2 Funding for flood risk management
Roles and responsibilities
3. Managing flood risk effectively has economic
as well as social and environmental benefits. The 2007 summer
floods cost the UK at least £4 billion and several people
died.[3] The Pitt review
of those floods made recommendations on improving, monitoring
and responding to flood risk; the majority were accepted by the
Government.[4] Key measures
were implemented in the Flood and Water Management Act 2010 (FWMA),
including definitions of the key roles and responsibilities of
the main bodies managing flood risk.[5]
The Department for Environment, Food and Rural Affairs (Defra)
has policy responsibility for flood and coastal risk management.
The Environment Agency (EA) has a strategic overview of all sources
of flooding and operational responsibility for managing risk from
rivers and the sea. Upper-tier local authorities (i.e. unitary
and county councils, known as Lead Local Flood Authorities) have
responsibility for local flood risk such as from surface water
and for encouraging greater local engagement and partnership working.[6]
Within this framework, Internal Drainage Boards (IDBs) have a
role in managing flood risk in a number of low-lying areas, such
as Lincolnshire and the Somerset Levels.[7]
Flood risk: the figures
- More than 5.5 million (one in six) properties in England and Wales are at risk of flooding from all water sources.
- More than 2 million properties are at risk of flooding from rivers or the sea and nearly 3 million are susceptible to surface water flooding alone. A million properties are threatened by both.[8]
- Climate change is predicted to increase the likelihood of sea and river flooding and coastal erosion. Changing rainfall patterns and some new building developments are likely to make flooding from surface water more frequent.[9]
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Current funding arrangements
4. In January 2013, we published an analysis commissioned
from the National Audit Office (NAO) setting out levels of public
and private investment in flood defences and their maintenance,
the level of protection this investment is providing, and how
engaged local communities are in developing the delivery plans.[10]
The NAO reports that Defra will spend an estimated £2.3 billion
on coastal erosion and flood risk management in the current spending
period.[11] This spend
is divided into capital fundingon new and improved defences,
major refurbishment of defences and other expenditure on assets,
plant and equipmentand revenue expenditure.[12]
The latter includes routine maintenance of flood defences, emergency
planning and response, forecasting and warning services, and other
running costs. Funding in 2012-13 was split with a capital budget
of some £266 million, compared to a revenue budget of just
under £295 million. For 2013-14, the figure for capital spend
is higher at just under £294 million whilst revenue spend
is set to decrease to around £280 million.[13]
5. Around 93% of Defra's flood defence budget
is allocated to the EA as Flood and Coastal Erosion Risk Management
Grant in Aid (FCRM GiA)which in turn is allocated to funding projects
and ongoing work.[14]
The method by which funding is allocated to specific projects
changed from April 2012 to reflect a new 'Partnership Model.'
This is discussed below. Defra retains a small proportion of the
overall flood risk management budget for projects such as the
Coastal Change Fund, Community Pathfinder projects, and research
and development.[15]
6. Additionally, some £129 million will
be provided over the current spending period in the form of retained
business rates, revenue support grant and direct grants from Defra
to Lead Local Flood Authorities (LLFAs) to support their new roles
under the Flood and Water Management Act.[16]
Central Government funding to local authorities via the Department
for Communities and Local Government for flood and coastal erosion
risk management has increased in recent years. Local authorities
are free to decide how much of this amount to spend on their own
flood and coastal risk management activity in light of other local
priorities as the funding is not ring-fenced. Local authorities
reported spending some £104 million in 2011-12 compared to
some £90 million in 2008-09 on flood and coastal erosion
risk management.[17]
Local authorities also pay local levies to the EA of some £30
million a year towards funding local priority schemes.[18]
INVESTMENT LEVELS
7. The original provision of a total of £2.17
billion for the current spending review for flood and coastal
defence works represents a 6% fall in central government funding
compared to the previous spending period.[19]
However, in the 2012 Autumn Statement the Chancellor of the Exchequer
announced additional funding, raising spend to a level close to
that of the previous spending period. Some £120 million of
funding would be made available for flood defence work, to be
spent in 2013-14 and 2014-15.[20]
Table 1 below sets out the level of funding provided to the EA
for 2007-08 to 2014-15.[21]
Table 1: Environment Agency Flood and Coastal
Risk Management Grant-in-Aid Funding:
2007-08 to 2014-15

* Additional funding refers to £120 million
announced in the Autumn Statement 2012
Source: Report by the Comptroller and Auditor
General, Department for Environment, Food and Rural Affairs and
Environment Agency, Flood Risk Management in England, HC 1521,
October 2011, p 13
8. The Secretary of State for Environment, Food
and Rural Affairs, Rt Hon Owen Paterson MP, said that, when £148
million of partnership funding from sources other than central
government grants was included, more would be spent over the current
four year spending period than during the preceding four years.[22]
9. In the last spending review period, 182,000
households were given improved flood protection against a target
of 145,000.[23] No targets
have been set for the current spending review period as Defra
considers that short term targets do not always lead to the best
long term outcomes.[24]
Nevertheless, the Secretary of State told us that total funding
committed to date would improve protection for some 165,000 homes
by 2015; some 20,000 more than originally estimated reflecting
the increased funding announced in the Autumn Statement.[25]
This should be set in the context of the more than 5.5 million
properties in England and Wales being at risk of flooding.
10. Many witnesses were concerned that overall
funding for flood risk management was inadequate. The Local Government
Association (LGA) considered funding was insufficient given the
"huge" scale of the problem.[26]
The Association of Drainage Authorities (ADA) pointed in particular
to the "urgent need" for increased revenue funding for
the EA.[27] Indeed, in
2009 the EA calculated that funding needed to increase by £20
million year on year between 2010 and 2035 to sustain current
protection as risk increased owing to climate change. The EA considered
that a "steady investment" in building and maintaining
defences was needed so that funding would reach around £1
billion a year plus inflation by 2035.[28]
This equates to an 80% increase on the £570 million investment
in such work in 2010-11.[29]
Funding for the current spending period would have needed to be
some 9% higher.[30]
11. The NAO noted that current costs of damage
to properties caused by flooding from rivers and the sea was around
£1.3 billion per annum but that this could rise to between
£2.1 and £12 billion by 2080, based on future population
growth and if no adaptive action was taken.[31]
The wide range in figures reflects the level of uncertainty over
the impact of climate change and other factors on flooding over
this long timescale.[32]
12. We received evidence on the high ratio of
benefits to investment in flood defences, with some £8 of
benefits achieved for every £1 spent on flood defence work.[33]
The Chairman of the EA, Rt Hon Lord Smith of Finsbury, considered
that such a ratio compared "robustly with virtually any other
bit of infrastructure development that the Government seeks to
undertake".[34]
He outlined strong reasons why HM Treasury should ring-fence flood
funding, including the efficiency of the EA's programme, the 200,000
properties protected during the floods of late 2012 and early
2013, the increasing threat of erratic weather patterns, and the
high benefit-to-cost ratio of schemes.[35]
13. HM Treasury appears to have recognised the
economic growth and regeneration benefits to be gained from investing
in flood defences. It stated that the additional capital funding
of £120 million announced in the Autumn Statement in December
2012 would deliver up to £1 billion of economic benefits
and "help drive growth".[36]
The Secretary of State told us that "emphatically these flood
defence schemes help grow the economy".[37]
However, the press reported that Defra Ministers had to fight
to preserve flood defence spending in the next spending period.[38]
14. After we finished taking evidence, on 26
June, the Chancellor announced that Defra's budget for 2015-16
would be reduced by 10%; from £2.2 billion in 2014-15 to
£2 billion in 2015-16. However, the settlement maintained
resource spending on flood defences in cash terms.[39]
Defra subsequently announced an additional £5 million for
EA maintenance work.[40]
Nevertheless, this is a modest increase since revenue funding
for the EA is at its lowest since 2007 and some £50 million
lower than in 2011-12.[41]
The Chancellor also announced that there would be a "major
commitment" of capital funding for new flood defences for
the rest of the decade as part of an overall investment of £10
billion for specific science, housing and flood defence infrastructure
projects over the period of the next Parliament.[42]
Funding would rise to £370 million in 2015-16 then be protected
in real terms until 2020.[43]
This would deliver improved protection to at least 300,000 homes.[44]
Despite this increase, capital funding in 2015-16 will be
only £16 million higher than in 2010-11, and around £80
million lower than the level the EA anticipated would be necessary
to match rising flood risk. Retaining funding constant until the
end of 2020 will further increase the shortfall as the EA estimated
that funding would need to continue to rise to reach £550
million in 2020-21.[45]
15. We welcome the Government's
recognition that effective flood protection is essential for economic
growth and for the regeneration of key parts of the country. Additional
capital funding until the end of the decade announced by the Chancellor
in the 2013 spending round is essential for securing flood defences
to protect homes and businesses. However, funding has not kept
pace in recent years with an increased risk of flooding from more
frequent severe weather events and the relatively modest additional
sums to be provided up to 2020 will not be sufficient to plug
the funding gap.
16. Defra, together with the
Department for Communities and Local Government, should act as
an advocate for local communities with HM Treasury to secure additional
investment for local flood defences. Defra must set out detailed
evidence to demonstrate to HM Treasury that flood management capital
funding must rise year on year by £20 million over the next
25 years to keep pace with increasing flood threat. This must
be matched by a better balance between revenue and capital funding,
whether from government or other sources. A review must take place
prior to each spending period to ensure that funding is neither
excessive nor inadequate in the light of developing scientific
evidence on the likely long term impacts of changing weather patterns
on flood risk.
Partnership funding
17. From April 2012, the EA has operated the
Flood and Coastal Erosion Resilience Partnership Funding model,
a new scheme for allocating funding to specific projects. It aims
to encourage non-Government sources to provide funding for flood
defence schemes. The proportion of central funding that a project
receives will depend on the benefits it will bring. The EA notes
that "instead of meeting the full costs of a limited number
of schemes, the partnership funding approach means that government
money can help meet the costs of any worthwhile scheme [...] As
a result, more schemes are likely to go ahead than under the previous
'all or nothing' funding system". The amount of money that
the Government will allocate to a scheme is based on the numbers
of households protected, the damages being prevented, and other
benefits the project would deliver.[46]
18. The Public Accounts Committee has questioned
the extent to which Defra could rely on funding from local sources
for flood risk management given that local authorities face their
own funding challenges.[47]
These challenges have increased with the 2013 spending round announcement
of a reduction in local government spending of a further 2.3%
for 2015-16.[48] The
NAO told us that during the previous spending review period sources
other than central government funded only a relatively small proportion
of the overall £1.02 billion budget: £2 million in 2008-09
rising to nearly £13 million in 2010-11. The private sector
contributed 20% of this external funding. The EA had expected
that under the new approach external funding of £9.5 million
would be achieved by 2011-12, with 70% coming from the private
sector over that year and the following year. However, out-turn
figures show that a total of only £5.3 million of partnership
funding (from public and private contributions) was achieved for
2011-12. Nevertheless, the EA now expects that partnership funding
between 2012-13 and 2014-15 will total £70.6 million, rising
to around £160 million if local levy contributions are included.[49]
Although higher than estimated at the time of the NAO's previous
report, total funding from non-government sources remains low
and only a small proportion of this is from the private sector
with relatively few schemes including significant private funding.
19. Evidence on the effectiveness of the partnership
approach was mixed. The LGA welcomed
the principle of levering in private funds since this potentially
allowed more schemes to go ahead than the previous system and
established an "important link between the beneficiaries
and flood defence investment". However, the Association also
considered that the model needed to be reviewed to ensure that
communities achieved the best value for money from limited public
funds. It recommended speeding up the approval process which was
currently "too long and complex", taking up to a year
before final funding approval was given. Councils considered that
this lowered confidence among potential funding partners and made
long term planning difficult. The Association also
wanted support for a more
diverse set of outcomes since "smaller,
more rural and dispersed areas" were unable to compete for
funding owing to the allocation criteria being applied on a national
basis according to outcomes
set out in the Partnership Funding Score.[50]
The Association also noted that, while many local communities
recognised the need for more funding to go into flood defences,
in many areas there were "simply not the businesses"
to fund this.[51]
20. There were concerns that the partnership
approach could allow some schemes to proceed ahead of more urgent
schemes owing to their ability to secure additional funding from
private sector or other partners. The EA acknowledged that there
would be projects which had not proceeded that might have under
the old system, but argued that other projects had gone ahead
that would not have under the previous system.[52]
Lord Smith noted that there were only a "handful" of
schemes which had gone ahead with private sector investment.[53]
The Secretary of State told us that the Partnership approach was
a "good thing",[54]
referring to schemes, such as a project in Leeds, which were going
ahead that would not have done so previously.[55]
However, he acknowledged that more private money could be delivered.[56]
21. In our 2010 report Future Flood and Water
Management Legislation, we supported the principle that beneficiaries
such as developers should help to fund new schemes but doubted
whether additional contributions
from other sectors would be forthcoming, particularly from local
government which is already contributing to many existing and
planned local flood defence projects.[57]
On the evidence of early experience of the scheme, those doubts
appear to have been well-founded.
22. Although the effectiveness
of the Partnership model for allocating flood funding will become
fully apparent in time, we are concerned that only small amounts
of private sector funding have been secured to date. Defra must
demonstrate in the next 18 months that this model can deliver
much greater private sector funding.
23. The Department and the Environment
Agency must simplify procedures to speed up delivery of funding
to local authorities for whom efficient cash-flow is vital if
project funding is to be secured from private bodies.
24. Our Natural Environment White Paper report
published in July last year recommended that the Government work
with like-minded Member States to incorporate sufficient flexibility
in the revised Common Agricultural Policy such that agri-environment
scheme funding could be spent on ecosystems management schemes,
such as land management to reduce flooding.[58]
The Government should ensure
that maximum use is made of natural methods to prevent and manage
flooding, which could enable the application of wider funding
streams such as those available for EU agri-environment schemes.
25. We recommended in that report that Defra
commissions and publishes an assessment of the possibility of
requiring licensed water supply companies to deliver specific
benefits to the natural environment, including improved water
flow management. We further recommended that a series of pilot
schemes, similar to that in Pickering, Yorkshire, which use ecosystems
management approaches to slow the flow of water be established
across England and Wales.[59]
The Government's response explained that such approaches were
being evaluated and that consideration of such issues took place
within the price review process.[60]
We regret that the current
regulatory framework does not permit innovative investment in
natural flood defences by water companies and expect Ofwat's next
Price Review to rectify this.
Funding the defence of agricultural
land
26. Some 14% of the agricultural land in England
and Wales is at risk of flooding from rivers or from the sea.[61]
The National Farmers' Union (NFU) told us that 58% of the most
productive English farmland (grade 1 land) is within the floodplain.[62]
The EA recognised the benefits of flood defences for agricultural
land, noting that projects in 2011-12 had provided flood protection
to more than 74,000 hectares of agricultural land.[63]
Nevertheless, around 30,000 hectares of high-quality arable and
horticultural land floods each year and this figure is likely
to increase. Defra has estimated that some 35,000 hectares of
high-quality horticultural and arable land will be flooded at
least once every three years by the 2020s, and that this could
rise to around 130,000 hectares by the 2080s if there is no change
to current flood defence provision.[64]
27. Witnesses criticised the method used by the
EA to assess the benefits of schemes since this skewed funding
allocations. The NFU considered that the Agency's scoring model
failed to reflect fully the benefits for food security of protecting
agricultural land and that greater consideration must be given
to the future value of food production.[65] The
Country Land and Business Association questioned the 5 to 1 cost-to-benefit
ratio set for household protection schemes, whilst for other assets
the ratio was required to be much higher at 18 to 1.[66]
The LGA also expressed concerns that the mechanism for partnership
funding would not lead to strategic protection of land required
for food security, and that it was not feasible for local communities
to fund the necessary protection measures.[67]
The EA acknowledged that the impact of flooding over a sustained
period on places such as the Somerset Levels had "diminished
the economic prospects of the farming community very substantially".[68]
28. We acknowledge the need to protect life and
property adequately from the impacts of flooding but this does
not mean that other imperatives, including the need to ensure
food security, should not be taken into account when decisions
are made on allocating scarce flood defence funding. We concluded
in a previous report on food security that, faced with global
challenges of meeting the world's demand for food in the face
of climate change and population growth, the UK has a "moral
duty" to make the most of its natural advantages for producing
certain types of food and should aim to "increase production
of those crops suited to be grown here".[69]
The Prime Minister told the House in June that farmland
must be protected "not least because, with global populations
rising, the demand for food production is going to increase, and
we should make sure we have a good level of food security in this
country".[70] However,
failure to adequately protect agricultural land from flooding
is working counter to that aim and threatens to undermine the
UK's ability to buffer itself against future crises in food supply.
29. The current model for allocating
flood defence funding is biased towards protecting property, which
means that funding is largely allocated to urban areas. Defra's
failure to protect rural areas poses a long term risk to the security
of UK food production as a high proportion of the most valuable
agricultural land is at risk of flooding. Defra must require the
Environment Agency to amend its scoring system to put a higher
value on the benefits delivered by agricultural land, so that
such land becomes eligible for a higher proportion of flood defence
funding.
3 Environment Agency, Review of the 2007 floods,
December 2007. Insured costs are estimated at £3 billion
with additional costs of £1 billion Back
4
Sir Michael Pitt, The Pitt Review: Lessons learned from the
2007 floods, June 2008. Sir Michael Pitt conducted an independent
review of the 2007 floods and their impacts at the request of
the Government Back
5
See Flood and Water Management Act 2010, Sections 7 - 10 in particular Back
6
Report by the Comptroller and Auditor General, Department for
Environment, Food and Rural Affairs and Environment Agency, Flood
Risk Management in England, HC 1521, October 2011 Back
7
Association of Drainage Authorities webpages http://www.ada.org.uk/downloads/publications/IDB%20Vision.pdf Back
8
Environment Agency flood webpages http://www.environment-agency.gov.uk/homeandleisure/floods/31666.aspx Back
9
Environment Agency briefing note, Flood and coastal risk management,
June 2010 Back
10
Ev w9. This information updated the NAO's 2011 Flood Risk Management
in England report considered by the Public Accounts Committee
in January 2012 Back
11
The current spending period runs from 2011-12 to 2014-15 Back
12
Revenue expenditure is also referred to by the EA as resource
expenditure Back
13
Defra webpages,http://www.defra.gov.uk/environment/flooding/funding-outcomes-insurance/funding/ Back
14
Ev w10. FCRM GiA was formerly known as Flood Defence Grant in
Aid (FDGiA). £2.01 billion in this spending period is allocated
to the EA as FDGiA and an additional £120 million capital
funding was announced in the 2012 Autumn Statement Back
15
The Coastal Change programme provided funding for local authorities
to help their communities adapt to changes in their area due to,
for example, coastal erosion. Defra launched the Community Pathfinder
project in December 2012 to fund "innovative community responses
to increase flood resilience" Back
16
Ev w10 Back
17
Defra webpages, http://www.defra.gov.uk/environment/flooding/funding-outcomes-insurance/funding/ Back
18
Q 115 Back
19
Ev w10. The previous spending period ran from 2007-08 to 2010-11 Back
20
"£120 million boost to flood defences will protect homes
and businesses and help drive growth", HM Government press
release, 1 November 2012 Back
21
Report by the Comptroller and Auditor General, Department for
Environment, Food and Rural Affairs and Environment Agency, Flood
Risk Management in England, HC 1521, October 2011, p 13, updated
to include additional capital funding information for 2013-14
and 2014-15 from HM Treasury press notice 115/12
Back
22
Q 294 Back
23
Ev w14 Back
24
Q 304 Back
25
Q 301 Back
26
Q 3 Back
27
Ev 75 Back
28
Environment Agency, Investing for the Future: flood and coastal
risk management in England, a long term investment strategy,
2009 Back
29
This would equate to around an additional £5 billion over
a 25-year period Back
30
Report by the Comptroller and Auditor General, Department for
Environment, Food and Rural Affairs and Environment Agency, Flood
Risk Management in England, HC 1521, October 2011, summary.
This report refers to the Environment Agency report, Investing
for the future: flood and coastal risk management in England,
a long term investment strategy, 2009 Back
31
The Foresight Flooding report published by the Department of Trade
and Industry in 2004 estimated potential annual economic damage
of between £1.5 billion and £21 billion by the 2080s
depending on scenarios with varying levels of GDP growth, economic
development, government structure and climate change. "Looking
ahead to reduce flood risks", DTI press release P/2004/150,
22 April 2004 Back
32
The Met Office held a seminar in June 2013 to examine evidence
on likely future trends in weather patterns. It noted that there
was considerable uncertainty over trends for the coming decade.
"Stand by for another decade of wet summers say Met Office
meteorologists", The Independent, 18 June 2013 Back
33
Report by the Comptroller and Auditor General, Department for
Environment, Food and Rural Affairs and Environment Agency, Flood
Risk Management in England, HC 1521, October 2011 Back
34
Q 100 Back
35
Q 113 Back
36
"£120 million boost to flood defences will protect homes
and businesses and help drive growth", HM Government press
release, 1 November 2012 Back
37
Q 296 Back
38
"Cabinet battle over flood defence budget", The Telegraph,
2 June 2013 Back
39
HM Treasury, Spending Round 2013, June 2013, Cm 8639, p
47 Back
40
Letter from Secretary of State, Rt Hon Owen Paterson, to Anne
McIntosh MP, on Spending Review 2013, 27 June 2013 Back
41
Report by the Comptroller and Auditor General, Department for
Environment, Food and Rural Affairs and Environment Agency, Flood
Risk Management in England, HC 1521, October 2011 Back
42
HC Deb, 26 June 2013,col 310 Back
43
From £344 million in 2014-15; a 7.6% increase Back
44
HM Treasury, Investing in Britain's Future, June 2013 ,
Cm 8669 Back
45
In his 27 June 2013 letter to Anne McIntosh MP on the Spending
Review 2013, Defra Secretary of State, Rt Hon Owen Paterson MP,
states that funding in 2020-21 will be over £400 million Back
46
www.gov.uk flood and coastal erosion risk management pages Back
47
Public Accounts Committee, Sixty-fourth report of Session 2010-12,
Flood Risk Management in England, HC 1659, recommendation
2 Back
48
HM Treasury, Spending Round 2013, June 2013, Cm 8639 Back
49
Ev 9. The Local Levy is raised by Regional Flood and Coastal Committees
(RFCCs) and their predecessor Regional Flood Defence Committees
(RFDCs) from county and unitary councils and is used to support
flood risk management projects that are not considered to be national
priorities and so do not attract national funding Back
50
Ev 99 Back
51
Q 4 Back
52
Q 117 Back
53
Q 129 Back
54
Q 344 Back
55
Q 311 Back
56
Q 344 Back
57
Environment, Food and Rural Affairs Committee, First Report of
2010-11, Future Flood and Water Management Legislation, HC
522 Back
58
Environment, Food and Rural Affairs Committee, Fourth Report
of Session 2012-13, Natural Environment White Paper, HC
492 Back
59
Environment, Food and Rural Affairs Committee, Fourth Report of
Session 2012-13, Natural Environment White Paper, HC 492 Back
60
Environment, Food and Rural Affairs Committee, Fifth Special
Report of Session 2012-13, Natural Environment White Paper:
Government response, HC 653 Back
61
Q 135. 1.5 million hectares Back
62
Ev w21 Back
63
Q 132 Back
64
Defra, UK climate change risk assessment 2012, July 2012,
Agriculture section. Figures are for England and Wales Back
65
Ev w22 Back
66
Ev w6 Back
67
Ev 99 Back
68
Q 136 Back
69
Environment, Food and Rural Affairs Committee, Fourth report of
Session 2008-09, Securing food supplies up to 2050, the challenges
facing the UK, HC 213 Back
70
HC Deb, 19 June 2013, col 887 Back
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