5.5 How to ensure sufficient money for physical measures?

Flood defences, water retention and adapted building can be costly measures. Therefore, in all countries analysed, a lack of financial resources was reported as a factor hindering the implementation of flood risk management. This is in particular the case for flood defence measures. In the analysed countries, financial resources from various actors are invested. Mostly, measures are funded by public authorities using taxes as in the Netherlands; in England private parties (co)finance flood measures; in France the Barnier fund finances measures from a supplement to the insurance premiums (see §7.2.3); and Poland relies equally on both World Bank or EU investments and on public funds in structural measures.

5.5.1 Funding by public taxes: the Netherlands

Strategies

Governance

Aims

Flood defence in the Netherlands is characterised by a clear responsibility division, explicit standards and regulations, and secure financing. Flood risk management in the Netherlands is mostly a public concern and financed on the basis of solidarity.

Citizens pay general taxes to the State and water management taxes to their Regional Water Authorities (Havekes et al. 2011). The latter are to some extent risk-dependent, as water authorities facing higher risks may raise higher taxes. Primary flood defences are financed from the Delta Fund, based on Chapter 7 of the Water Act. Specific projects are paid for by national funds (50%), the Union of Regional Water Authorities (40%) and the specific water authority implementing the project (10%). This provides an incentive to all to minimise total cost.

Due to the Delta fund and the fact that regional water authorities raise their own taxes, flood defence in the Netherlands is relatively independent of political whims. Citizens living outside the dike protected area are not part of the solidarity agreement and besides basic emergency management, they do not receive any protection or compensation.

The system of regional water authorities that raise their own taxes has historically grown in the Netherlands and due to the high dependency on dikes for safety, they have always remained a separate democratic entity. Also in other locations where a flood defence strategy is prominent, a system with clear responsibility division, explicit standards and regulations, and secure financing can be beneficial (STAR-FLOOD Deliverable 3.2, see §8.2.1).

5.5.2 Partnership Funding: England

Strategies

Governance

Aims

Partnership Funding is the government policy aiming to diversify the sources of funding for flood risk management. It is supported by a six year Investment Plan which gives a medium term planning horizon for grant-in-aid funding and facilitates the process of partnership funding and the raising of additional funding. The Investment Plan allocates £2.3 bn of capital spending towards over 1,400 flood defence schemes, with the view that these will improve protection to 300,000 properties and reduce current flood risk by 5% by 2021 (HM Treasury, 2014; Defra, 2014b). The Investment Plan aims towards ‘payment for outcomes’, where those who benefit contribute more towards the cost, reflecting the beneficiary pays principle. The costs should be shared between State, market and civil society actors at the scale of individual projects or flood risk measures.

The implementation of Partnership Funding in 2012, aims to enable more flood defence and mitigation schemes to be developed than in the past. In contrast to the previous system which favoured high-priority schemes, this new approach marks a step-change whereby more schemes are eligible for funding (depending on the ratio of costs to benefits). The specific actions that take place are dependent on the Lead Local Flood Authority, who has to be able to allocate and use alternative funding sources to fill funding gaps.

An example of this funding by mixed resources is Nestlé[1], which has contributed £1.65m towards the Lower Dove Flood Alleviation Scheme in Derbyshire, which is based near its factory at Tutbury (Defra, 2014b). Overall, between April 2011 and March 2015 it is estimated that 25% of financial contributions would have come from the private sector (NAO, 2014). Another example is the Willerby and Derringham Flood Alleviation Scheme, whereby funding has been secured through nationally-administered Grant in Aid from Defra, local levies from Yorkshire Regional Flood and Coastal Committee and the European Regional Development Fund.

Partnership Funding seems a promising instrument to fund more projects, and to involve more local governments and communities in the decision making process. Still, the implementation of the projects is dependent on sourcing additional revenue at the local scale. Some successes have been reported; in other cases it is still a challenge to attract local public and private funding. STAR-FLOOD Deliverable 3.3, see §8.2.1)

[1] Nestlé, work begins on river Dove Flood Scheme: http://www.nestle.co.uk/media/pressreleases/work-begins-on-river-dove-flood-scheme