Environment Minister Thérèse Coffey has said that the recent floods caused by Storm Babet were exacerbated by the impacts of rain coming from the opposite direction.

Giving evidence in person to the House of Commons Environment Food and Rural Affairs Committee in a wide-ranging discussion as part of its ongoing inquiry into the work of Defra, Coffey explained:

“One of the things particularly with Storm Babet is that we’re very good with the Met Office and Environment Agency flood forecasting, predicting weather normally. Most of our rain tends to come in from the west. We’ve got that pretty much down to a fine art. This was rain coming from the other way. We don't have quite as much experience on that and therefore our accuracy of predicting where such heavy rain would fall was not to the same degree as if it had been."

She told the MPs that the Environment Agency had moved flood defence assets from parts of the country more towards Yorkshire and the north-east. However, unfortunately about 1300 homes had been flooded but she was “conscious that there were still some places that felt they could have done with more pumps.” The Environment Agency would do a “rapid review of understanding what could have been done better.“

Asked by Sheryll Murray MP whether the Agency was on course to meet the promised target of 336,000 properties to be protected under the current £5.2 billion programme by 2027, Dr Coffey said “there is a concern that we may not be hitting that target.”

Coffey: “there will be situations where assets are working but there could still be flooding”

Sticking with coastal protection, Sheryll Murray MP raised the issue of the condition of flood defence assets, suggesting that while a lot of the Environment Agency’s flood defence assets in high-consequence systems were at the required condition, it looked as as though this was 94.5% of them and the proportion aimed for was 98%.

Coffey responded that there was a wide variety of assets, ranging from something like the Thames Barrier, which is manned 24/7 and has regular maintenance and regular exercises, to something that can literally be a mesh screen over an outlet in a stream or a river.

There was an expectation that the Environment Agency would make sure that they were all functional, she added. However, she qualified this by saying she could understand the situation “where they may not go and check how that screen is doing until they anticipate that there could be a storm.”

She was “very keen” to make sure that all the assets were well maintained and her understanding was “pretty much that they are functional, but there are definitely some issues where something has not quite worked and that needs remediating as quickly as possible.”

However, she cautioned:

“To be clear about this, there will be situations where assets are working but there could still be flooding, because they have not been designed for that level. It could be that they are designed to manage a 5-metre surge, not a 5.3-metre surge. That is one element to consider. Even then, people might say, “They have failed”. They were not designed to that level.”

Steve Bonnar: “unilateral roll-backs on environmental pledges has knocked confidence in industry and potential for investments”

Referring to the Office for Environmental Protection statement that the Government was “not on track” to meet any of its environmental targets, Steven Bonnar MP (SNP), asked how much of a priority the environment was for the Government, commenting:

“There have been some unilateral roll-backs on environmental pledges from the Government. That has knocked confidence in industry and the potential for investments. You said that it was a high priority of the Government.

“There have been reports of low staff pay, staff shortages and poor morale within the Department. These are all impacting and making it difficult to enforce environmental protections and implement our policies. What reassurances can you give us, and of course the wider economy, about the delivery of net zero on your watch, Secretary, especially when we know that the likes of the Environment Agency building itself was recently raided by bailiffs regarding issues with its leases?

“How can we trust you when you show the environment, right down to the very building itself, such blatant disregard?”

Dr Coffey responded:

“I do not accept the premise of what you have suggested. You can try to find another Government in the world that are doing what we are achieving as a Government on nature and net zero.”

Coffey: new investment “not about paying for the past, it is about paying for the future”

Questioning the Minister on water, Robbie Moore MP said the water companies had proposed business plans rise by approximately £156 a year – but this was while they’re “still being investigated for breaches of sewage and environmental performance-related challenges.”

“Do you feel it is an acceptable situation that water companies are looking to raise their bills?” he asked.

Thérèse Coffey responded by saying that “as a starting point, the situation on Future Price Reviews is now in the hands of Ofwat. It is entirely independent of Government.“ and that the regulator was under a legal obligation to consider consumer value.

She went on to suggest that the broader point was that water companies can only “basically be paid what’s deemed “value for money” …...in that regard on new investment into achieving the outcomes that they have been set.”

A combination of Government thinking – for example, the Storm Overflows Reduction Plan where there was now the anticipation of £60 billion pounds of capital investment over time - Ofwat’s requirements and the Environment Agency’s WINEP requirements would lead to what required new investment for the future. This was “rather than paying for things they should have dealt with and have already gone into customers bills to handle in the past. So it's not about paying for the past, it is about paying for the future,” she added.

Pursuing the same line of questioning, Robbie Moore continued:

“If we look just at the past briefly, do you think that Ofwat for example has been too much focussed on keeping customer bills low at the cost of the environment, particularly dealing with storm overflows and the like?”

The Minister replied that looking back over the amounts of capital that have been expected to be invested, “we’re seeing a much larger amount that’s going to be expected in the next five years.”

Environment Agency resources

Robbie Moore continued:

“The Government is giving regulators more power to impose unlimited fines but we've heard from the likes of the Environment Agency saying that simply don’t have the resources to be able to monitor compliance in the first place to be able to implement those fines that may come down the line. Has Defra got any aspirations to increase funding for the likes of the Environment Agency so that they can carry out that monitoring more efficiently?”

Thérèse Coffey said that funding for inspections should be coming from the charges made for the permits, adding:

“Bear in mind the largest ever criminal investigation is underway by the Environment Agency in partnership with Ofwat – who don’t have criminal powers but they do have other powers – and that investigation is still ongoing.”

She went on to say:

“At a particular point - I think that it was about 2018 - charges were increased on the permits to manage the cost of the inspections. The Environment Agency has asked for that to happen again.

“I am still waiting for its final submission, or it may be making its way through the system, such that I anticipate that we will be doing some regulations, which will put up the fees for the next financial year to help fund that along.”

Chair: “One of the barriers to investment is the high level of gearing”

Sir Robert Goodwill raised the issue of gearing, explaining:

“One of the barriers to investment in my opinion is the high level of gearing

“For example, Thames Water has debts of £14.3 billion, which is around about 80% gearing, whereas Ofwat’s target is a gearing ratio of under 60%. Do you think that the combination of high levels of borrowing combined with interest rates that are unprecedentedly high, certainly in the last decade, could be a real barrier? The water industry has got itself into quite a fix in this situation.”

According to Dr Coffey, the big increase in the gearing shifted back in 2006 or 2007 - when Macquarie acquired Thames and then “massively whacked up the gearing.”

Since the Strategic Policy Statement (SPS) done in the middle of the decade before last, there was “a clear direction to Ofwat to sort the gearing out on that.”

However, she cautioned:

“From my position, it still feels that Thames is too high, but I should recognise that equity has been put in and is being promised for the future.” ….

“There is a combination here about trying to make sure we still get that level of investment that Parliament and Government have asked for, and we will be getting, but we need to make sure that that can be delivered. Otherwise, we go back to the days prior to privatisation when there simply was not the amount of money put into fixing all the things that we want fixed.”

The long running inquiry started in January 2022 – click here to download the transcript of the evidence in person session on 24 October attended by Environment Minister Dr. Thérèse Coffey and Tamara Finkelstein, Permanent Secretary, Department for Environment, Food and Rural Affairs