Budget 2020: Understanding the implications for flood and water management

On 11 March the new Chancellor of the Exchequer, Rishi Sunak MP, presented the Government’s Budget 2020. Within it he has laid out plans to increase capital investment across Government, and in particular within its flood and coastal defence programme, citing the twin pressures of climate change and population growth that require further action to be taken.

Greater capital investment

The Government proposes to spend £5.2 billion on capital projects over six years between 2021 and 2027 to reduce the risk of flooding to 336,000 homes and non-residential properties. According to Environment Agency modelling, this is projected to reduce national flood risk by up to 11% by 2027. During the previous six year period up to 2021 the Government has invested £2.6 billion in capital projects to reduce the risk of flooding to 300,000 homes across England.

ADA looks forward to working with Defra and the EA to ensure that local Risk Management Authorities play their full role in delivering this enhanced investment to communities across the breadth of England, and tie it in with improved maintenance measures.

The Government is also making available £120 million to the Environment Agency to repair assets damaged by this winter’s storms. However, a significant question remains as to how smaller risk management authorities, specifically IDBs, will be supported by Government to recover from these events.

Where flooding and coastal erosion is deemed to be inevitable the government is to provide £200 million over the next six years for a place-based resilience programme to help communities to respond and recover more quickly to flooding and coastal erosion. The aim is to support over 25 local schemes with this fund, to be selected on a range of criteria, including repeated significant flooding in the past.

The Budget document also noted the implications of climate change to managing and conserving our water resources. Consequently the Budget announced £39 million of Government investment in the Environment Agency’s network of water supply and water navigation assets. Stating that this investment will help provide upfront funding for asset repairs, which will ensure that waterways remain open and navigable, while contributing to flood and drought mitigation.

Devolved administrations in Scotland, Wales and Northern Ireland are also set to benefit from the Government’s proposed increases in investment for flood and water infrastructure through the Barnett formula used by HM Treasury to automatically adjust the amounts of public expenditure allocated to these devolved powers.

Resource investment remains uncertain

Whilst the Budget heavily featured the Government’s increases in Capital Funding it deferred decisions around Resource Funding for the public sector until the conclusion of its Comprehensive Spending Review 2020 (CSR) in July.

Resource funding is money that is spent on day to day resources and administration costs. Amongst other things for FCERM, it covers spending by the Environment Agency on routine maintenance of defences; evidence (information used to support sound decisions in developing, implementing, and evaluating policy); and depreciation (the current cost associated with the ownership of assets).

The Environment Agency’s FCERM Resource funding for the past six years up to 2021 has been in the order of £1.8 billion. Without sufficient resource funding the Environment Agency will be challenged to deliver the Government’s ambitious new capital investment programme, as well as adequately maintain its existing assets and main river systems, and manage its role in flood warning and incident response.

The CSR will set out the Government’s detailed spending plans for public services and investment, covering resource budgets for three years from 2021-22 to 2023-24.

Red diesel

The Chancellor announced that from April 2022, red diesel will only be available to agriculture and the rail sector. Users of off-highway construction machinery will have to pay the standard tax rate of nearly 58 pence per litre for diesel rather than the subsidised red diesel rate of just over 11 pence per litre.

The ‘excepted vehicle’ status of tractors and other agricultural/construction plant machinery used by IDBs has previously resulted in differing opinions from VOSA, DVLA and the police. ADA will use this change to seek greater clarity from Government on this situation going forwards in relation to IDBs’ maintenance operations.

---