Special FCERM income sources

Local government funding settlement

A settlement working group, with representatives from Government and local government (including the LGA) meets every year to discuss the distribution formula. The Government issues a consultation paper informed by these discussions, making proposals on any new funding formula. Depending on responses, the Government make a decision and announcement in the December, so councils can set their budgets for the following April.

Currently some but not all of the flood elements of the formula are based on past spending.

‘New burdens' assessment process

The ‘New burdens' doctrine states that Government as a whole is committed to ensuring new burdens, defined as any new policy or initiative which increases the cost of providing local authority services falling on local authorities, are fully funded.

The LGA monitors this and collects evidence which it presents in regular meetings with the New Burdens team at CLG. This will require a list of any new roles and emerging costs, including new responsibilities and costs associated with, for example, floods regulations and other tasks to be completed in the current year and improvements to existing duties.

Additional sources of income

In April 2012, the Environment Agency (EA) published guidance, case studies and other resources for those wishing to build successful funding partnerships for flood and coastal defence schemes.

Guidance, case studies and other resources – on the Environment Agency website

They have also published an external contributions policy setting out the circumstances under which they will routinely seek contributions from those who benefit the most from its flood and coastal erosion management projects, such as businesses and local communities. The principles set out in this policy are equally applicable to other operating authorities. The policy also describes what influence these contributions could have on the scope and timing of the works to be completed.

The LGA has published guidance on additional sources of funding for flood and coastal defence projects, including lists of case studies.

In April 2012, Defra published additional guidance on how alternative sources of funding can be sought.

Long-term investment requirements

The Environment Agency has published a long-term investment strategy which presents an assessment of funding requirements for flood and coastal erosion risk management over the next 25 years (2010 to 2035) in the context of climate change assumptions.

Flood and coastal risk management in England – long-term investment strategy – (PDF, 24 pages, 277KB)

Defra commissioned work to help a sample of lead local flood authorities prepare strategic investment plans for their areas for all sources of flood risk.  The results were due to be published in summer 2012.

Local authorities

Local authorities and communities already have a range of options available to them to help pay for local schemes that do not meet national priorities but nevertheless deliver significant benefits to local communities. Such local funding mechanisms could range from the use of existing local authority prudential borrowing and wellbeing powers, the business improvement district (BID) model or even increases in council tax precepts, where these are affordable and in the best interest of local communities.

Other, new and alternative, funding sources are available from a range of organisations and beneficiaries. These include:

• Section 106 agreements (s106), local tariffs, supplementary planning documents and the community infrastructure levy (CIL)
• Local business rates including 'business rate supplements‘ and council taxes including specific precepts and 'special expenses‘, plus fees and charges, where appropriate and affordable
• Local activities that can achieve flooding and coastal erosion benefits as a secondary outcome to their primary purpose of securing community benefit and facilitating economic growth and sustainability.

These activities would include those associated with the local environment, land management, highways management, community infrastructure management, recreation, tourism, wealth creation and regeneration plans.

Community Infrastructure Levy

The Community Infrastructure Levy is a new levy that local authorities in England and Wales can choose to charge on new developments in their area. The money can be used to support development by funding infrastructure that the council, local community or neighbourhoods want - for example a new flood defence or surface water management scheme. The system is very simple. It applies to most new buildings and charges are based on the size and type of the new development.

Local authorities should introduce the levy because it:

• delivers additional funding for them to carry out a wide range of infrastructure projects that support growth and benefit the local community
• gives them the flexibility and freedom to set their own priorities for what the money should be spent on – as well as a predictable funding stream that allows them to plan ahead more effectively
• provides developers with much more certainty 'up front' about how much money they will be expected to contribute, which in turn encourages greater confidence and higher levels of inward investment
• ensures greater transparency for local people, because they will be able to understand how new development is contributing to their community and
• enables local authorities to allocate a share of the levy raised in a neighbourhood to deliver infrastructure the neighbourhood wants

To find out more, see the Community Infrastructure Levy (Amendment) Regulations 2011 which came into force in April 2011.

European Union (EU)

• Grants related to the regeneration of urban, rural or ecological locations
• Grants related to innovation or the development of best-practices.

Other Government and local agencies

• Regeneration grants from the CLG for growth areas, growth points and housing market renewal Pathfinders
• Grants linked to new housing through the Homes and Communities Agency (HCA)
• Funding for local area agreements (LAAs)
• Funding through local economic partnerships (LEPs) and neighbourhood renewal programmes.

Other beneficiaries

• Developer contributions agreed through the planning system overseen by local authorities (see above)
• Existing beneficiary contributions based on the additional damages avoided or additional benefits received through changes to existing risk management arrangements.

Other funding sources will exist and are being investigated, including bonds and loans, along with mechanisms to generate and secure investment, so opportunities to use them should not be discounted. Consultation with experts in obtaining grants and funding should take place to ensure that any conditions are met when designing projects.