Demystifying English flood funding announcements

Report_ demystyfying English flood funding.pdf

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Summary: 

The current government has made multiple announcements regarding flood-related spending commitments. Total figures and time periods have varied: 

• £1.4bn over one year.

• £2.65bn over two years, 

• £4.2bn over three years, 

• £7.9bn over 10 years; and

•  £10.5bn since coming into office. 

These announcements overlap and have occurred alongside modifications to existing spending and accounting rules. This has complicated the interpretation of the figures and caused confusion. 

This report addresses this confusion and aims to explain the nature of flood budgets and the metrics and the models available for correlating them with outcomes. Its purpose is to provide a clear explanation of how government flood funding should be understood by different stakeholders and how this framework applies to the currently announced commitments. 

It is based on discussions with senior officials from the Department for Environment, Food and Rural Affairs (Defra) and replaces an earlier investigation that relied on data obtained through a Freedom of Information (FOI) request. 

It finds that government announcements about spending levels are broadly reliable if not always clear, and that widely used modelled benchmarks for evaluating them are inapplicable, challenging their use. The recent Climate Change Committee’s CCRA4 analysis is found to be up-to-date and applicable. The report concludes that this situation is improving thanks to efforts by Defra and the Environment Agency. 

Key findings: 

On the use and effects of flood investment: 

• Clearer guidelines are needed to understand the impact of inflation on total government investment levels, so as to fulfil these data’s full potential as an indicator of real-world risk reduction. 

• Capital budgets are a useful metric, but their use and definition has evolved significantly, complicating any long-term comparisons. 

• Defra and the Environment Agency are developing metrics that will greatly enhance transparency regarding the effect of government investments if implemented. 

On benchmarks and recommendations for investment: 

• The National Infrastructure Commission’s recommendation for an annual budget of £1.4bn is at times cited without taking account into the fact that the recommendation is for capital expenditure and not total budgets, and is in 2017 figures. 

• Recommendations are being made by bodies outside of Defra and the Environment Agency on the basis of modelling that is out of date. Full account is not being taken of budgeting subcategories that are represented in modelled benchmarks and inflation. 

• The Environment Agency’s 2026 Long-term Investment Scenario (LTIS) publication has the potential to significantly improve the flood risk management sector and public's understanding of the outcomes that could be achieved from different levels of government investment. Comparing investment levels with previous models is currently difficult due to changes in accounting rules, unclear assumptions, and inflation.

• The most up-to-date recommendation stems from the Climate Change Committee’s CCRA4. It warns of increasing risk if investments are not increased, finds that increasing present levels by 50% would be economically optimal, and that maximising ambition would remain a net economic benefit. 

• Benchmarking exercises like LTIS or NIC modelling are a helpful tool for the public to assess the outcomes from government investment, but the assumptions on which the modelling is based must be transparent. 

On current levels of investment: 

• Government communication about flood investment levels has been accurate but often unclear. Explanation of the relationship between different pledges and the impact of inflation needs improvement.

• While investment is certainly at near record levels, claims of record spending may ultimately be inaccurate once inflation is fully accounted for. 

• Whether or not capital budgets are at record levels is not entirely clear given accounting rules changes, but remains a plausible claim. 

• Construction of new traditional flood alleviation schemes is set to decrease as a result of new spending rules as funds are re-directed towards replacing schemes that have reached the end of their lifespan. 

• The long-term impact of inflation on the 10-year infrastructure strategy remains a concern. 

• To the extent that any comparison is possible, current expenditure exceeds the Environment Agency’s recommendation but is significantly below the National Infrastructure Commission’s. 

Recommendations:

1. Spending announcements should be accompanied by a technical briefing contextualising them in relation to other announcements, inflation, and benchmarks. 

2. Defra and the Environment Agency should develop guidelines for understanding the impact of inflation on investment levels. 

3. The Environment Agency and Defra should complete and implement its new metrics disclosing levels of risk reduction currently in development and offer technical briefings to the flood risk management sector, civil society, and MPs. 

4. The Environment Agency should offer technical briefings on its Long-term Investment Scenarios to the flood risk management sector, civil society, and MPs. 

5. The Environment Agency should offer a technical briefing on its processes for regular validation of its national modelling on the basis of local and more up-to-date information. 

6. The 2026 Longterm Investment Scenarios should be subject to a National Audit Office review to ensure independent evaluation. 

7. If possible and affordable, the National Infrastructure Commission under its new identity as National Infrastructure and Service Transformation Authority (NISTA) should repeat its modelling exercise to offer an independent alternative.