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A future for funding flood resilience

Today, six million UK properties are at risk from flooding.

The drivers are well known, stemming largely from population growth, demographic shifts, land use and climate change.

KPMG estimated that last winter’s floods cost insurers £5bn.

The majority of government funding goes on flood defences, as opposed to increasing resilience against flooding.

Last year, capital and maintenance spending reached nearly £0.9bn, a figure that represents 90 per cent of total spending on flood risk management.

Alongside this there is the Local Levy, (a levy on local authority funding), drainage charges and EU funding.

While most of those affected are protected by insurance policies, the Flood Re scheme aims to ensure the availability of affordable flood insurance to those in high-risk areas.

Our ambition must be to create a more sustainable approach to flood resilience. To achieve this, the current funding regime needs revising.

Addressing the problems

There are two overarching issues that must be addressed:

Firstly, reactive flood defence funding could be changed to strengthen the relationship between those who contribute to risk, those who benefit from risk reduction and those who pay.

Secondly, the full environmental impacts of land use decisions must be considered, helping to optimise flood-related decisions from a societal perspective.

What might a revised regime look like?

Resources for funding flood risk management are scarce, so transparency is needed.

This should reflect a cost-benefit analysis both at a macro level, to decide how much to invest, and at a micro level, to decide on funding allocation.

“To help ensure that investment is fair and appropriate, distributional analyses are needed to identify those who stand to gain or lose and compensatory measures may be required”

Reform should ensure that account is taken of impacts on areas like health, recreation and biodiversity, both from traditional and innovative approaches like SuDS.

Consideration should be given to affordability, regional and sectoral impacts, alongside economic efficiency.

To help ensure that investment is fair and appropriate, distributional analyses are needed to identify those who stand to gain or lose and compensatory measures may be required.

Already embedded in the EU Water Framework Directive is the ‘polluter pays principle’, which can be applied to flood risk.

This would require those who contribute to increased flood risk to compensate those affected (or contribute an amount equivalent to the increase in risk generated).

Where additional funds are needed to secure a scheme, the ‘beneficiary pays principle’ would require those benefitting from flood risk reduction to make up the balance.

Increasing reliability

The reliability and predictability of funding is a known problem of the current system.

A reputable party could ensure that investment is collected, allocated and distributed fairly.

Whilst any alternative to the current system will face its own challenges, local authorities or wastewater service providers may be the best candidates for a greater role in this area.

Agricultural and land use subsidies should reflect a contribution to and a reduction of flood risk.

With regard to upper catchments, any potential cost (e.g. foregone food production) is likely to be relatively low, but significant benefits are likely – the reduction of flood risk, alongside the creation of natural capital and associated benefits is a plausible output here

Insurance policies should also reflect the true cost of cover to new properties in areas of risk, and incentivise property level risk protection in existing properties.

Taken together, these elements can improve the way in which the UK addresses the challenge of funding flood resilience.

Change will be evolutionary not revolutionary, but these proposals will ensure that flood risk management supports more sustainable outcomes for all.

Dr Bruce Horton is principal sustainability consultant at MWH

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