Exclusive: Insurance deal for flood risk homes ‘is nonsense’

Floodwaters surrounds local shops in the centre of Mytholmroyd, West Yorkshire, last June.
Floodwaters surrounds local shops in the centre of Mytholmroyd, West Yorkshire, last June.
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The coalition’s much-heralded deal to ensure people in flood risk areas can obtain home insurance is a “nonsense” due to exemptions which mean small businesses and new-build properties will not be covered, a Government aide has warned.

Stephen Gilbert, a Parliamentary aide to the Climate Change Secretary, has broken ranks over the Government’s recent agreement with the insurance industry to warn that many people with properties at risk of flooding will be “left behind” and still unable to afford cover for their homes. Mr Gilbert, an MP whose South West constituency suffers frequent flooding, said he may try to force changes to the scheme when the Water Bill comes before Parliament later this year to ensure insurance is “available and affordable to all”.

“It is clearly a nonsense to suggest that homes built since 2009 won’t be covered,” he said.

Mr Gilbert’s concerns were echoed by flood campaigners, who warned the omission of small businesses from the scheme could have “catastrophic economic consequences” in areas such as North Yorkshire.

Labour said the Lib Dem MP’s comments revealed “a split at the highest level of Government”.

The new insurance scheme – known as Flood Re – was unveiled in June after more than two years of negotiations with the insurance industry about how best to ensure people in flood risk areas can get affordable cover. Thousands of people across Yorkshire have seen their home insurance premiums or excesses soar after being victims of flooding over recent years.

The previous agreement between the insurance industry and Government was due to expire this summer – potentially leaving 200,000 British households unable to get any insurance at all. The new scheme, which is due to begin in 2015, involves levying a £10.50 charge on every household premium to effectively subsidise the costs of those living in flood risk areas.

The insurance industry has said bills will not actually rise, as an informal subsidy already exists within the current system.

Floods Minister Richard Benyon described the agreement in June as “one that will last for the long term”, while Environment Secretary Owen Paterson said it meant “people no longer need to live in fear of being uninsurable”.

But the agreement excludes any properties built after 2009, as well as all private firms – including small “domestic” businesses such as bed and breakfasts – and any property in the most expensive council tax band.

Ministers say the exclusion of new-build properties is supposed to discourage developers from building on flood plains. But Mr Gilbert, who is Parliamentary Private Secretary to Climate Change Secretary Ed Davey, said the Government’s approach risks “pulling up the ladder” on people who buy new homes only to find the changing climate leaves them exposed further down the line.

“We know there has been some inappropriate development in flood risk areas – but what we also know is because of climate change there isn’t an area of the country that isn’t a potential flood risk area,” he said.

“We are going into a world where climate change makes many, many more homes open to flood risk.

“Flash flooding, atmosphere warming, more water held in the atmosphere – (it is) completely unpredictable about where it may fall down.”

Labour has frequently questioned how effective the scheme will be, and warned last night that there were now “serious questions” for Ministers to answer.

Shadow Environment Secretary Mary Creagh, the MP for Wakefield, said: “There is a split at the highest level of Government on flood insurance.

“The Government’s proposals raise serious questions about who will be covered, how much householders will pay and who picks up the bill in the event of a catastrophic flood.”

But the Government insisted the current proposals are fair, as new homes should never be built in flood risk areas.

A spokeswoman for the Department for Environment, Food and Rural Affairs said: “We have always been clear that developers should avoid building in high-risk flood areas.

“Properties built after 2009 ideally should not be built in high-risk areas and would therefore be insurable at affordable prices.”