Examination of Witnesses (Questions 600
- 619)
WEDNESDAY 27 OCTOBER 2004
SIR JOHN
EGAN
Q600 Sue Doughty: In your memorandum
to us you say it would be possible to build 125,000 houses a year
within the Government's sustainable development policies and you
also say that the sustainable communities agenda is reversed,
but then you went on to qualify that. You emphasised the need
to improve planning, house building standards, leadership and
a lot more. It is very difficult to see how this is possible under
those terms. How realistic is this target of 125,000 houses being
built?
Sir John Egan: I think it is feasible.
If we look at the Thames Gateway, I would see it as a £15
billion project and I would plan it in a certain way. If you were
to ask me, "Could we do that?" the answer is, "Yes"
and I am actually helping the Deputy Prime Minister on the Thames
Gateway. So, the answer is, "Yes, it could be done"
but a number of things would have to happen. I cannot say at this
point that it cannot be done because we have not got too far into
the project yet. I would not say it was impossible. I would say
it is difficult but that certainly it can be done. Look at, for
example, what has been done in, say, Birmingham or Manchester
or Leeds or Coventry. People of great leadership have gone into
the job, they have got cracking and they have done a magnificent
job on their city centres, absolutely terrific. If we only had
to say, "If we had that get-up-and-go in the Thames Gateway
and we learned to coordinate all those local authorities together
and we all accepted the sustainable community agenda, could we
do it?" the answer is, "Yes, we could", but an
awful lot of things would have to happen to make that possible.
Q601 Sue Doughty: You went on to
say that there needed to be enormous improvements in the planning
system, building performance and the development industry and
you raised a large question in our minds about juggling from what
could be done to actually delivering the processes. What do you
think is actually needed in these areas?
Sir John Egan: For example, going
back to what I did earlier on construction, the question I was
asked was, how do we improve the performance of the construction
industry? The question I actually answered was, how to achieve
world-class standards in the UK construction industry and therefore
I could set a goal as to what we were trying to achieve. The very
good clients like, for example, Tesco, Sainsbury's, Whitbread
and BAA, the company I was then running, are achieving the standards
that we set and indeed are capable of building world-class buildings
today. So, it has been done. Whereas, the Government have not
got very far down their own agenda; they have not left lowest-cost
tendering in as quick a way as I would have wanted. So, they have
not achieved it. On the other hand, it is achievable and companies
are doing it. So, I can say what is to be done but I am not quite
sure how quickly people will pick up what is very obvious as a
plan of action.
Q602 Sue Doughty: We are really trying
to do these within the short to medium term and you have set out
quite a few challenges there and they are very real challenges.
So, we are back to the reality of whether or not these targets
can be met.
Sir John Egan: Can I just say
that I do not know how quickly you think it has to be done. It
has to be done very quickly. London and the south east is now
the most wealthy community in Europe and whether people thought
one million people were going to come here by the year 2010 a
few years ago, I think many of them are already here. What we
do not appreciate is that we have to build or else people will
find somewhere to live and they will come. They are on the way.
I would have said that this has to be very urgently tackled if
we are going to do it well. I sit with the government committee
and I can see that joined-up government is occurring at that level.
On the other hand, we need joined-up government at local level
as well. We also need to be able to have regional planning in
order that we do not try to build the same resource in two different
places when one will do. We have to have regional planning. We
have to have very good urban coding in order that developers will
know when they have designed something that will get planning
permission. It is very inefficient today; they keep offering plans
and they have no idea which ones will work until finally the bell
seems to ring and it has worked. We have to be very specific.
In the Thames Gateway, the most urgent thing is to get the transport
systems established in order that we know which new communities
can be developed. You can develop communities very rapidly in
the Thames Gateway if you have railway transport. I had asked
for that to be completed by midway through this year and we are
not there yet. I have to say that if we are going to do this huge
project and do it well, we should not be slipping on timetables,
we should get them right. We do not know yet which communities
we can develop versus which ones we cannot. We have been promised
that it will be done towards the end of the year, but that is
not the same thing as getting it done in June—I would say
that it is six months late already.
Q603 Mr Chaytor: Your comment on
transport interested me because it linked in with something in
your report that caught my eye. Do you consider the purpose of
developing sustainable communities in the south east is to provide
more housing for more people to work in Central London and ease
the pressures on accommodation in Central London or do you see
the purpose as developing stronger more autonomous centres of
economic activity on the periphery throughout the region? From
what you have said, the implication is that you envisage more
and more people commuting in through better transport links with
London but more and more people commuting in longer and longer
distances and I would be interested to hear what you think about
that.
Sir John Egan: Let me first of
all make two practical points. The first practical point is that
the people are on the way, those one million people are coming
and many of them are here already. They are not coming to Saffron
Waldon, they are actually coming to London. That is where the
huge wealth is being created. Incidentally, these are not the
poor people of the world who are coming here. These are people
with the world-class skills that are needed in things like the
financial services industry. They are coming here because they
think they can earn far more money here than they can earn anywhere
else in the world and that is why they want to come and they are
on their way. So, there is a certain speed attached to it. If
you start doing your planning for people who are not going to
satisfy that need, that need is still there, so I think we have
to be very, very practical about that. The second thing we have
to be practical about is, if you have rapid transport into Central
London, you can develop the community very, very quickly. You
do not need to search for jobs. The jobs are there. Fifty per
cent of the people can get jobs by getting on to a train. So,
you develop the community very well indeed. The third thing I
have to point out is that these commuter communities are extremely
well liked by the people in them. If you look at the places that
got the highest marks for liveability in the south east, they
were in the main commuter places. So, it is all very well building
up a brilliant place in Saffron Waldon or somewhere, but that
is not going to fulfil the immediate need we have which is one
million people coming into London. Is it a better or worse product
than something which is autonomous locally? I do not know. I do
not think it makes all that much difference. On the other hand,
we have an urgent need to find housing of high quality for some
of the best people in the world who want to come here. So, I think
we have to create very high quality communities and we have to
do it relatively rapidly.
Q604 Mr Chaytor: Do you see the priority
of the sustainable communities programme as providing high quality
housing for the most highly skilled people?
Sir John Egan: Yes.[1]
Q605 Mr Chaytor: That is not the
way the Government sell it. The Government sell it as providing
more affordable housing for people working in the public services
who are going to be priced out of the market in Central London.
Sir John Egan: I am only making
the obvious point that we have to cater for these people who are
on their way. By the way, a number of the waiters in restaurants
are also coming as well. In fact, I went on a night out recently
and I said to my wife, "I wonder if we will meet anybody
anywhere who is actually English" and we did not. Apart from
the taxi driver who took us home, we did not meet one person.
I said that a number of wealthy people are coming and a number
of poorer people are coming as well, but that is not quite the
point. It is outrageous to me that an average person on an average
wage cannot buy a house in the south east because it is too expensive
for them and I think we should set the challenge—and in
fact I am discussing this one with the Deputy Prime Minister—to
the building industry to start coming up with homes that are affordable,
to cut out the waste and to cut out the inefficiencies in the
building programme and actually start building houses that can
be afforded. I think it is extremely important that communities
are balanced and that everyone who needs to work in that community
can get a house in that community and can afford to do so. I think
the point is a very important point and one upon which we have
to focus. I would like to see the £80,000 or £90,000
house sale value actually on offer in order that people with normal
salaries can afford it and it is not impossible, I am quite sure
that it can be done.
Q606 Mr Francois: Can I ask what
may be a very appropriate and practical question. You talked about
the importance of public transport—I declare an interest:
my constituency is Rayleigh and I am right on the northern fringe
of the Thames Gateway in South Essex—and, in particular,
rail transport and, in principle, I would agree with you. However,
in the Gateway, we are coming into two termini in Central London:
Fenchurch Street and Liverpool Street. They both have narrow necks.
You cannot get any more lines in and out; you can barely get any
more trains in and out. A number of the platforms were extended
to take 12-carriage trains as opposed to eight-carriage trains
to increase capacity and then recently a number of those trains
were taken away from the area and given to other train operators
in the Midlands because those operators now come under the aegis
of bigger companies with larger franchises. So, I am really at
a loss to understand what on earth is sustainable about any of
that. You are nearly at capacity in terms of community in the
peak as it is. I will be fascinated to know how you are going
to seriously increase rail capacity into Central London given
all of those constraints.
Sir John Egan: Obviously I think
that some very important projects like Crossrail will be required
to make London work. By the way, for London to work as a world-class
city, there should be an anywhere to anywhere capability in order
that couples can live somewhere and both of them can get the jobs
they are looking for, which increasingly will be in places like
Canary Wharf, the City or in the West End. So, you need to be
able to live anywhere and the pair can work anywhere. That is
going to be very, very important. I agree with you, there are
bottlenecks. Running Stansted Airport as I was, I was quite clear
that Liverpool Street and the lines going into it did not have
enough capacity and we need more capacity.
Q607 Mr Francois: I take your point
about Crossrail. Other than Crossrail, how are you going to provide
that additional capacity?
Sir John Egan: I was not asked
to design the railway network for the south east, I was asked
to design some principles that would answer the job. I have no
immediate answer as to how to overcome the bottlenecks at Liverpool
Street.
Q608 Mr Francois: If you sit on the
Committee and have some influence in these matters, could you
possibly suggest—and I am trying to be serious—to
those on the Committee that this is a problem that really needs
to be looked at. Aspiration will not cut it because people cannot
get on aspirations, they need to get on trains.
Sir John Egan: You are absolutely
right. We have to look at the capacity of these lines moving into
Central London if we are going to fuel the requirements of Central
London with people to fill the jobs. You are absolutely right.
I cannot disagree with you.
Q609 Chairman: That was very interesting.
That was the first time that I have heard from anyone close to
this huge project that the whole Sustainable Communities Plan
is designed to house investment bankers rather than meet the needs
of the indigenous housing demand.
Sir John Egan: I think you have
put too many words into my mouth there! I said that we have a
very successful series of industries in Central London. Merchant
banking is one of them but the whole financial services industry
is a vast industry with a huge balance of payments deposited and
it does employ a huge number of people and, as such, probably
is employing more value added in salaries than any other industry
in the UK.
Chairman: I think that is beyond dispute.
Q610 Sue Doughty: Fascinating as
that line is, I think I had better go back to the Barker Report.
You did have a dialogue with Kate Barker as your work was developing.
Do you see you work overlapping in any way and, if so, in which
areas?
Sir John Egan: I think she and
I were both clear that, if we were going to be able to build another
100,000 houses a year, we are going to have to find places to
put those houses and that was not going to be easy. My solution
is that the people learn to trust the planning system better because
it is delivering benefits to them and that we can go and retrofit
many of the communities that have been badly served by the zoning
of the past and actually build the houses around the mistakes
that we have made in the past.
Q611 Sue Doughty: Does that agree
with what she would say?
Sir John Egan: I am not quite
sure which method she had for gaining planning permission for
these houses. The Treasury of course normally seem to be able
to command everything, so maybe they can snap their fingers and
they will get the housing space. I was trying to devise a housing
system that would be supported by the people. I think it is utterly
essential that any changes to the planning system are supported
by the people.
Q612 Sue Doughty: Some people said
that the Barker Report has let off the building industry in its
final conclusions concluding that, to improve prices, all you
needed to do was have a significant increase in the housing supply,
full stop. In your memorandum, you have made it clear that, for
housing construction to be compatible with sustainable development,
supply systems and building methods would have to change substantially.
Sir John Egan: Yes.
Q613 Sue Doughty: Is that going to
happen given this push to build?
Sir John Egan: I think the Government
will have to take a special action to make sure that houses that
can be afforded by the average wage earner are created. I do not
think the marketplace is going to fix that for them. They are
going to have to do it. Luckily, they do have a lot of houses
that they subsidise and I would like to see the subsidy effect
used to create much lower cost houses which will enable the factories
to create the prefabricated parts . . . By the way, we are now
using the words that are quite emotive. Mention "prefabricated
parts" to a British person and they immediately think of
prefabs of 50 years ago and they were not pleasant houses. If
we are going to establish much cheaper and much better quality
houses, we are going to have to prefabricate much of the buildings
in factories and I would like to see the Government taking a lead
on this. I do not think that the housing industry will get there
rapidly enough on its own.
Q614 Sue Doughty: As you say, the
housing industry is not very responsive to innovation. Do you
think that pressure from the Government, if we were able to get
the Government to apply the pressure, particularly at the lower
end of the housing market, is going to be the catalyst that is
needed to really bring these things in? Is that a realistic aspiration?
Sir John Egan: I would like to
introduce more builders into the building market. The house builders
as a group are into their comfort zone. They find it difficult
to get planning permission. They have economic cycles where their
product is difficult is sell and we are just moving into one of
those probably, according to one or two of the bigger house builders.
The ones that have survived have pared themselves down to a relatively
comfortable life, but that is not the way in which you stimulate
innovation. These are comfortable people doing a comfortable job.
If we are going to create a much higher quality lower cost product,
we have to invite different people into the industry. One or two
of the construction companies that have achieved very big improvements
in productivity with the key clients like BAA, Tesco and so on,
should be invited into the housing industry. I would like to see
them cracking into this and actually starting to do the job very
well and very efficiently. So, I think that some kind of initiative
is needed from the Government and we have to bring new players
into the market if we are going to get these much lower costs.
Q615 Sue Doughty: This is good stuff
but what worries me is, in Rethinking Construction six
years ago, we set a target for the construction industry that
productivity would be increased by 10% per annum and we would
reduce waste by 10% per annum and defects would be reduced by
20% per annum and yet, from what you are saying, it does not sound
as if we are getting it yet.
Sir John Egan: The clients who
have insisted on this are achieving it. So, yes, people like BAA,
Tesco and so on are achieving it. They are capable of building
these houses but they are not in the house building industry.
Q616 Sue Doughty: Unfortunately,
the house building industry is not doing so well. CABE looked
into this and only 17% of the schemes that they looked at were
judged as good or very good. It is not really very encouraging
at the moment, is it?
Sir John Egan: When I wrote the
report, most government reports get thrown into the dustbin as
far as I can see, so I was not expecting a great deal. Actually,
a lot has been done and the fact that 17% are doing well I am
quite pleased with. There was nobody doing it very well five or
six years ago, so I am quite pleased that we have got thus far.
I think you will find that probably 30 or 40% of construction
projects that are carried out by the major clients are being run
very, very efficiently and very well and I would like to turn
that kind of energy and expertise into the house building industry.
I think they would be able to do a much better job than the current
house builders.
Q617 Sue Doughty: Do you think that
is a realistic aspiration with the house building industry to
really bump up this efficiency and deliver much better projects?
Sir John Egan: I hope so. That
is an initiative that I have been discussing with the Deputy Prime
Minister and I am hoping we can do something.
Q618 Chairman: How is it going to
happen?
Sir John Egan: I think we have
to try to make sure that some of the large housing associations
can procure their products through a specially created pair of
companies, let us say, who were specifically tasked to achieve
these very high quality and very low cost standards that we have
in mind. They can do it with other kinds of buildings; I really
see no reason why they could not do it on houses.
Q619 Joan Walley: I really want to
press you a little more on that because I am really excited by
the opportunities there are to do all of these things. My fear
is that whatever CABE may be saying by way of 17% improvements
in good quality houses, that does not necessarily make a difference
on the ground where we have regeneration going on, for example,
in my constituency in Stoke-on-Trent. What I really want to press
you on is, when the Committee went to visit Aberdeen, we saw some
really wonderful examples of state of the art architectural design
new house building which was looking at efficiency and, when you
talk about getting these improvements for good quality low cost
housing, I am wondering how much you are integrating into that
the standards that you are wanting to see embedded in building
regulations within the next eight years. One of the other things
that was impressed upon us when we went to Aberdeen was that there
were a number of newer houses built by many of the housing companies
to which you have presumably just referred but actually the standards
of housing efficiency and of energy efficiency in those houses,
even though they might be new houses and expensive houses, were
just not fit for purpose and the real worry in Aberdeen was that
we were going to be facing a bigger problem with these newer houses
which related again to lack of follow-up on building control when
enforcing on not enforcing these new regulations and I just think
that is a whole area which no one really has any control over
and it has been left to be implemented on the ground without it
actually being done on the ground.
Sir John Egan: I would like to
see the BRE standards which are currently in place; I would like
to see those as a minimum standard for all house building. So,
I am on the side of control here and I would have put that into
the urban coding.
1 Note by the witness: For the Thames Gateway-because
London is one of the most successful communities in the world,
but in reality it must be for all the people. Back
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