“An Englishman’s home is his castle”, goes the old saying. The way the government’s flood insurance plans are going, we may soon need to start digging our own moats. Today the House of Lords is set to give its seal of approval to a new system of flood insurance for British households, called Flood Re. It has many good points: it seeks to keep flood insurance affordable for the most vulnerable, cross-subsidising those at highest risk through a small levy on all homes. But it has one fundamental flaw: it fails to factor in climate change.
This might seem a slight oversight, in light of today’s dire warnings from climate scientists, and particularly after the UK has just experienced the wettest winter on record. But the Government’s Impact Assessment for the policy states plainly: ”the baseline scenario assumes that flood risk remains the same over time”.
This is clearly ludicrous. The Government’s own figures project that the number of homes at significant risk of flooding will accelerate from 370,000 currently, up to almost a million by the 2020s. The insurance industry agrees; as a recent briefing by the Association of British Insurers states, “Climate change is expected to increase the probability of flood events in the future, and the average annual damages arising from them.”
So what’s going on? Defra’s justification for their rejection of growing flood risk is to claim, “as a working hypothesis”, that “the effects of climate change and investments in flood defences are broadly offsetting.” But it is patently untrue that investment in flood defences has kept pace with rising seas and worsening downpours. Ministers were warned by the Environment Agency in 2009 that much higher investment would be needed just to stop more homes sliding into flood risk; the Coalition responded by slashing flood defence spending. The Committee on Climate Change have recently warned that a half-billion pound gap has emerged between what the Coalition have spent and what’s actually needed.
The insurance industry, for their part, have a pressing interest in reducing the general risk posed to their business by climate change. It was their lobbying last summer, as negotiations over Flood Re came close to breaking-point, that forced Ministers to promise slightly increased spending on flood defences after the next election. But don’t imagine for a moment that this amounts to the state shouldering responsibility for protecting all its citizens from climate change. Current spending trajectories will lead to at least 250,000 more homes becoming at flood risk over the next twenty years. The Treasury has no intention of suddenly taking on new financial obligations, even when these constitute protecting people’s homes and livelihoods; as a Defra briefing icily notes, “we are clear that there is no Government liability for Flood Re”. Unfortunately, the insurance industry, sick of delays and bruised by endless fights with Treasury mandarins, has accepted these crumbs as being good enough for now.
But it gets worse. Because Flood Re isn’t even a permanent settlement; it has a sunset clause, meaning it will expire after 25 years. Every five years, it will reduce in scope, moving from a system of progressive cross-subsidy to ‘risk-reflective pricing’ - in other words, to a free market in flood insurance. So while climate change is pushing more and more households into flood risk, flood premiums will be becoming less affordable. ‘Risk-reflective pricing’ is meant to incentivise at-risk households into taking steps to prepare for flooding - such as installing door guards or airbrick covers. But even the insurance firms think such measures can only do so much against serious floods, and they would rather preserve the cross-subsidy system indefinitely. The impetus to return to a free market and push responsibility onto individuals is coming from Ministers with an ideological axe to grind, notably Owen Paterson. Perhaps his dream is for everyone to adopt the enterprising outlook of the Somerset millionaire who tried defending his mansion from flooding by building his own private moat.
In a civilised society, would it not be more sensible to pool our risk collectively? We have a social security system, after all, that provides (for now) a safety net against involuntary unemployment, sickness and destitution. As climate change increases the number of households at risk of flooding - through no fault of their own - we should surely seek to provide them with a modicum of environmental security. This requires governments to accept that paying for flood defences is a public good that they can’t shirk, and that climate change necessitates this investment to rise over time. Of course, austerity-minded Chancellors are unlikely to swallow this readily. But perhaps two things can help persuade them.
The first is that governments need not spend this money indefinitely, if they pull their fingers out in tackling climate change in the first place. We know that it will cost much less to cut emissions than to adapt to the consequences. The more fossil fuels we burn, the more it will flood, so prevention is obviously better than cure.
The second is that the rising numbers of households being put at flood risk could come together as a serious political force. They are in the frontline of climate change impacts in the UK, and as they come to realise this, it seems highly unlikely they will remain quiet for long. Divided, they are like so many stranded homes facing rising floodwaters; united, they could constitute an unstoppable tide for change.