House of Commons - Strategic Flood Risk Management

Strategic Flood Risk Management - Public Accounts Contents

1 Funding for flood risk management

1. On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for the Environment, Food and Rural Affairs (the Department) and the Environment Agency (the Agency) about strategic flood risk management in England.[1]

2. Some 5 million properties in England—1 in 6-are at risk of flooding. Of these, 2.4 million are at risk of flooding from rivers or the sea and 3 million are susceptible to surface water flooding. The 2012 Climate Change Risk Assessment reported that climate change will significantly increase flood risk in the UK. The government expects changes in the coming decades will include rising sea levels, increased rainfall and a higher frequency of severe weather events.[2] In 2013, the risk of flooding from the coast was one of the highest priority risks on the National Risk Register of Civil Emergencies.[3]

3. The Department has policy responsibility for flooding. At a national level, the Agency is responsible for managing flood risk, with lead local flood authorities and other bodies responsible for managing risk locally. These include regional flood and coastal committees, that ensure plans are in place to identify, communicate and manage flood risks across catchments and shoreline areas. Internal drainage boards are responsible for water-level management in low-lying areas.[4]

4. In 2014-15, the Department provided £795 million for flood risk management to the Agency and other local bodies, which included £180 million of the additional £270 million it allocated following the winter floods of 2013-14.[5] The Department and Agency told us that the additional funding allowed them to respond quickly to events, and to begin restoring the condition of flood defence assets.[6]

5. The Agency's 2009 Long Term Investment Strategy set out that in order to maintain the current level of flood protection, total funding would need to increase by £20 million in current prices every year until 2035.[7] However, the C&AG's report noted that between 2010-11 and 2013-14, funding for managing flood risk has fallen by 18% for capital and 10% for revenue in cash terms, excluding the extra allocations given for the repair of damage following the winter floods of 2013-14.[8]

6. In December 2014, after our evidence session, the Agency published an update of its 2009 strategy. The new strategy outlines that the optimal investment levels for first 10 years will be around £750 to £800 million a year in current prices. The Agency expects this to rise to £850 to £900 million a year for the 2020-2040 period.[9]

7. From 2015-16, HM Treasury has agreed a 6-year settlement of £2.3 billion for the capital flood risk management budget.[10] The Department and Agency told us that long term settlements help them to plan their work and ensure long-term value for money. For example, the Agency told us that in 2012 it had implemented a new long term construction framework contract which has reduced unit costs compared to its previous contract.[11]

8. However, the revenue budget settlement is agreed by HM Treasury on an annual basis and can only be planned as far as the end of the current cross-government spending period. This limits the Agency's ability to take a long term approach to planning and procuring maintenance, which is funded from the revenue budget. The Agency told us that a longer term settlement for revenue would enable it to drive efficiencies by planning work over a longer period, as it is doing for capital construction. In the case of Thames Estuary Phase 1 maintenance programme, the Agency was able to plan maintenance work over a longer period because the extent of the benefits give the programme a persistently high priority. The Agency is confident it will secure better value for money by providing certainty to the contractor and leveraging economies of scale.[12]

9. The Agency told us that, in response to financial constraints, it has carried out an efficiency exercise and is on track to meet a 15% cost reduction target by the end of the current spending review period. It has made savings from its capital construction programme totalling £44 million which it has reinvested back into the flood risk management programme.[13]

10. However, the Agency has limited resources, and must make difficult decisions about what it can and cannot fund. On maintenance—where the C&AG's report noted that funding declined by 6% in real terms between 2010-11 and 2014-15—the Agency supports these decisions with a process that prioritises funding according to area.[14] It told us that the exercise is undertaken annually, and combines data on the benefits provided in a given area with the maintenance needs of each flood defence.[15] The Agency then ranks areas according to cost-benefit ratio. It uses this ranking to decide whether to fund an area's defences to a 'minimum' level (which only addresses statutory requirements) or to meet 'identified needs' through pro-active maintenance. As of August 2014, around half of all asset systems were on a 'minimum' regime.[16]

11. Whilst the Agency's prioritisation exercise is a robust way of rationing a limited revenue budget, it may have an adverse effect on the total budget in the future. This is because flood defences maintained only to a minimal level may need repair or replacement sooner because they are not pro-actively maintained—thus bringing forward future capital expenditure.[17] The Agency told us that some of the assets in these areas are uneconomic so may not be replaced; however, many are simply deprioritised for maintenance reasons. The Agency recognises that in these cases it might have to spend money reinstating defences sooner where a 'minimum' regime is in place.[18]

12. In a small number of cases, the Agency is looking to stop maintaining flood defences because it considers they provide insufficient benefit compared to the cost of maintenance. Where the Agency identifies defences as uneconomic, it will discuss this with local partners who may be in a position to take responsibility. The Agency told us that it has identified around 60 areas where it hopes to relinquish its maintenance responsibilities. In 10 areas it has come to an agreement with local authorities, landowners or farmers to take on the maintenance of those defences and is currently in discussions in the remaining 50 locations.[19]

13. The Agency stated that for these locations, the decision to cease maintenance is categorical and the choice given to communities—between taking on maintenance and having the assets unattended—is clear. The C&AG's report notes the potential for community and political pressure to play a part in such situations.[20]

14. As well as maintenance ceasing altogether, communities may also experience reductions in maintenance regimes because of efficiency measures (such as reducing grass cutting) or because maintenance has been deprioritised in their area (as described above).[21] The C&AG's report found that while the Agency has engaged extensively with communities, there were some cases in which it could have managed expectations better by providing more clarity about the nature and impact on any changes to maintenance regimes.[22]

15. In 2011, the Department introduced a new partnership funding model which aimed to increase investment for capital flood defence projects from outside of central government. By the end of March 2015, the Department estimates that it will have attracted additional funding of some £140 million into flood defence projects.[23] The Department told us that partnership funding has changed the way in which local partners now consider flood defence schemes and how they are funded, with an increased awareness that central government cannot afford to fund all schemes. The Agency considers that partnership funding can have a significant effect on discussions at a local level, increasing the ownership taken by areas in finding solutions for their flood risk.[24]

16. The Department told us that partnership funding has helped bring forward more flood defence projects and that it may have helped increase the total number of projects by up to 25%. This includes projects which have been funded and delivered which would not have otherwise attracted funding, such as the Morpeth Flood Alleviation Scheme, which was one of the first to be delivered under the partnership funding programme.[25]

17. The Department considers that the partnership funding programme has been a success, but as it did not set a target at the outset for what level of additional contributions it expected, it cannot say whether the estimated £140 million raised is good or bad, high or low. It does not have enough data on which to base an informed view of how much partnership funding it could potentially raise.[26] The Department told us that it recognises the need to improve the data it collects about projects being run by other bodies. However it has been restricted from requesting this data because of an agreement with the Department for Communities and Local Government to reduce burdens on local authorities.[27]

18. The Department and Agency have started to learn from their experiences in the early years of the partnership funding model. An important part of this has been the consideration of the incentives for both public and private sector bodies to invest in schemes.[28] HM Treasury has instructed the Department that a minimum of 15% of all funding be from partnership funding sources, which the Agency told us equates to around £350 million.[29] Since our evidence session, HM Treasury has published the National Infrastructure Plan, which outlines a target of £600 million to be achieved from local contributions.[30] This corresponds to what the Agency had told us—that considerably more contributions above the 15% target would be needed to deliver the flood risk management programme.[31]

1 C&AG's Report, Strategic Flood Risk Management, Session 2014-15, HC 780, 5 November 2014 Back

2 C&AG's Report, para 1.1 and 2.16 Back

3 Cabinet Office, National risk register of civil emergencies 2013 edition, 2013 Back

4 C&AG's Report, para 1.2 and Figure 2 Back

5 C&AG's Report, para 2.2 and Figure 8 Back

6 Q 70 Back

7 C&AG's Report, para 2.8 Back

8 C&AG's Report, para 2.2 and Figure 8 Back

9 Q 12, Environment Agency, Flood and coastal erosion risk management, Long-term investment scenarios (LTIS) 2014, December 2014 Back

10 Q 1; C&AG's Report, para 16. Since the hearing, this settlement has been included in the National Infrastructure Plan HM Treasury, National Infrastructure Plan 2014, December 2014,para 9.A

Qq 9, 11 Back

11 Qq 19, 21 Back