Examination of Witnesses (Questions 40
- 59)
WEDNESDAY 28 NOVEMBER 2001
MR ELLIOT
MORLEY, MP AND
SIR JOHN
HARMAN
40. But the understanding with the ABI is that
over a period of time the Government is going to put more resources
into this, so that the risk declines. The ABI have said, "Yes,
we're going to give a two-year period of cover." We are almost
well through that two-year period, it expires on 31 December next
year, does it not?
(Mr Morley) That is right.
41. What can you do to persuade the ABI to extend
that?
(Mr Morley) I think that obviously the ABI are looking
for the outcome of the 2002 spending review and our next stage
of investment. Also I think the ABI were very interested in the
funding review which will be going up for consultation very shortly.
I think that that might give them some reassurances. What I would
also like to stress, Chairman, is that our record in relation
to flood defence in this country is a good one. We should not
forget that. Even in last year's floods, which were an extreme,
round about 10,000 homes were affected of round about 300,000
that were at risk at that time. The response worked very well.
There were no lives lost as a direct result of the flooding last
year. The co-ordination of the services, I think, was in many
cases exemplary in the way that they reacted. The flood defences
that we had in place, most of them, performed beyond their designed
capacity, in river levels which in some areas were at 400-year
peaks. So I think we should just remember that considering we
are an island, considering we have all these river systems, our
record in relation to defending people and reducing risk is a
pretty good one, and we intend to make it better.
42. You said earlier on that your standard was
one in 100, did you not?
(Mr Morley) That is what I would like to see, yes,
as a norm.
43. That is not the view of the insurance companies.
They are talking—Norwich Union in particular—about
a one in 200 chance of flooding. Clearly there needs to be more
discussion about a standard across all parties, does there not?
(Mr Morley) I think you can get a bit too hung up
on these standards, because when we talk about the one in 100
standard it does not necessarily mean it is going to be a one
in 100 year event, it might be a one in 300 year event, it might
be a one in 50 year event. It is a kind of chance really. In fact
the ICE report referred to it in a better way by looking at it
like odds, so that if you have a one in 100 standard it is a one
in 100 odds of flooding, which I think is a reasonable standard
as a norm to aim for. Many standards will be significantly higher
than that.
44. The point I am making is that it would be
better if the insurance companies, the Environment Agency and
yourself all agreed the standard, so the insurance companies are
not saying a one in 200 chance and you are using the dual standard
of one in 100.
(Mr Morley) Again, one of the advantages of commissioning
independent reports is that the ICE report recommends the one
in 100 standard which I think is a reasonable recommendation.
45. Finally, and very briefly, Sir John, the
Minister talked about difficulties in getting mortgages earlier
on. The Environment Agency has published maps of at-risk areas.
In Hoveringham, for example, in the Trent Valley, it appears that
those maps are not quite as detailed and precise as they might
be, and that there needs to be more work done on that, but as
a consequence there are insurance problems and mortgage problems
arising in houses that potentially could be flooded, but in the
end might or might not be, depending upon the detail of the map.
(Sir John Harman) I would accept immediately that
more work needs to be done on those maps. Indeed, they are very
good indicative flood-plain maps, and when the Agency published
them on the Internet last year they were extremely frequently
visited, for obvious reasons. This is important public information,
but, as you say, it can be improved. We really should offer the
flood-plain maps. In fact there is work going on to add to that
an extreme flooding event, a one in 1,000 year boundary, which
I think will help to show the gradation of risk. We also need
to be able to map flood risk which is different from the flood
plain, and there is work going on to do that. If I might take
this answer to comment on the point you raised earlier with the
Minister, Mr Tipping, there is no doubt that last year made the
insurance industry much more alert to its exposure on flood risk,
of course it did. As a result of that there has been much more
attention paid to the Agency's information and its accuracy. One
of the concerns I have is that we are now receiving many more
requests than we can reasonably deal with from individuals who
are being asked by their insurance companies to provide information
as to their element of risk, people being asked to ring the Agency
to find out what is the height of their property above mean sea
level, for instance, a whole range of similar questions. I have
raised this with the ABI, because we must have a situation where
publicly available information is freely available, but we cannot
be using public funds to supplement what the insurance companies
need to calculate their risk exposure.
Chairman
46. I am anxious that people who are obviously
concerned about the fate of their properties do get as clear an
idea as possible from this meeting. You said that the Association
of British Insurers effectively were linking their willingness
to maintain cover with the investment plans that the Government
was able to produce. Those would depend, as you have just said
and as we all know, upon the forward financial programme for which
you are now bidding for money from the Treasury. Of course yesterday
we had the Pre-Budget Statement, so we are beginning to be attuned
to those programmes. If the Association of British Insurers conclude
that you have not succeeded in getting from the Treasury the volume
of investment that they think is necessary, what will you be able
to do if people do find themselves unable to get insurance or
unable to get insurance at a level of premium which is reasonable
(to use a word frequently used by the Government)?
(Mr Morley) The insurance companies are not just looking
at the investment programme, they are also very interested in
the planning process as well. They very much welcome the PPG25
changes, because they regard planning as almost as crucial in
this as indeed the investment programme in relation to flood defences.
I would certainly hope that there would not be a situation where
there were significant numbers of people who were not able to
get insurance. Like everything else, Chairman, it is a market.
I suspect that there may be one or two insurance companies who
have decided that flood risk, or maybe even household insurance
is not a very good risk business for them, and they may even like
to withdraw from it and indeed may even be seeking a suitable
excuse to withdraw from this business. I do not believe that that
is the majority view of all insurance companies. I think the fact
that it is a competitive market will ensure that insurance cover
is available for all but extreme cases. There would be, in my
view, only a handful of properties which are very, very high risk,
frequently flood, that would not be able to get insurance cover.
There are, in those circumstances, other approaches such as flood-proofing
of properties which are in particular risk, isolated properties,
which we have seen and for which there is an increasing range
of products on the market and technologies on the market to deal
with these problems. I would like to see these developed more.
In fact I would also like to see, Chairman, if people are in risk
who actually take some steps in relation to flood protecting their
own properties, a discount on that, in the same way that if you
take extra steps to protect your home with burglar alarms or your
car with alarms, many insurance companies will give you a discount
on that. I see no reason why we cannot have approaches like that
within the insurance world as well. At the moment it seems to
be a one-way process, but there is clearly going to be a lot more
consideration in relation to the way that the insurance company
market operates in this.
47. So your hope and your expectation is that
almost everybody need not worry about insurance continuing to
be available, but there may be some cases where it is not, and
in that case they will simply have to look for different solutions
if they want to continue to live in that property?
(Mr Morley) Yes, that is my view, Chairman, but I
would like to stress that I believe that the people in the latter
circumstance will be a very, very small minority, and indeed there
is a minority of people in that position now, and they have been
in that position for some time.
Mr Martlew
48. Can I keep on insurance, Minister. You do
not appear to be accepting that there are a lot of people, an
increasing number of people, who cannot afford the premiums. It
is all right saying that this cover will be available, but especially
for people who perhaps rent a house, therefore there is no mortgage
commitment but they have the contents, the fact is that we are
going to get a situation in these areas where more and more people
cannot afford insurance. Has the Government any plans to deal
with that?
(Mr Morley) No, the Government has no plans to be
an insurer of last resort. We do not believe it is a government
function. It is certainly the view in the most recent funding
review that it is not the Government's function to step in and
to provide insurance if insurance companies will not. In fact
that actually is an invitation for insurance companies to pull
out of any high-risk area and leave that to somebody else to deal
with, rather than spreading the risk themselves in relation to
their own business plans and their own business projections. I
will come back to the point that while I can understand the insurance
companies re-evaluating risk in relation to the kind of flooding
there has been over the last year, it should be a two-way process.
Insurance companies have put the premiums up in some areas that
have suffered from flooding, and in one sense you can understand
the logic in that, but for some of those areas they are now getting
new defences which actually give them a much, much higher standard
of defence than they had previously. The other logic of that is
that if you are reducing the risk, the insurance premiums should
fall. So it should be a two-way process, but it is a market system
in the end, it is competitive, and of course individual companies
decide which areas of business they want to be in and pitch their
policy prices accordingly.
49. To go beyond that I think we have to accept
that there will be people who cannot afford the insurance. Is
the Government prepared to assist, even if they are not prepared
to be the insurer of last resort, in helping those people if their
areas are flooded?
(Mr Morley) Our primary role in providing assistance
is to reduce risk by public investment in flood and coastal defence.
That is our primary responsibility.
Mr Drew
50. Perhaps I can start with what is one of
the most important aspects of this, which is where we build in
the future. Virtually everybody welcomed PPG25. We have read the
report of the DETR Committee on building on the flood plain. If
I can start with Sir John, there is overwhelming evidence to say
that we should be at least very careful about any future building
on the flood plain. Why is it, do you think, that a great many
local authorities do not take a blind bit of notice of what the
Environmental Agency says?
(Sir John Harman) Can I put that into the context,
as you did, of PPG25 and say that it is a bit early to judge what
local authority responses are post-PPG25 which has only been in
since 17 July. Anecdotally, and I went to some trouble to try
and assemble evidence even on that rather short timescale, the
evidence looks quite encouraging in that quite a number of local
authorities who had previously displayed little interest in this
matter are now coming to the Agency and asking for guidance as
to how the long term plans—I do not mean individual applications;
I mean the planning documents for the area—are to be re-visited
in order to accommodate PPG25, in particular the requirement to
apply a sequential test. I have had anecdotal evidence, as I have
said, that quite a number of authorities are now looking at allocated
land to see whether it should remain allocated under the new regime.
There has been a history of a mixed response in local planning
authorities, some of whom have been very ready to take the Agency's
advice seriously and some of whom have not. PPG25 is going to
improve this and although it is too early to say we will be monitoring
in terms of keeping track of the number of times we have offered
advice, the number of times it has been heeded, the number of
times it has been turned aside, and we will report on this. I
presume our first report should be after the first 12 months.
That is my intention. So far post-PPG25 most authorities are taking
a lot of notice of what the Government has asked them to do.
51. I have just put in a written parliamentary
question to try and ascertain what the response has been since
the introduction of PPG25. I speak with some authority. My own
authority chose to completely ignore the Environment Agency and
is building in the flood plain and they will obviously take the
consequences. I would be interested to hear from the Minister
in terms of what the Government is saying to local authorities
because I certainly heard in this case that it was not called
in despite, I have to say, absolutely categorical positioning
by the Environment Agency that this was not a development that
they would support.
(Sir John Harman) I know you were addressing the Minister,
Mr Drew, but can I just say that I anticipated that you might
wish me to look at that and it is the Ebley Wharf development.
52. Funny you should say that. It is imprinted
on my brain at least.
(Sir John Harman) It was the television programme
that first alerted me to this. I would point out to the Committee
that the decision on that was taken before PPG25 came in.
53. Just.
(Sir John Harman) I had to be very careful to identify
what were the grounds of the Agency's objection. The grounds on
which we are objecting are sustainability, impact on conservation,
heritage, etc, rather than on flood risk at the moment.
54. I would just like to take you up on that,
and I do not want to dwell on personal grief here. The fact is
that you cannot separate sustainability and the other features
you talked about from the overall fact that you are building in
the flood plain. Let us not worry about every one in a hundred
years flooding; it may be this year, and this is part of the problem
where they get at local authorities. They say, "This land
does not flood". The very fact that every other bit of land
around it floods does not seem to come into their reasoning. How
would you respond to that sort of situation?
(Mr Morley) Basically planning decisions are taken
at local level and it is about devolving responsibility, and of
course powers. With powers comes responsibility. Planning authorities
do have a duty to take into account the advice of bodies like
the Environment Agency and under PPG25 that is much clearer now.
They also have powers in relation to asking for flood mitigation
measures from developers and asking for contributions from developers.
It may well be that you could theoretically have a development
and you could design it in a way that would make sure that it
was not at risk from flooding, although of course you also have
to take into account the potential impact of that development
on other existing properties and users. That is also a function
of the planning authorities. They know that very well. They have
very clear guidance on that. I understand this particular case
was not called in because it was a local decision, not a national
decision. The kind of anecdotal evidence that I am getting is
that it seems to have gone the other way and that many local planning
authorities are becoming almost paranoid about advice from the
Environment Agency and if they think the Agency is going to recommend
against it then they will not do anything. In fact, I have been
getting complaints of a kind of blight being put on. I think we
have to find a realistic middle way in relation to how you deal
with this. Planning authorities have to be reasonable and realistic
in terms of looking at each individual application on its merits.
In some cases yes, it is true that they will have to turn it down,
but that guidance has been given to them very clearly.
55. If I could take up one specific point on
that, you made the correct observation that if there are subsequent
losers as a result not of the development but, say, downstream
of it, what rights have those people got if they feel that the
development that has been built in the knowledge that there was
a possibility of flooding being worse than in other areas and
floods subsequently follow? What recourse have they got?
(Mr Morley) If they could make a case to demonstrate
that they were being affected because of a particular development
then I would have thought that there might be some liability on
the developer, but you are into legal areas here on which I am
not qualified to advise you.
56. One final point. In terms of returning to
the DETR Select Committee report, recommendation I was that it
was felt that the Minister could issue a direction if there was
strong evidence of Environment Agency recommendations being ignored
by a local authority, and Mark Todd has pointed out to me that
you do have reserve powers and you could intervene.
(Mr Morley) Yes.
57. I have two questions. First, have you used
these, and secondly, would you use these, but more particularly
is that sufficient if you really feel that there is an unwise
decision being taken by a planning authority?
(Mr Morley) This was for DTLR Ministers; it is not
a DEFRA power in relation to planning. It is a planning power.
58. But clearly you could make a recommendation
to DTLR?
(Mr Morley) It will be for DTLR to make the decision
on that. Certainly it could be overridden if that was the case.
The presumption is a reluctance to take much power to the centre
and to override local decisions and local planning decisions.
There are mechanisms for that, it is absolutely true, and the
public inquiry mechanism is one of the mechanisms that has to
be addressed. Whether or not that needs to be looked at in terms
of more frequent use I think would have to be analysed very carefully
in relation to what evidence we have of irresponsible decisions
being taken post-PPG25. I am not sure that we have enough evidence
here—it has not been in place long enough—to suggest
that there has been widespread irresponsibility in that.
59. I think it would be quite useful, Chair,
if we could have a parliamentary question put in in order to have
a breakdown of what has happened. I know it is early days yet
but it would help me to see what has been the result of PPG25
even if it is in its early stages because, whatever happens, that
will set a precedent for future planning.
(Mr Morley) Sure, but of course all these issues are
always open to discussion and consideration and if we identified
a problem then of course we would have to take steps to rectify
it.
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