Jonathan Evans, chairman of the All Party Parliamentary Group on Insurance & Financial Services, spoke during yesterday's 2nd Reading debate on the Water Bill. Here is the full text of his speech.
I draw the attention of the House to my entry in the Register of Members’ Financial Interests and to my chairmanship of the all-party group on insurance and financial services. My remarks will be limited entirely to that part of the Bill that deals with flood insurance.
Since 2010, the all-party group has met on four occasions to consider the issue in great detail. It has met the British Insurance Brokers Association and the Association of British Insurers, and has frequently met the National Flood Forum. The group had the pleasure of meeting my hon. Friend the Member for Newbury (Richard Benyon)—I am not sure it was a pleasure for him—who kept us up to date with the progress of his deliberations. I join other Members in thanking him for his contribution.
My remarks will focus entirely on the all-party group’s opinion of the Government’s proposals and the representations it made as part of the consultation. The concept of Flood Re is generally supported by the group, but its members have a number of concerns. Many of those were raised by the hon. Member for Kingston upon Hull North (Diana Johnson). She reminded us of the dreadful experience in Hull and highlighted some of the issues we need to examine in the context of the Flood Re proposal.
There is concern regarding small businesses. The Bill proposes to cover residential property, but under the statement of principles some small businesses were covered too. It is easy to see in Hull many corner shops and things of that nature where it is difficult to distinguish between the residential and business elements. The Federation of Small Businesses, the British Insurance Brokers Association and the British Property Federation have urged the Government to reconsider their exclusion of small businesses under the scheme. We do not want major businesses covered, but perhaps a turnover of £1 million would be an appropriate cut-off point when covering smaller businesses. The cost would not be prohibitive.
On another contentious area, the Government say, “Come what may, we must have the flood insurance obligation.” That is clearly desirable, but it cannot be a blank cheque. Under the one-in-200-years principle, insurance is supposed to cover all circumstances likely to arise, but it is difficult to assess what a one-in-200-years risk might be, given, for example, that the six wettest years on record have all been since 2000.
As we have heard, climate change is happening and it is difficult to make those assessments. Just this year, there have been major floods in Alberta, Canada that might count as a one-in-200-years event: total estimated damage was more than 5 billion Canadian dollars, 100,000 people were displaced, several people died and 2,200 troops were deployed. In the next few years, we could suffer such a calamity, yet it is not clear from the Flood Re proposal what the Government would bring to the party. It is unrealistic to think the insurance industry could cover the costs of such a calamitous event. The Government have been sending signals about what they might do, but they have not been much more than signals. We would like a bit more than that.
It is proposed that Flood Re be based on council tax bands. I agree with my hon. Friend the Member for Newbury, the former Minister, that we do not want to unpick this, but I would like it to go a bit further. The measure is a sort of rating by proxy, not risk, but band H properties have been excluded, which is something that the all-party group is concerned about. As he said, the reason for the exclusion is that we do not want subsidies for the rich, but I wonder whether that has been thought through. My hon. Friend the Member for Brecon and Radnorshire (Roger Williams) will be able to remind the House, as I can, of the council tax revaluation in Wales. Our top band is no longer H, but I. Band H properties are not occupied by millionaires, yet would not be covered by this proposal. Has that been taken into account?
The reason we do not want band H properties excluded is that historically all bands have been based on valuations of no relevance today. At some point, there is likely to be a revaluation, and who is to say that new bands will not be added, as happened in Wales? For that reason, it would be much better not to exclude band H properties. Against the claim that it would help the wealthy, I would simply say that the wealthiest occupiers probably use brokers to arrange their insurance. It is the people who cannot do that—people in what I would term “middle class-ish” properties—who might find themselves in difficulty. I make that case on behalf of not one political party, but the all-party group, and I urge the Government to reconsider.
The hon. Member for Kingston upon Hull North drew our attention to the distinct position of properties built after 2009. Yet again, I share that concern. That year was chosen because it was when the statement of principles was renewed, and the view, therefore, was, “Well, everyone knew that from that year onwards they would be excluded, so let’s not have them covered,” but we know that there is already much better mapping data. I would like us to make use of the mapping data, rather than simply not covering post-2009 properties.
Julian Sturdy (York Outer) (Con): My hon. Friend is making a powerful point. Should we not be ensuring that we do not build new properties in flood risk areas?
Jonathan Evans: That is a much better proposition than telling someone in a property built in 2010, “Flood Re is not for you.” If it is to be a solution to the difficulties of insurance, as many properties as possible should be covered. That includes what are termed “genuinely uninsurable” properties. They are excluded as well, yet they might be occupied or habitable properties with a council tax rating. Why are we not to include them? In my judgment, their number is not so considerable as to make the scheme impossible to operate. As the Minister knows, the all-party group made that representation to him during the consultation, and we hope he will take it on board as he considers his amendments in Committee.
I already know of one area where the Minister has accepted our recommendation. We suggested giving regulatory responsibility to the Financial Conduct Authority, and that is now in the Bill. The all-party group welcomes that inclusion, but hopes that the Minister will give further consideration to the other points we have made in support of what in our judgment is a proper solution to a difficulty that has taken too long to resolve.
(Extract from Hansard. The full debate can be found on the Parliament website)
Read David Worsfold's view of where the debate on Flood Re has now got to and what challenges lie ahead as the Water Bill goes to committee for more detailed scrutiny.
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