Water Bill

Public Bill Committee, 12 December 2013.

James Gray (Conservative, North Wiltshire)

I welcome the Committee back to our detailed consideration of the Water Bill. We are starting in what is perhaps a slightly unusual way, by debating clause 47 along with a large number of Government new clauses and Opposition amendments to those new clauses. The Government and Opposition have agreed to treat the debate as a stand part debate within which we will allow discussion of this large grouping of new clauses and amendments. As usual, it is perfectly reasonable for Members to speak more than once in the debate, if they wish.

The Government and Opposition have agreed that the Minister will open the debate, which is on insurance. Mr Docherty will reply, speaking to the amendments he has tabled to the Government new clauses, and the Minister will respond. Mr Docherty will then speak to his new clauses 37 to 40, and the Minister will respond. During the debate I will of course call other Members who seek to catch my eye, although it will be helpful to reserve speeches for the appropriate moment to try to create some sensible structure for the debate, which might otherwise become rather unstructured. Members should bear in mind at all times that the debate is on clause 47 stand part, within which we are allowing discussion of the new clauses and amendments to them.

Clause 47 - Flood insurance

James Gray (Conservative, North Wiltshire)

With this, it will be convenient to discuss the following:

Government amendment 2.

Government new clause 1—The Flood Reinsurance Scheme—

‘(1) For the purposes of this Part, the Flood Reinsurance Scheme is a scheme which—

(a) is established for the purpose mentioned in subsection (2), and

(b) is designated for the purposes of this Part by regulations made by the Secretary of State.

(2) The purpose referred to in subsection (1)(a) is the purpose of providing reinsurance to relevant insurers in respect of such risks relating to flooding as are identified by the scheme, in such a way as to—

(a) promote the availability and affordability of flood insurance for household premises while minimising the costs of doing so, and

(b) manage, over the period of operation of the scheme, the transition to risk-reflective pricing of flood insurance for household premises.

(3) Subsection (5) applies where the terms of the FR Scheme governing the availability of reinsurance under the FR Scheme for an insurance policy include a requirement as mentioned in subsection (4).

(4) The requirement is that the part of the premium for the policy which is attributable to risks relating to flooding does not exceed a specified amount (“the eligibility threshold”).

(5) The Secretary of State may by regulations make provision as to the level of the eligibility threshold, and may make different provision for different purposes.

(6) Regulations under subsection (5) may, in particular, make different provision for different insurance policies by reference to the value of the household premises to which a policy relates.

(7) In this Part, the Flood Reinsurance Scheme is called “the FR Scheme”.’.

Amendment (a) to Government new clause 1, line 23, at end add—

‘(8) Prior to making any regulations under subsection (5) the Secretary of State shall require the Committee on Climate Change to provide current and projected estimates of the number of properties that would be eligible for—

(a) inclusion in the Flood Reinsurance Scheme;

(b) the value of levy required under section [Schemefunding]; and

(c) the likelihood of additional levy or contributions being needed from time to time.’.

Government new clause 2—Scheme administrator.

Government new clause 3—Scheme funding.

Government new clause 4—Scheme administration.

Government new clause 5—Replacement of the scheme or administrator.

Government new clause 6—Disclosure of information: preparatory purposes.

Government new clause 7—Flood insurance obligations—

‘(1) The Secretary of State may by regulations require a relevant insurer to issue in a prescribed period insurance policies that provide cover against a prescribed description of risk for a prescribed number of registered premises.

(2) The regulations may prescribe different numbers of registered premises for different descriptions of risk.

(3) The descriptions of risks that may be prescribed are those relating to the effects of flooding.

(4) The regulations may provide for a prescribed number relating to a relevant insurer to be determined by reference to factors that include in particular—

(a) a target number (see section (Flood insurance obligations: target number));

(b) the relevant insurer’s share of insurance business of a prescribed description.

(5) The regulations may—

(a) make provision about determining the size of a relevant insurer’s share of insurance business of a prescribed description;

(b) provide for a relevant insurer to be exempt from the obligation described in subsection (1) in prescribed circumstances, whether wholly or so far as regards a particular description of risk, including circumstances relating to the amount of insurance business done by the relevant insurer;

(c) make provision about the circumstances in which a relevant insurer ceases to be subject to the obligation described in subsection (1), whether wholly or so far as regards a particular description of risk;

(d) make provision about the cases in which issuing an insurance policy is not to count towards discharging an obligation imposed on a relevant insurer by the regulations, including cases in which an insurance policy is not to count because of the content of its terms;

(e) make provision for allowing an insurance policy issued by another insurer to count towards the discharge of an obligation to issue a number of insurance policies imposed on a relevant insurer by the regulations;

(f) make provision about determining the number of registered premises for which a relevant insurer has issued insurance policies, including provision for varying, by reference to the risk band applicable to the particular registered premises, the extent to which insuring those premises counts in determining that number.

(6) Provision under subsection (5)(a) may require an insurer, in determining the insurer’s share of insurance business of a prescribed description, to use information about that insurance business held by—

(a) the Secretary of State,

(b) a person acting on behalf of the Secretary of State, or

(c) the FCA.

(7) Subsection (5)(e) is not to be taken as requiring a change in the person who is the insurer in relation to an insurance policy.

(8) Regulations under this section may include provision in respect of cases where an insurer has not provided such information as is required by regulations under section (Flood insurance obligations: information) including—

(a) provision for determining whether the insurer is a relevant insurer,

(b) provision for determining whether an exemption applies, and

(c) provision for determining what share of insurance business of a prescribed description the insurer is to be treated as having.

(9) Before making regulations under this section, the Secretary of State must consult such persons as the Secretary of State considers appropriate.

(10) In this section “prescribed” means specified in or determined in accordance with regulations under this section.’.

Amendment (a) to Government new clause 7, line 35, at end insert—

‘(g) make provision about the circumstances in which a relevant insurer may require mitigation activity to be a condition of cover under an insurance policy.’.

Amendment (b) to Government new clause 7, line 35, at end insert—

‘(g) make provision about the circumstances in which a relevant insurer may require an insured to retain certain elements of the risk under the Flood Reinsurance scheme.’.

Amendment (c) to Government new clause 7, line 35, at end insert—

‘(g) make provision about the circumstances in which a relevant insurer must build awareness of flood risk amongst those living in high risk households.’.

Government new clause 8—Flood insurance obligations: target number—

‘(1) The Secretary of State may, from time to time, by regulations prescribe a number to be a target number for the purposes of regulations under section (Flood insurance obligations).

(2) A target number is the number of registered premises to be covered against a prescribed description of risk by insurance policies issued in a prescribed period by those relevant insurers upon whom obligations are imposed by regulations under section (Flood insurance obligations).

(3) The regulations may prescribe different target numbers for different descriptions of risk.

(4) The regulations may in particular provide for a target number to be expressed as a percentage of the number of registered premises.

(5) The regulations may, at any one time, prescribe target numbers for two or more consecutive prescribed periods.

(6) In this section “prescribed” means specified in or determined in accordance with regulations under this section.’.

Amendment (a) to Government new clause 8, line 15, at end add—

‘(7) In prescribing a target number the Secretary of State shall refer to the advice of the Committee on Climate Change given under section [The Flood Reinsurance Scheme](8).’.

Government new clause 9—Flood insurance obligations: information.

Government new clause 10—Flood insurance obligations: further provision.

Government new clause 11—Register of premises subject to greater flood risk.

Government new clause 12—The register: further provision.

Government new clause 13—The register: reviews and appeals.

Government new clause 14—The register: expenses of relevant bodies.

Government new clause 15—Compliance reports.

Government new clause 16—Functions of the FCA.

Government new clause 17—Reports by the FCA.

Government new clause 18—Intervention by the FCA or the PRA.

Government new clause 19—Interpretation.

Government new clause 20—Period of operation.

Government new clause 21—Regulations and orders.

New clause 37—Right of appeal for households on removal from the flood reinsurance scheme—

‘(1) The Secretary of State shall by order establish a right of appeal for a household which has been removed from the Flood Reinsurance Scheme.

(2) The Financial Conduct Authority shall be responsible for the hearing and administration of appeals under subsection (1).

(3) An order under subsection (1)—

(a) shall be made by statutory instrument; and

(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.

(4) An order under subsection (1) must be made before the Flood Reinsurance Scheme has been implemented.’.

New clause 38—Flood reinsurance scheme: report on properties—

‘(1) The Secretary of State must prepare and publish a report on—

(a) how many properties are not eligible for the Flood Reinsurance Scheme; and

(b) the cost of including properties under (a) in the FR scheme prior to it coming into effect,

and must lay a copy of the report before Parliament.

(2) The report shall include a breakdown of the cost of including properties that fall under the category—

(a) Council Tax band H;

(b) built between 1 January 2009 and 31 December 2012; and

(c) built after 1 January 2013.’.

New clause 39—Flood reinsurance scheme: council tax band—

‘(1) The Secretary of State shall by order enable low income households to qualify for the Flood Reinsurance Scheme, regardless of their Council Tax band.

(2) An order under subsection (1) shall contain a definition of “low income households”.

(3) An order under subsection (1)—

(a) shall be made by statutory instrument; and

(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.

(4) An order under subsection (1) must be made before the Flood Reinsurance Scheme has been implemented.’.

New clause 40—Flood Reinsurance Scheme national database—

‘(1) The Secretary of State may by order (the “commencement order”) appoint a day on which section [The Flood Reinsurance Scheme] is to come into force.

(2) An order under subsection (1)—

(a) shall be made by statutory instrument; and

(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.

(3) The Secretary of State may only make an order under subsection (1) if a Flood Reinsurance Scheme national database has been established.

(4) Any Flood Reinsurance Scheme national database must—

(a) be accessible by the public;

(b) outline a property’s risk of flooding; and

(c) indicate if the property is covered by the Flood Reinsurance Scheme.’.

Dan Rogerson (Liberal Democrat, North Cornwall)

It is a pleasure to serve under your chairmanship once again, Mr Gray. With your permission and the permission of the Committee I should like first of all to discuss clause 47, the placeholder clause, and then move on to the Government new clauses.

Members of the Committee will recall that when the Water Bill was introduced to the House on 27 June it included a placeholder clause on flood insurance. The purpose of the clause was to ensure that the scope of the Bill was wide enough to allow us to introduce full flood insurance clauses by Government amendment following a public consultation over the summer.

James Gray (Conservative, North Wiltshire)

Order. I am sorry to interrupt the Minister, but I made it plain at the first of our sittings that we should maintain the same dress sense in the Committee as we do in the main Chamber.

Dan Rogerson (Liberal Democrat, North Cornwall)

Thank you for your guidance, as always, Mr Gray. I hope my dress is appropriate. [ Interruption. ] There may well now be interventions to give me sartorial advice, but I will move swiftly on.

As Members are aware, the Government have tabled a number of new clauses to the Bill. New clauses 1 to 21 set out our legislative approach for the new arrangements for flood insurance following the expiry of the voluntary agreement between the Government and the insurance industry. They replace the placeholder clause 47 in its entirety, so the clause is no longer needed. The Government therefore oppose the clause standing part of the Bill.

I will now set out at some length—with due apologies to the Committee—the thinking behind and argument for our approach as set out in the new clauses. I am delighted to introduce the new clauses on flood insurance, which were much anticipated on Second Reading. Colleagues from across the House were broadly supportive of the proposed approach and are, I know, looking forward to debating the detail of the new clauses in Committee.

The new clauses set out the future arrangements for flood insurance following the expiry in June 2013 of the voluntary agreement—called the statement of principles—between the Government and the members of the Association of British Insurers. We are seeking powers to establish a not-for-profit reinsurance scheme called Flood Re. We are also seeking powers in reserve to regulate for affordable cover if Flood Re should prove to be unworkable or not deliver our policy goals and if prices in an open market prove unacceptable. Having a fallback means that customers can have confidence that the issue will be addressed in one way or another. In the mean time, insurers have voluntarily agreed to continue to abide by their commitments in the statement of principles until Flood Re can be introduced.

We have always been clear that the only sustainable approach to managing flood risk is to move gradually towards more risk-reflective prices in order to increase the incentives for households and communities to manage their flood risk.

Sheryll Murray (Conservative, South East Cornwall)

I apologise for bringing this up so early in my hon. Friend’s speech, but I am due to leave the Committee temporarily. I know that small businesses are not included in the Flood Re programme. What about domestic small businesses such as bed and breakfasts? Will they be included?

Dan Rogerson (Liberal Democrat, North Cornwall)

The approach that we have taken, which has been agreed with the insurance industry, is that we will base the new Flood Re system on council tax bands. Therefore, any business based in a property that is primarily a residential property, and on which the occupier therefore pays council tax, will come into the system. Any business based in premises used primarily for business will not be covered. An example might be a farm business. If council tax is payable on the residential property—the farmhouse—that will be covered, but barns and outbuildings, which may be subject to a business rate, will not be covered. That is how the system will operate. I thank my hon. Friend for giving me the chance to clarify that.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am grateful to the Minister for giving way so early in his speech. While he is on the subject of banding, can he set out how the scheme will work in practice, given that four nations will be covered by Flood Re, each of which has its own variations on how it approaches local government valuations?

Dan Rogerson (Liberal Democrat, North Cornwall)

We will have the opportunity to return to these issues, but in England and Wales there are council tax bands. Wales has a band I due to the revaluation there, so the hon. Gentleman is right to point out that there is a slight difference. However, in the agreement, we have set the boundary at band G, so bands H and I will be excluded. Scotland has council tax bands, so the scheme will carry on there. The approach in Northern Ireland is slightly different—he and I have antecedents who will be looking down on us at this point. Northern Ireland has a system of rateable value, so an assessment will be made of council tax banding based on valuation, which will allow an equivalent system to be drawn up.

Thomas Docherty (Labour, Dunfermline and West Fife)

I do not wish to keep the Minister longer than I must. Can he confirm whether he intends to discuss the approach in more detail later in his speech, or would he prefer that I tease it out of him now?

Dan Rogerson (Liberal Democrat, North Cornwall)

I think it would be helpful for me to set out the broad principles, and then we can return to that issue. I am more than happy to address any particular concerns, and if they are so technical that I am unable to share advice with the hon. Gentleman now, we can proceed either via inspiration, which we have found to occur from time to time, or subsequently in writing, if he is happy with that approach. However, I will see what his requests are when we get to that point. I thank him for his intervention.

To return to the issue of risk-reflective prices, we want the system to increase incentives for households and communities to manage their flood risk. However, there was a risk that the expiry of the statement of principles could lead to sudden shifts in pricing and cause hardship for those at a higher risk of flood. That is why we are introducing measures to help those at risk in the medium term. We want to ensure that transition takes place in an orderly and equitable fashion. That message emerged clearly from the consultation, so we have strengthened the provisions in that respect.

Neil Parish (Conservative, Tiverton and Honiton)

One of my concerns is that perhaps we are being too soft on the insurance companies and that basically they are handing over the risk to the fund and potentially the Government, so what would happen at the time of a major flood if the fund was to run out? Will the Government not still be the insurer of last resort?

Dan Rogerson (Liberal Democrat, North Cornwall)

I will discuss later what will happen if there are particular demands on Flood Re, especially in its earlier period of operation, when the levy is building up its fund, but we are clear—I will put this on the record now for the benefit of my hon. Friend and the rest of the Committee—that there is no Government liability for Flood Re. As I have said before, the UK has a multi-billion-pound, world-leading insurance industry and we believe that it has the ability and the financial strength to resolve this issue without calling on hard-pressed taxpayers, so I can reassure my hon. Friend the Member for Tiverton and Honiton on that account.

Concern has been expressed that future trends, including impacts of climate change, have not been adequately considered. In fact, both Flood Re and the flood insurance obligation are designed to adapt to changing risk. For example, no firm limits have been set on the numbers of policies that could be covered under Flood Re. Our impact assessment makes assumptions about likely numbers, which I will come to later.

Anne Marie Morris (Conservative, Newton Abbot)

The Minister makes some very interesting points, but with regard to climate change, the intention, as I understand it, is to include pre-2009 properties, which are “uninsurable”. Given that, to some extent, “uninsurable” is a moving goalpost because of climate change, how will he define it and where will he define it? Will it be in the Bill or in subsequent legislation?

Dan Rogerson (Liberal Democrat, North Cornwall)

We will have the opportunity to explore the concept of uninsurability, if I may call it that, at a subsequent time. Essentially, the principle is that there are no households that would be excluded—we heard some evidence on this from the ABI—but over time Flood Re may develop an approach for properties that flood very frequently, and that is where the concept of uninsurability will come in.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am not seeking to take away from the Minister’s speech, but going back to the point made by the hon. Member for Newton Abbot, I recall that we heard evidence from the ABI that in fact 14,000 properties would be outside this scheme—properties that were built before 2009 and are not in band H—so perhaps the Minister can get some inspiration as to whether that is the correct position.

Dan Rogerson (Liberal Democrat, North Cornwall)

These are estimates of properties that might be at very high flood risk or repeat risk of flooding, but as the scheme starts, properties will be included. It is only if the flood risk is developed that we move forward.

As I said, no firm limits have been set on the numbers of policies that could be covered under Flood Re. Our impact assessment makes assumptions about likely numbers, which I will come to a little later. The design of the flood insurance obligation—the fall-back policy—builds in incentives for the highest-risk households to reduce their risk in order to become more attractive to insurers seeking to meet their quotas. However, I should emphasise to hon. Members that our policies are there to smooth a transition to risk-reflective pricing, not to act as a permanent intervention in the market.

The action that we are taking on flood insurance is only part of the story. The Government are spending record amounts on managing the risk of flooding. Events last week showed how effective our flood protection systems can be, with our early warning systems and defences protecting up to 800,000 properties. Of course, there were some very difficult circumstances in areas that did flood, but looking at the evidence, when compared to previous very high tides such as in 1953, the Environment Agency has estimated that up to 800,000 properties were protected as a result of defences that have been installed and maintained since that time. On Sunday, I saw for myself the positive impact that our policies have had at Jaywick in Essex, which was devastated in 1953 but was saved by its defences last week. In investing in these defences, Government take account of the changing risk of flooding and coastal erosion caused by climate.

I will start by setting out our proposals on Flood Re—new clauses 1 to 6. The Flood Re scheme would effectively limit the amount that most households should have to pay for flood insurance, providing the certainty that I know my constituents, and other hon. Members’ constituents, will seek on their insurance bills. That will deliver for the first time both availability and affordability for people in high-risk areas and is an improvement on the statement of principles.

New clause 1 would give the Secretary of State the power to designate a flood reinsurance scheme once it has been established by the insurance industry. It also provides the Secretary of State with powers to set eligibility thresholds or effective limits for premiums for the flood insurance part of a policy.

Flood Re will have a duty to promote the availability and affordability of flood insurance for domestic premises by making reinsurance for flood risk available to all insurers that underwrite domestic buildings and contents insurance policies in the UK. Flood Re will also manage the transition to more risk-reflective pricing over the period of operation of the scheme.

New clause 4(3) would provide Government with the powers to introduce a requirement on the scheme administrator to manage this transition and to publish a plan setting out how that will be achieved. Flood Re would target support towards those who need it most, helping those who are particularly challenged by the cost of living. We have debated that in relation to the rest of the Bill and I know it is a real concern for hard-pressed families.

Premiums would differ according to council tax bands, or their equivalent in the devolved Administrations, and people would know the maximum they could be asked to pay on the flood risk part of their insurance premium, as well as on excesses, should they have to claim. We do not want people to live in fear of being unable to afford their insurance.

We anticipate that around 500,000 high-risk households could benefit from the flood reinsurance scheme, and pay less for their insurance than they might otherwise. The price of a high-risk combined buildings and contents policy would be about £720 per year for a band C household. While that might be higher than some high-risk households are paying now, without Flood Re, such policies could be well over £1,000.

Thomas Docherty (Labour, Dunfermline and West Fife)

I want to tease out of the Minister that estimate of half a million. I think this is the first time we have had that figure in front of us. I know that it was not in the letter he helpfully sent me yesterday. Could he say a little more about how that figure of half a million homes was reached?

Dan Rogerson (Liberal Democrat, North Cornwall)

In all these issues, we are guided by those in the industry who have the information at their fingertips. I know that the hon. Gentleman is concerned about the accessibility of that information. That is an issue we will discuss later; it is a good point. Alternative estimates have been made, for instance by the British Insurance Brokers’ Association, that were slightly lower. In all of this we have been in discussion with the Association of British Insurers who, we feel, have the most up-to-date information, and that is where the figure of 500,000 came from.

Unlike the statement of principles, which effectively tied a customer to a particular insurer, customers would be free to shop around to get the best overall deal from an insurer of their choice. That is an important step change.

Neil Parish (Conservative, Tiverton and Honiton)

During scrutiny of the Bill I have occasionally been slightly critical of the Government. On this occasion I want to make it clear that we have negotiated a good deal on affordability for those seeking insurance. It is not simply a case of whether people can get insurance; it is whether they can afford it, so that insurance companies do not hype the risk and hike up premiums with it.

Dan Rogerson (Liberal Democrat, North Cornwall)

I am pleased my hon. Friend feels that and is not shy in holding Government to account, as other hon. Members do when they feel we have further work to do on developing a policy. He is right, hence the concentration on council tax bands, which assumes that those with properties in the lower bands would perhaps have lower incomes. Affordability is an important question, and I am grateful to him for drawing further attention to it.

On the subject of householders being able to shop around for the best deal from insurers of their choice, a household policy would be ceded to Flood Re only if the flood insurance element of their premiums would otherwise have exceeded the limit for their council tax band if offered at market price. That is the trigger for moving into the system.

We are absolutely clear that helping high-risk households must not lead to unfair price rises for others. The Association of British Insurers has assured Ministers that Food Re can be introduced without impacting customer’s bills in general, and there will be no liability for the Government or the taxpayer from the scheme. I want to emphasise that point to my hon. Friend, who raised the issue earlier.

We have been explicit that the Flood Re scheme is designed to cover risks and pay out reinsurance claims only if a flood exceeds a one in 200 year event. To put that in perspective, a one in 200 year event would be six times worse than the flooding experienced in 2007. The UK has a multi-billion pound, world-leading insurance industry, and we believe it has the ability and the financial strength to resolve this issue without placing an additional burden on taxpayers. We have been clear that Flood Re is not guaranteed by the Government above the one in 200 year level. We set out in the memorandum of understanding with the Association of British Insurers that if flooding exceeds that level, the Government of the day would take primary responsibility, working with Flood Re and representatives of the insurance industry, for deciding how available resources are distributed to Flood Re customers.

Anne Marie Morris (Conservative, Newton Abbot)

I am delighted to hear of the progress that has been made. The negotiation has certainly been a good one. However, in my constituency, which does flood, people have had problems making claims with insurers and getting them paid in a reasonable time to deal with the damage. Has the Minister looked at that issue and talked to the bodies concerned to ensure that the scheme will be smooth, rather than chaotic, as insurance provision is at the moment?

Dan Rogerson (Liberal Democrat, North Cornwall)

The Association of British Insurers and their members are not here to speak for themselves. I was elected as the Member of Parliament for North Cornwall just after the floods that affected Boscastle, Crackington Haven and Canworthy Water in 2004. My experience was that some insurance companies—particularly for commercial insurance—were hard to pin down. However, on Friday, when it became clear that we were experiencing a major flooding event on the east coast, the Government ensured that agencies and departments, local authorities, the police and volunteer organisations—whose work we value—co-ordinated their efforts so help reached where it was needed.

I had a conversation with a representative of the Association of British Insurers who told me that the industry’s ability to make assessments on the ground is much better than it was a few years ago. It is now clear that, sadly, we may have more flood events. There was a lot of pressure on the industry a few years ago, but it is now confident that it has the resources to process claims quickly. If insurance companies occasionally slip up, hon. Members will have the opportunity to raise issues on behalf of their constituents. I am sure that insurance companies, which no doubt will be following the debate, will take the hon. Lady’s point on board.

The memorandum of understanding with the Association of British Insurers sets out that if flooding exceeds a one in 200 year event the Government of the day will take primary responsibility for apportioning money and working with Flood Re and representatives of the insurance industry to ensure that resources are distributed to Flood Re customers. That will be part of wider Government action in response to such a national emergency to minimise the loss of life and provide essential services. As I have described, that happened at the end of last week. Fortunately, no lives were lost as a result of flooding on that occasion.

Thomas Docherty (Labour, Dunfermline and West Fife)

I echo the Minister’s sentiments. We are thankful that no lives were lost.

I want to bring the Minister back to our earlier exchange, because I have had a chance to read the evidence that we took in response to questions led by the hon. Member for Newton Abbot. I must press the Minister, because there was genuine confusion in the evidence session. Mr Kerr said that a group of people whose houses were built before 2009 were uninsurable and would not get insurance under the new Flood Re scheme. That appeared to be contradicted by his colleague from the British Insurance Brokers Association. I need the Minister to get some inspiration about which statement is correct before he winds up. Are there 14,000 properties built before 2009 that will not be covered by Flood Re?

Dan Rogerson (Liberal Democrat, North Cornwall)

I understand from the discussions I have had that the concept of uninsurability will emerge as Flood Re operates, in terms of the numbers of properties affected and the ability to take account of the cases that the hon. Gentleman raises. While there might be estimates of the number of properties that would be in that situation, that point is what we need to remember.

I can confirm to the hon. Gentleman that there are no plans to exclude those at the highest risk at the outset. However, it may be necessary to assess properties that might come into that category as the scheme develops, to establish whether they are flooding repeatedly year after year perhaps, or whatever—those at the very highest risk. When the system begins operating, there will not be that concept of uninsurability.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am most grateful to the Minister and I genuinely take him at his word. It may be helpful to members of the Committee if he could write to us this afternoon, before the deadline for tabling new clauses, to put that explicitly into writing for the benefit of all members of the Committee. Can the Minister give us that undertaking?

Dan Rogerson (Liberal Democrat, North Cornwall)

My hon. Friend the Member for Weston-super-Mare makes the point that it is already on the record that that is the intention. However, I am quite happy to write to the hon. Gentleman; that is no problem.

This is an industry-based scheme and so the details of the scheme will develop, but this concept of uninsurability is not there at the outset. However, we must have a means of ensuring that the use of the funds, which after all will be built up by a levy from other payers, is proportionate. We have to deal with that question. We must have a way of considering properties that repeatedly flood and draw disproportionately on the funds of Flood Re. As I say, I will happily write to the hon. Gentleman and the rest of the Committee; it should be a fairly brief note. I will endeavour to do that today and get it out.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am most grateful. May I just clarify something? As you know, Mr Gray, being a good parliamentarian, we cannot just rely on what the Minister says because it is then privileged and cannot be used in any future court case; a letter in writing is required to provide comfort. The problem I have, and I do not want to go down this track, is that if we do not have a letter by the close of play today when new clauses have to be tabled, on Tuesday I would start to say that we had not had adequate time to scrutinise this measure; I am sure that the Minister does not want that either.

Dan Rogerson (Liberal Democrat, North Cornwall)

No, I hope that we have moved forward in a process with which the hon. Gentleman has felt comfortable; we have had the opportunity to do that. The time pressure we are under to ensure that this system is in operation is, obviously, the reason for clauses being tabled when they have been. I will address that point with the hon. Gentleman.

Regarding the operation of Flood Re, the memorandum of understanding also set out that the system would form an integral part of the reinsurance sector. Reinsurance is routinely purchased by insurers to limit their exposure to risk, and this scheme effectively shares flood risk across the domestic home insurance industry and reinsurers, to allow insurers to provide insurance at affordable levels.

Flood Re will be regulated in the same way as any other reinsurance company by the Financial Conduct Authority and the Prudential Regulation Authority. It will be subject to their rules, and it will have to comply with company law and a wide range of financial services regulations.

New clause 2 provides the power for the Government to designate a body as the administrator of the scheme by regulations. Should the scheme ever need to be replaced with a new scheme, new clause 5 provides powers for the Secretary of State to make provision for arrangements to be made to ensure that there is a smooth transfer. That will be very important, both for insurers and for those policyholders who are being reinsured through Flood Re.

New clause 5 also provides for arrangements to be made if the administrator needs to be replaced with a new administrator, including powers to transfer property, rights and liabilities to a new administrator. I assure the Committee that it is hoped that those measures will not be needed, but we have to legislate for those eventualities.

New clause 3 provides for the Secretary of State to require all relevant insurers to pay a primary levy to the scheme administrator, and for further ad hoc amounts to be contributed if and when they are needed. It also makes provision about the circumstances in which those powers may be used, and additionally about how any reserves in Flood Re may be disbursed. It will apply to all insurers underwriting household insurance policies in the UK, both buildings and contents policies.

Stepping away from the clauses for a moment, it might be helpful to describe briefly how Flood Re’s funding is intended to work. Insurers that decide to reinsure the flood risk element of a household policy with Flood Re will pay in the premium to Flood Re based on the relevant eligibility thresholds for participation in the scheme, which will be effectively limited to a level lower than the market price for that risk.

By definition, therefore, Flood Re will on average make a loss on every policy it holds. Flood Re therefore needs an additional source of income to fund that loss and to cover its liabilities. That is where the levy comes in. The primary levy captures the existing cross-subsidy insurance market between those at low and high risk of flooding.

The majority of households not at flood risk should not see any increase in their bills due to Flood Re’s introduction. The Government have been clear throughout that limiting the impact on household bills was a vital component of the scheme. Flood Re will use the income to settle claims, buy reinsurance and pay for the administration of the scheme.

Subsection (1)(a) of new clause 3 therefore allows the Secretary of State to require all relevant insurers to pay the primary levy. The levy will be set by regulations at a level that would initially equate to £10.50 on each combined household policy in the UK for the first five years of the scheme. However, to facilitate a smooth transition to risk-reflective prices, that and other aspects of scheme funding and eligibility will be reviewed by the Government in consultation with Flood Re at regular intervals during the scheme’s 25-year lifespan. It is anticipated that future discussions will lead to decreases in the primary levy and corresponding increases in eligibility thresholds, which will ensure that the policy objective of a smooth transition to risk-reflective prices is being delivered.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am sure that the Minister understands the need for interventions as we go along, because we are discussing a new and complex process. Will he say a little more about the process going forward? As he seeks to raise eligibility requirements, does he see that being underpinned by secondary legislation? Does he see that being done by further primary legislation? Perhaps he will set that out for us.

Dan Rogerson (Liberal Democrat, North Cornwall)

The intention in setting up the scheme is that we put things adequately in place with the Bill, so that we do not need further primary legislation as we move through the transition. The Bill gives the Secretary of State the power, in consultation with the industry, to look at how much people are paying into the levy and to look at those eligibility thresholds.

Thomas Docherty (Labour, Dunfermline and West Fife)

Again, I do not want to interrupt the Minister mid-thought, but I want to ask something, because this issue is important to all constituents. He will recall from his time on the Select Committee on Environment, Food and Rural Affairs that it has always had concerns about parliamentary scrutiny. Will he clarify whether the intention is to have secondary legislation as the process proceeds?

Dan Rogerson (Liberal Democrat, North Cornwall)

It is certainly intended that the policy will be reviewed every five years by Government to assess the level at which the levy and the eligibility thresholds are set. That will ensure that the objectives for Flood Re will continue to be delivered, and that includes the transition to a risk-reflective price. Thresholds and the levy will need to be set in secondary legislation, as the hon. Gentleman rightly assumes, so Parliament will have the opportunity to take a view in the normal way as part of that scrutiny process.

Subsection (3) of new clause 3 specifies powers through regulations for the scheme administrator to pursue the non-payment of the required levies by individual insurers as a civil debt, should that prove necessary. Joint modelling by Government and the industry suggests that the primary levy, Flood Re’s reserves and its reinsurance cover should be sufficient in most years for Flood Re to cover its costs. If Flood Re makes a profit, that will be retained by the scheme and create reserves that, in the first instance, could cover a shortfall. However, given the unpredictable nature of flood damage, there might be circumstances where Flood Re faces a shortfall and does not have those reserves or where losses are below the point at which reinsurance takes effect, such as with consecutive flooding events, or in the early years of the scheme as the reserve builds up. New clause 3 therefore allows for further ad hoc contributions to be sought from all by way of a top-up levy. Subsections (1)(b) and (2) of new clause 3 refer to the top-up levy.

Analysis suggests that top-up contributions should be required, on average, only once or twice in the first 10 years of Flood Re’s operation. In those circumstances, Flood Re may be required to call on those top-up contributions urgently in order to remain solvent and to ensure it meets its capitalisation requirements under EU law.

From both a commercial and a prudential perspective, it is therefore important that the individual calls for a top-up levy would not require prior parliamentary approval. However, to ensure appropriate parliamentary oversight, subsection (2) sets out that Parliament would approve the framework for how the top-up levy should operate, which would be set out through affirmative regulations that cover both the circumstances and the maximum amounts of funding requested. We propose that the regulations under new clause 3 would specify that Flood Re could only ask for top-up contributions when it had a funding shortfall and no other way of covering the claims due, and it could only ask for the amount it actually needed. Those controls are needed to limit the costs for insurers, which they might otherwise pass on to households through higher bills.

Thomas Docherty (Labour, Dunfermline and West Fife)

The Minister touched on the issue of civil recovery mechanisms. Scotland has its own judicial process so could he tell us what discussions he has had with the Scottish Ministers? I am unclear because I am not a lawyer whether, because it is financial services that we are using, we would follow Scots law or English law for civil recovery in Scotland.

Dan Rogerson (Liberal Democrat, North Cornwall)

We have proceeded throughout our consultations with the industry on the basis of our discussions with the devolved Administrations to go through their concerns. As the hon. Gentleman points out, this is a financial matter and so applies across the United Kingdom. It is therefore important that we have those interactions right.

On the specific point about how civil recovery costs would work against defaulting companies—those which are not meeting their commitments to the scheme—we need a process to ensure that it does not fall as a cost on those companies that are paying in. I would need to look in more detail into some of those aspects of how the different legal systems would handle the situation. The Office of the Advocate General for Scotland has approved the drafting of the new clauses. Civil recovery in Scotland will be possible under the draft clause, so I can reassure the hon. Gentleman that no company that happens to be based in Scotland could escape its commitments if it failed to meet them. The hon. Gentleman has a way of prompting these thoughts into my mind which is quite striking.

There is another reason why having controls on this aspect of Flood Re is important. We expect the Office for National Statistics to classify at least some of Flood Re’s funding as public money. That is why it is necessary that these amendments provide the Government with the powers to specify a control framework to ensure the scheme is managed appropriately while respecting that Flood Re needs an amount of operational freedom to manage its business effectively.

Based on current assessments of Flood Re’s finances, we will look to prevent Flood Re from incurring net losses of more than £100 million in any one financial year. This, combined with controls preventing borrowing across years, will limit Flood Re’s impact on the public finances. I am sure that all Committee members would agree that it would not be acceptable to have an independently managed body that could add to public debt or borrowing without some controls. The industry proposes that insurers should be able to present top-up contributions as member capital to Flood Re, rather than as cash. This capital call could be retained as an asset on insurers’ balance sheets, and would not then be a cost to be passed on to consumers.

Flood Re could then use these contributions to cover any shortfall and pay the claims due. There must be an expectation that the capital could be paid back to insurers, subject to the terms of the scheme and providing that Flood Re had built up sufficient reserves and it would not be prudentially detrimental to do so. Flood Re would not be permitted to pay a dividend or return on capital invested. We believe that this is the most appropriate way of safeguarding any impact the top-up levy might have on household bills, and of meeting insurers’ needs to minimise volatility for their profit and loss accounts, and minimise the amount of capital provision they need to make. Discussions on the detail of how to control the amount of capital which could be built up are continuing. I would like to take this opportunity to pay tribute, as I have done in the past, to the approach taken by the Association of British Insurers to considering a way to make the scheme work that meets the industry’s need to ensure that the market functions correctly and gives us confidence that where moneys are treated as public money, the correct scrutiny is in place.

Given Flood Re’s management of public money, it is right that the Government should take the powers in subsections (5), (6) and (7) of new clause 3 to make provisions about the reserves in Flood Re when it is being wound up or if it is de-designated. Detailed discussions with the ABI about how that might work in practice continue. Both the primary levy and any additional contributions that might be required have the potential to affect public finances, so it is appropriate that any decisions made by the Secretary of State regarding Flood Re’s funding will need the consent of Her Majesty’s Treasury.

New clause 4 provides the Secretary of State with powers to set rules for how the Flood Re scheme is administered. As already noted, it is important because it relates to Flood Re’s management of public finances and accountability to Parliament. I draw the Committee’s attention in particular to our proposed arrangements for parliamentary accountability, which with the Committee’s permission I will set out in detail for the record.

Subsection (2) of new clause 4 sets out that those regulations may require the scheme administrator, in managing the scheme, to consider value for money, the public interest and propriety and regularity. The Government will use the power to ensure that Flood Re is established with economy, efficiency and effectiveness at its core. Subsection (4) sets out what restrictions might be put on Flood Re’s finances through regulations in order to limit the scheme’s impact on public finances. We are taking powers to restrict Flood Re’s ability to borrow or be in debt, impose limitations on its drawdowns and transfers and place restrictions on the level of net loss that it may incur in any financial year. The restrictions will not affect Flood Re’s ability to provide reinsurance cover or manage itself as a going concern, but they are important controls that will ensure the sound management of public money. The operations and impacts on costs for households are in line with those expected.

I draw the Committee’s attention in particular to our proposed arrangements for parliamentary accountability, a matter that will rightly and properly be of concern to all Committee members, although it was the hon. Member for Dunfermline and West Fife who raised the matter in his intervention. Our approach is to establish Flood Re as operationally independent and transparent, giving it the freedom to operate as an integral part of the reinsurance industry while retaining essential controls to minimise any undue impact on households, policyholders and the public finances.

As far as possible, we want Flood Re to be treated like a private sector body, even though it will be managing public money. We are therefore proposing specific arrangements for Flood Re to be directly accountable to Parliament for its ongoing operations. Clearly, that has novel implications for accountability and scrutiny arrangements, with less direct Government management, oversight and accountability than would be expected for a conventional arm’s-length body, and greater direct accountability for Flood Re.

We propose that the relevant Ministers will be accountable to Parliament concerning general policy matters relating to flood insurance, with DEFRA’s accounting officer accountable to Parliament for the net expenditure for Flood Re as reported in DEFRA’s accounts. However, as an industry-owned and managed entity, Flood Re would be accountable to Parliament for the details of its operations.

Thomas Docherty (Labour, Dunfermline and West Fife)

I put my hand out when the Minister mentioned oversight. If he was not about to spell out what the scrutiny process will involve, can he do so?

Dan Rogerson (Liberal Democrat, North Cornwall)

Yet again, the hon. Gentleman is uncanny in his ability to provoke a response from me. I will now set out some of the accountability arrangements, particularly with regard to how the company will be scrutinised.

To provide effective oversight, the clause provides the Secretary of State with powers to introduce through secondary legislation requirements on accounting, including the role of the National Audit Office in scrutinising Flood Re. The approach has been agreed with the NAO. The NAO will be able to examine the scheme’s value for money aspects, propriety and regularity. It will have a right of access to documents and the ability to report to Parliament on its investigations. Flood Re’s audited accounts will also be laid before Parliament.

In addition, the clause provides powers to require Flood Re to appoint a responsible officer. The responsible officer will be responsible for Flood Re’s finances and accounts and will be directly accountable to Parliament for value for money, propriety and regularity. They will also be responsible for responding to any studies or reports carried out by the National Audit Office.

Although Flood Re will be directly accountable to Parliament for its ongoing operations, it will be spending public money that will be accounted for in DEFRA’s accounts. Subsection (8) deals with powers for the Secretary of State to seek information from Flood Re, to account for its finances in the Department’s accounts.

Taken together, the powers provide both an effective means of parliamentary oversight of the Flood Re scheme and appropriate Government controls of Flood Re’s impact on the public finances.

Access to council tax data by the industry is essential for Flood Re to work. Without it, Flood Re cannot offer premiums that differ according to property value and thus allow support to be targeted towards lower income households. That would mean that Flood Re would not deliver its intended benefits.

Thomas Docherty (Labour, Dunfermline and West Fife)

Before we move further away from the scrutiny, might I tease out of him a little bit more information? Although I welcome his mentioning the NAO, does the Minister intend that the Select Committee on Environment, Food and Rural Affairs, the Treasury Committee or the Public Accounts Committee would regularly be involved? What does he think is the appropriate way for Parliament to hold Flood Re to account?

Dan Rogerson (Liberal Democrat, North Cornwall)

Any appropriate Select Committee could seek to interrogate the NAO about any information that is put into the public domain through its investigations. The Public Accounts Committee has a role here, but as a great advocate for the EFRA Committee, I am sure that the hon. Gentleman feels that it might find an opportunity to consider some issues, too. We have written to the Public Accounts Committee and the EFRA and Treasury Committees to information them of the approach. They are able to inquire into these issues, should they feel it appropriate. There will be multiple opportunities to consider scrutiny as we move forward, for example, in terms of the operation of the scheme in this way and, as the hon. Gentleman has teased out of me, in secondary legislation on the future of the levy.

Subsection (6) provides for regulation-making powers, allowing for council tax information to be shared with Flood Re and the insurance industry.

Thomas Docherty (Labour, Dunfermline and West Fife)

As we move on to income, does the Minister accept that some lower income households are in higher council tax bands and that the reverse is also true? Is this not a quite crude mechanism?

Dan Rogerson (Liberal Democrat, North Cornwall)

One of the key advantages of the council tax band system is that it is related to property values, so it is established: the bands exist. Were we to move into more in-depth analysis of people’s income, and so on, it would complicate the system a great deal. Our intention has always been to keep the system as straightforward and easy to operate as possible, because we do not want to add hugely to the costs of the scheme’s operation.

Pat Glass (Labour, North West Durham)

In my constituency there are few band H properties, but there are some and the people who live in them are not necessarily particularly well-off; some are, some are not. Given that there will be small numbers of such properties, does the Minister envisage any system of appeals, if people in band H properties are not in a position to take on the cost of uninsured losses?

Dan Rogerson (Liberal Democrat, North Cornwall)

We have considered this issue in detail. We received information from the Joseph Rowntree Foundation, which stated that there are some 14,000 band H nationally in which occupants may be on a low income. Only a small proportion of those would be subject to the scheme. Most of the one in six properties at risk of flooding are protected by flood defences. The analysis we have carried out demonstrates that including band H would be a regressive measure. That is the approach I outlined in a letter to Committee members. Strong support was expressed in the consultation for using council tax bands as a way of making such judgments. Our analysis suggests that relative to other bands, a move to risk-reflective pricing would have a limited impact on the affordability of a combined insurance policy for band H households. We think that we have got it right in cutting the scheme off at band G.

George Hollingbery (Conservative, Meon Valley)

Are we actually saying that council tax banding is a crude and blunt instrument? I think that is what is reflected in the Opposition’s comments. Within living memory, however, the Opposition have not attempted to change the council tax bandings—that has not happened since the early 1990s—which suggests that they are satisfied with such a crude and blunt instrument for funding local government. I think, therefore, that they should accept that the proposal is a reasonably simple way of addressing the issue.

Dan Rogerson (Liberal Democrat, North Cornwall)

The hon. Gentleman sets out his view that people are used to using the system and it has stood the test of time. Various parties have proposed changes to the system, but it has not been the coalition Government’s policy to move away from council tax banding.

Pat Glass (Labour, North West Durham)

I understand what the hon. Member for Meon Valley is saying about the measures being crude, and that is true of any proxy indicator. A whole range of proxy indicators on local government funding cover a range of services, but we are talking about individuals. I am concerned that there may be a very small number of people in band H properties who are flooded and not eligible for Flood Re. Why can we not look at some kind of appeal system for those individuals?

Dan Rogerson (Liberal Democrat, North Cornwall)

Our intention is to make the system transparent. It is not a permanent system; we are moving towards a more risk-reflective process, as I have made clear throughout. The analysis that we have done, for all the reasons I have given, demonstrates that it is correct to draw the cut-off at band G. The hon. Lady is free to raise those issues and take a different view, but it is not my position to move away from what has been agreed with the industry.

We want Flood Re to be up and running as soon as possible, an intention that I am sure hon. Members’ constituents will support. New clause 6 provides the Secretary of State with powers to enable Her Majesty’s Revenue and Customs to release council tax data in good time before the designation takes place, to allow the insurance industry to make the preparations necessary for the operation of Flood Re. Although it is unlikely, should Flood Re not come into effect for any reason, the new clause will allow regulations to be made to specify that any data disclosed to the industry in respect of council tax would have to be destroyed. Subsection (6) of new clause 4, and new clause 6, provide the Secretary of State with powers to legislate that any data released under the scheme are protected by a criminal sanction. Those provisions are important to ensure the necessary safeguards around the use of those data.

Subsection (7) of new clause 4 provides powers to allow Flood Re to share data with the Environment Agency and its equivalents in Wales, Scotland and Northern Ireland, or with other bodies that are specified in regulations. That would enable Flood Re to share information on flood risk, such as the geographic location of properties supported through Flood Re. That information will help the Environment Agency and its devolved counterparts to improve flood risk models and to target flood risk investment to where it is needed most.

Hon. Members and their constituents are particularly interested in exactly who would be able to benefit from Flood Re. Our public consultation called for evidence that businesses were struggling to obtain appropriate insurance. Having examined the responses, we remain of the view that there is insufficient evidence to justify Government intervention in the provision of insurance cover for businesses. My hon. Friend the Member for South East Cornwall sought to explore that point earlier. The insurance industry is developing a more detailed set of eligibility criteria for Flood Re. The key issue in determining who is eligible is whether they currently hold a domestic policy.

I now turn to the flood insurance obligation, and I hope that hon. Members will agree that it is important to hold it in reserve in order to give our constituents peace of mind. We are seeking powers in new clauses 7 to 18 for the Secretary of State to regulate to require insurers to provide cover to households at higher risk of flooding at an affordable price, through the flood insurance obligation. We hope that such powers will never need to be used, but we want to have the power to implement a fall-back solution should it become necessary.

The flood insurance obligation will work as follows. The Environment Agency, working with its equivalents in the devolved Administrations, would create a register of those properties at higher risk of flooding. The Secretary of State would set an overall target for the number of registered properties that the industry as a whole needs to cover. Insurers would then be required to provide insurance cover to a proportion of those properties to meet a quota, which is calculated in proportion to their share of the overall market, or risk enforcement action by the Financial Conduct Authority. As a result, insurers will be incentivised to compete with one another to ensure that they meet their quota requirements. We recognise that the obligation does not offer certainty about the cost of insurance in the way that Flood Re does. However, our modelling suggests that the creation of an artificial market for properties at greater risk of flooding will drive insurers to compete with one another to provide cover for the properties on the register, which will have the effect of keeping prices down.

New clause 7 puts in place the framework for the obligation. It allows the Secretary of State to require all insurers selling domestic home insurance in the UK to issue insurance policies to meet their quotas. Regulations may make provision for individual insurers to calculate their quotas with reference to a market-wide target set by the Secretary of State, which will mean that each insurer will have to insure its fair share of higher-risk properties. Different targets could be set for different types of insurance risk, such as for buildings and contents cover. That should enable both home owners and tenants to access affordable insurance.

Insurers that have a small share of the market could be exempted from complying with the obligation altogether, which will support new entrants into the market. That exemption is important also in ensuring that the intervention in the market is proportionate under European law and protects the freedom of insurers to establish and provide services.

New clause 7 also gives us the ability to define what constitutes a qualifying policy for the purpose of counting toward an insurer’s quota, should it be required. It would not be in the public interest to allow insurers to count towards their quotas polices that provide inadequate or misleading cover to households, such as polices with unreasonable exclusions. Similar protections are available for customers under Flood Re. Given the highly competitive nature of the domestic home insurance market, we hope that we will not need to exercise that power.

In order to maximise insurers’ capacity to meet their quotas and at the same time to develop their business in the direction they see fit, we intend to build some flexibility into the regulatory system. In practice, that means allowing those insurers that are likely to exceed their quotas to trade the credit for issuing policies to households at high flood risk with insurers that do not have sufficient policies to meet their own quotas. The trading of credits under the obligation will not alter the relationship between insurers and their customers.

New clause 7 also provides for an insurer’s market share to be determined if it fails to provide the information required by regulations made under new clause 9. That will prevent the implementation of the obligation being delayed by an insurer’s failure to co-operate.

New clause 8 provides the Government with the power to set a collective target for the number of registered properties for which the industry as a whole must provide cover so that individual insurers can determine their share of the target. Not all households want insurance, so the aim would be for the target to reflect existing levels of take-up and likely demand. In addition, our policy intention is that the obligation should be phased out over time in order to support a gradual transition to risk-reflective pricing. Accordingly, the Secretary of State needs to be able to set the overall target at a level below 100% of the properties on the register.

New clause 9 gives the Government the power to set out in regulations arrangements for the provision of information or documents by insurers to the Secretary of State or a person acting on his or her behalf. There are two principal requirements. Insurers will need to provide information or documents to demonstrate first whether or not they are liable for the flood insurance obligation regulations, and secondly the number or value of insurance policies that they have written in a particular period.

Such information is fundamental to the operation of the wider flood insurance obligation. The information collected will enable the total size of the UK home insurance market to be calculated, so that individual insurers can determine their share of the market.

Pat Glass (Labour, North West Durham)

Will the information be monitored within the Department to ensure that individual insurance companies are not cherry-picking?

Dan Rogerson (Liberal Democrat, North Cornwall)

The approach we are taking is to ensure that all the companies are carrying their fair share of the risk. That is very much the intention, so, as I have said, we need that information from them to be able to look at the size of the market, and then we will be able to see how much each company would need to make to carry its fare share. The hon. Lady is absolutely right about ensuring a fair share across the industry.

Thomas Docherty (Labour, Dunfermline and West Fife)

Further to the excellent point made by my hon. Friend the Member for North West Durham, can I tease out of the Minister how he intends to do that monitoring? Would it be through DEFRA or the FCA? Who will monitor it?

Dan Rogerson (Liberal Democrat, North Cornwall)

I will go on to that in more detail, and if the hon. Gentleman is unhappy with what I set out, I am happy to take a further intervention from him.

The Secretary of State may publish that information in order to enable insurers to determine their individual market share. Insurers are required to submit annual returns to the PRA. The information collected relates to household risks. That is not suitable for the purpose of the flood insurance obligation, first because it does not distinguish between buildings and contents insurance policies, and secondly because certain types of firms are not required to provide that information to the PRA.

New clause 10 enables the Secretary of State to provide for enforcement of the requirements on insurers made under clause 9 to provide certain information. The information required under clause 9 is fundamental to the operation of the wider flood insurance obligation, so it is right that we have a robust enforcement mechanism, as provided in the clause.

Regulations will allow the Secretary of State to impose sanctions such as civil penalties against those insurers who fail to comply with the requirements to provide information. The regulations would set out the procedures to be followed if sanctions are imposed and could provide for costs incurred in connection with imposing sanctions to be recovered. Insurers would be able to appeal against the sanctions or a requirement to pay costs to the first-tier tribunal.

Thomas Docherty (Labour, Dunfermline and West Fife)

I suspect that the Minister anticipates this question, which goes back to my earlier point about devolution and the Scottish justice system. Again, I stress that I am not a lawyer, so I am seeking genuine inspiration. Will he set out how it will work for insurance companies—there are many, as you know, Mr Gray—that are based in Edinburgh and elsewhere in Scotland?

Dan Rogerson (Liberal Democrat, North Cornwall)

As I set out in my earlier answer to the hon. Gentleman, we have consulted with the devolved Administrations throughout the process. As I reassured him following his earlier intervention, with regard to Flood Re as opposed to the flood insurance obligation—our back-up—the Advocate-General has had the opportunity to look at the clauses and is happy with them. I hope that that reassures the hon. Gentleman.

To encourage non-compliant insurers to take remedial action quickly, provision is also made to require an insurer that continues to fail to comply to pay further sums. Ultimately, if insurers remain non-compliant, further civil and criminal enforcement action could be taken by the Financial Conduct Authority.

New clause 11 provides for the creation and maintenance of a register of properties in the UK that are at greater risk of flooding and are therefore more likely to be experiencing problems with the availability and affordability of flood insurance. The register is essential for the obligation to work properly. Our expectation is that the register will be based on flood risk information held by the bodies with principal responsibility for flood risk management in the different parts of the UK: the Environment Agency, the Scottish Environmental Protection Agency, Natural Resources Wales and the Department of Agriculture and Rural Development in Northern Ireland. New clause 11 also provides for the exclusion from the register for properties built since 2009.

Inclusion on the register is intended to help enable households to access affordable flood insurance. We hope that that will be attractive to them, but provision has been made to enable households automatically to opt out of the register if they wish. Of course, that would mean that they would not benefit from the obligation.

We believe it is appropriate that existing households and potential buyers or occupants should be able to find out whether a particular property is on the register and therefore stands to benefit from access to more affordable flood insurance. The clause therefore makes provision for the publication of the register in whole or in part. Our intention is to make the register searchable by address. Given that the register will be based on flood risk information that is already publicly available, we feel that that is a sensible and proportionate approach.

The creation of the register will rely on the input and expertise of the devolved Governments and their agencies, and as such, we have agreed that the Secretary of State would consult their Ministers before making regulations under this clause.

Thomas Docherty (Labour, Dunfermline and West Fife)

The Minister is aware that we have tabled a new clause on the national database. It sounds as though we are pretty much at the same place, so will he confirm that the database will be accessible not only to potential house buyers, but to mortgage lenders, who obviously need to have comfort before they can lend the money to a potential house buyer? Who exactly will have a right of access to the database?

Dan Rogerson (Liberal Democrat, North Cornwall)

The hon. Gentleman raises a fair point. If the data are available to a prospective buyer it would be difficult to restrict their availability to other interested parties who would want to look at them. I shall confirm the approach on the basis of consultation.

We intend to make some of the information on the register publicly available, so existing households and potential buyers and tenants would be able to enter an address into a database to find out whether a property was on the register. However, the full register would be accessible only to insurers, the Environment Agency and its devolved counterparts. Aspects of it would be publicly available, so it is my understanding that it would be accessible to mortgage lenders if they wanted to search the database.

At the point where a potential buyer was making such an investigation and a sale was proceeding, they would no doubt be in contact with a potential lender, and that relationship would mean that the information could be shared between them. However, I want to make it clear that the full register would be accessible only to insurers, the Environment Agency and its counterparts in the devolved countries, and to the FCA.

New clause 12 enables the Environment Agency and its devolved counterparts to carry out functions involved in the creation of a register of properties at greater flood risk in the UK. Regulations could require them to create and maintain a register, for example, by considering any applications to join the register, notifying relevant persons when a property was entered in the register, and giving access to information contained in the register.

The Environment Agency would be responsible for co-ordination and for encouraging consistency in carrying out the functions imposed on the relevant bodies. The new function would not have an impact on the devolved competencies of each Administration with regard to flood risk mapping. The intention is purely to ensure that insurers would ultimately be able to access a UK-wide register, and that different approaches to mapping in the different jurisdictions would not disproportionately benefit some UK households, such as by making it significantly easier to join the register in a given area, at the expense of others.

New clause 13 provides for a person with a qualifying interest in a property to seek a review of a decision to exclude a property from the register. It also allows for appeals in the event that the person is not satisfied with the decision.

George Hollingbery (Conservative, Meon Valley)

This question should have occurred to me earlier, but I hope that the Minister will forgive me for not giving him notice of it.

I can imagine a situation in which someone in a band H property wanted to challenge their inclusion in the register. I hope that the Minister will correct me if I am wrong, and things would not work in this way, but it seems to me that that person would be excluded from Flood Re and therefore could be subject to very large insurance premiums for flood insurance. They might therefore want to be able to challenge the decision to include them in an area of flood risk. As far as I can see, the clause would exclude that possibility.

Dan Rogerson (Liberal Democrat, North Cornwall)

The provisions that I am discussing relate to the flood insurance obligation, which is our back-up alternative should Flood Re not come into operation. The issue that my hon. Friend refers to relates specifically to Flood Re.

George Hollingbery (Conservative, Meon Valley)

I thank the Minister and apologise.

Dan Rogerson (Liberal Democrat, North Cornwall)

Not at all. We are debating a big group of new clauses, and it is important that we discuss issues relating to Flood Re and to the alternative approach in the flood insurance obligation, so I am grateful to my hon. Friend.

New clause 13 provides for a person with a qualifying interest in the property to seek a review of the decision. That is what my hon. Friend was querying.

New clause 14 provides the Secretary of State with the power to make regulations to raise a levy from insurers to cover the costs of maintaining the register. The levy would be raised by the Secretary of State with the approval of the Treasury, to cover the expenses that the Government would incur in the administration of the register. The regulations may state the rate of the levy and the way it would be calculated.

A levy on insurers is a fair and appropriate way of meeting those essential costs. If the Government were instead to bear them through general taxation it is likely that there would be implications for spending in other areas, such as flood risk management, which is essential for keeping down the cost of insurance in the long run. The power is intended, subject to Treasury agreement, to make it possible for the Government to recover the costs incurred not just by the Environment Agency but by its counterparts.

New clause 15 provides the Secretary of State with the powers to make regulations to require insurers to make a report of their compliance or non-compliance with the obligation to the Financial Conduct Authority. Our intention is to align the monitoring and enforcement regime for the flood insurance obligation as closely as possible with existing regulatory practice in the financial services sector. We expect that the regulations made under the new clause will require insurers to report breaches of their obligation only to the FCA. However, the powers set out also enable us to regulate to require a more stringent compliance reporting regime, should that be deemed necessary.

It is our view that the Financial Conduct Authority is the appropriate body to receive compliance reports from the insurers, as it will be responsible for monitoring and ensuring their compliance with the overall flood insurance obligation. The FCA will receive compliance reports from insurers and, under provisions in new clause 16—Functions of the FCA—will be empowered to take enforcement action, should an insurer breach the requirements of the compliance reports.

New clause 16 gives the Treasury powers to apply the Financial Conduct Authority’s existing supervision and enforcement powers to its new role of monitoring and enforcing insurers’ compliance with the requirements set out in new clause 7. Such requirements include issuing a prescribed number of qualifying insurance policies to registered properties at greatest risk of flooding, as set out in new clause 7, and making a report of their compliance or non-compliance with that obligation to the FCA, as set out in new clause 15. The provisions also enable enforcement by the FCA in the case of inaccurate data returns from insurers and late or missing returns where DEFRA sanctions under new clause 10 have been exhausted. The provision allows for the FCA to recover its costs by imposing fees on firms, should that be necessary, in line with its existing practice in wider financial services regulation.

New clause 17 gives the Treasury the power to make regulations requiring the Financial Conduct Authority to prepare reports in relation to its role in monitoring and enforcing compliance, as set out in new clause 16. Such reports may contain information about the number of firms that have reported breaches of the flood insurance obligation and the enforcement action that it has taken against them. That information will enable the Secretary of State to review the operation of the obligation and consider whether changes to the level of the overall obligation target are required, ahead of the next compliance period.

New clause 18 enables the Treasury to confer on the Prudential Regulation Authority and/or the Financial Conduct Authority the ability to suspend temporarily or modify the flood insurance obligation requirements. That intervention power will be a reserve power, to be used only in exceptional circumstances. The intention is that the PRA and/or the FCA could exercise the power where the continuation of the obligation requirements on an individual insurer pose a threat to the statutory objectives of the regulators, or an individual insurer is failing or likely to fail to satisfy threshold conditions imposed by the regulators. For example, an insurer may be under extreme financial stress. In such circumstances, it may be inappropriate for the insurer to continue to write high-risk business.

Regulations will detail which parts of the relevant regulations may be disapplied or modified and in what circumstances. The PRA and FCA would be required to notify the Secretary of State when using those powers.

Thomas Docherty (Labour, Dunfermline and West Fife)

When the FCA notifies the Secretary of State, is the intention that it notifies Parliament in turn?

Dan Rogerson (Liberal Democrat, North Cornwall)

We hope that those circumstances will be rare, but it is important that we have a provision. Whether that information would be made public is an important question and there is provision for that information to be provided to Parliament.

The need for the Prudential Regulation Authority and the Financial Conduct Authority to exercise the intervention powers to suspend temporarily or modify the flood insurance obligation provisions recognises that insurers operate in a wider regulatory sphere and that other obligations may need to take precedence over the flood insurance obligation. The amendments also include measures that apply to both Flood Re and the obligation. New clause 19 provides the power to define certain terms used in the amendments, such as “household premises” and “flood risk”. We believe that it is important to set the definitions through regulations; because they are technical, we need them to be clear and we want to allow appropriate consultation.

For both Flood Re and the obligation, we need to specify the definition of an “insurer” and a “relevant insurer” to ensure that all insurers operating in the UK domestic home insurance market, including insurers based overseas and operating in the UK, are covered. That will create a level playing field for all insurers, which did not exist under the statement of principles.

We will need to have a different definition of “flood” for Flood Re and the obligation, because it is possible, although unlikely, that both Flood Re and the obligation could be in force at the same time—for example, if Flood Re is being wound down and the obligation is in the process of being implemented. Unlike Flood Re, eligibility for the obligation is based on flood risk mapping data, which is why different definitions are needed.

New clause 20 concerns the proposed lifespan of the flood insurance measures, which we intend to limit to no more than 25 years. We believe that it is right to plan to provide support over that period to smooth the transition to risk-reflective pricing. The approach to managing that transition will be subject to regular review as part of the levy setting discussions. Alongside that, the Government will continue to focus on appropriate controls on spatial planning, maintaining flood defences and other resistance measures and, at household level, protecting properties in higher flood risk areas by encouraging the installation of flood protection measures and resilient repairs after a flood.

Hon. Members will be aware that, throughout the debate, we have talked about the powers to make regulations or orders. New clause 21 sets out the parliamentary procedures for all regulation and order-making powers, which are relevant to the flood insurance amendments.

I noted at the beginning of this speech the levels of interest in and broad support for our proposals on flood insurance during Second Reading and the public evidence session. The proposals are designed to tackle issues that are of considerable concern to many of our constituents. They cannot take away the pain and distress caused by flooding, but having affordable and accessible flood insurance can help to deal with the devastating aftermath. I therefore propose that the new clauses stand part of the Bill.

James Gray (Conservative, North Wiltshire)

I remind the Committee that with this we are discussing the following:

Government amendment 2.

Government new clause 1—The Flood Reinsurance Scheme—

‘(1) For the purposes of this Part, the Flood Reinsurance Scheme is a scheme which—

(a) is established for the purpose mentioned in subsection (2), and

(b) is designated for the purposes of this Part by regulations made by the Secretary of State.

(2) The purpose referred to in subsection (1)(a) is the purpose of providing reinsurance to relevant insurers in respect of such risks relating to flooding as are identified by the scheme, in such a way as to—

(a) promote the availability and affordability of flood insurance for household premises while minimising the costs of doing so, and

(b) manage, over the period of operation of the scheme, the transition to risk-reflective pricing of flood insurance for household premises.

(3) Subsection (5) applies where the terms of the FR Scheme governing the availability of reinsurance under the FR Scheme for an insurance policy include a requirement as mentioned in subsection (4).

(4) The requirement is that the part of the premium for the policy which is attributable to risks relating to flooding does not exceed a specified amount (“the eligibility threshold”).

(5) The Secretary of State may by regulations make provision as to the level of the eligibility threshold, and may make different provision for different purposes.

(6) Regulations under subsection (5) may, in particular, make different provision for different insurance policies by reference to the value of the household premises to which a policy relates.

(7) In this Part, the Flood Reinsurance Scheme is called “the FR Scheme”.’.

Amendment (a) to Government new clause 1, line 23, at end add—

‘(8) Prior to making any regulations under subsection (5) the Secretary of State shall require the Committee on Climate Change to provide current and projected estimates of the number of properties that would be eligible for—

(a) inclusion in the Flood Reinsurance Scheme;

(b) the value of levy required under section [Schemefunding]; and

(c) the likelihood of additional levy or contributions being needed from time to time.’.

Government new clause 2—Scheme administrator.

Government new clause 3—Scheme funding.

Government new clause 4—Scheme administration.

Government new clause 5—Replacement of the scheme of administrator.

Government new clause 6—Disclosure of information: preparatory purposes.

Government new clause 7—Flood insurance obligations—

‘(1) The Secretary of State may by regulations require a relevant insurer to issue in a prescribed period insurance policies that provide cover against a prescribed description of risk for a prescribed number of registered premises.

(2) The regulations may prescribe different numbers of registered premises for different descriptions of risk.

(3) The descriptions of risks that may be prescribed are those relating to the effects of flooding.

(4) The regulations may provide for a prescribed number relating to a relevant insurer to be determined by reference to factors that include in particular—

(a) a target number (see section (Flood insurance obligations: target number));

(b) the relevant insurer’s share of insurance business of a prescribed description.

(5) The regulations may—

(a) make provision about determining the size of a relevant insurer’s share of insurance business of a prescribed description;

(b) provide for a relevant insurer to be exempt from the obligation described in subsection (1) in prescribed circumstances, whether wholly or so far as regards a particular description of risk, including circumstances relating to the amount of insurance business done by the relevant insurer;

(c) make provision about the circumstances in which a relevant insurer ceases to be subject to the obligation described in subsection (1), whether wholly or so far as regards a particular description of risk;

(d) make provision about the cases in which issuing an insurance policy is not to count towards discharging an obligation imposed on a relevant insurer by the regulations, including cases in which an insurance policy is not to count because of the content of its terms;

(e) make provision for allowing an insurance policy issued by another insurer to count towards the discharge of an obligation to issue a number of insurance policies imposed on a relevant insurer by the regulations;

(f) make provision about determining the number of registered premises for which a relevant insurer has issued insurance policies, including provision for varying, by reference to the risk band applicable to the particular registered premises, the extent to which insuring those premises counts in determining that number.

(6) Provision under subsection (5)(a) may require an insurer, in determining the insurer’s share of insurance business of a prescribed description, to use information about that insurance business held by—

(a) the Secretary of State,

(b) a person acting on behalf of the Secretary of State, or

(c) the FCA.

(7) Subsection (5)(e) is not to be taken as requiring a change in the person who is the insurer in relation to an insurance policy.

(8) Regulations under this section may include provision in respect of cases where an insurer has not provided such information as is required by regulations under section (Flood insurance obligations: information) including—

(a) provision for determining whether the insurer is a relevant insurer,

(b) provision for determining whether an exemption applies, and

(c) provision for determining what share of insurance business of a prescribed description the insurer is to be treated as having.

(9) Before making regulations under this section, the Secretary of State must consult such persons as the Secretary of State considers appropriate.

(10) In this section “prescribed” means specified in or determined in accordance with regulations under this section.’.

Amendment (a) to Government new clause 7, line 35, at end insert—

‘(g) make provision about the circumstances in which a relevant insurer may require mitigation activity to be a condition of cover under an insurance policy.’.

Amendment (b) to Government new clause 7, line 35, at end insert—

‘(g) make provision about the circumstances in which a relevant insurer may require an insured to retain certain elements of the risk under the Flood Reinsurance scheme.’.

Amendment (c) to Government new clause 7, line 35, at end insert—

‘(g) make provision about the circumstances in which a relevant insurer must build awareness of flood risk amongst those living in high risk households.’.

Government new clause 8—Flood insurance obligations: target number—

‘(1) The Secretary of State may, from time to time, by regulations prescribe a number to be a target number for the purposes of regulations under section (Flood insurance obligations).

(2) A target number is the number of registered premises to be covered against a prescribed description of risk by insurance policies issued in a prescribed period by those relevant insurers upon whom obligations are imposed by regulations under section (Flood insurance obligations).

(3) The regulations may prescribe different target numbers for different descriptions of risk.

(4) The regulations may in particular provide for a target number to be expressed as a percentage of the number of registered premises.

(5) The regulations may, at any one time, prescribe target numbers for two or more consecutive prescribed periods.

(6) In this section “prescribed” means specified in or determined in accordance with regulations under this section.’.

Amendment (a) to Government new clause 8, line 15, at end add—

‘(7) In prescribing a target number the Secretary of State shall refer to the advice of the Committee on Climate Change given under section [The Flood Reinsurance Scheme](8).’.

Government new clause 9—Flood insurance obligations: information.

Government new clause 10—Flood insurance obligations: further provision.

Government new clause 11—Register of premises subject to greater flood risk.

Government new clause 12—The register: further provision.

Government new clause 13—The register: reviews and appeals.

Government new clause 14—The register: expenses of relevant bodies.

Government new clause 15—Compliance reports.

Government new clause 16—Functions of the FCA.

Government new clause 17—Reports by the FCA.

Government new clause 18—Intervention by the FCA or the PRA.

Government new clause 19—Interpretation.

Government new clause 20—Period of operation.

Government new clause 21—Regulations and orders.

New clause 37—Right of appeal for households on removal from the flood reinsurance scheme—

‘(1) The Secretary of State shall by order establish a right of appeal for a household which has been removed from the Flood Reinsurance Scheme.

(2) The Financial Conduct Authority shall be responsible for the hearing and administration of appeals under subsection (1).

(3) An order under subsection (1)—

(a) shall be made by statutory instrument; and

(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.

(4) An order under subsection (1) must be made before the Flood Reinsurance Scheme has been implemented.’.

New clause 38—Flood reinsurance scheme: report on properties—

‘(1) The Secretary of State must prepare and publish a report on—

(a) how many properties are not eligible for the Flood Reinsurance Scheme; and

(b) the cost of including properties under (a) in the FR scheme prior to it coming into effect,

and must lay a copy of the report before Parliament.

(2) The report shall include a breakdown of the cost of including properties that fall under the category—

(a) Council Tax band H;

(b) built between 1 January 2009 and 31 December 2012; and

(c) built after 1 January 2013.’.

New clause 39—Flood reinsurance scheme: council tax band—

‘(1) The Secretary of State shall by order enable low income households to qualify for the Flood Reinsurance Scheme, regardless of their Council Tax band.

(2) An order under subsection (1) shall contain a definition of “low income households”.

(3) An order under subsection (1)—

(a) shall be made by statutory instrument; and

(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.

(4) An order under subsection (1) must be made before the Flood Reinsurance Scheme has been implemented.’.

New clause 40—Flood Reinsurance Scheme national database—

‘(1) The Secretary of State may by order (the “commencement order”) appoint a day on which section [The Flood Reinsurance Scheme] is to come into force.

(2) An order under subsection (1)—

(a) shall be made by statutory instrument; and

(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.

(3) The Secretary of State may only make an order under subsection (1) if a Flood Reinsurance Scheme national database has been established.

(4) Any Flood Reinsurance Scheme national database must—

(a) be accessible by the public;

(b) outline a property’s risk of flooding; and

(c) indicate if the property is covered by the Flood Reinsurance Scheme.’.

Dan Rogerson (Liberal Democrat, North Cornwall)

On a point of order, Mr Gray. The hon. Member for Dunfermline and West Fife asked me a question, and I undertook to write to the Committee. I can confirm that I have provided copies of that letter in the Committee Room, and that they are available to any Committee member who wants to take one.

James Gray (Conservative, North Wiltshire)

We are grateful to the Minister.

Thomas Docherty (Labour, Dunfermline and West Fife)

I thank the Minister for the speedy response that he was able to engineer during our brief adjournment.

It is a pleasure to serve under your chairmanship once again, Mr Gray. With your permission, it may be worth taking a couple of minutes to set out the Labour party’s position on the broad principles of Flood Re insurance. I will then speak to some of the new clauses and amendments that stand in my name, before allowing hon. Friends and Government Members to add their thoughts. I hope that I will stay in order at all times.

James Gray (Conservative, North Wiltshire)

Do not worry; I will let you know if you do not.

Thomas Docherty (Labour, Dunfermline and West Fife)

You are most gracious, Mr Gray. I am sure that you will.

We welcome the Government’s progress in building on the work begun by the hon. Member for Ogmore (Huw Irranca-Davies) in 2009. We therefore support the principles set out in the new clauses and welcome the bipartisan manner in which both sides of the House have tried to address the matter. I have perhaps made clear my views on some of the officials in the Department for Environment, Food and Rural Affairs from time to time, and it has been a real pleasure to see a Minister and officials working so effectively together to benefit constituents up and down the country. I commend the work that they have undertaken.

I do not need to tell you, Mr Gray, but I am reliably informed that Wiltshire is occasionally prone to flooding. Flooding is a blight on constituencies up and down the country, from the north-east of Scotland to the south-west of England. In my constituency, with which you, being a Scot, are of course familiar, Mr Gray, places such as Rosyth and Kincardine have in recent days and years suffered more than their fair share of flooding, and many of my constituents will welcome this legislation. According to the Association of British Insurers’ written submission, some 40,000 Scottish households will benefit from the new Flood Re scheme. It is an example of where we are better together as a United Kingdom.

Dan Rogerson (Liberal Democrat, North Cornwall)

I am grateful to the hon. Gentleman for giving way so early, and for his kind remarks. I concur with what he says. Does he agree that it is crucial that we build on the benefits of working collectively to solve such problems, rather than seeking division, which could lead to greater risk?

James Gray (Conservative, North Wiltshire)

The hon. Gentleman should answer strictly within the context of the clause stand part debate.

Thomas Docherty (Labour, Dunfermline and West Fife)

Of course. As you will probably seek to remind me, Mr Gray, this is a good example of where we can work together, and where we should not let people separate us when it is not in the common interest.

Climate change is a reality. We saw on our televisions just last week the horrific weather that affected the eastern side of the United Kingdom. My hon. Friends from the north-east faced some real challenges in getting back to their loved ones due to damage from storms and floods, so this is a timely debate. I could not help thinking, when we sat here last Thursday and watched the wind beginning to gust, that we were debating a live issue that has to be dealt with. A recent report from the Environment Agency stated that in the past year, some £200 million of damage to domestic property was caused by flooding. In 2007, some £3 billion of damage was caused by flooding. I will return briefly to the causes of flooding.

We welcome the principles behind the Bill. We had a good exchange this morning in which we teased out many of the issues, but the Opposition have some specific concerns that we hope the Minister will address. One issue that we did not touch on this morning—I was reminded of this by the excellent speech given on Second Reading by the hon. Member for Thirsk and Malton (Miss McIntosh), in her capacity as Chair of the Select Committee on Environment, Food and Rural Affairs, and as a local MP—is the problem of surface water flooding, which is a growing problem across the country.

Sheryll Murray (Conservative, South East Cornwall)

I do not know whether the hon. Gentleman is aware of the fatality that occurred in my constituency in the early months of this year, when a landslide fell on to a house and the occupant very sadly died. Does he agree that that is a clear example of the growing problem that we have with surface water?

Thomas Docherty (Labour, Dunfermline and West Fife)

I am grateful to the hon. Lady, and I am sure that the whole House sends their condolences to her constituent’s family. She is absolutely right to highlight that issue in a bipartisan manner. In many regions—Yorkshire being an example, as we heard from the Chair of the Select Committee—surface water is the biggest single problem. Indeed, I met Yorkshire Water yesterday afternoon with the shadow Secretary of State, my hon. Friend the Member for Garston and Halewood (Maria Eagle), and the company highlighted the fact that surface water is becoming a growing issue.

That leads me on nicely, if I say so myself, to some of our technical amendments. We do not seek to derail or delay the Bill, but building on the comments made by the Minister, we think it is important to be mindful of the fact that the problem is likely to get worse over the next 25 years, which I understand is approximately the anticipated lifespan of the Flood Re insurance scheme. Although we welcome many of the comments and clarifications that the Minister gave this morning, he will be aware of the concern, raised by Lord Krebs and the Committee on Climate Change, that the number of properties affected by flooding is, regrettably, likely to increase significantly over the lifetime of the scheme. The Government’s figures also show an estimated significant increase in the number of properties at high risk.

We recognise that that increased risk is caused by climate change, which is why amendment (a) to new clause 1 would require the Secretary of State to seek advice from the Committee on Climate Change on estimates of the current and future number of properties at risk. It is important that we are all clear about what the Opposition are requesting. We do not seek to bind the Secretary of State to follow the advice of the Committee on Climate Change, but we want him to be required to ask it for advice. I believe that both sides of the Committee would consider that a reasonable step for the Secretary of State to take.

Neil Parish (Conservative, Tiverton and Honiton)

I understand the points that the shadow Minister is making, but one problem is that from time to time, climate change analysts change their view of exactly where the high levels of water are and which houses will be affected. If we are not careful, we will blight areas where there is no real risk of flooding.

Thomas Docherty (Labour, Dunfermline and West Fife)

I absolutely agree that we must be careful and cautious; with your permission, Mr Gray, I will talk later about properties that might find themselves at the at-risk level. That is why we are clear that it must be done in a methodical way. I am sure that the Minister would agree that the Committee on Climate Change, which is supported by the Department for Environment, Food and Rural Affairs, is the leading authority on the issue. That is why we think it is absolutely right that the Secretary of State should be clear that he will be guided in drawing up future risk assessments by the committee’s advice. However, so that there is no ambiguity in the mind of the hon. Member for Tiverton and Honiton, we are not seeking to bind the Secretary of State to follow the committee’s advice; he would merely be required to seek it, which is an entirely reasonable step.

Emma Lewell-Buck (Labour, South Shields)

Does my hon. Friend feel that the anticipated flood maps would have been helpful to this debate?

Thomas Docherty (Labour, Dunfermline and West Fife)

I agree. My hon. Friend is right to highlight that issue, which I hoped to mention. When the Minister responds, can he answer that point, which was made so excellently? It is regrettable that the maps have not been circulated to this Committee. Perhaps, with some inspiration, he could seek to have that done as speedily as possible.

We heard good remarks from the Minister earlier about mitigation, but he will recall the evidence that we heard last week, and indeed during our time serving together on the Environment, Food and Rural Affairs Committee, that there is concern about how we mitigate the risk of flood damage to communities and individual properties. One criticism made of Flood Re is that it does not include provisions to reduce flood risk, encourage a transition to risk-reflective pricing or—on the point made by the hon. Member for Tiverton and Honiton—increase the information available to high-risk households.

There is a good debate to be had about whether it is sensible for insurers to be able to incentivise flood-resilient property repairs. Mr Gray, you will probably be aware that in the evidence session, some were arguing—this addresses the point made by the hon. Member for Newton Abbot—that many insurers do not just want to return properties to their original standard; they want to be able to expect improvements to be made to prevent damage from happening again. If Committee members turn their attention to our amendments (a), (b) and (c) to new clause 7, they will see that they set out those points. I hope that when the Minister responds, he will be able to set out the Government’s position on those issues, because they are live.

Amendment (a) to new clause 8 involves target numbers. Again, we heard some welcome talk from the Minister this morning about the use of target numbers, but my problem with some of the methodology in Flood Re is that to an extent, it looks as though the ABI has licked its finger, stuck it in the air and come up with some figures. The Minister seemed to look to the heavens; I am not sure that it was for inspiration. In his letter, which he helpfully supplied to the Committee, there was a very large banding of properties. It is important—again, this builds on the point made by the hon. Member for Tiverton and Honiton—that we get more robust information. We propose that such information be made available. One useful body that can help guide the Government is the Committee on Climate Change. I stress to those Members who are not familiar with that committee that it is not some whack-job organisation; it is the body that DEFRA recognises as the UK’s leading adviser to the Government on the impact and mitigation of climate change.

The Opposition think that it is absolutely right that over the coming 25 years, as we try to reduce the number of properties added to high-risk areas—or, more pessimistically, reduce the rate at which properties are added to such areas—the Secretary of State should be able to take credible, benchmarked advice and provide real and substantive targets to Parliament. Although we recognise the need for secondary legislation, the Minister is asking us to take at face value that that work will be done, so we are seeking more plating to ensure that that scrutiny takes place.

The final issue that I wish to address is the database. We had a good exchange earlier on how information will be gathered and shared. I keep name-checking the hon. Member for Tiverton and Honiton, which is probably not career-enhancing for him. He is right to refer to flood maps, which were one of my concerns after the evidence session. The big challenge that all our constituents face is that the proposal is not to use flood maps for determining whether a property will be part of the Flood Re scheme. The determination will be made on an individual street or postcode basis. Will the Minister clarify the detail to which he expects the scheme to work? It sounds almost as if the detail might go down to individual properties on a street, but if he is inspired to provide information on that, it would be helpful.

The Opposition think it is important that information on whether properties are covered by Flood Re is made available to two groups of people. Members will be familiar with cases of people looking to purchase a new home in areas that are perhaps perceived to be at risk of flooding. Those people are concerned about the insurance available. We propose—again, this came out of the evidence session—that potential home buyers be able to access from the Flood Re organisation confirmation, or otherwise, that a particular property is covered by the Flood Re scheme.

It is also important that mortgage lenders are able to access that information on request, because we understand that many of our constituents are finding it challenging to get a mortgage in the best of circumstances. It is even harder for people to get a mortgage if the mortgage lender is concerned that their property may be at higher risk of damage, particularly from flooding.

This technical and genuinely helpful amendment seeks to ensure that, when the scheme is up and running, both the potential house buyer and the potential mortgage lender are able to ask Flood Re whether a particular property is within the scope of the Flood Re scheme, which is not an unreasonable or unusual proposal. I suspect—I may have some inspiration myself—that the Minister might try to argue against the proposal on the basis that he has not yet had it signed off by the ABI, but I note that the ABI has said that, on a couple of occasions, the Minister has diverged from what they have agreed; he will see that if he looks at the ABI’s written submission. I hope his response is slightly more robust than, “I have to get permission from the ABI to do this.”

If the Minister is concerned about any of the technical issues on the funding or oversight of the proposal, we are more than happy to work with him on a bipartisan basis. We are clear that we would use secondary legislation, so we do not expect him to tell us exactly how it would operate today. [Interruption.] Bless you. We are more than happy to meet as soon as possible—

Dan Rogerson (Liberal Democrat, North Cornwall)

On a point of order, Mr Gray. Surely the hon. Gentleman should have said, “Bless her”.

James Gray (Conservative, North Wiltshire)

Order. The Minister is of course quite right. None the less, I am delighted to have been blessed.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am most grateful to you, Mr Gray, and to the Minister for that helpful point of order. He always seeks to be helpful and I want to see that in his response today.

We are more than happy to work on a bipartisan basis with the Government—and I am sure with the ABI—in the coming months; that is why we have been clear in the amendments that we would use secondary legislation. But we want to put down a clear marker that we think creating a database is an important, practical step that needs to be taken.

With your permission, Mr Gray, I will discuss some of our other provisions later in the debate.

James Gray (Conservative, North Wiltshire)

Order. The nature of my discussion with the Clerk was that if the hon. Gentleman wants to speak on other new clauses or amendments in the group it might be convenient to do so now.

Andrew Percy (Conservative, Brigg and Goole)

I want to say a few words about flood insurance, not least because it is a huge issue in my constituency, which at the present time is recovering from serious flooding over the weekend: yet again, hundreds of homes have been flooded, this time because of the tidal surge, which overwhelmed our very substantial flood defences along the Humber, the Ouse and the tidal Trent. This issue is a live one in my constituency. Sadly, a number of the properties that were flooded this weekend were not insured because the owners were unable to take insurance or because they felt the insurance offered to them was too expensive. As in previous years, perhaps some of the saddest cases from this weekend have been those of people who thought they were insured but on contacting their insurers found out that they did not have flood cover as part of their policy.

Geography is important; that will be clear in one of the later points I want to make to the Minister. Unfortunately, this is not a problem that we have seen only this year: my constituency sees flooding pretty much every year because of our local geography. Last year, 1,000 or so properties in Goole were affected; the year before, it was about 1,000 in Goole, Swinefleet and various villages. That has created a difficult insurance market locally.

I myself have struggled with the issue. I live next to the tidal river Aire, with 10-foot high flood defences right in front of my house. They were very nearly overtopped last weekend, but fortunately for my village that did not happen. In the past I have taken out insurance, but on looking at the details have suddenly realised I am not covered for flooding. There is a lot of confusion out there, which is why I welcome the Flood Re proposals in general. The statement of principles did a job to a point, but was by no means perfect for people in my area, as many found after the devastating floods in 2007, which also had a huge impact on my constituency.

We were hoping that this year we would have a full calendar year without any flooding, and we very nearly got there, but unfortunately it was not to be. We have also had a number of near misses in recent years. I appreciate the Minister’s concern for those who cannot get insurance. I would like to invite him to my constituency to see some of the recent damage for himself and to meet some of the people who have problems getting insurance; perhaps he will be able to reassure them of the viability and likely benefit to them of the Flood Re scheme.

I want to build on a few concerns raised across the Committee and add my view. I am pleased to hear that small businesses operated from properties that are primarily residential will be included in the provision. That was raised at a public meeting that I rushed back for in Reedness, one of the communities that was flooded, on Monday evening, to which about 100 people turned up. That is important to us, because in our area many small businesses operate from residential properties.

I have some concerns about the council tax band issue. I live in a band A property. The average house price in my constituency is very low and the median income is only £16,800. We do not have a large number of properties in band H, but I hope that the Minister will respond on those.

Thomas Docherty rose—

Andrew Percy (Conservative, Brigg and Goole)

I am surprised that the hon. Member for Dunfermline and West Fife is trying to intervene on me, because on Tuesday he said that Yorkshire MPs were generally fine, but that I was not that fine.

Thomas Docherty (Labour, Dunfermline and West Fife)

On a point of order, Mr Gray. If I could check the record, I think I said on Tuesday that many Yorkshire MPs were better than average and some were below average. I did not look in the direction of any one Member when I said that.

James Gray (Conservative, North Wiltshire)

The record will speak for itself. That is not really a point of order.

Andrew Percy (Conservative, Brigg and Goole)

I give way to the hon. Gentleman.

Thomas Docherty (Labour, Dunfermline and West Fife)

The Opposition intend to tease out the banding and exemptions issue later in debates on some of the other new clauses, which may help the hon. Gentleman. I suspect that we may debate that shortly.

Andrew Percy (Conservative, Brigg and Goole)

I have the record with me and the hon. Gentleman’s exact words in Hansard were:

“I am most grateful, if for no other reason than the hon. Gentleman has demonstrated that, while Yorkshire has some of the finest MPs in the House of Commons, they are not universally fine.”––[Official Report, Water Public Bill Committee, 10 December 2013; c. 206.]

I think he was looking at me as he said that. Anyway, I look forward to that debate and I look forward to his subsequent apology, because that did hurt me. It has been a difficult time. I am a soft, thin-skinned, sensitive individual, as all Yorkshiremen are, so I was a little upset by that. I am sure he will want to apologise. Perhaps he could make just a small donation to one of our local flood appeals to make up for it.

I look forward to the debate on council tax bands, because that will be an issue for some people, perhaps not largely for my constituents. I would like to hear the Minister go into more detail on whether he is prepared to take the Opposition’s offer to look at whether something can be done for those in financial distress or poverty who happen to live in a big or expensive property.

I also want to flag up the 2009 deadline. I saw the Minister’s letter, which was cleverly and fully worded to make it clear that those who stand up and argue for a date later in 2009 are arguing for everyone’s insurance premiums to be put up. That is, of course, a fact and I thank him for helpfully reminding us of that.

In our area, however, we have a problem because of the geography, which I raised on Second Reading and in a previous debate on the water industry. We have, as I think I said in one of our sittings last week, homes built since 2009 being marketed through the Government’s Help to Buy scheme whose owners will not have access to the Flood Re scheme that the Government are rightly working so hard on. We have a disconnect in the message we are sending out to people. How can we have a Government-backed scheme that says, “Buy these properties” while the Government are trying to incentivise people not to purchase properties built after 2009?

Dan Rogerson (Liberal Democrat, North Cornwall)

The Chancellor of the Exchequer is not here to discuss the policy to which my hon. Friend refers, but I think I would be right to say that that policy is simply a mechanism available to all people in the right circumstances who are looking to buy. It is not specifically linked to those properties, which just so happen to have been developed in a flood plain. Perhaps those two policies are not quite so closely linked.

Andrew Percy (Conservative, Brigg and Goole)

I tend to think the effects of most Government policies are unintentional, and the present instance is of course an unintended consequence; but the average punter might not understand a scheme in which the Government help with the purchase of a property that may not be insurable. However, the Minister is right. The scheme is a general one and was not designed with the considerations in question in mind.

The hon. Member for Kingston upon Hull North (Diana Johnson) has pushed the issue because in her constituency, as in large parts of mine, it is not possible to create a disincentive in relation to building on the flood plain. Five tidal rivers coalesce in my constituency, and three of them—the Dutch river, the Ouse and the Aire—meet in one town alone, whose name means “open drain” in old Norse.

In those conditions it is difficult for us not to build on a flood plain. Indeed, a massive development of 10,000 homes is proposed on the edge of Scunthorpe, on the natural flood plain for the Trent, in my constituency. The proposal was made under the previous Government, through the local development framework, and the council, which is now Conservative-controlled, supports it; but that will all be on the flood plain. It is difficult in an area such as ours not to use such land for development.

Dan Rogerson (Liberal Democrat, North Cornwall)

I appreciate the way the hon. Gentleman is outlining the things affecting his formerly Norse-dominated constituency. As someone from the Celtic end of the country, I reach a hand of friendship across Anglo-Saxon territory.

Should there be a pressing need for development in an area that is prone to flooding, we want incentives for flood resilience in the design and levels of properties, such as building living floors above storage or garage facilities. It is not as simple as house or no house: it is a question of the sort of house.

Andrew Percy (Conservative, Brigg and Goole)

Absolutely. That is why we have been so supportive of sustainable urban drainage systems and the rest. We want improved standards, but a concern then arises that development can produce a knock-on effect for nearby properties, whose flood risk increases. The storage standard has gone from one in 30 to about one in 100, but our town has suffered one in 200 year incidents. We had a one in 800 year storm that flooded the town two years ago.

It is not just the new properties that are affected; there is an impact on the others. I acknowledge the Minister’s point about building proper flood resilience into properties, and the importance of that for insurance, but my constituency neighbour the hon. Member for Kingston upon Hull North and I want Ministers to bear in mind the geographical and topographical issues. We might, to be politically correct, describe our constituencies as topographically challenged.

I shall not demand that the Minister should add 2.2% to everyone’s insurance premiums to pay for band H properties, or that properties built to the end of 2012 should be included, but perhaps on Report he will keep in mind the difficult issue for constituencies such as mine: in many communities it is practically impossible to build without building on land that is prone to flooding.

I agree with some of the concerns raised earlier about action on properties that are uninsurable. That is a problem for a number of people in my constituency.

I have spoken about my concerns in the round, but I do not want the Minister to conclude that I do not support the Flood Re scheme. It is a fine replacement for the statement of principles and I congratulate him, his Department and his predecessor on their hard work in establishing it. It will be reassuring. I attended a public meeting in Reedness on Monday evening and was able to tell people that Flood Re was coming down the line and would be of benefit to residents. Of course, no scheme can be perfectly designed, but if the Minister could say anything about the concerns I have raised, and also about helping to make uninsurable properties more flood resilient, that would be greatly appreciated.

I would like to end by reiterating my invite to the Minister. We do not ask many Ministers to come to Brigg and Goole—I am generally pleased when they stay away—so it is a great honour that we have asked him to come, and an honour that I am sure he, as far away as he is in the south-west, would not want to refuse.

Mary Glindon (Labour, North Tyneside)

It is a pleasure to serve under your chairmanship, Mr Gray, and to follow a fine MP who, I am sure we all agree, represents his constituents with passion, especially on this issue.

I want to speak in support of the amendments tabled by my hon. Friend the Member for Dunfermline and West Fife and to demonstrate why this part of the Bill is so important. We know that much of the Bill is about managing water as a precious resource that is vital to life, to the environment, for our consumption and for businesses. I think of water as being a bit like a god—we depend on it for life, but we know that it can also destroy lives.

The devastation and tragedy we have seen in the UK in recent years because of flooding has already been mentioned. However, when Members talk about flooding in our constituencies, we are talking about people losing their homes and businesses—not just once, but time and again. They must then endure all the accompanying disruption and misery. I feel that a water Bill must address the concerns and fears of the people who have been so badly affected; it must give them confidence that the Government are tackling the issue and will make things better for them in future.

In my constituency, we have been hit by floods a number of times since 2007. In fact, some households have been hit three or four times in that period. When I say “hit”, I mean that people have been out of their houses for several months. The upside of what I have to say is my praise for Northumbrian Water, the water utility company in our area. I have worked closely with the company to try to help people who have been affected by floods, and I want to congratulate it on winning some of the utility Oscars earlier this week. It was declared “utility of the year” and also won the marketing initiative award for Dwaine Pipe, a little pipe creature who tells people what they should or should not be putting down their sinks and toilets.

James Gray (Conservative, North Wiltshire)

Can we keep things in the context of the Bill, please?

Mary Glindon (Labour, North Tyneside)

Sorry. I suppose the point is that he will help us not to block our drains and therefore to avoid flooding in a number of areas.

Despite the fact that Northumbrian Water has spent the most money on improvements to help with flooding, those improvements have not always worked to the degree needed. Only last year, a holding tank that holds 10.5 million litres of water was completed to save a whole street of homes. Unfortunately, however, when we had the floods last summer, those homes were still flooded because the water table was so high. Nothing could be done about it.

The people who live in that area cannot get flood insurance, and the problem will continue because the Longbenton Letch runs behind their houses. That is a fact, and trying to do anything else will be really hard. The money has been spent, the work has been done, and they just hope that in future, things will work out. In the meantime, many of them have not been able to renew their insurance policies because of the expense. When there are natural occurrences such as rivers, streams and so on, how can we mitigate the position for people so that they can get insurance under Flood Re?

I also say that some people found it difficult to understand what was being proposed in the consultation; there was a low take-up before the Government announced or decided how we would move forward in relation to insurance. I do not know how that can be helped; perhaps it is just something to be observed.

We have help from water companies such as Northumbrian Water, on issues such as those in Hadrian Park, for example—an estate that is 30-odd years old. When a new road roundabout was put in, the nearest houses were suddenly flooded when the floods occurred last year and a couple of years previously. The water company is now looking at doing a modular response for them, but we know that such things take a long time.

Meanwhile, those people are in limbo. That is why it is so important to get this part of the Bill right, otherwise people will have to live every day hoping that it will not rain and that they will not, yet again, have to leave their homes, which they have just refurbished. Something that came out from a number of people, including the water board—something that I think is really important in the Bill—is that when repairs are costed and paid for by insurance, people’s homes should be upgraded to make sure that they are resilient to floods. It should not be like for like. We have seen that that can make such a difference, but unfortunately, as things stand, people cannot get upgrading on their home insurance and often do not have the spare cash themselves to upgrade.

I shall finish there. I really feel that we have to get these things right, and I want to support the amendments. I hope that when the Bill becomes an Act, the people whom we represent will have the surety to look forward to a safer future.

Dan Rogerson (Liberal Democrat, North Cornwall)

It is a pleasure to follow such a thoughtful debate from three hon. Members, and many other hon. Members are paying close attention and following the points that have been raised. It is really important to say that the Government appreciate just how closely hon. Members are working with people in their constituencies to overcome some of these problems and to work with the relevant agencies and companies. The stories that we heard from two Back Benchers are a good reminder of what we are dealing with and what the whole thing is about.

I thank the hon. Member for Dunfermline and West Fife for his amendments to new clauses 1, 7 and 8 and for his proposed new clause 40. The amendments together cover the role of the Committee on Climate Change, the role of insurers in incentivising householders to manage their flood risk and the need to raise awareness of flood risk among those who stand to benefit from our proposed arrangements on flood insurance.

Neil Parish (Conservative, Tiverton and Honiton)

In Axminster and Feniton in my constituency, bungalows and houses were flooded three or four times last year. Not only is it difficult then to get insurance, but it is difficult sometimes for those houses to take mitigation measures and perhaps put up certain barriers. That is not exactly to do with Flood Re, but it is to do with the fact that very often the Environment Agency will not allow people to make improvements to their property. The whole thing has to be taken in the round. My final point is that I congratulate the Government on getting Flood Re agreed, especially for 25 years, although we will see the same problem happen time and again.

Dan Rogerson (Liberal Democrat, North Cornwall)

My hon. Friend raises the important issue of betterment, which the hon. Member for North Tyneside also raised. It is important that Flood Re should have the right incentives to allow householders to take steps to tackle the underlying problems of the risk of flooding to their properties. I am interested in that issue, and the Secretary of State has made clear that he is also interested in it.

Constructive discussions with the Association of British Insurers on whether and how to encourage households in Flood Re that claim to reinstate their property and make them more resilient to flooding are continuing. I appreciate the high degree of interest in the issue from hon. Members on both sides of the House. I would like to see proposals on that basis and our discussions with insurers will continue.

I intend to take new clause 40 from the hon. Member for Dunfermline and West Fife and the proposed amendments to Government new clauses together, in the following order: amendments to new clause 1; those to new clause 8; those to new clause 7; and new clause 40.

I am grateful to the hon. Gentleman for his wish to ensure that the policies in legislation meet the needs of today and are flexible enough to meet the demands that climate change may bring in future. I support his desire to see flood risk management at the heart of the approach to tackling the financial consequences of flooding. Managing the risk of flooding will always be the best way to secure available flood insurance.

The proposed amendment to new clause 1 suggests that the Committee on Climate Change will provide advice before setting eligibility thresholds. That proposal was raised on Second Reading. I am happy to respond. I assure the hon. Gentleman that climate change protections were considered, alongside other risk factors, during the design of the policy. The effects of climate change will continue to be considered during future levy setting discussions, as part of the consideration of the number of households at risk. The best way to ensure that flood insurance is affordable in the long term, in light of climate change and other risk factors, is to tackle underlying flood risk, not the symptoms. Therefore, in the long term, it is key that we continue to invest record amounts in flood defences to prevent flooding in the first place.

Thomas Docherty (Labour, Dunfermline and West Fife)

I do not wish to slow the Minister’s flow, but can he confirm whether he has seen last week’s article in The Observer and whether Friends of the Earth made available to him the submission it made to Opposition Members? It says that the Government have not taken into account the full scale of the problem.

Dan Rogerson (Liberal Democrat, North Cornwall)

I have indeed seen the contribution from Friends of the Earth. I am always grateful to receive such submissions, but our position is that we took the factors into account in developing the model. The Government also take account of the changing risk of flooding and coastal erosion caused by climate when investing in defences.

The hon. Gentleman is clearly familiar with the role of the Committee on Climate Change, but it might help this Committee if I set it out in a little detail. It is an independent statutory body with the purpose of advising the UK Government on preparing for climate change. Advising on the scope of and financial parameters for the transitional flood reinsurance scheme is outside its current remit, and, for reasons I will highlight, would not be the most appropriate use of its resources or expertise.

The number of policies eligible for Flood Re is based solely on the cost of the flood risk component of any policy, which is set by the insurers and will differ based on each insurer’s assessment of flood risk. It is not possible for the Committee on Climate Change to provide any estimates, without detailed knowledge of industry pricing models; the industry has that expertise.

Any advice the Committee on Climate Change gave would have to be informed by the industry in the first place. In a sense, we would be duplicating information and looping it round. The value of the levy required and the likelihood of any additional contribution by insurers is similarly based on financial parameters that could change year on year. Those include: the level of premiums received; the cost of reinsurance; and the amount of levy collected.

The Government and the ABI worked intensively to determine the value of the levy required and the likelihood of a need for additional contributions, based on industry data and assumptions subject to independent review by Professor Stephen Diacon. In addition, extensive modelling has been carried out by Government using those data, as part of both the pre and post-consultation impact assessments. The Environment Agency will continue to collect and analyse data on flood risk, which will feed into the Government’s ongoing assessment of the scheme.

Flood Re is also directly accountable to Parliament. Detailed audit information about Flood Re’s ongoing operations will be reported to Parliament regularly. It is not clear what value the Committee on Climate Change would add.

Thomas Docherty (Labour, Dunfermline and West Fife)

Can the Minister clarify for the Committee’s benefit whether Lord Krebs and the Committee on Climate Change share that analysis of their role?

Dan Rogerson (Liberal Democrat, North Cornwall)

Lord Krebs chairs a sub-committee of the Committee on Climate Change considering adaptation. He has helpfully made suggestions, and we always welcome contributions from committee members, but as I have said, we believe that the data that he would use would come from the same source as the data informing our approach.

It should also be noted that Flood Re has been designed as a transitional policy. That is important to ensure a continued incentive to encourage householders to become resilient and prepare for the long term. The eligibility thresholds for households and the levy will therefore change in accordance with the five-yearly discussions between Flood Re and the Government to facilitate that transition. Amendment (a) to new clause 1 is therefore unnecessary.

On the proposed role of the Committee on Climate Change in advising the Secretary of State when setting targets for the flood insurance obligation, our alternative approach to flood insurance, that proposed role is the purpose of proposed amendment (a) to new clause 8. In setting the target for the obligation, the Secretary of State would refer to the register of properties at greater risk of flooding created for that purpose by the Environment Agency and its counterparts in the devolved Administrations. The register of properties at high risk of flooding will be based on the flood risk mapping published by the Environment Agency and its equivalents in the devolved Administrations.

To respond to the point about the Environment Agency maps raised by the hon. Member for South Shields, who is no longer in her place, I can confirm that they were published today and are available on the website. Hon. Members may wish to examine them; I am sure that they will be a useful tool for all our constituents who are concerned.

Thomas Docherty (Labour, Dunfermline and West Fife)

Does the Minister not accept in hindsight that it probably would have been wise to bring those maps with us today so that we could see them at first hand? I seem to recall that we have had problems before with him inadvertently misleading the Committee by telling us that things were on the internet that we could not then access.

Dan Rogerson (Liberal Democrat, North Cornwall)

It would certainly not be my intention ever to mislead the Committee. The example that the hon. Gentleman gave from the evidence sessions involved information made available through the Department. There was then an issue with the scrutiny unit as well, which was servicing and ably supporting the Bill. The information was passed between the two. I can confirm with him what happened in that regard.

I suspect that we might be detained even longer than by my earlier lengthy contribution if we were to analyse the flood maps in detail. However, I welcome the fact that they have now been published, as I hope does the hon. Gentleman.

In setting the target for the obligation, the Secretary of State would refer to the register of properties at greater risk of flooding. The number of properties subject to flood risk may change with time as a consequence of climate change or other factors. Any property shown to be at higher risk could therefore become eligible to benefit from the obligation. The Secretary of State would then set an overall target for the proportion of properties on the register that the industry as a whole must cover. That target is provided in new clause 8.

In setting the target, the Secretary of State would consider evidence on existing take-up rates and other relevant data, which could include data on climate change. Not all households want insurance, so the goal would be to set a collective target that reflects existing levels of take-up and likely demand and the fact that some homes that flood regularly are already considered uninsurable. To be clear, the amendment deals with flood obligation rather than Flood Re.

Although the Committee on Climate Change has a great deal of advice to be drawn on regularly, I am not persuaded that there is a particular need for its duties to expand in relation to what is principally a financial support mechanism. For the reasons discussed in relation to Flood Re, I do not believe that it would be the most appropriate use of the committee’s resources or expertise. In any event, regulations made under new clause 8 will provide for the Secretary of State to set the target for the obligation from time to time by statutory instrument following consultation. Therefore, there is already provision for the Committee on Climate Change to have input into the target-setting process.

The Government’s new clauses provide for both the target setting and the obligation to respond to the demands of climate change, and for the register to accommodate changes to properties’ level of flood risk. Amendment (a) to new clause 8 is therefore not necessary.

In terms of reducing flood risk, I turn to the amendments to new clause 7, which also concern the flood insurance obligation. Amendment (a) to new clause 7 would enable insurers subject to the obligation to require households to take steps to reduce their flood risk, as a condition of benefiting from insurance cover. We expect that, within the obligation, insurers’ pricing strategies are likely to lead to competition being greatest for properties on the register at a lesser risk of flooding, where an insurer’s exposure to risk will be correspondingly lower.

Households on the register seeking flood insurance cover are thereby already incentivised to take steps to reduce their need to make a flood claim—for example, by installing property level flood protection or making their property more resilient to flooding when undertaking repairs, because by doing so they are making their property more attractive to insurers seeking to meet their obligation quota. Likewise, insurers will have a strong incentive to support households in reducing their risk of flooding, because that will also reduce the cost to insurers of meeting their obligation quota.

Constructive discussions on our preferred approach to Flood Re continue with the Association of British Insurers, both on this issue and on whether and how to encourage households in Flood Re who make a claim to reinstate their property, so that it is more resilient to flooding. It is important that Flood Re has the right incentives for both households and insurers, for action to be taken to tackle the underlying problem, which is the risk of flooding. This is why, for instance, Flood Re has a duty to secure value for money. The hon. Member for Dunfermline and West Fife is right to say that more thought is needed in this area. As I have said, in relation to Flood Re, we are actively considering this with the ABI and I hope to introduce proposals on that. The amendment is unnecessary in relation to the obligation, for the reasons that I have outlined.

Amendment (b) to new clause 7 would enable insurers to require their policyholders to retain some portion of the financial risk associated with their insurance policy. Under the flood insurance obligation, insurers would continue, as at present, to be primarily responsible for the financial risk of the insurance policies that they write. We anticipate that, as at present, it will be normal practice for insurers writing policies to meet their quota under the obligation to continue to ask their policyholders to pay an excess. Therefore householders already retain an element of risk.

Under the flood insurance obligation, a competitive market for flood insurance cover is maintained. We would therefore expect insurers to take different approaches to excesses. Some insurers may offer a reduced premium if a policyholder is willing to accept a larger excess. However, large excesses may be unaffordable for households, in the same way that high premiums would be. Insurers that offered very high premiums and excesses to households would likely struggle to win sufficient custom to meet their obligation quota. Under the obligation, as we have just discussed, it is likely that households would be able to lower both premiums and excesses by taking action to reduce flood risk.

The amendment is therefore unnecessary. However, judging by the reference to the flood re-insurance scheme, I wonder whether the hon. Gentleman was instead interested in requiring households benefiting from that scheme, rather than the flood insurance obligation, to retain some element of the risk. If that is the intention, I continue to believe that the amendment is unnecessary, and it could reduce the affordability of flood insurance.

The 2008 statement of principles, signed under the previous Administration, did nothing to deal with the affordability of flood insurance. It also did nothing to limit the excesses that insurers could charge. Many Committee members will have constituents who have faced either excessive premiums or high excesses. Flood Re would effectively limit these, as well as the premium charged, for the first time. A standard excess would help ensure that all policies within Flood Re were treated in the same way and that, if people needed to make a claim on their policy, they would receive the help they needed.

The final level of excesses in Flood Re would be within the range of £250 to £500, as set out in the memorandum of understanding that we reached with the ABI in June. By shopping around and being prepared to take action to reduce flood risk, customers may be able to reduce their premiums and excesses. We want flood insurance to be more affordable, but I am concerned that the amendment could achieve the opposite. Therefore I reject it.

Amendment (c) to new clause 7 introduces a requirement on insurers to raise awareness of flood risk among those at high risk. The hon. Gentleman is right to ask about what the insurance industry can do to raise awareness of flood risk, not least because the Government intend that there should be a gradual transition towards more risk-reflected prices; as we have discussed, that should be based on robust evidence of local risk, to increase the incentives for flood risk to be managed.

Flood risk management authorities, such as local authorities and the Environment Agency, already do an invaluable job in making information on flood risk available to households. The benefits of such activities were reinforced only last week during the most serious coastal flood event for more than 60 years, as we heard from Committee members. The EA warned communities at risk, through the flood warning service, and promoted its free flood warning service through traditional and social media. Great leadership has also been shown by local authorities.

Under the flood insurance obligation, insurers will be incentivised by market forces to make high-risk households on the register aware of their flood risk and actions that they can take to reduce the need to make an insurance claim, such as signing up for warnings.

Andrew Percy (Conservative, Brigg and Goole)

The Minister is talking about Floodline, which gave a number of important warnings, but which does not seem to have worked everywhere. In the list of people whom he congratulated on warning about flood risk and impending flood risk, he missed out volunteers and emergency committees. In my constituency, where Floodline did not provide warnings, volunteers and parish councils in communities such as Reedness, South Ferriby and Burringham went about and evacuated people.

Dan Rogerson (Liberal Democrat, North Cornwall)

I thank the hon. Gentleman for his intervention. I have, on other occasions, pointed out the contribution made by civil society generally, from volunteers and communities, but it is good that he has made that point again.

New clause 40 is intended to ensure that those who are affected have an increased understanding of their flood risk and are aware that they are benefiting from the Flood Re scheme. We agree that households that benefit from Flood Re will need to know that their insurance is being subsidised, and that the support will be withdrawn over time, so that they can plan for the future. That was a key issue that emerged from the public consultation. The Government continue to explore with the industry how that can best be achieved, and I hope to be able to return to the House shortly with further details.

The new clause provides for a separate commencement order, made by affirmative resolution, to

“appoint a day on which section [The Flood Reinsurance Scheme] is to come into force.”

The intention of subsections (1) and (2) is, no doubt, to provide for a specific day on which the scheme can come into force through a commencement order following the establishment of the proposed public national database. However, information on flood risk categorisation of properties has been publicly available for many years. In England, the Environment Agency makes flood risk data available on its website. In addition, the maps that the hon. Members for Dunfermline and West Fife and for South Shields referred to have been published today.

Since June, we have been working with the insurance industry to go even further to improve the data that are available on flood risk. We have agreed that the Environment Agency and its devolved counterparts will be able to access Flood Re’s data on the location of the highest-risk households. I thank hon. Members for their contributions to the debate, and I understand the spirit in which the hon. Gentleman has tabled the new clauses. This is a new scheme, and it is important that we get it right. For the reasons I have laid out, I hope he will see why the Government want to maintain the approach that we have negotiated with the industry.

Thomas Docherty (Labour, Dunfermline and West Fife)

Despite the Minister’s detailed response, I am disappointed that he or his officials have completely missed the point of new clause 40. I will start by recapping for the benefit of the Minister and his officials. The point is that it is the potential house buyer and the mortgage lender who need to have access. A constituent and his wife came to see me recently with a similar problem, and their situation may help to explain why the new clause is so important. When they bought their house, the vendor assured them that there were no factoring fees on the property, and there was no way for the house buyer and his wife to check that information. They have now found themselves—surprise, surprise—stuck paying hundreds of pounds a year in factoring fees, and they cannot track down the vendor, who has now left the area.

If a buyer is told by their vendor that the property that they are looking to buy is in a flood risk area, they have to have comfort that they and their mortgage lender can verify that information. I am disappointed that the Minister did not address that issue at all. I repeat the Opposition’s offer to work with the Minister and his officials to find an appropriate mechanism. Perhaps he might receive some inspiration from his officials on the matter before his final remarks. I understand that new clause 40 may not be pressed to a vote before Tuesday, so if the Minister would like to enter into dialogue in the days ahead, we would be happy to do that.

I turn to the other new clauses. We believe, as do Lord Krebs and the Committee on Climate Change, that they do have a role to play in coming up with the risk assessment for going forward. I suspect that the Secretary of State is a lot less keen on the proposal than is the Committee on Climate Change, and that is why he is averse to it. That proposal is slightly more political, and I confirm that we will press the amendments to a vote, because the Secretary of State should take advice from his independent advisers. After all, what is the point of independent advisers if the Secretary of State does not even have to take advice from them?

New clauses 37 to 39 were “inspired” by the evidence sessions. I praise the hon. Members for Newton Abbot, for South East Cornwall and for Brigg and Goole, who have all spoken on the issues that the new clauses address, both in our line-by-line scrutiny of the Bill and in the evidence sessions some nine days ago.

New clause 37 addresses the right of appeal for a household. We very much welcome the letter that we had this morning from the Minister in response to an earlier exchange, but it highlighted an issue that all members of the Committee are concerned about. Without reading out the whole letter and detaining the Committee, the letter says that on the opening date—I think 1 January 2015 is the date that the Minister has in mind, but I am sure he will interrupt me if I have got that wrong —all properties built before 2009 and not in band H, or band I in Wales, will be included in the scheme.

As the letter sets out, and as the evidence we took from the industry made clear, the intention is to start to move to remove some households from qualifying for the Flood Re scheme, and the Bill has no right of appeal for them. They might not agree with the decision of the Flood Re body. I am sure, Mr Gray, that as an assiduous MP, you have been able to help many constituents over the years, where they have run into the bureaucracy of officialdom. We would normally expect there to be some right of appeal.

Sheryll Murray (Conservative, South East Cornwall)

Does the Minister not agree that, as I understand it, everyone starts on a level playing field and it is only if a property has an increasing history of constant and continual flooding that it will become genuinely uninsurable?

Thomas Docherty (Labour, Dunfermline and West Fife)

I am most grateful to the hon. Lady for her intervention and for promoting me to the Government Front Bench. I am not sure the Minister was grateful for that. I agree with the hon. Lady that there will of course be individual households that do not take reasonable steps, but the problem, as we saw in the evidence submitted by the Association of British Insurers and in the Minister’s letter from yesterday, is that the Government cannot come up with a definition of “uninsurable” at this time.

The Minister is a smart fellow. [Interruption.] If the hon. Member for South East Cornwall wants to intervene, I am more than happy to give way in a second, but I will expand on my point. The Minister is a smart fellow and he has a group of officials in his team who are pretty sharp. If neither they nor the industry can come up with a definition of “uninsurable” at the start, I am concerned that we are setting off on a path without a back-stop to ensure that no one falls through the cracks.

Dan Rogerson (Liberal Democrat, North Cornwall)

To be helpful to the hon. Gentleman, the definition of “uninsurable” is a property for which it is impossible to get insurance. Flood Re will take a view that is proportionate to the amount of resource being used to insure that property, if there is a need to make frequent payments. This is the point: until the process is in action and judgments are being made about the insurance of individual properties, we cannot define or we cannot say whether properties are uninsurable.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am most grateful to the Minister and I will address his point in a second, but I want to let the hon. Member for South East Cornwall intervene.

Sheryll Murray (Conservative, South East Cornwall)

I am grateful to the hon. Gentleman. One of the principles of insurance is that a claims history is taken into account when calculating premiums. That is basic and that is all that Flood Re is replicating, but at the end of the day, everyone starts, as we heard in the evidence session, by being able to obtain insurance. It will be only someone’s claims track record that results in their becoming genuinely uninsurable.

Thomas Docherty (Labour, Dunfermline and West Fife)

I suggest that the hon. Lady and the Minister re-read columns 43 to 46 of the evidence from the Tuesday afternoon, which covers this issue at great length. I do not think that we are a million miles away. I have a genuine concern, as I think all Opposition Members have and, I suspect, one or two Members on the Government Benches have, about there not being a right of appeal. We all know from our own experience as Members of Parliament that someone will say, “I think I have taken reasonable steps, but my”—

Sheryll Murray rose—

Thomas Docherty (Labour, Dunfermline and West Fife)

If I may finish the point, I will let the hon. Lady intervene again. We can all think of examples of bureaucrats versus constituents—situations in which they have a differing view. Let me be clear. Opposition Members are not saying that the approach that the hon. Lady is outlining—that people should be removed when they refuse to take steps—is without merit, but not having a right to say, “I think I am taking steps and the bureaucracy doesn’t agree” will be a real danger for her constituents. I will let her back in if she wants to add to her comments.

Sheryll Murray (Conservative, South East Cornwall)

We are talking about insurance. I do not know of a single insurance company that applies a right of appeal to its cover. Does the hon. Gentleman not agree with me? I do not get a right of appeal. It is not the case that when I ask an insurance company to provide me with home insurance and it gives me a premium, I have a right of appeal. I think that is where the hon. Gentleman is becoming confused. Does he not agree?

Thomas Docherty (Labour, Dunfermline and West Fife)

I cannot think—your service to the House, Mr Gray, is much greater than mine—of a situation in which we have had an insurance system that is underpinned by statute, overseen by a Secretary of State and the subject of a debate such as this, so this is not the same as home insurance or car insurance. This is about a specific measure that has bipartisan support. I have a genuine concern, which I think is shared by hon. Members on both sides of the Committee, that without a right of appeal as a back-stop, constituents will be coming to us in two or three years’ time. I believe that it will be very soon after 1 January 2015, when Flood Re starts to take people off the policy, because Mr Kerr and his colleagues made it clear in the evidence that they gave us, both in writing and in columns 43 through 48, that their intention is to move quickly, to start to be quite vigorous. We heard the Minister himself say this morning that they expect to make progress.

I say this again so that if things go wrong, there will be no ambiguity about whether Opposition Members raised this issue. We are in real danger of constituents coming to us within months of the start of 2015 and asking, “Why am I being removed? This is unreasonable.” At the risk of labouring the point, I urge the Government to have a think, because it is a new clause, over the next few days. Again, I am more than willing to meet the Minister to discuss the matter. It is a simple measure. It is designed to help the Government and, crucially, help our constituents.

I will summarise new clause 38. It is about the debate that the hon. Member for Brigg and Goole kicked off for us very well earlier this afternoon. I am grateful to the Minister for his letter of yesterday, which I shall refer to extensively when discussing new clause 39 as well, but my criticism both of that letter and of the written evidence we have had from ABI and others is that the ranges for the figures of those excluded are very broad. I do not mean to sound churlish, but it is almost as if the Department has licked its finger and stuck it in the air to come up with such broad numbers.

We understand the Minister’s reasons for not including properties built after 2009 or properties in council tax band H in the scheme from the outset; we are not entirely convinced by the arguments but I am happy to humour him this afternoon. However, we believe that more robust evidence must be gathered on the matter, and the very broad figures that we have at the moment need to be brought down to more precise ones. Parliament is entitled to have robust evidence before reaching a final decision on the scheme.

The Minister is quite a smart fellow, and I do not think it beyond his wit to work with the insurance industry to come up with more exact figures and costings. Even the band H figure that he set out in the letter to the Committee yesterday was phenomenally broad in its range: there is a 300% gap between the two extremes of the figures. Frankly, we need more robust figures on that. When he makes his contribution to this part of the discussion, I hope he will give us an assurance that he intends to produce much more exact figures before the Bill has finished in the other place.

I turn now to new clause 39. We have already heard excellent speeches about what we would call asset-rich, income-poor households from both my hon. Friend the Member for North Tyneside and the hon. Member for Brigg and Goole. Both of them made powerful cases on behalf of their constituents and we share their concerns. I am grateful to my hon. Friend for pressing me several times to make sure that the Opposition tried to do something about the issue. I will say to the hon. Member for Brigg and Goole that he may not be keen on Ministers visiting his constituency, but I hope to visit his constituents on more than one occasion between now and 7 May 2015, and we may well discuss flood insurance on those visits.

Andrew Percy (Conservative, Brigg and Goole)

I will be delighted for the hon. Gentleman to come to my constituency. When he does, I hope that he will coach my Labour opponent on how to engage with the public in a better way than she has to date, and that he will take the opportunity to view our flood defences, which have been under considerable strain recently, and support the investment in them that we so desperately need.

Thomas Docherty (Labour, Dunfermline and West Fife)

Mr Gray, you would call me back to order if I sought to comment on the coaching of the hon. Gentleman’s opponent.

James Gray (Conservative, North Wiltshire)

Order. We are drifting a little, I think.

Thomas Docherty (Labour, Dunfermline and West Fife)

However, I would be keen to speak to the hon. Gentleman’s constituents and see the flood defences. Yorkshire has some examples of strains of the sort we are discussing, which are being felt by his constituents and by people up and down the county, including the constituents of my hon. Friend the Member for Kingston upon Hull North—the hon. Gentleman said some very kind things about her earlier.

As an example of the problem of people who are asset rich but income poor, I draw the Committee’s attention to the 3 January edition of The Northern Echo, which highlighted a case from the constituency of the hon. Member for Thirsk and Malton, who chairs the Environment, Food and Rural Affairs Committee. The newspaper spoke to a couple aged 77 and 79, who live in a farmhouse that is prone to flooding and are struggling with the cost of repairing it. I am sure the Committee would agree that that couple are income-poor individuals. They are getting by on a pension and I would imagine they are not physically able to do much of the required work themselves, so will be heavily dependent on hired contractors. People such as that couple are in danger of slipping through the net. People such as that couple are in danger of slipping through the net.

I did some research in the House of Commons Library yesterday and, as ever, I am in awe of how quickly its staff are able to produce information for Members. Based on the letter that we received from the Minister on 10 December, I asked the Library staff what were the latest figures for the number of people in each council tax band in each income decile. For the benefit of any Member less educated than you, Mr Gray, by deciles I mean the 10 percentage point groupings of population by income. As we said earlier, the problem with council tax banding is that it is quite crude, because while some 60% of those living in band H properties are in the top decile—the wealthiest 10% of incomes—a small number are at the other extreme.

I am keen to stress that we are not getting into a spending commitment on behalf of householders, but the most up-to-date figures from the Library—if the Minister has received more up-to-date figures from his officials, I am sure that he will be happy to share them—state that the five deciles below the national average income contain 10% of people living in band H properties. I suspect that many such people will live in constituencies represented by hon. Members on both sides of the Committee. That 10% figure is the extreme, but it is astonishing that the Government are making no provision for that relatively small number of people. Based on the Minister’s letter, it is actually statistically insignificant. As a smart individual, the Minister will know that anything below 0.5% becomes statistically uncountable. We are genuinely surprised that the Government are not providing any assistance to those people. We are happy to work with the Minister on the exact details—secondary legislation can be used to get it right, which the Government are doing—but there should be a system to assist people on lower incomes.

Using the figures from the Minister’s letter to the Committee on 10 December, even if we take the highest figure that the Minister has used so far—we have already stressed that the figures are wildly far apart—we are talking about less than 10% of £5.4 million. For the Minister’s benefit, that is around £500,000. According to the Minister’s figures, it would add at most £1.65 to bills. I can afford £1.65 and will even buy the Minister’s £1.65 if necessary. I believe that that is a reasonable step that Parliament could take. As I stress, that is at the very top end, using both the extreme example of 10% of band H dwellers being in the five deciles below average income and the highest figure that the Minister provided. It would be inconceivable that the Government are in effect imposing a mansion tax by not providing any assistance to somebody purely because they happen to live in an asset-rich property.

I am sure that we all have examples of constituents who have inherited a property, perhaps following their partner, husband or wife passing away. They could be elderly and struggling to cope, but as things stand, the Government do not intend to provide any assistance. That is wrong and should be rectified. We have offered to work with the Minister, but I must warn him that we intend to press new clause 39.

Dan Rogerson (Liberal Democrat, North Cornwall)

I shall attempt to speed up a little to help the Committee. The hon. Gentleman indicated that he feels that I have been a little thorough and that I have been going into a lot of detail.

On new clause 37, I recognise that the removal of the right of appeal from Flood Re is an issue of great concern to the hon. Gentleman. He has raised it on several occasions. I want to reiterate the points that were made in the evidence session on 3 December. All domestic policies for properties at risk of flooding will initially be eligible to be ceded to Flood Re. Should properties flood repeatedly, Flood Re will seek to ensure that action is taken to reduce the risk of flooding or the cost of rectifying the damage. Constructive discussions continue with the industry about how best that can be achieved.

Some households may move out of Flood Re if their premiums are lowered because they take action to reduce their flood risk. Insurers will not be compelled to use Flood Re; they will be able to choose whether to cede high-risk policies to Flood Re. Householders can and should continue to shop around for the best deals. They may find that one insurer can offer a lower price because they are able to offset risk against other perils and then cede the flood element to Flood Re at the lower level.

I agree that it is important that consumers have a right to appeal if an insurer behaves badly towards them. However, there is already a mechanism in place. The Financial Ombudsman Service offers a free dispute resolution service for people who wish to complain about how their insurance company has treated them. Therefore, we do not think the new clause takes the right approach.

New clause 38, as the hon. Gentleman set out, would place a requirement on the Secretary of State to publish a report detailing the number of properties that are excluded from Flood Re and the cost of including those properties. I understand the rationale for the new clause, but I do not agree that it is necessary. Flood Re is designed to help people who live in properties at the highest risk of flooding and those who need the greatest help with their bills. Any increase in the amount of flood risk taken on by Flood Re would need to be funded by increasing bills for all households, raising the levy on household insurance policies or increasing the price of insurance for high-risk households by raising the eligibility thresholds for a policy to be ceded to Flood Re. We have been clear all along that helping high-risk households must not lead to unfair price rises for others.

I want to emphasise that householders not covered by Flood Re should still be able to find suitable cover through a broker or a specialist insurer. Installing resilience and resistance measures may help to reduce bills, particularly if the installer records the changes in the property’s flood risk in the industry recognised flood risk report. The Government will keep the situation under review, and new evidence may emerge. For instance, the ABI is gathering more data from its members on the likely take-up of Flood Re, which will be available shortly.

The hon. Gentleman raised the issue of the range, and said that we should improve the data. That is a fair point. Ultimately, it is a reflection of the uncertainty about surface water flooding. We now have maps for surface water flooding, which will allow the ABI to do further work and gather more data from its members. The results of that data-gathering exercise should be published in January. I hope that helps the hon. Gentleman.

Thomas Docherty (Labour, Dunfermline and West Fife)

As the Minister is aware, we hope that the Bill will progress to the House of Lords as soon as possible. Will he put the ABI’s feet to the fire and guarantee that the data will be available to the Lords before the Bill leaves the other place?

Dan Rogerson (Liberal Democrat, North Cornwall)

Clearly, that is a matter for the ABI. It depends on how quickly it can get the data from its members. It is helpful for hon. Members to place on the record, for anyone who is watching the debate closely, how important we feel that information is. In that spirit, I am sure the hon. Gentleman’s remarks will reach the right quarters.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am grateful.

Dan Rogerson (Liberal Democrat, North Cornwall)

New clause 39 seeks to ensure that Flood Re is available to lower-income households, regardless of their council tax band. The primary criterion for eligibility for Flood Re is whether a household is at risk of flooding. A household that is not at risk of flooding, regardless of income, should be able to find a price that is more affordable than the Flood Re price.

An income-based assessment using Her Majesty’s Revenue and Customs’ records was considered. It was decided that, as the majority of HMRC income data is collated by each individual, it would be difficult to target support based on household income. It would involve a system of checking self-declared income against the data, and it was not deemed suitable. Targeting support to households that receive particular income-related benefits was also considered. However, that would not include a large number of households that are working on low incomes, and support would not be targeted at that group.

The third option that was considered was the index of multiple deprivation, as an additional social deprivation measure. However, it was not deemed suitable, as it only identifies deprivation at a community level, not a household level. It would not be suitable for targeting support to households, which the scheme will do through the reinsurance model. An assessment against household income that targets households in receipt of benefits, and a social deprivation measure, would also be a relatively complex mechanism for the industry to administer. We need to ensure that the costs of Flood Re remain manageable, especially given that we expect only between 1% and 2% of UK properties to be ceded to Flood Re and because Flood Re is funded by a levy on all households. So it is not only the money that will be added to the reinsurance demand that we need to consider but the administration costs.

For the reasons that I have given, although I understand the helpful spirit in which they have been tabled I urge the hon. Gentleman to withdraw these amendments, which the Government are unable to support.

Thomas Docherty (Labour, Dunfermline and West Fife)

I am disappointed that the Minister is yet again digging his heels in. I am particularly disappointed that, despite the pleas that we have heard repeatedly about band H, he is using this measure as a mansion tax. It is unfair on those on the lowest incomes to be penalised in this manner. I know, from looking at the examples in Scotland, that there are very simple ways of introducing social tariffs and therefore we will be pressing this amendment to a vote next Tuesday if the Minister is not prepared to discuss it further.

Clause 53 - Transitional, transitory or saving provision

Dan Rogerson (Liberal Democrat, North Cornwall)

I beg to move amendment 147, in clause 53, page 91, line 5, at end insert—

‘(2) Subsection (1) does not apply if or to the extent that subsection (3) or (4) applies.

(3) If a provision of this Act is brought into force to any extent by the Welsh Ministers acting alone under section 56(3), the Welsh Ministers may by order made by statutory instrument make such transitional, transitory or saving provision as the Welsh Ministers consider appropriate in connection with the coming into force of so much of that provision as is so brought into force.

(4) If a provision of this Act is brought into force to any extent by the Secretary of State and the Welsh Ministers acting jointly under section 56(3), the Secretary of State and the Welsh Ministers may, acting jointly, by order made by statutory instrument make such transitional, transitory or saving provision as they, together, consider appropriate in connection with the coming into force of so much of that provision as is so brought into force.’.

The amendment gives appropriate powers to Welsh Ministers to put in place transitional arrangements when connecting sections of the Bill. This is a standard power, bringing Welsh Ministers in line with the Secretary of State.

Clause 55 - Extent

Thomas Docherty (Labour, Dunfermline and West Fife)

I wish the Minister to place on record whether his officials have had full discussions with Scottish Ministers in particular, or the devolved Government, about whether or not they are content for the Bill—as it applies to Scotland and Scottish households—to be introduced.

Dan Rogerson (Liberal Democrat, North Cornwall)

I am grateful to the hon. Gentleman for giving me the chance to put on record a point of information. As one might expect of a Scottish Member of Parliament, he has been consistent in discussing the need to ensure that the arrangements will apply across the United Kingdom and that those consultees, such as the devolved Administrations, have had a chance to make an input. The Scottish Parliament agreed to a legislative consent motion for the Water Bill on 12 November 2013, and in that way they have been very much part of the process.

Clause 56 - Commencement

Dan Rogerson (Liberal Democrat, North Cornwall)

I beg to move amendment 148, in clause 56, page 91, line 28, at end insert—

‘(aa) section13;’.

James Gray (Conservative, North Wiltshire)

With this it will be convenient to discuss the following:

Government amendments 149 to 161.

Government new schedule 1—Commencement orders: appropriate authority.

Dan Rogerson (Liberal Democrat, North Cornwall)

These amendments to part 6 of the Bill provide additional powers for Welsh Ministers to commence relevant parts of the Bill; I believe and hope that they will be uncontroversial. The amendments also make further changes to the provisions on commencement, notably by increasing how much of the Bill is commenced two months after the Bill receives Royal Assent. New schedule 1 provides further detail by laying out the commencement arrangements in more complex cases.

New Clause 1 - The Flood Reinsurance Scheme

New Clause 2 - Scheme administrator

New Clause 3 - Scheme funding

New Clause 4 - Scheme administration

New Clause 5 - Replacement of the scheme or administrator

New Clause 6 - Disclosure of information: preparatory purposes

New Clause 7 - Flood insurance obligations

New Clause 8 - Flood insurance obligations: target number

James Gray (Conservative, North Wiltshire)

If the Committee is content I shall combine the questions on Government new clauses 9 to 21.

New Clause 9 - Flood insurance obligations: information

New Clause 10 - Flood insurance obligations: further provision

New Clause 11 - Register of premises subject to greater flood risk

New Clause 12 - The register: further provision

New Clause 13 - The register: reviews and appeals

New Clause 14 - The register: expenses of relevant bodies

New Clause 15 - Compliance reports

New Clause 16 - Functions of the FCA

New Clause 17 - Reports by the FCA

New Clause 18 - Intervention by the FCA or the PRA

New Clause 19 - Interpretation

New Clause 20 - Period of operation

New Clause 21 - Regulations and orders

New Clause 22 - Disputes about the provision of public sewers: premises in Wales

Dan Rogerson (Liberal Democrat, North Cornwall)

I beg to move, That the clause be read a Second time.

After that little flurry of democracy in action, we may continue democratically—perhaps more consensually, but we shall see.

The new clause amends section 101A of the Water Industry Act 1991 as it applies to Wales. Owners or occupiers of properties served by private sewers that are not connected to a public sewer may apply to the incumbent water company for connection to a public sewer under section 101A.

The new clause removes the statutory duty for determining disputes under section 101A(7) of the Act from the Natural Resources Body for Wales and places it with Welsh Ministers. It confers a power on the Welsh Ministers to appoint a person or body to determine disputes on their behalf.

The new clause also imposes a duty on the Natural Resources Body for Wales to advise, when requested, sewerage undertakers, owners, occupiers and those determining disputes under section 101A(7) in relation to premises in Wales. Welsh Government Ministers want to preserve the role of the Natural Resources Body for Wales as the environmental regulator in Wales while enabling it to offer advice and guidance that is independent of the decision-making process to sewerage undertakers and owners or occupiers considering provision of a public sewer under section 101A of the Act.

Thomas Docherty (Labour, Dunfermline and West Fife)

I shall be brief, Mr Gray, as I do not want to hold up the Committee. I welcome this move as a sign of further devolution being conducted in a sensible and pragmatic way. I also welcome the fact that Welsh Ministers are being given greater control of water and sewerage in Wales.

Dan Rogerson (Liberal Democrat, North Cornwall)

Just a point of clarification: this is about certain duties and whether they are carried out by the Natural Resources Body for Wales or Welsh Ministers. The arrangement has been consulted on heavily and those in the Welsh devolved areas are happy with it. I thank the hon. Gentleman for his support.