Homeowners may be denied flood insurance due to Government cash shortfall

The Association of British Insurers accused Gordon Brown of failing to protect families and businesses from the sort of floods that devastated thousands of homes this summer.

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Tewkesbury, seen here before and after the summer floods, was one of the worst hit areas

The Government insisted it had doubled spending on flood defences in a decade and accused the industry of creating a row over a 'very small' difference in figures. Around five million people live in flood-risk areas. Two million homes are vulnerable from river or coastal flooding while a growing number are thought to be at risk from poorly maintained and inadequate drains and sewers.

The row follows Chancellor Alistair Darling's confirmation on Tuesday that spending on river and sea defences will rise to £800million a year by 2011. Over the next three years, total spending on defences would be £2.15billion.

Before this summer's floods in Yorkshire, the Midlands, Thames Valley and South-West England the ABI had called for flood defence spending to rise to £2.25billion – £100million more.

Yesterday it warned that the shortfall could leave homeowners struggling to secure insurance. Premiums could also rise for those whose councils fail to maintain and repair drains.

Rescue workers were forced to help people escape from their homes

Stephen Haddrill, the ABI's director-general, said insurers had paid out £3billion in flood claims this year and could not offer insurance 'at a significant loss'.

'The insurance industry is helping tens of thousands of people affected by flooding this summer, but the Government has now failed to play its part,' he said.

Insurers have signed up to a voluntary code which agrees to renew flood cover for customers as long as adequate flood defences are in place. They will also renew cover for those in high-risk areas if there are plans to build or improve flood defences in the next five years.

However, the code applies only to existing customers, not new ones, and it also leaves many homeowners in high-risk areas where there are no flood defences planned struggling to get cover. Environment Secretary Hilary Benn said the Government was taking flood defences seriously.

'The fact that we have doubled investment in flood defences in the last decade shows that the Government is committed to doing more to protect people, their homes and their businesses,' he said.

Mr Brown joined in the row when he appealed to insurers not to deny cover to those at risk of flooding.

He told MPs at Prime Minister's Questions: 'Over the summer period, and very recently, the ABI have been asking that by 2011 we spend £750million a year on flood defences.

The figures we announced yesterday are that we have raised flood defences from £600million this year to £800million in 2011. I hope whatever difference there is between the ABI and us, which is very small on the figures that are involved, we can show that we are doing everything we can to improve flood defences in this country.'

In Hull, where around 6,500 homes flooded in June, the city council's Liberal Democrat leader Carl Minns was critical of Mr Darling's announcement.

He said: 'I'm deeply concerned that, without proper investment in flood defences, the events of this summer could happen again and this announcement doesn't do anything to calm my nerves.'

Mr Minns added that not all of the £2.15billion promised by the Chancellor was due to be spent on flood defences.

'It's also going to tackle coastal erosion which, although that's a very important issue, is letting down people who desperately need the money,' he said.