Oral evidence: Winter Floods, HC 991Wednesday 2 April 2014
Oral evidence, 2 April 2014.
Witnesses
Rt Hon Mr Owen Paterson MP, Secretary of State, and Sonia Phippard, Director, Water and Flood Risk Management, Department for Environment, Food and Rural Affairs, gave evidence.
Chair
Good afternoon, Secretary of State, and welcome. May I say it is a particular pleasure to have you back in harness and being with us this afternoon? Just for the record, would you like to introduce yourself and your colleague from the Department?
Mr Paterson
Thank you, Chairman, and thank you for your kind words. It is very good to be back in front of the Committee. I am Owen Paterson. I am the Secretary of State for Defra, and this is Sonia Phippard, who is the Director for Water and Flood Risk Management.
Chair
Thank you for being with us this afternoon. A report was published by the Prime Minister assessing the future capability of flood defences, and the response from volunteers but also the flood response agencies following the winter floods. It was promised by the end of January. Has the report been completed and delivered, and what were its main conclusions?
Mr Paterson
Yes. Effectively the statement to Parliament that Eric Pickles made—and he very kindly stood in for me at incredibly short notice, because at the time he was making a statement I was on the way to hospital, so I am very grateful to Eric for taking up the burden—covered the update at that time, and the main element from the Defra point of view was that, following the very severe weather in December and January, we were going to spend a further £130 million on emergency repairs and accelerated maintenance. Of course, events have moved further on since then. In the Budget we announced a further £140 million for the same thing, because our defences have taken a tremendous pounding, and we need to fix those parts of the defences that have been really damaged, but we also need to bring forward maintenance that was scheduled over the coming years.
Chair
On the military personnel, there was an expectation that there might be armed forces helping, and then eventually 5,000 were committed to help with the flood relief. It would be helpful for the Committee to learn who pays for the military assistance, and in the event where there is not deemed to be an immediate threat to life, whether that change the system of charging for military support. I do not know if Sonia would like to answer that.
Mr Paterson
Sonia, do you want answer the exact details of the payment?
Sonia Phippard
Yes. In the course of this series of floods, we did change the normal approach to paying for the military, and the Treasury agreed to bear the marginal costs of the deployment of military, whether in support of the Environment Agency or local authorities. In previous flood events, the full cost has been met and then, at times, reclaimed by a very complicated budget transfer. We have gone for the simpler approach. We obviously need to sort out a discussion with all the relevant Departments whether that sets a precedent in the future.
Chair
Could you just confirm it is not going to come from the Defra budget? It will come from the Department for Communities and Local Government.
Sonia Phippard
That is correct.
Chair
That is very helpful.
Sonia Phippard
And from the Treasury. The MoD will continue to bear the core cost, because obviously the biggest part of the cost is military salaries, but they would be being paid anyway. The marginal costs are being borne by the Treasury.
Chair
That is very helpful. I will, if time permits, very briefly return to insurance at the end, but we will crack on now, if we may, with the role of the Environment Agency.
Ms Ritchie
Secretary of State, you are very welcome. What is your assessment of the work of the Environment Agency during the winter floods?
Mr Paterson
I think the Environment Agency did a remarkable job protecting 1.4 million homes and properties. Now, I am fully aware that is no consolation to those in the 7,000 properties that were flooded. Having your home flooded is absolutely appalling—filthy dirty water swirling through the house at three o’clock in the morning; it is frightening for the children; it is disastrous having your most beloved personal possessions ruined and sometimes lost; and it is disastrous for businesses. I absolutely offer my genuine deepest sympathy to those affected, but I think we should also remember that this weather, which was extraordinary, went on right through December, January and February. You had people from the Environment Agency out night after night, through the weekends, through the New Year, and I would go and see these guys, grey with fatigue, all badly in need of a shave and badly in need of a bath, but all really getting stuck in, and they did a tremendous job. We should just remember that 1.4 million homes were protected, and that was a major achievement under very, very difficult circumstances. I would also pay tribute obviously to all those in local government, military services, and police and fire services, who also did a great job.
Ms Ritchie
In view of what you have said, has the criticism of the Environment Agency and its Chairman, Lord Chris Smith, been fair?
Mr Paterson
If you are in public life and a public figure, you have to expect to get flak. I think a lot of it was unfair, because, as I have said, the organisation was protecting a very significant number of properties. It was awful for the 7,000 properties flooded, but compare that to the 55,000 in the last major floods under the last Government. You can always do better; there is no doubt about it. There are lessons to be learned, and, for me, one of the lessons is that you are never going to have such a vast monster organisation at national level which is so well funded and so well staffed that it can get into every corner of the waterways of England. One of the real lessons is to see more partnership activity, and I think that is developing; we may come on to that in a minute.
Ms Ritchie
The Prime Minister has said that “nothing will be done at the Environment Agency that will hamper our flood relief effort”. Does that mean that Defra will reassess its funding cuts to the Environment Agency, and we have just heard from the Environment Agency about their previous staffing levels, about their current staffing levels, and about future staffing levels later this year?
Mr Paterson
Let us just remember that when this Government came in in 2010, we were borrowing as a nation £300,000 a minute, so every Department had to take some very difficult decisions, including my predecessor. I would point out that within a week of me coming in, I had met Chris Smith at a splendid scheme in Nottingham, which cost £45 million, protected 16,000 properties, and gave the ratio of 8:1, which was the average. However, no one told me until I went there that it had actually freed up 500 acres of land on the other side of the Trent, which was blighted. I am a monster supporter of flood schemes, and I asked Chris Smith, “Can you please give me a list of schemes, which, if I could get the money, you could put into action and get the JCBs digging?” and he did. That was autumn 2012. We got an extra £120 million, which has gone into schemes that are going ahead; for the next spending round, we have got unprecedented extra money going ahead to 2020, so it is £370 million capital going up to £400 million. Also last year, because of the stress on maintenance, I have got another £5 million for maintenance. To show how seriously I have taken this, I exempted the flood budget from the 1% across-the-board cut in Defra; that is probably worth—what do you think, Sonia?—£3 million, perhaps? Since then we have got £130 million, as I have just said, which was announced in the statement by Eric Pickles, and another £140 million in the Budget. I am very proud that this Government, despite the incredibly difficult economic circumstances we inherited, will be spending over the course of this Parliament £3.2 billion. I talked to Chris Smith yesterday, and he has assured me that, although there will be slimming down within the Environment Agency—for instance, they are taking out the regional tier, because we no longer have regional government—there will be no reductions in those who are concerned frontline on the floods. I think you have probably been grilling him and Paul Leinster for the last hour and a half, so perhaps you are more up to date than I am.
Mrs Lewell-Buck
Good afternoon. I was just wondering if you could clear something up for me, please, because I know you have touched on the Budget already, but the announcement on the additional flood spending suggested £100 million of additional funding would be made in this financial year, and then the Under-Secretary of State confirmed that the Budget would add a further £80 million, yet in the Budget Report itself it is only listed as £100 million. The figures for the next financial year also do not seem to match up, because he said there would be an extra £60 million in 2015‑16, but the report actually says £70 million. What are the correct figures please?
Mr Paterson
The figures I would like to give you are that—
Mrs Lewell-Buck
Are these the correct ones?
Mr Paterson
Extra revenue in 2012-13 is £10 million and capital is £20 million; 2013-14 revenue is £120 million and the capital is £60 million; 2014-15 it is £35 million and £25 million capital, so that comes to £270 million. That is the £130 million and the £140 million.
Mrs Lewell-Buck
I must be looking at something different, Secretary of State. I wonder if you could provide a written answer, because what I am looking at is not the same as what you have just said.
Chair
If we go to Jim, because I think it might be covered in that, and, if not, we will ask for a written clarification.
Jim Fitzpatrick
Secretary of State, we heard today of one particular problem of the silting or dredging, which in normal times would have been classified as revenue spend, but because of the nature of the times—sorry, Secretary of State, Ms Phippard, good afternoon. My apologies; I was taking by surprise by the Chair. In normal times, it would be expected to be revenue budget spend, but it is coming out capital, because of the nature of the times that we are in. We have had written submissions calling for a blurring and a removal of the artificial separation between capital and revenue spend. Is it something that should be one pot and should be merged? Are there Treasury rules to force them to be kept apart? Have you had discussions with Treasury? Is there a way to be more flexible? What is the best way forward in terms of these two different budgets when it is clear that sometimes you can dip into one and out of the other? Have you got a view on that?
Mr Paterson
I would defer to Sonia on the exact details. I think you make a very good point; there is a bit of a grey area. In Somerset, where the pumps have been absolutely hammering away, they have taken a lot of damage. If you fly a pump to Holland, perhaps, to get it mended, how many of the parts that might need replacing become capital? Perhaps the whole pump needs replacing. There is a bit of a grey area in practical terms on some of this stuff.
Sonia Phippard
That is absolutely right. You are right that fundamentally it is Treasury and ONS rules that decide what can be classified as capital and what can be classified as revenue. In the case of what you might call major maintenance activity, it is not always clear until the work is complete, for the very reasons the Secretary of State gives. A really major project like the dredge in Somerset clearly is going to be capital, because of the sheer scale and the fact that it is a one‑off thing, and it will then have to be maintained by revenue spend, but in some cases, until the full state of the damage has been assessed and the repair worked out, it will not be clear. There is at the moment an art for the Environment Agency in managing what comes in two different pots to make it shift. You can always shift revenue funding into capital under Treasury rules, but not the other way. I think there is a wider issue, but it is one for the Treasury, and we are certainly talking about whether we have got all the classifications right and can free anything up as we look at the budgetary challenges going forward.
Jim Fitzpatrick
In discussions with Treasury, is the greyness helpful and clarification unhelpful, or are you trying to make it clearer?
Sonia Phippard
On the whole, clarification is helpful, because the more you know at the outset, the better. From the point of view of this particular Budget, if you could move to a total expenditure classification that would be more helpful still, but that is not the usual Government approach. In fact, it would be very revolutionary, so we clearly would need to have considerably lengthy debates with the Treasury on that.
Neil Parish
Good afternoon, Secretary of State; good afternoon, Ms Phippard. The Prime Minister has stated that money is no object in the relief effort. Has Defra got sufficient funding to allow them to carry out a full and effective response to the flooding event? It is great to see the dredgers out in the River Parrett and Tone as we speak, but was it great enthusiasm at the time? Are you convinced that once the flood waters recede that there will be enough money to sort it out?
Mr Paterson
The Prime Minister was referring to the immediate crisis and the recovery, and I am very pleased to say that in your part of the world the waters have receded; at last, people are beginning to get their homes back and their lives back in order, and sadly it will take time. I have outlined what we have done on the flood defences; there are a whole range of schemes that we have put into place. Yesterday there was the repair and renew grant, which was £5,000 per household, which just started up yesterday. We have offered 100% business rate relief for three months. There is a business support scheme worth up to £10 million for SMEs. In Somerset, as you know, there was a special fund of £10 million from us, there was a further £10 million from the Department for Transport, and there was half a million from DCLG. For farming, there were two £10 million pots of money there, some to restore land, some to work on forestry. There are grants of up to £5,000 for fishermen. The Bellwin scheme has been extended to 100% of local authority costs. I have literally just talked to the Minister in the vote just now, and that has been well subscribed; a large number of councils have come forward. On transport there is a major stack of money, which is not to be underestimated, which is £140 million, and I think you know that we have done a fantastic job. I really congratulate everyone involved with the Dawlish line; the reopening of that is absolutely imminent.
Neil Parish
Can I just question you a little bit on the help for business and farms, because this is very much welcome? You have got the sums of money there, but are you confident that businesses are going to be able to claim that money? Is it going to be too bureaucratic? What is happening?
Mr Paterson
We have made these announcements on a regular basis, and I hope your Committee as well, by asking penetrating questions, will give it the real glare of publicity. We want people to apply for these schemes. We have made a significant amount of public money available; we want people to take it up rapidly. We want people to get their lives and their businesses back on stream as rapidly as we can.
Neil Parish
This money is very welcome, but I know sometimes people are frustrated about actually physically getting the money into their bank accounts.
Mr Paterson
By all means, if you or anyone around here have your constituents write to us, we are genuinely here to help. We have made it pretty clear publicly how people should apply for these schemes, because there is obviously a whole range of different pots of money here. There is such a raft of different schemes we are very happy to write to you and give the Committee the exact details, because the more we publicise this, the better.
Chair
The Committee would be very grateful.
Neil Parish
I think I would like Richard Drax to do the next question.
Chair
Okay. We will do it at the end.
Iain McKenzie
Secretary of State, since February this year, the Government has announced an additional £270 million for emergency repairs and maintenance money. Can you tell the Committee if this additional maintenance money will be used solely for repairing the damaged flood defences?
Mr Paterson
I think I answered that just now. That is for emergency repairs, so things like sea walls, and for extended or accelerated maintenance. I was in Lincolnshire on Monday; they have had a really tough time there, but thankfully the wall has held, and—unlike 1953 when tragically 307 people died and a large amount of very valuable land was damaged for a long time,—a) there was no loss of life there; and b) the land was protected by the sea walls, but they have taken a tremendous hammering. We were told that the stretch was 32 miles long of beach which has been washed away. Now that has to be put back rapidly, otherwise the sea wall will take a hammering next year. That is the sort of thing that needs to be done rapidly. It is a mixture of emergency repair work and accelerated maintenance.
Iain McKenzie
With that said, how would Defra ensure that they will be able to respond to any future flooding events after this one-off additional spend?
Mr Paterson
We have not finished yet, of course, because we are still getting reports in. There has been tremendous help from the military, who have been surveying our defences, and more data is still coming in. This is an absolutely constant process, but it is significant that we have got an extra £270 million. First of all, there was the sum announced in February, and then we had the Budget. I cannot stress enough how strongly I support these schemes and how I really battled, and I give full credit to Sonia and her team working with the Treasury, persuading our colleagues in Government of the value of these schemes. This is a constant process. We will get a lot more news over the next few weeks as the reports come in from the Environment Agency.
Sonia Phippard
Could I just add: the aim is to get the Environment Agency and local authority high-consequence defences all back up to target condition. In terms of your original question, it is the ones that have been affected by the flooding whose condition may have slipped appreciably below what the Environment Agency were expecting, but, no, they will certainly be looking at the full suite of defences with their full maintenance budget, with the aim of getting that all back to target condition.
Richard Drax
The art of great leadership being delegation, I shall now take over from Mr Parish, who is a great leader.
Mr Paterson
He has gone.
Richard Drax
Can I ask you, Secretary of State: is there enough money available to restore the flood defences to the same or better level of integrity that they were before the recent storms?
Mr Paterson
Our target is to get 97% up to the right standard, and that is what the extra money that we have literally just been talking about is intended to do.
Richard Drax
So the answer is yes.
Mr Paterson
Absolutely, that is our clear intention.
Richard Drax
You very generously have given money to lots of organisations. The fishermen, in my humble opinion, have lost out quite big time: they have not been able to fish; have lost their kit. They can apply through the MMO, as I am sure you know, for European funding, but even then they do not get all the money. Mr Clegg announced initially that the £10 million from BIS would help cover the fishermen, but that has not turned out to be the case unless they have flooded homes, which most of them do not. My question to you is: does Defra have any responsibility at all, bearing in mind fishing comes under your remit, to provide some sort of back-up and support to fishermen, certainly on the south cost, who really have been clobbered hard?
Mr Paterson
I did touch on that briefly. We are offering up to £5,000 for fishermen to replace storm-damaged gear or stuff they have lost, like lobster pots and crab pots, which might have been washed away.
Richard Drax
Where is that from? How do they get it?
Mr Paterson
First of all there was the Trinity House dues—not charging the Trinity House dues—and we are using the EFF, which is the European Fisheries Fund.
Richard Drax
Right. That is the fund they have gone to, and they are having a very proscriptive time getting what little money they can, and they will not get it completely. That is Europe and the MMO. Does Defra itself have any responsibility to provide some funds for the fishermen, bearing in mind this is very much in Defra’s remit of fishing or not? Everyone else is getting money; do they?
Mr Paterson
The other area where we have helped is lifting the Trinity House dues, which is worth £140,000 across the sector. Those are the two main areas where we are helping fisheries.
Mrs Lewell-Buck
Could you please explain to me the benefit‑to‑cost maintenance rule?
Sonia Phippard
Yes, the much quoted 8:1 benefit‑cost ratio is the average for the flood schemes that are funded by the Environment Agency. For every scheme that is proposed, all the benefits—so the benefits in terms of property, life, economic value, environmental benefits—are assessed, and a benefit‑cost ratio is derived. That then is considered against the partnership funding framework. For schemes that have a very high benefit‑cost ratio—a very high public benefit—the Environment Agency will generally provide 100% of funding; for those where the benefits are lower, but still a positive benefit‑cost ratio, they are in the market for partnership funding from other partners to make up the shortfall in terms of what the Environment Agency would provide. There is some confusion quite often between the 8:1 average, in the sense that that is a rule. Schemes can be funded; they are eligible for funding as long as the benefit‑cost ratio is positive; they just will not necessarily be eligible for 100% public funding. A lot more schemes have come forward as a result.
Mrs Lewell-Buck
Who makes the decisions?
Sonia Phippard
The decisions are made by the Environment Agency on the basis of the funds available and the schemes that are ready to go, and have had, if necessary, partnership funding through regional flood and coastal committees; it is quite a democratic process involving a lot of people.
Mrs Lewell-Buck
Is it entirely necessary? Could things not operate without that?
Sonia Phippard
Local involvement is really important. One of the things that we have really learned through the three years or so that partnership funding has been running is it brings in extra money, which is very welcome, but it also hugely increases the local engagement in schemes and the willingness to look at different sorts of scheme, and the scheme that will most cost-effectively meet the needs. We have seen some very innovative schemes come forward as a result of that local engagement. It is complicated, but I think it is necessary; it is helpful.
Mrs Lewell-Buck
Could I just quickly ask: why do you think the Environment Agency have described it as a “fundamental constraint”?
Sonia Phippard
Described what as a fundamental constraint, sorry?
Mrs Lewell-Buck
The benefit-to-cost.
Sonia Phippard
I do not think in itself it is a constraint. The overall availability of resource and money is the constraint. The reason the benefit-cost ratio is so good is because there is a lot of opportunity, a lot of schemes, a lot of need and an increasing but still finite amount of money.
Mr Paterson
Chairman, could I just chip in on broadly how it works? I think I said earlier to a question, we will be spending £3.2 billion over the course of this Parliament, which is unprecedented, but despite that we are still never going to have such an enormous Environment Agency, as I have said, that it will get into every single corner of the waterways. As I see it, the Environment Agency will carry on doing this very important work on the high‑profile schemes, where you have got a high payback. What we have seen with the partnerships already running—the £148 million coming in mainly from local councils—is that we have got a whole range of schemes over the hump, which had not quite made the cut before. That is partly because, bringing local councils in, they are slightly sharp with their pencils when it is their money. We have seen possibly better value, we have seen some schemes reduced in size, and possibly people, when it is their money, are prepared to see efficiencies made in the schemes to get it through. There is a real lesson from Somerset. I see a real role for internal drainage boards working in partnership with the Environment Agency. The Environment Agency is doing the big dredge, which is all the high-profile stuff, all the national publicity, but for the long term, I very much see the IDBs working with district councils and county councils on the long‑term maintenance. I had a very good visit to Lincolnshire on Monday, and they have already beaten me to it; they have the Lincolnshire flood and drainage strategy group. I have got a list here that I can give you of a whole raft of organisations that sit on that. It is not just the Environment Agency: it is a whole number of IDBs; it is the city council; the district councils; the county council; Natural England; Anglian Water; Severn Trent. In answer to your earlier question, they sit down and work out, as I can understand it, in great harmony, where the money should be spent. This is a really good model that we could look at for other parts of the country. In Somerset I hope they will continue to work together and form something that I have suggested should be called the Somerset Rivers Board. Below that there will still be low‑key waterways, brooks and streams, which traditionally were always done by landowners, and I think we should just face up to the fact that that should go back to the landowners and the farmers who understand their own area best, and with minimum interference from the Environment Agency, just supervising and making sure that along a brook, for instance, everybody was involved and carried out the dredging in sensible manner. That should be pushed back down to local farmers and landowners. I see about four tiers of this, because it is no good just looking at the Environment Agency, this great big national quango, and shouting at it. It is not going to do everything. What will happen in future is much more partnership at various levels, going right down to the lowest level.
Richard Drax
Partnership funding, now you have mentioned it, is next, Secretary of State. In this Committee’s Winter Floods evidence session on 22 January, the Committee was told that £40 million of the £148 million has been contributed by the private sector. How can more private sector funding be encouraged and secured through this partnership funding model?
Mr Paterson
Sonia might like to answer the detail on the question, but, in fairness, this scheme has not been going very long; we brought in partnership funding, and we are pushing it hard. As I have just said in the previous question, it has already delivered results. We are already getting quite a number of schemes that were stalled, did not quite make the criteria to get 100% Environment Agency money, and they are now going to go ahead. The more we publicise this, the better. When I was not far from you, just outside of Exeter in Topsham—
Richard Drax
A little bit away, but not too far.
Mr Paterson
It is the South West; I go from Shropshire. There was a fantastic farm shop there with a very large number of visitors; there was a great RSPB reserve; there was a bus service that carried 1.3 million people a year. They had all suffered because a little river called the Clyst had flooded. They had a real interest in working together, as did the city council and the district council. As far as I was concerned, that was a mini-Somerset where we had a big meeting, called together by Hugo Swire, getting everyone to sit down together and work out how they could all chip in. I hope they will deliver results on that particular small river.
Richard Drax
You say “chip in”; to repair and maintain costs millions, as we know. Who do you hope will chip in?
Mr Paterson
Local councils contributed—
Richard Drax
It is local authorities; it is not private sector, really, is it?
Mr Paterson
No, but local authorities have already contributed about £100 million.
Richard Drax
Are you hoping that people will donate or leave it in their will?
Mr Paterson
Yes, very much. Yes, absolutely delighted—
Richard Drax
Where is all this money going to come from?
Mr Paterson
I think local businesses suffer if roads are closed unnecessarily by floods, and it is in everyone’s interests to work together.
Richard Drax
When will the independent review of the partnership funding model, which was due to report last autumn, be published?
Sonia Phippard
Shortly.
Chair
In the spring?
Sonia Phippard
It is broadly complete, but the flooding events, I am afraid, have delayed one or two of our planned publications, but we anticipate making that available shortly.
Chair
Who is conducting the independent review?
Sonia Phippard
It was simply an independent technical evaluation. I am afraid I cannot remember; we can let you know.
Chair
How do we know they are independent?
Sonia Phippard
We will let you know what the arrangements are.
Chair
In leaving, Lord Smith said that he would make a plea, in terms of his lessons learned from the winter floods, to have more funding spent on maintenance activities. Do you believe that his wish is likely to be fulfilled, and that more maintenance funding will be incurred over the spending period? You have mentioned the additional funding, but will it go on maintenance?
Mr Paterson
We have not done badly. We have got in £270 million over the past couple of months, quite a lot of which is going on maintenance.
Chair
I know, but the confusion, which Sonia Phippard and yourself have just addressed, is that until it is completed we do not know, you do not know, and the Treasury does not know whether it is capital or maintenance. For example, I assumed that the dredging of the two rivers—
Mr Paterson
Parrett and Tone.
Chair
That is the one, thank you. I assumed that that would be maintenance, but then we learned that it is capital. Will Lord Smith’s wish be granted that more will be spent on maintenance, in addition to very justifiable capital expenditure?
Mr Paterson
I think I answered that for Iain McKenzie. I said that this is constantly moving and data is coming in on a daily basis. We have had this major military survey of all the assets, and we will react to that news as it comes in but, in fairness, look at what we have done over the past couple of months. We have got £130 million, and then a further £140 million, and all I can say is, “Look at what I have done, not what I have said.”
Chair
I think help is at hand. All that we are asking for is just to be absolutely clear that there will be a better balance of the spending between capital and maintenance.
Mr Paterson
At the moment, the priority is the emergency repairs and the accelerated maintenance, and that is what we mainly provide the money for. That is something we have done up to now on what we have seen. If there is further data come forward then we will react accordingly.
Sonia Phippard
We have been clear that a significant element of that funding will be revenue, and we have already promised to clarify how the £270 million splits, but £70 million of it over the next two years is revenue designed for the maintenance budget, because the Secretary of State has said that was needed, because there is a greater maintenance need following the flooding, but obviously that forms the basis on which we will be looking at budgets beyond that period.
Chair
Something that Lord Smith flagged up is that the Environment Agency only have a permissive role on dredging. In written evidence that we have received from Hampshire County Council they suggested that Defra should lead a publicity campaign engaging local partners to raise awareness of the rights and responsibilities of riparian landowners, and this should be backed up by the Government providing lead local flood authorities with adequate resources to enable enforcement action and/or maintenance works to be undertaken as deemed necessary. Is that likely to happen? It is from them, not from me, Secretary of State.
Mr Paterson
I think I have outlined that. Looking to central Government to pay for absolutely everything is not going to be the end solution, but we are putting a very significant extra sum of money, so £3.2 billion is what we have spent. Okay?
Chair
No, can I just ask about asking them to make riparian owners more aware of their responsibility? Is that likely to happen?
Mr Paterson
Again, I answered that. That is the fourth tier I was talking about. We have got the seven pilots we started over a year ago, which I have started, to allow local farmers and landowners to clear out risk—
Chair
I think they were started in October.
Mr Paterson
Yes, I announced it in February last year.
Chair
You are going to make them run for the whole year.
Mr Paterson
Yes. Unfortunately it was obviously a very wet winter, so it was not a great year to start, but the clear proposal there is that the people you are talking about—local landowners and farmers—can get on with it and clear low-risk streams, because they have got the local knowledge and they know how their local waterways work.
Chair
Hampshire County Council have asked that you lead a publicity campaign. As far as the Department is concerned, riparian landowners understand their responsibilities?
Mr Paterson
Yes. I think what will happen is they currently clean out their own ditches, and it is completely right they should be cleaning out their own brooks and streams, if they are local and low-risk. That is the bottom layer. Wherever I have been, frankly, across rural England—I can list a stream of counties—people are absolutely fed up with being held back; they want to get on with it, and they know how to do it, because they understand their own water systems.
Chair
If there was one lesson to be learnt, as the Prime Minister has said that we should learn lessons from the events, what main lesson would Defra take away from the winter floods?
Mr Paterson
My main lesson is the great value of the money that is spent on flood defences protecting 1.4 million people, the real misery that floods cause, and our absolute determination to keep up this very significant programme. Over the course of this Parliament, we will protect a further 165,000 properties. I fully intend that our Government will carry on and our plans will be seen through to 2020, and we will see a further 300,000 properties protected. That is a very clear lesson. These schemes provide tremendous human and economic benefit.
Mrs Glindon
Secretary of State, could you say what progress has been made on the implementation of Flood Re, and is it on track for implementation by next year?
Mr Paterson
It is making good progress through the House of Lords and should complete there shortly. It is absolutely our intention that it is ready to start July next year. It will be tight, there are an awful lot of things to do, but it is absolutely our clear intention.
Mrs Glindon
You have just said that there are a lot of things to do, so has the application for state aid approval of Flood Re been submitted yet?
Mr Paterson
That is a good question. It is in process. Whether a formal note has been sent to the Commission, I will have to get back to you on that. Obviously there have been preliminary discussions, but I would have to get back to you as to whether a formal submission has been made.
Mrs Glindon
Obviously there are very tight deadlines—
Mr Paterson
You are absolutely right; it is a showstopper. We will get back to you.
Mrs Glindon
In your opinion, what has been the biggest barrier to the implementation of Flood Re so far?
Mr Paterson
Parliamentary time. There is a lengthy Parliamentary process to go through in the Commons and the Lords. We have had significant co-operation—a real tribute to the ABI and the way they work with us. This is a very complex scheme, and a large number of companies and interested parties had to be brought along, but overall there is great support for what we are all trying to do. If we can complete it, the worry of people living in high‑risk properties not being able to afford insurance will be removed from very large numbers of people, and I think it will be a thoroughly worthwhile scheme.
Chair
In the ABI submission that we received on Flood Re, it is very clear that the Government potentially could end up as an insurer of last resort, particularly in the event of a one‑in‑two‑hundred‑year scenario. The winter floods were a one‑in‑two‑hundred‑and‑fifty‑year scenario, so where does that leave the Government and who would pick up the bill? Would it be the Treasury who would pick up the bill? What they say, and I will quote this, is the Government would “take primary responsibility, working with Flood Re and representatives of the insurance industry, for deciding how any available resources should be distributed to Flood Re customers”. In times past, one in two hundred years did not seem very likely, but now that we have had a one‑in‑two‑hundred‑and‑fifty‑year event, where does that leave the Government as insurer of last resort?
Mr Paterson
You are quite right. I went to Immingham; it was a one‑in‑five‑hundred‑year event. Ultimately this is reflecting reality; if there is a really catastrophic event, ultimately the Treasury, i.e. the taxpayer, will have to pick up the bill. What I have shown in my comments just now, with the number of properties that are intending to protect, we are clear there is a trajectory of trying to get the significant number of high‑risk properties at the moment ultimately protected by flood schemes. As I said, it is going to be 165,000 by the end of this Parliament, and a further 300,000 by 2020. That will make a significant hole in the high‑risk. Additionally there are local government schemes and also householders; they have responsibility for their property. Quite modest amounts of money can make a huge difference: putting a one-way air brick on a house, or putting in a flood-resistant door as opposed to a plywood door, makes an enormous difference. Our plan is that ultimately we get to the happy dry ground where the vast majority of houses are not at risk from floods or are resistant to floods, which will eventually take away the need for Flood Re.
Chair
But the Treasury would have to step in.
Mr Paterson
We are just facing reality: if there is a complete catastrophe like 1953, the Treasury has to move in.
Chair
The NFU in a briefing on the winter floods refer back to the June/July 2007 floods, where they say only 5% of the £50 million estimated agricultural losses from flooding were insurable. Is that something that the Government might address—the insurance cover and insurance losses to farmers?
Mr Paterson
On this particular recent flood, we have put up the £10 million scheme to help people restore land and pasture. Your question is, sorry, whether we looking to insure ourselves.
Chair
Is there any way that farmers can have insurable cover for their losses?
Mr Paterson
No. Flood Re is intended to address private properties where people live. We have discussed with the industry, and we have not seen a problem with businesses getting cover.
Chair
The next question you will probably answer negatively as well: would small businesses have access to affordable flood insurance on the open market?
Mr Paterson
The ABI has been quite clear with us; they cover the whole industry, and they do not see a problem with small businesses getting cover.
Chair
Okay. That is not what we are hearing. I have certainly had representations locally, and we have had representations from the Council of Mortgage Lenders in connection with the inquiry, on the situation where leaseholders and private landlords are going to face full market pricing, as soon as Flood Re is introduced. That is going to price their flood cover out of the market.
Mr Paterson
Is this businesses?
Chair
Private individuals like where I used to live in Topcliffe in North Yorkshire.
Mr Paterson
We have modified the rule on leasehold, where there is a property owner and up to three leased properties in the same building, and on small businesses we will obviously monitor this, but to go back to your previous question, I think we should—
Chair
But blocks of flats are not going to be covered. They are already writing now, saying that they will have to pay £2,000, £5,000, or £15,000 in some instances.
Mr Paterson
No, because in most blocks of flats there is a cross‑subsidy across the block of flats.
Chair
There is not and I have written to you, so if you would be good enough to perhaps look at that.
Mr Paterson
I will have a look at that particular case.
Chair
That is certainly what they are saying. As I say, the Council of Mortgage Lenders are suggesting that this be addressed as a matter of urgency. The Prime Minister announced that there was going to be a review of the exceptions and he did indicate that this might extend to Band H houses. Is that the case?
Mr Paterson
Currently in the House of Lords it is not our proposal to bring in Band H, because, of course, we have agreed that the levy will be £10.50, and that is open recognition of the cross‑subsidy that exists at the moment. That is £10.50 from very large numbers of people who are not at risk of being flooded, to cover those who might have real trouble paying premiums. Obviously as the flood redevelops there may be other options and there will be flexibility within Flood Re.
Richard Drax
Could I ask one more question? This is not necessarily for your Department, Secretary of State, but now this country has had the worst floods for some time, and bearing in mind all the information technology we have nowadays, not least satellites, has the country been mapped while the country was under water, so that in future we do not have planning applications that put houses where water could be, bearing in mind these occurrences are happening more frequently?
Chair
For example, Ebbsfleet springs to mind.
Richard Drax
Has any work been done?
Mr Paterson
I think it is probably a technical question for the Environment Agency, but we are constantly tracking floods through the Environment Agency, and where the Environment Agency recommends that a planning application should not go ahead, we estimate in 95% of cases that advice is taken. Where the Environment Agency are informed, it is 99%. It is obviously, I think everyone has seen, idiotic in most cases to build on a flood plain. Our planning guidance very clearly says it is not sensible to build on flood plains, and the Environment Agency advice is overwhelmingly accepted.
Richard Drax
If the Environment Agency are responsible, do you know if such an operation—mapping the country underwater—has been done?
Mr Paterson
They are doing this all the time, yes. They are doing it. I do not know if they have taken actual photographs—we can find out rapidly—but they are monitoring floods the whole time.
Chair
Will they share the results of their mapping with insurance companies, district councils, and others?
Mr Paterson
Yes, absolutely.
Chair
Excellent. Secretary of State, Sonia Phippard, thank you very much indeed for being with us, participating in the inquiry, and being so generous with your time this afternoon. I apologise for the delay at the start of proceedings. Thank you both very much indeed. Oral evidence: Winter Floods, HC 991 22 [1] Amended following clarification from the EA