UK floods: prevention is better than cure. Photo: Getty
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Counting the £1bn cost of the winter floods

This week it's six months since the winter floods struck, and from the latest available figures it looks like the floods have cost the country over £1bn.

Six months ago, the UK was wracked by the wettest winter ever, leaving thousands of households flooded and devastating communities from Somerset to Hull. The risk of flooding is now out of the headlines, but for many families still counting the costs, the problem remains extremely real.

What's more, the likelihood of terrible floods is increasing: climatologists at Oxford University have recently calculated that climate change made the 2013-14 floods 25 per cent more likely. Faced with this prospect, it's clear the government needs to be doing all it can to bring down emissions and stop the costs of future flooding soaring still higher.

But what have the total costs of the most recent floods been? I've been reviewing the latest available figures and can conclude that the 2013-14 floods have cost the nation at least £1.1bn.

Here's how it breaks down:

1) Insurance claims: £451million

In March, the Association of British Insurers (ABI) estimated that insurance claims could be £446m. Friends of the Earth has since corresponded with the ABI, who told us in early June that "The final data collection suggested a cost of £451m for the winter floods" - and this is just for incurred insurance claims.

 

2) Uninsured costs: £130million

In February, PwC estimated that insurance claims from the floods would total £500m, and that total 'economic costs' would sum to £630m - in other words, additional uninsured costs would be around £130m.

Also in February, the NFU's head of policy services, Andrew Clarke, estimated that the cost of the floods to farmers could reach £50m-£100m. Some of this may be able to be claimed back through insurance; a portion of it may also be covered by the Government's Farming Recovery Fund (see below); but additional costs may still remain.

 

3) Central Government support and repairs: at least £540million

The Government states it has made £540m available for flood recovery, in the form of various grants for businesses, households, and farmers; for flood defence repairs; and for patching up transport infrastructure.

Not all of this money, however, has yet reached the intended beneficiaries. For example, farmers say just five per cent of the Government's Farming Recovery Fund has been paid out to them so far - with the grants of just £5k per farmer proving very bureaucratic to obtain and each form taking a fortnight to process.

The £270m made available for flood defence repairs, meanwhile, may not be sufficient to cover the total costs of damages. The grant was announced before full estimates of damages had been completed by the Environment Agency (EA). A joint review of the state of flood defence damages was completed by the EA and the British army before Easter, and reported that around 1,000 defences had been damaged or were undergoing repairs. Subsequently a more detailed appraisal was carried out by engineers, and the latest publicly-available statements from the EA's Flood Recovery Programme team suggest that the total number of damaged assets now stands at 1,300. A full breakdown of damaged defences is expected to be released in early July. Whether the costs of repair will exceed the £270m pot made available is as yet unknown.

A detailed analysis of the costs of the floods undertaken by Channel 4's Factcheck in early February came to a slightly higher figure for costs borne by the state being £583.6m. This used a slightly different methodology, adding in the costs of pumping water in the Somerset Levels, some estimated costs of repairing damaged rail track, and estimates for Local Authority claims under the Bellwin Scheme - the means by which flood-struck councils can recoup some of their costs from central government.

 

4) Local Government costs and claims under the Bellwin Scheme: at least £6.6m

A Freedom of Information request made by Friends of the Earth to the Department of Communities and Local Government (DCLG) has revealed that by early June, 13 local authorities had reported total costs of £6.6m, of which £4m has been above the Bellwin Scheme's thresholds and has therefore been submitted as claims to central government. However, this is unlikely to be the final figure, with applications open until the end of June and DCLG expecting further claims. The Local Government Association has said that it will take "some time" before the final costs are known.

 

5) Lost output due to closed businesses, travel disruptions and blackouts: unknown

Travel disruption over the winter was considerable, with the Westcountry effectively cut off for two months after coastal surges destroyed a stretch of rail track near Dawlish. The Department of Energy & Climate Change record that almost one million customers were affected by power disruptions during the Christmas storms. The Office of National Statistics states that there is some evidence that construction output was affected by the storms and floods.

 

6) Longer-term costs?

Longer-term costs at this stage remain hard to estimate, but the 7,800 homes that were flooded during the winter could well see their insurance premiums go up, while the value of the houses could be dented. There is also a feared longer-term impact on agricultural land prices in Somerset, where the fertility of fields were badly affected by being underwater for months.

 

Conclusion: prevention is better than cure

When the coalition first entered office, it slashed spending on new flood defences and cut maintenance. This is now looking like a terrible false economy, and the government is having to pay far more to mop up the mess left by the floods than it cut originally.

The Committee on Climate Change warns there is now a half-billion pound shortfall between flood defence investment and what's needed to keep pace with our changing climate. The government needs to invest properly in flood management, but most of all it needs to ratchet down the emissions causing climate change - which if left unchecked will lead to ever-more costly floods in the future.

Guy Shrubsole is energy campaigner at Friends of the Earth.

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Leader: The unresolved Eurozone crisis

The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving.

The eurozone crisis was never resolved. It was merely conveniently forgotten. The vote for Brexit, the terrible war in Syria and Donald Trump’s election as US president all distracted from the single currency’s woes. Yet its contradictions endure, a permanent threat to continental European stability and the future cohesion of the European Union.

The resignation of the Italian prime minister Matteo Renzi, following defeat in a constitutional referendum on 4 December, was the moment at which some believed that Europe would be overwhelmed. Among the champions of the No campaign were the anti-euro Five Star Movement (which has led in some recent opinion polls) and the separatist Lega Nord. Opponents of the EU, such as Nigel Farage, hailed the result as a rejection of the single currency.

An Italian exit, if not unthinkable, is far from inevitable, however. The No campaign comprised not only Eurosceptics but pro-Europeans such as the former prime minister Mario Monti and members of Mr Renzi’s liberal-centrist Democratic Party. Few voters treated the referendum as a judgement on the monetary union.

To achieve withdrawal from the euro, the populist Five Star Movement would need first to form a government (no easy task under Italy’s complex multiparty system), then amend the constitution to allow a public vote on Italy’s membership of the currency. Opinion polls continue to show a majority opposed to the return of the lira.

But Europe faces far more immediate dangers. Italy’s fragile banking system has been imperilled by the referendum result and the accompanying fall in investor confidence. In the absence of state aid, the Banca Monte dei Paschi di Siena, the world’s oldest bank, could soon face ruin. Italy’s national debt stands at 132 per cent of GDP, severely limiting its firepower, and its financial sector has amassed $360bn of bad loans. The risk is of a new financial crisis that spreads across the eurozone.

EU leaders’ record to date does not encourage optimism. Seven years after the Greek crisis began, the German government is continuing to advocate the failed path of austerity. On 4 December, Germany’s finance minister, Wolfgang Schäuble, declared that Greece must choose between unpopular “structural reforms” (a euphemism for austerity) or withdrawal from the euro. He insisted that debt relief “would not help” the immiserated country.

Yet the argument that austerity is unsustainable is now heard far beyond the Syriza government. The International Monetary Fund is among those that have demanded “unconditional” debt relief. Under the current bailout terms, Greece’s interest payments on its debt (roughly €330bn) will continually rise, consuming 60 per cent of its budget by 2060. The IMF has rightly proposed an extended repayment period and a fixed interest rate of 1.5 per cent. Faced with German intransigence, it is refusing to provide further funding.

Ever since the European Central Bank president, Mario Draghi, declared in 2012 that he was prepared to do “whatever it takes” to preserve the single currency, EU member states have relied on monetary policy to contain the crisis. This complacent approach could unravel. From the euro’s inception, economists have warned of the dangers of a monetary union that is unmatched by fiscal and political union. The UK, partly for these reasons, wisely rejected membership, but other states have been condemned to stagnation. As Felix Martin writes on page 15, “Italy today is worse off than it was not just in 2007, but in 1997. National output per head has stagnated for 20 years – an astonishing . . . statistic.”

Germany’s refusal to support demand (having benefited from a fixed exchange rate) undermined the principles of European solidarity and shared prosperity. German unemployment has fallen to 4.1 per cent, the lowest level since 1981, but joblessness is at 23.4 per cent in Greece, 19 per cent in Spain and 11.6 per cent in Italy. The youngest have suffered most. Youth unemployment is 46.5 per cent in Greece, 42.6 per cent in Spain and 36.4 per cent in Italy. No social model should tolerate such waste.

“If the euro fails, then Europe fails,” the German chancellor, Angela Merkel, has often asserted. Yet it does not follow that Europe will succeed if the euro survives. The continent that once aspired to be a rival superpower to the US is now a byword for decline, and ethnic nationalism and right-wing populism are thriving. In these circumstances, the surprise has been not voters’ intemperance, but their patience.

This article first appeared in the 08 December 2016 issue of the New Statesman, Brexit to Trump