That is because flood defences – bar the odd sand bag – are almost invariably communal. No one can build a sea wall of any meaning for one house. Flood plains work communally, or not at all. And things like the Thames Barrier are beyond the capacity of the private sector because they have no mechanism available to fund them without the problem of free-riding coming into play. The rate of return on them is high, but only if you can find a method to capture it. That method is called tax.
This is indeed true. Which is why it’s so odd that Ritchie thinks pensions should be invested in bonds hypothecated to flood defences. It’s a public good, non rivalrous and non-excludable. Thus it is, absent tax, extraordinarily difficult to appropriate any revenue stream to pay off the bonds. This is simply lending to the government and it’s very difficult indeed to see why pensions should be invested in that. Especially since at the current (or any likely future) interest rate on government bonds you would be losing money on your pension investments.
So flood defences are an ideological issue. The individual is not capable of defending themselves against flood water in most cases. Communities can and states are well placed to reallocate resources to ensure the vulnerable are protected. This is, therefore, a role for the state, like it or not.
That is exactly why this government has been and is cutting spending in real terms, and plans to continue doing so.
Ah, no, not really. There has indeed been an ideological change but it’s not one about money. It’s more of an environmental thing. Over the past decade or so there’s been a realisation that it’s possible to go overboard on flood defences. A rigid insistence that the cost must never change, that cliffs must always be protected: that’s the old dogma. The new one is that we should allow the environment to change naturally: except where doing so would be prohibitively expensive, like allowing London to flood. But the odd patch of Norfolk? It’s been either silting up or washing away for millennia. So, allow it to keep happening.
We have had an ideological change: but it’s from the greenies in the Environment Department, not in the Treasury.