Coastal flooding and erosion, and adaptation to climate change: Interim Report Contents

3Funding and sharing the balance of costs

24.According to the Environment Agency there are three main sources of funding for coastal flood and erosion management:

25.The Environment Agency also said its Long-Term Investment Scenarios suggested a long-term average annual spend of over £1 billion was needed (on maintenance and capital investment) to manage flooding and coastal change for the next 50 years, for all sources of flooding.54

26.In 2018 the CCC examined long-term spending on flood and coastal erosion risk in England against the long-term need, concluding that: “whilst the overall investment levels are sound, the specific schemes that secure funding are not prioritised relative to their importance in long-term sustainable plans.”55

27.The NIC told us that in recent years management of flood risk had “too often been short term and reactive.”56 Government budgets were reduced in 2006/7 and 2007/8 but then increased after floods in 2007, “and cut again in 2011/12 with a large increase following floods in the winter of 2013/14”, and argued that it would “clearly be better to build flood resilience before it is needed.”57 The NIC also said the Government’s six-year capital programme for 2015/16 to 2020/21 “provides greater certainty and should result in more efficient planning. However, there is no clear long term objective for the level of flood resilience that the government is seeking to achieve.”58

Funding for adaptation

28.DEFRA told us:

Flood Defence Grant in Aid and local levy … are some of the principal routes used by Risk Management Authorities to fund management of flood and coastal erosion risks. An element of the formula grant allocation that Local Authorities receive from Government is based on their coastal flood and erosion responsibilities …

Adaptation is also integrated within Government policies and programmes that support flood and coastal erosion risk management.59

29.However, others highlighted that there was no clear funding source for adaptation. The Environment Agency stated that: “current government funding policy does not fully facilitate the allocation of FCERM GiA to adaptation or roll back measures like relocating properties further inland.”60 East Riding of Yorkshire Council told us DEFRA promoted adaptation requiring the Council locally to provide significant and ongoing financial support.61 It therefore had to “explore external sources of funding, including EU funding streams… due to the lack of suitable funding options within [sic] our own Government.”62 Coastal Partnership East contrasted the lack of funding support for coastal adaptation compared to defences, as:

Currently, inhabited areas that are policy designated by SMPs as ‘managed realignment’ or ‘no active intervention’ have no funding to adapt, with the exception of a small DEFRA funded demolition grant. Whereas ‘hold the line’ frontages can utilise public funding for the provision of traditional defences, subject to business case appraisal.63

30.The need for change is recognised by the Environment Agency, whose evidence said it is proposing changes to the current GiA funding formula to “help reduce the funding gap for coastal roll back schemes and encourage such schemes to come forward”.64 It proposes that the formula should: “include homes that are part of coastal adaptation (roll back) schemes; … B&Bs as ‘homes’ and not just business premise[s]; … [and] homes that become at risk due to impacts of climate change.”65

Delivering Shoreline Management Plans

31.Terry Fuller of the CIWEM told us:

In terms of the ethos and the concept behind shoreline management plans they are intrinsically good. The long-term thinking that those plans have encouraged us to try to adopt over the last decade or so is absolutely the right way to be going. However, in terms of implementation, it has not been working as it should. Part of that is because they inevitably point towards some challenging and difficult decisions that have to be taken and there is not sufficient impetus or obligation to face up to some of those implications.66

32.Cornwall Council said that the Cornwall & Isles of Scilly SMP (which covers the longest stretch of coastline) was not being fully implemented, with “many difficult and unpalatable actions” having been “pushed into the second epoch [after 2025] to allow time to prepare during the first epoch [2005–2025]. In most cases this preparation simply has not happened due to a lack of resource”.67 The Council said it had developed SMP-recommendations for the priority area of Mount’s Bay with a £3.7 million short-term scheme underway to “allow time for the longer-term adaptation approach to be developed” with longer term funding of £130 to £140m potentially required.68 However, whilst it had: “concentrated [its] resources” in developing a coastal adaptation approach for this priority location; “many others around Cornwall … will require similar levels of investment. FDGiA will only provide a very small proportion of the required funding and successful schemes will need to be integrated with economic and social regeneration drivers and funding pathways”, but how this will be funded is unclear.69 The Council said despite trying to proactively develop and implement coastal erosion and flooding adaptation measures, “we are only addressing the ’tip of the iceberg’; maybe a few percent of what is required … with anticipated global warming impacts we are probably moving backwards”.70 Rachael Bice from the Council told us that there was an 85 per cent shortfall in funding for its 25-year investment plan.71

33.It was not clear however that all of the proposals currently in SMPs represented value for money, especially given the change in philosophy towards adaptation and resilience rather than holding the line. In 2018 the CCC estimated that implementing current local SMPs, would cost between £18-£30 billion (depending on the rate of climate change) across their life-times, but that the costs of the plans for between 149 and 185 km of England’s coast outweighed the benefits using current Government cost-benefit analysis methodologies.72 Holding the line on a further 1,460km of coastline, as currently planned, would achieve lower benefits to cost ratios than the interventions the Government currently funds.73

34.The Environment Agency’s written evidence said it is spending £1 million over 3-years to ensure SMPs are “up to date and use the best evidence”,74 equivalent to £50,000 for each of the 20 SMP areas, though Cornwall Council suggested this could mostly be eaten-up by the Agency’s administration costs, sharing the cost burden of sea-level rise.75

35.The evidence we received raised important questions about the current distribution of the cost burden from sea-level rise. The Borough Council of King’s Lynn & West Norfolk told us “feedback from local communities is that coastal erosion and flooding should be funded centrally and not left to local communities to fund”.76 Malcolm Kerby of the CCAG in Happisburgh argued that individuals bore 100 per cent of the cost of losing a home to coastal erosion but “we are not the only people in the country who contribute to climate change” and sea level rise.77

36.Others questioned whether the Government’s cost-benefit model provided a sufficiently broad decision-making framework for assessing when coastal management interventions were made. Coastal Partnership East told us:

Adapting to changing coastlines entails costs. But how those costs are shared out raises issues of distributive justice. The emphasis on the cost benefit principle in decision making… is particularly challenging in areas with small or scattered populations. However, the underlying principle of cost-benefit analysis is that a project is only undertaken where the benefits outweigh the costs such that society as a whole is better off. This should include all the benefits and all the costs; not just those that can be easily expressed in monetary terms and identified as criteria.78

37.Finally, concerns were raised about the ability of some communities to compete with others with more socio-economic resources for attention and funding. Rachael Bice of Cornwall Council explained:

One of the features of austerity has been an approach that says, “Work with the willing locally”, and working with the willing often means the communities with most social capital, which to some degree often means most wealth. That is good for those communities, and they can advance things, but it means that some other communities are left behind. That is where the local authority should step in, but because they want to advance something, they will work with the willing. There is a real challenge in that.79


38.The role of insurance in helping to mitigate the impacts of coastal flooding or erosion, and in supporting adaptation, was another that was repeatedly raised in evidence. Flood Re was set up as a joint reinsurance initiative between the UK insurance industry and the UK Government under the Water Act 2014 to help people at risk of flooding access affordable insurance against flood risk.80 The scheme is due to run until 2039.81 Aidan Kerr of Flood Re told us the scheme provided insurance cover to 55,000 homes in areas at risk of coastal flooding.82 The British Insurance Brokers’ Association launched a small business flood insurance scheme (as Flood Re did not cover them); but Business in the Community (BITC) said many small businesses remained unaware of their flood risk or were unable to get affordable insurance. They estimated that 300,000 UK businesses were not currently covered.83 It is also not currently possible to insure against coastal erosion as highlighted by Malcolm Kerby of CCAG, and Coastal Partnership East which said it was: “in the process of commissioning a ‘Coast Re’ scoping review to… mitigate coastal property losses, today and as climate adaptation demands”.84 Karen Thomas from the Partnership told us the proposal had been sent to DEFRA to consider.85

39.In evidence Flood Re told us that it was asking the Government to allow it to introduce a policy of “build back better” when paying claims for flooding rather than just restoring homes to their previous state.86 This would allow for insurers to pay for homes to be made more resilient to flooding and to be adapted to reduce the damage future floods would cause, for instance by raising the height of plug sockets.87

Private sector contributions

40.Under the Government’s Partnership Funding model, if FDGiA does not cover the whole cost, a local scheme can still proceed if other contributions are generated.88 To encourage private sector contributions, the Finance Act 2015 allows companies and unincorporated businesses to claim corporation tax relief on funding contributions to FCERM schemes.89

41.However, the evidence suggested it had become increasingly difficult to attract private investment. The Association of Drainage Authorities (ADA) said limited private money had been forthcoming “with the exception of a few standout schemes such as Pfizer’s ~£6 million investment towards the Sandwich Town Tidal Defences Scheme”.90 ADA suggested new approaches were needed to secure private investment such as pension funds or a new Green Infrastructure Bank.91 Terry Fuller of CIWEM told us partnership funding had “enabled a lot of schemes to move ahead that otherwise would not have done”; but now all “the low-hanging fruit has gone and it is becoming harder to make that work”.92 He suggested a “radical rethink” was needed on how else to attract private sector contributions, because the current model encouraged “short-term thinking”.93

42.The Environment Agency suggested that ongoing restrictions on public spending, meant questions about “‘who pays’ for future climate resilience and the balance of contributions between the public and private sector” would continue to be asked.94 It suggested the “growth of green finance and increasing awareness about climate resilience in financial markets” could be a future source of private funding.95 We recognise that in recent years the Government has reversed previous cuts to core Flood Defence Grant in Aid, so that it is now seen as broadly sufficient, if not always correctly targeted.

43.The Environment Agency and National Infrastructure Commission should explain what levels of long-term funding they consider will be required given projected sea-level rise, and the priorities for that funding.

44.The Government should explain how the repeated cycle of cuts to funding to below sustainable levels, which are then reversed only after major flood events, will be ended and prevented from re-occurring. It should also explain how it intends to fund adaptation to coastal changes and sea-level rise.

45.Local communities that may be affected by changes to the management approach to their local coastline should know when and how those decisions will be taken. The evidence suggests, in part owing to a lack of funding, that the current Shoreline Management Plan process can be opaque and the timetables for the decisions unclear. The Environment Agency should provide a timetable for the revision of individual Shoreline Management Plans, to enable communities and landowners to plan for the future.

46.The Government should demonstrate its seriousness about attracting private sector funding and how it will reverse the apparent stalling of private sector contributions under the Partnership Funding model, and how it intends to strengthen the system including the use of tax incentives for private investment. It is clear that the implementation, affordability, and funding of Shoreline Management Plans in the face of the challenges posed by climate change needs further scrutiny. This includes the availability of funding to support adaptation and other measures that are not traditional “hold the line” sea defences. How the burden of the costs of sea-level rise is spread across the country, and between the public and private sectors also needs further consideration. Insurance, or related products, may play a significant role in that. However, the question of how it would encourage adaptation and resilience rather than just paying for the status quo to be replaced, or even encourage inappropriate development, needs to be further explored.

51 Environment Agency (FCC0007) para 5.1

52 Environment Agency (FCC0007) para 5.4

53 Environment Agency (FCC0041) page 2

54 Environment Agency (FCC0007) para 5.6

55 Committee on Climate Change, Managing the coast in a changing climate, October 2018, page 50

56 National Infrastructure Commission (FCC0031) para 3a

57 National Infrastructure Commission (FCC0031) para 3a

58 National Infrastructure Commission (FCC0031) para 3a

59 DEFRA (FCC0013) para 17–19

60 Environment Agency (FCC0007) para 5.9

61 East Riding of Yorkshire Council (FCC0014) para 4.2

62 East Riding of Yorkshire Council (FCC0014) para 4.2

63 Coastal Partnership (FCC0036) para 4

64 Environment Agency (FCC0041)

65 Environment Agency (FCC0041)

67 Cornwall Council (FCC0021) page 1

68 Cornwall Council (FCC0021) page 1 and 2 & Q154

69 Cornwall Council (FCC0021) page 2

70 Cornwall Council (FCC0021) page 2

72 Committee on Climate Change, “Managing the coast in a changing climate”, October 2018, page 10 and 11

73 Committee on Climate Change, “Managing the coast in a changing climate”, October 2018, page 11.

74 Environment Agency (FCC0007) para 3.2

75 Cornwall Council (FCC0021) page 2

76 Borough Council of King’s Lynn & West Norfolk (FCC0001) page 4

78 Coastal Partnership East (FCC0010) para 2.3.3

80 Flood Re (FCC0023)

81 Flood Re (FCC0023)

83 Business in the Community (FCC0030) page 2

84 Q93 [Malcolm Kirby]; Coastal Partnership (FCC0036) page 2

88 DEFRA (FCC0013) para 20

89 DEFRA (FCC0013) para 24

90 ADA (Association of Drainage Authorities) (FCC0027) para 4.5

91 ADA (Association of Drainage Authorities) (FCC0027) para 4.5

94 Environment Agency (FCC0007) para 5.8

95 Environment Agency (FCC0007) para 5.8

Published: 1 November 2019