When we took evidence on the insurance aspects of the Bill during the Select Committee’s scrutiny stages, we were told that the package on Flood Re stood as a whole and that we could not consider any exceptions—not small businesses or leaseholders, or anything else, and certainly not band H. I hope that my hon. Friend the Minister will permit me a wry smile as I see that some of those exceptions have been included.
I hope that my hon. Friend will clarify the position on leaseholders. I—like many others, I am sure—have been contacted by constituents asking me to consider the implications for an owner who buys a leasehold property, as my constituents did in their block of flats. Apparently, the cost under Flood Re of the flood insurance alone will run to thousands of pounds, which they cannot afford and which they believe will affect their ability to resell those properties. I would be grateful for an explanation of where we are on that.
I understand that my noble Friend Lord de Mauley confirmed in the other place that domestic contents policies will be available to all under Flood Re, regardless of whether the properties are leasehold or freehold, rented or owned-occupied, except for properties in band H and those built since 1 January 2009. I have seen on many of my flood visits around the country that tenants on low incomes are often the first not to take out an insurance policy for their contents. The cost is therefore greater when they have to replace many of their possessions, some of which are of course priceless and cannot be replaced. Will domestic contents policies indeed be available to all?
Will my hon. Friend the Minister confirm the intention behind the exception for band H properties? It seems bizarre. We are going to exclude from Flood Re leaseholders
who are perhaps on lower incomes and often in smaller, more affordable properties, but people in band H tend to be wealthier and in a better position to afford insurance. I want to understand the situation so I can explain to my constituents why these exceptions have been considered.
I know that the date of 1 January 2009 was taken as the benchmark, but did the Department ever look closely at why that was a good date to choose? With hindsight, should it perhaps have been 1 January 2012 or 1 January 2013, when we first began closely to scrutinise these issues through the proposals from the Department and the work of the Select Committee and others in this place?
It would also be helpful to understand the position for small businesses, particularly farms. If the farmhouse itself has been flooded, will that be covered in the provisions of Flood Re?
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The greatest concern—I am sure the Minister will recall that I raised it earlier—remains that the Government may end up as an insurer of last resort because Flood Re will not cover a one-in-200-year or one-in-250-year event. We found out that the winter floods in 2013-14 were a one-in-200-year event, so it will be sooner rather than later that the Government will end up as the insurer of last resort. The House will be interested to learn what provisions the Treasury has in place if that occurs earlier than might have been assumed, because there will not be money in the pot if the winter floods are repeated in the autumn of 2014 and 2015.
The hon. Member for Penistone and Stocksbridge (Angela Smith) raised an interesting issue that we discussed in Committee. The evidence we took was that the subsidy was then £8.50. It has already gone up to £10.50, and we need an assurance from the Minister that there will not be an open remit to the insurance industry and that the level of subsidy will be reasonable. Before the Bill leaves this place today, the Minster should comment on what the Treasury has in place were the Department and the Government to be an insurer of last resort.
I have two more issues pertaining to this group of amendments. One concerns regulated as opposed to negotiated access. Amendments were proposed to make it clear in the Bill that access should be regulated, not negotiated. The amendments were unsuccessful, but I understand that the Department has given a commitment that access terms should be regulated. Can the Minister give a commitment today that that will be in the regulations that will give effect to the Bill?
An issue that caused great concern in our pre-legislative scrutiny in Committee and later was the de-averaging of charges. Concern was raised about the risk of a competition or EU challenge to the Department’s guidance or Ofwat’s implementing rules on harmonised or regionally averaged wholesale charging, which could result in a forced de-averaging of charges. My understanding is that that could be seriously bad news for rural areas and I would like the Minister to put my mind at rest. Amendments were proposed to address that risk, but the Government did not accept that the risk existed or, if it did, that the existing provisions in the Bill were not adequate to address it. Any de-averaging of charges that might arise through application of the Bill would be highly regrettable.
Otherwise, I welcome this group of amendments, but I hope that the Minister can put my mind at rest on the concerns I have raised.