Wet, wet, wet

I’m up North, and it’s raining. It seems to have rained continuously since the start of December. Flooding is no longer an event, it is a fact of life. The government is getting it in the neck for having paid lip service to flood defences, and in turn the Environment Agency is being crucified by commentators such as the economist Dieter Helm alleging incompetence and inefficiency. The stable door is being sandbagged, but the horse has already drowned.

Flood defences are the poor relation of the infrastructure world, with outdated policy, procurement and funding models. Over the last few years organisations including the Institution of Civil Engineers have highlighted flood defences as a key area of infrastructure weakness, and the Department for Environment, Food and Rural Affairs (Defra) has hosted numerous discussions with interested parties bringing ideas. But not a lot has changed. Throwing more money at it would have helped but I wish the whole approach had been reformed.

First, policy. Flood defences are essentially regarded in the UK as a matter of public provision, unless associated with new building when they can become a condition of planning permission. Schemes in the past were prioritised by government and either received government funding through the process of spending review allocations to Defra, passed on to the Environment Agency (EA), or deferred.

In 2011, a new approach was announced, creating a partnership model where schemes would be supported by a combination of government flood defence grant-in-aid and local or private funding.

But the financial temptation leads to a perversion of priorities. Schemes which are not necessarily the most important from a public-interest perspective can proceed because the match funding can be found, while more important schemes may languish.

I also find it curious that in the world of flood defences there is no real recognition of the separation of public and private good. The dominant ranking criteria for government is the value of property protected. In theory someone can buy a brick house in a flood risk area, then expect the government to fund the flood defences which
protect it.

It would be better if the government prioritised the spend of taxpayers’ money on flood defences strictly in accordance with the economic value that was protected, which would largely mean schemes to protect whole cities and towns, critical infrastructure and transport links.

Flood defences are the poor relation of the infrastructure world,
with outdated policy, procurement and
funding models

Equally the provision of flood defences can lift land values, in the same way as has been evidenced for major transport schemes, yet that value is rarely captured by the government and becomes a windfall gain to land owners.

Second, procurement. The vast majority of flood defence work is procured as individual schemes, specified by the EA, and contracted to the market. It is inherently short term and leaves more risk with the public sector. Another consequence of the 2010/11 spending cuts, I remember, was a search for a more efficient model, and the EA launched Thames Estuary 2100, a consultation on a new approach for flood defences to hold back the River Thames.

The Treasury, while supportive of bolder thinking, rapidly choked on the idea of being on the hook for commitments stretching out 90 years. A 10-year contract was eventually given in late 2014 to CH2M Hill, together with delivery partner Balfour Beatty, but across the rest of the country the procurement approach remains unchanged.

Third, funding. I don’t believe the government will bite the bullet on transferring responsibility for private benefit from flood defences to private owners, so the alternative funding solution is to tap the huge sums which get paid out in insurance when flood risks occur and divert them to flood defence investments, preventing the events in the first place.

Various ideas have been offered over the years for how this might be accomplished but instead the government and the insurance industry have spent the time hammering out the terms of Flood Re, a scheme to cap the insurance premiums of homeowners in flood prone areas, launching in April.

Another perverse result of political pressure, this creates a world in which neither property owners or the government has an incentive to protect against floods and yet they will not accept the need for sweet surrender and a return to nature. We all end up paying for that through higher insurance premiums.

The UK’s approach to flood defences is a soggy mess. Another one for the National Infrastructure Commission to offer its words of wisdom on, once it has sorted out London, the North and energy policy. I suggest it should be a priority for the summer, before next winter’s deluge. Heaven help us all.

Richard Threlfall is head of infrastructure, building and construction at KPMG