PAC warns on gaps in flooding risk assessment and protections; funding concerns

• “Next major housing and building regulations scandal brewing” in flood protection failures

Flooding puts people’s homes, well-being and livelihoods at risk, and can impact food supply and destroy natural habitats. More extreme weather as a result of climate change and increased housing development will continue to increase the UK’s flood risks.

The impacts of climate change can already be seen in the increasing strain on existing flood defences. Only half of the defences damaged in the 2019-20 winter floods have had their standard of protection restored. Defra has not addressed the problem of prohibitive insurance costs imposed on the recently flooded or removed the obstacles to households taking up their own flood resilience measures.

Despite the obvious risks, and a government policy not to build on flood plains “unless unavoidable”, the Environment Agency (EA) thinks there could be an increase of up to 50% in the number of houses built on flood plains over the next 50 years. EA is working with MHCLG on the planning reforms needed to mitigate the risk of building in these areas but responsibility for surface water flooding, worsened by developments in urban areas, sits with the local authority. Scarce local authority resources, now under further extreme strain from the pandemic, and low levels of private sector investment are hampering England’s flooding response.

The Committee says neither Defra nor the EA understand enough about the significant decline in the proportion of flood investment going to deprived areas since 2014, or about the wide variation in the level of flood defence investment per property at risk across regions.

The current indicators used to monitor national flood risk do not cover important elements such as risks to agricultural land, business premises, and infrastructure; short-term funding cycles are impacting on EA’s ability to manage flood risks effectively.

EA is set to achieve its target to better protect 300,000 homes through its capital investment programme on time and budget, which is a significant achievement. However, Defra should recognise that with new build on the flood plain and increased vulnerability to existing properties from climate change, the net number of homes that are better protected is actually lower. With the level of investment due to increase significantly over the next six years, Defra needs to monitor and challenge EA’s performance and get a better understanding of whether funding to each local authority matches the level of flood risk it faces.

Meg Hillier MP, Chair of the Public Accounts Committee, said: “Damaging floods are becoming more and more frequent and with climate change extreme flooding events are not going to just go away. With public finances stretched to the limit, Government and the Environment Agency have to do more to make sure limited funds for flood defence and risk management are spent effectively. The risks to our homes, businesses, national infrastructure, food supply and whole ecosystems are not even being properly monitored, much less strategically mitigated.

“You can see the next major housing and building regulations scandal brewing here - the Government is simply not doing enough to protect the UK’s current housing stock from floods or stepping in to prevent new homes being built on flood plains, and more needs to be done to tackle the prohibitive home insurance costs that result.”

PAC report conclusions and recommendations

5. The Department is not doing enough to challenge the Agency’s performance and hold it to account. In recent years the Department has reduced its level of scrutiny of the Agency. It relies on information provided by the Agency without carrying out any quality assurance and does not produce its own assessment of the delivery risks to the Agency’s capital investment programme. The framework agreement that defines the relationship between the Department and the Agency is out of date. The Department does have some oversight arrangements in place and is supported by the Infrastructure and Projects Authority. However, it recognises the need to do more to challenge the Agency’s performance and to use its existing arrangements more effectively. The Department considers that developing a better set of performance indicators will be a major element in improving its scrutiny of the Agency’s performance. It has committed to developing a set of indicators for the new capital investment programme by April 2021

Recommendation: The Department should immediately strengthen its scrutiny of the Agency so that its new approach is in place for the new investment period starting in April 2021 and should report to us by July 2021 on how the new scrutiny arrangements are operating.

6. Scarce local authority resources and low levels of private sector investment are barriers to the effective management of flood risks, especially given the impact of Covid-19. Lead local flood authorities (unitary authorities or county councils) are responsible for managing local flood risks. Their funding for this is not ring-fenced and there are concerns over the level of revenue funding available to local authorities. The Department understands that, taken as a whole, local authorities spend more on managing flood risks than they are allocated through the Ministry of Housing, Communities and Local Government’s (MHCLG) local government funding formula. However, it recognises that it needs a better understanding of why spending varies so much across individual authorities and whether the formula for allocating funding to each local authority accurately reflects its level of flood risk. The partnership funding model has been successful in attracting additional investment to flood defence projects, but the level of private sector contributions has fallen to just 7% between April 2015 and March 2021, down from 25% between April 2011 and March 2015. While the Department and Agency want to see this percentage increase, the impact of Covid-19 on contributions is uncertain.

Recommendation: The Department and the Agency should identify areas where there is likely to be a shortfall in local authority resources and private sector contributions to ensure the effective management of flood risk in local areas. They should report to us on their assessment by July 2021.

7. In 2014 the NAO report on strategic flood management found there was a profusion of plans that often duplicate across geographical or administrative areas. Defra and the Agency have not followed the NAO recommendation to review their strategies and plans with a view to rationalise them to reduce the burden on communities and to promote public engagement.

Recommendation: Defra should write to the Committee within 6 months with an update on the opportunities to streamline local planning and with a timeline for implementation of any reforms.

8. Short-term funding cycles are impacting on the Agency’s ability to manage flood risks effectively. The Agency has a six-year capital funding settlement for investment in flood defences (2021-22 to 2026-27), but only a one-year settlement for revenue funding (2021-22). Revenue funding pays for people and running costs including the on-going maintenance of flood defences. Maintenance costs are increasing due to more extreme weather as a result of climate change, more flood defences being built and as some defences reach the end of their life. Only half of the defences damaged in the 2019-20 winter floods have had their standard of protection restored. Multi-year revenue funding settlements would improve planning in areas such as staffing. The Agency has skills gap in some areas such as engineering that are critical for flood defence, which it says is largely down to the pay difference between the public and private sectors. As a result, the Agency is looking to develop in-house expertise, which requires long-term investment in skills and, in turn, certainty over revenue funding.

Recommendation: The Department and the Agency should work with HM Treasury to reduce the adverse impacts of short-term funding cycles. The Government should also undertake a cost benefit assessment of the level of funding needed to maintain flood defences and flood risk management assets both at and above current Environment Agency target condition. The Environment Agency should have a duty to maintain flood defence assets and the Government should commit to maintenance funding in revenue funding settlements for longer-term security.

9. The current indicators used to monitor national flood risk do not cover important elements such as risks to agricultural land, business premises, and infrastructure. The Agency uses the number of homes ‘better protected’ as the main performance indicator for its capital investment programme. It also uses its National Flood Risk Assessment model to estimate the number of properties at risk of flooding each year, although changes in methodology make comparisons over different years uncertain. The Agency does not measure what is happening nationally to the overall flood risk for agricultural land or infrastructure. In addition to the specific indicators it is developing for the capital investment programme, the Department has also committed to developing a new set of national flood risk indicators by spring 2022.

Recommendation: The Department’s new set of national flood risk indicators should incorporate all types of flood risk to ensure they provide a full picture of what is happening to flood risk including for homes, non-residential property, agricultural land, and infrastructure across England and should facilitate the comparison of flood risk across previous years so progress can be clearly assessed.

10. The Department has not ensured that all regions, deprived areas in particular, get a fair share of the available funding. The Agency uses the level of risk in an area and the readiness of projects to go ahead to decide where to invest in flood defences. The Agency’s own research in 2020 shows that deprived areas are more at risk from flooding, yet the proportion of all homes ‘better protected’ that were in the 20% most deprived areas declined from 29% in 2014 to just 8% in 2019. The Department speculates that this is largely due to viable projects in deprived areas happening early but has not done any analysis to back this up and it remains the case that deprived areas are more at risk. There is also significant variation in the level of flood defence investment per property at risk across regions. The timing and size of projects as well as the availability of match funding also created a variation in investment levels and the Agency recognised it needs to understand more about the pattern of investment and the impact of its decisions on communities.

Recommendation: The Department and the Agency should undertake and publish annual analysis of investment levels across regions and deprived areas. This should be followed up by appropriate action to reduce any funding inequality. Annual analysis and reporting should start at the end of the first year of the next investment period (March 2022).

11. We are not convinced that the Department has yet done enough to address the difficulties those recently flooded have in getting affordable insurance. Some people who have recently been flooded still face difficulties in obtaining affordable insurance. The Department states that the existence of Flood Re should ensure that affordable insurance is available even for those households at high levels of flood risk. However, the Department’s own research, following the floods in Doncaster in November 2019, suggests that some people were still unable to obtain affordable insurance. There also remain obstacles, and a lack of incentives, for households to take up property-level flood resilience measures such as installing flood barriers and doors. Such measures can reduce the damage and recovery time after a flood and could help people to get affordable insurance. There is scope to make flood resilience grants more effective, reform building regulations and introduce Flood Performance Certificates.

Recommendation: The Department should write to us by April 2021 setting out the findings of its research into non-take up of insurance and how it is going to ensure remaining obstacles to obtaining affordable insurance are addressed. It should include what it is doing to overcome the obstacles to households implementing property-level flood resilience measures.

12. Despite the known risks, there are still plans to build houses on flood plains. While government policy is not to build on flood plains unless unavoidable, the Agency’s analysis indicates that there could be a large increase – of up to 50 per cent - in the number of houses built on flood plains over the next 50 years. The Agency is working with MHCLG on reforms to the planning system and is also a statutory consultee on planning applications; it says that in 99% of cases its advice is accepted by the planning authority. However, the Agency does not have responsibility for surface water flooding which sits with the lead local flood authority, the risk of which can be increased with developments in urban areas. There is also a disconnect between the developers who financially benefit from new housing developments and those who face the consequences of it not being sustainable or insurable.

Recommendation: Planning policy guidance notes should be strengthened to avoid new builds in areas prone to flooding wherever possible, but in any case, the environment agency should be involved in measures to mitigate the risk. The Department should report to us by July 2021 on the outcome of its discussions to date with MHCLG on reforms to the planning system and how this will mitigate the risks of building on flood plains and other flood risk areas including those at risk from surface water flooding. This should consider approaches to ensure developers guarantee property can be insured and contributes to flood mitigation measures

The Department should work with MHCLG to

• ensure mandatory reporting on planning decisions approved in flood risk areas – particularly when the Agency disagrees.

• ensure mandatory installation of Sustainable Drainage Systems (SuDS) in new builds

• Consider changes to building regulations to include mandatory flood protection measures in new builds such as raised electrical sockets, fuse boxes and sealed floors /ENDS