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Insurance Premiums (Flooding)

Volume 520: debated on Thursday 9 December 2010

15. What assessment she has made of the effects of proposed changes to her Department’s flood defence budget on the level of insurance premiums for homes at risk from flooding. (29452)

DEFRA is working closely with the insurance industry to maximise the availability of flood insurance cover. We are consulting on changes to the way in which Government funding is allocated to flood and coastal erosion risk management projects. That will help safeguard insurance terms by encouraging increased investment beyond levels that the national taxpayer alone can afford.

The insurance market in Hull has been closed since 2007, and unless people had insurance then, they will not be able to get it now. Moreover, for people who can access insurance, premiums have gone up hugely. What does the Minister have to say to my constituents, as even those who currently have insurance are now very concerned that they will not be able to continue to have it in the future?

The hon. Lady’s constituents, like mine, have suffered greatly from flooding in the past, and what she says is true: there are excess charges and premiums have risen. We have taken forward, from our very successful flood summit, two important working parties with the insurance industry—one on data sharing, so that information on where money has been spent is made available to insurers, and a second on working with the insurance industry so that following the post-2013 statement of principles, there will be an environment in which insurance is still available. The insurance industry will then be able to gear up for a new environment in which specialist brokers can start to help constituents such as the hon. Lady’s and mine.

Recognising the challenge of securing insurance in certain parts of the country, I recently met representatives of the Association of British Insurers, and they talked about building design and the fact that electric circuits are at the bottom of buildings rather than in the middle and higher. That is one of the primary reasons why people are out of their homes for months if not years, as opposed to merely needing replacement furniture and so forth. Will the Minister agree to meet the ABI to discuss such building design principles?

I have met, and do meet, the ABI, and we do talk about such matters. I need do no more than recommend one of the great legends, Mary Dhonau—[Hon. Members: “Maradona?”] No, Mary Dhonau. She runs the National Flood Forum, and her home has frequently been flooded. The last time she was flooded she made no claim because she had taken precisely the precautions that my hon. Friend mentions. I hope that more households will learn from her experience.

There was a bit of confusion from the Secretary of State earlier about the figure of 145,000. The figures are in DEFRA’s 2009 annual report, and I will happily send the link to the Secretary of State’s office so that she can see the delay that the 27% cut has caused.

The Minister says he is consulting on new flood defence proposals. The new system would remove the Environment Agency’s role in deciding who gets flood defences, and communities would be expected to pay a flood tax in order to receive central Government funding. Will this new system not disadvantage people from poorer parts of the country who cannot afford a new flood tax?

Oh dear—another own goal, I am afraid. The hon. Lady really must read the consultation documents. She will then see, first, that that is one of Sir Michael Pitt’s recommendations, which she and her predecessor were very keen the new Government should continue to put into effect, and secondly, that payment for outcomes is not a flood tax. It is not compulsory; it is an additionality, and it provides clarity for communities that for too long have failed to get their schemes above the line. The hon. Lady’s point will be very unwelcome if that is her party’s future policy, on its blank sheet of paper.

One of the key recommendations of the Pitt review was that investment in flood spending should rise above inflation year on year. No matter what dodgy DEFRA maths the Minister tries to put before the House he cannot disguise a 27% cut in flood defence spending. We increased it by 38% over three years—that is the difference. That gave communities and the insurance industry certainty. He has increased the risk that the insurance industry could walk away from universal flood insurance after 2013. He has already mentioned speciality brokers; does he agree that we will need a new statement of principles in 2013 to make sure that flood insurance is universally available?

We will certainly need a new relationship with the ABI post-2013, but the hon. Lady must be careful with the numbers that she bandies around before the House. The right hon. Member for Leeds Central (Hilary Benn) had spoken of 50% cuts in capital for the Department that she now shadows if Labour had been re-elected, and she cannot now decide that that was a pipe dream and was not mentioned. Of course this issue is important: it is about people’s homes and flooding. Some 5.2 million homes in this country are at some risk of flooding, and the Government have made this issue a priority. That is why we have protected this budget out of all proportion to other budgets in the difficult round that has been forced on us by the previous Government.