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After the flood: Who should pay the bill?

Andyj Dr Andy Johnston, Head of the Centre for Local Sustainability at the Local Government Information Unit, says either stricter insurance requirements are needed or Councils could issue disaster bonds.

Last week’s terrible floods in Cumbria catapulted flood management to the top of the political agenda.  Speaking at this week's LGiU conference on flooding, Allerdale Council Leader Tim Heslop discussed the “massive recovery effort” that local government will be required to lead.

With 90 percent of businesses lost and disruption to services such as doctor’s surgeries and schools, getting people’s lives back to normal – and ensuring the survival of already hard-pressed small businesses – will not be cheap.  One estimate reckoned that the cost of repairing the damage could hit £200 million.

Who will foot the bill?  Gordon Brown visited Cockermouth and committed his Government to supporting the recovery effort.  But the state of the public finances – with a record October rate for UK public sector borrowing reported last week – means that communities may not be able to count on a blank check in future.

Instead, communities and individuals will need to play a bigger role. That’s why the Local Government Flood Forum– a group representing 68 councils and other bodies across the UK run by the LGIU – is looking into new community-based funding options for flood defences.

Options under discussion include local authority bonds – an approach used in the USA to finance recovery from major disasters and flood defence works – and supplements on business rates to pay for local
flood protection.

But at our conference, Anne McIntosh – Shadow Minister for Environment, Food and Rural Affairs – also called for individuals to take on some of the responsibilities in managing flood risks. This could mean insurance-based solutions or investment in flood risk management products.

Both approaches have their advantages and disadvantages. Insurance-based options, for instance, have the advantage of realising the benefit of market-based competition but can also leave individuals vulnerable to high premiums and costs.  And increased taxes, of course, can be politically difficult.

Either option – however – would be preferable to the status quo.  The world of flood prevention is in a never-never land of open-ended budgets.  As climate change makes floods a more regular occurrence – and the squeeze on public spending really bites – it is people affected by flooding who will have to pick up the tab.

What we need now is an open debate about how this should happen. We’d welcome the views of Conservative Home readers on this difficult but vital issue.


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