MPs doubt UK government's ability to raise private sector flood defence funding

The Department for the Environment, Food and Rural Affairs (Defra) must make it clear how it intends to source the funding needed to supplement its own £2.3 billion commitment to flood defence projects, and set out a contingency plan if the money is not forthcoming, according to a House of Commons committee. Only £40m of the £148m funding from outside central government in 2014-15 came from private sources, with the rest coming from local authorities, according to the committee's report on Defra's performance over the previous financial year.

"We support the principle that the private sector should help to fund new flood defence schemes, but we have repeatedly expressed concern about the relatively small amounts of private sector funding secured to date under the 'partnership funding' approach," said Anne McIntosh, chair of the Environment, Food and Rural Affairs (EFRA) Committee.

"It is unclear how the £600m target can be met, and we want Defra to demonstrate how it intends to obtain that money and to explain the impact on its investment programme if the money does not come forward," she said.

Elsewhere in its report, the committee criticised Defra for its repeated refusal to identify which of its policies and programmes had or would be affected by budget cuts or the need to reallocate funding in an emergency, for example in response to winter flooding. In February 2014, Defra announced an additional £130m had been sourced from its existing funding allocation to respond to the winter floods of 2013/14. However, it was unable to provide the committee with more information about the source of this funding.

The latest update to the National Infrastructure Plan (NIP), published alongside the Autumn Statement in December, included a £2.3bn commitment to over 1,400 flood defence projects in England over the next six years. These projects are anticipated to protect 300,000 properties, reduce flood risk by 5% and save the economy £2.7bn by 2021, according to government estimates. However, in order to deliver this investment Defra will need to make efficiency savings of at least 10% and attract £600m or more in additional funding from private sector and local authority partners.

At the Autumn Statement, the government announced that contributions by businesses to flood defence projects would become a deductible cost for tax purposes. However, the committee said that this alone would not enable Defra to meet its funding targets. It urged Defra to demonstrate how its preferred funding model would deliver much greater private sector funding in the future, and to explain the impact on the planned flood defence schemes if it was unable to raise the necessary funding or make the required efficiency savings.

In addition, the committee said that it was concerned that the six-year investment programme covered only capital funding for new projects, and not revenue funding for ongoing maintenance over the course of a financial year. According to the committee, additional revenue funding would be needed to maintain the new capital assets that would be developed over the six-year investment period. For this reason, a "fully-funded" six-year revenue funding commitment to cover the upkeep of new projects as well as a "backlog of appropriate and necessary maintenance work" was needed, it said.

The report listed other policy delivery failures by Defra over the review period, including the delayed delivery of biodiversity offsetting proposals and the department's slow progress on officially designating 'marine conservation zones'. Defra had also been fined a cumulative £580m by the European Commission for making payments under the EU's Common Agricultural Policy (CAP) incorrectly since it was introduced in 2005, the committee said.