The state has been interfering in protection against floods since 1531
“The Environment Agency, the quango responsible for Britain’s flood defences, is set for 1,700 job losses in the next 12 months even as swaths of the country struggle to recover from the new year deluge.”, Financial Times, January 7
Awkward timing.
Yes. Although Owen Paterson, the environment secretary, insists that spending on flood defences is higher than it used to be.
Is it?
Doubtless there is some way to chop the numbers that makes Mr Paterson’s statement correct. But there’s a trap in this argument that we should avoid. Governments like to cut vague things: “finding efficiencies”, “making tough choices”. Oppositions like to point to specific things that have been cut. This week, that means flood defences. During the 2011 riots, the complaint was that the government had cut funding for youth centres. When a West End theatre roof collapsed, the story was about London fire stations being closed. And the government will always try to scrape together some story saying that, no, this particular thing was not cut, the cuts were instead something rather less tangible. It is not an illuminating discourse.
But there is a specific problem about flooding. Isn’t there?
Experts expect more of it – blame climate change. But let’s back up a bit. What causes flood damage?
Water, silly.
Not just water. Nobody complains about flood damage in the middle of Loch Ness, and there’s plenty of water there. Flood damage is caused when water meets valuable property. This isn’t just splitting hairs: one of the reasons that more flood damage is expected in future isn’t just that more downpours are expected, but that we’re building homes in vulnerable places. It’s nice to be near water, after all – as long as the water doesn’t come too near you.
I get all that – but why are we building homes where they’ll be flooded?
Part of the problem is the way we think about important but unlikely risks. Consider a flood that is expected to occur roughly every 30 years, and to cost £30,000 pounds if it does occur. The expected cost of that is £1,000 a year, or £3 a day. But to a homeowner, or a local council granting planning permission, the subjective perception of the risk is likely to fluctuate between the odd sleepless night and utter unconcern.
That’s a rather psychological take from an economist.
There’s a straightforward economic explanation, too. The government has been interfering in flood protection since Henry VIII’s Statute of Sewers in 1531, and that interference has had malign effects. Until recently, the arrangement has been that homeowners in high-risk areas have received subsidised flood insurance, which naturally makes people more willing to buy houses in such areas, and to build houses in such areas. The quid pro quo for the insurers was that, if they agreed to provide this cross-subsidy, the government would spend money on flood defences to enable people to continue to live near the beach, or with gardens backing on to the Thames. These are people of quality, after all – people whose opinions should be respected. People are quite good at making sure their choices are subsidised by others.
I get the picture. But you’re speaking in the past tense.
Things have changed. There’s a new accord between the insurance industry and the government. The cross-subsidy is going to be made more transparent, with a levy on all home insurance policies going into a non-profit fund called Flood Re.
If everyone is going to pay into Flood Re, why not just fund it from general taxation?
Because politically speaking it is convenient to be able to outsource some tax collection to insurance companies, and pretend it isn’t a tax, even if it amounts to the same thing. But that’s not the only change. Many houses – including the priciest ones, and those built in the past five years – are excluded. Others that end up flooding too often will also be thrown out of the scheme.
Is that an improvement?
Possibly, if the scheme is solvent; that remains to be seen. There is something to be said for withdrawing the insurance subsidy for new-build homes, although it hardly seems fair to make it retroactive to 2009. But we need to hope that the government makes wise choices about flood defences – and our planning system needs to allow homes to be built on dry land.
Also published at ft.com.