Examination of Witnesses (Questions 940
- 959)
MONDAY 4 FEBRUARY 2008
BARONESS YOUNG
OF OLD
SCONE, MR
PHIL ROTHWELL
AND MR
DAVID ROOKE
Q940 Mr Drew:
You have correctly said we have identified the flood plain and
actually got some sense into the way in which we treat the flood
plain. The problem is, if you take the Severn Vale, which is earmarked
for huge development, it is not as though we have a flood plain
that we are either protecting or that the flood plain as such
is so easy to define. The problem of the flood plain is not just
the main river; it is all the tributaries and all the water flows
that come into that flood plain and yet we are quite blasé.
I was at a planning inquiry this morning and the idea that we
have learned anything from the July floods—you would have
to pinch me to understand what the people who were actually debating
this had learned at all, because it was as though July had never
occurred, that January, again, was something that was a minor
problem, but whether that would affect anything in terms of the
overall distribution of houses and jobs and so on is really something
that I just think is left to the imagination.
Baroness Young of Old Scone: Can
I say that that, in my mind, reinforces the need for a very strong
role for local authorities in holding the ring locally on this
stuff because they hold the planning—
Q941 Mr Drew:
But they have not learned anything, Barbara.
Baroness Young of Old Scone: I
know but unless we get them responsible, David, if we are trying
to do it from outside and we have none of the levers in our hands,
it will not work. We have to get to the point where local authorities
see what flood risk means and begin to operate PPS25. We are getting
there in terms of gross development of flood plain and development
of flood plain that will cause flood risk to other properties.
One of the things we are going to do is start taking a much tougher
line on the surface water provisions in PPS25 and simply objecting
to development proposals that have not been able to demonstrate
that the surface water issues have been properly thought through.
So we can put a bit of pressure on local authorities but, at the
end of the day, if we are really going to adapt to climate change,
we have to get local authorities to the point where they understand,
as much as they understand development and economic development
and social issues, what climate change risks look like and they
are building that into the things that they do.
Q942 Mr Drew:
Should you have a statutory responsibility to be able to object
to a particular planning proposal that, if and when you go in
there and say "This is a definite flood risk", the local
authority only agrees to that at its own risk and is clearly liable
for a decision that it took given that it ignored your pleadings?
At the moment, as you know, too often the pleadings of the Environment
Agency are ignored or are put in a box to say "hypothetical"
and yet we saw in Gloucester brand new housing estates under water.
Somebody should be held responsible for that.
Baroness Young of Old Scone: The
thing that I think we can go even further on is, as we have in
the past objected to development proposals because there is not
a proper flood risk assessment, we will increasingly object to
development proposals if there is not a proper surface water risk
assessment as well. Getting an understanding that developers and
planners need to think about surface water is going to be part
of what we will be doing. We now have tougher powers under PPS25
that if a local authority does decide to go against our advice,
we can ask for the Secretary of State or ask the regional Government
Office to ask the Secretary of State to call the proposition in.
So we have more powers than we have ever had. Clearly, if there
were wholesale planning applications going ahead against our advice,
we would have to seriously ask the Government to review PPS25
but at the moment, on the issues of riverine flooding that is
not the case. We are getting better understanding with local authorities,
we are getting developers developing a better understanding of
the need to have flood risk assessments and we have less major
developments going ahead against our advice. We now need to replicate
that on the surface water issues.
Q943 Mr Drew:
But you would accept that there is a degree of interconnectedness
to this? You cannot just isolate river flooding to water run-off
to all the other causes of flooding. The problem here is—and
this is where people do get heartily sick of being told that their
problems will be dealt with—it is because of the interconnectedness
of these problems, and that is where, I have to say, all power
to your elbow because you have to educate local authorities that
this is a new world and they must not take the risk, even if it
is a risk which looks to be relatively minor, because you have
heard some of the previous interviewees when we were talking about
critical infrastructure. It is all well and good to talk about
a one in 100 year flood but a one in 100 year flood is becoming
a twice a year flood now, and they have not really caught up with
what that means in terms of the implications.
Baroness Young of Old Scone: Certainly,
as far as the infrastructure is concerned, I do not think we should
just be looking at the inconvenience and disruption and economic
impacts of things like roads and railways and power stations and
water treatment works going offline. I think we have to start
looking at the wider ramifications, particularly in the electricity
distribution sector, where it is not necessarily the degree of
risk or the frequency of an event occurring that is the issue.
It is the fact that knocking out distribution to a very large
number of people for a considerable period of time would have
such huge ramifications right across everything that we do in
life these days that it is really unthinkable to run that risk
in any way.
Q944 Dr Strang:
I think that is a good cue to put it to you that we agree that
there is a need for a substantial and ongoing increased programme
of investment in this area. That is presumably common ground.
We recognise, obviously, that you have a confused role in this
but in terms of investment that is only part of it. We have—and
you have these as well—the Secretary of State's statement
today on allocations and projected outcome targets for this area,
for flooding and coastal erosion risk management. Looking at these
figures, let me put two observations to you. First, they do not
seem to take into account likely increases in construction costs.
These are cash figures we are looking at so in real terms, the
real term impact on this investment programme may fall short of
what the response should be to the recent flooding. The second
point I would like to put to you is that the increases are in
the last year; the major increases come in the last year of the
CSR period, that is, 2009-10, 2010-11. What is your comment on
these two observations, recognising that, at the end of the day,
you can only spend what the Government gives you?
Baroness Young of Old Scone: To
take the last point first, if they had given us £200 million
straight off, I think we would have had quite a lot of difficulty
getting enough schemes in place to spend it effectively. You have
to have a period when you are planning. We try not to bring too
many schemes to a point where we are able to press the button
on them, as it were, if we do not have the money to do that, because
it means they sit on a shelf, they get out of date and all those
things and it also raises hopes locally. A trajectory upwards
is the right way. A steady increase year on year on year is what
is best and we have had that with the last two spending rounds.
We have had increases and we have got this increase and we do
not think it should end there. We think the next spending round
needs to give us more after that. Whether we could have lifted
off faster, perhaps, but a trajectory up the way is the answer.
In terms of inflation, there is no doubt that construction inflation
runs ahead of general inflation. We have put about 5% into our
programmes as an assumption for inflation costs. There is a view
that we are probably in some instances running at about 6½%
inflation costs, so though we have allowed for some inflation,
that will probably run ahead and we are not clear what the inflationary
impact will be of a very large number of schemes, like schemes
for the Olympics, like the Thames super-sewer, like some of the
big construction projects coming forward from the water industry.
We do, however, in counterbalancing that inflation, have a commitment
with Defra to deliver an efficiency programme each year, and we
have been successful in delivering substantial efficiency in the
way that we both plan and deliver capital schemes and maintenance
in the Environment Agency in our flood risk management programmes,
and I believe there is more to come. I do not think we are at
the end of the road yet on that efficiency programme, which delivers
about £15 million a year in improved efficiency, which will
help counteract some of the impacts of inflation on the capital
programme. We are now looking at a long-term investment strategy
which would look 20 years forward, and certainly the best advice
we are getting from external bodies who should know about these
things, like Partnerships UK, is that if we can give longer-term
certainty to the market and if we can clump some of our projects
into much bigger deals, we will be able to drive even greater
efficiency out of procurement processes. So there are ways in
which we can try to mitigate some of the impacts of inflation
but there is no doubt about it: it does bite.
Q945 Dr Strang:
I am assuming the construction costs and inflation figures you
have mentioned there are basically Treasury figures.
Baroness Young of Old Scone: They
are figures taken from some of the external market commentators
and also from our own experience with our schemes.
Q946 Dr Strang:
Finally, accepting that if you are given a lot of money quickly
there is a limit to the extent to which you can wrap up this programme
and make the most efficient use of additional resources but, looking
at these figures again, is it fair to say that there is huge emphasis
on capital? In terms of the actual maintenance expenditure, it
does not look all that impressive. Is that fair?
Baroness Young of Old Scone: One
of the difficulties of the government accounting system is what
you call capital and what you call resources, and in fact, many
of the schemes that we have in our capital budget will contribute
a considerable amount to improving the standard of our assets
because they will be rehabilitating, rejuvenating assets and raising
the quality for the future. So the capital programme is not just
about completing new flood defence schemes; it is also about re-energising,
refurbishing existing schemes, and that will also contribute to
the standards of our assets. David may want to comment on exact
numbers. About £64 million worth of the capital programme
also contributes towards asset maintenance, so the figure that
is in our budgets under maintenance per se is not a true
reflection of the total amount that goes towards maintenance.
Q947 Dr Strang:
Is it part of your role to encourage local authorities to make
sure that they come up to scratch at least in terms of these figures?
Baroness Young of Old Scone: Where
we have a joint piece of work with local authorities that involves
assets that they are responsible for as well as assets that we
are responsible for, we will of course be looking at how best
to get investment into both sides of the equation, and certainly,
on the work that we do in allocating flood risk management money
to local authorities, we will be primarily looking at capital
schemes rather than maintenance, which is very much for the local
authority to make decisions about on the flood risk management
systems that they have a responsibility for.
Q948 Chairman:
It all sounds very nice, this money that is coming along but are
you not being a bit kind on the Government? For example, the ABI
have vacillated a bit but they offer around the Foresight number
of needing to spend at least £1 billion a year to achieve
the level of flood defence which they, as insurers of risk, feel
comfortable with. The nearest we get to that by 2010-2011 is a
grand national total of £804 million. What I have never seen
and I just wondered if in your quiet moments you have actually
sat down as an agency and said "Look, let's just forget money
for a minute. If we had a free hand and a blank piece of paper
and we could do all the things that we thought we ought to do—we
cannot protect everything but let's just have a root and branch
whiz through the whole of flood protection—this is what
we think we would like to do over, say, the next five years and
10 years?" Because you are quite right; these are long-term
schemes. First, have you done such an exercise? Secondly, what
did it cost?
Baroness Young of Old Scone: We
are involved at the moment in working up our long-term investment
strategy. You can have different views about what a long-term
investment strategy is. One is you could say you wanted to start
and do the kind of thinking that you describe, which is, knowing
what we know about flood risk, knowing what we know about climate
change, knowing what we know about future development and all
that, what is it going to cost to get everybody who needs to be
protected to a certain standard protected to that standard, and
proper maintenance and proper warning and all that? That is part
of what a long-term investment strategy approach could be but,
on the other hand, one could take the view that we will never
reach a point where all of that investment is able to be afforded
by the country. I think there is a big issue for the country as
a whole, and that is, knowing what we know about climate change
and the need to adapt to it, what is the level that can be afforded
by the public purse?
Q949 Chairman:
You have to do that exercise now, which is why you have your current
prioritisation scheme, because not everybody can have a slice
of the action. So you are doing that now.
Baroness Young of Old Scone: We
focus on the highest priorities. Under the long-term investment
strategy I think what we will end up with is a realistic view
about what the level of funding might be over the next 20 years
and how we best could spend it, the priorities within that and
how best we can deliver that but it will be informed along the
way by work on looking at what the need is for funding for the
future over a 20-year period.
Q950 Chairman:
I am still uncomfortable that there are a lot of members of the
public who would like to know candidly what the difference is
between what you are doing now and what you think might need to
be done, because the job of Ministers is to answer why they cannot
necessarily have the gap between the two.
Baroness Young of Old Scone: I
was interested to hear that you said I was being kind on the Government.
I have been accused of many things in the past but being kind
on the Government is not one of them. Yes, we have pressed hard,
as you are aware, for at least approaching the £1 billion
a year investment mark, and I believe that that needs to happen
in the next spending round but, beyond that, we want to have a
look at this 20-year process.
Q951 Chairman:
What we have today is an announcement by the Secretary of State
that he is going to provide £34.5 million to implement Sir
Michael Pitt. Is that new money or has it been sliced out of the
existing budget? Are you aware of that?
Baroness Young of Old Scone: That
is money out of the £200 million additional funding that
the Prime Minister announced in the middle of the summer.
Q952 Chairman:
So you could say it is additional but a lot of people perhaps
thought that was money that was going to go to the programmes
that you and others were responsible for notwithstanding the extra
things which Pitt has come up with. Anyway, thank you for clarifying
that. Let us just have a look because I was intrigued; for the
first time we have had presented by the Secretary of State a detailed
table showing how the various amounts of money annually are made
up, and I was interested to see on local authorities—and
we put a lot of weight on what they were saying—we have
roughly a level spend over the next three years of £87 million.
That effectively means in real terms the local authorities' spending
on flood alleviation is going to drop. Is that right?
Baroness Young of Old Scone: If
one took account of inflation but I hope the local authorities
are also going to be delivering with increasing efficiency so
that will offset the—
Q953 Chairman:
But what it means is that they are not able to increase the amount.
They can hold steady, if they are lucky, in real terms their expenditure.
Baroness Young of Old Scone: If
they choose to increase, they can, of course, because this is
only an estimate of local authorities' own spending. Many of them
would choose to put money, for example, into our levy.
Q954 Chairman:
These are your words again. "This is only an estimate."
So when we are looking at the global sums which the Government
advertise, we have to put a health warning on that, for example,
in the forthcoming financial year the £87 million that is
down for local authorities is only an estimate.
Baroness Young of Old Scone: It
is for local authorities to decide what they are going to spend.
Q955 Chairman:
Let us move on to the next bit because the National Audit Office
identified that you are short of about £150 million to bring
all our flood defences up to target maintenance standard. So that
is £150 million over this three-year period. Looking at the
numbers that are identified, I am not seeing an increase over
the CSR period of £150 million in the column headed "Environment
Agency resource, maintenance and operational costs."
Baroness Young of Old Scone: David
Rooke will no doubt want to tell you what is in that £150
million. We are, as I said, doing some work at the moment to look
at how best we can raise the quality of our assets over a period
of years, which is in fact already proving successful in that
more of our assets are in serviceable quality, and we have targets
for the next three years to improve the serviceability of our
assets, so the £150 million was an estimate some time ago.
Mr Rooke: The £150 million
was our estimate in discussions we had with the National Audit
Office in terms of how much money would be needed to spend per
year for a 10-year period, so it came to £1.5 billion altogether
to get our asset systems up to their target condition. That does
include some capital money within that £150 million. It is
not just all resource money.
Q956 Chairman:
I understand that. It is not all resource money. If I look at
the numbers that are down here, compared with the baseline figure
for your resource, maintenance and operational costs, you get
£4 million extra in the forthcoming financial year, you get
another £7 million the next year and then you get another
£21 million in the year after. Even if you carry on for 10
years, you are still not going to get your assets up to the right
level. Something does not add up in the numbers here.
Baroness Young of Old Scone: I
think you have to take account of the fact that in the capital
programme the improvement of defences, which is listed there because
it is for new and improved defences; in many cases that improvement
of defences will in fact be changing the quality of that asset
markedly, taking it from being in poor or moderate condition up
to being in good condition because we have refurbished it. So
in fact the maintenance targets are hit not just from the maintenance
funding but from the capital funding as well. You do have to bear
in mind that we are talking about looking at a ten-year programme,
which is one of the things that we want to look at in the long-term
investment strategy.
Q957 Chairman:
It is all right talking about we are looking at a 10-year programme.
That is the classic excuse: "I will not be here in 10 years'
time so I will duck and weave." What we are looking at is,
the Government have talked about a Comprehensive Spending Review
and they have talked about spending money. Every time Ministers
are asked, "We are spending more money," they say and
the difference between where we are now and where they are going
to be is roughly £200 million. I want to know really what
that represents as real extra expenditure against a background
that you lot are behind with the maintenance of your assets; the
public expectation for action, as we have teased out during our
discussions, rises with every passing period of heavy rain that
they want to see some action; with Sir Michael Pitt having got
at the moment an un-costed shopping list ,which looks huge in
terms of what needs to be done, and so far he has had £34.5
million top-sliced off this budget against a background of level
local authority expenditure where they may or may not spend that.
In other words, this number, this big number that is being quoted
in 2010-11, looks increasingly illusory in terms of actually providing
real net extra expenditure on flood alleviation prospects.
Baroness Young of Old Scone: I
think we have to correct that one because it is real money and
it will deliver real things. We will have protected 145,000 minimum
more properties. We will have taken 45,000 properties that are
vulnerable and at highest risk out of that category.
Q958 Chairman:
By the end of the CSR period?
Baroness Young of Old Scone: By
the end of the CSR period. We will have delivered a series of
other targets that we are required to deliver through our flood
risk management programme, including improving the standard of
our assets. So there will be some very clear deliverables that
you can say at the end of this three-year period that is what
this money bought and it will be more than was bought in the previous
three years.
Q959 Chairman:
I would hope it would do, because these are not inconsiderable
sums of money in total, but in terms of meeting the anticipated
"Now we need extra money," because everybody said, "We
need extra money spending." What you have described are the
projects that are in the pipeline. What I would like to see is
a refinement of these numbers so that we can really have an understanding
of just exactly what it is we are going to be able to buy, because
I am not clear.
Baroness Young of Old Scone: We
can certainly give you the details of the outcome measures that
we will be delivering from this money, i.e. the targets for number
of houses protected and all that. What we will not be able to
give you at this moment is absolutely every scheme that is going
to be done over the next three years because the nature of the
programme is not sufficiently flexible.
| 
