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I remind the Committee that with this we are discussing the following:
Government amendment 2.
Government new clause 1—The Flood Reinsurance Scheme—
‘(1) For the purposes of this Part, the Flood Reinsurance Scheme is a scheme which—
(a) is established for the purpose mentioned in subsection (2), and
(b) is designated for the purposes of this Part by regulations made by the Secretary of State.
(2) The purpose referred to in subsection (1)(a) is the purpose of providing reinsurance to relevant insurers in respect of such risks relating to flooding as are identified by the scheme, in such a way as to—
(a) promote the availability and affordability of flood insurance for household premises while minimising the costs of doing so, and
(b) manage, over the period of operation of the scheme, the transition to risk-reflective pricing of flood insurance for household premises.
(3) Subsection (5) applies where the terms of the FR Scheme governing the availability of reinsurance under the FR Scheme for an insurance policy include a requirement as mentioned in subsection (4).
(4) The requirement is that the part of the premium for the policy which is attributable to risks relating to flooding does not exceed a specified amount (“the eligibility threshold”).
(5) The Secretary of State may by regulations make provision as to the level of the eligibility threshold, and may make different provision for different purposes.
(6) Regulations under subsection (5) may, in particular, make different provision for different insurance policies by reference to the value of the household premises to which a policy relates.
(7) In this Part, the Flood Reinsurance Scheme is called “the FR Scheme”.’.
Amendment (a) to Government new clause 1, line 23, at end add—
‘(8) Prior to making any regulations under subsection (5) the Secretary of State shall require the Committee on Climate Change to provide current and projected estimates of the number of properties that would be eligible for—
(a) inclusion in the Flood Reinsurance Scheme;
(b) the value of levy required under section [Schemefunding]; and
(c) the likelihood of additional levy or contributions being needed from time to time.’.
Government new clause 2—Scheme administrator.
Government new clause 3—Scheme funding.
Government new clause 4—Scheme administration.
Government new clause 5—Replacement of the scheme of administrator.
Government new clause 6—Disclosure of information: preparatory purposes.
Government new clause 7—Flood insurance obligations—
‘(1) The Secretary of State may by regulations require a relevant insurer to issue in a prescribed period insurance policies that provide cover against a prescribed description of risk for a prescribed number of registered premises.
(2) The regulations may prescribe different numbers of registered premises for different descriptions of risk.
(3) The descriptions of risks that may be prescribed are those relating to the effects of flooding.
(4) The regulations may provide for a prescribed number relating to a relevant insurer to be determined by reference to factors that include in particular—
(a) a target number (see section (Flood insurance obligations: target number));
(b) the relevant insurer’s share of insurance business of a prescribed description.
(5) The regulations may—
(a) make provision about determining the size of a relevant insurer’s share of insurance business of a prescribed description;
(b) provide for a relevant insurer to be exempt from the obligation described in subsection (1) in prescribed circumstances, whether wholly or so far as regards a particular description of risk, including circumstances relating to the amount of insurance business done by the relevant insurer;
(c) make provision about the circumstances in which a relevant insurer ceases to be subject to the obligation described in subsection (1), whether wholly or so far as regards a particular description of risk;
(d) make provision about the cases in which issuing an insurance policy is not to count towards discharging an obligation imposed on a relevant insurer by the regulations, including cases in which an insurance policy is not to count because of the content of its terms;
(e) make provision for allowing an insurance policy issued by another insurer to count towards the discharge of an obligation to issue a number of insurance policies imposed on a relevant insurer by the regulations;
(f) make provision about determining the number of registered premises for which a relevant insurer has issued insurance policies, including provision for varying, by reference to the risk band applicable to the particular registered premises, the extent to which insuring those premises counts in determining that number.
(6) Provision under subsection (5)(a) may require an insurer, in determining the insurer’s share of insurance business of a prescribed description, to use information about that insurance business held by—
(a) the Secretary of State,
(b) a person acting on behalf of the Secretary of State, or
(c) the FCA.
(7) Subsection (5)(e) is not to be taken as requiring a change in the person who is the insurer in relation to an insurance policy.
(8) Regulations under this section may include provision in respect of cases where an insurer has not provided such information as is required by regulations under section (Flood insurance obligations: information) including—
(a) provision for determining whether the insurer is a relevant insurer,
(b) provision for determining whether an exemption applies, and
(c) provision for determining what share of insurance business of a prescribed description the insurer is to be treated as having.
(9) Before making regulations under this section, the Secretary of State must consult such persons as the Secretary of State considers appropriate.
(10) In this section “prescribed” means specified in or determined in accordance with regulations under this section.’.
Amendment (a) to Government new clause 7, line 35, at end insert—
‘(g) make provision about the circumstances in which a relevant insurer may require mitigation activity to be a condition of cover under an insurance policy.’.
Amendment (b) to Government new clause 7, line 35, at end insert—
‘(g) make provision about the circumstances in which a relevant insurer may require an insured to retain certain elements of the risk under the Flood Reinsurance scheme.’.
Amendment (c) to Government new clause 7, line 35, at end insert—
‘(g) make provision about the circumstances in which a relevant insurer must build awareness of flood risk amongst those living in high risk households.’.
Government new clause 8—Flood insurance obligations: target number—
‘(1) The Secretary of State may, from time to time, by regulations prescribe a number to be a target number for the purposes of regulations under section (Flood insurance obligations).
(2) A target number is the number of registered premises to be covered against a prescribed description of risk by insurance policies issued in a prescribed period by those relevant insurers upon whom obligations are imposed by regulations under section (Flood insurance obligations).
(3) The regulations may prescribe different target numbers for different descriptions of risk.
(4) The regulations may in particular provide for a target number to be expressed as a percentage of the number of registered premises.
(5) The regulations may, at any one time, prescribe target numbers for two or more consecutive prescribed periods.
(6) In this section “prescribed” means specified in or determined in accordance with regulations under this section.’.
Amendment (a) to Government new clause 8, line 15, at end add—
‘(7) In prescribing a target number the Secretary of State shall refer to the advice of the Committee on Climate Change given under section [The Flood Reinsurance Scheme](8).’.
Government new clause 9—Flood insurance obligations: information.
Government new clause 10—Flood insurance obligations: further provision.
Government new clause 11—Register of premises subject to greater flood risk.
Government new clause 12—The register: further provision.
Government new clause 13—The register: reviews and appeals.
Government new clause 14—The register: expenses of relevant bodies.
Government new clause 15—Compliance reports.
Government new clause 16—Functions of the FCA.
Government new clause 17—Reports by the FCA.
Government new clause 19—Interpretation.
Government new clause 20—Period of operation.
Government new clause 21—Regulations and orders.
New clause 37—Right of appeal for households on removal from the flood reinsurance scheme—
‘(1) The Secretary of State shall by order establish a right of appeal for a household which has been removed from the Flood Reinsurance Scheme.
(2) The Financial Conduct Authority shall be responsible for the hearing and administration of appeals under subsection (1).
(3) An order under subsection (1)—
(a) shall be made by statutory instrument; and
(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.
(4) An order under subsection (1) must be made before the Flood Reinsurance Scheme has been implemented.’.
New clause 38—Flood reinsurance scheme: report on properties—
‘(1) The Secretary of State must prepare and publish a report on—
(a) how many properties are not eligible for the Flood Reinsurance Scheme; and
(b) the cost of including properties under (a) in the FR scheme prior to it coming into effect, and must lay a copy of the report before Parliament.
(2) The report shall include a breakdown of the cost of including properties that fall under the category—
(a) Council Tax band H;
(b) built between 1 January 2009 and 31 December 2012; and
(c) built after 1 January 2013.’.
New clause 39—Flood reinsurance scheme: council tax band—
‘(1) The Secretary of State shall by order enable low income households to qualify for the Flood Reinsurance Scheme, regardless of their Council Tax band.
(2) An order under subsection (1) shall contain a definition of “low income households”.
(3) An order under subsection (1)—
(a) shall be made by statutory instrument; and
(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.
(4) An order under subsection (1) must be made before the Flood Reinsurance Scheme has been implemented.’.
New clause 40—Flood Reinsurance Scheme national database—
‘(1) The Secretary of State may by order (the “commencement order”) appoint a day on which section [The Flood Reinsurance Scheme] is to come into force.
(2) An order under subsection (1)—
(a) shall be made by statutory instrument; and
(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.
(3) The Secretary of State may only make an order under subsection (1) if a Flood Reinsurance Scheme national database has been established.
(4) Any Flood Reinsurance Scheme national database must—
(a) be accessible by the public;
(b) outline a property’s risk of flooding; and
(c) indicate if the property is covered by the Flood Reinsurance Scheme.’.
I thank the Minister for the speedy response that he was able to engineer during our brief adjournment.
It is a pleasure to serve under your chairmanship once again, Mr Gray. With your permission, it may be worth taking a couple of minutes to set out the Labour party’s position on the broad principles of Flood Re insurance. I will then speak to some of the new clauses and amendments that stand in my name, before allowing hon. Friends and Government Members to add their thoughts. I hope that I will stay in order at all times.
You are most gracious, Mr Gray. I am sure that you will.
We welcome the Government’s progress in building on the work begun by the hon. Member for Ogmore (Huw Irranca-Davies) in 2009. We therefore support the principles set out in the new clauses and welcome the bipartisan manner in which both sides of the House have tried to address the matter. I have perhaps made clear my views on some of the officials in the Department for Environment, Food and Rural Affairs from time to time, and it has been a real pleasure to see a Minister and officials working so effectively together to benefit constituents up and down the country. I commend the work that they have undertaken.
I do not need to tell you, Mr Gray, but I am reliably informed that Wiltshire is occasionally prone to flooding. Flooding is a blight on constituencies up and down the country, from the north-east of Scotland to the south-west of England. In my constituency, with which you, being a Scot, are of course familiar, Mr Gray, places such as Rosyth and Kincardine have in recent days and years suffered more than their fair share of flooding, and many of my constituents will welcome this legislation. According to the Association of British Insurers’ written submission, some 40,000 Scottish households will benefit from the new Flood Re scheme. It is an example of where we are better together as a United Kingdom.
I am grateful to the hon. Gentleman for giving way so early, and for his kind remarks. I concur with what he says. Does he agree that it is crucial that we build on the benefits of working collectively to solve such problems, rather than seeking division, which could lead to greater risk?
Of course. As you will probably seek to remind me, Mr Gray, this is a good example of where we can work together, and where we should not let people separate us when it is not in the common interest.
Climate change is a reality. We saw on our televisions just last week the horrific weather that affected the eastern side of the United Kingdom. My hon. Friends from the north-east faced some real challenges in getting back to their loved ones due to damage from storms and floods, so this is a timely debate. I could not help thinking, when we sat here last Thursday and watched the wind beginning to gust, that we were debating a live issue that has to be dealt with. A recent report from the Environment Agency stated that in the past year, some £200 million of damage to domestic property was caused by flooding. In 2007, some £3 billion of damage was caused by flooding. I will return briefly to the causes of flooding.
We welcome the principles behind the Bill. We had a good exchange this morning in which we teased out many of the issues, but the Opposition have some specific concerns that we hope the Minister will address. One issue that we did not touch on this morning—I was reminded of this by the excellent speech given on Second Reading by the hon. Member for Thirsk and Malton (Miss McIntosh), in her capacity as Chair of the Select Committee on Environment, Food and Rural Affairs, and as a local MP—is the problem of surface water flooding, which is a growing problem across the country.
I do not know whether the hon. Gentleman is aware of the fatality that occurred in my constituency in the early months of this year, when a landslide fell on to a house and the occupant very sadly died. Does he agree that that is a clear example of the growing problem that we have with surface water?
I am grateful to the hon. Lady, and I am sure that the whole House sends their condolences to her constituent’s family. She is absolutely right to highlight that issue in a bipartisan manner. In many regions—Yorkshire being an example, as we heard from the Chair of the Select Committee—surface water is the biggest single problem. Indeed, I met Yorkshire Water yesterday afternoon with the shadow Secretary of State, my hon. Friend the Member for Garston and Halewood (Maria Eagle), and the company highlighted the fact that surface water is becoming a growing issue.
That leads me on nicely, if I say so myself, to some of our technical amendments. We do not seek to derail or delay the Bill, but building on the comments made by the Minister, we think it is important to be mindful of the fact that the problem is likely to get worse over the next 25 years, which I understand is approximately the anticipated lifespan of the Flood Re insurance scheme. Although we welcome many of the comments and clarifications that the Minister gave this morning, he will be aware of the concern, raised by Lord Krebs and the Committee on Climate Change, that the number of properties affected by flooding is, regrettably, likely to increase significantly over the lifetime of the scheme. The Government’s figures also show an estimated significant increase in the number of properties at high risk.
We recognise that that increased risk is caused by climate change, which is why amendment (a) to new clause 1 would require the Secretary of State to seek advice from the Committee on Climate Change on estimates of the current and future number of properties at risk. It is important that we are all clear about what the Opposition are requesting. We do not seek to bind the Secretary of State to follow the advice of the Committee on Climate Change, but we want him to be required to ask it for advice. I believe that both sides of the Committee would consider that a reasonable step for the Secretary of State to take.
I understand the points that the shadow Minister is making, but one problem is that from time to time, climate change analysts change their view of exactly where the high levels of water are and which houses will be affected. If we are not careful, we will blight areas where there is no real risk of flooding.
I absolutely agree that we must be careful and cautious; with your permission, Mr Gray, I will talk later about properties that might find themselves at the at-risk level. That is why we are clear that it must be done in a methodical way. I am sure that the Minister would agree that the Committee on Climate Change, which is supported by the Department for Environment, Food and Rural Affairs, is the leading authority on the issue. That is why we think it is absolutely right that the Secretary of State should be clear that he will be guided in drawing up future risk assessments by the committee’s advice. However, so that there is no ambiguity in the mind of the hon. Member for Tiverton and Honiton, we are not seeking to bind the Secretary of State to follow the committee’s advice; he would merely be required to seek it, which is an entirely reasonable step.
I agree. My hon. Friend is right to highlight that issue, which I hoped to mention. When the Minister responds, can he answer that point, which was made so excellently? It is regrettable that the maps have not been circulated to this Committee. Perhaps, with some inspiration, he could seek to have that done as speedily as possible.
We heard good remarks from the Minister earlier about mitigation, but he will recall the evidence that we heard last week, and indeed during our time serving together on the Environment, Food and Rural Affairs Committee, that there is concern about how we mitigate the risk of flood damage to communities and individual properties. One criticism made of Flood Re is that it does not include provisions to reduce flood risk, encourage a transition to risk-reflective pricing or—on the point made by the hon. Member for Tiverton and Honiton—increase the information available to high-risk households.
There is a good debate to be had about whether it is sensible for insurers to be able to incentivise flood-resilient property repairs. Mr Gray, you will probably be aware that in the evidence session, some were arguing—this addresses the point made by the hon. Member for Newton Abbot—that many insurers do not just want to return properties to their original standard; they want to be able to expect improvements to be made to prevent damage from happening again. If Committee members turn their attention to our amendments (a), (b) and (c) to new clause 7, they will see that they set out those points. I hope that when the Minister responds, he will be able to set out the Government’s position on those issues, because they are live.
Amendment (a) to new clause 8 involves target numbers. Again, we heard some welcome talk from the Minister this morning about the use of target numbers, but my problem with some of the methodology in Flood Re is that to an extent, it looks as though the ABI has licked its finger, stuck it in the air and come up with some figures. The Minister seemed to look to the heavens; I am not sure that it was for inspiration. In his letter, which he helpfully supplied to the Committee, there was a very large banding of properties. It is important—again, this builds on the point made by the hon. Member for Tiverton and Honiton—that we get more robust information. We propose that such information be made available. One useful body that can help guide the Government is the Committee on Climate Change. I stress to those Members who are not familiar with that committee that it is not some whack-job organisation; it is the body that DEFRA recognises as the UK’s leading adviser to the Government on the impact and mitigation of climate change.
The Opposition think that it is absolutely right that over the coming 25 years, as we try to reduce the number of properties added to high-risk areas—or, more pessimistically, reduce the rate at which properties are added to such areas—the Secretary of State should be able to take credible, benchmarked advice and provide real and substantive targets to Parliament. Although we recognise the need for secondary legislation, the Minister is asking us to take at face value that that work will be done, so we are seeking more plating to ensure that that scrutiny takes place.
The final issue that I wish to address is the database. We had a good exchange earlier on how information will be gathered and shared. I keep name-checking the hon. Member for Tiverton and Honiton, which is probably not career-enhancing for him. He is right to refer to flood maps, which were one of my concerns after the evidence session. The big challenge that all our constituents face is that the proposal is not to use flood maps for determining whether a property will be part of the Flood Re scheme. The determination will be made on an individual street or postcode basis. Will the Minister clarify the detail to which he expects the scheme to work? It sounds almost as if the detail might go down to individual properties on a street, but if he is inspired to provide information on that, it would be helpful.
The Opposition think it is important that information on whether properties are covered by Flood Re is made available to two groups of people. Members will be familiar with cases of people looking to purchase a new home in areas that are perhaps perceived to be at risk of flooding. Those people are concerned about the insurance available. We propose—again, this came out of the evidence session—that potential home buyers be able to access from the Flood Re organisation confirmation, or otherwise, that a particular property is covered by the Flood Re scheme.
It is also important that mortgage lenders are able to access that information on request, because we understand that many of our constituents are finding it challenging to get a mortgage in the best of circumstances. It is even harder for people to get a mortgage if the mortgage lender is concerned that their property may be at higher risk of damage, particularly from flooding.
This technical and genuinely helpful amendment seeks to ensure that, when the scheme is up and running, both the potential house buyer and the potential mortgage lender are able to ask Flood Re whether a particular property is within the scope of the Flood Re scheme, which is not an unreasonable or unusual proposal. I suspect—I may have some inspiration myself—that the Minister might try to argue against the proposal on the basis that he has not yet had it signed off by the ABI, but I note that the ABI has said that, on a couple of occasions, the Minister has diverged from what they have agreed; he will see that if he looks at the ABI’s written submission. I hope his response is slightly more robust than, “I have to get permission from the ABI to do this.”
If the Minister is concerned about any of the technical issues on the funding or oversight of the proposal, we are more than happy to work with him on a bipartisan basis. We are clear that we would use secondary legislation, so we do not expect him to tell us exactly how it would operate today. [Interruption.] Bless you. We are more than happy to meet as soon as possible—
On a point of order, Mr Gray. Surely the hon. Gentleman should have said, “Bless her”.
I am most grateful to you, Mr Gray, and to the Minister for that helpful point of order. He always seeks to be helpful and I want to see that in his response today.
We are more than happy to work on a bipartisan basis with the Government—and I am sure with the ABI—in the coming months; that is why we have been clear in the amendments that we would use secondary legislation. But we want to put down a clear marker that we think creating a database is an important, practical step that needs to be taken.
With your permission, Mr Gray, I will discuss some of our other provisions later in the debate.
Order. The nature of my discussion with the Clerk was that if the hon. Gentleman wants to speak on other new clauses or amendments in the group it might be convenient to do so now.
I want to say a few words about flood insurance, not least because it is a huge issue in my constituency, which at the present time is recovering from serious flooding over the weekend: yet again, hundreds of homes have been flooded, this time because of the tidal surge, which overwhelmed our very substantial flood defences along the Humber, the Ouse and the tidal Trent. This issue is a live one in my constituency. Sadly, a number of the properties that were flooded this weekend were not insured because the owners were unable to take insurance or because they felt the insurance offered to them was too expensive. As in previous years, perhaps some of the saddest cases from this weekend have been those of people who thought they were insured but on contacting their insurers found out that they did not have flood cover as part of their policy.
Geography is important; that will be clear in one of the later points I want to make to the Minister. Unfortunately, this is not a problem that we have seen only this year: my constituency sees flooding pretty much every year because of our local geography. Last year, 1,000 or so properties in Goole were affected; the year before, it was about 1,000 in Goole, Swinefleet and various villages. That has created a difficult insurance market locally.
I myself have struggled with the issue. I live next to the tidal river Aire, with 10-foot high flood defences right in front of my house. They were very nearly overtopped last weekend, but fortunately for my village that did not happen. In the past I have taken out insurance, but on looking at the details have suddenly realised I am not covered for flooding. There is a lot of confusion out there, which is why I welcome the Flood Re proposals in general. The statement of principles did a job to a point, but was by no means perfect for people in my area, as many found after the devastating floods in 2007, which also had a huge impact on my constituency.
We were hoping that this year we would have a full calendar year without any flooding, and we very nearly got there, but unfortunately it was not to be. We have also had a number of near misses in recent years. I appreciate the Minister’s concern for those who cannot get insurance. I would like to invite him to my constituency to see some of the recent damage for himself and to meet some of the people who have problems getting insurance; perhaps he will be able to reassure them of the viability and likely benefit to them of the Flood Re scheme.
I want to build on a few concerns raised across the Committee and add my view. I am pleased to hear that small businesses operated from properties that are primarily residential will be included in the provision. That was raised at a public meeting that I rushed back for in Reedness, one of the communities that was flooded, on Monday evening, to which about 100 people turned up. That is important to us, because in our area many small businesses operate from residential properties.
I have some concerns about the council tax band issue. I live in a band A property. The average house price in my constituency is very low and the median income is only £16,800. We do not have a large number of properties in band H, but I hope that the Minister will respond on those.
Thomas Docherty rose—
On a point of order, Mr Gray. If I could check the record, I think I said on Tuesday that many Yorkshire MPs were better than average and some were below average. I did not look in the direction of any one Member when I said that.
The Opposition intend to tease out the banding and exemptions issue later in debates on some of the other new clauses, which may help the hon. Gentleman. I suspect that we may debate that shortly.
I have the record with me and the hon. Gentleman’s exact words in Hansard were:
“I am most grateful, if for no other reason than the hon. Gentleman has demonstrated that, while Yorkshire has some of the finest MPs in the House of Commons, they are not universally fine.”––[Official Report, Water Public Bill Committee, 10 December 2013; c. 206.]
I think he was looking at me as he said that. Anyway, I look forward to that debate and I look forward to his subsequent apology, because that did hurt me. It has been a difficult time. I am a soft, thin-skinned, sensitive individual, as all Yorkshiremen are, so I was a little upset by that. I am sure he will want to apologise. Perhaps he could make just a small donation to one of our local flood appeals to make up for it.
I look forward to the debate on council tax bands, because that will be an issue for some people, perhaps not largely for my constituents. I would like to hear the Minister go into more detail on whether he is prepared to take the Opposition’s offer to look at whether something can be done for those in financial distress or poverty who happen to live in a big or expensive property.
I also want to flag up the 2009 deadline. I saw the Minister’s letter, which was cleverly and fully worded to make it clear that those who stand up and argue for a date later in 2009 are arguing for everyone’s insurance premiums to be put up. That is, of course, a fact and I thank him for helpfully reminding us of that.
In our area, however, we have a problem because of the geography, which I raised on Second Reading and in a previous debate on the water industry. We have, as I think I said in one of our sittings last week, homes built since 2009 being marketed through the Government’s Help to Buy scheme whose owners will not have access to the Flood Re scheme that the Government are rightly working so hard on. We have a disconnect in the message we are sending out to people. How can we have a Government-backed scheme that says, “Buy these properties” while the Government are trying to incentivise people not to purchase properties built after 2009?
The Chancellor of the Exchequer is not here to discuss the policy to which my hon. Friend refers, but I think I would be right to say that that policy is simply a mechanism available to all people in the right circumstances who are looking to buy. It is not specifically linked to those properties, which just so happen to have been developed in a flood plain. Perhaps those two policies are not quite so closely linked.
I tend to think the effects of most Government policies are unintentional, and the present instance is of course an unintended consequence; but the average punter might not understand a scheme in which the Government help with the purchase of a property that may not be insurable. However, the Minister is right. The scheme is a general one and was not designed with the considerations in question in mind.
The hon. Member for Kingston upon Hull North (Diana Johnson) has pushed the issue because in her constituency, as in large parts of mine, it is not possible to create a disincentive in relation to building on the flood plain. Five tidal rivers coalesce in my constituency, and three of them—the Dutch river, the Ouse and the Aire—meet in one town alone, whose name means “open drain” in old Norse.
In those conditions it is difficult for us not to build on a flood plain. Indeed, a massive development of 10,000 homes is proposed on the edge of Scunthorpe, on the natural flood plain for the Trent, in my constituency. The proposal was made under the previous Government, through the local development framework, and the council, which is now Conservative-controlled, supports it; but that will all be on the flood plain. It is difficult in an area such as ours not to use such land for development.
I appreciate the way the hon. Gentleman is outlining the things affecting his formerly Norse-dominated constituency. As someone from the Celtic end of the country, I reach a hand of friendship across Anglo-Saxon territory.
Should there be a pressing need for development in an area that is prone to flooding, we want incentives for flood resilience in the design and levels of properties, such as building living floors above storage or garage facilities. It is not as simple as house or no house: it is a question of the sort of house.
Absolutely. That is why we have been so supportive of sustainable urban drainage systems and the rest. We want improved standards, but a concern then arises that development can produce a knock-on effect for nearby properties, whose flood risk increases. The storage standard has gone from one in 30 to about one in 100, but our town has suffered one in 200 year incidents. We had a one in 800 year storm that flooded the town two years ago.
It is not just the new properties that are affected; there is an impact on the others. I acknowledge the Minister’s point about building proper flood resilience into properties, and the importance of that for insurance, but my constituency neighbour the hon. Member for Kingston upon Hull North and I want Ministers to bear in mind the geographical and topographical issues. We might, to be politically correct, describe our constituencies as topographically challenged.
I shall not demand that the Minister should add 2.2% to everyone’s insurance premiums to pay for band H properties, or that properties built to the end of 2012 should be included, but perhaps on Report he will keep in mind the difficult issue for constituencies such as mine: in many communities it is practically impossible to build without building on land that is prone to flooding.
I agree with some of the concerns raised earlier about action on properties that are uninsurable. That is a problem for a number of people in my constituency.
I have spoken about my concerns in the round, but I do not want the Minister to conclude that I do not support the Flood Re scheme. It is a fine replacement for the statement of principles and I congratulate him, his Department and his predecessor on their hard work in establishing it. It will be reassuring. I attended a public meeting in Reedness on Monday evening and was able to tell people that Flood Re was coming down the line and would be of benefit to residents. Of course, no scheme can be perfectly designed, but if the Minister could say anything about the concerns I have raised, and also about helping to make uninsurable properties more flood resilient, that would be greatly appreciated.
I would like to end by reiterating my invite to the Minister. We do not ask many Ministers to come to Brigg and Goole—I am generally pleased when they stay away—so it is a great honour that we have asked him to come, and an honour that I am sure he, as far away as he is in the south-west, would not want to refuse.
It is a pleasure to serve under your chairmanship, Mr Gray, and to follow a fine MP who, I am sure we all agree, represents his constituents with passion, especially on this issue.
I want to speak in support of the amendments tabled by my hon. Friend the Member for Dunfermline and West Fife and to demonstrate why this part of the Bill is so important. We know that much of the Bill is about managing water as a precious resource that is vital to life, to the environment, for our consumption and for businesses. I think of water as being a bit like a god—we depend on it for life, but we know that it can also destroy lives.
The devastation and tragedy we have seen in the UK in recent years because of flooding has already been mentioned. However, when Members talk about flooding in our constituencies, we are talking about people losing their homes and businesses—not just once, but time and again. They must then endure all the accompanying disruption and misery. I feel that a water Bill must address the concerns and fears of the people who have been so badly affected; it must give them confidence that the Government are tackling the issue and will make things better for them in future.
In my constituency, we have been hit by floods a number of times since 2007. In fact, some households have been hit three or four times in that period. When I say “hit”, I mean that people have been out of their houses for several months. The upside of what I have to say is my praise for Northumbrian Water, the water utility company in our area. I have worked closely with the company to try to help people who have been affected by floods, and I want to congratulate it on winning some of the utility Oscars earlier this week. It was declared “utility of the year” and also won the marketing initiative award for Dwaine Pipe, a little pipe creature who tells people what they should or should not be putting down their sinks and toilets.
Sorry. I suppose the point is that he will help us not to block our drains and therefore to avoid flooding in a number of areas.
Despite the fact that Northumbrian Water has spent the most money on improvements to help with flooding, those improvements have not always worked to the degree needed. Only last year, a holding tank that holds 10.5 million litres of water was completed to save a whole street of homes. Unfortunately, however, when we had the floods last summer, those homes were still flooded because the water table was so high. Nothing could be done about it.
The people who live in that area cannot get flood insurance, and the problem will continue because the Longbenton Letch runs behind their houses. That is a fact, and trying to do anything else will be really hard. The money has been spent, the work has been done, and they just hope that in future, things will work out. In the meantime, many of them have not been able to renew their insurance policies because of the expense. When there are natural occurrences such as rivers, streams and so on, how can we mitigate the position for people so that they can get insurance under Flood Re?
I also say that some people found it difficult to understand what was being proposed in the consultation; there was a low take-up before the Government announced or decided how we would move forward in relation to insurance. I do not know how that can be helped; perhaps it is just something to be observed.
We have help from water companies such as Northumbrian Water, on issues such as those in Hadrian Park, for example—an estate that is 30-odd years old. When a new road roundabout was put in, the nearest houses were suddenly flooded when the floods occurred last year and a couple of years previously. The water company is now looking at doing a modular response for them, but we know that such things take a long time.
Meanwhile, those people are in limbo. That is why it is so important to get this part of the Bill right, otherwise people will have to live every day hoping that it will not rain and that they will not, yet again, have to leave their homes, which they have just refurbished. Something that came out from a number of people, including the water board—something that I think is really important in the Bill—is that when repairs are costed and paid for by insurance, people’s homes should be upgraded to make sure that they are resilient to floods. It should not be like for like. We have seen that that can make such a difference, but unfortunately, as things stand, people cannot get upgrading on their home insurance and often do not have the spare cash themselves to upgrade.
I shall finish there. I really feel that we have to get these things right, and I want to support the amendments. I hope that when the Bill becomes an Act, the people whom we represent will have the surety to look forward to a safer future.
It is a pleasure to follow such a thoughtful debate from three hon. Members, and many other hon. Members are paying close attention and following the points that have been raised. It is really important to say that the Government appreciate just how closely hon. Members are working with people in their constituencies to overcome some of these problems and to work with the relevant agencies and companies. The stories that we heard from two Back Benchers are a good reminder of what we are dealing with and what the whole thing is about.
I thank the hon. Member for Dunfermline and West Fife for his amendments to new clauses 1, 7 and 8 and for his proposed new clause 40. The amendments together cover the role of the Committee on Climate Change, the role of insurers in incentivising householders to manage their flood risk and the need to raise awareness of flood risk among those who stand to benefit from our proposed arrangements on flood insurance.
In Axminster and Feniton in my constituency, bungalows and houses were flooded three or four times last year. Not only is it difficult then to get insurance, but it is difficult sometimes for those houses to take mitigation measures and perhaps put up certain barriers. That is not exactly to do with Flood Re, but it is to do with the fact that very often the Environment Agency will not allow people to make improvements to their property. The whole thing has to be taken in the round. My final point is that I congratulate the Government on getting Flood Re agreed, especially for 25 years, although we will see the same problem happen time and again.
My hon. Friend raises the important issue of betterment, which the hon. Member for North Tyneside also raised. It is important that Flood Re should have the right incentives to allow householders to take steps to tackle the underlying problems of the risk of flooding to their properties. I am interested in that issue, and the Secretary of State has made clear that he is also interested in it.
Constructive discussions with the Association of British Insurers on whether and how to encourage households in Flood Re that claim to reinstate their property and make them more resilient to flooding are continuing. I appreciate the high degree of interest in the issue from hon. Members on both sides of the House. I would like to see proposals on that basis and our discussions with insurers will continue.
I intend to take new clause 40 from the hon. Member for Dunfermline and West Fife and the proposed amendments to Government new clauses together, in the following order: amendments to new clause 1; those to new clause 8; those to new clause 7; and new clause 40.
I am grateful to the hon. Gentleman for his wish to ensure that the policies in legislation meet the needs of today and are flexible enough to meet the demands that climate change may bring in future. I support his desire to see flood risk management at the heart of the approach to tackling the financial consequences of flooding. Managing the risk of flooding will always be the best way to secure available flood insurance.
The proposed amendment to new clause 1 suggests that the Committee on Climate Change will provide advice before setting eligibility thresholds. That proposal was raised on Second Reading. I am happy to respond. I assure the hon. Gentleman that climate change protections were considered, alongside other risk factors, during the design of the policy. The effects of climate change will continue to be considered during future levy setting discussions, as part of the consideration of the number of households at risk. The best way to ensure that flood insurance is affordable in the long term, in light of climate change and other risk factors, is to tackle underlying flood risk, not the symptoms. Therefore, in the long term, it is key that we continue to invest record amounts in flood defences to prevent flooding in the first place.
I do not wish to slow the Minister’s flow, but can he confirm whether he has seen last week’s article in The Observer and whether Friends of the Earth made available to him the submission it made to Opposition Members? It says that the Government have not taken into account the full scale of the problem.
I have indeed seen the contribution from Friends of the Earth. I am always grateful to receive such submissions, but our position is that we took the factors into account in developing the model. The Government also take account of the changing risk of flooding and coastal erosion caused by climate when investing in defences.
The hon. Gentleman is clearly familiar with the role of the Committee on Climate Change, but it might help this Committee if I set it out in a little detail. It is an independent statutory body with the purpose of advising the UK Government on preparing for climate change. Advising on the scope of and financial parameters for the transitional flood reinsurance scheme is outside its current remit, and, for reasons I will highlight, would not be the most appropriate use of its resources or expertise.
The number of policies eligible for Flood Re is based solely on the cost of the flood risk component of any policy, which is set by the insurers and will differ based on each insurer’s assessment of flood risk. It is not possible for the Committee on Climate Change to provide any estimates, without detailed knowledge of industry pricing models; the industry has that expertise.
Any advice the Committee on Climate Change gave would have to be informed by the industry in the first place. In a sense, we would be duplicating information and looping it round. The value of the levy required and the likelihood of any additional contribution by insurers is similarly based on financial parameters that could change year on year. Those include: the level of premiums received; the cost of reinsurance; and the amount of levy collected.
The Government and the ABI worked intensively to determine the value of the levy required and the likelihood of a need for additional contributions, based on industry data and assumptions subject to independent review by Professor Stephen Diacon. In addition, extensive modelling has been carried out by Government using those data, as part of both the pre and post-consultation impact assessments. The Environment Agency will continue to collect and analyse data on flood risk, which will feed into the Government’s ongoing assessment of the scheme.
Flood Re is also directly accountable to Parliament. Detailed audit information about Flood Re’s ongoing operations will be reported to Parliament regularly. It is not clear what value the Committee on Climate Change would add.
Lord Krebs chairs a sub-committee of the Committee on Climate Change considering adaptation. He has helpfully made suggestions, and we always welcome contributions from committee members, but as I have said, we believe that the data that he would use would come from the same source as the data informing our approach.
It should also be noted that Flood Re has been designed as a transitional policy. That is important to ensure a continued incentive to encourage householders to become resilient and prepare for the long term. The eligibility thresholds for households and the levy will therefore change in accordance with the five-yearly discussions between Flood Re and the Government to facilitate that transition. Amendment (a) to new clause 1 is therefore unnecessary.
On the proposed role of the Committee on Climate Change in advising the Secretary of State when setting targets for the flood insurance obligation, our alternative approach to flood insurance, that proposed role is the purpose of proposed amendment (a) to new clause 8. In setting the target for the obligation, the Secretary of State would refer to the register of properties at greater risk of flooding created for that purpose by the Environment Agency and its counterparts in the devolved Administrations. The register of properties at high risk of flooding will be based on the flood risk mapping published by the Environment Agency and its equivalents in the devolved Administrations.
To respond to the point about the Environment Agency maps raised by the hon. Member for South Shields, who is no longer in her place, I can confirm that they were published today and are available on the website. Hon. Members may wish to examine them; I am sure that they will be a useful tool for all our constituents who are concerned.
Does the Minister not accept in hindsight that it probably would have been wise to bring those maps with us today so that we could see them at first hand? I seem to recall that we have had problems before with him inadvertently misleading the Committee by telling us that things were on the internet that we could not then access.
It would certainly not be my intention ever to mislead the Committee. The example that the hon. Gentleman gave from the evidence sessions involved information made available through the Department. There was then an issue with the scrutiny unit as well, which was servicing and ably supporting the Bill. The information was passed between the two. I can confirm with him what happened in that regard.
I suspect that we might be detained even longer than by my earlier lengthy contribution if we were to analyse the flood maps in detail. However, I welcome the fact that they have now been published, as I hope does the hon. Gentleman.
In setting the target for the obligation, the Secretary of State would refer to the register of properties at greater risk of flooding. The number of properties subject to flood risk may change with time as a consequence of climate change or other factors. Any property shown to be at higher risk could therefore become eligible to benefit from the obligation. The Secretary of State would then set an overall target for the proportion of properties on the register that the industry as a whole must cover. That target is provided in new clause 8.
In setting the target, the Secretary of State would consider evidence on existing take-up rates and other relevant data, which could include data on climate change. Not all households want insurance, so the goal would be to set a collective target that reflects existing levels of take-up and likely demand and the fact that some homes that flood regularly are already considered uninsurable. To be clear, the amendment deals with flood obligation rather than Flood Re.
Although the Committee on Climate Change has a great deal of advice to be drawn on regularly, I am not persuaded that there is a particular need for its duties to expand in relation to what is principally a financial support mechanism. For the reasons discussed in relation to Flood Re, I do not believe that it would be the most appropriate use of the committee’s resources or expertise. In any event, regulations made under new clause 8 will provide for the Secretary of State to set the target for the obligation from time to time by statutory instrument following consultation. Therefore, there is already provision for the Committee on Climate Change to have input into the target-setting process.
The Government’s new clauses provide for both the target setting and the obligation to respond to the demands of climate change, and for the register to accommodate changes to properties’ level of flood risk. Amendment (a) to new clause 8 is therefore not necessary.
In terms of reducing flood risk, I turn to the amendments to new clause 7, which also concern the flood insurance obligation. Amendment (a) to new clause 7 would enable insurers subject to the obligation to require households to take steps to reduce their flood risk, as a condition of benefiting from insurance cover. We expect that, within the obligation, insurers’ pricing strategies are likely to lead to competition being greatest for properties on the register at a lesser risk of flooding, where an insurer’s exposure to risk will be correspondingly lower.
Households on the register seeking flood insurance cover are thereby already incentivised to take steps to reduce their need to make a flood claim—for example, by installing property level flood protection or making their property more resilient to flooding when undertaking repairs, because by doing so they are making their property more attractive to insurers seeking to meet their obligation quota. Likewise, insurers will have a strong incentive to support households in reducing their risk of flooding, because that will also reduce the cost to insurers of meeting their obligation quota.
Constructive discussions on our preferred approach to Flood Re continue with the Association of British Insurers, both on this issue and on whether and how to encourage households in Flood Re who make a claim to reinstate their property, so that it is more resilient to flooding. It is important that Flood Re has the right incentives for both households and insurers, for action to be taken to tackle the underlying problem, which is the risk of flooding. This is why, for instance, Flood Re has a duty to secure value for money. The hon. Member for Dunfermline and West Fife is right to say that more thought is needed in this area. As I have said, in relation to Flood Re, we are actively considering this with the ABI and I hope to introduce proposals on that. The amendment is unnecessary in relation to the obligation, for the reasons that I have outlined.
Amendment (b) to new clause 7 would enable insurers to require their policyholders to retain some portion of the financial risk associated with their insurance policy. Under the flood insurance obligation, insurers would continue, as at present, to be primarily responsible for the financial risk of the insurance policies that they write. We anticipate that, as at present, it will be normal practice for insurers writing policies to meet their quota under the obligation to continue to ask their policyholders to pay an excess. Therefore householders already retain an element of risk.
Under the flood insurance obligation, a competitive market for flood insurance cover is maintained. We would therefore expect insurers to take different approaches to excesses. Some insurers may offer a reduced premium if a policyholder is willing to accept a larger excess. However, large excesses may be unaffordable for households, in the same way that high premiums would be. Insurers that offered very high premiums and excesses to households would likely struggle to win sufficient custom to meet their obligation quota. Under the obligation, as we have just discussed, it is likely that households would be able to lower both premiums and excesses by taking action to reduce flood risk.
The amendment is therefore unnecessary. However, judging by the reference to the flood re-insurance scheme, I wonder whether the hon. Gentleman was instead interested in requiring households benefiting from that scheme, rather than the flood insurance obligation, to retain some element of the risk. If that is the intention, I continue to believe that the amendment is unnecessary, and it could reduce the affordability of flood insurance.
The 2008 statement of principles, signed under the previous Administration, did nothing to deal with the affordability of flood insurance. It also did nothing to limit the excesses that insurers could charge. Many Committee members will have constituents who have faced either excessive premiums or high excesses. Flood Re would effectively limit these, as well as the premium charged, for the first time. A standard excess would help ensure that all policies within Flood Re were treated in the same way and that, if people needed to make a claim on their policy, they would receive the help they needed.
The final level of excesses in Flood Re would be within the range of £250 to £500, as set out in the memorandum of understanding that we reached with the ABI in June. By shopping around and being prepared to take action to reduce flood risk, customers may be able to reduce their premiums and excesses. We want flood insurance to be more affordable, but I am concerned that the amendment could achieve the opposite. Therefore I reject it.
Amendment (c) to new clause 7 introduces a requirement on insurers to raise awareness of flood risk among those at high risk. The hon. Gentleman is right to ask about what the insurance industry can do to raise awareness of flood risk, not least because the Government intend that there should be a gradual transition towards more risk-reflected prices; as we have discussed, that should be based on robust evidence of local risk, to increase the incentives for flood risk to be managed.
Flood risk management authorities, such as local authorities and the Environment Agency, already do an invaluable job in making information on flood risk available to households. The benefits of such activities were reinforced only last week during the most serious coastal flood event for more than 60 years, as we heard from Committee members. The EA warned communities at risk, through the flood warning service, and promoted its free flood warning service through traditional and social media. Great leadership has also been shown by local authorities.
Under the flood insurance obligation, insurers will be incentivised by market forces to make high-risk households on the register aware of their flood risk and actions that they can take to reduce the need to make an insurance claim, such as signing up for warnings.
The Minister is talking about Floodline, which gave a number of important warnings, but which does not seem to have worked everywhere. In the list of people whom he congratulated on warning about flood risk and impending flood risk, he missed out volunteers and emergency committees. In my constituency, where Floodline did not provide warnings, volunteers and parish councils in communities such as Reedness, South Ferriby and Burringham went about and evacuated people.
I thank the hon. Gentleman for his intervention. I have, on other occasions, pointed out the contribution made by civil society generally, from volunteers and communities, but it is good that he has made that point again.
New clause 40 is intended to ensure that those who are affected have an increased understanding of their flood risk and are aware that they are benefiting from the Flood Re scheme. We agree that households that benefit from Flood Re will need to know that their insurance is being subsidised, and that the support will be withdrawn over time, so that they can plan for the future. That was a key issue that emerged from the public consultation. The Government continue to explore with the industry how that can best be achieved, and I hope to be able to return to the House shortly with further details.
The new clause provides for a separate commencement order, made by affirmative resolution, to
“appoint a day on which section [The Flood Reinsurance Scheme] is to come into force.”
The intention of subsections (1) and (2) is, no doubt, to provide for a specific day on which the scheme can come into force through a commencement order following the establishment of the proposed public national database. However, information on flood risk categorisation of properties has been publicly available for many years. In England, the Environment Agency makes flood risk data available on its website. In addition, the maps that the hon. Members for Dunfermline and West Fife and for South Shields referred to have been published today.
Since June, we have been working with the insurance industry to go even further to improve the data that are available on flood risk. We have agreed that the Environment Agency and its devolved counterparts will be able to access Flood Re’s data on the location of the highest-risk households. I thank hon. Members for their contributions to the debate, and I understand the spirit in which the hon. Gentleman has tabled the new clauses. This is a new scheme, and it is important that we get it right. For the reasons I have laid out, I hope he will see why the Government want to maintain the approach that we have negotiated with the industry.
Despite the Minister’s detailed response, I am disappointed that he or his officials have completely missed the point of new clause 40. I will start by recapping for the benefit of the Minister and his officials. The point is that it is the potential house buyer and the mortgage lender who need to have access. A constituent and his wife came to see me recently with a similar problem, and their situation may help to explain why the new clause is so important. When they bought their house, the vendor assured them that there were no factoring fees on the property, and there was no way for the house buyer and his wife to check that information. They have now found themselves—surprise, surprise—stuck paying hundreds of pounds a year in factoring fees, and they cannot track down the vendor, who has now left the area.
If a buyer is told by their vendor that the property that they are looking to buy is in a flood risk area, they have to have comfort that they and their mortgage lender can verify that information. I am disappointed that the Minister did not address that issue at all. I repeat the Opposition’s offer to work with the Minister and his officials to find an appropriate mechanism. Perhaps he might receive some inspiration from his officials on the matter before his final remarks. I understand that new clause 40 may not be pressed to a vote before Tuesday, so if the Minister would like to enter into dialogue in the days ahead, we would be happy to do that.
I turn to the other new clauses. We believe, as do Lord Krebs and the Committee on Climate Change, that they do have a role to play in coming up with the risk assessment for going forward. I suspect that the Secretary of State is a lot less keen on the proposal than is the Committee on Climate Change, and that is why he is averse to it. That proposal is slightly more political, and I confirm that we will press the amendments to a vote, because the Secretary of State should take advice from his independent advisers. After all, what is the point of independent advisers if the Secretary of State does not even have to take advice from them?
New clauses 37 to 39 were “inspired” by the evidence sessions. I praise the hon. Members for Newton Abbot, for South East Cornwall and for Brigg and Goole, who have all spoken on the issues that the new clauses address, both in our line-by-line scrutiny of the Bill and in the evidence sessions some nine days ago.
New clause 37 addresses the right of appeal for a household. We very much welcome the letter that we had this morning from the Minister in response to an earlier exchange, but it highlighted an issue that all members of the Committee are concerned about. Without reading out the whole letter and detaining the Committee, the letter says that on the opening date—I think 1 January 2015 is the date that the Minister has in mind, but I am sure he will interrupt me if I have got that wrong —all properties built before 2009 and not in band H, or band I in Wales, will be included in the scheme.
As the letter sets out, and as the evidence we took from the industry made clear, the intention is to start to move to remove some households from qualifying for the Flood Re scheme, and the Bill has no right of appeal for them. They might not agree with the decision of the Flood Re body. I am sure, Mr Gray, that as an assiduous MP, you have been able to help many constituents over the years, where they have run into the bureaucracy of officialdom. We would normally expect there to be some right of appeal.
I am most grateful to the hon. Lady for her intervention and for promoting me to the Government Front Bench. I am not sure the Minister was grateful for that. I agree with the hon. Lady that there will of course be individual households that do not take reasonable steps, but the problem, as we saw in the evidence submitted by the Association of British Insurers and in the Minister’s letter from yesterday, is that the Government cannot come up with a definition of “uninsurable” at this time.
The Minister is a smart fellow. [Interruption.] If the hon. Member for South East Cornwall wants to intervene, I am more than happy to give way in a second, but I will expand on my point. The Minister is a smart fellow and he has a group of officials in his team who are pretty sharp. If neither they nor the industry can come up with a definition of “uninsurable” at the start, I am concerned that we are setting off on a path without a back-stop to ensure that no one falls through the cracks.
To be helpful to the hon. Gentleman, the definition of “uninsurable” is a property for which it is impossible to get insurance. Flood Re will take a view that is proportionate to the amount of resource being used to insure that property, if there is a need to make frequent payments. This is the point: until the process is in action and judgments are being made about the insurance of individual properties, we cannot define or we cannot say whether properties are uninsurable.
I am grateful to the hon. Gentleman. One of the principles of insurance is that a claims history is taken into account when calculating premiums. That is basic and that is all that Flood Re is replicating, but at the end of the day, everyone starts, as we heard in the evidence session, by being able to obtain insurance. It will be only someone’s claims track record that results in their becoming genuinely uninsurable.
I suggest that the hon. Lady and the Minister re-read columns 43 to 46 of the evidence from the Tuesday afternoon, which covers this issue at great length. I do not think that we are a million miles away. I have a genuine concern, as I think all Opposition Members have and, I suspect, one or two Members on the Government Benches have, about there not being a right of appeal. We all know from our own experience as Members of Parliament that someone will say, “I think I have taken reasonable steps, but my”—
Sheryll Murray rose—
If I may finish the point, I will let the hon. Lady intervene again. We can all think of examples of bureaucrats versus constituents—situations in which they have a differing view. Let me be clear. Opposition Members are not saying that the approach that the hon. Lady is outlining—that people should be removed when they refuse to take steps—is without merit, but not having a right to say, “I think I am taking steps and the bureaucracy doesn’t agree” will be a real danger for her constituents. I will let her back in if she wants to add to her comments.
We are talking about insurance. I do not know of a single insurance company that applies a right of appeal to its cover. Does the hon. Gentleman not agree with me? I do not get a right of appeal. It is not the case that when I ask an insurance company to provide me with home insurance and it gives me a premium, I have a right of appeal. I think that is where the hon. Gentleman is becoming confused. Does he not agree?
I cannot think—your service to the House, Mr Gray, is much greater than mine—of a situation in which we have had an insurance system that is underpinned by statute, overseen by a Secretary of State and the subject of a debate such as this, so this is not the same as home insurance or car insurance. This is about a specific measure that has bipartisan support. I have a genuine concern, which I think is shared by hon. Members on both sides of the Committee, that without a right of appeal as a back-stop, constituents will be coming to us in two or three years’ time. I believe that it will be very soon after 1 January 2015, when Flood Re starts to take people off the policy, because Mr Kerr and his colleagues made it clear in the evidence that they gave us, both in writing and in columns 43 through 48, that their intention is to move quickly, to start to be quite vigorous. We heard the Minister himself say this morning that they expect to make progress.
I say this again so that if things go wrong, there will be no ambiguity about whether Opposition Members raised this issue. We are in real danger of constituents coming to us within months of the start of 2015 and asking, “Why am I being removed? This is unreasonable.” At the risk of labouring the point, I urge the Government to have a think, because it is a new clause, over the next few days. Again, I am more than willing to meet the Minister to discuss the matter. It is a simple measure. It is designed to help the Government and, crucially, help our constituents.
I will summarise new clause 38. It is about the debate that the hon. Member for Brigg and Goole kicked off for us very well earlier this afternoon. I am grateful to the Minister for his letter of yesterday, which I shall refer to extensively when discussing new clause 39 as well, but my criticism both of that letter and of the written evidence we have had from ABI and others is that the ranges for the figures of those excluded are very broad. I do not mean to sound churlish, but it is almost as if the Department has licked its finger and stuck it in the air to come up with such broad numbers.
We understand the Minister’s reasons for not including properties built after 2009 or properties in council tax band H in the scheme from the outset; we are not entirely convinced by the arguments but I am happy to humour him this afternoon. However, we believe that more robust evidence must be gathered on the matter, and the very broad figures that we have at the moment need to be brought down to more precise ones. Parliament is entitled to have robust evidence before reaching a final decision on the scheme.
The Minister is quite a smart fellow, and I do not think it beyond his wit to work with the insurance industry to come up with more exact figures and costings. Even the band H figure that he set out in the letter to the Committee yesterday was phenomenally broad in its range: there is a 300% gap between the two extremes of the figures. Frankly, we need more robust figures on that. When he makes his contribution to this part of the discussion, I hope he will give us an assurance that he intends to produce much more exact figures before the Bill has finished in the other place.
I turn now to new clause 39. We have already heard excellent speeches about what we would call asset-rich, income-poor households from both my hon. Friend the Member for North Tyneside and the hon. Member for Brigg and Goole. Both of them made powerful cases on behalf of their constituents and we share their concerns. I am grateful to my hon. Friend for pressing me several times to make sure that the Opposition tried to do something about the issue. I will say to the hon. Member for Brigg and Goole that he may not be keen on Ministers visiting his constituency, but I hope to visit his constituents on more than one occasion between now and 7 May 2015, and we may well discuss flood insurance on those visits.
I will be delighted for the hon. Gentleman to come to my constituency. When he does, I hope that he will coach my Labour opponent on how to engage with the public in a better way than she has to date, and that he will take the opportunity to view our flood defences, which have been under considerable strain recently, and support the investment in them that we so desperately need.
However, I would be keen to speak to the hon. Gentleman’s constituents and see the flood defences. Yorkshire has some examples of strains of the sort we are discussing, which are being felt by his constituents and by people up and down the county, including the constituents of my hon. Friend the Member for Kingston upon Hull North—the hon. Gentleman said some very kind things about her earlier.
As an example of the problem of people who are asset rich but income poor, I draw the Committee’s attention to the 3 January edition of The Northern Echo, which highlighted a case from the constituency of the hon. Member for Thirsk and Malton, who chairs the Environment, Food and Rural Affairs Committee. The newspaper spoke to a couple aged 77 and 79, who live in a farmhouse that is prone to flooding and are struggling with the cost of repairing it. I am sure the Committee would agree that that couple are income-poor individuals. They are getting by on a pension and I would imagine they are not physically able to do much of the required work themselves, so will be heavily dependent on hired contractors. People such as that couple are in danger of slipping through the net. People such as that couple are in danger of slipping through the net.
I did some research in the House of Commons Library yesterday and, as ever, I am in awe of how quickly its staff are able to produce information for Members. Based on the letter that we received from the Minister on 10 December, I asked the Library staff what were the latest figures for the number of people in each council tax band in each income decile. For the benefit of any Member less educated than you, Mr Gray, by deciles I mean the 10 percentage point groupings of population by income. As we said earlier, the problem with council tax banding is that it is quite crude, because while some 60% of those living in band H properties are in the top decile—the wealthiest 10% of incomes—a small number are at the other extreme.
I am keen to stress that we are not getting into a spending commitment on behalf of householders, but the most up-to-date figures from the Library—if the Minister has received more up-to-date figures from his officials, I am sure that he will be happy to share them—state that the five deciles below the national average income contain 10% of people living in band H properties. I suspect that many such people will live in constituencies represented by hon. Members on both sides of the Committee. That 10% figure is the extreme, but it is astonishing that the Government are making no provision for that relatively small number of people. Based on the Minister’s letter, it is actually statistically insignificant. As a smart individual, the Minister will know that anything below 0.5% becomes statistically uncountable. We are genuinely surprised that the Government are not providing any assistance to those people. We are happy to work with the Minister on the exact details—secondary legislation can be used to get it right, which the Government are doing—but there should be a system to assist people on lower incomes.
Using the figures from the Minister’s letter to the Committee on 10 December, even if we take the highest figure that the Minister has used so far—we have already stressed that the figures are wildly far apart—we are talking about less than 10% of £5.4 million. For the Minister’s benefit, that is around £500,000. According to the Minister’s figures, it would add at most £1.65 to bills. I can afford £1.65 and will even buy the Minister’s £1.65 if necessary. I believe that that is a reasonable step that Parliament could take. As I stress, that is at the very top end, using both the extreme example of 10% of band H dwellers being in the five deciles below average income and the highest figure that the Minister provided. It would be inconceivable that the Government are in effect imposing a mansion tax by not providing any assistance to somebody purely because they happen to live in an asset-rich property.
I am sure that we all have examples of constituents who have inherited a property, perhaps following their partner, husband or wife passing away. They could be elderly and struggling to cope, but as things stand, the Government do not intend to provide any assistance. That is wrong and should be rectified. We have offered to work with the Minister, but I must warn him that we intend to press new clause 39.
I shall attempt to speed up a little to help the Committee. The hon. Gentleman indicated that he feels that I have been a little thorough and that I have been going into a lot of detail.
On new clause 37, I recognise that the removal of the right of appeal from Flood Re is an issue of great concern to the hon. Gentleman. He has raised it on several occasions. I want to reiterate the points that were made in the evidence session on 3 December. All domestic policies for properties at risk of flooding will initially be eligible to be ceded to Flood Re. Should properties flood repeatedly, Flood Re will seek to ensure that action is taken to reduce the risk of flooding or the cost of rectifying the damage. Constructive discussions continue with the industry about how best that can be achieved.
Some households may move out of Flood Re if their premiums are lowered because they take action to reduce their flood risk. Insurers will not be compelled to use Flood Re; they will be able to choose whether to cede high-risk policies to Flood Re. Householders can and should continue to shop around for the best deals. They may find that one insurer can offer a lower price because they are able to offset risk against other perils and then cede the flood element to Flood Re at the lower level.
I agree that it is important that consumers have a right to appeal if an insurer behaves badly towards them. However, there is already a mechanism in place. The Financial Ombudsman Service offers a free dispute resolution service for people who wish to complain about how their insurance company has treated them. Therefore, we do not think the new clause takes the right approach.
New clause 38, as the hon. Gentleman set out, would place a requirement on the Secretary of State to publish a report detailing the number of properties that are excluded from Flood Re and the cost of including those properties. I understand the rationale for the new clause, but I do not agree that it is necessary. Flood Re is designed to help people who live in properties at the highest risk of flooding and those who need the greatest help with their bills. Any increase in the amount of flood risk taken on by Flood Re would need to be funded by increasing bills for all households, raising the levy on household insurance policies or increasing the price of insurance for high-risk households by raising the eligibility thresholds for a policy to be ceded to Flood Re. We have been clear all along that helping high-risk households must not lead to unfair price rises for others.
I want to emphasise that householders not covered by Flood Re should still be able to find suitable cover through a broker or a specialist insurer. Installing resilience and resistance measures may help to reduce bills, particularly if the installer records the changes in the property’s flood risk in the industry recognised flood risk report. The Government will keep the situation under review, and new evidence may emerge. For instance, the ABI is gathering more data from its members on the likely take-up of Flood Re, which will be available shortly.
The hon. Gentleman raised the issue of the range, and said that we should improve the data. That is a fair point. Ultimately, it is a reflection of the uncertainty about surface water flooding. We now have maps for surface water flooding, which will allow the ABI to do further work and gather more data from its members. The results of that data-gathering exercise should be published in January. I hope that helps the hon. Gentleman.
Clearly, that is a matter for the ABI. It depends on how quickly it can get the data from its members. It is helpful for hon. Members to place on the record, for anyone who is watching the debate closely, how important we feel that information is. In that spirit, I am sure the hon. Gentleman’s remarks will reach the right quarters.
New clause 39 seeks to ensure that Flood Re is available to lower-income households, regardless of their council tax band. The primary criterion for eligibility for Flood Re is whether a household is at risk of flooding. A household that is not at risk of flooding, regardless of income, should be able to find a price that is more affordable than the Flood Re price.
An income-based assessment using Her Majesty’s Revenue and Customs’ records was considered. It was decided that, as the majority of HMRC income data is collated by each individual, it would be difficult to target support based on household income. It would involve a system of checking self-declared income against the data, and it was not deemed suitable. Targeting support to households that receive particular income-related benefits was also considered. However, that would not include a large number of households that are working on low incomes, and support would not be targeted at that group.
The third option that was considered was the index of multiple deprivation, as an additional social deprivation measure. However, it was not deemed suitable, as it only identifies deprivation at a community level, not a household level. It would not be suitable for targeting support to households, which the scheme will do through the reinsurance model. An assessment against household income that targets households in receipt of benefits, and a social deprivation measure, would also be a relatively complex mechanism for the industry to administer. We need to ensure that the costs of Flood Re remain manageable, especially given that we expect only between 1% and 2% of UK properties to be ceded to Flood Re and because Flood Re is funded by a levy on all households. So it is not only the money that will be added to the reinsurance demand that we need to consider but the administration costs.
For the reasons that I have given, although I understand the helpful spirit in which they have been tabled I urge the hon. Gentleman to withdraw these amendments, which the Government are unable to support.
I am disappointed that the Minister is yet again digging his heels in. I am particularly disappointed that, despite the pleas that we have heard repeatedly about band H, he is using this measure as a mansion tax. It is unfair on those on the lowest incomes to be penalised in this manner. I know, from looking at the examples in Scotland, that there are very simple ways of introducing social tariffs and therefore we will be pressing this amendment to a vote next Tuesday if the Minister is not prepared to discuss it further.