National Audit Office finds evidence of under-investment in flood risk management

The latest value for money audit by the government’s spending watchdog finds good value being achieved with the money being spent on flood risk management.  That should come as no surprise, with the often quoted figure of investment in flood defences delivering £8 in benefits per £1 spent. The NAO found that the average benefit-to-cost ratio of investment is currently even better, at £9.50 to 1.

Such a high benefit-to-cost ratio appears to be a positive outcome, but is in fact a symptom of under-investment.  The less the Environment Agency are given to spend the better value for money they will achieve, as only the very best projects would be affordable.  More funding would allow more projects to be included, more communities protected and more flood damages avoided. But the average benefit-to-cost ratio of the programme would fall due to projects further down the priority list being included.  Such a high benefit-to-cost ratio suggests the Environment Agency is a long way from exhausting the list of projects that would be beneficial to deliver.

The benefit-to-cost ratio also tells us about the impact of budget cuts on future flood losses.  It suggests that each £1 not invested means communities will suffer up to £8 in unnecessary flood damage.  In January we said that spending over this Parliament will be around £500 million behind the long-term need, with future flood damages perhaps £3 billion higher as a result (see previous blog).  Yesterday, despite the winter of 2013/14 being the wettest on instrumental record in southern England, grants to Lead Local Flood Authorities for their roles under the 2010 Flood and Water Management Act were cut by £5 million.

The NAO also found other evidence of under-investment.  They note that existing budgets mean half of existing flood defences (asset systems) receive no more than a minimum standard of maintenance.  In some cases the minimum standard is no maintenance at all.

This is consistent with our own analysis published in the Adaptation Sub-Committee’s 2014 progress report Managing Climate Risks to Well-Being and the Economy.  Using (I suspect) the same dataset from the Environment Agency, our analysis published in July highlighted that only a quarter of flood defence systems will be maintained this year according to their identified needs.  So half of systems only ever get minimal maintenance, and the other half are maintained according to their identified needs, but not each year as they should.  Last month, Lord Krebs wrote to the floods minister Dan Rogerson to explain our analysis in more detail.

As a consequence, our report said, we can expect flood defences to degrade more quickly and need replacing earlier.  This will be compounded by the extra pressure being put on structures by climate change and sea level rise.  The NAO also point out that the strength of value for money being claimed for new defences may be a mirage, if insufficient maintenance means they have to be replaced early.

After last winter an extra £270 million was found at short notice to repair the defences damaged or destroyed by the storms and increase the maintenance budget back to where it was in 2010/11.  To my knowledge no-one has looked at whether falling maintenance budgets prior to last winter and the condition of assets at the time was a factor in so many defences failing.

The Environment Agency is due to publish a new assessment of long-term flood defence funding needs on 3rd December, alongside the Chancellor’s Autumn Statement.  A six-year programme of new flood and coastal defence schemes will also be announced.  The question is whether, as part of their assessment, the Environment Agency has looked again at the appropriate amount to be spent in the coming years.  If not, activity at the national and local levels will continue to be constrained by the funding levels already announced.

This blog was written by Daniel Johns, Head of Adaptation.

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