WEDNESDAY 28 NOVEMBER 2001

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Members present:

Mr David Curry, in the Chair
Mr David Borrow
Mr David Drew
Mr Michael Jack
Mr Eric Martlew
Mr Austin Mitchell
Diana Organ
Phil Sawford
Mrs Gillian Shephard
Paddy Tipping
Mr Mark Todd

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Examination of Witnesses

MR ELLIOT MORLEY, a Member of the House, Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs, and SIR JOHN HARMAN, Chairman, Environment Agency, examined.

Chairman

Gentlemen, welcome. For the record, we have Mr Elliot Morley who is the Minister for Flood Management, one of his many titles, I think, and Sir John Harman who is the Chairman of the Environment Agency. This is an update on where we are on flood defence. Everybody is aware of the fairly catastrophic winter we had and the real crisis we had in the management of floods. Everybody is obviously very apprehensive that we might have another dose this year. The Committee has reported in some detail on this and we have had a series of updates. This is a further update just to demonstrate our continuing interest and to be able both to air the concerns and to highlight what actions may or may not have been taken. The papers have recently had some fairly apocalyptic stuff about houses being unprotected, insurance being withdrawn and large parts of the United Kingdom at risk in terms of financially, or flooding or both. The issues which arise are obviously ones of money, then there is one of insurance, there is one of planning and there is one of the actual management of who does what, which, as far as I am concerned, is still lost in byzantine complexity which I do not understand. Therefore I find it almost entirely impossible to explain to my constituents when they say, "Who should be doing this?" My answer is, "I'll try and find out," but I usually fail. So in the course of this session, if we could at some stage have the absolute idiot's guide to who is responsible for what, when, where and how soon, that would be extraordinarily helpful to everybody in practical terms. Can I start, Sir John, with you and ask you first of all, have you got as much money as you need? What do you think you will need? Could you say a little bit about the time lags between the identification of a problem and your being able to do something about it in terms of environmental assessments, that sort of thing? There is obviously an expectation amongst people that there is a problem and that it can be sorted immediately, but we all know that occasionally - or more than occasionally - it may take a little longer than that. Therefore, perhaps you could start and tell us if you have enough money?

(Sir John Harman) Thank you, Chairman, and good morning everybody. The Agency is obviously going to say - and I think this is not something that the Minister would disagree with - that there needs to be more investment in flood defence. It is a very good question, though, as to how much additional money is required. Rather than take a sort of stab at it or just take what the Agency feels, I would refer the Committee to the research that the Agency and DEFRA have commissioned and which reported last year. This research makes some assumptions which I will return to so you are clear in what context the figures are being offered. It identified a need for an additional £120 million of capital expenditure for flood defences and £20 million for maintenance. It also identified, because it did not factor in any assumptions about the costs of adapting the standards of flood defence to assumptions about climate change, that there might be a further £30 million to £60 million arising from that. I would offer that research as probably the most informative and independent view to the Committee. The research was asked to evaluate what would be required to maintain broadly the present policies on flood defence; if Government or Parliament decided that there had to be a change in policy, for instance on standards, then you would have to do a recalculation, but to maintain the present policy, which is the standards we have extended to all the places where they might apply, and then maintained. That is the answer.

I am sorry, I have not quite understood what the answer is. Tell us and remind us what the answer is.

(Sir John Harman) £120 million for capital - the research provided these figures - £20 million for maintenance, £30 million to £60 million to accommodate the effects of climate change. That is what I meant by that.

That is an annual amount, I take it?

(Sir John Harman) That is an annual amount, yes. The ICE said something in their report - I think they may have said more than they printed - about the need for a substantial additional investment, but my understanding of their position is that it is not very far from the same figures. That gives me confidence that that is probably correct.

The earlier announcement was an increase from £76 million to £114 million a year by 2003-04. Am I right in thinking that earlier in the year the Government announced that MAFF funding to support capital flood and coastal defence works would increase from £76 million in 2001-01 to £114 million in 2003-04?

(Mr Morley) That is correct.

(Sir John Harman) Yes, that is correct. Of course, that is the MAFF grant-in-aid contribution to a much larger sum which is expenditure on flood defence capital.

Yes, when we get into the institutional arrangements we will then need to get into those additional amounts of money. In fact we might as well do that now. How much is government money, DEFRA money, and how much is coming from the local authorities? What are the relationships between local authority funding and the ability of that to trigger government funding?

(Mr Morley) It is absolutely crucial, Chairman, because of course we set grant ceilings of expenditure which is a maximum grant aid for regional flood defence committees. Regional flood defence committees then have to raise the levy in order to access the full amount of money. Generally speaking, the vast majority of them do that. We have made a significant increase available in the next financial year, partly funded by the additional £51 million that we announced which is spread over the next three years. So that there have been significant extra capital resources made available to the regional flood defence committees, but of course they do have their ongoing expenses as well which come from the levy, the Environment Agency budget, and there are also the internal drainage boards as well, local authorities, coastal defence operating authorities, all of whom are grant-aided in various ways. That brings about a total spend in the next year of round about £400 million a year.

When Sir John mentioned that that money was for certain level of standards, was that a one in 100 standard we are now talking about, because you referred to moving to a one in 100 standard, did you not?

(Mr Morley) Yes, that is right. I would like to see one in 100 as a norm. That was a recommendation by the recent Institute of Civil Engineers report that we commissioned as a department. I certainly think that that is the kind of norm we should be in.

But is the money Sir John mentioned a moment ago money which is relevant to a one in 100 standard?

(Mr Morley) I think it is a bit more complicated than that, Chairman. Generally speaking, I think that would give you an average standard of round about that, because of course some of these defences will provide protection at a one in 200 or even one in 300 standard, and there are still a lot of existing defences around the country with a minimum standard of perhaps, say, one in 20. So a one in 100, I think, as an average norm, is something we should be aiming for.

When you gave your press conference about six weeks ago now on conclusions of flooding, you talked about the variations in the performance between regional flood defence committees, did you not?

(Mr Morley) Yes.

You said that those would have to be addressed. Can you tell us what is happening on that front?

(Mr Morley) Yes. Following on from the last appearance before the Select Committee, we introduced a range of high-level targets. The high-level targets are a way of standardising performance across the country by setting those targets, in consultation with the Agency, for the regional flood defence committees in terms of what they have to meet, the kind of supervisory role that they have to have, the kind of analysis that needs to be taken. Those targets related to the Agency, local authorities and regional flood defence committees, so that has been done in terms of trying to have a more uniform standard of approach. We also, Chairman, have the funding review which we also commissioned. Again following on from the Select Committee, you did raise this issue of the complications relating to the structures and institutional arrangements. That report is complete. I very much regret, Chairman, that it was not published before this hearing, as it would have been helpful to the Committee, but unfortunately, as you will be aware, it has to go to the devolved administrations and various departments, and there has been a rather longer delay than I would have liked. That report will come out very shortly and will address some of these issues as well. It is for consultation. It is not prescriptive, it is a consultation report, but it covers many of the points that you raised in the last report.

My final question in this initial batch is that I think I am right in saying that about 40 per cent of the flooding occurs because the drains are too small, is that right, and the water backs up into the sewers?

(Mr Morley) Yes.

When you were talking about the standard at which you were seeking to apply the flood defence mechanisms, could I ask where drains fit into that?

(Mr Morley) This is urban drains sewage, you mean, Chairman?

Yes.

(Mr Morley) The sewage and water companies clearly have responsibilities on that. There are concerns that because of the design of many urban sewage systems there has been backing up and of course sewage pollution in many floods. Again that was identified in the ICE report. That is clearly something that will need to be addressed in terms of the standards that urban drains and sewage systems are built to and whether or not, in actual fact, they are adequate in relation to modern requirements and the kind of changing patterns of weather which we have been seeing. They will be addressed as part of the overall approach.

There was a report yesterday which accused Ofwat of having been so preoccupied with reaching European standards for cleanliness that actually it had taken its eye off the ball of dealing with physical problems like drains being too small. Do you think that is a justified criticism?

(Mr Morley) I did see that report. I really could not comment on whether it is justified or not. I suspect it is rather a simplistic presentation, in that there are European Directives, there are legal standards that the sewage companies have to meet, and therefore there is a priority on that. There is this issue of whether or not drains are currently up to the kind of standard we want to see. There are of course new standards relating to drains as well. The Urban Waste Water Directive for example, also has implications in raising standards. So I think that the sewage companies do have those responsibilities, and I am not altogether sure that they have been detracted in the way that was suggested in that report.

Paddy Tipping

Could I ask you about urban problems and sewage problems? One of the issues in the Institute's report is the issue of sustainable urban drainage systems, is it not?

(Mr Morley) Yes.

In a built-up environment there is clearly going to be more water. One of the ways of tackling it is this relatively new approach. You mentioned water undertakers and sewage undertakers. I understand that they are not at all keen to go down this road, is that right?

(Mr Morley) I guess they will not be very keen, because there are very considerable cost implications to them, which they will be well aware of. It comes back to the point that a very high proportion of flooding does vary according to areas and events we have had, but a very high proportion has come from drains being completely overwhelmed, drains backing up, highway runoff and urban runoff; it is not just fluvial river systems that are accountable for the kinds of floods that we have seen, although obviously they are accountable for the majority. So there are financial implications to the operating authorities in these new Directives, but they are ones that they are going to have to face up to.

We have a new technology, a new approach that, on the face of it, appears to be more sustainable and, on the face of it, is going to be more costly?

(Mr Morley) Yes.

The water companies are saying "No" at the moment. What can we do about it?

(Mr Morley) I do not think they are actually saying "No". They are certainly expressing concerns about the implications to them, which is not surprising in that respect. Given the kind of problems that we are well aware of - as constituency MPs I am sure we are all well aware of problems in our own constituencies, I certainly am in my own constituency - that whenever we have a heavy downpour, the way the sewers are designed they flow straight into the drains, and it is causing problems now, I really think we have to address these. Actually it is a bit of a wider issue than simply flood management, but there is this link and it does have to be addressed.

Mr Todd

I think it would be helpful, bearing in mind that earlier conversation about precisely how much money had been asked for and precisely how much had been given, if we had a comparative table which set those two things together by comparison, so if we refer back to the original - I think it was the MAFF report on funding from last year - we can set that against the actual expenditure. I say that because I think we are all a little bit confused as to precisely which figures we are comparing against which. There is a comparison with what the Environment Agency has asked for and what they are getting. There is a comparison with the total global sum for flood defences, which includes money that goes to local authorities and other agencies and so forth. Can we see a table which actually presents the picture, as assessed, of what is needed as against what has been given, on a comparative basis, rather than seeking to confuse us - which I am sure is not the intent - by picking different figures from different elements?

(Mr Morley) I can certainly arrange that for you, Chairman, so that the Committee can see that. What I can arrange for you is to see the current spending programme which DEFRA has, which of course is committed up to 2003. We are just preparing our bid for spending review 2002 which will take us through the next three-year period. In that period, of course, we are guided by some of the independent research that Sir John has been talking about. We can also give you - it is the Halcrow report - what the Halcrow report are saying in relation to their assessments.

Could we have a set of lines which say, "This is what the assessment is that we actually need. This is the actual money that's been spent" and how it is broken down? That would be helpful.

(Mr Morley) I am sure we can do that. I know what you want. I am sure we can put something together on those lines and also give some indication of where other funding revenue comes from from various sources. If I can make another comment on this last point, what John was also saying is that there are these assessments of what money is required for flood defence in the Agency. You need a programme that can absorb the funds in a stepped programme. Even if we made huge sums available this year, they could not be spent, so there has to be a stepped programme which we agree ourselves.

That is precisely the point I am going to turn to, which is how has the money actually been spent as opposed to the money allowed for. If we look at the figures between 1997-98 and 2000-01, what we actually see in spending terms, as opposed to what the programme said would be spent, is a decline in capital expenditure by the Environment Agency. Is that an accurate assessment of what actually happened during those periods?

(Mr Morley) I must be very clear about what figures you are talking about here. This is the capital programme you are talking about, is it?

Yes, the capital programme.

(Mr Morley) It is the capital programme of 1997-98?

In 1997-98 we had £43 million, according to the figures I have here.

(Mr Morley) Yes, that is correct.

That fell to a split figure of £26.4 million in 2000-01, is that right?

(Mr Morley) Yes.

With a "contributions on other initiatives" - which is another thing I am going to ask you about as to what that means - of £15.5 million. If you add those two together, they actually add up to less than the figure allowed for in 1997-98, do they not?

(Mr Morley) Yes, I can explain that for you. What happened in 1997-98 is that, as you will appreciate, there was a funding line which was agreed in relation to the spending programme. This was the incoming Government, of course, in 1997-98. There were extra resources found within the Department at that time, within then MAFF. Some of those resources came from capital programmes that had slipped, and therefore the money had not been committed. The money was reallocated in relation to the flood defence programme. So there was a particular one-off reallocation of extra capital in that year. That is the reason why it then shows a decline in 1998-99 which is basically back on track, with the set spending pattern that was already in place.

So there was a windfall for flood defence in 1997-98?

(Mr Morley) Yes, you could put it that way.

Is that how the Environment Agency see it?

(Sir John Harman) Yes, that is an accurate description of what happened to the government capital grant in that year. My recollection - I do not have the figure in front of me - was that the original planning figure was very similar to the figure for 1998-99. I would say to Mr Todd that I think you are taking the figures from Mrs Beckett's Parliamentary Response to a Question by Peter Ainsworth. These are figures for government grant and they do not represent anything like the total of capital expenditure of the Agency.

Yes, I know, but my earlier question was to try to see if we can sieve out these rather confusing figures.

(Sir John Harman) I agree with the Minister's response.

(Mr Morley) I am always keen to find a bit of extra money.

What is the difference between the capital works as defined in 1997-98 and the capital works as defined in 2000-01, bearing in mind that there is a different heading on "other initiatives" which makes up that total in the later year? Is there some distinction between those two activities?

(Mr Morley) It is a total sum, but the other initiatives, if I remember, came following on from the floods of that year. It was part of a contribution which was originally actually programmed to be £15.5 million, but as a matter of fact the latest outturn figure is that we have actually spent £17.5 million and there is an extra £1 million for the national flood and coastal campaign fund.

If this had not happened, if we had not had the flooding, then the fall would have been what?

(Mr Morley) It partly came from the additional money that was made available because of the floods of 2000. I can give you a breakdown if you like, very briefly. It was £9 million related to response and repair costs, £3 million special funding for feasibility and design costs on accelerating river defences, bringing forward some of the existing defences so they could be done quicker, £1.7 million for catchment flood management plans, £1 million for the flood warning/flood awareness campaign, £0.8 for other flood warning initiatives and the national flood and coastal campaign fund.

It would be useful if that could be tabled for us.

(Mr Morley) Certainly.

Turning to Sir John, that would imply that without the events of last winter, the funding of flood defences would increase dramatically from 1997-98. The figures the Minister has just set down are the ones that you instigated only after that event, is that fair?

(Sir John Harman) I think not. Well, it is partly fair. Let me explain this answer. The floods themselves called forth a lot of emergency response and prevented a lot of ordinary work, so we saw a shift from expenditure on programmed work to expenditure on emergency response.

The net outcome was what?

(Sir John Harman) The way I think the figures were classified in that previous analysis looked as if there had been a big drop in actual expenditure on defences, but it had switched from programmed to emergency. That I think is what you are seeing. I think that will be the same in the current year because we were still operating -----

Catching up?

(Sir John Harman) Yes, we were still repairing defences all this time.

My own constituency has had a lot of help which we appreciate.

(Mr Morley) I should make it clear, because I think it may be confusing these figures, that there was £51 million additional on top of the programmed spend that was announced last year as a response to the flooding. On top of that there was an additional initial £16.5 million for the repairs to the damage to defences, and the outturn for that was £17.5 million.

I think that this will all be a lot clearer if we have that like-for-like table.

(Mr Morley) No problem.

The other element is about the methodology for deciding on flood defence work, which we have discussed privately actually, but I think already is criticised for only taking account of some parts of the financial loss that may be involved from flooding and that some other elements are not taken account of. I think that when I have talked to people who have been affected, the amount involved that has been taken account of has been much less than the amount committed to repair of damage to their homes from flood damage, but also certainly does not take any account of any human distress that happens. In my area where people were out of their homes for eight or nine months in some cases, that distress is very considerable.

(Mr Morley) It is an issue of methodology. In fact Sir John and I have been discussing how you can try to quantify these kinds of issues. What we want to have is a priority system. You can have as much money in the world as you like, but you are still going to have to identify priorities. Therefore, if you are going to have a priority system, it should be transparent, it should be easy to understand. People have a right to know exactly how the calculations are being done, that one area gets a defence and another area has to wait. It is true, a lot of the current methodology is based on cost benefit. That is true. You cannot get away from that totally, because there has always got to be a cost benefit in that element.

But it is actually quite a selective cost benefit, is it not? There are only certain costs which are taken into account in doing that cost benefit. When you gave the preconditions for a successful system, it is certainly not transparent.

(Mr Morley) I think cost benefit is a way of quantifying, because of course you can do a cost benefit in relation to ----- Put very crudely, you can put a value on what is being protected, and then you can put the cost on what it is going to cost in relation to the assets. In fact we have also commissioned independent research on this. We would like to make it a bit more sophisticated in relation to such things as the effect on people's health and the point you were saying about the socioeconomic impact of flooding. We are discussing that. We are reviewing our points-awarding system and the way the assessments are done. I am not unsympathetic at all to the points you are making.

Chairman: Mr Tipping, I think we can move on to insurance now.

Paddy Tipping

Tell us about costs in a different way and the costs of insurance. I know that you have been having meetings with the Association of British Insurers. Could I ask you two things to begin with? First of all, people in the Trent Valley, for example, who have been flooded at Gunthorpe, have said to me that they cannot get insurance. Secondly - and this is the most persistent complaint - they have said, "Yes, we can get insurance, but premiums have gone up very rapidly." What is your experience of this and what are the ABI saying to you about it?

(Mr Morley) The ABI have reached an agreement with the Government that insurance cover will be maintained in flood-hit areas for at least the next two years. Of course, the ABI, understandably, want to see the kind of investment programmes and they want to be reassured that the Government and the operating authorities have a long-term plan in relation to reducing risk of flooding. That is not an unreasonable position to take, and we, I think, can provide that kind of reassurance. On the other hand, we do expect the insurance companies to maintain that level of cover in all but the most exceptional circumstances. There is always going to be the odd exceptional circumstance where it is going to be very difficult to get insurance cover. By and large, that agreement has been maintained. There have been one or two anomalies in it which we have raised with the ABI in our meetings with them. It is an issue of risk sharing and risk assessment. Of course in that respect we both have an interest in this: for the Government in reducing risk and of course ABI in reducing risk in relation to their premiums. It is in the end a competitive market, though, and people can shop around and do shop around. Generally speaking, that market does deliver, but I do recognise that there are some anomalies in it.

You have not said anything about premiums. Premiums are clearly going up and in some cases excesses are being demanded by insurance companies now. Taken together with the comments that you made earlier on to Mr Todd about the social costs of flooding and that no allowance is made at the moment for the social costs, this is a real issue that needs to be addressed. What are the ABI saying to you when you are pushing them about increased premiums?

(Mr Morley) The last time we met with the ABI I made it very clear that refusing insurance or indeed having excessive premiums or excesses (which, in effect, is the same thing), has a huge socioeconomic cost not only in terms of individual homes, which can also affect such things as mortgages and whether people will grant mortgages sometimes, if the insurance is difficult to get, but also on people's businesses too, so there is a business cost here, and that can force businesses out of certain areas. I believe ABI recognise that. There is a bit of market economics in this, which is inevitable, and of course you cannot control totally the level of premiums which are placed on the level of risk as perceived by insurance companies. There is that market element and that competitive element within insurance companies that does tend to keep insurance cover down. It is just like anything else. When companies reassess risk, then that will be reflected in premiums, in the same way, Chairman, that car insurance has increased dramatically in the last two years because of reassessment of risk there. That is a function of the market, and you cannot control that to a certain extent. What we are quite anxious to see is that there is not the kind of policy decision taken by insurance companies that very large sections of communities will be denied insurance. We do not want to see that. That is why we have these close connections with the ABI which I think have been helpful, and I think we do understand each other's position.

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.

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.

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.

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 chances 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.

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.

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

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.

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

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.

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

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 method 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.

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 Ebling Wharf(?) development.

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.

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.

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.

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.

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.

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 DETLGR Ministers; it is not a DEFRA power in relation to planning. It is a planning power.

But clearly you could make a recommendation to DETLGR?

(Mr Morley) It will be for DETLGR 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.

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.

Mrs Shephard

It seems to me that you have a problem and that is that the system has not worked. Part of the reason it has not worked is that, as you have said, there is a division of responsibility between central and local government and different arms of central government. We would welcome your further thoughts, given that PPG25 is very new, on what happens when you have a local authority that simply says, "Fine, but we are going ahead". It is all very well to talk about working together and there is not much evidence of problems so far. Here is a gross problem which, according to what you said, you could do nothing about.

(Mr Morley) There are the powers to call in in some cases. It is of course all about proportionate powers, as you will understand, and how they are applied. I do come back to the point that we have not identified very large numbers of cases of this kind post-PPG25. Most of the problems that we currently have are developments which have taken place some years ago which were not really very well thought out and of course dealing with the consequences of that is quite difficult and potentially expensive as well. It is being addressed both in relation to PPG25 and also in the funding review. There are some interesting ideas such as a levy on flood plain development. The powers for that are already in PPG25 and that is one of the ways of considering extra money and if there is development in flood risk areas then there has to be a contribution for it, which of course makes people think about that. That will be made public very soon for consultation. The other restraint, incidentally, going back to the insurance issue, is that insurance companies have made it very clear that if they feel that developments are being put in an inappropriate place there is no guarantee that they will provide insurance for that. That in itself is a restraint in relation to development which developers need to think very carefully about. I think there are a number of mechanisms in place at the present time that do provide a restraint on inappropriate developments. The last one of course is that within the structure plans that planning authorities have an obligation to bring forward, they have an obligation to consult with the Environment Agency and again they must take into account flood risk areas and areas which are and which are not appropriate for development.

I accept all that. You yourself touched on another problem, which is that of planning permissions given before PPG25.

(Mr Morley) Oh, outline permissions.

And the fact that some of these may be more than 25 years old or whatever, and which were given of course before the climate changes and the effects of building were known about. Sir John has touched on that this morning. What happens about those because local authorities get themselves into a problem with undertakings given to developers, with developers saying, "Okay, if you are going to rescind this planning permission because of things you know now, we will seek compensation"? Local authorities of course are not in a position to pay out these large sums. I have had cases of this in my constituency because we are quite a watery area. What happens in that sort of position? Everybody loses, it seems to me.

(Mr Morley) I think that you have touched on a real potential problem. You are quite right: once outline permission has been given then really it is very difficult for local authorities and potentially very costly for them if they rescind it. You are into planning law and I am not an expert on planning law, so if what I say is wrong I will certainly write to the Committee, but I suspect that even if outline permission has been given, when it comes to the detailed planning application I think that local authorities could stipulate certain provisions post PPG25 in relation to flood risk mitigation. There is also the possibility - it is there now under PPG25 - of asking for a contribution from the developer in relation to reducing flood risk.

Yes, but what local authorities would need to have in that situation in order to avoid litigation from the developers is pretty clear and concrete evidence, say from the Environment Agency, that the situation had changed in respect of a particular site. Is the Environment Agency in a position to give unequivocal advice like that which would have to stand up to court scrutiny, and would that mean that the Environment Agency was then in the frame as far as litigation was concerned?

(Mr Morley) We should have brought some advisers with us.

(Sir John Harman) Or a planner.

These are the questions that local authorities ask.

(Sir John Harman) If I might comment on that, although I am not a planner it is my understanding that the key power in PPG25 is the sequential test. That I understand applies at outline planning permission stage, which is the choice of site. As the Minister said, when you get to detailed planning permission you can insert requirements about the way that is handled. On the choice of site however a decision has often been made many years in the past. The Agency, to answer the question you asked, certainly can maintain its objection sturdily and will do. It cannot change the nature of its objection unless circumstances have changed, evidently, but I believe that as we are an advisory and not a deciding body in this matter we would not be in line for any liability which a developer might wish to seek from the local authority planning process.

But if circumstances really had changed in respect of a particular site you would be able to give very firm and (in so far as you could) unequivocal advice about the nature of those changes?

(Sir John Harman) Yes, we certainly would do that.

Diana Organ

Is that not the problem though, that even in PPG25 the role of the Environment Agency is to be consulted and to be an advisory body? You do not have the mandate to veto a planning application on the basis that it may be at risk of flooding. Am I right? A company in my area that makes drainage materials, bricks for surfacing, - they make them in Scotland and they make them in the Forest of Dean - say to me that in Scotland the Environment Agency has a slightly different remit about its powers of consultation and advice but if the Environment Agency in Scotland says, "We think there is a risk here to flooding", then it is mandatory that that advice is taken and adhered to and it does not go through. The problem is that in England, even with PPG25, it is just advice and local authorities can ignore that. Do you not wish that the English Environment Agency had the same strength and power that that in Scotland has?

(Sir John Harman) I was not aware but I will check what you have told me about SEPA, the Scottish Environment Protection Agency. I do not think the Agency should be able to veto those decisions and you may find it odd that I should say that. In the end we are accountable of course to Parliament through Ministers but we do not carry the democratic mandate that the local planning authority would do and I believe that they should exercise that mandate on the basis of the advice that is given to them. However, I would add a rider to that, that if it turns out that the much welcomed PPG25 does not lead to much more caution about developing in areas of flood risk, then we ought to be coming back to seek further mechanisms, maybe an automatic power of referral so that the Secretary of State can call the matter in, maybe the exercise of the DETLGR's powers on direction. I think it is probably too early to move to that option. I would not want the agency to be in a position where, without a democratic accountability, they could take a decision on planning applications. This situation reminds me very strongly of the situation on out of town supermarkets some time ago where planning guidance came in but quite a lot of cats had got out of the bag by the time it had started to bite.

We are in a slightly different position than out of town supermarkets, are we not, because if you have building that goes ahead, 150 houses or 25 houses here, those residents may, as Mark Todd talked about earlier, go through nine months of hell, being out of that home and the distress that that has caused. They may find that they have insurance premiums that they cannot pay or it is difficult to get. I am sorry; there is a little bit of chuckling going on here relating to this piece of paper. They may find they cannot get a mortgage and also, I have to say, in the model my friend here is the other side of the River Severn and it does have an impact on my constituents when local planning authorities one side of the river say, "Let us put down all this extra tarmac and concrete" because that could have an implication for some of my constituents now being at further risk of flooding because it has an effect on the model of how the river floods. My argument is that it is no good, is it, to say that it is a wish list; let us have it? You are the experts and if we do not take your advice and there is some strength behind it, local authorities will just go on ahead trying to meet their housing numbers and ignore it, and then people will suffer later, and then government has to pick up the bill.

(Sir John Harman) I have no idea what is on the piece of paper but -----

Diana Organ: It says that the Highways Agency does have a veto power. Why cannot the Environment Agency have one also?

Chairman

It is a serious question, Sir John. It is almost impossible for a local authority to go ahead with a development if the Highways Authority objects to it. In practice it has a veto and Diana has drawn the analogy between the Environment Agency and the Highways Authority.

(Mr Morley) Just from my local knowledge, if the Highways Agency can object to a developer, it is usually on traffic access and traffic flows.

Diana Organ

And safety.

(Mr Morley) It is not a veto but the planners have to take it into account. They may well have a veto on some national schemes. We are back to the difference between the call-in on national and local planning schemes. It is consistent in that sense. It is not quite what was being asked, but just on the point about what one council does which may impact on another, one of the things that we are moving towards in quite a significant way is whole catchment planning strategies. We are doing this with the Agency. In fact, the Agency are carrying out the strategy. The idea of that is to look at the way you model the whole flows of rivers. That does take into account development down a whole catchment and a whole flood plain development because that does impact on it. We are currently considering removing some obstructions on some flood plains, in fact on the Severn, to both speed up the flows of the river so that therefore the peaks go down more quickly, and also to reduce the height. We are gradually doing that now and that will of course have quite significant implications. If you are modelling obstructions and removing obstructions, then of course the Agency would take a very strong view if there were some developments putting obstructions back in place again.

(Sir John Harman) I do not want to repeat what the Minister has just said, but I want to make clear something. The Agency does very strongly wish to see much less development in the flood plain than we have seen in recent years. There are now something like five million people living in the areas coloured blue on the Agency's flood plain maps. Much of that is historical York, Shrewsbury, towns that are built around rivers, but we cannot simply carry on doing it. We will oppose very strongly what we believe to be inappropriate flood plain development. That will not be of course each and every case but we will assume the development guilty until proved innocent. I still do not believe that that should lead to our having a veto if the present tools that we have been given, which are now proved not to be adequate, then we must ask for them to be strengthened. I here defer to politics and policy but it is a matter of policy very much higher than my level to consider giving the Agency a veto over the local government planning process.

Mr Mitchell

I want to ask you about the planning policy on existing developments which are industrial. I am concerned particularly here of course with the South Humberside development which is the best prospect of jobs in our area and the front line of defence of Scunthorpe. What is the policy on industrial developments in this area?

(Mr Morley) Mr Mitchell makes a very persuasive case in relation to his local issues. Scunthorpe is on the escarpment, I am very glad to say. It is a serious issue and it comes back to strategies and policies. In fact, of course I know the Humber strategy very well, not only having policy responsibility but also being one of the local Members of Parliament in the area. You have a situation on the Humber where there are parts of the Humber which are predominantly agricultural. There are parts of the Humber where there is enormous investment, and you have of course got Hull. The whole of Hull is on a flood plain. You have got the south bank industries in Mr Mitchell's own constituency where there are literally billions of pounds of infrastructure investment. This is a coastal defence issue really. We are moving towards a much more sustainable approach towards coastal defence. That means taking much more consideration of natural processes and working with natural processes rather than putting very large, hard defence obstructions in place. But you do have to make a consideration of what you put behind the coast. In the case of the south bank industrial area with literally billions of pounds of investment, we will commit ourselves to quite expensive, hard defences for the south bank of the Humber. That also means that some land might be lost as part of that engineering because we also have to take into account rising sea levels and that is going to be quite a big investment over the coming years because we are probably going to have to strengthen and raise some coastal defences to take into account that rising sea level. The Humber is one of the places where we are piloting a number of managed re-alignment schemes and we have put in place some of those schemes. In fact I went to launch one at Thorndenbull(?) which is on the northern bank. On the Thorndenbull scheme the defences will be re-aligned in the land. The farmland has been purchased by the Agency for this scheme and the existing defences, which will collapse in the next few years, will be breached to allow the sea to go in. That gives us an advantage there. We are using natural processes on the north bank where there is low population density and it is predominantly agricultural land. We are using hard defences on the south bank where there are big urban conurbations, big industrial investment, and we are giving added benefit with the habitat creation on the south bank. If we lose some habitat for engineering on the south bank we are mitigating it by creating habitat on the north bank. It is a scheme where everybody benefits in this particular scheme. We are looking at one or two other schemes on the Humber where we might do some more managed re-alignment and I think it has great potential. Basically it is the balance between traditional hard engineering which will go on; we will always have that, and we will have to make strategic decisions on where that will take place, but also using much more sustainable natural defences as well; a combination of both.

I am happy to hear that. Is there any possibility of charges on industry developing that kind of site which you protect, like the South Humber development, which would of course be dangerous because it would put off development in those areas? Is there any consideration of passing the burden of these costs on to incoming industry?

(Mr Morley) There is consideration of any new development in flood risk areas in relation to the consultation document which will be published very shortly in terms of a flood plain levy. That is going out for consultation. The funding review also does stress that the conclusion of the funding review is that the Government through taxation should primarily continue to bear the bulk of the cost of flood and coastal protection.

Mr Todd

One of the recommendations and lessons learned in the report, which I seem to remember was called a wake-up call, was that there was an urgent need to have an understanding of the state of inadequacy of existing defences. I think, coincidentally, the NAO did their own study of defences which showed that some of them were in a very poor state and at best much of them were in a mediocre condition. What progress has been made in preparing that report?

(Mr Morley) There is an asset survey which is in process which also involves putting in place a database of all the flood defence assets we have in this country. The Agency have contacted local councils to provide information from the assets in their area as well as doing a survey on the assets for which the Environment Agency are responsible, and John might like to say a word about that. We have had a reply from the bulk of local authorities on this. There are still some local authorities who have not yet replied for a variety of reasons. We are in the process of chasing that up at the present time and I have also raised this with the Local Government Association.

(Sir John Harman) There is quite a lot to be said about the condition of defences and the works being done to inspect them. As regards the Agency's main responsibility rather than our supervisory duty, which is for main river and sea defences, we do have an ongoing programme of inspection which demonstrates that the condition in 2001 is substantially unchanged as an aggregate, as a national position, from the condition the previous year. That is not to say that each and every set of defences is in the same condition as it was. Indeed, many of those that were damaged during last year's events are in a slightly better condition now but as an average we would say we are no better than we were the previous year. We also have a supervisory duty in respect of ordinary water courses, which is where the Minister was referring to local authorities and their responses. There are two main operating authorities to do with that: internal drainage boards and local authorities. At the present moment all internal drainage boards have either inspected their defences or are saying they are willing to inspect, although there are a number saying they have resource difficulties in doing it. On the local authority side - this is last week - 223 authorities are stating they are willing and they are undertaking the inspection of defences. A hundred and three are willing but have said they are unable to do the work for resource purposes. That does worry us. A small number, as we said, are not willing.

Elliot, you will know that I raised this particular matter before about the level of co-operation received by the Environment Agency from local authorities. If you reflect on the evidence that we had on this a year ago, in which this was drawn to your attention and the Environment Agency drew it to our attention, it does not sound as if the position has substantially improved, at least from what Sir John has told us. There is still firstly a very large number of local authorities who say, "Yes, we are willing but we are not yet able to do the job", and there are some local authorities who, for whatever reason, have declined to co-operate at all.

(Mr Morley) Bear in mind that 223 are dealing with it now. A hundred and three are willing to deal with it but have not got on with it at the present time.

That is a large number.

(Mr Morley) It is still a large number but it is a lot better than it was a year ago, I have to say.

(Sir John Harman) It is much better.

(Mr Morley) I do not want to be complacent about this, Chairman, because there is a job to do here.

But there is a 12-month interval that has happened in which it could get a little better as it appears to have done, but we still have a very large number of local authorities who have not undertaken these task. Even in the 220-odd a significant proportion of those presumably have said they will do it but have not done it yet.

(Mr Morley) They are doing it. Some have done it and some are doing it.

Mr Todd: We are talking about a 12-month interval after a period in which, as I said at the start, there was a wake-up call. I think Cinderella slumbered through wherever it is. I cannot remember. Who was the one who was asleep?

Diana Organ: Sleeping Beauty.

Mr Todd

Sleeping Beauty slept through many events. This appears to be still a problem with local authorities.

(Mr Morley) We are moving forward.

Chairman: Who do you propose is going to give the kiss?

Mr Todd: Was it not a frog who did this?

Diana Organ: No, no.

Chairman

We will take Mr Todd aside in a little while.

(Mr Morley) Yes, and give him his pills. Some of these local authorities of course really do not have very much in the way of flood defence assets. We were trying to get some information on non-main systems here as well. This is important because non-main waterways can be responsible for quite severe localised flooding and we do not underestimate those particular roles. We are progressing on that. We are talking with the Agency about that. Again, the funding review which is coming out does have one or two things to say about streamlining, institutional systems, which might address one or two of these problems.

(Sir John Harman) Although it is slowing down there is a continual accretion as more authorities come into it. However, I do think there is a serious point here. The target was to report by April 2001. I say "we" because I know the Minister intends to do this and certainly the Agency intends to do it. We do need to discuss not just with individual local authorities but with the Local Government Association just how to get the maximum position. The maximum will never be every local authority because there is a small number who have no appreciable interest in the area at all, no reason to have.

Mr Todd

No, and one recognises that there are some people who genuinely have no role in this, but certainly there are not 103 who do not have a role in this, nor, whatever the number was, for those who failed to respond at all. You did not quote that figure. Does this not highlight - and I recognise that it may be about to be addressed some three years after our report which originally suggested it might be addressed - the issue of institutional reform and reducing the model in this area? Does it not concern you that it was April 2001 that we were supposed to be having a completion of survey?

(Sir John Harman) That was the target date for reporting on the condition of defences.

And so I think we can certainly say that that target has been manifestly missed.

(Sir John Harman) Certainly it has been missed by at least 112 local authorities.

At least because of course some of the 220-something have not finished the job either.

(Sir John Harman) Yes.

It is not a very happy picture.

(Mr Morley) No, and I repeat that we are not complacent about this. We are chasing it up through the LGA and with the local authorities concerned. What I would be reluctant to see is bad authorities setting the standard for all authorities. Many local authorities are really very good in relation to their responsibilities of river and coastal defence. We should give them credit for that. I do not want to suggest that there is a universal failure of local authorities. I do not think that the best should be tarnished by the worst. But yes, there is a failure here in terms of hitting the target and it is something that we intend to address both at the present in relation t chasing this up, and also in the short to medium term in relation to the consultation proposals in the funding review document that will be coming out shortly.

Phil Sawford

In the Environment Agency's "lessons learned" document you refer to public confusion and information. I think there is a serious need to pull this side of it together. We talk planning and insurance and things that can happen before the flood, but in the immediate aftermath for businesses, for home owners, the feelings that I get from constituents is that there is an awful lot of buck passing on it. Are we any nearer to the "seamless and integrated service"?

(Mr Morley) I think we are. On the policy side may I say a word and John may say a word in relation to the operational side? On the policy side, following on from the Bye(?) Report, going back to 1998, there was a complete overhaul of the response organisations to flood defence. That really paid off in the 2000 floodings when generally speaking people knew what their responsibility was, there was good co-ordination between local authorities, emergency services, the Agency, government departments. The emergency response swung into action pretty seamlessly and smoothly, and also the flood warning system was significantly uprated from 1998 onwards. That was commended in the recent Institute of Chartered Engineers' report that we have just commissioned. They entered it with rivers where they paid particular tribute to the investment that has been made in flood warning, the way that that went. Again, that is not to say that we should be complacent. There are issues of course in relation to contact. The Environment Agency has done an awful lot of work on their flood line system which is a one-stop point of contact and that is still developing, and John might like to say a word abut that. That has worked very well in the recent severe weather that we have had. I am sure Members will have seen on the TV weather forecast the phone number that people can ring for the flood line so that people can find out what the condition of their river systems is, whether they are in a risk area, and even on the latter point, there has also been the ongoing flood awareness programmes, so people who are in flood risk areas have had leaflets about this, it has been drawn to their attention, what the warning systems mean, what kind of action to take. We are also dealing with things like a sandbag strategy which we have identified as quite significant. It is individual householders' responsibility in relation to sandbags and people do not see it that way. We also have to be realistic in that. We would not expect pensioners to go out and start lugging sandbags around. We understand that there is a role in relation to providing that kind of support and we need a strategy for that, we need strategic reserves, we need to know where these things are. The Agency has sandbag filling machines. The local authorities need to know how to access those and distribute them. That is all being done as part of our flood preparation programme where I think we are in very good shape. Basically, in relation to future flooding, we do have a good organisation. It is exercised, it is reviewed and it is kept up to date, so we can reassure you on that point.

(Sir John Harman) Mr Sawford's question is a very complex one because I think there is an issue of first of all what information people need at the time a food occurs. There is the issue about what information they can have provided in advance of that, and then the warning arrangements. Then there is the issue also, as you have put it, Minister, of people being passed around like pass the parcel. When something happens, when the flood water is coming towards the front door, determining whose responsibility it is to do something about it has been rather difficult. Each of those questions deserves a separate response. A great deal has happened, particularly in the investment programme over the last year, in terms of increasing the quality and volume of information. Of the number of people brought into the warning systems over 1.1 million now receive direct warnings, whether it is telephone or the flood warden or sirens from the Agency. There is still more we can do there. We have made a considerable amount of information available. Flood directories have gone to very many homes in flood risk areas which try to give you at least the contact numbers in the various organisations who might be responsible. I think the Holy Grail here which we would really like to arrive at but we could not say that we were anywhere near it yet is the ability to ring the flood line number and, whether it is automated or via a person at the other end, have direct access through that first stop to, in the case of emergency, the correct authority. The databases do not exist to post people's enquiries on, so to speak. The information has not been gathered. Our information systems need to talk directly to local authority information systems and at present they do not. What we will be doing next year is to trial the practicalities of that first stop shop approach with a small number of co-operating local authorities in particular areas of the country because we do need to crack that. We are giving a tremendous amount of information out. I think people, particularly when an emergency occurs, do feel that there should be what you referred to and we refer to as a seamless integrated service and an information service that is seamless and integrated. We are not there yet, but we know that is what we are aiming for. I will go on to say that the automatic voice messaging service which is very valuable does need to be turned into something a little more modern and we are working very hard at that because the telephone is great but there are plenty of media that one can use to get through to people these days. We do need to bring in a new generation of ABN which will help us support what we are talking about.

Chairman

May I make the observation, Sir John, that if you have such an emergency and you phone up, and you get a voice which says, "If water is coming through your bathroom window press one", by and large I do not think your punter is going to be terribly impressed. In an emergency people like a voice at the end who will display some sense of urgency. Nothing is more infuriating than these automated systems where you spend a fortune before you get through to anybody, if you ever do.

(Sir John Harman) In the case of ringing in an emergency when our flood rooms are active, you will get through to a person in the area dealing with it.

Phil Sawford

We do recognise the amount of work that has gone in and the amount of information that you have produced. Thee things never happen when you expect them and since 1998 I think we have learned a great many lessons. Even so, at the level of the individual it is still very difficult to find out whose responsibility a particular water course happens to be. If you have lived in a property since the early sixties and then all of a sudden there is a torrent of water running through your garden, to be told that you have to sue your next door is not particularly helpful, and then the neighbour has to talk to a local farmer. At the end of the day, you are relying on somebody's goodwill to try and address that problem because no-one seems to want to accept responsibility.

(Mr Morley) This is a slightly different issue in relation to flood response. This is the responsibility of where the flood came from. I understand exactly what you are saying, that the Agency is responsible for critical water courses and again that is a government strategy, but as to the non-critical water courses, local authorities have permissive powers but they have no obligation in doing it. In some non-critical water courses are the responsibility fo the landowner so where you have a flood which has not come from a main river, a critical water course, then the response is there. We have the responses in place to help people out, but of course the aftermath and who is responsible for some of these minor water courses, will it happen again, that is a more complex issue. Again that is addressed in the funding review, the issue of non-critical water courses, but there is always going to be the issue of landowner responsibility which is a very tricky one.

That proved particularly difficult. I have had no massive amount of flooding. I mainly had problems with individuals and the volume of letters that passed back and forth to find out who may be responsible, but then you turn to the issue of where you might find the funding to prevent this happening again and then everyone passes the buck around. It is almost impossible and you end up with individuals funding certain remedial works themselves or local farmers having to fund it because no-one else is prepared to do it and there are no central sources for that funding. You referred to the National Joint Strategic Emergency Group to bring together everyone involved. Where are we on that?

(Mr Morley) Each local authority is tasked - it is one of the high level targets - to ensure that they have in place an emergency group for responding to floods. One target is for them to have exercises to make sure that that works as well. There is also currently a Home Office review in relation to the wider issue of emergency planning of which flood preparedness is one aspect. But of course that will fit into that review as well. I very much hope that that will strengthen the current situation which worked generally pretty well when it was called upon in the floods last year.

Mrs Shephard

All of this is extremely important as far as individuals are concerned of course and I think we would say good progress is being made and the Committee feels that. But of course at a different level it is the question of accountability for the decisions that are made about preventing flooding or reducing the risk, and the fact that that accountability is fractured between a number of agencies, some of which are more accountable than others. I was interested to hear Sir John say that the Environment Agency would want to reserve the elected accountability of local authorities and I agree with that absolutely. Nor would I want to see one great pinnacle of decision making to do this subsuming, or indeed replacing, of all the properly elected accountable bodies that there already are. However, something clearly needs to be done even given issues that have been raised this morning. For example, one of you said that some of the drainage boards say they have not got the resources to inspect their own flood defences.

(Mr Morley) Local authorities.

No, it was drainage boards.

(Sir John Harman) There are some drainage boards.

In addition to local authorities. Drainage boards are not over-resourced bodies. This surely must be a matter of concern. I cannot imagine that they are being awkward. They are not in a sense homogeneous enough to be awkward. If there really is a problem with a lack of resources for the proper accountable bodies even to inspect the efficacy of what they are doing, do you not think that matters, and who is looking at the overall funding for the overall problem?

(Mr Morley) It is a strategic issue. We are looking at the overall funding issue. The funding review document does have some suggestions on streamlining the funding into virtually one funding stream as a matter of fact. What the proposal is, Chairman, in the document I will give you very shortly is that there is one strategic regional flood defence body which gets core funding. It does the assessment of what it needs for its area based on river catchments. It assesses what it needs, makes some bids to central government, gets core funding and then contracts for the delivery in the area, so you are streamlining the funding and you are also streamlining the decision process. The suggestion is that they have the powers for a precept which is a top-up. They will get the core funding but if they want some localised issues which the core funding does not cover they can precept to top up if they so choose. These are our suggestions and they are out for consultation.

If they have a precepting power are they elected?

(Mr Morley) Yes. The proposals of local authorities will still have the -----

This will be a consortium then?

(Mr Morley) Yes, that is right, and it is all about accountability and I do support John on this in that I think local democratic accountability in the provision of local flood defence is very important. I would not want to see it all brought to the centre. I think that that local involvement and accountability is an important part of it. That also applies to the drainage boards. The drainage boards have the power to precept now. They really ought to have the funding which would allow them to do asset inspection and management as part of their function. There are an awful lot of drainage boards and there may be an argument for bringing more of them into consortiums as many have already done. Indeed, in Norfolk there is a very good consortium and it is a very efficient operation. That is a very good model that we would like to encourage in relation to drainage boards.

What is important is that with accountability must go transparency and it is one thing for there to be consortia of various kinds. It is another for the public to know where the buck rests if there are these consortia because it is all too easy for the buck to be passed round the individual components of the consortium.

(Mr Morley) It is true. The main problem of buck passing is that you are back to the non-critical water courses. That is where you get the main problem about who is responsible for that because it clearly is not the Environment Agency. It is very clear at the moment and it is not the Environment Agency's responsibility, the non-critical water courses. The IDBs have some responsibility for drains but some water courses of course have no clear ownership in relation to responsibility. That is a problem; I do accept that. We have identified that problem and there are suggestions to address it in the forthcoming review.

Mr Drew

The idea of a more strategic role for drainage boards and a wider area must come because I think they are in my part of the world very worried people but they are always reactive and that may be counter productive. The other issue, to go back to the point that Phil Sawford was making, is that the powers that they have to be able to do something to prevent a possible flooding problem in the future. I would urge both of you, and we would welcome a rapid response, to go back and look at the powers where you have clearly got a problem that is going to occur in the future because of historical features and to intervene and to get the different householders or whatever together to make sure that there is agreement on what that action is going to be.

(Mr Morley) I would certainly agree with that, Chairman. Flood and coastal defence is a long term game. It is a long term investment and it has to be a long term strategy. I come back to the development of such things as whole catchment planning where you can address these kinds of issues in the long term. That must be the strategy that we have to pursue.

Mr Mitchell

The previous Agriculture Committee as it was called until recently in our 1998 report recommended a policy of managed retreat. In fact, we recommended it so well that the Daily Express, which I noticed used to carry news even if they got it wrong, its headline on the front page was Lunatics Advocate Sinking Britain or something. The Government at that time said it did not see the need.

(Mr Morley) To sink Britain? No. We still do not see the need.

They did not see the need for a managed retreat. The Institute of Civil Engineers has since come out and said that that is a sensible strategy, so let me ask you whether you now accept that a system of managed retreat from land areas prone to flooding and coastal erosion should be the basis of policy.

(Mr Morley) To be fair, Chairman, we never said we did not accept it. We always said that managed retreat was an option alongside a range of options that we have in relation to flooding and coastal defence. Indeed, as I said earlier on, we do recognise as a department, and in fact the creation of DEFRA has emphasised the need to put sustainability at the heart of all our policies, that if we are going to have strategies to reduce the risk of flooding and coastal risk then we should whenever possible base it on sustainable engineering and sustainable development. In some cases - not all - that managed retreat is most certainly an option. When I say that of course, in the article you were referring to the inference was that that was going to be the new policy, just give up and let the sea take everything. That is not going to be the case. We will always engineer defences against the sea where there is a case to do so, but in some other cases the most practical option and the most beneficial option will be to re-align defences and to use more natural defences as part of wave energy absorption, shingles, sand, salt marsh. These are all very effective ways of defending inland assets and also give you an environmental gain, so I am quite keen on this option - where it is appropriate to do it.

It will not be the major policy but it will be an aspect of policy?

(Mr Morley) Absolutely. As I was outlining, we already have a number of small projects where we are starting the process of managed retreat, but these are small scale at the present time.

(Sir John Harman) It is very much an option and the key area where this is a concern is the East of England, so I took the precaution of bringing along - and you could put this round the Committee if you wish - a map showing the options that the Agency sees as available round each part the coast of the East of England.

Does that include the Humber?

(Sir John Harman) No, it does not. I am going from the Wash down to Basildon.

(Mr Morley) The Humber is not on the map, I am a bit worried!

(Sir John Harman) The areas of coastline coloured in different colours show that there are many different options and the green areas, as you will see when it comes round, are where we have identified managed retreat as probably the option. You will see that it is significant but not hugely extensive, put it that way.

I am glad to hear that because we argued quite effectively for that. You yourself said, Minister, you would like to see a "one in a hundred years" standard for flood defences, but the Association of British Insurers has argued for a one flood in two hundred years standard. What standard should be set below which consideration should be given to abandoning properties and areas subject to flooding or coastal erosion?

(Mr Morley) Abandoning properties is quite extreme really and you would really have to have some very good reasons for doing that. In the ICE Report they said in some cases the option would be to abandon some properties. It is not the kind of general policy we would like to follow. I was saying before that one in a hundred is a reasonable indicative standard to aim for but because the nature of flood and coastal defence varies so much that it is not very meaningful in some cases to have one particular standard, but generally speaking as an indicative target that is not on unreasonable one. I do not know the reasoning for the ABI one in two hundred. I do not think they have quantified how they have come to that conclusion while the ICE Report has gone through it in much more detail.

Is there any indication of what the differences mean in terms of properties that might be abandoned to flooding? What would be the number in your one in a hundred category?

(Mr Morley) I am not working on the assumption of abandoning any properties to flooding, apart from there are some isolated properties on the coast that are subject to on-going natural coastal erosion. There is nothing new about that.

That is all?

(Mr Morley) That is all I am aware of at the present time.

Paddy Tipping

Do you recognise there is a problem that if you build hard defences around areas that are a priority to defend that that can have the effect of encouraging either flooding or erosion in other areas where that would not take place had the strategic decision not been taken to build hard defences? I think that does raise the issue then of compensation for those landowners or properties affected and consultation about how the whole process is managed around those properties because generally the assumption is if the property erodes that is the landowner's problem but if government is taking decisions in terms of hard defences around certain areas that lead to the erosion of land further down the coast, then obviously there is an argument that there is some national responsibility to those landowners that are affected?

(Mr Morley) You are absolutely right, Chairman. Any engineered scheme, in fact any scheme at all that is approved for grant aid by the Department must go through an assessment of, first of all, whether it is technically right, secondly, whether it is coast effective and, thirdly, its environmental impact, and part of that assessment is whether or not if the scheme goes ahead it will impact on other communities or indeed the dynamics of the waterways of the coast. The Agency engineers are, of course, very well aware of this, as indeed are our own engineers from DEFRA so no scheme is approved until that assessment has been made.

(Sir John Harman) It is fair to say that quite often people feel there has been an impact and it is quite hard to evidence that, things pass into folklore. We were talking earlier about the Humber, the whole of the decision-making around the Humber is taken in the context of something called the Humber Shoreline Management Plan. The whole estuary is such a dynamic system you really do have to think about it altogether and you cannot take individual flood defence decisions in that particular location without a planning system?

(Mr Morley) It is a very good planning system.

Diana Organ

I want to come on to flood risk because that is what it is all about. Are you going to do anything or are you not, so you have got to work out does it need it or does it not, is it worth doing it? The Institute of Civil of Engineers concludes that current methods of estimating and reducing flood risk suffer from "a serious inadequacy in representing the dynamic effects of land use changes, catchment processes and climatic variability." Do you think you do suffer from serious deficiencies? Are you inadequate in what you can do?

(Mr Morley) I sometimes feel I am! But I think what they are talking about is a fairly narrow aspect in relation to their comments there and that deals with the estimation of the developments on flood plains and the impact that they can have. I would accept that we do need more sophisticated computer modelling and we do need to do a lot more work on that, but overall it should not be taken as a generalised criticism of the approach. It is to do with specific issues of estimating the effects of possible future changes in land use, catchment processes such as rainfall infiltration, and also climate change and trying to quantify the impacts of climate change. That is what they are talking about. We accept that and we are doing a lot of work and putting a lot of investment into research and development on how we can address those issues.

I have got here a News Release of September 2001 "Elliot Morley announces an update of the assessment of national flood and erosion risks". You have talked about computer modelling there. Are you going to put in extra computer modelling so they have the tools to do the job properly?

(Mr Morley) We have a departmental R&D budget and I can send the Committee details of that of what some of the studies are. For example, on climate change, we are supporting the Hadleigh Centre for forecasting with £5 million or £6 million, just from memory, and of course we do support various studies in relation to coastal dynamics and river systems so that is an on-going process but I can give you the details of what we spend it on.

(Sir John Harman) Can I add to the Minister's answer on that. Going back to your first question, I accept what the Institute said but not how it was reported. The Institute said there was a serious inadequacy in the models that we use in the fact that they are static rather than dynamic models. There is not a serious inadequacy in the flood risk assessment that those models give and I think it is quite important not to undermine confidence in what we know about flood risks in catchments. Yes we can make it better. The fact we are using static models based in many cases on data collected in the early 1990s means that of course those models need updating. It is a bit like the Census and, indeed, we are doing that at the moment. Better than that would be to have a model that could make predictions about what will happen in terms of flood risk if a particular development takes place in a catchment, if one makes assumptions about increased rainfall or patterns of rainfall, if one makes assumptions about the hydro-geology of the area or you want to change those assumptions. So dynamic models will be an improvement, I agree very strongly with the Institute on that. But I do not think you should have any lack of confidence in the utility of the models we are presently operating. They do give pretty good results. They could be better but they are not inadequate.

(Mr Morley) The Institute was also very supportive of the recent flood risk handbook produced in 1999 with a lot of ICE input, as a matter of fact. The Committee might also be interested in an example of what we are talking about in that there is a joint R&D project between DEFRA and the Agency for a computer-based modelling and decision support framework on the MDS model. This is just being developed. The first edition is currently being tested and it will be made available for those carrying out the first round of the catchment flood management plans at the beginning of 2002, so we are making good progress on this.

All of this is very important because people do not get the flood defences that they want or need until the risk assessment has been fully carried out. As Sir John has said, lots of places, including the River Severn, are relying on the early static models that were done in the 1990s and I know that in the Severn there has been a lot of talk about completely re-modelling and updating that work because so many changes have gone on and we know so much more and we know so much less. Has the remodelling for the Severn been completed?

(Mr Morley) The Severn is one of the river systems where we have financed whole catchment plan studies and that is under way at the present time.

It is under way, it is not finished?

(Mr Morley) Yes.

The second thing I want to go onto is the same Institute of Civil Engineers said that "the appropriate technical skills are lacking within the industry, from drainage engineers in local authorities, to river engineers in the Environment Agency, and skilled hydraulic specialists in universities." In fact, there is a skill shortage all around according to them. To what extent are you suffering from this skills shortage and what are you doing about it so you get the necessary people in with the necessary technical knowledge and skills so that we can do the appropriate work?

(Mr Morley) This is a national problem, Chairman, in that there has been a shortage of people entering university to study civil engineering. Engineering generally has never had the image that some other professions have had in terms of attracting students, which is surprising because it is a very fulfilling profession and it is a key role for people to have. I know that the Institute of Chartered Engineers are very keen to encourage more people to go into training. I know that the Agency has some training courses itself in terms of flood defences and flood engineers, and we recently have been talking from DEFRA to our colleagues in the Department for Education and Employment about what we can do to encourage people to go into skill shortage areas. So we do recognise that there is a need to encourage the number of people going through and qualifying as engineers.

For instance, how many river engineers does the Environment Agency employ?

(Sir John Harman) I would have to go away and look that one up. Is there a shortage? Yes, there is. Has it prevented us adequately delivering our programme? No, it has not because we have done a great deal of internal training. It has been necessary to do that training. If we are looking (and I hope we are looking) at a much increased programme in flood defences, then the issue of the skills available in the industry will have to be addressed. There is a shortage and we are just about managing at our present levels.

Just about managing?

(Sir John Harman) Just about managing.

Chairman

Gentlemen, we have had quite a wide-ranging discussion this morning. You were going to give us some figures in writing about the investment levels correlated to the risks which they are intended to address because obviously there is a correlation there. I would personally find it helpful to have an organogram of who does what in this business. If it rains like it did last year again this year then I can find out who I am supposed to get hold of. Who does sewers, who does drains, who does little rivers, who does big rivers, who does land above X feet, who does land below X feet. I still think that is information which people do find very confusing.

(Mr Morley) We can certainly provide that for you, Chairman. Generally speaking, if there is some kind of crisis issue you will find my name linked with it somewhere!

One valedictory question, if we were to get a repeat of the winter that we had a year ago, are you confident that we are much better prepared now, or are the time lines in the investment such that you would be able to make that predication for next year or the year after?

(Mr Morley) I am confident that we are well prepared. I am not complacent about this. I think there is a lot that we need to do, and John touched upon some of the development work that the Agency is doing, particularly on its Flood Line network, which I think has great potential in terms of helping individuals and I am very keen to see that progress. In terms of the emergency response that we would need in any flood situation, I am very confident that we have a good and well-tried and well-prepared response structure available for people. I am also confident that we are "making good progress", it is a phrase that Mrs Shephard used, in terms of reducing risk. We can never take away completely the risk of flooding in this country. We cannot guarantee that flooding will not happen and that was the theme of the ICE Report. In fact, the very title of the ICE report was Learning to Live with Rivers, and was about managing risks, managing rivers and managing these issues, but our job is to reduce risk to the people of this country, and I believe we have a programme in place that is delivering in that but it is a long-term programme and, of course, because river systems are dynamic, the weather system appears to be changing, we have to take into account the implications of such things as global warming, and we must respond to that in a dynamic way well. You cannot do that overnight. I believe we have the process in place which is improving service delivery, which is reducing risk, and we are also open-minded about future changes, taking into account some of the recommendations, for example, from your last Committee Report. We are in the process of trying to think through that and, as I say, you will see that the report on the funding review does address many of the suggestions that came forward from this Committee in the last report and that will go out to consultation very soon.

Mr Drew

I have a very sneaky question because I was meant to be here and unfortunately I had to slip away. We are going on to look at alternatives to traditional use of farmland, and there is the idea of tendering in flood land that is being talked about?

(Mr Morley) Yes.

I am just very interested in the model of the national forest and that tendering process. Is that applicable to farm land that could be used as flood prevention? Is that a real possibility?

(Mr Morley) Not at this stage but all options are open as far as I am concerned. The idea of flood storage catchment and using farm land for that is a very interesting one, and it is certainly one that we are giving very serious thought to in river plains and river catchment areas. The reason why we are thinking about this is that if we can expand winter catchment areas on flood plains then you can reduce peaks and if you reduce the peaks going down the river you protect a lot of small communities who may not qualify at the present time for expensive defences, and of course you are taking pressure off existing defences. We are very seriously considering this approach but it needs much more development.

It has been a great relief to have had a session of two hours in which the phrases "cross-cutting", "joined up" or "rolling out" have not occurred.

(Mr Morley) We can soon rectify that!

Chairman: We are grateful that we have communicated with each other in something resembling English and we hope we continue to do so. Thank you very much indeed.