15 November 2023

Government ‘must ensure value for money as flood defence plans hit by inflation’

15 November 2023

The Government must ensure value for money when executing flood protection plans in England as inflation hampers its short-term goal to safeguard more properties.

The National Audit Office (NAO) said the Environment Agency (EA) has cut its forecast for the number of additional properties it will be able to better protect from flooding by 40% since plans were unveiled in 2020.

The Government committed to protecting 336,000 more properties as part of a six-year flood and coastal erosion programme from 2021 to 2027.

But in a 56-page report published on Wednesday, the public spending watchdog said EA reduced its forecast to 200,000 properties, identifying inflation as a major reason.

The report also revealed EA has removed 500 of the 2,000 new flood defence projects that were originally included in the Government’s programme.

It comes despite the Government doubling capital funding to £5.2 billion for the programme.

Meanwhile, 203,000 properties that already had protection from flooding are also facing an increased risk because of a £34 million shortfall in EA’s maintenance funding for existing flood defence assets for 2022-23, the report said.

At the same time, EA underspent £310 million when it came to investing in new projects during the first two years of the capital programme, it noted.

The NAO said neither the agency nor Defra assessed whether using some of this underspend to meet the shortfall in its maintenance budget would have provided better value for money rather than the Treasury deferring it to later in the programme.

The watchdog also warned that due to underspending in the first two years, EA will need to spend an average of almost £1 billion each year over the remaining four years to spend the full £5.2 billion.

It said this creates a risk for projects to be accelerated or new projects to be introduced too quickly, leading to delays or cost overruns, as EA pushes to meet this level of investment.

The NAO recommended Defra, EA, and the Treasury work together to ensure that decisions on the current capital programme are not influenced by short-term funding periods and targets but are focused on maximising value for money.

The watchdog also said decisions should be taken quickly to switch money from the capital programme into the maintenance budget where it provides value for money.

Although the Government has outlined its vision for flood resilience up to 2100 and EA has a number of strategic objectives for 2050, it has not set a target for the level of flood resilience it expects to achieve and has not mapped out any solid plans beyond 2026 to bridge the gap between its shorter-term actions and long-term objectives, the report noted.

It stated: “This will make it difficult for the Government to make rational and informed decisions about its priorities, measure its progress or plan effective investment for the long term.”

Gareth Davies, head of the NAO, said: “Government recognises the growing dangers from flooding and has committed to doubling its capital funding in England in the six years to 2027, as well as doing more to understand flood risk.

“However, the capital funding is forecast to better protect only 60% of properties that were promised when the programme was launched in 2020, while inflation and other programme risks mean the Environment Agency could deliver even fewer than that.

“If there are further delays to the capital programme, Defra must work with HM Treasury to make sure it is in a position to switch money quickly into maintenance, where this would provide value for money.

“EA will have to manage a record level of capital investment in flood defences for the remaining four years of the programme.

“In doing so, it must resist pressure to accelerate projects or initiate new ones too quickly, if this is likely to lead to cost overruns and delays and put value for money at risk.”

Meg Hillier, chairwoman of the Public Accounts Committee, said: “Flooding and coastal erosion put lives, livelihoods and people’s well-being at risk.

“Government must decide what level of flood resilience it wants to achieve and how it can make long-term investment decisions that provide the best protection for citizens and businesses.”

Tom Lancaster, land analyst at the Energy and Climate Intelligence Unit (ECIU), said: “Recent storms have brought flooding to the top of the political agenda, and this new report from the NAO reveals that we are well off the pace in using the power of nature to protect homes and communities in England.

“Restoring sponge-like peatlands can keep water in the hills and out of living rooms, and new woodlands and wetlands will slow the flow and absorb carbon, mitigating as well as adapting to climate change.

“Alongside getting on with an ambitious set of new land management schemes for farmers, Defra have the chance here to transform the role that nature plays, and yet as things stand we’re at risk of missing the protection that it can and should afford.”

A Defra spokesperson said: “The Government’s priority is to make the difficult but necessary long-term decisions for the country.

“As has already been set out in the Environment Agency’s annual report, inflationary pressures and delays brought about by the pandemic mean we must look again at the targets set out in our £5.2 billion programme.

“We will consider the National Audit Office’s recommendations as we continue to deliver our record investment to protect hundreds of thousands of homes from floods.”

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