Dr Andy Johnston, Head of the Centre for Local Sustainability at the Local Government Information Unit, has a guest post at ConservativeHome asking for ideas about the funding for Councils in cases of floods and other natural disasters. It’s important, I think, to recognise that floods are not the only expensive disaster which can befall an area – the cost of Buncefield, for example, was significant to the public sector as well as local people and businesses.
I’d urge anyone with good ideas to chip in. My personal view is that the current system, with tweaks, should be adequate. Above a certain level of cost, the Government steps in and supports the local authority directly, as well as the funding it provides to some other emergency and recovery services. Requiring insurance with the private sector would be a significant extra cost, and might lead to systemic risk for insurance companies if there were a major national disaster like the 1987 hurricane, adding economic turbulence to the mix.
That is, however, based on my belief that the scale of costs imposed by natural disasters is not that great compared to the scale of the fiscal gap, and that tying the two together is neither necessary nor wise. Certainly I’d describe the business rates supplement idea as a non-starter for recovery work, though I can see how it might be used to enhance flood protection.
The claim that “It is increasingly people affected by flooding who will have to bear the cost” flies in the face of the ‘averaging out’ role of Government. Of course we shouldn’t unduly reward people who choose to live next to a river and don’t maintain the flood defences (though we’ve bailed people out of even stupider risks over the last two years!) but nor should viable communities be blighted by the triple whammy of being flooded, and then having to pay for the flood remediation and the improved flood defences. Their personal insurance premiums will rise anyway, without the Government adding to their problems.
Similarly funding rescue and recovery through a local bond issue by the affected Council threatens an undue longer-term penalisation of that Council simply due to their bad luck in where nature struck. I can see why the people of, for example, Wandsworth may not want to pay extra tax to alleviate the costs falling on flood-prone Cumbria, but I don’t recall the building cost of the Thames Barrier being hypothecated, so I would say these things tend to work themselves out. That would militate in favour of a sector-led self-insurance policy, although we have to wait for a conclusion on LAML and associated legislation before taking advice on how that could be established.
There is one very specific change I would make to the system whereby money is repaid to authorities engaged in disaster recovery. This is the “Bellwin Scheme for Emergency Financial Assistance”, commonly known as Bellwin Grant. Bellwin Grant is payable, at a rate of 85% of costs incurred, once a local authority has undertaken eligible work in excess of 0.2% of its annual budget. I think the 0.2% threshold creates an illogical unfairness, since it disadvantages communities who live in a large authority.
For example if a flood occured which caused £5 million worth of costs, the Government would support Birmingham Council to the tune of £1.25m. If that same flood occured in Rutland, the Government contribution would be £4.15m. Even more bizarrely, the system could be ‘gamed’ in a two-tier Council area by pushing the costs onto the District Council. In theory the guidance forbids this, but responsibilities can be porous and arguable between the tiers, as anyone who has worked in such an area knows. Whether this is best solved by a flat threshold, or by clustering authorities into sub-regional flood management boards based, for example, on river catchment areas, I will leave to the experts!