Memorandum submitted by the Association
Of British Insurers (ABI)
The Association of British Insurers (ABI) is
the voice of the insurance and investment industry. Its members
constitute over 90% of the insurance market in the UK and 20%
across the EU. They control assets equivalent to a quarter of
the UK's capital. They are the risk managers of the UK's economy
and society. Through the ABI their voice is heard in government
and in public debate on insurance, savings, and investment matters.
SUMMARY
— The Pre-Budget Report (PBR) is a
badly missed opportunity for the UK Government to stimulate the
economy and protect more homes, businesses and infrastructure
from climate risk.
— Spending plans on flood defences
should be brought forward.
— Government failed to use the fiscal
stimulus program to encourage the uptake of environmental friendly
and climate resilient products.
— Government should introduce VAT exemptions
for products that help to prevent or prepare for climate change.
INTRODUCTION
It is essential that through these tough economic
times climate change remains at the top of the Government's agenda.
We do not believe this was sufficiently reflected in the 2008
Pre-Budget Report.
The most immediate impact of climate change
is the action of weather on our built environment, communities
and infrastructure. The 2007 floods demonstrated the crippling
impact extreme weather events can have on the economy. They are
costly not only to insurers—the total bill to insurers for
the 2007 floods amounted to approximately £3bn—but
also to public services and small businesses.
The ABI is working closely with the Government
to develop a long-term flood management strategy, which looks
at funding needs 25-30 years ahead, and regional planning taking
into account the likely impact of climate change in 50 and 100
years time.
STIMULATING THE
ECONOMY BY
INVESTING IN
CLIMATE RESILIENCE
1. The ABI calls on the Chancellor to use
the PBR to bring forward spending plans on vital flood defences.
Speeding up this spending would stimulate the economy and protect
more homes from increasing flood risks.
2. The Chancellor's decision to bring forward
just £20 million of expenditure, from the £850 million
allocated, is a token gesture and a missed opportunity.
3. Following the devastating floods of 2007,
the Government agreed to spend £1.5bn on flood defences between
2009 and 2011. By bringing that spending forward to 2009, the
Government could help boost expenditure projects to the benefit
of the wider economy.
4. Investing in flood risk management is
much less complicated and cumbersome than other capital expenditure
projects and it would allow the Government to quickly and efficiently
inject a fiscal stimulus to the economy.
5. Our own research shows that investment
in climate resilience is very cost effective. For example, flood
defence expenditure in the UK has a cost-benefit ratio of 7:1.
This is much higher than for other public sector capital investments.
6. Turning promises for tomorrow into action
today on flood defences will enhance protection for households
and businesses from the threat of flooding; is much less complex
and contentious than other possible capital projects; and can
be rolled out faster.
STIMULATING THE
ECONOMY BY
INCREASING THE
UPTAKE OF
CLIMATE RESILIENT
AND ENVIRONMENTAL
FRIENDLY PRODUCTS
7. Infrastructure, including housing, has
a long legacy (around 1% of the housing stock turns over each
year) so we need to build houses that are sufficiently energy
efficient and climate resilient. We also need to retrofit the
existing building stock and infrastructure to withstand more extreme
weather events.
8. To incentivise the use of resilient and
energy efficient materials there should be a VAT exemption on
these products.
9. Carefully targeted fiscal incentives
could boost the uptake of these products and measures. The increased
domestic demand for climate friendly and resilient products would
enable UK business to become world leaders in adaptation and mitigation
technologies.
10. Insurers are also playing their part
and some companies are encouraging the purchase of environmentally
friendly cars through lower premiums or repairing homes in a flood
resilient way.
January 2008
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