|
UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 779-ii House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE ENVIRONMENTAL AUDIT COMMITTEE
Sustainable Housing: a progress report
Wednesday 18 January 2006 MR PETER REDFERN, MR PAUL GARBER, MR JOHN CALLCUTT and MR PAUL DONNELLY
MR JOHN SLAUGHTER and MS SUE BRIDGE Evidence heard in Public Questions 89-179
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Environmental Audit Committee on Wednesday 18 January 2006 Members present Mr Tim Yeo, in the Chair Ms Celia Barlow Mr Martin Caton Colin Challen Mr David Chaytor Lynne Featherstone David Howarth Mr Nick Hurd Mark Pritchard Emily Thornberry Dr Desmond Turner Mr Edward Vaizey ________________ Witnesses: Mr Peter Redfern, Chief Executive, George Wimpey, Mr Paul Garber, Planning Director, George Wimpey, Mr John Callcutt, Deputy Chairman, Crest Nicholson Plc and Mr Paul Donnelly, Group Environment Manager, Crest Nicholson Plc, gave evidence. Q89 Chairman: Gentlemen, welcome, can I start by apologising for the fact that you have been waiting, which was partly our fault, but only partly, because there was a division in the House, unfortunately, just as this meeting was due to start, just after half past two, which set us back a bit. It was not our intention to be discourteous and we are grateful to you for coming in, both companies. You are here because you have been identified as market leaders, as you are well aware, in the second annual review of listed house builders conducted by Insight Investment and WWF. Welcome to the Committee and thank you for your time. Can I kick things off with a very general question to both companies, as to why you have committed your businesses to sustainable housing, what the decision-making process was and what the factors were that led you to make that decision? Mr Callcutt: Good afternoon. We decided to go into sustainable housing and to make a large commitment to it because we actually believed that at some stage in the future - we made this decision in about the late 1990s and we felt that there was a great deal of resistance against poor quality development, unsustainable development, communities that fell apart a few years after the physical process of building was finished, and we thought that if we made a very large investment in it, produced something better - not just a physical product but a product that was better managed, better organised, had the facilities for long term sustainability, or at least started that process - it would give us a significant market lead against the competition. As, of course, time unfolded, these things have come more and more to the fore - I would just add as an appendage that in fact we have been quite disappointed that it has not delivered the commercial results, that such a huge investment that we have made really has not paid commensurate dividends. Q90 Chairman: It has not done so? Mr Callcutt: No. Mr Redfern: I have a lot of commonality with John's perspective. There are two real reasons why in the first place we have gone down this route, the first is a point of principle. We started off as a business, probably five years ago, taking a very, very serious look at our health and safety performance, and that has led us down almost a cultural route of how we believe it is right to run the business, and very much our sustainability agenda has grown on the back of that point of principle about how the business ought to be run. From a more practical commercial angle there is also a perspective that it differentiates us in our land acquisition arena, particularly with Government bodies and other major land sellers. Those two elements, one principle and the other practical, are what have been behind it. I would agree with John though on the latter, it is very frustrating that when you are genuinely trying to do the right thing you do not always get the reaction that you desired or expected in the first place. Q91 Chairman: Why do you think that is? Are people just not interested? Mr Redfern: There are two reasons. There is one group of people who are not desperately interested and there is one group of people who are cynical about the industry, almost any industry, but particularly perhaps the construction industry across the board, so do not really want to try to differentiate between companies that are trying to do and can prove that they are doing the right thing and companies that are not necessarily making the same sorts of efforts, so there is that element of you are just a developer so you are not really interested in this, and that cynicism can be frustrating and quite a barrier. It is very difficult to differentiate yourself and what is published often does not really help to create that clear differentiation that some things do. Mr Callcutt: Can I add onto that? It is at several levels: first of all there are the issues on the Insight/WWF analysis of social responsibility, and then in addition to that we have what is called the quality and service of the product you are producing. I actually find it quite difficult to know how you can produce a social responsibility report without including quality and service in the product, but that is another issue. The main points however are that landowners of course want the highest value for their land, and unless what you are doing drives through to a higher selling price and you are able to recover that, then of course you are at positive disadvantage on costs of production and on overheads. The second point is that increasingly we rely on the public sector as the source of land. They control, we think, about 60 per cent directly or indirectly of development land, and whilst having the credentials gets you in to a point in terms of buying land from the public sector, sadly, of course, we have all got pressures and it will go for the highest buck in many cases, and so there is not a follow-through in terms of, as it were, making sure, if I can put it like this, that the good guys get on top, and I do include my friend here within that definition. Q92 Chairman: You have a lack of consumer interest or consumer cynicism, plus a cost factor, which are both against you. Mr Callcutt: Yes, indeed. Q93 Chairman: Are there any other factors that are actually an obstacle to trying to achieve greater degrees of sustainability? Are there any planning or building regulations or anything like that that is an obstacle? Mr Redfern: Probably the biggest practical area - and I suspect that John would say the same thing but I will leave that to him - is the sheer complexity of the regulation in the area as a whole. You mentioned building regulations, and one of our biggest frustrations is the disjoint between building regulations, ecohome standards, the code for sustainable buildings and a hundred other regulations of a local and national nature, all of which try and achieve broadly the same thing but in subtly different ways. Effectively you cannot quite meet all of them, or not without a very significant cost impact with very little value back, even from an environmental point of view, let alone from a customer's perspective in terms of value of the house. That complexity of regulation is quite a major barrier to actually doing the right thing rather than just ending up with a box-ticking exercise to hit a particular target that has been set by some particular group. Mr Callcutt: I am sure we are going to fall out violently soon, but at the moment we are in harmony. What we have is a problem, we have as it were a regulatory confusion. We have such a varied number of regulatory advices and directions, all the way through from NHBC to building regulations, through to ecohomes, soon CSB, then we have statutory services and everyone is also pushing out informal advice. We have now local authorities with sustainable building checklists - if we are not very careful it will fragment to the local level. What we really need, if I could suggest, is that somebody needs to look at the very beginning and to drive a consistent approach to the entire consolidated regulatory environment, and then perhaps you only have one regulatory environment for building. That standard is, say, one star, and beyond that you can go to appendix one, two, three and four if you want to as it were get up to five stars. That is really what I call logical, and you also have to actually work out not just what you want to achieve but the buildability and the way that the regulatory environment interfaces with your ability to have efficient production. This means that you have to have a really big, technical research know-how base to do all these things - harmonise it with EC regulations coming through and with other regulations, make sure it is buildable and also have a science and technical base as it were to evaluate, for example, long term impacts, carbon impacts, carbon equivalents to measure all the various regulations for both building quality and sustainability. This is conspicuous by its absence. Q94 Mr Vaizey: I was going to ask about the sort of environmental systems you can put in your home. You may have read over the New Year that the Leader of the Conservative Party is planning to have an eco-friendly home, but it is going to cost thousands of pounds to have water butts and so on. In fact, I have got Thames Water coming round to my home to look at it; but all these things are very expensive. If everyone had them, would the costs fall dramatically? If everyone had solar panels on their roofs would they be pennies or pounds or thousands of pounds? Mr Redfern: There are a number of questions in there. If you look at solar panels, there is a very specific issue there with costs and if there was an enormous mass demand the cost would drop, but the evidence that exists today is still that it is not an economically viable source of energy, purely because of the cost of producing the panels full stop. It may get to that point, but it is a long way off and it is not about mass production at the moment, it is about technology. There are other areas where a significantly high take-up of a particular issue will actually bring the costs down quite significantly, so there is not one black and white answer. It is certainly not the main solution, the main areas that will impact on environmental performance, particularly the energy generation, are more to do with technology development than they are to do with scale of production. We would look quite closely at wind generation and solar energy, but we feel it is still some way off being viable, even if there was the scale of production. Mr Callcutt: There are two sides: first of all there is the cost of it per se, as to whether in fact it is cost-effective in energy terms, whether the embodied energy in the component is ever going to be repaid in the savings and that, once again, makes you fall back on real, high quality science research and what have you. In a sense the other part of it is that what developers really are concerned about and what my gripe was at the beginning is when you are relatively disadvantaged, in other words when company A is carrying out one set of standards and is not getting the return, or has them imposed and does not get a return, then, frankly, you under-perform, your investors get angry with you, your chief executive loses his job ultimately. I did retire actually, so I managed to hang on in there. If in fact you have, however, a level playing field, then you find in fact, that provided the costs are the same for everybody there is a greater acceptance of them. Clearly you want them to be inherently sustainable as products, but provided that is so it is a much better way to raise the regulatory bar than it is to hope that you are going to get some pioneers, at the moment putting themselves forward and not getting a return. Q95 Mark Pritchard: In the WWF report, obviously, you are listed there; can you tell the Committee what measures you are putting in place to ensure that you keep your places on that listing? Mr Redfern: The point I would start from is that we are not putting any measures in place to make sure that we keep on that listing because that is completely the wrong philosophy for approaching this whole area, and one of the things that you do in reality have to battle against in a business is a degree of initial cynicism from people within your own business on a particular issue. We set out, when we started down this road, with a clear statement that we were doing it because we felt it was right; in some areas for commercial reasons but not for presentational reasons, and one of the things that continually frustrates is the need to present something rather than actually do it. So we are looking at areas where we can improve our underlying performance, but the report and our CSR report comes on the back of what we do, not as we sit down and think what do we want to write in next year's report? It may be a strong reaction, but it is quite a fundamental point of principle about how you run a business rather than how you actually report externally. In terms of a practical answer to the question you are really asking, what are we actually doing about it, we are looking at a number of areas. We have never had as a business a specific statement that we will hit a particular ecohomes standard; that is likely to be replaced by the Code for Sustainable Buildings and we are looking at whether we actually say we see that as being the level we should aim for across the board, with a general stance of, where practical, we will aim for a higher level. That sort of question is what we are going through at the moment, should we set minimum standards rather than improvement standards. There is quite a big cultural shift to get from one to the other. Q96 Mark Pritchard: Just out of interest, when WWF are compiling this list do they actually come along and discuss things with you, or do they do it remotely on paper? Mr Redfern: They do normally discuss it, but there are two stages: a remote stage based on paperwork and then a visit and a conversation about the process. Q97 Mr Hurd: Could I just ask you to expand a little bit on consumer attitudes. I picked up that there was some cynicism about your motives as an industry but can I ask you to say a little bit about consumer attitudes towards the product? Do they want it? Do they understand it? Are they prepared to pay a premium for it? Are there specific environmental additions that you have detected really do chime with buyers, do engage with the public? Mr Redfern: In general consumers want it, probably if you asked that question now rather than 12 months ago you would see an increased desire to look at environmental issues because of world events. Do consumers want to pay for it or will they pay for it? The answer is generally no, almost exclusively, almost to the point of saying most house buyers will not pay anything for it, not just will not pay very much. As John said to begin with, that disappoints us because we have been looking both for a practical advantage and for an ethical position that that was the case. In reality, however, it is not what we find. If I could give an example - it is not a UK example - we have a US business as well as our UK housing business and we put together on one particular development a package of environmental measures that people could choose as an option. It is one of the ways in which we work out and test what people actually will pay for certain things. There were, I think, 100 houses on this development and the cost of the package was about $2,500. In the scheme of the cost of a house, it was not enormous, but a significant cost. The real underlying costs of providing solar energy, drainage systems, in the US a different air conditioning system, those sorts of things, we have one person take it up on the development, who was the person who had actually designed the package. It is a silly example that makes a point, but unfortunately our experience in the UK is generally the same, that consumers do not want to pay for it except in very extreme circumstances, very unusual circumstances. Q98 Emily Thornberry: Could you just tell us what measures you are talking about, just so that we understand? Mr Redfern: It is fairly clear it is the whole range. We have tried in different developments quite a range of different measures, but you could be talking about solar or wind energy, you could be talking about will customers pay for a different drainage system within a development, even if you educate them, energy efficiency in housing, do SAP ratings, for instance, make a difference to consumers' perception of the value or quality of the housing? I would say almost across the board the impact of that, except in a small number of niche markets, is that there are areas and types of consumers who will, but they are very small, and our business is a volume business. We have tried a lot of different things and have struggled to get any identifiable value from that. I do not know if your experience is the same? Mr Callcutt: It is exactly the same. Q99 Emily Thornberry: Of the ones that there are, what is the most popular? Okay, they are not popular, but of these unpopular measures what are you saying? Mr Redfern: Without doubt waste separation is probably the area where consumers see the most practical advantage for themselves because they can see it in the show home, they can physically see it. 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 ten years living there, rather than just saying "Here you are, £158,000, but you do not want the wind energy because that is another ten 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 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. Q120 Dr Turner: We used to have a Building Research Establishment that did that. Mr Callcutt: Amazingly, it is still there. It is still probably the greatest repository of knowledge in the world on this, but it has been neglected. This ought to be the centrepiece of driving forward new and better standards; it is still there, it could still be resuscitated and brought back. We need to start right at the beginning, designing homes for communities, designing homes that suit the needs of people and developing that through, thinking it through. This is really research that you need, you need to look at the materials, what their profiles are, what they do to the environment, how you measure sustainability long term, impact, cost of running it, their carbon performance over 60 or 100 - all this is not some sort of stuff that comes out of a committee of worthies, this is something about which you actually have to sit down and do some proper hard science and research. If you do not do that you get contradictory regulations and you get regulations that simply cannot be built, and regulations that smash up the productive capability of the industry. All this needs to be done together and it is not happening. Q121 Chairman: Given the importance of it, is it the responsibility of the industry to do some of that work that you just described? Mr Callcutt: It might be the responsibility of industry to contribute - that is the supply industry as well as the house-building industry - but I think what we need to try and do, what ought to happen, is the Government ought to push and cajole the setting up of bodies that are capable, at least in principle, of delivering the quality of research and development that is necessary to push this initiative forward. We all want higher standards, but it is not some part-time amateur process, it is a very sophisticated, difficult business. Chairman: I have a clutch of colleagues who want to ask questions and we have other witnesses waiting outside, so brief questions, please. Q122 David Howarth: On this point can I put to you the more sceptical view that the Chairman was hinting at, I think, which is that you cannot expect the Government to understand this sort of thing. You understand your own industry better than anybody else, so what the Government should be doing as an alternative to what you suggest is announcing improvements in standards, but well in advance. What happens then is that you can then set up and commission the appropriate research to meet the standard the Government is requiring, and as long as you are given enough time to do it, both sides are satisfied and you are not trying to rely on Government guesswork about your own industry, about which you know more than Government. Mr Callcutt: I am not saying that they should not pay, they should not contribute, but if you think that somehow the industry is going to miraculously organise itself to give the science and the research, which sometimes does not have a payback for a long time - it has not got an immediate return - that is simply not going to happen. I am not saying it ought to be a subsidy, but the Government's role is perhaps not to pay for it but certainly to cajole it, certainly to prod it in that direction and give clear directions. I do not think it will happen on its own. Q123 Mr Vaizey: In terms of Government quangos in this area, is CABE - the Commission for Architecture and the Built Environment - an effective body? Does that help you in terms of guiding Government in how to be assisting the building industry? Mr Redfern: I do not think it has an environment-specific role such that it impacts in that area, I do not see that as being its remit. Mr Callcutt: It has an impact indirectly and that is, obviously, the quality of the built environment - the architecture, the way you lay your estates out - impacts massively on the quality of people's lives, and it impacts on the lives of some very poor members of our society who actually need better living environments. What has happened is that CABE has produced lots of guidance and, frankly, has carried out two reports, one last year and one this year, which have in fact pretty well reported that the standard of layout and design is poor, very poor indeed. Therefore, you must say that CABE has not been effectual in bringing about any material improvement in poor quality layout and design. Whilst I think that there has been some improvement in design, there is a case again for CABE having a slightly more proactive role in this process. At the moment they have got a very proactive role in commercial developments, I do not know whether you realise, but you can refer to CABE as a non-statutory consultee in commercial developments and, frankly, if they do not like your scheme you will not get it through the planning system. That is a massive incentive for people as it were to do it right and get it through CABE. There is no equivalent in housing and - again, I am very much aware that a lot of my colleagues might not agree with me on this - I do think that there ought to be some tiebreaker whereby you can get an objective opinion on the quality of the layout and the quality of the development that you are doing, and this would help local authorities but it would also help house builders when in fact you have, as it were, very good schemes being turned down because the front door of number 27 was red instead of blue. So there is a great need for some sort of objective appraisal of layouts. I would welcome that. Mr Garber: The other factor regarding CABE is that they certainly will look at innovation and try to look for something different without the realities, and certainly the experiences I have had in many instances are that the realities of what they are putting forward are totally inconsistent with what one could actually achieve in planning terms. It is promotional, and it is seeking a reaction to new ideas, new innovations, without looking at how it could actually be applied, looking at the qualities of what one is looking for within sustainable development. Particularly in the layout of housing it is ignoring actually what people want and the qualities that people are looking for within development. That is one of the saddest things that is missing. It is fine to be promoting it and fine to have the general idea of looking at architecture and the quality of architecture, but it does not actually apply itself in the way it should in a practical sense. Q124 Mr Vaizey: You are pioneers in this in a sense. Do you not have one home where --- Mr Garber: Yes, we both do actually. Mr Callcutt: He is putting himself about, yes. Mr Vaizey: I salute you for that. Q125 Mr Hurd: Is the Government doing enough to promote the code within the industry? If a Government came in and said we want to give you clarity, our end objective is zero emissions from new build but we want to achieve that objective without adding to the problems of affordability, what would you advise as being a realistic timescale for achieving those objectives if the political will was there? Mr Redfern: The first question is fairly easy, I think the government has actually done quite a lot to promote the Code, it is quite well understood within the industry and the participation, the debate, has actually been quite active, more active than it has often been in the past. To be honest, I do not think I can comment on the timescale over which you could achieve zero emissions, I do not feel qualified. Mr Callcutt: I could not give you a timescale, but I could tell you a process. The process would be to set up the mechanisms for it to be done properly and then announce, as it were working with that mechanism, a phased and logical step towards it, to making sure that you do not actually end up producing no houses, producing contradictory regulations. So you organise, as it were, the regulatory infrastructure properly and you then talk to them in the context of the supply chain, practicality, mass production, things we need to do, the skills and all the rest of it, and then you put against that a timescale of five, ten years, whatever it is, and say by then we want to get to a zero carbon building industry. That way the whole industry is on a level playing field and at least everyone knows that it is going to be worked through in professional and practical terms and we know what we have to work against. That would be the way to undertake it. I am sorry to go around the houses, but you need a process and then you need a timescale flowing from that process. Q126 Mr Caton: Can we move on to the Office of the Deputy Prime Minister's Five Year Action Plan, Sustainable Communities: Homes for All. Does it, in your view, represent a genuine attempt to deal with the environmental impacts of increased house-building, or does it merely pay lip service to it? Mr Redfern: I think it represents a genuine attempt. Some of the issues in it are covered at a relatively top surface point rather than going into detail, so it is difficult to judge it too closely against that, but it is trying to get to where we ought to be, I would not read it as lip service. Mr Callcutt: It is a statement of intent, is it not? I did not read it as anything other than a fairly political document which attempted to say what their ambitions and hopes were, and I think they are very reasonable hopes and ambitions, it does not have any huge, what I will call concrete proposals. I accept that in terms of the environment, certainly, in terms of what I call the large spatial strategy impact of development, it does not go into that at all, and in terms of the detail of the implementation of sustainable stuff, it refers to many principles and what have you, so it is a top of the waves job and I read it as such, frankly. Mr Redfern: The devil is in the detail; I would not say it us just lip service.. Q127 Mr Caton: Can you understand why some people have interpreted it as being exactly that, just lip service, because those hard and concrete proposals are not there? Mr Callcutt: More concrete proposals have followed on behind it, or followed on with it, so I think that we had Kate Barker who looked at how many houses we need, the CSB followed on building standards and a belated impact study came as a result of the promptings of this Committee on the environmental impacts of certainly the Barker stuff. Mr Redfern: From our perspective, certainly from my perspective, we are sitting in the detail that the devil is in, dealing with the code for sustainable buildings and the pressure that that puts on dealing with the planning system which, regardless of whether it is actually legally compulsory or not, that code will create - is already creating - a pressure within that planning system. Dealing with the changes to building regulations, some of which are environmental in nature, dealing with the actual decisions that we go through day by day in our dealings with English Partnerships, with RSLs, with the Housing Corporation - it does not feel like lip service to us because we are actually dealing with it. I can see that for somebody who read that report and was not actually dealing with it day by day, why there is that sense, but as my colleague said, that is the nature of those reports. Mr Caton: Thank you. Q128 David Howarth: Staying with the ODPM, could we just move to the vexed subject of Part L of the Building Regulations? As you know, when the draft came out in the autumn a number of environmental organisations and WWF said this to this Committee, that there was disappointment that they had been watered-down, that the environmental impacts would be insufficient. I was just wondering what your comments on that were and how you saw the watering-down of Part L from a commercial point of view. Mr Callcutt: Is that a 40 per cent improvement from the pre-2002 position and 20 per cent on 2002 is the latest standard? Mr Redfern: Yes. Mr Callcutt: Generally, our view was that they had taken it as high as they could without actually going over the threshold of having to spend serious additional resource to get beyond that which is in the latest promulgation of Part L. Mr Redfern: I think that is fair. I guess you would always expect us to say that in a sense, but from a practical point of view - we touched earlier on the impact on customers and what customers value in terms of, particularly, energy efficiency - one of the reasons that I think we struggle in that area is we are effectively competing in most of our business, not with each other but with the second-hand housing market. If you compare a new house today with even a second-hand house built five years ago - which in most people's eyes is virtually a new house in terms of what it physically looks like - there has been a 40 per cent shift in efficiency. That shift from a competitive sense is already so much greater that there is a huge gap, and actually trying to eke out the last elements from new housing rather than from the existing stock really does get you into the law of diminishing returns from a percentage perspective. So, yes, you could eke out a little bit more, but it actually would mean that the whole way in which you built would have to change quite radically once you get past that threshold, and the returns are actually quite small compared to the cost. Q129 David Howarth: Can you give us some quantitative view on that? Mr Redfern: To be honest, not realistically. Cost-wise you would probably be changing your production methods sufficiently that you are talking about £5,000 to £6,000 a plot, that sort of scale, in terms of moving from traditional construction to timber frame in some instances, to a completely different method of insulation, different wall thicknesses, a total change in the design of cavities, those sorts of things. It is quite a radical shift at that point, and the percentage improvement that you get from it is very small. Looking at it from an overall country perspective in terms of value, there is lot easier territory to go for than getting that last few per cent out of it. Mr Callcutt: I agree; that is one thing I would like to reinforce. At the moment we have an existing stock of some 20 to 25 million houses, and we produce about 150,000 new homes a year. The existing stock in terms of its efficiency is four times less efficient, so you have a massive block in the existing stock of what I would call carbon waste, which dwarfs incremental improvements. That is not to say that adding to that stock should not get better and better, but what I am saying is that there is a real need to address the huge number of the existing stock because relatively small improvements in that are going to make a gigantic difference. Q130 David Howarth: Does that mean that you would be in favour of stricter standards on, for example, where house improvements are made - the idea of requiring those making improvements to reassess the whole of the energy efficiency of their home? Mr Callcutt: I am not sure that that might not be counter-productive in putting people off improvements per se because suddenly they are involved in carrying out an improvement and they are into a huge amount more money, and if they are not helped I can see that that could quite seriously backfire. Just going back to an earlier point, if there was ever an area where incentivisation could make a massive difference it is incentivising people more to improve, to insulate and to put in what I would call environmentally efficient features in their homes. That would be the single biggest contribution that we could make towards getting our carbon emissions down to our target levels. Q131 Chairman: Specifically what incentives do you think would work in terms of getting consumers to do that? Mr Callcutt: One again goes to the old ones, and that is possibly incentives on mitigation of council tax, maybe stamp duty that you mentioned if you have a certificate, although I do appreciate that this makes the collection of that revenue trickier and trickier, and possibly even tax allowances, grants. It is really for people at the Treasury to sit down and think how best it could be done and how it may be most efficiently done, but this is an area of what I call the mitigatable or avoidable tax where it ought to be deployed and would have huge effects. If you could electively decide to have a rating on your home and for all the improvements you made on insulation, separation of waste or whatever you were going to do you could have some form of certificate which enabled you then, as it were, to have a reduction in your council tax so that you could claw back from your tax the costs of doing that, or some of it, I think that would be a tremendous step forward, a huge step forward. It is something like 25 million houses which are three or four times less efficient than new houses: one can only begin to see the amount of benefit environmentally that could be derived from encouraging home improvements. Chairman: Thank you very much. You have been generous with your time, and renewed apologies for the fact we kept you waiting. You have now stayed much longer with us, but that reflects the interests of the Committee in what you have had to say and, rather cleverly, you have neatly put the problem onto the owners of second-hand houses and away from your own, but thank you very much indeed. Memorandum submitted by Home Builders Federation Examination of Witnesses
Witnesses: Mr John Slaughter, Home Builders Federation and Ms Sue Bridge, Director, Planning and Development, Bellway plc, gave evidence Q132 Chairman: Apologies for the fact that we are running quite late now. It initially was not our fault, we had a division unexpectedly at half past two. We have overrun and I am grateful to you for waiting; I apologise for the discourtesy. I know that you have been to this Committee before but not in this immediate session, and you have changed your name from House Builders to Home Builders in the intervening period. Mr Slaughter: That is right, yes. Q133 Chairman: We are delighted to see you. I do not know what the exact implication of that change is, but if we can start with the Code for Sustainable Homes; am I right in saying that you were not actually part of the Government's senior steering group for the Code, but some of your members may have been involved. Mr Slaughter: We were not as HBF, no, but David Pretty, who is the chief executive of Barratt, was one of the steering group members, so in that sense in a personal capacity he represented the industry viewpoint. Q134 Chairman: As the Federation did you try to influence the development of the draft Code before the consultation paper was published? Mr Slaughter: No, we were not in a position to do so, not being members of the steering group, and we have expressed views in terms of what debate there was in the public domain about it, but beyond that we, like other organisations, had to wait to see what came out in the consultation in December. Q135 Chairman: It has been suggested by some people, notably the WWF, that actually the draft Code is a step back rather than forwards. What is your view about that? Mr Slaughter: Rather surprised by WWF's view, which we certainly would not agree with. Listening to the previous session, very clearly the Code does point the way forward to increasingly ambitious levels of building in terms of environmental performance and the Government has been quite clear that they want to add elements into the Code as it develops. We certainly would not agree that it is lacking in ambition. The point of it is that it is meant to be a voluntary initiative and, therefore, effectively engage and provide a pathway for the industry to develop commercially towards the objectives. Listening to what has been said already, we would agree with those points and that does imply that there are limits to how far you can go on day one as opposed to whatever it may be, 15 or 20 years in the future. If you go back to the thinking of the task group, Sustainable Buildings, whose work underlay the proposal for the Code, part of the objective here is to also improve the regulatory environment, which is a point that I wanted to add into the discussion on this. A positive element of the Code which we would certainly welcome in terms of what really the Government is trying to do is that it actually represents a less prescriptive approach to regulation, if I can use that term in the general sense, in the sense that the Code is based on certain performance objectives rather than trying to specify how you achieve them. That is a very important distinction, because we have certainly been concerned, to add to the points that were made earlier about complexity of regulation, that it is also very prescriptive, and in fact that prescription is very arguably a barrier to innovation rather than a facilitator of innovation. So we very much welcome the fact that the Government is now starting to look at a different approach to encouraging better performance, and that element of the Code is very welcome, although there are other issues with it. We certainly do not feel that that is lacking in ambition either; part of that mindset is also to try and pre-signal what the future levels of building regulations may be so that the different tiers of achievement, the different star ratings under the Code, are as I understand it meant to actually suggest that in five, ten, fifteen years time we might be looking at building regulations in that kind of area. That also does not seem to me to be lacking in ambition, in fact quite the opposite in the sense that by creating in a sense a more level playing field, a more certain business environment about what business might expect in terms of regulatory standards going ahead, it will make it easier for business to plan and innovate towards achieving them. Q136 Chairman: Are there things that actually cause concern to you or your colleagues? Mr Slaughter: On the Code there certainly are. There are specifics, and the big issue example there is initially the issue of sustainable urban drainage systems. It is quite an important element of the entry level of the Code - you essentially have to have sustainable urban drainage systems in place. That is not a problem for the industry, the industry is quite happy to do that and is able to do it, but we have essentially a major practical issue in that it is very difficult to get adoption of sustainable urban drainage systems by the utilities. This is a point that we have already made to the ODPM, that if we are going to have an entry level of the Code that includes SUDS then we need to sort out that issue with the utilities. That is one area of concern; another area of concern is around what I might call consumer behaviour. To add to the points that were made earlier, I think there is another element in the picture when you look at the market context of how you achieve better standards going forward, which is not just about is there an immediate market for something and what the cost of that is to the consumer, whether they are willing to pay a price premium for it, it is also about how consumers behave. A debate around the Code is essentially about that. If you include things in the Code that do not accord with consumers' way of living, the way they are likely to behave in a home, then requiring it through either formal regulation or through a voluntary code is not likely to work. There are examples we can cite from contemporary experience that would go along with that. I am not sure this is specifically an issue for the Code, but it is an illustration of the point. Certainly, it is the experience of developers that if they install low energy light bulbs, for example, they are very often taken out by customers when they move into the houses. You could specify through a code or regulation that you should install low energy light bulbs, but if consumers do not like them, for whatever reason, and take them out, the builder cannot control that and there is no way that you can do that. Q137 Colin Challen: Can you tell us why you think they do take them out? Mr Slaughter: I am not entirely sure. Q138 Colin Challen: Has anybody researched that issue? Mr Slaughter: I do not know. Can you add to that, Sue? Ms Bridge: The BRE report, which looked at these things, found that the biggest disincentive for home owners to retain low energy light bulbs was that there were not enough light fittings and light shades suitable - enough variety of lampshades available to make your home bespoke. We need to grasp that for more people to use low energy light bulbs the lampshade makers need to make more variety of lampshades. Mr Slaughter: Power showers are another example. It is not entirely clear to us whether the entry level of the Code would mean that you could no longer have a power shower, but it is certainly very much the case in market terms that if it did have that effect, there is no doubt that customers want power showers at this stage. If you install non-power showers in a new home they would probably take them out and replace them with something even less effective than what the developer would otherwise install. There are certain consumer behaviour issues, therefore, that we always have to take into account in however we approach these things. The third area of concern about the Code is really about the planning system, which again was touched on earlier. I think it is very unclear to us at this stage how the Code as a voluntary entity will exist with the planning system, but if it has the effect of encouraging local authorities to effectively go off down their own track and say we will do X or Y in our area, which may be different things in different cases, it would compound a problem that already exists in the planning system where local authorities are tending to adopt their own form of quality building regulations on a local basis. The problem that that causes for the industry is precisely that you do not have a level playing field. You might want to comment on that, Sue. Ms Bridge: It is a particular problem in London where you have got the Mayor producing his draft Code for Sustainable Buildings and then each of the local authorities, the London boroughs, in turn are looking at that and then adapting it for their own purposes, with their own sustainability checklists. Again, it is an issue that we are lacking a common playing field and you do not know where you are at any one point in time in what is going to be required of you. Q139 Chairman: I do not think your memorandum, for which thank you, expanded on the urban drainage problem which you just referred to, which presumably affects the water industry. If you could write to us afterwards and just deal with that in more detail, and indeed the other concerns you have got with the Code, that would be very helpful. Mr Slaughter: It was difficult because we had very little time to put that together. I should say that I have been as frank as I can be, but we are still in the process as an organisation of consulting all our membership, so we do not have a definitive view. I will happily write to you and say whatever I can on these points. Chairman: Put any qualifications that you feel are necessary in that respect, yes. Celia. Q140 Celia Barlow: Quite a number of the memoranda that have been sent to the Committee express some concern about the voluntary nature of the Code. Is it not the case that most builders will either ignore the Code or, even if they comply with it, will go for the minimum standard rather than the gold standard? Mr Slaughter: That all depends on whether you get the Code right. Listening to the previous session has been very helpful, because it has made me think about this issue even more than I had before coming here today. It is basically a choice between an effective voluntary code and doing it through more classical regulation. We think there are advantages in going down the route of a Code approach, because if you get it right it will provide an incentive for industry to innovate as much as it can do on a cost-efficient basis. If you can do that, in the end it is probably always going to be better value for society, if I can put it that way, than trying to require the market to do various things through the way you design regulations, because it is very difficult to always try and think about how you regulate various things in order to get the best overall outcome in market terms. New housing provision is 90 per cent privately provided in practice, so we really have to get this right in the private sector. I am going to ask Sue to comment again in a minute because she is a practitioner and I am not, but we believe that there can be a basis for that being effective as a voluntary thing above the entry level, which is that it is a competitive market between housing providers and there are a lot of individual house builders. Kate Barker herself has remarked in other contexts that it is a comparatively fragmented industry and, if we can do other things like improve the planning system to get the supply side right on housing, you will certainly find it is a very competitive market in terms of product, and so an effective voluntary code in that context, I think, could work extremely well. Q141 Celia Barlow: Would that not go against the evidence that we heard earlier that it is not an issue for many consumers, so why would they want to be competitive in that way if it is not an issue? Mr Slaughter: That is a fair question. In terms of the way the developer would perceive it, they are also dealing with a lot of other actors - it may be English Partnerships, as we have heard also, but it is also the planning authorities and the other stakeholders who control, in one degree or another, the speed and nature of planning decisions, which are the lifeblood of the industry. There are issues about public image and reputation which I think are increasingly important for companies as well, so in other words it may be that you do not necessarily get the immediate consumer payback that you were talking about and, certainly, all the anecdotal evidence that we have from our members totally accords with what was being said earlier. Nevertheless, there may be commercial drivers for companies as to why they would want to do this, and if that can be done on a basis that is as cost-efficient and as commercially efficient as possible, with the right regulatory environment, then maybe there is no reason why you would not do it. There are, therefore, other dimensions to this that can decide whether a company wants to do it. Do you want to comment on that, Sue? Ms Bridge: Just to add one thing, you have got a difference when you are looking at the major house builders, the big volume house builders, who are probably achieving the minimum standard anyway through their corporate social responsibility because they have an incentive to achieve these things. A significant number of new homes in this country are still produced by small local builders, and when you look at this together with the raft of planning changes and the fact that you have got locally-proposed requirements - take, for example, the lifetime homes issue, you have more than version of what constitutes a lifetime home. To go back to what was being said in the previous evidence, we do need to look at homogenising all of these things and making sure that everybody understands the background from which we are all working. Q142 Dr Turner: You seem to be committed to the principle of the Code being voluntary; how many of your members do you think will actually use it? Mr Slaughter: I cannot give you a hard and fast answer to that, but if I go back to what the companies who were giving evidence before us have said, potentially a very large percentage would, because the reality is that local planning authorities, as the Code is proposed, will in many cases want to adopt standards in their own local planning policies related to the provisions of the Code which means that it is likely to be a reality to some degree for most companies. If that is the case then there will certainly be a wish and a need to get to grips with it. In the ideal world, where the concerns that we have expressed are resolved and it works on a voluntary basis, for us all of this is inseparable from the wider Barker agenda. The incentives and the case for doing this are obviously important in environmental policy terms, we do not dispute that, but the effectiveness of this agenda must necessarily be linked to solving the wider housing supply issue because that will deliver a planning environment, for example, that facilitates business decision-making and competition on a less constrained basis than is possible at the moment, and it will create a volume that may help to pull through some of the innovations that we are talking about. There are a number of reasons why a voluntary code, with the right surrounding circumstances, could work very well. Q143 Dr Turner: As it stands, how many of your members seek to build houses that satisfy anything but the most basic legal requirements at the moment? Mr Slaughter: I cannot give you a specific answer. Q144 Dr Turner: Is it the majority, half, less than half? It is not as if we are talking about anything very demanding. Mr Slaughter: All our members will build to building regulations ---- Q145 Dr Turner: Allegedly, yes. Mr Slaughter: No, they do, they build to building regulations, because they have to be signed off on building regulations in order that homes can be mortgageable; if they do not have the right sign-off then they cannot sell the homes. What you are really talking about is how many people go beyond the requirements of current legislation, and I cannot give you a hard and fast answer on that, we do not have any specific information. If you look at it in the sense that something like 50 per cent of output is provided by the 11 or 12 largest companies, the national house builders, then it is certainly the case that all of those major companies are involved actively in the sustainability agenda, in modern methods of construction and related issues in various ways. They are all testing the market for this, and we heard very eloquent testimony to that earlier, to see how they can try and make this work in the context that we have been discussing, so in the sense that the companies that produce the bulk of the output are all involved in sustainability, then I think we can give a very positive answer, but if you are looking at the smaller, local companies, then I suspect they are not. It is very difficult for smaller businesses in the environment that we are talking about to take a major lead on this. Q146 Dr Turner: What you have said constitutes a strong argument for making the Code statutory in effect, because it would then bite on the smaller builders who are competing with you as well. Mr Slaughter: I do not necessarily agree with that. Q147 Dr Turner: It would give you a level playing field. Can you justify being solely committed to the voluntary Code? Mr Slaughter: I did not say I was solely committed to the voluntary Code, I said there was a choice between them. Q148 Dr Turner: Could you live with a statutory code? Mr Slaughter: I do not know whether you call it a code or not. As I said, thinking it through today I think the choice is between an effective voluntary code - and there are issues about whether what has been proposed is, I am not sure if the Government has got it wholly right - and what I call a new approach to regulation. What I do not think is acceptable is carrying on with an evolution of regulation as it has been up to now, because it raises some real concerns about whether that will be the best way and most cost-effective way of delivering the standards that we are looking for. Q149 Mr Hurd: We have talked before about fiscal measures to stimulate the demand side, but are there fiscal measures that you can imagine members supporting to reward and encourage better environmental design? Mr Slaughter: Yes. I have to say that we do not have an HBF position on this set of issues, but in principle it has got to be an area that should be looked at. As to what the right fiscal incentive might be, I do not have a specific answer. The comments that John Callcutt made earlier about council tax on a personal level I would say would be one of the more practical issues. I am trying to think it through. Q150 Mr Hurd: I am talking more about the producer side, in terms of adjustments to the cost base. Mr Slaughter: Yes, potentially. I guess that in practice you cannot do things through VAT for wider reasons, it is very difficult, but issues would be around whether you could maybe create incentives that would facilitate research and development in a supply chain for example, but I can only really talk about this in a very conceptual way, I am afraid. Q151 Mr Caton: What does your Federation think of the Five Year Action Plan Sustainable Communities: Homes for All? Mr Slaughter: My answer on this is very similar to John Callcutt's. In a sense we did not think that the five year plan really added very much to the stock of knowledge as it was at the time it was published, it was perhaps more a summation of actions the Government had already taken and a statement of intent, as was said earlier. The important thing is that since then we have had very substantive proposals brought forward in December that cover a lot of the issues that need to be looked at for planning gain supplement, for PPS3 and, indeed, for the Code for Sustainable Homes. We would not attach particular importance to the five year strategy, but we certainly think that the Government is genuinely seeking to get to grips with the right issues and has shown that in its most recent proposals. Ms Bridge: Could I just add to that in that the five year plan is now a couple of years old, and it is incumbent on us to look at what has been achieved between the publication of that document and where we are sitting today. One of the most significant achievements has been the very early achievement of building on brownfield, previously developed land - the Government's target is 60 per cent by 2008 and we are already building 70 per cent as of 2004. That is a significant achievement in terms of achieving the overall sustainability objectives of the Government. If you look at the age of the five year plan, it is motherhood and apple pie really - laudable, but is it achievable? What has the Government achieved? The significant thing has been the implementation of the 2004 Planning Act, in particular the requirement for all new development proposals, not just residential proposals, to be tested rigorously through sustainability appraisals, at all levels of the planning process, from regional down to site specific level through sustainability appraisals, strategic environmental assessments and down to individual site environmental impact assessments. With individual site proposals you also have requirements for design and access statements, sustainability statements, green travel plans and so forth, so there has been a significant move towards achieving the overall objectives in the five year plan. We are not there yet, we are still consulting on the Barker agenda, the planning gain supplement, PPS3, and there is still a way to go but we have made a positive achievement over the last two years. Q152 Mr Caton: Do you think Government action since publication of the plan has proved to the NGOs, who were very disappointed with it in environmental terms, that they were wrong? Ms Bridge: It was a document of its time. I do not want to be too critical of it, but the Government did produce the sustainable communities plan, and then it appeared that nothing was happening. In fact there was an awful lot happening between the house building industry and the ODPM and planning authorities, moving towards achieving the agenda established in PPG3. The objectives that were set out were, as I said, very broad brush, and it is what has been achieved since then that I think we have to look at. Q153 Mr Caton: Is the difference between your assessment of the plan and organisations like WWF and Friends of the Earth that your priority and your members' priority is economic, and theirs is environmental and sustainability? Ms Bridge: At the end of the day the priority has got to be delivery. We have a serious housing problem in this country; it is a basic human right to have a decent home, appropriate to your needs. That has to be balanced with the environmental objectives and, as I said, by introducing a rigorous system of sustainability appraisal using strategic environmental assessments right the way through to individual site specific environmental impact appraisal it will go an awful long way to meeting those concerns. Mr Slaughter: I would not agree with the premise of your question in the sense that, yes, the economic side is very important for our members and, after all, they are commercial organisations whose desire commercially is to deliver more homes, to be able to build more, and their frustration is with a planning and regulatory system that makes it difficult for them to do that. They are certainly quite on-board in terms of the need to take environmental standards forward and there is not an option in the sense that not doing something in terms of housing supply is actually worse for the environment than going forward with the Barker agenda, in the sense that as has been said, on the energy side for example the existing stock is far less energy efficient than new build, and new build is improving in other areas. We have one of the oldest housing stocks in Europe in this country, and that is an issue for other reasons - social as well as economic - and if we are going to address all those issues and improve environmental performance, then enabling the right volume of the right standard of new housing to be built is critical to meeting all those objectives. So I do not think we agree with the premise of the organisations who are saying that. Q154 Colin Challen: You have told us this afternoon that all new houses comply with building regulations, but the Environment Agency have told us that nearly a third do not comply with the existing building regulations. How would you endeavour to explain that discrepancy? Mr Slaughter: That is a difficult question, obviously. I have tried to research that a little bit because I thought it might come up. The research that underlies that observation that the Environmental Agency mentioned in their evidence was specifically about a fairly small sample of new homes in relation to energy efficiency, and the assessment was based on 2002 regulations rather than the ones that are just about to come in - I am just saying this for background. As far as I can establish, and I am not a technical expert but I have tried to research this, the position is essentially that the 2002 regulations were primarily focused on the thermal efficiency of the building structure itself, the walls, the roof and so forth, and the issues that are thrown up by this research are to do with permeability and air pressure testing, which was not particularly emphasised by the 2002 regulations. As a formal matter of principle, as I said earlier, homes have to be signed off in order to be mortgageable, that is effectively the position --- Q155 Colin Challen: That is true, but the building society is not necessarily interested in the environmental qualities of the house, they just want to make sure it is not going to fall down in the next 100 years or whatever period. Mr Slaughter: Whatever the building regulations are you have to comply with them, that is a necessary thing to do. Q156 Colin Challen: To be clear on that point, if a building society found that a particular house did not comply with purely environmental regulations, they would refuse to take it on? Mr Slaughter: Just as much as any other part of the regulations. You have to have a building inspector say that the home has complied with the relevant building regulations, not just these, so it is not a question of homes not being assessed as having done so. The issue I am trying to raise, as far as I understand it, is that because of the thrust of the 2002 regulations, they met those regulations in those terms, but what has been assessed in the BRE research is the element of the 2002 regulations that was not prioritised, so you can see that the two things are not entirely incompatible. Being positive about it, what I can also say is that the views about the BRE research have certainly been picked up and this issue will not arise with the new Part L 2005 regulations because that will require air pressure testing. Whatever the issue has been, as highlighted by this research, is now resolved and will not happen in the future. Q157 Colin Challen: So we are all okay, we have enough approved inspectors, do we, to actually do a comprehensive, thorough job? Mr Slaughter: I do not know, I cannot give you a 100 per cent answer on that because it is not an issue that we are specifically responsible for. Looking at the evidence given by Sir John Harman, I saw that he raised some issues about that and I thought the interesting point he raised, for example, related to what I said earlier which is that to some extent building regulations prior to the Code had been going down this very prescriptive route and going beyond the question of the actual physical construction of the building to begin to touch on issues about how the buildings are used post-construction. If you get into that kind of territory, which we have been tending to do, it certainly does raise issues about the ability to enforce regulations. If you are talking about elements that effectively relate to usage after completion, how can a building inspector say whether or not the home will be used in the right way? I do not see how anyone could do that. Q158 Colin Challen: I am interested in your comment that you are not really responsible for these approved inspectors; maybe directly you are not responsible for them because they will be independent from your own members. Mr Slaughter: Yes. Q159 Colin Challen: But you surely must take an interest in the enforcement issue, you must surely be aware of whether or not there are adequate inspections taking place? From our previous inquiry I seem to recall that there were concerns expressed about the number of inspectors available to do this job and the decline of building inspectors employed by local authorities who can clearly be seen as independent from the trade. Surely you will be aware of whether there are enough, or you will have some perception as to whether there are a sufficient number of inspectors to do the job. Mr Slaughter: I believe there are a sufficient number of inspectors, but the issue is essentially what are they being asked to inspect, and I think there are questions about that. Chairman: David wants to come in on this question a moment. Q160 David Howarth: It is on precisely the same point, and perhaps Colin can then come back. In the course of the research you did, did you happen to come across any information about what proportion of your members regularly use local authority inspectors and what proportion go outside local authorities to the private sector? Mr Slaughter: I can answer that in a slightly different way. One of the main providers is NHBC and they are an independent organisation, although they have commercial elements, and there is no question of them not being impartial. If I get this wrong, Sue, please chip in, but NHBC have something like 55 to 60 per cent of the market and there are other providers as well as local authority building control. It is a competitive market, that is Government policy, I do not know - though I have not been at HBF long enough to know the answer to this - that the industry lobbied for a competitive market in this. We are where we are on that, but we would not have an issue with ensuring that we have an effective inspectorate that can actually deliver enforcement, but I would come back to the fact that there is an issue about what they are being asked to do, and that is a matter that I think deserves serious consideration. Q161 Colin Challen: Can I take it that you are happy then with the way that building regulations are enforced, you do not have any problems with it, or concerns? Mr Slaughter: I do not. Do you have any feel for that, Sue? Ms Bridge: Not as far as I know. Mr Slaughter: I am not aware of any as such, no. Q162 Colin Challen: It does seem to me - I just press this point once more - that you are in a situation analogous to the car manufacturers who make their cars, they can make cars that go, say, at 200 miles an hour and we have a speed limit of 70, but you are not in the least bit interested about whether we have enough police to enforce the speed limit, you just do not see that as being your responsibility at all, it is somebody else's job to enforce. You seem to be distancing yourself from what actually comes at the end of this process. Mr Slaughter: I come back to the point that our members cannot sell their product if they have not complied with building regulations, so it is not a question of distancing ourselves in any sense and building regulations are critical and central to the way the industry works. Q163 Colin Challen: Is every single house inspected? Mr Slaughter: It has to be, yes. Ms Bridge: Yes, it has to be to get the warranty. The other thing you need to take into account is that not only is every single property individually inspected, but they come with a ten year warranty and we are, as part of the Barker agenda, looking at ways in which to improve our customer services. We can come back to you on this with some more information later, but the level of customer satisfaction in terms of the build and the product has significantly improved over the last couple of years. Again, we cannot sell the properties unless they have a warranty, and they have to achieve building standards in order to get that warranty. Q164 Colin Challen: Just on this question of the WWF saying that Part L represents a watering-down of what we have, you said it is actually a positive step. Do you see any way that those two positions could be reconciled? Mr Slaughter: I have to agree with the answers given in the previous session essentially. It is not a question of selling things short because there are very clear technical and cost benefit issues about taking it further than it has done now. There is another element to this equation that was not touched on earlier, which is that in order to take full energy efficiency beyond the new Part L in an effective way, you really need a more holistic approach to building regulations. One of the concerns we have and one of the reasons why we think the Code is potentially a step in the right direction, is that it is beginning to take a more holistic approach to these issues, but if you go down the path of continuing to tighten up air tightness and the other elements of the current approach on energy efficiency, that is going to raise other issues in terms of building performance. There are questions of new ventilation standards, there are questions of air quality and I know those who are at the forefront of discussing environmental issues for building are also very worried about the issue going forward of how we reconcile our traditional approach to Part L with climate change in practice, given that we are going to have hotter summers and colder winters. We need to have an approach to building regulations that probably goes beyond the scope of Part L itself in order to reach a sensible balance of requirements. Q165 David Howarth: You have to forgive those of us who are obsessed with building regulations, but can I just ask you as a matter of historical interest whether you made any representations to Government last year before September when the draft came out about Part L, and if so what the nature of those representations were? Mr Slaughter: We certainly did, yes. Q166 David Howarth: What did you say? Mr Slaughter: I cannot give you chapter and verse because I am not the technical person - we were going to have our technical director here today but he could not be here for personal reasons, so you will forgive me, I have to give an imperfect answer on this. Essentially, as I understand it, there were a number of elements. One was relating to the issues I have just been touching on about how far you could push the traditional approach to improving Part L. We had concerns about the methodology - which to my knowledge may still not be totally clarified - and there is a real transitional issue for developers about how they are actually going to be sure they can comply with the new regulations, because the complex computer methodology, the SAP methodology, that is going to be required under the new Part L was only provided at a very late date and even then had not been fully assessed in terms of how you do it, yet the Government was committed to the regulations coming in at a particular point. So we lobbied about that, and the other area that we lobbied about and are still lobbying about is that we would like to see the equivalent of what we call the robust details approach, which has already been adopted for Part E of the building regulations, adopted for Part L as well. Robust details are basically pattern book approaches to how you achieve the standards required by the building regulations, and the positive thing from the industry point of view about those is that they actually create, if you like, an open door to innovation. If you go down this approach of registering pattern book approaches that are assessed as being sufficient to meet the requirements of the regulations, it actually is very liberating because it means that you can continue to add and research new, more cost-effective ways of achieving these objectives. So we are continuing to lobby Government to seek to include an approach based on that in Part L. We have lobbied for some time and are still lobbying. Q167 Chairman: Would it be possible just to give us a fuller account that your technical director could have given? Mr Slaughter: I am quite happy to provide you with a written note about that, yes. Q168 Colin Challen: I was about to say that the previous evidence we had in our former inquiry suggested really that your organisation found the Barker review to be almost on a par with Sir Thomas Moore's Utopia and that there was hardly anything in it with which you could take issue. Do you equally welcome the Government's response to the Barker review; do you take issue with anything that the Government has said in its response, do you find that it is helpful or not? Mr Slaughter: I am happy to reassure you that we are not completely Utopian. We generally welcome the Government's response because it is addressing the right issues, but we are certainly not saying that the Government has got everything right in that response. I do not know how much detail you want me to go into, and again I have to give a health warning that we are consulting our members about not just the Code but the PPS3 revision and the proposals for a planning gain supplement. As opposed to an individual company I cannot necessarily give you a hard and fast view at this stage, but if you look at the planning gain supplement, for example, it is very welcome that the Government has raised this issue because I think we all recognise that there are real issues out there about how do we have an effective funding mechanism that works, both for local communities and for industry in terms of delivering infrastructure requirements that are associated with housing. I do not think it is clear that the Government's proposals are necessarily the right answer - we are assessing that and our acid test will be whether those proposals actually will have the effect overall of encouraging more development land to come forward so we can actually meet the housing needs that are out there. I might ask Sue to say something about PPS3 but, again, we have not fully assessed that; there are many welcome elements of it in terms of, from our point of view, building on the positive recommendations that Kate Barker made concerning allowing due weight but not excessive weight to the market in the planning process. I am not sure they have got everything right and we still have some concerns about how this might work in practice. Ms Bridge: That is fair to say. There is an extensive consultation exercise going on at the moment on that, but there will however be a general welcome to the Barker Report. In particular, the industry will welcome the provisions of 10 year housing trajectories and the planning for housing provision, draft practice guidance, which will give the industry an element of much-needed certainty in terms of allocating land for development and the time when that development can be expected to come forward. That is probably the most important thing from the industry's point of view at the moment, but we expect to make substantive comments on the consultation exercise. Q169 Mr Chaytor: When the HBF came before this Committee before, 18 months ago, you got a bit of stick for not leading the industry in terms of the sustainability agenda. The Barker Report also was quite critical, but presumably you were quite relieved that she did not ask you to do anything that would need to be enforced, it was all strategies and codes of conduct and so on. Mr Slaughter: Yes. Q170 Mr Chaytor: You responded, I understand, by saying you were going to have a sector sustainability strategy. Could you tell us a bit about that; where are we with that, does it apply to all your members and, in particular, how are you going to measure the progress as a result of the sustainability strategy? Mr Slaughter: It is fair to say that a lot has gone on since we last came before the Committee, so we have made a lot of progress and, given, the Barker agenda, a lot of that is related to Barker activity. For example, we facilitated a very major process of discussion about modern methods of construction which, as I remember, was one of the issues that was touched on when I came to the Committee before. We have not quite published the outcome of that, it is due out in a few weeks, but that has been a massive process involving 50 to 60 different stakeholders to try and reach a consensus view about what the obstacles to facilitating investment in modern methods of construction are. A very important aspect of that, of course, is that modern methods of construction are not an end in themselves but a means of achieving desirable objectives so, yes, they are partly about housing volume but they also have benefits of reducing waste and improving quality of homes, contributing to the outcomes the Government wants to see generally. We have also undertaken a lot of work on skills and the major home builders - that is the top 11 or 12 Plcs - have made three commitments publicly since I last came to the Committee about how they intend to take that agenda forward, particularly to work proactively with CITB construction skills to develop new ways of bringing additional trainees into the industry, and we are ongoing with that. Perhaps most significantly of all, they have committed to adopt the construction skills certification scheme and the objective of a qualified work force working towards the aim of a fully qualified work force by the end of 2010. That is a very major new commitment --- Q171 Mr Chaytor: That was going to be a further question, so can I check that; this is now a specific commitment, an obligation on all the members of the major home builders group? Mr Slaughter: It is a specific commitment that they have made as companies. They have to make it, we cannot make it for them. Q172 Mr Chaytor: Coming back to the broader work on the sector sustainability strategy, does that exist as a document? Mr Slaughter: No, it does not because resources being what they are in the trade association we had necessarily to pick up some of these very major issues which have consumed a lot of our resource. We regard them ultimately as being part of this strategy and we would wish to package them as such, but in practice we concentrated on taking forward work on the issues rather than producing a glossy document. Q173 Mr Chaytor: Do you have a timescale for getting something committed to paper? Mr Slaughter: No, not at present as an overall strategy. Q174 Mr Chaytor: Would it not be a good idea to have a timescale so people can assess the level of your commitment to this work? Mr Slaughter: I accept that. We are essentially doing it in a piecemeal way and we are communicating publicly about those elements. We are holding a major Barker conference in late February which David Milliband is going to speak at and Peter Hall is going to speak at, and we are going to be reporting at that conference all the things that we are doing in these areas; we will be publishing reports and papers at that time. It will not, formally-speaking, be badged as a strategy in the terms you have mentioned, but to my mind it is essentially the major elements of that. Q175 Mr Chaytor: So there is progress, a bit slow --- Mr Slaughter: There is very substantial progress. Q176 Mr Chaytor: But it is moving in the right direction. Mr Slaughter: We are doing other things as well. Something I wanted to mention this afternoon - and if my colleague had been able to be here today he would have talked about this better than I can - we are working with the Construction Products Association, for example, on a new initiative that will help pull innovative and sustainable products through the supply chain. We are hoping to announce that publicly in a couple of weeks time - it has not been published yet, but it will be. Q177 Mr Chaytor: Do you envisage that all of these initiatives will be pulled together into one document? Mr Slaughter: Ultimately, yes, I think it is important that we do that. One of the issues for the industry is, frankly, that it has not communicated well enough about the things that it is doing, and ultimately as I would see it that is a communication issue. Q178 Dr Turner: I am sure you will be aware of the latest review of progress and performance conducted by Insight Investments and the WWF. It clearly indicates improvements in the performance of the majority of companies reviewed, but it also states that other house builders "appear to be finding it difficult to keep pace with the evolution of government policy, particularly within the planning process, and are failing to put together comprehensive programmes to respond effectively; their approach is still principally compliance driven and operates on a site-by-site basis." Would you agree with that assessment? Mr Slaughter: I think so, if I can understand it. It is quite difficult to understand and it is a long time since I actually read that bit. I think so essentially. If I understand it correctly, what that is about is one of the concerns that we have, which is that the regulatory environment is too complex, changes too often on a piecemeal basis and when you lump that together with the fact that the planning system does not deliver a sufficient or predictable enough land supply, those are all factors that make it more rather than less difficult for industry to move standards forward. I think that is what it is saying. Q179 Dr Turner: Is it also perhaps saying that the smaller company is less able to deal with this and more concerned with just scraping by? Mr Slaughter: The smaller company is always going to find this more difficult to deal with, but I think the reality is that if the larger companies can help move this forward with the right climate to support them, then things like the supply chain will come through and then it will be possible for the smaller companies to buy into that. What is difficult for the smaller companies to do is to take leading edge risks because they have not got the same mass and safety net for doing it. Chairman: Thank you very much. You have been very generous with your time, renewed apologies for the fact that we started late but it has been useful for us. We are very grateful to you. |