Examination of Witnesses (Questions 320-339)
MR ELLIOT
MORLEY MP AND
DEPARTMENT FOR
ENVIRONMENT, FOOD
AND RURAL
AFFAIRS
31 JANUARY 2006
Q320 Chairman: We spoke a few minutes
ago about the distressingly large percentage of new buildings
that do not comply with Building Regs. In addition to tightening
them up themselves the question of enforcement is absolutely central
in this. Specifically, does Defra have any views about how that
enforcement can be improved?
Mr Morley: As I say, it is primarily
a matter for local building inspectors through the local authorities.
We certainly think that the pressure testing needs to be improved.
There needs to be more pressure testing in relation to housing
development. We need to make sure that builders are building to
a standard where they do not fail the pressure test. That is one
example where we could see improvements. If you have better compliance
with pressure testing you have better compliance in relation to
energy efficiency.
Q321 Mr Caton: When we spoke to her
last week, Yvette Cooper said that one reason for the Code was
to: "provide the direction of travel for future improvements
to Building Regulations" and, indeed, you echoed that this
afternoon. Is that not an expensive and time-consuming way for
Government to flag up its future intentions about Building Regulations?
Why not just produce draft Building Regulations with a reasonably
long lead-in time?
Mr Morley: This is a long lead-in
time. You have got the new regulations coming in in April and
you are right to say what is being developed is the Code, and
it is still being developed, of course, it is not quite there
yet. Once it is developed then the building industry can see what
is coming and they can prepare for that and, indeed, they can
prepare for that sooner rather than later by adopting it voluntarily
rather than waiting for it to become statutory. I do not think
that is an unreasonable way of approaching the issue.
Q322 Mr Caton: I welcome what you
say about the Code not being tablets of stone yet and a lot of
people who have given us evidence will share that view because
a worrying majority of them have expressed real concerns about
the adequacy of the Code, and I am sure they will be saying the
same thing in their responses to the consultation. Will Defra
be seeking to raise the bar on the Code's standards making it
more challenging and, therefore, of more value?
Mr Morley: We are always looking
to apply environmental and sustainable measures to the highest
possible standards that we can reach agreement on. Bearing in
mind that you do have to take into account the points I made about
the fact that if you raise voluntary standards too high then you
will get less and less people willing to take them, you have got
to strike the balance about having real improvements but doing
it in a way that encourages people to apply. In fact, having a
number of standards, which is being suggested, is one way of doing
that because there is some pride in those builders who can build
to the highest standards and I also think there are some commercial
advantages in relation to their marketing if they can do that
as well.
Q323 Mr Hurd: You have been quite
consistent with Yvette Cooper in signalling that the voluntary
Code is to be seen as a stepping stone towards higher standards
of Building Regulation, but are you satisfied that message has
got out there to industry because it has not been the overwhelming
impression from the evidence that we have received? If you are
not satisfied what is Government going to do to make sure that
message gets out?
Mr Morley: It has been said numerous
times, and you heard Yvette make these points, she is the lead
minister, she has responsibility for that, and I am sure the industry
take very careful note of what she has said as Planning Minister.
On a number of occasions, and you mentioned the BRE conference,
I repeated that point there, which was an audience predominantly
of builders. They know very well that this is the intention.
Q324 Colin Challen: It seems to me
that the Government machine is designed to run at a precise speed
of something like 37 miles per hour and anything which detracts
from that is a bit of a nuisance. We have just had the publication
of the Exeter report and there is nothing particularly new in
that since the initial results of the conference last year, but
how do you feed that into this process? It seems to me that in
response to some of the questions we have had in this session
and in previous sessions there is a bit of a cosy accommodation,
if you will forgive the pun, with the house building industry
on how we proceed. Is there not a bigger sense of urgency and
can Defra really imbue ODPM with that sense of urgency a little
more and push the process?
Mr Morley: I would not want you
to think I was being too cosy with the house building industry.
While I do not want to be unreasonable, I think you have got to
listen to their legitimate concerns and I think giving them time
to prepare for higher standards in terms of training and preparation
is not unreasonable. The other side of the coin is I think building
standards have been sloppily applied and there has been a lack
of ambition by our volume house builders in this country. Many
other countries are building more efficiently to better standards
and in a very cost-effective way. I think many of our building
companies can do a lot better and I certainly expect to see them
do so when we apply these new standards.
Q325 Colin Challen: On the back of
the Exeter report, would you expect to have discussions with house
builders to look at the wider context?
Mr Morley: The need to take action
on climate change is real and pressing. The building sector within
the UK contributes about 40% of total emissions so, therefore,
they are a major source of greenhouse gases and CO2. It is absolutely
essential that we combat this in terms of better building standards,
new technologies and planning issues. It also has the advantage
that not only are you addressing environmental issues, you are
also making homes more comfortable and cheaper to live in. These
are highly desirable outcomes and I do not think we should apologise
for the new standards that we are introducing and we should not
be looking for ambitious conditions within the Code, and that
is what the Government is doing.
Q326 Chairman: The industry will
always say that it wants more time, industries always do that,
and I think the message from reports like the Exeter report is
time is the one thing we have not got in addressing this problem.
We would like to strengthen your case and any discussions you
have by what we say here. This leads conveniently on to the next
point I wanted to raise. In the evidence we took from house builders,
and from others, although everyone would like to think that consumers
would prefer to buy homes that are built to high environmental
standards, in practice they say there is very little evidence
of that and what people want is the cheapest possible deal for
the level of specification they are going to be using. The Sustainable
Buildings Task Group did recommend that compliance with the Code
should attract an incentive in the form of Stamp Duty discount.
What has happened to that idea?
Mr Morley: Fiscal matters, as
you will appreciate, are matters for the Treasury. There are clearly
arguments for using fiscal incentives in various forms to try
to encourage uptake. Just as a personal opinion, I think we should
have good standards which are statutory, not incentivised. If
there is a role for incentivisation it is to go way beyond the
statutory standard. That is where there may be an argument for
incentivisation and I think we should look at the case for that.
Q327 Chairman: I think your answer
was a polite way of saying the Treasury blocked this idea, which
will not come as a great surprise but it is nice to have it said
as explicitly as that. The difficulty that I have is we have got
a situation where the statutory requirements are not as demanding
as many of us think they should be. Appreciating the pressures
that you and others are under, nevertheless the progress is still
disappointingly slow and, therefore, even though in principle
I sympathise with what you said about using an incentive to go
beyond the statutory requirement, at the moment the only way to
get to a level of standard which is going to make progress addressing
climate change is to go beyond the present statutory Code and,
therefore, a fiscal incentive is quite appropriate even if it
is only taking it a little bit further. That is why I think many
of us feel that a fiscal incentive would be highly desirable.
If Stamp Duty for the moment is blocked by the Treasury, are there
any other fiscal incentives that you think might be worth trying?
Mr Morley: It is possible. I am
not saying that these kinds of approaches are blocked by the Treasury,
they do have to be considered and it is the Treasury that considers
them. Chairman, you are probably aware of a pilot scheme in Woking
whereby British Gas as part of the Energy Efficiency Commitment
is working with the local authority where the authority are contributing
some money and British Gas are contributing some money and what
they are doing for existing buildings is if people uprate the
energy efficiency of their homes then they get a discount off
their Council Tax. I quite like that approach. That is an example
of how you can incentivise retrofit, which is one of the more
challenging areas. I think we should explore these approaches
within the Energy Efficiency Commitment which will be revised
under EEC3, which is coming up very shortly. That is just one
example and I am quite sure there are other fiscal approaches
that could be taken although these are in the hands of the Treasury,
as you will appreciate.
Q328 Mr Hurd: Can you satisfy us
that Defra are making the case here because the evidence we have
received from builders like Crest Nicholson and Wimpey's, who
claim to be at the forefront of sustainable building, is that
there are no economics for them because the consumer is not prepared
to pay a premium. All the evidence from the Energy Saving Trust,
which you are well aware of, is that the major roadblock is consumer
apathy because the cost benefit and hassle trade-offs do not work
out and for a number of years now there has been a chorus calling
for fiscal stimulants to break through this consumer apathy but
nothing has come out of the Treasury for quite a long time. Can
you satisfy us that Defra are making the case? Can you see a way
of hitting our energy efficiency targets without these types of
fiscal stimulants to the consumer?
Mr Morley: We are always looking
at energy efficiency targets and Defra makes its submission to
the Pre-Budget review and the Budget review along with all other
departments and we make our suggestions on matters the Chancellor
might like to consider in relation to meeting some of the objectives
that we have as a Department and as a Government, so we do do
that. There are a number of points. First of all, I do not necessarily
accept that having good energy efficiency standards is going to
add an awful lot to the price of a house. It depends on how high
you go. If you go into a very high zero emission standard then,
yes, you are going to add cost but the cost is going to be very
different. I do not think in terms of good quality consumers will
necessarily have to pay a lot. In fact, I went to see a development
on Monday just outside Manchester, I think it was Stamford Brook,
which is being built on National Trust land and the National Trust
have an interest in the development. That is a very large scale
housing development and they are very traditional style houses.
If you look at it, it looks like any other housing development,
but they are building to a very, very high standard. They are
building to EcoHomes excellent standard. I know from my talks
with the Housing Corporation, the Housing Corporation believe
that if you are doing this on a large scale then building to EcoHomes
standard excellent does not add a great deal to the cost of the
houses. Let us just make that point, which I think is quite important.
Secondly, I guess for many people, given the price of houses,
cost is the main issue, I would not dispute that, but there is
an issue also of making consumers and buyers understand the arguments.
I think if you say to someone, "Would you object to paying
£500 or £1,000 more, bearing in mind that you will recover
that cost in reduced heating bills over the next few years",
a lot of people would say, "Yes, that sounds pretty reasonable
to me". There are issues of incentivisation, which I recognise,
there is an argument for fiscal measures, but there is also an
argument for good standards and keeping the costs down to the
consumer and there are also arguments for making people aware
of the arguments and benefits of energy efficiency. I come back
to the point that perhaps one way of doing that is having a star
rating in buyers' packs.
Q329 Mr Chaytor: Minister, do you
think that Government has taken its eye off the ball a little
bit with all this focus on the Code for Sustainable Homes which
only applies to new homes given that new homes inevitably are
a tiny, tiny proportion of the existing housing stock and the
attention given to retrofitting of existing homes, which provides
the largest contribution to CO2 emissions in the housing sector,
is almost ignored? You mentioned the EEC3 scheme which comes in
from 1 April this year—
Mr Morley: I do not think it is
quite that soon.
Q330 Mr Chaytor: I was going to ask
can you remind us of the timescale of EEC3.
Mr Morley: I think I will have
to check that but I think EEC3 is 2007.
Q331 Mr Chaytor: Is there a formal
consultation on the kinds of things that might be in EEC3?
Mr Morley: There is no reason
why we could not have a consultation on that, we normally do in
relation to these measures. In fact, I have been talking, along
with my colleagues, the Minister for Energy and also the Financial
Secretary, to the energy companies who have some ideas themselves
about being a bit more innovative in the EEC and having some more
flexibility in approach. I have encouraged them to give us those
ideas and we will certainly consider those. You are right, it
is the existing stock that is a challenge. For example, the point
about Part L to extensions, although that is important, is the
carbon savings it will give you are tiny, frankly, but they are
important because even small savings add up altogether to help
you with your life savings. You can get much bigger savings in
relation to the existing stock and that is why I am very glad
that we have this joint working with ODPM and Defra and also have
the involvement of the Carbon Trust and the Energy Saving Trust
who are also involved in that work in terms of drawing up proposals
on this.
Q332 Mr Chaytor: Do you think there
is an argument for a formal consultation process on EEC3 in exactly
the same way as there is now on the Code for Sustainable Homes?
Mr Morley: I am very keen on being
as open and transparent as we possibly can in all these approaches.
Q333 Mr Chaytor: In terms of fiscal
incentives, is not the case for fiscal incentives even more powerful
with retrofitting, whether it is the Council Tax rebate that you
have mentioned or the Stamp Duty rebate that applies equally to
the purchase of older homes?
Mr Morley: I repeat, I think that
fiscal measures could well have a role in it and I think they
should be given serious consideration.
Q334 Mr Chaytor: Moving on from energy
efficiency, which we tend to focus on, to water efficiency, there
is a fiscal incentive for water efficiency in terms of enhanced
capital allowances for the installation of water efficient devices.
Mr Morley: For companies.
Q335 Mr Chaytor: For companies, yes.
Do you have any knowledge of how successful that has been? That
has been in place for two years now. Is there a formal assessment
of how effective it has been in reducing consumption?
Mr Morley: I am not sure there
has been a formal assessment but I can check that for you and
if there has I will make sure the Committee has the analysis on
this. Not very long ago I did launch the measures on the water
fitting devices and there were more water saving devices which
had been added to the list, which was administered for us by Envirowise,
and basically there is a whole list of approved water saving devices
which are on the website which potential buyers can look at and
because they are approved they can get a capital allowance on
those fittings. All I can say to you is there has been a lot of
interest in this but I am not sure whether it has been running
long enough to have a formal evaluation although I will check
that out for you.
Q336 Mr Chaytor: You appreciate the
point that where there is a fiscal incentive in place already
it would make sense to have a full evaluation of the effectiveness
of that which might determine the Treasury's response to the pressure
for new fiscal incentives.
Mr Morley: I think, Chairman,
if David is trying to convince me that there is a good role for
fiscal incentives he is pushing an open door really. You do have
to look at these within the range of measures that you have, I
agree with that.
Q337 Chairman: Indeed, we would entirely
support you. We want to use the resources cost-effectively so
we want to find out what the best incentives are and how they
work.
Mr Morley: That is right. This
particular measure has only been going for two years so it is
perhaps a little bit early, I think you would want to see a three
year period before you evaluate.
Q338 Chairman: Returning very briefly
to what you were saying about new homes, the evidence we had very
strongly from the house builders we saw was that most buyers of
new homes are stretching themselves to the very limit in their
mortgage and that even an extra thousand quid on a hundred and
fifty thousand quid enters into their calculations as a burden.
I think that is something else which could be explored as part
of the research. I would love to think what you have said in answer
to those questions is right but I could not help being slightly
convinced by what they were saying. Knowing people who are buying
for the first time, they are absolutely at the limit.
Mr Morley: I am sure that is true
of first-time buyers. I do not disagree with you that cost is
certainly a consideration. I come back to this point that I just
do not accept that having good standards of energy efficiency
are necessarily going to add a large cost to the building, I think
it is about how the buildings are designed and built as well.
Q339 Joan Walley: When the plan was
first there for the new homes we were talking about 150,000 new
homes a year and subsequently that has gone up to 200,000 new
homes by 2016. We are aware that ODPM have commissioned research
about that but could you tell us a little bit about what Defra
has done in terms of the environmental impact and various issues
which will arise from that increase in the numbers of new build?
Mr Morley: We did commission a
report by Entec to look at the environmental impact of the Barker
review.
| 
