Future funding of flood and coastal erosion risk management in England

A summary of responses to this recent consultation has now been published (23 May 2011). Based on responses to the consultation, Defra has also announced how capital funding will be allocated to individual projects in England from now on.

Instead of meeting the full costs of just a limited number of schemes, the partnership approach to funding flood and coastal resilience could potentially make Government money available to pay a share of the costs of any worthwhile scheme. Funding levels will be based on the number of households protected, the damages being prevented, and the other benefits a project would deliver. Overall, more schemes are likely to go ahead than if the previous ‘all or nothing’ approach to funding were to continue.

Key funding figures

• Defra expects to spend at least £2.17 billion on flooding and coastal erosion over the next four years. This is an average of £544 million a year.
• This is approximately 6% less than spend by Defra over the previous four years (an average £579 million a year).  These savings will be partly offset through efficiencies in delivery and procurement, and better risk-based prioritisation.
• The £2.17 billion consists of around £1.04 billion capital (approximately £261 million per year) and around £1.13 billion resource which includes ‘programme’ spend such as maintenance, flood forecasting, and incident response; and ‘admin’ – people and back office costs.
• Defra remains committed to fully funding local authority new burdens under the Flood and Water Management Act.  Up to £36 million a year will be provided directly to lead local flood authorities (£21 million in 2011/12 due to phasing-in).
• On top of the £2.17 billion from Defra, local authorities will be spending money supported by formula grant from the Department for Communities and Local Government.  This is expected to be around £100 million in 2010/11.  The £2.15 billion spent on flood and coastal erosion risk management between April 2008 and March 2011 included around £280 million of local government money.

Implications of the Spending Review

The Chancellor presented the Government’s Spending Review on 20 October 2010, which fixes spending budgets for each government department up to 2014-15.

Following this announcement Defra has looked at how this will impact on funding for flood and coastal risk management. For details on Environment Agency budgets for flood and coastal erosion risk management can be found in the Defra Arms Length Bodies allocations.

As a result of the investment that Defra is making, we expect to deliver better protection to 145,000 households by March 2015. This is in addition to the households with better protection as a result of investment in the previous spending period from April 2008 to March 2011. During this period, the Environment Agency and other operating authorities were able to exceed the target that was set of providing improved protection for 145,000 households. In the end they were able to better protect 182,000 homes.

Risk Management Authority expenditure and funding

Details on previous years operating authority expenditure can be found on the funding page.

Outcomes – measuring performance

Six measures have been established for the 4 year period from April 2011 to March 2015 to monitor the outcome from our capital investment in flood and coastal erosion risk management. 

• Flood and Coastal risk Management Outcome Measures

These measures are broadly similar to those used up to March 2011, continuing our focus on the number households receiving an improved standard of protection from flooding or coastal erosion, the overall economic value of the Government’s capital investment and the achievement of important environmental outcomes which are dependent on flood or erosion management.

The new measures are consistent with the Flood and Coastal Resilience Partnership Funding arrangements for the allocation of capital grants announced on 23 May 2011.

Insurance

Adequate flood insurance cover can reduce the financial impacts of a flooding event. The UK has one of the few private insurance markets that offer cover for flood events.  There is an agreement between Government and the insurance industry, called the Statement of Principles. This obliges insurance companies to offer flood cover as part of standard policies in almost all cases. The current Statement of Principles was agreed on 11 July 2008.

For more information the Statement of Principles and flood insurance see the Insurance page.

It is important individuals and organisations take action to manage the risks they face, including accessing suitable insurance against the potential consequences of a flood. The government and insurance industry are working closely to continue the availability of insurance while recognising that policy terms are likely to reflect local risk, including any actions taken to reduce it.