Government pledges £800m flood defence spending

The insurance industry will maintain pressure on the government to curb the threat of flooding, despite its announcement that flood defence spending will be raised to £800m within three years.

Insurers and flood experts have raised questions over how the extra funding will be spent, as well as the government’s wider strategy for dealing with property development in high flood risk areas.

Alan Gairns, property development manager for Royal & SunAlliance (R&SA) said: “It looks positive, but other issues need to be discussed. If the money is misspent it won’t mean anything.”

An ABI spokesman said: “We will continue to monitor the government’s activity closely. Let’s see the detail.”

The government’s announcement, that by 2011 annual spending on flood risk manage-ment and defences will be increased to £800m, represents an increase of over a third, from its current mark of £564m.

The announcement came as the ABI predicted the recent floods could cost the insurance industry over £1bn.

The ABI estimated that 27,000 homes and 5,000 businesses had been affected by the recent floods in northern England. It warned that the claims prediction could rise if more properties are affected by further flooding.

The ABI has called for annual spending on flood defences to reach £750m by 2011.

A recent report by the National Audit Office said that an extra £150m alone was required to bring existing flood defences up to scratch, having found that less than half of existing flood defences – including those that protect urban areas – are in their target condition.

Pointing out the fragmented nature of the flood defence network in the UK, Gairns said: “You can argue, given the issue of existing defences, is £800m enough?”

Gairns said R&SA would be meeting with the government to discuss how the money would be spent.

The announcement by environment secretary Hilary Benn came as no surprise after former prime minister Tony Blair promised that flood defence spending would “obviously form a fairly significant, serious part of the comprehensive spending settlement”.

Peers have also demanded that ministers up spending levels and consult insurers, to ensure premium rises are kept to a minimum, after the recent devastation in Yorkshire, the Midlands and Lincolnshire.

Insurers have said that it is too early to say if the flooding would have an effect on premiums in the £6bn household market – despite flooding in 2007 already having cost the industry an additional £450m compared with last year, according to Deloitte.

Environment minister Lord Rooker said it was normal for the government to have discussions with the ABI over its flood defence programme, but conceded there was “a huge amount of work to do”.

The insurance industry will continue to push for a review of policy planning statement 25, introduced in October last year, which made the Environment Agency (EA) a statutory consultant for planning applications on flood plains.

There are concerns that local authorities are rejecting EA recommendations.

Gairns said: “If the EA chooses to deny planning, the case may be referred to the secretary of state for the environment. We want this referral to be compulsory.”

Rooker also insisted the multi-million pound cuts to the EA’s budget made no difference to the recent flooding across England.

He said: “None of that affected capital flood defences. Of the £15m, some £9m affected maintenance, others affected general administration.

“I’ve been assured that none of that would actually have changed anything that has happened in the past few days.”