House of Commons Library 1 July 1999 Dear Mr Davey Flooding You requested some information regarding the statutory obligations of local councils with respect to flood control. I have set out the distribution of responsibilities below but am not aware of any particular changes recently which have meant that the local authorities have less responsibility. However, the establishment of the Environment Agency in 1995 did change the organisation of the flood defence committees slightly and MAFF is currently consulting on possible improvements to the funding arrangements for flood defence. General organisation of flood defence in England and Wales The provision of flood defences relies on a partnership between Government and local operating authorities. The term "operating authorities" includes the Environment Agency, local authorities and Internal Drainage Boards (IDBs). The involvement by this array of bodies with varying responsibilities makes for a complicated system and a confusing funding mechanism.
Under Section 165 of the Water Resources Act 1991 the Environment Agency (previously the National Rivers Authority) has the power "in connection with a main river...to construct new works, that is to say, to make any new watercourse or drainage work or erect any machinery...required for the drainage of any land". These powers are discretionary, and there is no requirement which compels the Agency to construct such works. It will normally only proceed with a particular scheme if it can be shown to be economically cost effective. Under Section 118 of the Act, the Environment Agency has the power to raise a flood defence levy from local authorities within a local flood defence district to pay for flood defence schemes. Expenditure by local authorities on this levy is taken into account in their Standard Spending Assessments (SSA). The SSA for flood defence is based on the actual expenditure on the levy in the previous year. Flood Defence Committees The Environment Agency is required by the Environment Act 1995 to exercise its flood defence and land drainage functions through Regional Flood Defence Committees (RFDCs) who can in turn appoint Local Flood Defence Committees (LFDCs) to carry out their functions. RFDCs are mainly concerned with the regulation and improvement of watercourses to alleviate flooding of land or property; maintenance or improvement of sea defences; and the provision of flood warning systems. They have executive powers to deliver the necessary work programmes and to raise the matching funding. LFDCs have delegated powers to raise the necessary funding for their local area. Section 15 of the Environment Act 1995 sets down the composition of the RFDCs. All Committees operate within Nolan principles with meetings held in public. RFDC members comprise of:-
Some RFDCs have appointed three or more Local FDCs (LFDCs) whose members comprise:-
This membership is intended to provide a direct link to local authorities in order to provide local input to the identification of flood defence needs. In effect local authorities have the final say over most funding for flood defence committees. Ms Katherine Bryan, the Environment Agency’s South-West regional manager, whilst acknowledging the benefits of giving the local people a voice in the process, has been quoted in the Financial Times as saying that "the system does not appear to work". Internal Drainage Boards (IDBs) Where IDBs exist, they have a duty to exercise supervision over all matters relating to the drainage of land within their Districts (Internal Drainage Districts) and have the powers to carry out work on ordinary watercourses within their District (i.e. all watercourses except those shown on the Agency’s statutory main river maps ). They have to consult with the Environment Agency before carrying out works and are subject to direction by the Agency through its RFDCs. The IDBs date from the Land Drainage Act 1930 which established catchment boards for certain river catchments. They are bodies consisting of members elected by agricultural ratepayers and in some cases local authorities. An IDB is not empowered to do any work in connection with a main river and is generally only empowered to do work within its own drainage district. The powers conferred on a local authority may only be used for the purpose of carrying out works in pursuance of a scheme for the drainage of small areas or that necessary or preventing flooding or remedying or mitigating damage caused by flooding in its area. If the IDB wants to carry out drainage works beyond that in relation to drainage of a small area it must seek the consent of the Environment Agency and accord with any conditions that the Agency imposes. In turn, the Agency must consult with any IDB before giving any consent or imposing conditions on a watercourse under the control of an IDB. (This does not apply for work carried out in an emergency). Funding for IDBs is primarily from two sources: the rating of agricultural land and the special levies payable by the constituent local authorities. The former is collected directly from the occupiers of land reflecting the benefit to their holding and the latter reflecting the benefit received by all the industrial, commercial, domestic property, highways etc. Funding is also received from the Environment Agency where the IDB’s drainage systems are required to deal with water flowing into the District from higher land. Funding arrangements Financing for flood and coastal defence policies comes from a diverse array of sources and is channelled through many organisations. However, there are three basic means of funding for flood defence schemes: local levies (Environment Agency), council taxes (Local Authorities) or drainage rates (Internal Drainage Boards). The financing arrangements for flood and coastal defence were considered by the House of Commons Agriculture Committee in their recent inquiry on Flood and Coastal Defence. I have drawn largely on their work in setting out the arrangements below. Revenue Support Grant (RSG) This is the largest central Government funding source for local authorities, disbursed by the DETR for payment of levy to the Environment Agency and IDBs as well as for authorities to instigate their own local flood and/or coastal defence programmes. In the 1997/8 financial year, the flood and coastal defence element of the RSG totalled £225.4 million. The total RSG made available to the relevant local authority for these purposes is distributed under two separate headings of the local authority’s Standard Spending Assessment, for flood defence and coast protection respectively. Under each heading there are two elements to the SSA:
MAFF dispenses SCAs to local authorities to cover any remaining expenses incurred by the authority in the construction of flood defences which cannot be met from its own resources. In 1998/99, the total value of MAFF-issued SCAs is estimated at £15 million. The local authorities’ contributions ("levies") are supported by a specific element within the Standard Spending Assessment (SSA) formula. An authority’s share of the national totals of SSA for the day-to-day expenditure in the previous year. The national totals reflect an estimate by MAFF/DETR of expenditure on Environment Agency levies and IDB special levies, together with authorities own spending. The SSA is based on the amounts actually levied, and is in effect a payment in arrears. The SSA system is currently under review by the Government. In their evidence to the Agriculture Committee, the Local Government Association commented that: As the Statutory Spending Assessment (SSA) is based on local authority budgets in the previous year, the "cost" to authorities of flood defence spending is less than the cost of other services—any increased spending is compensated for through the SSA and grant system. One might then expect local authorities to "overspend" on flood defence compared to other service areas. However, this does not appear to happen in practice. It would be reasonable to retain the existing SSA methodology (as it would be difficult to develop a robust distribution formula which was free from bias) with additional safeguards to reflect within year changes in local authorities' spending on their own flood defence schemes in the SSAs for subsequent years. This would allow for consistency and certainty within the SSA procedure and for strategic planning for flood defence. Grant-in-aid MAFF provides flood defence grant to the Environment Agency and to IDBs, and grant-in-aid to local authorities for the construction of flood defence and coastal protection works. Total expenditure under these three headings is expected to be £53.9 million in 1998/99; the majority of grant-in-aid to local authorities is for coast protection works (£20.1 million allocated in 1998/99). Grant-in-aid paid to local authorities is made on the basis of project submissions from these authorities to the Ministry which have successfully met certain technical, economic and environmental criteria, under the Project Appraisal Guidance Note (PAGN) procedure. Levels of funding for approved projects range from 15 % to 85 % of the total project costs, depending on the needs and financial resources of the specific local authority. MAFF sets a limit each year for each Flood Defence Committee area on the value of the works which will receive grant. This is done for each Committee area and is referred to as their Grant Earning Ceiling (GEC). The residual capital cost of grant aided schemes, the cost of all non grant aided schemes and all revenues expenditure is financed from local funds. This is primarily from levies on County, Metropolitan and Unitary Councils which then recoup through the SSA and Revenue Support Grant. The situation in practice Many operating authorities have at least some responsibility for the collection and disbursal of monies and their involvement often depends on the specific flood defence activities undertaken. This makes the system rather complicated. For example, the provision of flood defence by a district council might involve:
The Agriculture Committee have commented that the "array of funding streams is, to our mind, both confusing and highly inefficient in policy terms". It also urged the Government, after proper consultation with operating authorities to: "radically [to] simplify the existing funding procedures for flood and coastal defence activities, with the aim of achieving measurable improvements in policy efficiency through cutting out unnecessary bureaucracy and administration. As we are in favour of devolving greater decision-making responsibility for flood and coastal defence to the regional level, one possibility for consideration may be to replace scheme-specific grant-in-aid from MAFF and the Welsh Office with block grants, allocated to RFDCs or regional coastal groups, as appropriate. There has been little change to the funding procedures for flood defence since May 1997. The main development has been that MAFF has reviewed its Project Appraisal Guidance Note (PAGN) which sets out the procedure which operating authorities such as FDCs must follow for flood defence and coastal defence project proposals to be eligible for Government grant-in-aid. This review was in response to criticism that the appraisal procedure did not provide sufficient guidance on how environmental criteria might be assessed. The House of Commons Agriculture Committee recently conducted an inquiry on flood and coastal defence which considered the PAGN and the funding of flood defence. Constraints on flood and coastal defence projects of current funding procedures The Committee also heard from from Ernst and Young that accounting conventions among local authorities and national Government can have negative implications for the scale of flood defence projects. The limiting of expenditure to the amount available in any one financial year in the case of larger works encourages the programming of projects over a number of years, potentially increasing overall costs. In addition, MAFF can claw back unspent grant, which, combined with there being no carry-over facility for grant from year to year, provides a major incentive for local authorities to maximise their grant spending and to commence construction of defence works as soon as possible, potentially leaving less time for impact studies or environmental assessments of the proposed structure. This situation is exacerbated by the fact that the activities of certain operating authorities, including LFDCs, RFDCs and local authorities, are restricted to their geographical area of competence and it is not possible to use local or regionally-levied funds outside their delimited areas. This is the case even if there are projects of high priority in adjoining regions which cannot be implemented for lack of funds. In its report on flood defence the House of Commons Agriculture Committee comments: The point was made to us by several witnesses that MAFF's funding of capital, rather than maintenance (revenue) projects led to the tacit encouragement of construction of new flood defence and coast protection works, at the expense of maintaining existing infrastructure[48]. According to the Chartered Institution of Water and Environmental Management, under current arrangements local authorities can obtain MAFF funding for flood defence capital works equal to three to four times the amount of their own contribution, but cannot receive any grant-in-aid from the Ministry towards maintenance of existing defences. The CIWEM maintained that the effects of this "anomalous situation[49]" had been heightened recently, with local authorities earmarking resources, which could potentially be spent on maintenance of existing works, to match MAFF aid granted for the construction of new works. …. our opinion is that MAFF and DETR should undertake a joint review of the current mechanisms for public financing of flood and coastal defence works to ensure that the funds made available by both Departments do not prejudice decisions taken by local authorities against the maintenance of existing infrastructure and in favour of the construction of new works. The review should include an evaluation of the existing maintenance heading of the SSA to assess whether it provides the most effective mechanism for delivering funds for the maintenance of flood and coastal defence works. We recognise the urgent need for extensive renovation, and, in places, the replacement of existing works over the next decade; but in order to safeguard life and property in the long term, the piecemeal, reactive approach to maintaining defence works, endemic in the current system, must be replaced by a considered national strategy striking the appropriate balance between maintenance and new developments. The Committee also commented………… From our inquiry, it has been difficult to determine, other than in the most general terms, what the probable future UK expenditure requirements on flood and coastal defence policy might be. Certainly at present there seems to be a shortage of finance for all but the most urgent of works. We are, therefore, encouraged that the Government has seen fit to plan to increase spending under the Comprehensive Spending Review on flood defence, and has no immediate plans to cut global levels of flood and coastal defence expenditure. From the evidence we have received, it appears operating authorities are hard enough pressed as it is to maintain vital local flood and coastal defence programmes. We also commend the Government on the introduction of three year budgets for flood and coastal defence expenditure, which should assist strategic planning in this area. I hope this information is helpful Science and Environment Section
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