National Audit Offices publishes report on resilience to flooding

The Environment Agency (EA) has cut its forecast for the number of additional properties that will be better protected from flooding by 40% since plans were first unveiled in 2020, according to a new report by the National Audit Office. EA estimates that inflation accounts for between a half and two-thirds of this reduction.

Resilience to flooding sets out that EA has reduced its forecast of the number of properties it will be able to better protect by 2027 from 336,000 to 200,000, a reduction of 40 per cent. In addition, EA is removing 500 of the 2,000 new flood defence projects that were originally included in the programme. This is despite government doubling its capital funding in England in the six years to 2027 to £5.2 billion to combat the danger of flooding.

In the first two years of the government’s six-year flood and coastal erosion management programme, EA has improved protection from floods for 59,000 properties in England against a commitment when the programme was announced of better protecting 336,000 by 2027.

EA assessed that maintaining 98% of its high consequence assets at their required condition at a cost of £235 million would provide the best value for money.¹ However, a shortfall of £34 million in its annual resource funding for 2022-23 meant that EA would only be able to maintain 94%-95% of its assets at the required condition resulting in 203,000 properties at increased risk of flooding. Although this is not a directly comparable figure, it exceeds the 200,000 properties that are forecast to be better protected through the capital programme.

Most of the individual projects within the capital programme are required to secure additional funding, known as partnership funding, from other sources including local authorities and local businesses. The EA estimates that a total of £2.3 billion of partnership funding is needed for the capital programme but continuing inflationary pressures are likely to see this rise further. This is an increase on the £1.5 billion of partnership funding that was estimated at the start of the capital programme. In July 2023, around £800 million out of the £2.3 billion required partnership funding was yet to be secured, of which £450 million is for projects that will contribute to the government’s 2027 target.² Private sector businesses are often major beneficiaries of the capital programme but contribute little towards the cost of the programme: to date across the capital programme only 9% (£128 million) comes directly from private sector contributions.

Because of the slow start to the programme, there was an underspend of £310 million in the first two years of the capital programme. HM Treasury (HMT) has deferred this funding for use in later years to ensure that Defra is funded to meet the government’s commitment to spend £5.2 billion on flood defences. As a result of this and with investment already at record levels, EA will need to spend an average of almost £1 billion each year over the remaining four years of the programme. The NAO report concludes that, although a review of the capital programme is on-going, there is a risk that attempts to meet short-term targets will further erode value for money if projects are accelerated or new ones introduced too quickly as previous experience suggests this can lead to delays and cost overruns.

The report also warns that the EA is failing to meet its maintenance targets but neither Defra nor EA assessed whether using part of the capital underspend to meet the shortfall in its maintenance budget in 2022-23 would provide better value for money than deferring it to later in the capital programme.

The NAO recommends that Defra, the EA, and HMT should work together to ensure that decisions on the current capital programme are not influenced by short-term funding periods and targets and are focused on maximising value for money and that decisions can be taken quickly to switch money from the capital programme (which funds new projects) into the maintenance budget where this provides value for money.

The report concludes that, although the government's vision for flood resilience stretches to the year 2100 and EA has several strategic objectives for 2050, it has not set a target for the level of flood resilience it expects to achieve and has not mapped out any concrete plans beyond 2026 to bridge the gap between its shorter-term actions and long-term objectives. This will make it difficult for the government to make rational and informed decisions about its priorities, measure its progress or plan effective investment for the long-term.

Gareth Davies, the head of the NAO, said:

“Government recognises the growing dangers from flooding and has committed to doubling its capital funding in England in the six years to 2027, as well as doing more to understand flood risk.

“However, the capital funding is forecast to better protect only 60% of properties that were promised when the programme was launched in 2020, while inflation and other programme risks mean the Environment Agency could deliver even fewer than that. If there are further delays to the capital programme, Defra must work with HM Treasury to make sure it is in a position to switch money quickly into maintenance, where this would provide value for money.

"EA will have to manage a record level of capital investment in flood defences for the remaining four years of the programme. In doing so, it must resist pressure to accelerate projects or initiate new ones too quickly, if this is likely to lead to cost overruns and delays and put value for money at risk.”

ENDS

Notes for Editors

1. The Environment Agency assessed that it needed £235 million but agreed £201 million for maintenance following the 2021 Spending Review.