To ask Her Majesty’s Government, further to the announcement in the Autumn Statement of £170 million to be invested in flood defence and resilience measures, and in the light of damage to farmland and property caused by the recent floods, whether they intend to extend the provisions of the Flood Re scheme to farms and small businesses.
My Lords, I declare my farming interests as set out in the register. There are no plans to extend Flood Re, because it is based on council tax bands and was specifically designed by the insurance industry for households at the highest flood risk. This would include farm-houses under a domestic policy. We are, however, working with the British Insurance Brokers’ Association, BIBA, which is launching a commercial product very shortly that provides flood insurance to businesses.
I thank my noble friend for his Answer and refer to my interests in the register. Does my noble friend agree that this insurance must be affordable? Does he further agree that it is particular rural areas that have suffered extensive damage from recent and historic flooding? Will the Government agree that the 2% increase in the insurance premium tax will be spent on flood defence measures to make sure that flood damage will be less pervasive in future?
My Lords, it would be fair to explain that £2.5 billion—a six-year capital flood programme allocated to DEFRA to 2021—is the route to protect more than 300,000 homes, 205 miles of railway and 340 miles of roads. This is the way that we will overwhelmingly ensure that more of not only our urban but our rural areas are better protected. Included in that programme will be £1.5 billion of benefits for agriculture. However, I will bear in mind what my noble friend said and will write to her.
My Lords, will the Minister resist any suggestion that the insurance companies should make a contribution for flooding, bearing in mind that any contribution made would lead to higher premiums in areas that already have higher premiums than those affected by flooding?
My Lords, I understand what the Lord said. The whole purpose of Flood Re is precisely to give householders—53,000 home insurance policies are now backed by Flood Re—the benefit of affordable insurance, but I am grateful to the noble Lord for his comments.
My Lords, it is the turn of the Cross Benches.
My Lords, I am grateful. I declare my insurance and farming interests as set out in the register of the House. Does the Minister agree with me on two points? First, Flood Re is very much in its start-up phase—it began trading only in April this year, and 53,000 policies is, in insurance terms, not very many—and the concept will really be proven when the first claims are successfully settled and paid. Secondly, once that is done, however, it would be sensible for the Government to engage the relevant parties in conversation about extending the concept of Flood Re—which is different from Flood Re itself—to small businesses, which I think would be greatly to the benefit of this country.
My Lords, I am conscious of the noble Earl’s experience in the insurance industry, but it is fair to say that Flood Re is financed to cover up to £2.1 billion in claims. To give a sense of scale, that is seven times worse than the flooding in 2007. I hope that the BIBA product will advance further understanding of how best businesses, and small businesses in particular, can avail themselves of what the noble Earl described: a Flood Re-concept policy.
My Lords, is it possible that we waste a lot of money on flood defence systems? Especially around rivers, you do not abolish flood-water by spending money on defences but simply push it on elsewhere. In my former constituency, I did wonders for Upton upon Severn and ruined the lives of people in Tewkesbury.
My Lords, the whole of the taxpayer’s financing of this is predicated on receiving the best value we possibly can. Perhaps under the natural capital programme, with the further £15 million following on for schemes such as those in Pickering, Holnicote and Upper Derwent, we can have whole catchment systems on rivers such as those my noble friend mentioned, whereby we engineer the use of natural capital.
My Lords, the scheme ought to be extended to the poorest and most vulnerable individuals caught up in the floods—that is, people such as the tenants and the farm workers who do not meet the rather restricting qualifying criteria that currently exist.
My Lords, perhaps I should say to the noble Baroness that, in fact, Flood Re does include leaseholders for up to three flats and contents insurance, but above three flats it becomes a commercial policy. So in point of fact there are permutations to the scheme. I want to emphasise that Flood Re is an industry-owned and managed not-for-profit reinsurer; it pools the risk of flood claims and is targeted, with a subsidy, to lower-income households.
I am grateful. Last February, £450,000 was allocated to a vital scheme to improve a culvert, called Victoria Clough, in the small town of Earby on the boundaries of Lancashire and Yorkshire, but nothing has yet happened. Is there a problem of capacity or resource constraints in getting the schemes going in Defra, the Environment Agency or anywhere else? If there is, would it not be sensible to let a competent local authority take it over?
I think that I had better look into the individual case that the noble Lord has referred to and come back to him. Generally speaking, we are confident that this £2.5 billion allocated to Defra over six years is going to make a very substantial difference, but we need continually to review the situation.