Minister pulls out: Deal or No Deal?

Richard Benyon, the Floods Minister, has pulled out of the meeting with the All Party Parliamentary Group on Insurance & Financial Services tomorrow (Tuesday) afternoon. I am not entirely surprised given the tone of the exchanges between Benyon and backbench MPs at Environment Questions last week.

Faced with questions from anxious Labour and Conservative MPs about the progress of the talks between the government and the insurance industry about a replacement for the Statement of Principles which expires in a little over three months, the best Mr Benyon could do was to stall.

"I think that there is a misconception in some parts of the House that the statement of principles represents some halcyon world in which our constituents living in high flood-risk areas are protected from exorbitant rises in premiums. That is not the case. What we want is affordability to be brought into the new system. I am involved in those conversations at the highest levels and want to assure the House that we are working as hard as we can to find a solution that can give comfort to everyone who is at risk of flooding, particularly those on low incomes". (In answer to Labour MP Lillian Greenwood - Nottingham South).

"The hon. Gentleman is wrong when he says that there is inaction; I can assure him that there is an awful lot of action. Alongside the negotiations that have been going on, we have been producing documents such as one that has been highly recommended by the British Institute of Insurance Brokers Association: “Obtaining flood insurance in high risk areas”. We are also assisting people in flood-risk measures they take for their property at household level so that that will be reflected in the premium. The hon. Gentleman is right to be concerned about the potential impact on mortgages and lenders, and that is one of the main drivers towards the quick result we want to get in this matter." (In answer to another Labour MP, Gavin Shuker - Luton South).

It had been hoped - indeed anticipated - that the minister's willingness to face the All Party Group meant that a deal between the government and the insurance industry was close. So where do we stand today?

It would be easy to assume Mr Benyon's last-minute withdrawal meant that the talks had collapsed, not for the first time. That would give us an easy headline but doesn't seem to be the case.

We do know that the lead responsibility for resolving this was removed from DEFRA (Department for the Environment, Food and Rural Affairs) at the beginning of the year after the public spat between them and the Association of British Insurers and now rests with the Cabinet Office and Oliver Letwin. It was only after checking with them that Mr Benyon contacted the All Party Group's chair Jonathan Evans to suggest rescheduling the meeting.

Mr Evans says he believes it is now only a question of details and timing before a new deal is announced: "We are very keen to hear from Richard Benyon the full details of the outcome of the discussions between the insurance industry and the government. The indications are that an agreement is close but that the details won't be finalised by tomorrow. I believe that there will be full clarity on the government's position in the next week or so".

Of course, that will take us up to or past the Budget on 20 March. Should we be looking for an indication from the Chancellor that the government has agreed a new scheme? George Osborne is definitely in need of some good news stories to work into the Budget so maybe he will include it on Wednesday week. If this is the case I think it points towards a levy on premiums using Insurance Premium Tax rather than government underwriting of a Flood Re. I cannot see the Treasury risking the additional public expenditure that standing as reinsurer of last resort could require. The Treasury is not in the habit of looking out of the window just hoping it doesn't rain as a means of controlling public expenditure.

Hopefully, Mr Benyon will then be able to meet the All Party Group a few days later to explain how this scheme is going to work. Only then will we know whether we have really got a workable solution.