Insurers have told the Chancellor that unless he spends more money on flood defences, household premiums will increase and they may withdraw cover entirely.

Alistair Darling promised in his budget statement to spend £650 million on flood defences in 2008-09, but the insurance industry said that at least £800 million was required.

Stephen Haddrill, of the Association of British Insurers (ABI), accused Mr Darling and other ministers of failing to grasp the importance of improving defences. The association was deeply disappointed that the Chancellor offered nothing more in his budget statement than had already been announced.

A report this year by the National Audit Office found that more than half of flood defences in Britain were in need of repair. The ABI said that its predicted £150 million shortfall for 2008-09 was likely to lead to more defences falling into disrepair. Mr Haddrill cautioned that this “could push up the cost of insurance and make it unavailable”.

Even before the extensive floods this summer, insurers demanded that at least £2.25 billion be spent by 2011 on improving flood defences. The Chancellor committed the Government to spending £2.15 billion by 2011.

Hilary Benn, the Environment Secretary, said: “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.”

During Prime Minister’s Questions Gordon Brown played down the criticisms and urged insurers to maintain cover for people who were threatened by flooding. He insisted that differences with the industry over spending were “very small” and that the Government was doing everything it could to improve defences.

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