The future of Partnership Funding - Daniel Johns Head of Public Affairs Who pays?

The future of
               Partnership Funding
               Daniel Johns
 Who pays?     Head of Public Affairs
Who decides?
               Flood and Coast, Telford
               19th June 2019

The core of the issue

      “Investment in flood defence achieves
      fantastic value for money…

      …but no-one wants to pay for it.”
                                          Me, fairly regularly

The seeds of Partnership Funding
• 2008: Review by Sir Michael Pitt
  following 2007 floods
  •   Government should plan on the basis of
      above inflation settlements in future
      spending rounds
  •   “There are direct beneficiaries from flood
      defence work, and aligning those who
      benefit with those who pay will bring
      greater efficiency and greater
      responsiveness from those carrying out the
      work”.

The seeds of Partnership Funding
• 2008: Review by Sir Michael Pitt
  following 2007 floods

• 2009: Long-Term Investment
  Strategy, Environment Agency
  •   investment needs to increase by £20 million
      plus inflation each year for next 25 years
  •   to avoid an increase in number of homes at
      significant flood risk by 2035

The seeds of Partnership Funding
• 2008: Review by Sir Michael Pitt
  following 2007 floods

• 2009: Long-Term Investment
  Strategy, Environment Agency

• 2010 Spending Review,
  following the financial crisis
   •   EA budget cut from £680m (2010/11)
       to £521m (2011/12)

The seeds of Partnership Funding
• 2008: Review by Sir Michael Pitt
  following 2007 floods

• 2009: Long-Term Investment
  Strategy, Environment Agency

• 2010 Spending Review,
  following the financial crisis

• Late 2010: Defra consultation
  on ‘Payment for Outcomes’

The seeds of Partnership Funding
• 2008: Review by Sir Michael Pitt
  following 2007 floods

• 2009: Long-Term Investment
  Strategy, Environment Agency

• 2010 Spending Review,
  following the financial crisis

• Late 2010: Defra consultation
  on ‘Payment for Outcomes’

• ‘Partnership Funding’ launched
  May 2011, to apply from April 2012

More funding = more schemes
                                          Leeds
                     Sandwich

Morpeth

          Kempsey
                                Clacton

Design choices
• Deliberate focus on:
   •   households
   •   at significant risk
   •   in deprived areas

• Also achieving statutory EU
  requirements:
   •   compensatory habitat
   •   river restoration

• Other benefits valued in full but
  funded at a lower rate:
   •   businesses
   •   infrastructure
   •   agriculture
   •   excluded: new homes built in floodplain

The future funding challenge

• Spending has been                                         LTIS3 (2019)
  broadly in line with
  LTIS2 since 2014

• LTIS3 increased the
  ‘optimal’ long-term
  spend needed
   •   from £860m per year,
       to £1bn per year
   •   = £100-150m gap

• Partnership Funding
  has grown
   •   to ~£50m per year
   •   reached saturation?

                              © Daniel Johns, Committee on Climate Change, 2017

Reforming Partnership Funding: goals
•   1.   Increase investment to meet the long-term need
•   2.   Encourage catchment-wide approaches (rather than fund single interventions)
•   3.   Support a greater range of the ‘national suite of resilience tools’
•   4.   Integrate with other funding sources
     •   Water company investment
     •   New Environmental Land Management Scheme
     •   Biodiversity Net Gain in new development
• 5. Encourage delivery of co-benefits wherever possible
     •   Carbon reduction, biodiversity, soils
     •   Water quality, water resources, etc
• 6. Be truly risk-agnostic
     •   Surface water projects disadvantaged?
     •   Coastal erosion?

Reforming Partnership Funding: options
• A: Scrap and revert to ‘all or nothing’ funding system, overseen by EA

• B: Recognise greater range of benefits in the payment rates
   •   1. Risk reduction to infrastructure, businesses and agriculture
   •   2. Environmental co-benefits
• C: Introduce more risk thresholds, or fund directly in proportion to risk reduced

• D: Reduce payment rates, to create greater reliance on external contributions
• E: Sharpen focus on deprived households at significant risk
• F: Switch from funding the most beneficial schemes to the least beneficial

• G: Additional revenue raising options
   •   1. Catchment management levy
   •   2. Land value capture when flood risks reduced
   •   3. Green bonds
• H: Mandate contributions from identified beneficiaries
   •   Tax on high risk households, businesses etc benefitting from defences
• I: Payment from Flood Re whenever a high risk home is removed from the ‘pool’

Daniel Johns
Thank you   Head of Public Affairs

            djohns2@anglianwater.co.uk

               @DanielJ88