The availability and affordability of insurance in flood-risk areas are important issues for the Government. Constructive negotiations continue with the insurance industry, at the highest levels of Government, on a range of approaches that could succeed the current statement of principles. The Government are on course to spend £2.3 billion on reducing the risk from flooding and coastal erosion and delivering better protection to 165,000 households over the four years to March 2015.
On 24 January I asked the Minister how much premiums will rise if he fails to reach agreement with the insurance industry. In response, he assured me that negotiations were at an advanced stage and that he would come to the House with details shortly. I understand that he does not actually have a seat at the negotiating table, but when does he expect to have news of a deal from his Cabinet Office and Treasury colleagues?
I think that there is a misconception in some parts of the House that the statement of principles represents some halcyon world in which our constituents living in high flood-risk areas are protected from exorbitant rises in premiums. That is not the case. What we want is affordability to be brought into the new system. I am involved in those conversations at the highest levels and want to assure the House that we are working as hard as we can to find a solution that can give comfort to everyone who is at risk of flooding, particularly those on low incomes.
17. My constituents in West Worcestershire, which is quite flood-prone, are concerned about the length of the negotiations. I understand that the Association of British Insurers is asking for the taxpayer, in effect, to be the reinsurer of last resort. How confident is the Minister that we will be able to come up with a private sector-led solution in time for the expiration of the statement of principles? (146593)
My hon. Friend has a great many constituents who live in flood risk, and we want to be able to assure them that there is something that will continue after the end of the statement of principles. As I said to the hon. Member for Nottingham South (Lilian Greenwood), the new system is better because it will not only be available to all properties that are at flood risk but will have an affordability element. We have in mind my hon. Friend’s constituents and many others around the country who live in flood risk, but we are also responsible to the taxpayer. We want to make sure that what we are doing is fair to the taxpayer and fair to the person living in flood risk.
The Building Societies Association has said that the consequences of failing to get a deal would be “grave”. Potential buyers would find it difficult or impossible to get a mortgage, loan book values would drop, capital requirements would rise, and there would be less money to lend in the real economy. Is sales blight on 200,000 properties an acceptable price to pay for this Government’s inaction?
The hon. Gentleman is wrong when he says that there is inaction; I can assure him that there is an awful lot of action. Alongside the negotiations that have been going on, we have been producing documents such as one that has been highly recommended by the British Institute of Insurance Brokers Association: “Obtaining flood insurance in high risk areas”. We are also assisting people in flood-risk measures they take for their property at household level so that that will be reflected in the premium. The hon. Gentleman is right to be concerned about the potential impact on mortgages and lenders, and that is one of the main drivers towards the quick result we want to get in this matter.
Thank you, Mr Speaker. May I reinforce to the Minister the importance of achieving affordability? Will he take the message from the people of Stonehaven, who have been flooded for a second time, that urgency is also important so that they can have the comfort of reinsuring their properties?
I entirely accept what my hon. Friend says. There is an urgent need to get a resolution, but I hope that he agrees—I am sure he does—that it cannot be at any price; we have to be mindful of the needs of the taxpayer as well as those of his constituents. This is a fiscal matter and therefore a UK responsibility, so it is important that we liaise closely with the devolved Governments as well.