Fears over money to maintain flood defences

Around 200,000 homes at risk from flooding may face problems getting insurance from next year, the industry warned today.

The Association of British Insurers (ABI) said an existing deal with Government expires in 2013 and time was running out for on-going talks about a new safety net arrangement.

ABI's director-general Otto Thoresen said: "Insurers want to make sure that every home has access to affordable insurance, should the worst happen, and we're concerned that those people most at risk will lose out unless the Government considers a safety net.

"We are frustrated with the progress of our talks with the Government on this issue and want it to look urgently at a model that would allow flood cover to remain widely available and competitively priced.

"No country in the world has an entirely free market providing universal affordable flood insurance, and action is needed now to avoid 200,000 high-risk homes struggling to afford cover."

The warning came as MPs raised concerns over whether there will be enough money to maintain and improve flood defences to protect millions of at-risk homes in the future.

The Public Accounts Committee (PAC) also warned it was unclear "where the buck stops" for managing the risk of flooding, as the Department for Environment, Food and Rural Affairs (Defra) has said it is not ultimately responsible for the issue.

Defra told the committee it shares responsibility for flooding with the Environment Agency and local bodies, but the MPs warned the department had no way of knowing if local flood management was adequate and when it should step in.

A report by the parliamentary committee said the costs of flood damage currently stand at around £1.1 billion a year, and are likely to rise with climate change.

Last week, a climate change assessment for the Government warned that the annual costs of flooding could increase to between £1.5 billion and £3.5 billion by the 2020s, and £2.1 billion to £12 billion by the 2080s for England and Wales.

Despite the Environment Agency's prediction in 2009 that its flooding budget needed to increase by 9% during the current spending period to maintain levels of flood protection, funding is being reduced by 10% over that time, the PAC said.

Defra told the MPs that efficiency savings and improved use of resources would mean capital expenditure on flood defences would not be reduced.

Defra also hopes to encourage more funding for flood defences from sources such as businesses and local authorities, boosting contributions from £13 million in the last spending period to £43 million - but it has not yet secured the increase.

Margaret Hodge, chairwoman of the PAC, said the committee was "sceptical" of the possibility of raising funds locally when councils and businesses were facing financial pressures.

Commenting on the MPs' report, a Defra spokeswoman insisted the country was better prepared than ever before to deal with a major flood.

She said: "Under the new Partnership Funding system, the most at-risk and deprived areas can receive more money for flood defence schemes, backed by funding from the private sector whenever possible."

And she said local authorities were accountable for local flood risk management and should be the first port of call for affected communities.

An Environment Agency spokeswoman said: "We are already addressing a number of points raised in this report including placing more and more importance on how we work together with communities to agree the best options for local flood and coastal risk schemes."

Meanwhile, the ABI released analysis which suggests 92 constituencies around England and Wales have more than 1,000 homes at significant risk of flooding.

Boston and Skegness tops the list of the communities with most homes at high flood risk, with 7,550 homes under threat.

The Vale of Clwyd, Folkestone and Hythe, and Windsor each have more than 7,000 homes with a more than one-in-75 chance of flooding in any one year.

Environment Secretary Caroline Spelman said: "The ABI are clearly lobbying hard for the taxpayer to subsidise their industry.

"We are discussing with the insurance industry, including the ABI, the shape of a new agreement.

"We want flood insurance to remain widely available and as part of these discussions, over the next few months we are looking at feasible, value for money ways of targeting funding support to those most in need."

The analysis of the latest Environment Agency flood data against the 573 Parliamentary constituencies in England and Wales shows the communities with the most homes at significant risk of flooding are:

:: Boston and Skegness - 7,550 homes

:: Vale of Clwyd - 7,339

:: Folkestone and Hythe - 7,196

:: Windsor - 7,125

:: Runnymede and Weybridge - 6,541

:: Clwyd West - 6,160

:: Aberconwy - 5,500

:: Nottingham (south) - 5,043

:: Great Yarmouth - 4,965

:: Sittingbourne and Sheppey - 4,295

:: Leeds (central) - 4,209

:: Canterbury - 4,199

PA