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Defra failing to take account of climate change implications for new flood insurance scheme

Bob Ward

16 December 2013

The Department for Environment, Food and Rural Affairs has shown once again that it is struggling to make the UK more resilient to the impacts of climate change under the stewardship of its Secretary of State, Owen Paterson.

Last month, Defra signalled that it had been forced into an embarrassing U-turn after admitting that it should not have ignored the implications of climate change for a new flood insurance scheme.

It sneaked onto its website a response to a public consultation about its proposal for the new scheme, called Flood Re, which would ensure coverage for homeowners whose properties are at highest risk of flooding.

At present, insurance for these properties is implicitly subsidised through higher premiums for all policy-holders. However, insurance companies have told the Government that the rise in the number of properties at risk of flooding has pushed the existing set-up to breaking point.

So Defra and the insurance industry have agreed to launch Flood Re to provide cover for high-risk properties, paid for through an explicit levy on all policy-holders’ premiums.

In order to allow insurance companies to introduce the levy, technically classified as a new tax, the Government has had to include the necessary legislation in the Water Bill, which reaches the Committee stage in the House of Commons on 17 December.

When Defra presented the original proposal for Flood Re in June, the accompanying Impact Assessment| stated that it would cover about 500,000 homes, and to pay future claims, £180 million each year would need to be raised through a levy of about £10 on all policy-holders’ premiums.

But the Grantham Research Institute on Climate Change and the Environment pointed out in its response to the consultation| that the Impact Assessment for Flood Re, which would operate for between 20 and 25 years from 2015, had failed to take into account any increase in flood risk through rising sea levels and shifts in rainfall due to climate change.

The Institute highlighted the Climate Change Risk Assessment|, published by Defra in January 2012, which concluded that the number of residential properties in England and Wales exposed to a significant risk of coastal or river flooding could increase from 370,000 in 2008 to between 450,000 and 800,000 by the 2020s, even when assuming no new buildings.

Met Office data| show that four of the five wettest years in the UK have all occurred since 2000), and the Environment Agency this week reported| that flooding in 2012, the second wettest year on record, cost the economy £600 million.

Long-term averages of 30-year periods show an increase in annual rainfall of about 5 per cent between 1961-1990 and 1981-2010. In addition, a preliminary analysis| by the Met Office also indicates that 1-in-100-day extreme rainfall events have become more frequent since 1960.

Global sea level is also rising by more than 3 centimetres every decade, and poses a particular problem for coastal properties in south-east England where the Earth’s crust is slowly sinking.

So by ignoring climate change, Defra had significantly underestimated the number of homes exposed to significant flood risk and which might need to be covered by Flood Re.

But on 18 November, Defra appeared to acknowledge this serious mistake and promised to publish a revised clause to be added to the Water Bill and an updated Impact Assessment| which “has taken account of the consultation responses, notably in terms of developing the analysis of transition to a free market, the potential impacts of climate change, impacts on property values and the costs of the options”.

However, its revised Impact Assessment|, published on 29 November, made a risible attempt to include the implications of climate change. It acknowledged that that Climate Change Risk Assessment showed that the number of residential properties in England and Wales at an annual risk of coastal or river flooding of 1 in 75 or greater will increase from 365,000 in 2012 to between 475,000 and 825,000.

These figures exclude residential properties in the rest of the UK, and all properties at significant risk of surface water flooding, but are still much higher than the 500,000 properties which Defra has assumed will be covered by Flood Re.

But the revised Impact Assessment simply dismisses with a single statement this substantial rise in the number of homes at risk due to climate change: “The significant uncertainties in these factors, the relatively short term transitional nature of measures being considered and the Environment Agency Long Term Investment Strategy whose aim is to match the lower climate change scenario suggest that the assumption of no change in flood risk is a reasonable one for comparing options against the baseline scenario”.

Hence, Defra simply assumes that new and enhanced flood defences will prevent the risk to any additional homes from becoming significant, and that its original calculations, which ignored climate change, require no modification at all!

This feeble reasoning has all the hallmarks of a Government Department that is unable or unwilling to perform the analysis needed to ensure that its plans are robust. It also provides further evidence that Defra has been failing, since the appointment of Owen Paterson as Secretary of State for Environment, Food and Rural Affairs in September 2012, to ensure that the UK adapts and becomes more resilient to the impacts of climate change, particularly flooding.

Not only does Defra’s Impact Assessment ignore surface water flooding, but it also fails to acknowledge that current expenditure on defences is insufficient to deal with the increase in risk along coasts and rivers.

The expert Committee on Climate Change last year noted| that investment in flood defences needs to increase by £20 million above inflation every year to “keep risk levels constant in the face of climate change and deterioration of flood defence assets”. It warned that “[i]f current investment plans for flood defence continue into the future, the country will be faced with an increasing risk of flooding from climate change”.

In June 2013|, the Government announced further expenditure on flood defences as a result of the Spending Round. However, the Committee concluded that expenditure “remains below the amount the Environment Agency estimated in their 2009 Long-Term Investment Strategy would be required to keep pace with climate change”.

Defra’s inadequate management of climate change risks appears to be linked to Mr Paterson ideological approach to the issue.

In September, he delivered a speech| at a fringe meeting of the Conservative Party conference in which he made the erroneous claim, copied from a newspaper article by his brother-in-law Lord Ridley, that the latest assessment by the Intergovernmental Panel on Climate Change concluded unchecked global warming would only raise temperatures by 1 to 2.5 centigrade degrees.

Mr Paterson has also cut the team| responsible for the UK national adaptation programme from 38 to just six, and arranged to be out of the country when it was eventually published on the Defra website in July.

Defra’s continuing preference for basing policies upon Mr Paterson’s ideological views on climate change, rather than on expert scientific advice, could place the lives and livelihoods of millions of people in the UK at risk.

Bob Ward is policy and communications director at the Grantham Research Institute on Climate Change and the Environment| and the Centre for Climate Change Economics and Policy| at London School of Economics and Political Science.

 

 

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  Bob Ward