Water Bill

Lord Krebs Excerpts

Tuesday 11th February 2014 Lords Chamber

[Lord Campbell-Savours (Lab)]

My Lords, I, too, am very interested in this amendment, which has been drawn to the attention of people who live in my former constituency, in particular in the town of Keswick, which noble Lords may recall was the victim of substantial flooding a few years back.

I received a letter from Mrs Lynne Jones, the chair of Keswick Flood Action Group, one of the bodies that was established following the floods some years ago. I will read her letter to the House, because it comes from the front of the battle against flooding, from people on the ground who have to deal with this every day. She writes:

“My particular concern has always been that there is no encouragement or independent advice to reinstate properties in a more flood-resistant, resilient manner after a flood. It can be considered as betterment. Insurance companies have to reinstate properties with insulation which satisfies government legislation, whether there was insulation before or not. However, there is no requirement to consider solid waterproof floors as opposed to floorboards or a rewire from the first floor down, or the many other measures which can make flood recovery that bit less stressful, prolonged and expensive should the worst happen”.

In other words, people on the front line in this battle against flooding are now considering to what extent this scheme can be adapted in a way that incentivises investment not just in the solution of the immediate problem but in remedial measures which can affect claims in the future.

[Lord Krebs (CB)]

My Lords, I support the amendment in the name of the noble Baroness, Lady Parminter. As will be apparent, the amendments that I will bring forward shortly are in the same vein. They reflect the points I made in a letter to the Secretary of State on 22 November 2013, in which I said:

“The Flood Re scheme offers the opportunity to strengthen incentives for the uptake of household flood protection measures but it is currently not designed to do this. The consequence is that Flood Re costs will be higher than they need to be, at the expense of householders funding the programme through the industry levy”.

I declare an interest as the chairman of the adaptation sub-committee of the Committee on Climate Change.

As this discussion has made clear, there is a real opportunity here and this is a helpful and supportive proposal. I will shortly describe my amendment, which would redesign Flood Re to help it, as has been said, to do two things: to provide cover for householders at risk and, at the same time, help to reduce those risks over the years ahead, so that when Flood Re comes to an end householders do not drop off a cliff after 25 years.

[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.

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[Baroness Parminter]

My Lords, briefly, I support my noble friend Lord Shipley on this important amendment. We are rightly spending the majority of our time today discussing a financial vehicle to deliver affordable flood insurance, but the planning system has a vital role in making our country more resilient for the future. On the potential effects of cuts in local authority budgets on their ability to undertake their important planning functions, which my noble friend mentioned, I add that a review in 24 months’ time is sensible, given that in the intervening 24 months there will be further significant cuts to the Environment Agency’s budget, with an expected cut of more than 550 staff.

Given the scenes we have seen in recent days, it would be only too easy for people, rightly, to make the case that we must protect front-line staff in the Environment Agency. However, it is equally important to look appropriately at people in the back room who are working hard on the consultations on significant planning applications for developments of more than 10 houses or one hectare. Equally, it is important that the national flood management strategy, which the EA devised in 2011, is carried forward.

I add my support. The timeline that my noble friend Lord Shipley has suggested of 24 months is apposite given the need to review some of the resource constraints that both local authorities and the Environment Agency will face in the forthcoming months.

[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.

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I can reassure noble Lords that the most recent agency report, for 2012-13, shows that 99% of proposed new residential units to which the Environment Agency objected on flood risk grounds were decided in line with agency advice where those decisions are known. This proportion has remained very similar over a number of years.

[Lord Krebs]

In the case of the Environment Agency lodging an objection, in what proportion of cases was it informed of the outcome? In the review that the adaptation sub-committee carried out in 2012, we found that in nearly a third of instances where the Environment Agency had been consulted, it did not know the outcome because it had not been informed. Has that figure changed?

[Baroness Northover]

I hope to get an inspired answer any second in order to be able to tell the noble Lord. If I do not get inspired, I will write to him.

I remind noble Lords that the Environment Agency is already required, under Section 18 of the Flood and Water Management Act, to report on the delivery of the national flood and coastal erosion risk management strategy for England. These reports must include information on all sources of flood risk and coastal erosion, and cover the work of all of the relevant accountable authorities. To reassure the noble Earl, Lord Lytton, the Environment Agency helps to provide the national overview that he seeks.

My noble friend Lord Shipley suggested that we need to know better whether properties built since 2009 are flooding or making others flood. One of the benefits of the memorandum of understanding between the Government and insurers last year, which I will come on to in the next group, is that for the first time we will have access to claims from flooding. This information will be used by the Environment Agency and its equivalents to target flood risk investment and could be used to inform policy development. In this context, I also note what the noble Lord, Lord Krebs, said about his data sets. Clearly, the more information we have, the better. I am sure that those data sets will be of interest both to Defra and to the Environment Agency.

Let me see whether I am inspired by the note I have been handed.

Where the outcome is not known, which is what the noble Lord, Lord Krebs, is talking about, the agency is satisfied that there is no significant difference in the outcomes between those cases reported and those not reported by authorities. I hope that that reassures the noble Lord. It is, of course, important that all these areas continue to be probed, because everybody needs to be reassured that that is, indeed, the case.

Coming back to the assessments that are taking place, high-level reports are produced annually, with more detailed reports provided to coincide with the six-year cycle of the flood risk regulations. Further interim reports may be produced as directed by the Government to support policy decisions such as future government spending reviews. The Government also conduct regular reviews of the effectiveness of policy delivery. For example, a review of the impact of the new partnership approach to flood risk management funding has just concluded. There are also two reviews of flood risk management in progress at the moment and one at a scoping stage. I listened to the comparison by the noble Lord, Lord Campbell-Savours, of the situations in Abingdon and Keswick. My noble friend Lord Younger, who was in his place a moment ago, noted this with interest and passed me a very interesting comment, but I hear what the noble Lord said and I will make sure that his suggestion is fed through to the relevant authorities.

Coming back to the general reviews, in addition to those I mentioned, my right honourable friend Oliver Letwin MP is leading a review of the lessons learned from the recent flooding, particularly the tidal surge, and the other review is looking at the resilience of key infrastructure to major coastal flooding. Both of these are expected to complete in the spring. Defra is also scoping an evaluation of the effectiveness of the Flood and Water Management Act 2010, which I hope will reassure my noble friend and which will initially focus on local flood risk management. Under the Act, lead local flood authorities and other risk management authorities have a duty to co-operate with each other, as he noted, to ensure that constructive and active engagement takes place and helps to build local relationships between relevant authorities within and across operational boundaries. We noted what he said about Northumberland and Somerset. Work on this evaluation is anticipated to start later this year. We therefore feel that proposed new paragraphs (b) and (c) of this amendment would duplicate existing planned work.

I hope that my noble friend is reassured by what I have said and that he will be content to withdraw his amendment.

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[Lord Krebs]

My Lords, I am grateful to the noble Lord, Lord Whitty, for suggesting an additional task for the Adaptation Sub-Committee of the Committee on Climate Change. While recognising that that is a task that we could carry out, I just say that one important corollary would be that the committee would need access to the relevant data from Flood Re, Defra and the insurance industry. Given access to that information, the committee could, as the noble Lord suggests, provide an independent assessment for the Government, which I think would be helpful in seeing how Flood Re is progressing.

[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.

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Moved by

[Lord Krebs]

156C: Clause 54, page 108, line 25, at end insert—
“(e) the need to build awareness of local flood risk amongst beneficiaries of the FR Scheme,(f) the need to inform beneficiaries of the FR Scheme of the need to achieve transition to risk-reflective prices as mentioned in paragraph (d).”

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[Lord Krebs]

My Lords, in speaking to this amendment I will also speak to the other amendments standing in my name. I can be brief because the issues raised in the first of these amendments, and indeed in the second, have already been thoroughly explored by the noble Baroness, Lady Parminter, in her amendment.

Amendments 156C and 156D are really about information for householders. I find it hard to see why one would object to giving householders information that will help them now and in the future. The first part of Amendment 156C simply asks that Flood Re should build awareness among householders of their own flood risk. Earlier this afternoon we heard the noble Lord, Lord Crickhowell, alluding to a Defra website where information could be garnered, but the fact remains, from surveys of householders, that many of them are unaware that they are living in a flood risk area, and Flood Re has been designed to be invisible to the households concerned. As currently cast it will not give them any source of information. It is important that we incorporate in the Bill the requirement for the Flood Re administrator to give households information about their risk.

The other part of this, in the addition of proposed new paragraph (f) at the end of line 25, is to again alert householders who might be affected to the fact that Flood Re is not a permanent arrangement, and that there will be a transition. The transition is over a long period—over 25 years, as we are now familiar with—but it is important that householders over that 25-year period take action if they are at risk, to reduce their risk. Therefore it is important for households to have transparent information about the nature of the transition to risk-reflective prices that will arise at the end of Flood Re. It is hard to object to giving consumers information.

I now move to Amendment 156D, the second of my amendments. Again, I can be brief about this. It requires Flood Re to be explicit about the plan for transition, and to publish a transition plan so that the householder concerned will know what to expect—otherwise there will not be clarity for households. Difficult decisions to gradually withdraw the benefits of the scheme may continually be postponed, because it is always difficult to tell householders that they are going to lose a certain benefit that would arise through the coverage of Flood Re. In order to avoid confusion it is important that the Bill sets out a requirement to give a plan for the future, and therefore prevent Flood Re becoming a permanent and growing burden on the costs of insurance paid by other policyholders. So the transition must take place at the end of the 25-year period, and my Amendment 156D seeks to ensure that a plan for the transition is published, so that we can have more confidence that it will take place, and when it will take place.

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[Lord De Mauley]

My Lords, I concur with the noble Lord, Lord Krebs, in Amendment 156C that it is important that householders whose policies are ceded to Flood Re are aware both of the flood risk in their vicinity and of the transitional nature of the scheme. Knowing about flood risk is vital so that households can take simple steps, such as signing up to free flood warnings, as well as investigating longer-term options for managing their flood risk, and can understand the likely impact on their future premiums of the withdrawal of the subsidy from which they are benefiting.

We will work with insurers and Flood Re to support people at flood risk to plan for and adjust to risk-based pricing. I hope that noble Lords will be reassured to know that we have agreed with the ABI that insurers will be required to provide information to customers about their flood risk, Flood Re and the actions that they can take to manage this, both when a property is ceded to Flood Re and at the point of a claim. Of course, raising awareness of flood risk remains primarily a matter for risk management authorities, such as the Environment Agency, so it will be important to ensure that any action by insurers on behalf of Flood Re complements their work.

Turning to Amendment 156D, I understand that by changing the phrasing of the power in Clause 54(3) from “may” to “shall”, the notion that Flood Re is a transitional measure is strengthened. I point to the Government’s stated policy objective in the June 2013 public consultation that,

“there should be a gradual transition towards more risk-reflective prices”,

and to the existing provisions in subsection (2) of the clause, which may require the administrator to have regard to the transitional nature of the scheme in discharging its functions. We have been clear that there should be a gradual transition to more risk-reflective prices and that we are committed to ensuring that the scheme retains incentives for flood risk to be managed. The Government will not designate the scheme until we are satisfied with the industry’s proposals. As I have already said today, the regulations designating the scheme will be subject to public consultation and we are currently considering the recommendation of the Delegated Powers Committee that regulations made under this clause should be subject to the affirmative procedure. While I recognise that the shift from a permissive power to a firm expectation could be claimed to underscore Flood Re’s duties in this regard, I believe that there is sufficient clarity in Flood Re’s role to manage the transition to risk-reflective pricing and for that to be achieved through the current drafting of the Bill.

Turning to Amendment 156E, from my noble friend Lady Parminter, I can confirm that it is, as she said, our firm intention that the policy will be reviewed every five years by the Government. This review will assess the level at which the levy and the eligibility thresholds are set to ensure that the policy objectives of Flood Re continue to be delivered, including the transition to risk-reflective pricing. The plan will be a public document and Parliament will be able to use existing powers to call Flood Re’s staff to answer any questions. On the point made by the noble Lord, Lord Whitty, in the case that Flood Re’s finances are out of kilter or the scheme is not operating effectively, that review will be brought forward. We are working with the ABI to define this process. The amount of the levy and the thresholds will be set out in secondary legislation. We intend those instruments to have a review period, always accepting that they might be reviewed early if circumstances require it. In addition, as I have just said, we are taking a power to make Flood Re’s responsible officer directly accountable to Parliament for the scheme’s value for money and for propriety and regularity. There are powers to require Flood Re’s audited accounts to be laid before Parliament and provided to the Comptroller and Auditor-General to examine and compare against Flood Re’s published transition plan.

I now turn to Amendment 156F, which would require the Flood Re scheme administrator to set out how it intends to manage the transition to risk-reflective pricing by investing in flood risk mitigation measures. Actions taken by households, communities, businesses and Government to reduce flood risk are the best and most cost-effective way to secure affordable insurance for households at risk of flooding in the long term, and I recognise the noble Lord’s intention to see this reflected in the Bill. As I said earlier, Flood Re will have a duty to have regard to the need both to act in the public interest and to ensure economy, efficiency and effectiveness in the discharge of its functions. It may well be that the Flood Re administrator decides in due course that investments of the sort that the noble Lord would like to see present an appropriate means of complying with these requirements where there is a clear case for doing so. Nothing in the Bill precludes this. However, we think that it is important for Flood Re to retain flexibility in the way that it discharges its public-interest duty and plans for transition, in order to ensure that it is in a position to balance these requirements against its core obligations as a reinsurer. Accordingly, we do not think that it would be appropriate to mandate Flood Re to subsidise flood risk mitigation measures.

Finally, Amendment 156G would limit the maximum proportion of the cost of a claim that an insurer could reclaim from the Flood Re scheme to a specific amount, as part of the Flood Re scheme’s management of transition to risk-reflective pricing. I understand that the intention is that this would restore an element of risk-reflective pricing to insurance policies in Flood Re. This could create a financial incentive for households and insurers to put in place the necessary measures to manage their flood risk. However, price is one, but not the only, signal to households for achieving that and our proposals for ensuring that households have the necessary information to make informed choices about managing their risk should also act to drive resilient behaviours. While superficially attractive, sharing an element of the risk between Flood Re and households would also have the effect of creating a more complex system to administer, thereby adding to the overall costs of the scheme. Having listened to what I have said, I hope that the noble Lord will be prepared to withdraw his amendment.

[Lord Krebs]

My Lords, I thank the Minister for those comments in response. Above all, my amendments are about trying to put risk communication and management at the heart of Flood Re; we have heard that in relation to previous amendments earlier this afternoon. I am pleased to hear from the Minister that this is indeed the Government’s intention. I look forward with great interest to seeing how that develops through to the next stage of the Bill.

I also thank other noble Lords who have taken part in discussion of these amendments. On the frank feedback of the noble Lord, Lord Whitty, on my lecturing skills, in Oxford we normally do that anonymously. This was non-anonymous feedback on my lecturing skills in explaining risk sharing; I will take that away and consider it for the future. In the mean time, however, I beg leave to withdraw the amendment.

Amendment 156C withdrawn.