Examination of Witnesses (Questions 100-119)
GEORGE WIMPEY
AND CREST
NICHOLSON PLC
18 JANUARY 2006
Q100 Colin Challen: Is it not time
that you started selling houses, not just on the capital cost
but also on their running costs so that consumers have a better
idea of what it costs them over 10 years living there, rather
than just saying "Here you are, £158,000, but you do
not want the wind energy because that is another 10 grand",
or whatever. You are not really promoting it, are you?
Mr Callcutt: I agree. We do need
to try and make an effort to do more of that, but in a sense for
a lot of people it is a fairly short term process, they want to
buy homes and sometimes it is quite a struggle. In a sense if
they can get the extra features or another bedroom—
Q101 Colin Challen: You want to sell
them as fast as possible too. It is the biggest purchase of their
life, you want to sell it as fast as possible, that is the problem.
You should be doing more.
Mr Callcutt: We do not as an industry
promote it because as an industry, at the moment, we think we
are flogging a dead horse in trying to actually get it. The general
awareness of people as to the importance of the environment, if
that was generally higher I think that possibly marketing it might
be more fruitful, but at the moment I suspect that such a marketing
campaign, based on the environment, would not be particularly
effective. I do not know whether you think it would be or not,
I cannot see that it would, sadly.
Mr Redfern: We have tried it and
not successfully. Unfortunately, I would go back to John's comment
that when people look to buy a house—it is particularly
a UK phenomenon but I think it is true elsewhere—the biggest
single issue is capital cost, it is can I afford the mortgage,
can I afford that repayment, can I get through the next six months,
because people still have that perception that the capital cost
of the house will go down over time and the running costs will
change in relation to where they started off. It is getting over
that first 12 months that is the hurdle; people do not have, unfortunately,
that kind of mindset.
Q102 Chairman: Given that that is
the case, and now that stamp duty is such a big extra cost for
purchasers, if there was a stamp duty regime which actually offset
some of these features, is that a way whereby not only would it
provide for some of the extra costs that might be associated with
this, but it also would highlight potentially a marketing tool—you
are going to get half your stamp duty rebated if you buy a house
which achieves a certain SAP, or whatever it might be?
Mr Callcutt: There is a huge potential.
Obviously, it is not for me to go into what government policies
may or may not be on this, but I think—
Q103 Chairman: Feel free to do so.
Mr Callcutt: In that case I think
there is a huge potential for both the public and for industry
in the concept of what I call avoidable or mitigatable taxes that
actually begin to regulate behaviour and purchaser choices, and
in so doing you can in fact possibly pay less council tax, pay
less stamp duty, pay less corporation tax or offset costs against
all sorts of things. If I can then I will; there needs to be a
great deal more integration of what I will call fiscal policy
and environmental objectives across the board in order as it were
to get the show on the road. Once it is on the road and people
are seeing, for example, that they have tax breaks or they have
council tax breaks, and companies also are incentivised, the whole
process itself will raise awareness that the environment is an
important issue. Then you might find, as it were, people advertising
and promoting it as part of the marketing of houses. That will
be a lot more effective, but we are a long way from that, I am
afraid.
Q104 Mr Chaytor: Pursuing the same
point, do you think that attitudes may start to change following
the recent significant price increases in gas and oil, and does
that open the door for flexible forms of finance and more emphasis
on the payback period of the extra costs of the energy situation?
Mr Callcutt: I know it is not
intended to be, but a duty on fuel is in a sense a mitigatable
tax, in the sense that if you actually begin to have cars that
do 100 miles to the gallon, or some ridiculous thing, or you have
my zero carbon homes that, by definition, use very, very little
energy—in balance anyway—then you certainly do mitigate
it and, again, this sort of thing will raise the threshold of
consciousness that this is important, it does matter. Yes, that
would help.
Q105 Mr Chaytor: There is more awareness
of energy costs now than there was even three months ago, I would
imagine, so this may provide an opportunity.
Mr Redfern: That is true. As a
general comment, there is much more awareness now than there was
even 12 months ago of an awful lot of issues, which might make
it a little bit easier. Certainly, for us as a company we do not
see ourselves giving up on the route because it ought to work
in the end, it is still where we are.
Q106 Dr Turner: Given that it is
perfectly possible—Japanese companies have been doing it
for some years—to build and sell houses which are of a much
higher standard than any of the variegated codes and guidelines
that we are referring to here, it is faintly depressing, is it
not, that we seem to be reaching such business standards when
we could do so much better? You say that it is very much down
to cost; let us start with the draft code for sustainable homes.
If everyone had to build to that code, what practical difference
would it make to the capital cost of a house? What would be the
real extra cost of building all your homes to that standard?
Mr Callcutt: We have not costed
the CSB yet, I do not know whether you have.
Mr Redfern: Broad brush, to which
level of the draft code?
Q107 Dr Turner: To its basic level.
Mr Redfern: Just going through
it very broadly, I would have said probably it is about £1,000,
it is in that sort of scale.
Dr Turner: Which is absolutely insignificant
in the context of modern property prices.
Q108 Emily Thornberry: But what does
it mean, those basic levels, what are you actually getting for
your £1,000?
Mr Callcutt: As I understand it
at code standard building star one you are getting precious little
more than building regulations.
Q109 Dr Turner: Which are not very
ambitious.
Mr Callcutt: It is not ambitious
at all. In my mind there is absolutely no reason why star one
should be the starting point.
Mr Redfern: If I could give you
two examples, that ought to give you a sense of what it means.
One is a site specific environmental action plan and a waste action
plan for each site. We as a company, and a lot of the industry,
do that already. The Government's estimate is that it costs about
£50 a site. It is basically a drawn-out, specific plan for
that site saying what we will do with waste, where will it go,
what are the priorities, what are the particular issues on this
site. The Government's estimate would be that that will cost £50
per site, in reality it is probably more like £100 to £150.
We do it on every site because actually it makes sense to do it,
it is the right thing to do, I do not think there is any problem
with demanding that on every site but it does not add anything
new. If you take, say, the requirement which is also within that
base level to produce a bill of materials as to where materials
have come from for that particular house, from an environmental
point of view, I really do not see that it adds an enormous amount
to the required development of a house or development, but it
does produce an enormous administrative burden which creates very
little.
Q110 Dr Turner: Would you agree that
if, instead of all these codes being voluntary, apart from building
regulations—and there are separate questions about the enforceability
of building regulations—and your competitors who are not
trying to do what you do are undercutting you and producing the
cheapest that they possibly can—if instead there was a statutory
code and everybody had to work to a given level, what difference
do you think that would make to you as builders?
Mr Callcutt: First of all can
I say that possibly if it is going to be adopted by planning authorities
then for all practical purposes it seems to me that CSB is going
to be the compulsory code, because I cannot see that there are
going to be many planning authorities that are not going to require
it. For practical purposes, therefore, we are going to be operating
on a one star basis at least, and I would imagine that there will
be a lot of local authorities sitting around the council chamber
saying come on, boys, let us go to five, why not, let us save
the planet. How that is going to work out I am not terribly sure;
I am a little bit concerned as well, to be absolutely honest with
you. I think that there is absolutely no reason why you could
not just start on that, acknowledge the reality of it and kick
off at that point, frankly.
Q111 Dr Turner: This would then not
put you at any commercial disadvantage.
Mr Callcutt: It is a level playing
field.
Mr Redfern: My answer would be
slightly different. I do not actually disagree with the point,
but if that were the only code that dealt with that area then
that would be absolutely valid and I think that would be the right
thing to do and actually would help us, both as an industry and
certainly as individual companies, but the reality is that it
is not. A lot of those areas are already covered within other
legislation, in a slightly different way, and the problem is that
that then ends up being very prescriptive. Again, perhaps an example
helps. Over a period of time the industry has developed its production
methods, and one simple long term way that that has happened is
moving from wet plasterwork to dry lining, which is more environmentally
friendly, much better in terms of customer service, much quicker
on site, much better in terms of deliverability of consistency.
Recent changes in the building regulations to deal with sound
insulation between buildings have meant that, in a number of instances,
most of the industry has reverted to wet plaster at a stage in
the construction process, when they would have been away from
those kind of trades which impact on quality, on customer service,
on costs and on a number of other things. That is a completely
unforeseen consequence of actually a very detailed legislation
that was trying to make a level playing field. It is the right
objective, but the problem with it is that when it interacts with
the other legislation you end up moving backwards because it is
the only way that you can deliver the absolute requirements of
a set of legislation. If it really was a level playing field you
would say this is it, there is the code for sustainable buildings
and that covers those areas absolutely, but I just do not think
we are there.
Q112 Dr Turner: Would you say there
is a case then for a unified code which covers precisely the sort
of conflict that you have just described to resolve this issue
for the future, because then we would have something to really
build on?
Mr Redfern: Absolutely.
Q113 Mr Hurd: Whether the Code stays
voluntary or mandatory at a minimum level, am I right in understanding
from your previous evidence that actually there is no commercial
incentive for companies to move beyond that minimum standard today?
If that is right, what could or should the Government be doing
to create those incentives for higher building quality and greater
environmental performance?
Mr Callcutt: There is an incentive,
and that is that the Government as client is requiring at least
an equivalent, I believe, to the old EcoHomes very good, which
I think is going to be represented by a three star standard on
the CSB.
Q114 Emily Thornberry: What does
that mean?
Mr Callcutt: Sorry, I was jargoning
away. The BRE decided what was called the EcoHomes standard, which
was an environmental assessment system for housing. It was the
best system in the world and, in fact, most of the world has adopted
it. In fact, the CSB, the Code for Sustainable Building, has come
along and has added onto that by adding a few fields where there
are minimum thresholds. BRE simply had a trading basis, in other
words you could make the saving in many ways—for example,
high insulation but low on water or something, and you could trade
off different aspects. The CSB is pretty much identical to the
BRE except for the purpose that they have set minimum thresholds
on energy, waste, water and one more which I have forgotten.
Mr Redfern: Transport.
Q115 Emily Thornberry: What does
the level three mean then?
Mr Callcutt: The level three means
that in the amended form it is what I would call very good. The
top is excellent and this is one down from excellent, which means
it has got a very, very high score and I would say with three
stars you are pretty near to producing an extremely good product
by today's standards, and in fact it is quite expensive to get
there. I would say that my own view is that to get there is about
at least £3,000 plus per house, to get to very good.
Q116 Emily Thornberry: But social
housing is going to be greener than private housing.
Mr Callcutt: Social housing already
tends to be greener than private housing because housing associations
clearly have got what I will call some non-marketplace objectives—
Q117 Dr Turner: The Better Homes
standard.
Mr Callcutt: Yes, indeed. Very
good is that which English Partnerships have committed themselves
to demanding on all their projects.
Q118 Mr Hurd: If I can bring you
back to the private sector market, would you like to see the Government
do more to reward your industry to reach out for higher quality
and greater environmental performance, and what sort of measures
would you like to see?
Mr Redfern: It is an easy answer
to say yes, we would, sitting here feeling that we already do
those things, to be rewarded for doing what you already think
you are good at and can get better at quicker than others is attractive.
From a practical point of view, the Code and the EcoHomes standards
that have existed for a number of years have helped the whole
industry, ourselves included, to move on, even when they have
not been compulsory, or even when they have not been set on specific
sites. I mentioned the site-specific waste action plans; we started
to do that because it was within the EcoHomes standards, we tried
it on a site and we actually felt there was value and use in it
and that it was actually the right way to run a site. We now do
that on all of our sites, even though it is not compulsory, so
there is a progressive learning that that sort of coding structure
actually gives you, that takes you down a particular route—not
necessarily quite as quickly as a compulsory code, but actually
with a more constructive way of getting there and a more constructive
answer.
Q119 Mr Hurd: What I am trying to
get at is could the Government make a big difference to companies
not like yours who are struggling to get this by looking at the
grants for renewables or amending section 106? Could that make
a significant difference, or is the big overarching problem the
fact that the consumers do not care and the Government should
address that?
Mr Donnelly: The Government should
address the point that consumers do not care. Our sales and marketing
people tell us that the consumers do not care. We try to raise
awareness about SAP ratings and EcoHomes, so there needs to be
some kind of education to create sustainable consumers. The same
people who go into supermarkets and buy organic carrots, when
they come to buy a house they have forgotten all about the environment
and they are thinking about power showers and marble kitchen worktops
etc. It is just forgotten about.
Mr Callcutt: To answer your question
I would not actually start from that point in the first place,
but what I would say is that you need to go right back and have
a facility whereby you not only improve the regulatory threshold
by constantly raising, over the years, the standard for CSB—in
other words the hurdle goes up and up and up—but you also
back that up with facilities which actually examine the buildability,
the deliverability, of those standards as a practical thing, and
also analyse the ability of the supply chain that is servicing
those higher standards. What we want is not just some well-meaning
raising of the thresholds in a well-meaning attempt to achieve
better environmental standards, we need a much more science and
technology-based approach to be able to evaluate not only the
impact of that, but the buildability of that and the ability of
the supply chain to respond to it. That way, if it is done comprehensively,
over years or maybe quicker if in fact that is the decision, you
can then begin to raise the regulatory bar, and the sorts of problems
that you have described, where you have unforeseen knock-on effects
and contradictions, will be overcome. So there is no substitute
and we have not got a proper research, science and development
base that can give well thought-out regulations that are harmonious
with themselves and also facilitate efficient production from
the industry. That, in my opinion, is the single biggest problem
we are facing.
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