Select Committee on Public Accounts Minutes of Evidence



Examination of Witnesses (Questions 1-19)

MONDAY 26 MARCH 2001

MR BRIAN BENDER, DR JAMES PARK, THE RT HON BARONESS YOUNG OF OLD SCONE, DR GEOFF MANCE AND MR JAMES BRADLEY

Mr Williams

  1. Good afternoon everybody. We are here today to hear on the NAO Report on Inland Flood Defence. It would be appropriate, in conjunction with it, to refer if we wish to the document produced by the Agency, Lessons Learned from the Autumn 2000 floods. May I welcome our witnesses, Mr Brian Bender and Lady Barbara Young. Like myself, you have suffered from a confusion of names, there are two of me in the House as well. We also have Mr Bradley from the Environment Protection Strategy Directorate. I wonder if, Mr Bender and Lady Young, you would introduce your colleagues, please.


  (Mr Bender) If I may start, Mr Williams. Can I introduce Dr Jim Park who is the Head of the Flood & Coastal Defence and Emergencies Division of the Ministry of Agriculture. Also perhaps if I can say that I hope the Committee will understand that for the last few weeks most of my waking hours have been spent dealing with foot and mouth disease and, therefore, I may need to refer more questions to Dr Park than I would otherwise wish to be the case. I crave the Committee's indulgence if that turns out to be the case.

  2. It is a good chance for us to get an up to date version of the situation on the foot and mouth disease.
  (Mr Bender) I may be appearing before you in a year or two's time on that question I can imagine.

  3. I think we must make clear as far as the Committee is concerned, we are not particularly concerned who answers the questions as long as the questions are answered. Of course you can call on anybody you think appropriate.


  (Baroness Young of Old Scone) I wonder if I could introduce Dr Geoff Mance, who is Director of Water Management and responsible for flood defence.

  4. Welcome. May I start by saying that if you wanted to create an organisational shambles I think the situation we find in the structure of organisation, the pattern of responsibility in relation to flood defence, would be a perfect model. Hence I suspect the hastily produced Lessons from 2000, getting your own rebuttal in first. The risk assumptions on which much of your planning has been done and on which you have been requesting the production of maps and so on, have really been made invalid, have they not, by the sudden effect of the worst features of global warming? Mr Bender, would you care to comment on that?
  (Mr Bender) Can I say, first of all, on your point about the institutional arrangements, they are arrangements that need to strike a balance between having a coherent overall strategy and a respect for local democracy. As the NAO report shows there are similar arrangements in other countries but that does not mean, of course, that they are the right arrangements. Getting that shared responsibility right between Central Government and local decision making is something that we will need to keep under review and is likely to emerge from some of the reviews that are currently taking place. Reverting to your other question, Mr Williams, the floods that we saw in the autumn followed unprecedented weather conditions. I think too it is fair to say that overall the story was one that the situation had been got reasonably right in terms of the Agency, local authorities and the emergency services pulling together but there are a lot of lessons to be learned from that as the Agency's own report shows.

  5. I rather suspect the evidence that will be produced here will not confirm exactly the degree of satisfaction you felt about the pre year 2000 situation. If we look at the investment formula, we are told in your own report Lessons Learned on page 37 at paragraph 6.5.3, the first paragraph there makes the point about the benefit cost analysis but it weighs up benefits and costs valued in monetary terms to decide which is the best option. Then towards the end of the paragraph it says that this approach ". . . is consistent with current Treasury guidance given in the Green Book" and I gather last year MAFF issued new project appraisal guidance. Then it ends with the very ominous sentence "Early indications are that the benefit/cost decision rule leads to a reduced standard of defence at a time of increased uncertainty such as climate change and changes in catchment characteristics. The Agency is concerned at this early unexpected outcome". What is the Department's view of that concern?
  (Mr Bender) We have a priority score system for project appraisal, Mr Williams. It was first set out in 1997 taking account of Ministerial priorities, taking account of urgency and taking account of economics. There are weaknesses in it and as a result of developments in the autumn we have given a higher priority now to the inland flood problem. Also we have put more money into flood defence through the autumn, as the Committee will be well aware. We have issued a suite of guidance on project appraisal. We recognise the need to review our priority score system on grant aided schemes. We recognise the need to review the way in which we carry those out and we are very ready to work with the Agency and other operating authorities on the process of decision making and the methods of evaluation. The Committee does not need to hear me say that the issue is one of getting the best value for money out of a certain size of cake or an enlarged cake.

  6. I understand that the Ministry itself has estimated that there is a shortfall of 100 million a year in capital work and maintenance. That is without allowing for the impact of climate change. Now, with that shortfall how on earth are we going to address the newly arising situation?
  (Mr Bender) We are carrying out, as I think the Committee is aware, a review of the funding arrangements. That is due to report by September 2001. It involves some external help. It builds on earlier consultation and it will be looking at the current arrangements and the scope for reform. It will take a fundamental look at these things, as I say.

  7. The Agency advises the Flood Defence Committees on the amount of funds they should try to secure in the form of levies from the councils and yet I gather that nearly half the Committees could not secure the funding recommended which meant there was a shortfall of 6 million in England alone. Now how do we address that?
  (Mr Bender) Mr Williams, the Ministry did provide some new money. In addition to the 51 million announced in November we had a further 11.6 million package to fund the exceptional costs of the Agency in responding to the flooding, of which 6.6 million was new money. The fundamental issue is the one you brought out earlier about the institutional arrangements and the balance between the local accountability and central strategic decision making. At the end of the day, whether or not there is a particular defence that is repaired in a particular area is for the local Flood Defence Committee. Lady Young may want to comment on that. It is getting this balance between local accountability and central strategy setting which is the institutional issue we have to grapple with.

  8. Yes, but the 51 million which is spread over three years, I think, that 51 million represents six months of the annual capital shortfall before global warming. It is derisively irrelevant, is it not?
  (Dr Park) Mr Williams, if I could help you with that question. Already within the provision that has been agreed following the recent spending review, there is an increase in the baseline provision of capital for flood defence which in the third year will amount to 35 million[1]. You add to that the 51 million which spread over three years is approximately 17 million in each year. There is already 50 million[2] a year built into the base line. The R&D that we commissioned to look at the investment needs was a first look at the situation, the first time it has ever been done. The R&D was based on the information that was then available about the state of the assets which were held by the Agency, other operating authorities and ourselves. That is currently being updated. The current view on climate change is that the weather that we have experienced in the last year is consistent with climate change but does not prove that it is with us. The general prediction is that we will be exposed over the next 50 years or so to an increasing frequency of flooding, it is not a prediction that that will be happening in the next three years.

  9. No.
  (Dr Park) We have a piece of research in place which will provide us with updated information in the next few months. On the basis of that for the next Spending Review we will have a better informed position from which to make the judgment as to what is the appropriate expenditure for the next three years.

  10. I understand all that but, again, we come back to the inexorable arithmetic and even on the extra funding that you have adduced you said 52 million[3] a year whereas it has already been recognised by the Ministry that there is a shortfall of 100 million a year at the moment and historically without global warming. It still does not match up to the needs of the situation, does it?


  (Dr Park) I think you are assuming that the R&D output was very precise but, in fact, it was a ball park figure that was being suggested.

  11. Which was a ball park?
  (Dr Park) The 100 million.

  12. How big a park?
  (Dr Park) It was a round figure that came from that analysis. The analysis was experimental in its nature, so further R&D is being done at the moment and we are waiting for the results of that.

  13. How long is that likely to take?
  (Dr Park) We would expect to have that by the summer.

  14. By the summer. So it is not going to make any difference in this year but it might make some difference in the next year?
  (Dr Park) The preparations for the next consideration of the spending are for Spending Review in 2002, so it will be quite timely in terms of inputting into that process and providing us with some really quite firm information which we believe is very important in terms of making these sorts of judgments.

  15. If you can match the number of reviews you have in hand with volume of money we might be getting somewhere near what is the base requirement. Can I switch to you, Lady Young. I know that you are relatively new in your office. It must be very frustrating for the Agency that it can make recommendations to councils in relation to defence and in relation to planning, particularly in relation to planning in the context of flood plains, yet the local government can override your recommendations. How serious, in the light of what has happened in the last six months, has some of this recalcitrance been?
  (Baroness Young of Old Scone) Can I make one correction before I go on to the issue of supervisory duty and that is that our Lessons Learned report, alas, was not published just in time to be before the hearing, it was actually commissioned by Ministers for a report earlier in March, in fact, and we slipped it slightly. It was mere coincidence that it actually was published just before this hearing.

  16. We are used to coincidence on this Committee.
  (Baroness Young of Old Scone) This one was a genuine one.

  17. The Navy found sonar for ships that did not have sonar before coming here. The Whitehall timetable seems to be fairly well established.
  (Baroness Young of Old Scone) I am glad the supervisory duty does not include that. Our supervisory duty is a bit frustrating, I must confess, because it is one that we can only carry out by consensus with the other operating authorities. In terms of the work that we are doing, both to put forward proposals for flood defence measures to the Flood Defence Committees and the work that we are doing with local authorities on mapping and assessing the condition of defences, we are frustrated that we cannot necessarily move ahead as fast as we would like. In terms of the planning issue, I think that the redraft of PPG25, provided it comes out in much the way that it has been consulted upon, will in fact make a substantial difference to our ability to work with local planning authorities in terms of inappropriate planning in the flood plain.

  18. Because there is no mandatory responsibility on the councils it is difficult, I suppose, for the public who suffer as a result of their ignoring your advice to claim any damages against the councils, they are not actually in breach of their duty?
  (Baroness Young of Old Scone) I suspect that local people are in the same position with that as they are with many services provided by local authorities that have no statutory levels that they must perform to.

  19. I wonder if I could ask you, Permanent Secretary, about the questions that are of particular concern to the public in relation to what has been happening other than the issue of flooding direct, namely the impact you envisage of what has happened in the last year will have—one of your colleagues can answer if you would prefer—on the insurability of properties in the areas of flooding? Some of these areas have had as much as six floods in the last year or so. Is there any risk that insurers will refuse to insure or is it likely that they will demand higher premiums?
  (Mr Bender) The Government has had intensive contacts with the insurance industry through the Association of British Insurers and, if I may, I will ask Dr Park to say a little bit about how those discussions have been operating.
  (Dr Park) If I may just make a background comment first. One of the features of the flood and coastal defence business in the last five to ten years is that more and more information is put into the public domain about the risk of flooding and about the standard of defences, so there is the possibility of making clear choices about where people live, about insurance premia, those sorts of things. The Association of British Insurers has clearly been taking advantage of that information and have followed the debate. They have engaged with us and the Agency in that debate so that they can understand what the situation is for flood risk in particular areas, they can understand what the plans are of Government and operating authorities in dealing with that risk. Clearly the floods of last autumn have demonstrated that some properties are at more risk of flooding than perhaps the residents appreciated. It is helping inform the decisions that have to be made about where flood defence measures are introduced. The ABI will be in dialogue with ourselves and the Agency about what our plans are to proceed. Insurance is offered on the basis of a judgment by the insurer of the risk that they will be exposed to and the premium reflects that. To the extent that there is more information in the public domain about the risk of flooding then the insurers will be making their decisions on that information.

 


1   Note: The figure is, in fact, 25 million, not 35 million. Back

2   Note: The figure is, in fact, 40 million, not 50 million. Back

3   Note: The figure is, in fact, 51 million, not 52 million. Back

 
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