The Priority Problem

Summary

Defra's new priority scoring scheme should be of some concern to the insurance industry:

•  From April 2003, Defra will give priority to protecting certain specific areas. It may or not be coincidence that these are areas of particular interest to Defra, such as wildlife habitats, listed buildings, and economically deprived areas.

•  Significantly, it will no longer give priority to areas that have been flooded before. All this will be at the expense of wealthier areas, (where potential insurance claims costs are higher) and areas which have suffered from recent flooding.

•  Defra's new priority scoring will not give any incentive to design defences to high standards of service or to take into account climate change.

For details see below or: http://www.defra.gov.uk/corporate/regulat/forms/flood/LDW14.pdf

Priority Scoring Scheme

This scheme introduces additional factors into the question of eligibility for government grants for flood defences. For example protection of wildlife habitats where there is a legal obligation under the Conservation (Natural Habitats etc) Regulations 1994 will not be scored and will be funded if "cost effective". (This seems to be saying that such schemes will have priority over schemes that are designed to protect life and property provided benefits exceed costs.)

For cases that do not come within the terms of the Conservation Regulations, the scheme has an environmental score to "give greater priority to those schemes that are expected to provide additional benefits to the natural environment". Priority will also be given to heritage sites and "Scheduled Monuments".

For people who do not happen to live in a habitat conservation area or a heritage site, the following scoring applies.

How the scoring works

Each year, the Ministry will announce indicative minimum priority scores. For example, the threshold for 2003/4 is 22 points, for the next year 15 points and the year after 10 points.

•  Economic score

While in Scotland , benefits only have to exceed costs, to get the full 20 points from the economic factor in the English system, benefits will now have to be more than 10.5 times costs. Even then, this is not enough in itself for the 22 points needed for 2003/4.

•  "People" score

This is based on the number of residential properties benefiting from the proposed defences per £1,000 of the project cost. The number of residential properties is multiplied by 75 and divided by 1,000 to produce a score. The maximum score allowable is 8. This means for example that a flood defence will need to cost less than £100 per house if it is to have any chance of a maximum score.

Hotels "and similar" properties are considered as single residences. Presumably this means that a sheltered housing complex with 100 elderly residents gets the same score as a ground floor flat occupied by one student (upper floor flats are excluded). While the vulnerability of people can be taken into account, this is based on deprivation indices for which only 15% is made up of consideration for the elderly or infirm, or patients in hospitals. In any case, only the 300 most deprived electoral wards (out of 8,400) can get the maximum score of two points, whereas the 1,400 least deprived wards can have their score reduced. Exceptionally, a further two points can be added for very high risk flood areas, that is areas where floods more than 2 metres deep can be expected with little chance of an effective warning.

•  Environment Score

Up to 12 points can be awarded for sites of special scientific interest, wildlife conservation areas, special monuments, or heritage buildings. In other words the environment scoring is potentially equal to the "people" score.

Comments

•  Hospitals and Sheltered Housing

The scheme seems to give no special treatment to hospitals or sheltered housing. Nor does it take the age profile of the population into account. This seems indefensible.

•  Urgency

Under the old system, there was recognition that areas recently flooded and likely to flood again needed an element of urgency. Thus there was an "urgency" score as follows:

This has been discontinued, despite the many promises made by members of the government to flood victims that they would get flood defences as a matter of urgency. For example, according to the National Flood Forum, the second stage of the Bewdley scheme now scores only 7.9 points, and despite government promises that it would be implemented urgently it may now be postponed for several years. Lewes, which was so badly flooded in 2000, may now not get a flood defence for another five years.

•  Commercial and Industrial properties

Because the scoring is dependent on residential properties, there now seems to be little chance of a government flood defence grant for commercial or industrial estates in England or Wales for the foreseeable future, no matter how much the economic benefits of a flood defence exceed the costs.

•  Standard of Service

The previous scoring scheme allocated increased scores to projects with higher standards of service. For example, if the current standard of service was less than 1 in 75 years, points would have been allocated to improve the standard, for example:

The new scheme does not offer points for a higher standard of service, and the scoring system will effectively discourage schemes which cost more than £100 per house. It seems unlikely that many defences with a 200 year standard of protection will be eligible for grant aid in the future, and cheaper defences with a much lower standard of protection will be the norm.

Insurance implications

The ABI Statement of Principles emphasises the importance of the insurance template and the need for a 200-year standard of protection if insurance is to be available at normal terms. In addition if the standard is less than 75 years, insurance may not be available at all. The ABI have been lobbying DEFRA for more spending on flood defences, but have only had partial success. DEFRA's new scheme prioritisation seems to ignore these considerations, and is likely to lead to a lowering of standards of protection for new defences. We already have the example of the £98m Jubilee River scheme designed to protect Windsor and Maidenhead which only offers a 60 year standard of service, and which therefore will not do anything to make insurance easier to obtain in such areas. Such examples are likely to become more widespread.

This is happening at a time when climate change scenarios for flood are becoming increasingly serious. A report in Nature last year demonstrated that, based on the 19 leading climate change models in the world, the risk of a very wet winter in the UK and central Europe will increase fivefold in the next 100 years. The implications of climate change and the need for a higher standard of protection in the future seems to have also been ignored by DEFRA.

By contrast, in Scotland , flood defence funding will not be granted unless the defence offers at least 100 year protection including climate change impacts to 2060. In effect this is resulting in a minimum standard in today's terms of around 140 years protection plus an additional freeboard allowance of around 300mm. Most new defences are being built to much higher standards than this. For several years now, almost every Scottish local authority will not allow new developments where the flood hazard exceeds 1 in 200 years.

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