On Tuesday, two much-awaited flood investment documents were published (see previous blog). Both Defra’s six-year Investment Plan and the Environment Agency’s Long-Term Investment Scenarios (LTIS) paint a positive picture of how much can be achieved in managing flood risk in the coming years. But the devil is in the detail, and these initial thoughts may evolve as we dig deeper.
Behind the headlines there is a stark message, that flooding is here to stay. Even if investment is pushed to the upper limit of what is worthwhile in the coming decades, and all cost-effective flood and coastal defence projects are delivered, the number of properties at high flood risk is still expected to increase over time. This assumes new development will not add to these numbers, and mostly ignores surface water flood risk. The projections are worse still if global greenhouse gas emissions do not peak in the next decade and then fall away rapidly.
- As a summary of the key points, the highlights of the two documents include:
An overall net reduction in flood risk of 5% is expected by 2021. This is the first time the Environment Agency has quantified the impact of future investment on expected annual damages. The ministerial foreword to the Investment Plan talks of “winning the war” against flooding, recognising that whilst 300,000 households might be better protected by 2021 this will be almost entirely counteracted by the other four million homes at risk being slightly worse off as defences age and climate change eats away at standards of protection. The government is developing new metrics to track the overall net change. - The long-term programme will benefit from £600 million in contributions from external funders. Of this, £345 million is expected to be banked between now and 2021, in line with the 15% contributions target previously announced. To help secure them, contributions from businesses will be tax deductible, at a cost to the Treasury of £5 million per year.
- Certainty in government funding for the next six-years will unlock £230 million in efficiencies. This is almost double the value anticipated. Savings will be re-invested in to the programme to deliver more schemes.
- £60 million is being brought forward in the capital programme to deliver early benefit. Annual investment levels from 2016/17 to 2018/19 will be £20 million higher, and the two subsequent years £30 million lower. This will allow some schemes to be accelerated but may mean Treasury consider the baseline for the period after 2021 to be £385 million, not £405 million. This could depress capital budgets in subsequent years*.
- 1,400 schemes are being taken forward. 213 are already being built, and 39 new projects are expected to start construction by March 2016. A further 58 schemes may also start by then if contributions are secured. The remaining 1,100 projects won’t start until later years. Half of these are subject to contributions being secured and around 200 schemes out of the 1,400 won’t start construction until 2021 or later. This overview shows how important external funding has become to the delivery of the programme.
Overall levels of flood risk may fall over time, but the gains will be due to hundreds of thousands of properties that are already at a relatively low risk of flooding being even better protected. That makes good economic sense, as these investments yield the greatest overall benefit per pound spent. But some households already in the high risk category (1-in-30 annual chance of flooding or greater) are expected to remain so, and others will join them as the climate continues to change. These properties are likely to be in sparsely populated areas, where the density of benefits is lower and the relative costs of protection higher.
As well as the direct impacts of flooding for these homes, this will have long-term consequences in terms of the affordability of flood insurance, and perhaps mortgages and property values. At the moment the costs of living on the floodplain are subsidised by others. This is expected to unwind. The Flood Re subsidised insurance scheme will help smooth the transition over the next twenty-five years but the scheme’s value for money is too poor to be a permanent solution (Flood Re delivers just 70 pence in benefits per £1 of cost). For those in the high risk category in the long-term the only cost-effective route is likely to be property-level protection and/or flood-resilient interiors. But at the current rate of rolling out property-level protection (1,800 homes by 2021), it will take 600 years to meet the cost-effective potential for such measures to be fitted.
This points to two immediate, broad conclusions. First, that new development must not add to the problem. Despite PPG25/PPS25 being in place, 4,000 new properties per year were built in areas of significant flood risk over the decade to 2011. More than 200,000 new properties were built in the floodplain during the first decade of this century. The new National Planning Policy Framework is based on the same broad principles as PPS25, but we have evidence that suggests smaller developments in particular are not being adequately scrutinised. We are currently collating data on new house building in the floodplain over the last three years.
Second, that there needs to be a much greater focus on managing residual risk. As one proposal, Flood Re could have the explicit aim of building awareness of flood risk and addressing it amongst its customers. Flood Re will be a public body spending public money, and will be required by law to act in the public interest. Whilst the need is recognised, there are as yet no specific proposals for how Flood Re will incentivise and support the uptake of flood resistance and resilience measures. Doing so could save Flood Re money, in reduced future claim costs, as well as helping insurance to remain affordable as the scheme is withdrawn.
If there is a final conclusion (at this stage), it’s to reinforce the importance of reducing global greenhouse gas emissions. The Royal Society pointed out last week that resilience to extreme weather will depend on climate change mitigation as well as adaptation. We have the information we need to address both. As Lord Krebs wrote recently, it will be much easier to be resilient in a two degree world than in a four degree world.
This blog was written by Daniel Johns, Head of Adaptation at the Committee on Climate Change.
* Something similar happened in 2010/11. The original capital budget for 2010/11 was £400 million before £20 million was moved forward as part of the ‘fiscal stimulus’ in the 2009 Budget. The 2010/11 capital budget was then reduced by a further £26 million shortly after the 2010 general election. Arguably the 2010 Spending Review reduced the capital flood defence budget by 35%, from £400 million to £260 million. Most people (and the government) use the post-fiscal stimulus, post-2010 election budget of £354 million in all year-to-year, and period-to-period, comparisons.
ANNEX: The six flood defence questions the Autumn Statement should answer
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