage to the industry. So we must be very careful. The Minister’s job is to look after the taxpayer and householder. Yes, we need a solution, but not at any price. Whoever was standing at the Dispatch Box, they would not want to bring before the House a deal that was unworkable or that would cause the wrong sort of increases for some of the most at risk and hard up of our constituents. We need to get this right.

My hon. Friend the Member for Portsmouth North (Penny Mordaunt) made a point about farmland and the wider risk. When farmland is flooded as part of a formal flood alleviation scheme, the landowner is compensated.

My hon. Friend the Member for Esher and Walton introduced the debate with a powerful speech. He made a point about the governance of any arrangements. He was right to do so, and it is important that we take forward his concerns and make those arrangements clear in the announcement. I can assure him that the Department for Communities and Local Government and the Department for Environment, Food and Rural Affairs are working closely.

I was concerned that the hon. Member for West Lancashire (Rosie Cooper) talked about shambolic local flood administration in her constituency. We have implemented the Flood and Water Management Act 2010, which arose from Sir Michael Pitt’s recommendations after 2007. I note that she said that that is not happening in her constituency, and I am happy to take that up.

Many hon. Members made good points, which I could probably summarise as, “We want a decision and an announcement soon, because our constituents are worried.” I can understand that. We are doing other things to help those who might be struggling to find affordable insurance. We have published a guide to obtaining flood insurance in high flood risk areas in collaboration with the National Flood Forum, Which? and insurance industry representatives. The guide helps people navigate through the insurance market and acts as a signpost to actions that individuals can take to reduce their flood risk.

Insurance can be found for reasonable prices if people talk to their insurer about their specific circumstances. The Environment Agency can provide supporting evidence on the local flood risk, for free, which people can use in discussions, and I want to hear from hon. Members if that is not happening. Different companies take different approaches to flood risk and it almost always pays to shop around.

I recognise the great concern on both sides of the House on this matter. I want to give hon. Members and their constituents the assurance that they want, but I will not do it at any price. Yes, it has taken longer than any of us would have wished, but I hope that the deal we bring to the House will be better than what we have now, especially for those of our constituents who are on low incomes.