Future flood and water management legislation

Supplementary written evidence submitted by Defra (FFW 24A)

Thank you for your letter of 4 November in follow up to Richard Benyon’s appearance before the Committee on Wednesday 3 November and including six further questions. Please find below the answers to your questions plus a few more responses where the Minister committed to write.

1. Has Defra considered incorporating food security measures into the outcomes for gauging the cost-benefits of flood defences?

Defra has considered creating a specific outcome measure in relation to agricultural benefits and food security to be used in the prioritisation of national funding for flood and coastal defence. A specific outcome has not been included to date as doing so would divert resources away from protecting people and property and other sectors of the economy that tend to suffer much greater damages than agriculture when flooding takes place. The agricultural sector suffered less than 2% of the damages from the 2007 floods in comparison with 38% borne by the housing sector and 23% by the business sector (Source: Costs of the summer 2007 floods, Environment Agency). This was despite the 2007 flooding being an extreme series of events occurring at the most damaging time of the year for the agricultural industry with many farms having crops in the ground close to harvest. While flooding undoubtedly does have an impact of agriculture, this is partly no coincidence as much of the most fertile land in the country has been created by a history of regular inundation. Despite this, overall, it appears that agricultural land is not at disproportionate risk, with around 2% of grade 1, 2 and 3 agricultural land at a significant risk of flooding (1.3% likelihood or greater each year) which is similar to the proportion of households at this level of risk.

There is also no evidence that flood events, such as those experienced in the summer of 2007 and autumn 2009, represent a threat to food security in the UK. The summer 2007 floods did not have a significant impact on food supply, although it may have made a very small contribution to price increases in some products during a year of general commodity deficit on a global scale. According to the UK Food Security Assessment, the UK enjoys a high level of food security as a developed, stable, economy integrated into Europe with a very diverse supply base.

Whilst there is no specific outcome measure relating to agriculture and food security, agricultural benefits are appropriately valued and reflected within the existing appraisal and prioritisation system. Defra’s guidance on the appraisal of flood and coastal erosion risk management requires operating authorities to incorporate food security considerations into their economic assessments of investment options by placing values on the damages avoided to agricultural land, infrastructure and other assets which play a role in growing food and making food available to consumers.

The case for maintaining or improving the defences of agricultural land is assessed in a similar way to other assets. A Defra policy statement on the appraisal of flood and erosion risk management published last year reiterates the need to value agricultural land and the damages that can occur as a result of flooding and erosion. Specific guidance was provided by Defra in 2008 based on HM Treasury Green Book appraisal principles. This takes account of the decoupled Single Payment Scheme introduced in the UK from 2005. Agricultural land and produce are valued according to market values, excluding any up-lift due to transfer payments to avoid landowners receiving a double-benefit.

Defra will shortly be consulting on a revised set of outcome measures for the period 2011/12 to 2014/15, as well as proposals to reform the funding system more generally. Defra would welcome as part of the consultation any new evidence on the relationship between agriculture, food security and flood and coastal erosion that can help inform Ministers’ decisions.

2. The Minister referred during the session to the anticipated income from asset disposals. Will these amounts be assigned as savings to Defra as a whole or assigned to the individual bodies, such as the Environment Agency or Natural England?

The Secretary of State will cover income from the sale of assets at her forthcoming appearance on "The Outcome of the Comprehensive Spending Review" on Tuesday 16 November.

3. Members raised the issue of the need for a statutory duty on Fire and Rescue Authorities to undertake work on flooding. Please could we have a note setting out Defra’s response to this, including on the specific Pitt Review recommendation that there be a "fully funded national capability for flood rescue with Fire and Rescue Authorities playing a leading role, underpinned as necessary by a statutory duty".

The Pitt Review is not categorical about the issue of statutory duty, and in Sir Ken Knight’s review of the Fire and Rescue Services (FRS) response to the summer 2007 floods ‘Facing the Challenge’, it was stated that a duty was not necessary. The FRS and other responders do turn out to flood events, as is evidenced from past flood incidents. It is therefore not clear what difference a statutory duty on the FRS would make. Introducing a statutory duty could also lead to the FRS being the only organisation carrying out flood rescue, because the other responders would withdraw from the response due to lack of statutory duty, which would lead to increased pressure on FRS funds.

The then Government accepted Sir Michael’s recommendation and our focus since then has been on the development of a national capability, through work we have been doing with all of the main players, including the FRS.

For this purpose, the Flood Rescue National Enhancement Project was initiated by Defra. A comprehensive multi-agency Flood Rescue Concept of Operations (FRCO) has been published which provides national standards for flood rescue assets, training and equipment, and clarity on command and coordination in a wide scale flooding event.

A national, multi-agency register of flood rescue assets and the operational arrangements that will govern how they are used is being finalised, and will be coordinated by the FRS National Coordination Centre. To complement this, Defra have recently launched a grant scheme for flood rescue operators, including the FRS, to apply for funding to help improve national capability and meet the standards for flood rescue assets as defined in the FRCO. So far a number of applications have been received and these will be considered on November 12th, with an announcement on the initial successful bids expected to take place soon after.

Defra has also committed funding to raising the standard of existing teams to the required level, as articulated in the FRCO. This is vital as the concern is not only numbers of assets, but the standards of assets allowing them to be successfully utilised in flooding emergencies. Defra has committed such funding to FRS as well as voluntary flood rescue organisations.

The introduction of a statutory duty is not however, ruled out. On completion, the Flood Rescue National Enhancement Project will provide us with the means of assessing what shortfalls exist in our national capability and also what statutory underpinning is needed, if any.

4. The Chair raised concerns about the lack of detailed information on the likely infrastructure to be caught within the proposed private sewer and lateral drains transfer. Please could we have a note setting out the detailed information on the extent and physical condition on infrastructure which Defra has used to evaluate the likely costs to water company customers of this proposal.

As set out in the Impact Assessment accompanying Defra’s consultation paper on draft regulations to implement private sewers transfer, published on 26 August, a lack of detailed knowledge of the extent and, particularly, the condition of private sewers means that water and sewerage companies cannot provide Ofwat with full and accurate data from which to calculate levels of funding in future price determinations beyond providing best available estimates. To obtain greater accuracy, an extensive survey and mapping exercise would be required, the latest estimate of the cost of which is around £1 billion. The government does not consider the cost of such an exercise to be justifiable.

Water and sewerage companies already report to Ofwat on the costs of operating and maintaining different types of asset, and the cost of maintaining assets most closely related to those proposed to be the subject of transfer has been used as a basis for estimating the cost of maintaining the transferred assets. Ofwat’s current estimates of the financial costs to water and sewerage companies are based on these indicative assumptions. Full details are set out in the Technical Annex to the Impact Assessment that accompanies Defra’s consultation paper which is available at: http://www.defra.gov.uk/corporate/consult/private-sewers/100826-private-sewers-condoc.pdf

The precise expenditure associated with the ownership and maintenance of private sewers will become clear over time as companies respond to faults and build up pictures of transferred assets. The estimates contained in the latest Impact Assessment reflects the increasing number of pumping stations estimated and a decreasing proportion of the sewerage network assessed likely to require immediate replacement, based on data provided by water and sewerage companies to Ofwat, which has fallen from 7.5% to 2.5%.

5. Please could you provide a note on the communication between Defra and the European Commission about the Urban Waste Water Directive, and outline Defra’s view as to whether the Commission’s treatment of specific types of property, such as business parks, leads to specific problems for the UK.

The UK is currently subject to infraction proceedings for alleged breaches of the Urban Waste Water Treatment Directive in relation to the adequacy of collection systems in Whitburn in NE England and collection and treatment systems in London. In addition to updates from the UK to the Commission on progress in London and on progress with compliance stemming from a previous infraction case in relation to Brighton, we have recently submitted pleadings to the Court of Justice of the European Union in defence of the UK position in the infraction proceedings.

In addition to the standards set for sewage treatment, the Directive sets requirements for the treatment of biodegradable waste water from industries that discharge directly to the water environment, including for example milk processing and the production of alcohol and alcoholic beverages. In doing so, the Directive makes no distinction in relation to specific types of property such as business parks. We are not aware therefore of any specific problems for the UK in this regard or in relation to any Commission interest in planning issues relating to business parks or farms .

6. Members referred to the issue of support for vulnerable water customers. What is Defra’s view of the potential for improved communication between water companies and central/local government in order to help identify customers in need of support?

In her final report, Anna Walker made a range of recommendations around tackling bad debt in the water industry, including the sharing of data between central and local government with water companies so they might better target customers with affordability issues. We are currently looking into the feasibility of this recommendation under existing data protection legislation and will set out our policy on tackling debt and affordability concerns in the forthcoming Water White Paper.

Supplementary

The Chair asked if people will be allowed access to the Environment Agency maps without charge.

The Environment Agency’s generic maps are available to everyone free of charge and they also offer, for a fee, a bespoke service.

The Chair asked if the Department has estimated the length of pipe and drains that will transfer.

It is estimated that the transfer will mean water and sewerage companies taking on responsibility for some 184,000km of private sewers and 36,000km of private lateral drains.

The Chair expressed concerns raised by the Local Government Association in relation the department’s assessment of the savings expected to accrue to local authorities as a result of the private sewers transfer going ahead

The transfer of private sewers to water companies is expected to relieve local authorities of activity they have historically undertaken in respect of their own estate and property, and on behalf of local householders. This has especially been the case when multiple households are involved, responsibilities unclear, disputes have arisen, or where people are not in a position to bear the sometimes considerable costs. Local authorities were therefore amongst those calling upon Government to intervene on the issue and find a way to avoid costs continuing to fall upon them and their communities.

Annual savings to local authorities as a result of the transfer are conservatively estimated to be in the region of £50 million per year. This is based on a survey conducted amongst local authorities in 2002. Whilst this survey was conducted some years ago, it remains the best evidence available. This is particularly as the survey was conducted before the options around transfer were widely discussed, and therefore before the knowledge of potential transfer could have influenced levels of local authority activity. A more recent survey or one conducted now would not provide a better picture of the potential savings, as the exercise may be prejudiced by knowledge of the transfer and the purpose for which the data would be collected. There is some evidence that authorities began cancelling contracts and minimising costs even before transfer was formally announced, in the knowledge that it was likely to go ahead.

Further evidence in support of Defra’s assessment has come from OFWAT, who estimate that the transfer will cost water companies £172 million a year, plus almost £1 billion one-off capital costs to resolve legacy issues that they will inherit. Without the transfer, a considerable proportion of these costs might otherwise fall on local authorities.

Whilst accepting there will be some savings, LGA have not offered an alternative estimate, nor presented any evidence that is inconsistent with Defra’s assessment. The department recognises that some local authorities will be and have been involved in private sewerage more than others, and that in some cases costs are partially or fully recovered. These issues have both been accounted for in arriving at the £50 million estimate. The 2002 survey also found that many local authorities did not know how much dealing with private sewerage was costing them, as expenditure was and is often spread between many service-level budgets. This, taken with the conservative methodology applied to the 2002 data (which for example removed the highest cost estimates from local authorities), suggests the Defra assessment underestimates the true level of savings.

The savings to local authorities from the private sewers transfer have now been accounted for as part of the Spending Review. As a result, Defra has secured the funding it committed to provide to lead local flood authorities from 2011/12 onwards. Transferring the money to Defra has allowed the sums to be fully protected from both the reductions in Formula Grant and the reductions in Defra’s other budgets. Up to £36 million a year in total will be distributed directly to lead local flood authorities through Area-Based Grants. Funds will be unringfenced to allow for local flexibility. On top of this, funding to support the maintenance of adopted SuDS will also be provided by Defra, whilst options for a longer-term funding mechanism are considered. Local authorities were consulted before the savings were accounted for, and their views sought on how the value of each area-based grant should be set. By basing allocations on levels of local flood risk, those lead local flood authorities managing the highest levels of local risk will be provided with funds several times higher than the average. In some areas this could reach £750,000 per year.

Defra fully understands the concerns raised by local authorities surrounding the funding of new burdens under the Flood and Water Management Act. The department is committed to achieve a fair outcome for both local authorities and the taxpayer. This is evidenced by the importance attached during the Spending Review to protecting the funding for lead local flood authorities. In addition, Defra and the LGA have established a joint review panel specifically for the purpose of monitoring actual local authority costs and burdens, and resolving any issues that arise. The panel meets monthly and has an independent chair; a former local authority executive officer.

17 November 2010