UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 779-iii

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

ENVIRONMENTAL AUDIT committee

 

 

SUSTAINABLE HOUSING: A PROGRESS REPORT

 

 

Wednesday 25 January 2006

MR COLIN FENN, MR DAVID PETTIFER, MS JO PARKER, MR RICHARD AYLARD and MR ROB HARRISON

YVETTE COOPER MP

Evidence heard in Public Questions 180 - 289

 

 

USE OF THE TRANSCRIPT

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Oral Evidence

Taken before the Environmental Audit Committee

on Wednesday 25 January 2006

Members present

Mr Tim Yeo, in the Chair

Ms Celia Barlow

Mr Martin Caton

Colin Challen

Mr David Chaytor

David Howarth

Mr Nick Hurd

Mr Graham Stuart

Emily Thornberry

Mr Edward Vaizey

________________

Memorandum submitted by The Chartered Institution

of Water and Environmental Management

 

Examination of Witnesses

 

Witnesses: Mr Colin Fenn, Chairman, CIWEM Water Resources Panel, Mr David Pettifer, Chairman, CIWEM Rivers and Coastal Group, Ms Jo Parker, Member, CIWEM Water Supply and Quality Panel, the Chartered Institution of Water and Environmental Management, Mr Richard Aylard, Director of External Affairs and Environment and Mr Rob Harrison, Director of Asset Management, RWE Thames Water, gave evidence.

Q180 Chairman: Good afternoon and welcome. Thank you for making time to come to the Committee. We have got until 3.30 to get through our session with you so we will proceed, I hope, with reasonable zip. Can I start by referring to the memo in which the Chartered Institution expressed disappointment with the way in which the Sustainable Communities document dealt with some of the water issues. I wonder if you would like to say, given the pressure that there is on water resources in the South East generally, and the flood risks associated with the Thames Gateway particularly, whether there are parts of the South East which would have been less at risk of flooding and better able to cope with additional calls on water resources than the ones which have been chosen?

Mr Pettifer: I am talking on the flooding issues. I think the point is, yes, but the main thing is that there is a parcel of land which has been earmarked or allocated, in our opinion without too much study in terms of what the actual flood risk is. Most of the Thames Gateway, most of the Thames Estuary is at a flood risk but it is protected. It is not a direct flood plain but it is protected. Any protection can be over-topped to any degree, in an extreme case it can collapse, as we have seen in New Orleans. What we are saying is yes, you are going to have housing, you must have housing, you have to put it in the South East, what needs to be done is more study on what the actual flood risk is in those areas to identify where it is probably at less risk of flooding. The other thing we are a bit concerned about, if you do put housing in the flood plain and take account of it, we do not think there is enough being looked at in the structure of sustainable housing. If you are going to put it in a flood plain, it needs to be of a fabric that can sustain the flooding if it should occur in the lifetime of somebody. You can have electricity points at a height, for instance, you can have a fabric that if water does come in it does not disintegrate, something I have seen recently, in a flood event. These are the things which have not occurred. It is "there is the area, that is where we are going to put the housing". I agree there will be areas less vulnerable in that flood risk area than others but not enough study has been done to identify those.

Q181 Chairman: Is that Thames Water's view as well?

Mr Aylard: Yes. We would not want to comment on flooding which is not particularly our area of expertise. We would look at water supply and waste water. Some of the biggest problems are around waste water disposal. Once we have treated the waste water it needs to go back into the environment. In some areas we are being forced to put water back into the headwaters of streams and rivers which have a very low dilution capability so it is more of a problem which means we have to treat the effluent to an even higher standard, which requires a long lead time and more investment.

Mr Fenn: If I can add on the water resources, the South East is clearly the dynamo of the nation's economy, as it is, but it happens, also, to be the driest region, that with least headroom between resource and demand, that which is most vulnerable to climate change. So water resource availability is a material factor in the environmental limits and sustainability of the development. I suppose that was the issue of concern we expressed.

Q182 Chairman: This leads naturally on to the question about whether water issues are sufficiently taken account of in the whole planning process. Do you have a view about that?

Mr Fenn: Water is fundamental to the infrastructure and carrying capacity of any development, whether it be household or industrial and commercial. Water is clearly a material factor in that process, particularly as we reach the point in the nation's development of our water resources where there is not a great deal left to be had. The water companies really ought to be statutory consultees in the process. They do need to be involved early, such that proper design can take place early.

Ms Parker: A further issue, which is often a problem, is providing the services within a lay-out. This is frequently totally neglected until the detailed design is complete. It is then passed to the water companies or their consultants to do the detailed design. It is often extremely difficult and sub-optimal, so pipes are laid in places where it is expensive to come back and make repairs or it is expensive to install them in the first place. That is not sustainability.

Q183 Ms Barlow: The Environment Agency have estimated that you will need four to five new reservoirs built in the South East over the next 15 years. Do you think that is correct?

Mr Aylard: Certainly as far as Thames Water is concerned, we are going to need a major new resource by about 2020, to serve both Swindon and Oxford, and more particularly London. We are revisiting a number of studies that have been done over the years but our current provisionally preferred preference is to build a new reservoir near Abingdon to take water from the Thames in the winter, when there is plenty of water available, store it, put it back into the Thames, again in the upper reaches in the summer, and then allow that water to work its way downstream under gravity and abstract it in London, treat it and put it into supply.

Q184 Ms Barlow: Is that the only one that you are planning to build?

Mr Aylard: That is the only one Thames Water has designs to build but I know that other water companies are looking in the South East, also. I do not know the details though.

Mr Fenn: Yes. The Environment Agency's original view was that the plans that the various water companies have in their plans, currently accepted by the regulators, provide sufficient capability to be able to meet the extra demand, provided that the reduction in consumption, mooted before the Sustainable Communities, was in fact delivered. That 25 per cent reduction in per capita consumption is an absolute requirement. The kinds of capacities that we are talking about - it would come not just from new reservoirs and new resources' schemes but also from demand management and demand reduction and even continued leakage management to the economic levels - would all be necessary, not just in new homes but in those that exist as well.

Q185 Ms Barlow: Is that not rather pushing the buck on to the consumer? Do you agree that the Environment Agency's predictions are correct if we do not have that reduction? I am thinking particularly also about the cost implications. I do not know how much yours is going to cost?

Mr Aylard: It will be in the region of £800 - 900 million to build but then it will be supplying water for 200 years, on the experience of our reservoirs so far. I think I should explain why we anticipate needing this new resource. It is really three things. First of all, it is the impact of climate change, which we expect to be getting really quite severe by 2020 with longer drier springs and summers. The second thing is population growth. In our supply area alone we expect to have an extra 800,000 people to supply water to by 2016, that is in ten years' time. The third thing is that our existing customers are using around one per cent more water every year which compounds over time. More and more people are using power showers, most people now have dishwashers, water use is going up despite our best efforts with water efficiency campaigns and also, of course, our top priority which is to get leakage down in London.

Mr Fenn: There is a need for us as a nation to encourage our people to value water more highly than they currently do. There does seem to be this view that there is an obligation and a right upon each and every household to have water to the extent required, whatever the conditions, whatever the weather, and frankly that is not a sustainable proposition. It is not a statutory duty upon the water companies to fulfil either. They have a duty to supply water for essential needs not for any need. Proper addressing of education awareness, the need for us to arrest, perhaps, this rush towards this profligate water using lifestyle, is a message that needs to be balanced alongside the necessary resource development.

Q186 Mr Vaizey: We are going to talk about water conservation later on in our questions to you. Can I ask a number of questions related to the reservoir because, in fact, the reservoir Richard identified is slap bang in the middle of my constituency, so it is something I have an interest in. First of all, I understand that one of the other options would be desalination plants. I wonder, Richard, if you would talk about Thames Water's attempts to build a desalination plant in the Thames?

Mr Aylard: The reservoir is designed to be producing water by about 2020. We have, also, a pressing short and medium term need to bridge the gap between the amount of water that we can guarantee to supply in a drought year and the expected demand. A desalination plant on the tidal Thames is, in our opinion, the best and most sustainable solution to plug that short and medium term gap. Now, the Mayor of London does not like this. He says it is using too much energy. Our argument is that if we had a less energy intensive option we would use it, and, secondly, that the energy is much less than people think because we are not treating sea water, we are treating brackish water. We take the water from the river on the ebb tide, so it is mainly fresh. This plant only uses one-third of the energy it would need to use to treat sea water. The second thing is because this is expensive in energy terms we will only use it when we have to. Our energy bill is a concern to us, as it is to everybody else. It gives us the capacity to provide a top-up to supplies when we are in the middle of a drought or anticipating one. That is our short and medium term solution. In the longer term a reservoir is, indeed, a more sustainable solution. We could not, even starting now, get it built before 2020.

Q187 Mr Vaizey: In terms of water conservation and Thames Water leakages, what sort of reduction in per capita water usage would need to be seen in order not to have a reservoir or any reservoirs in the South East? What sort of reduction in leakages? Thames Water is first or second, I think, in terms of leakages.

Mr Aylard: We have a particular problem with leakage in North London. Outside London, Thames Valley, our leakage record is very much the same as the other water companies, and indeed better than some. In London, a third of our pipes are more than 150 years old, half are more than 100 years old. North London is the worst area. We spend a lot of money every year finding and fixing leaks in the London mains but that does not get leakage down, it just stops it going up. Three years ago we started a programme to replace all the mains in some of the worst affected areas. In this five year regulatory period we are going to be replace 850 miles of mains, and we have accelerated that programme to do it in four years because we want to get leakage down as quickly as possible. That will make a real difference. The areas which have been completed so far, we are getting significant reductions in leakage, very much along the lines that we predicted. We are confident that as we roll that programme forward, we can get London's leakage down quite significantly. In terms of the percentages involved, I think I should look to my colleague.

Mr Harrison: If we look at our plans over the next period to about 2029-30, if we did nothing on demand management then demand would rise by about 21 per cent. By tackling leakage, by metering, by water efficiency measures, that increase is reduced to seven per cent. A very significant part of our water resource and supply demand plans is water efficiency and leakage management.

Q188 Mr Vaizey: That includes population growth in your predictions?

Mr Harrison: That includes the population growth that Richard alluded to.

Q189 Emily Thornberry: Ed, as an MP for North London, can I just ask a couple of questions about this. What proportion of water in North London has been lost through leakages? It is very easy for people to say that we should be persuading the public to use less water but when we are awash with it, when we are constantly having leaks, and it really seems like Thames Water is not taking it seriously, it is very difficult for us to persuade the public that water is precious. What is the proportion? Can I just say, I am the MP for Islington South so you know just why I feel quite so strongly about this.

Mr Aylard: I do understand that.

Mr Vaizey: More power showers.

Q190 Emily Thornberry: No, we are just walking around in great puddles.

Mr Aylard: We do take reducing leakage very seriously indeed. It is our absolute top corporate priority bar anything else we do as a company.

Q191 Emily Thornberry: That sounds nice but what are you doing?

Mr Aylard: We are replacing 850 miles of mains at a cost of £540 million in the next four years. We are spending £90 million a year on finding and fixing leaks. We have had our efforts on leakage independently audited to make sure we are doing everything we possibly can. We have hundreds of people, literally, working on leakage all the time. Sometimes you will see a surface leak which does not get attended to immediately but that is because somebody has been there, they have assessed there is no damage to property and the amount of water is smaller than leaks being dealt with somewhere else.

Q192 Emily Thornberry: What proportion of Islington water, therefore, is being lost through leakage?

Mr Aylard: It is probably about a third.

Q193 David Howarth: Can I bring you back, briefly, to this question of the planning system and the value of water. When water was privatised, a very long time ago now, the reason why the water companies were not given the place on the planning system that the water authorities had was because the legislation set up a system of infrastructure charges and connection charges, both of which are regulated. There has been criticism especially of the infrastructure charge, that it has been kept artificially low and therefore does not produce enough money to pay for infrastructure. At the same time, also, it does not act as any disincentive to development. I would like your comments on that? Are those charges too low and does the whole system of infrastructure connection charges need looking at again?

Mr Fenn: I cannot profess any great knowledge of this but I would refer to the statements made in the Code for Sustainable Buildings where there is reference to should we be going for piped solutions or for sustainable drainage systems. The kinds of performance indicators that were proposed, and measures to encourage developers to go for systems that would attenuate run-off by peak and by volume, I thought were very sound.

Q194 Colin Challen: I want to ask whether or not building new capacity would deliver more shareholder value than reducing demand?

Mr Harrison: The way in which we plan to provide for new resources is on a least cost economic programme. What we do is balance the economics of further reductions in supply with new resources. The question of whether or not there is a choice in terms of shareholder value does not come into it. In fact, Ofwat, our regulator, gives very close scrutiny to our plans to ensure that they are the least cost from an economic, environmental and social point of view.

Q195 Colin Challen: Ofwat does act as a bit of a brake on your plans?

Mr Harrison: They ensure that our plans are the most economic to meet our statutory and regulatory obligations. They scrutinise it very closely at each of the periodic reviews.

Q196 Colin Challen: If it was up to you which delivers the better value pounds per litre, is it new capacity or is it reduced demand? I know this is a bit of a hypothetical question but it is quite important.

Mr Aylard: The role of the regulator is to make sure that we provide the most efficient, cost effective service to customers. He will challenge everything in our business plan to make sure that we are providing that value.

Mr Fenn: The regulatory system does build in incentives. When the allowed return on capital on an asset on a balance sheet is greater than the cost of capital, there is an incentive by virtue of the regulatory system to go for that solution as opposed to an operating one. If the converse is true then, obviously, the operating solution would be preferred to the capital.

Q197 Colin Challen: You debate this with Ofwat, obviously? You do not wait for Ofwat to tell you what to do and leave it at that. How do you respond to Ofwat's demands in this regard?

Mr Aylard: We have a daily dialogue with Ofwat on a whole range of issues. Ofwat is our financial regulator and watches everything we do. We have an independent reporter who links us to Ofwat as well and gives us a challenge to our plans. It is not something that we look at once every five years, it is literally going on on a daily basis.

Q198 Mr Caton: Mr Aylard and Mr Harrison, the website for the London Thames Gateway Development Corporation lists the various partnerships it has formed to help it deliver the regeneration. We could not find your name there.

Mr Aylard: We are working with them on one or two things to do with the Olympics at the moment, so we are talking to them. I am surprised we are not on their website, and I will talk to them about whether we should be.

Q199 Mr Caton: What are you delivering for the regeneration of that particular area?

Mr Aylard: We are working, particularly around the Olympic sites, to make sure that we deliver it as efficiently as possible. For instance, the water-hungry phase of the Olympics will be the construction rather than the operation; we want to make sure that all that concrete is not mixed with drinking water. We are looking to establish a non-potable water supply to be used during construction which would then form the basis of a grey water network for the Olympic site as it is developed.

Q200 Mr Caton: You have a clear idea of timescale and costs?

Mr Aylard: It was only relatively recently that we won the Olympic bid. We are working with all the stakeholders in the Olympic area. A former engineering director of the company has been appointed as our Olympic project director and he is building relationships with people, including the Gateway, to see how we can contribute to the wider regeneration through the Olympics.

Q201 Mr Caton: Get your name on their website.

Mr Aylard: Okay.

Q202 Mr Vaizey: We have got this draft Code for Sustainable Homes which has six essential elements in it. Do you think that Code will provide an incentive to builders to raise their standards in building sustainable homes? Do you think that the two elements which will particularly relate to water efficiency and to sustainable drainage go far enough in those areas?

Mr Fenn: On the first, the categoric answer is no, I think it is romantic. People and firms do things for their reasons. If they are asked to push to a solution which provides greater cost, it must either be required of them or there must be a competitive advantage accruing from it. I can see some top-end house builders going for a solution which has a high style rating household as a selling point. It will be a niche part of the market in my view. I do not believe that to ask people to exercise their own purchasing power is sufficient to enable a big difference to be made, and in any event what about a lot of people who do not have lots of spare capacity and money to invest in environmental benefits the way perhaps they would like to. I do not see developers rushing to do that which is voluntary.

Mr Aylard: We would be happy to be proved wrong but we do not see the proposals in the voluntary Code achieving the 20 per cent increased efficiency that people are seeking. We think that would have to come through building regulations in due course.

Ms Parker: To emphasise this, having worked with developers extensively in the water industry, there are two main drivers for developers. The first is to minimise the cost of construction and, secondly, to gain occupancy as quickly as possible. Anything else they will do if they really have to but their focus will be on those two issues.

Mr Fenn: There is one suggestion, perhaps, which might make a difference. I understand the reason why it has not been made regulatory is to reduce the burden of regulation upon developers. I am quite sure that they would gladly swap the burden in that way if it was to be replaced by a smoother path towards planning applications being accepted, but it is not. At the moment I do not think it will provide a sufficient incentive.

Q203 Mr Caton: In their memo to us Water UK gave examples of essential elements that should be included in homes built on flood plains; things like door gates, flood resistant under-floor vents, high level electric sockets. Does the Code as drafted accommodate these sort of preventative measures?

Mr Pettifer: Not to my knowledge, no, this is the sort of thing that should be taken more account of. That sort of thing just goes back to what we have just said, what is the incentive for a developer to do that? This is what you need. At the moment, for instance, if you are going to do sustainable urban drainage, it is probably done because a developer has to do it to get approval from the Environment Agency. They have to do that to get that, and that is not what seems to be coming out of this Code. It is not going to be something that perhaps has to be approved by somebody. Those methods are all very well, those flood guards and things like that. The other thing that has to be pushed forward is to make it known that you live in a flood risk area, and that is a thing which is very hard because the developers obviously will not want to do that, they are not going to sell their houses. If you are going to get a flood, if something happens it will happen quickly because it is going to be either a major over-topping or a collapse, then people ought to know why they have got this air brick blocked up or why have they got these gates which can be put temporarily in place. They need to know they are in that flood risk, but I do see it is very hard and the house builders will not go for that because they are not going to sell their houses.

Mr Fenn: It seems to me there is already sufficient incentive upon house builders to look at appropriate resilience in buildings and protection of areas for new homes and those further downstream in the existing PPG25 guidelines and in the new proposed PPS25. I do not see the ones in the Code adding to those in any way other than to suggest that sustainable drainage systems could be given a tick-mark type scheme.

Q204 Mr Caton: There are five levels in the draft Code. At what level will the Code make a difference in water efficiency terms? Are you worried that it is voluntary?

Mr Fenn: Yes, I am worried that it is voluntary. I think it is appropriate and well-meaning that there is a target entry level of around about 125 litres per head per day or 46 cubic metres per head per year. That contrasts, interestingly, with the ones for the GLA which have 40 as the mandatory standard and 25 for the aspirational one. It is akin to what is already the situation in Germany where their current consumption is 125 per head compared with ours in the South East of about 165. Clearly we have a long way to go in order to be as water-wise and as efficient and the opposite of profligate in our use of water, and anything which achieves that is to be welcomed.

Q205 David Howarth: This is a slightly naïve question, it is about size, the effects of these various levels of the Code. Connecting back to the previous question about reservoirs, if, let us say, in the four growth areas, we were to go for a very high level of the Code and have dual-flush loos, spray taps, advanced management systems, and every house in the four growth areas had those, would that negate the need for the reservoir we are talking about or is that not enough? Would we have to be talking about making changes to existing problems?

Mr Harrison: From our point of view in Thames it would help us but it would not go as far as negating the need for the reservoir. As Richard outlined, there are two main drivers, the first driver is growth in population and growth in usage but there is also the impact of climate change on our existing water resources. To an extent that is making a very significant difference. It may affect the timing by a year or two but it would not affect the absolute need.

Mr Aylard: There is one other factor I should have mentioned earlier which is the impact of two European directives, the Habitats Directive and the Water Framework Directive, which may mean that some of our existing abstraction licences with the Environment Agency are taken away from us. We may even be losing some of the water we have at the moment.

Mr Fenn: I do not think any of that is a reason not to pursue them.

Mr Aylard: I agree.

Mr Fenn: There are substantial 25 to 30 per cent reductions available to be had with appropriate technology and appropriate support for technology in ways other than just the enhanced capital allowance scheme. If we compare what we do as a nation with what, say, Australia is doing with regard to encouraging demand management to have funds that developers can apply for, that householders can apply for, to have rainwater systems and grey water systems, grey water systems are an obvious way in which water that is used once in a household can be reused for flushing loos in a household and yet there is not even a category for it on the water technology listing. Appalling.

Q206 Emily Thornberry: What are your views on fiscal incentives in order to ensure we have higher building quality and better environmental performance?

Mr Fenn: I think fiscal incentives are useful, valuable and necessary, that the enhanced capital allowance scheme which currently exists, even if only to some of the product set which is available, should be retained, but it could be enhanced as well by measures like reductions in VAT, reductions in stamp duty, anything which can get a changing mentality, a changing conception, that using water efficiently and effectively in our households as individuals, as societies, is absolutely crucial. We have to change the mentality of us all to become low water user people as much as possible.

Mr Aylard: We have sponsored a piece of work which the Green Alliance are doing into this question of fiscal incentives for water and energy efficiency, and that report is published on 8 February and I will make sure the Committee has a copy of it.

Q207 Emily Thornberry: Thank you. Do you know of any international examples where fiscal incentives have worked?

Mr Fenn: Australia; Sydney. They have a tremendous drought in South Australia at the moment and they are looking at all sorts of solutions on the supply side and the demand side, and they have been really quite interesting and radical in the various solutions they have gone for on the demand side.

Q208 Emily Thornberry: Can I slip in one last question? The reservoir which looks like it might be being built in my colleague's constituency, which is going to come down canals, is it coming through those canals which are in Islington?

Mr Aylard: No, it will come down the Thames.

Emily Thornberry: That's all right. Good. I wondered if we were going to get all his water as well!

Mr Vaizey: It might improve some of the canals!

Q209 Mr Stuart: In the Government's response to the Barker Review, we learnt that the intention is to build more homes than originally intended, and even before this was known the Environment Agency said that water companies had under-estimated by 20 per cent the level of housing growth in their water resource plans. I wonder whether you can say whether this under-estimation applied to Thames Water, and then go on to say what impact the proposed increase in housing above the previous levels, announced in response to Barker, will have on those plans? Finally, were you consulted about this increase?

Mr Aylard: First of all, our water resource plans go 25 years ahead. They are reviewed annually and up-dated every five years. At what stage those additions were factored in, I am not sure, but they would certainly be in our latest plan.

Mr Harrison: We factored in the thinking that was included in the Mayor's drought plan and the difference between that original thinking and the later numbers is about 1 per cent over the planned period. Whilst that is a significant issue for us, it can be accommodated provided the phasing of developments is correct. So I think it would be wrong to say in the case of the Thames area there is a 20 per cent mismatch between our forecasts which were in our latest review and those currently being proposed.

Q210 Mr Stuart: Are you satisfied that the water companies have sufficiently realistic and robust long-term plans in place now to be able to meet the needs of these new communities?

Mr Fenn: I think the regime through which all of the water companies in England and Wales are required to produce plans to conduct appropriate demand exercises for the housing and to balance those is appropriate. I applaud the move to make the publication of the results of those plans more widely available; that is a good thing to do. I do believe that we should not be pulled to a knee-jerk reaction simply because we have at long last had a drought; it is many years since there was a drought - 1995-96 being the previous one. Droughts are part of our history and will be part of our future, but they will be more common in the future. We have to be able to deal with them effectively, adaptively, flexibly, and that includes using appropriate instruments. It includes using measures like appeals, water efficiencies and restraints and hosepipe bans as part of the battery of tools we have available.

Q211 Mr Vaizey: Given that most members of the public are either not aware of the problem of security of supply of water resources, or are not prepared to change their behaviour to any significant degree, what can the water companies or the Environment Agency or the Government do to deal with these issues? Also, given that you are looking at a strategy of building reservoirs and increasing capacity, does that not, as it were, take the emphasis off forcing consumers to limit the consumption of water?

Mr Fenn: I am not sure I agree with the premise. I think you can persuade people. People do respond appropriately, in circumstances, when they are aware of the situation and they have appropriate information to make decisions. There might well be local variations in the willingness to respond but these are days in which we engage with stakeholders early to form partnerships so that individuals, communities, water companies form part of a partnership for water reviews in the river basin for the long-run, not just for meeting today's current problem but for a long-run sustainable approach to managing the issues. I think there is no reason to doubt that we can persuade ourselves, individuals and our communities to behave rationally in those situations.

Q212 Mr Vaizey: I have Thames Water coming to my house on Friday to advise me on how to reduce water consumption. It does strike me first of all that every home should have a water meter and I would like you to comment on the cost of doing that and how it could be pragmatically brought about. Secondly, if you get a bill from a water company they are more likely to say, "You can save 5 per cent, 10 per cent by paying by direct debit", but they will not say, "Tick this box and we will install a dual-flush toilet and your water bills will come down by 10 per cent." It seems to me, given your relationship with your customers, because every three months you send them a bill, you have an enormous opportunity to tell them, "This is how you can save money on your water bill and try and save the planet as well."

Mr Aylard: We do correspond with our customers as much as we possibly can. We had a water efficiency campaign running in the national media during last summer, and we are planning a major campaign jointly with the Mayor of London to be launched in the spring - a £1 million campaign to encourage water efficiency in London and the South East. We tried through the media as much as possible to counter the prevailing view that we somehow live in a wet part of the world. We make the point that London actually gets less rainfall than Rome, Istanbul or Dallas. It may be a grey and miserable city sometimes but it is not wet; it is dry! We have to get that point across somehow. We do correspond with our customers, we do give them water efficiency tips. We do offer subsidised rainwater butts, as we will offer you. I think on the very specific question of metering, which is a highly complex issue, I would like to ask my colleague to say something.

Mr Harrison: We do of course meter all new properties which are constructed, and that came into force in 1990. We also do offer anybody who wants to change from an unmeasured to a measured basis the opportunity to be metered. In fact we are working quite hard to persuade people that they should do that. What we are doing is in this coming period installing 50,000 meters to really get to the bottom of the advantage of metering in terms of managing the supply-demand situation.

Q213 Mr Vaizey: That is partly what I was going to ask. Do you have a rough figure of how much water consumption is reduced when somebody puts a meter in?

Mr Harrison: The national statistics are on average 10 per cent, but for peaks in demand then 25 per cent, and that is without the application of advanced tariffs; but for advanced tariffs you need a good penetration of metering across your customers, and you need the ability to be able to introduce those tariffs. So the level of saving which comes from pure metering is around those sorts of numbers.

Ms Parker: Can I flag up one other advantage of metering which should not be overlooked which has an impact on leakage issues? When leakage levels are quoted they include the leakage from the pipe which is owned by the property owner and which is on their land; the private supply pipe. Installing a meter will help reduce that leakage. That is more problematic to manage because you have to work with the householder. Water companies at the moment first subsidise repairs and encourage people to manage their own pipes efficiently, but installation of meters will help promote that.

Q214 Mr Vaizey: Just a broad figure - if Parliament said tomorrow "Everyone must have a water meter in the South East", what would that cost? Is that a ludicrous question?

Mr Aylard: Some properties are much more difficult to meter than others. 41 per cent of London's housing stock is flats and they tend to have all the water connections to the kitchens up one side and to the bathrooms up the other, so you would actually need two meters or to re-plumb the whole housing stock. So you then have a very expensive proposition in order to meter the people who have the lowest discretionary water use because they do not have hosepipes or swimming pools. So there are real problems about the cost. The second point is that in some parts of the world, particularly the more affluent parts, a lot of people have meters and then say, "Now I can use as much as I like because I am paying for it" and I think the Chartered Institute has done some work on this.

Mr Fenn: Yes. The Institute itself as a presumption in favour of metering because it believes metering tied to tariff provides a cost signal to the customer with regard to how much water is being used. If the tariff is used intelligently to put the price in relation to the cost of that unit of water provided, or even better in relation to the availability of water, then you can tailor the cost to the prevailing circumstance very nicely. The cost of metering is not a straightforward question to answer. If you do it piecemeal, if you do it in small areas, it is around about £200 to £230 per property. If, however, you do it across a whole area, you blitz an area, as was done on the Isle of Wight for example, as a test of just what it does cost and what are the logistics of doing so, it is very much cheaper.

Q215 Mr Chaytor: Could I pick up a point about tariffs and ask again what you said about targeted tariffs. It is possible to structure the tariffs so there is a disincentive to use more?

Mr Fenn: Indeed. There are a whole set of tariffs - one is called a rising block tariff where the lowest social amount of water which people would need from us is priced at a lower rate, and then each block you use above that gets more and more expensive.

Q216 Mr Chaytor: This is a model which your Institute is promoting, is it standard practice amongst all water companies?

Mr Fenn: No, it is not.

Q217 Mr Chaytor: How many use this concept? Does Thames Water?

Mr Fenn: None of them.

Mr Harrison: Not at the moment. At the moment, meter penetration is about 20 per cent of the population, and our tariff structure does not include rising block.

Q218 Mr Chaytor: If that 20 per cent is more likely to be the bigger residential consumers of water, because it is people buying new houses and it is larger, older houses, does it not make absolute sense to introduce that kind of rising tariff, because this would make a contribution to reduction in consumption.

Mr Aylard: It is a way of reducing consumption, it is also a way of making sure the most vulnerable customers do not end up paying more for their water. You can have a social element at the bottom which is priced particularly low but rising from there.

Q219 Mr Chaytor: What I am saying is, is this not a quick win in reducing overall consumption, because you can easily, without any capital cost of installing new meters, simply by adjusting your tariff, make it more expensive for the biggest residential consumers of water to go above a certain threshold? The point you made earlier was that those who have meters will think, "I am paying for it, I am going to use as much as I can." This is an easy way, surely, or providing a restraint?

Mr Aylard: We will first have to persuade them to change to meters because we are not allowed to compulsorily meter other than on new homes and on change of occupancy.

Q220 Mr Chaytor: Sure but the tariff is at your discretion, is it not, with no capital cost of introducing a new tariff? This is equivalent to, for example, the way the energy companies did away with standing charges because they saw that as a regressive form of charging, as by and large the unit cost of gas or electricity was bigger for the poorest households.

Mr Harrison: We are at present, and we will need to confirm it, bound not to discriminate against customer groups. The other point I would make is that many of the customers who have opted to change, have opted to change for the reasons of rateable value and moving on to a metered cost, vastly reducing their costs, not necessarily because they are high consumers. There may well be people who are low consumers living in very large rateable value properties.

Q221 Mr Chaytor: In which case, if they moved on to a meter and you introduced a rising tariff, it would not make any difference because if they are low consumers they are protected by the structure of the tariff.

Mr Harrison: But if the aim was to reduce consumption?

Mr Chaytor: The aim is to reduce the consumption of the largest consumers, is it not? The purpose of a rising tariff is to put a constraint on excess consumption above what is absolutely necessary.

Q222 Chairman: Just to wrap this up, the policy is to meter new homes and to meter on change of occupancy?

Mr Aylard: In some circumstances. We are doing two large trial areas, one around Swindon and one around Chigwell, where we are metering all homes on change of occupancy, and we are monitoring that trial to see what results we get.

Q223 Chairman: So generally it is thought to be a good idea?

Mr Harrison: In principle, yes, obviously, but to try and work out exactly what degree of benefit we will get, we are doing these trials.

Q224 Chairman: But you have also said that it might be expensive to meter compulsorily all properties because of the individual characteristics of the buildings, but there is a significant number of properties which, because of their footprint, it might be possible to meter fairly cheaply. So would it be sensible as a policy objective for the Government rather than individual companies to say that a higher proportion of properties should be metered?

Mr Harrison: I think making the link as much as possible between consumption and size of bills must be good. We have to also recognise then that the water bill is a very small proportion of most people's household expenditure, less than 2 per cent. If they save 10 per cent of that, that is 0.2 per cent. It is a relatively small amount. In Germany, where you have about 125 litres per head, which is about 25 per cent less consumption per head than in the UK, water bills are three times as high. So you have to think about the price signals and how you apply those.

Chairman: On that happy note, it seems right to imply if we vastly increase the price of water, it might reduce consumption, which we might have worked out for ourselves! Thank you very much for your attendance, it has been very helpful.

Witness: Yvette Cooper, a Member of the House, Minister for Housing and Planning, Office of the Deputy Prime Minister, gave evidence.

Q225 Chairman: Welcome. Thank you for coming along and making time to come and talk to us. I would like to start with the Code for Sustainable Homes, on which we took evidence, among other things, last week. Both oral and written evidence suggests that the majority of people feel that the voluntary basis of the Code is a severe weakness, that it is not going to work, that most builders will not comply with a voluntary code, those who do will go for the absolute minimum and not for the gold standard. Would you like to comment on that?

Yvette Cooper: We were clear that as part of the response to the Barker Review we wanted to set out a series of environmental improvements as well. One of those was the Code for Sustainable Homes. We should be clear about this, this is not a replacement for building regulations, so in addition to the Code we also of course need a statutory framework of obligations which builders need to follow and which will continue. I think the additional benefits from the Code are first of all that it is something where public sector investment will reach higher standards than the level set out in the building regulations, so we have said that from this year the housing corporations' funded investment in new social housing as well as English Partnerships' funded and other public sector funded buildings will need to comply with Level 3 of the Code. That means you will have additional benefits on top of building regulations. Secondly, I think it is right to offer a voluntary code which we will monitor and we will keep under review in order to provide the building industry with a way in which to improve standards without further regulation. Thirdly, I think it provides the direction of travel for future improvements to building regulations. So I think it gives greater clarity to the building industry about where we will want to head with building regulations in the future. It provides on top of the statutory minimum which has to be achieved through building regulations and it says, "These are the directions we want to go in, whether it is around water, whether it is around energy efficiency" and so on, and demonstrates what can be done and allows the building industry to set off in that direction rather than wait for the statutory building regulations process to catch up.

Q226 Chairman: How are you going to monitor compliance with the Code?

Yvette Cooper: Obviously those buildings which do comply with the Code will want to get the recognition of complying with the Code. Clearly it actually helps as a benefit in terms of marketing a property to be able to say, "These properties are compliant with the Code", so that is relatively straightforward. I think this is something we are going to be looking at in some detail, the ways in which to do it. It is relatively easy when you are talking about public funded properties but what we want to do is discuss with local authorities the way in which to do it with new developments which are taking place in the private sector.

Q227 Chairman: We talked to two of the more responsible builders last week who said there was not a great deal of public interest in whether buildings comply with the Code or not, but what you have said suggests you do not yet know how you are going to monitor in fact?

Ms Parker: On the first point, I think there will be greater interest in it. I think it is probably right there is very limited interest in it at the moment, but bear in mind we will be introducing the home information packs which will include information on the environmental standards in terms of the buildings. So there is going to be far more information available to people about what the environmental sustainability is of their homes, and there is growing interest I think in all of these issues. It may well be right that the builders are saying they are not getting that interest at the moment, but my prediction will be that in five years' time it will be rather different. Your second point was, do we know exactly how we will review, we have not got detailed proposals set out but we will work with local authorities to do that.

Q228 Chairman: So it will be a voluntary code which many people think is inadequate and the Department will not know how to monitor whether anyone is actually obeying it anyway?

Yvette Cooper: It will be obvious whether they are in terms of public sector funded ones, because they have procedures in place already. Also if builders are choosing to comply with the Code there will be benefits for them for doing so and they will get credit for doing so. First of all, there are considerable benefits in having a code in addition to building regulations - this is not a substitute for building regulations, it is in addition to building regulations. Secondly, there are ways of monitoring it and reviewing it which we will develop once the Code is in place.

Q229 Chairman: The problem does not arise with the companies who want to show off they are complying with it, the problem arises with the companies who are not complying with it. If they are aware, as they must now be, there is no system under which ODPM can monitor this in the foreseeable future, they have a free ride for the time being.

Yvette Cooper: Except for the fact that actually local authorities grant planning permission; local authorities have discussions about new developments at every stage. There are all kinds of ways in which we can look at keeping track of the use of the Code and the development of the Code. I think you are exaggerating the case.

Q230 Chairman: In the case of building regulations, would you like to say a little about the way in which approved inspectors monitor compliance with building regs?

Yvette Cooper: The building regulations obviously have been in place for some time and we are keen to improve the compliance with the building regulations and improve the training for building regulations. Systems are in place. We are increasing the standards of building regulations and that means you need to have up-dated training for compliance, but we think there is further work which needs to be done. Local authorities do take this seriously but there are variations in practice across the country.

Q231 Chairman: Is that why the Environment Agency told us that over 30 per cent of new homes do not comply with building regulations?

Yvette Cooper: I think there are two reasons why there are problems with compliance with building regulations. The first is that there are variations in the level of compliance in terms of the monitoring which takes place across the country. The second is that the way in which we do building regulations frankly needs to be improved. The traditional way of doing building regulations is that it is done on a kind of alphabet basis, so every few years there is another bit of the alphabet, another section of building regulations, which gets up-dated and changed. So from the point of view of the building industry there is always another bit of the regulations which is about to be up-dated or has just been up-dated and changed. Under those circumstances, therefore, you get less compliance than if the Building Regulations are updated in a more systematic and consistent way over time. So there are two things that we are looking at. First of all, we are trying to link in a better way the way in which we revise different sections of the Building Regulations rather than doing them in an incremental way. The second is to link the Building Regulations better with the Code for Sustainable Homes. This is where I think the Code for Sustainable Homes could improve compliance with Building Regulations because, as I have said, it sets out the future direction of Building Regulations improvements rather than amendments to Building Regulations simply coming out of the blue and, therefore, making it something that is just challenging for the building industry to keep up with.

Q232 Chairman: Emissions from buildings are a significant part of the overall problem of rising carbon emissions. At what point would the ODPM be prepared to consider redrafting the Code and giving it a mandatory basis if indeed it appears that people like the WWF are anxious that it does not represent any advance at all, in fact it may even be a step backwards? How willing are you to consider that if it looks as though we are not making progress here?

Yvette Cooper: The approach you would take to improving the mandatory standards would be to raise Building Regulations. So you have a system of statutory standards in place and the question is at what pace you increase those standards and over what time period. The idea is not to replace the Code itself and to turn the Code itself into a statutory standard but rather to raise the standard of Building Regulations over whatever time period in order to keep up with progress in the Code.

Q233 Colin Challen: When you said that it is a credit to builders who obey the Code, how is that credit banked? Why do they do it? Obviously some of them want to do it. We have heard that 30 per cent do not even comply with existing statutory regulations. Can they bank it in terms of higher house prices? Can they bank it in terms of better loan conditions from building societies? Do consumers recognise that they are buying a house from a better builder? How do you think they earn credit?

Yvette Cooper: You mean what is the benefit to them?

Q234 Colin Challen: Yes.

Yvette Cooper: I think over time consumers will take this more and more seriously. You have seen a change in attitudes to something like recycling which is very different now to what it was ten years ago. I do not think that we have had the same sort of debate about housing and about environmental standards around homes that we have had around something like recycling.

Q235 Colin Challen: Are you waiting for a process of osmosis or are you going to force it along?

Yvette Cooper: I think it is starting to take place. One of the things that we are looking at as part of our review of existing buildings and the sustainability of existing buildings is how you promote that kind of debate among the public and how you raise people's awareness. My prediction would be that awareness will change and increase over time in the first place.

Q236 Colin Challen: Is there empirical evidence that shows that is what has happened in the past with consumers?

Yvette Cooper: I think consumer awareness of a whole range of environmental issues has increased substantially over the last ten years.

Q237 Colin Challen: What about on housing specifically?

Yvette Cooper: We have not got there yet on housing. Given the rising awareness in a whole series of other areas, I think that you would expect this to happen in housing as well, but I would agree that we need to do more to make that possible and that is one of the things that we are looking at with Defra as part of the review of existing buildings. Your second point was really about what incentives there are for builders, whether there are financial incentives and so on. Sometimes it will be reflected in higher prices, although from the point of view of the consumer, you actually have reduced bills and reduced energy bills for a lot of these kinds of improvements further down the line. There is a separate question about whether there should be further incentives to comply with the Code and that is one of the things that we are looking at across government at the moment.

Q238 Emily Thornberry: The two builders we heard from said that they had hoped they would be able to have environmental add-ons and so on. Their evidence was quite powerful and I suppose it makes a certain amount of sense, which is that when people buy a new home they buy everything they can with the money they have available. If they were offered something as an add-on extra then people would say, "No, I would rather have the extra bedroom." They were essentially saying, "Our hands are clean. We have got the best will in the world. It's the public's fault." If we are not going to make this Code in any way compulsory, are we going to be promoting it? What are you going to be doing? Will there be a role for the voluntary sector in promoting it? I think we are going to end up with public sector housing being at Level 3 and private sector housing really bumping along at the bottom.

Yvette Cooper: I do not think there is any problem with public sector housing leading the way and having a higher standard in leading the way and showing what is possible. Bear in mind that at the same time we are raising statutory standards as well, so we are raising the standards in Building Regulations. The new standards that are in Building Regulations, that is the statutory minimum that all of the private sector housing will need to meet, will be increased from this April by 20 per cent compared to the current standards of energy efficiency and by 40 per cent compared to the standards that were in place in 2000. This Code is not the only way in which we are improving the energy efficiency of buildings. We are increasing the Building Regulation standards to improve the energy efficiency of new buildings by 40 per cent compared to 2000. That is a substantial increase. We are then saying there should be this voluntary Code which sets out where we go next and what the additional improvements are. We are very clear, with changing technologies and the demands for climate change and so on, that this is a journey that we are on and we are going to have to improve standards further. We are improving them as far as we can in the statutory process already this April. The Code is then about going further. It can be a good thing for the public sector to lead the way. Yes, it is true that the building industry will be thinking about their customers and so on and so there is an issue about raising awareness as well, but I think you can do both, you can raise statutory standards and have a Code that goes further on top of that.

Q239 Emily Thornberry: Are you going to have a promotional strategy?

Yvette Cooper: We will clearly have to have a strategy to promote the Code. The first stage is obviously to get the final detail of the Code set out. The consultation on the Code concludes at the beginning of March. Then there will be the final process of getting the detail right and after that we will need a process in order to publicise it.

Q240 David Howarth: I want to come back to this question of direction of change and just make a few comments on that and ask you to comment on it. Some people, especially environmental groups, are worried that the direction of change is not as positive as it might be. The Code itself seems to draw back from the EcoHomes Standards and that seems to be going in the wrong direction. What happened with Part L, for example drawing back from trying to do something about existing properties and using what happens when extensions are made, seems to be the wrong direction of change, even though you could say it is going to be an improvement, but it is a change in where it could have been going to. The second point is, coming back to what you said about using the Code as contradicting where regulation is going to go, would it not have been better to say to the industry that the standard is going to improve at a particular point in time in the future? One of the points that the industry was raising with us was about the research of new building methods and new ways of producing higher standards and they were saying that they needed time for research. Would it not encourage them to do the research if there was a definite date for when the improvement was going to come in?

Yvette Cooper: I have quite a lot of sympathy with that second point. I think having a far better timetable and a longer time period and a sense of certainty for the future would make it much easier for the building industry to comply. I do have quite a bit of sympathy for that and it is one of the things we will look at as part of the review of how we take forward Building Regulations into the future. You will appreciate that obviously it is difficult to give certainty if you are going to have a proper period of consultation and a response to the consultation. If something comes up in the consultation and you want to change direction, that is less certain for people who might have liked it to be nice and clear from the beginning that this is what was going to happen, but you need to respond to consultation and to learn from the things that come up. As a general point, ie should there be a longer time horizon, I think that is a direction that we should move in. Your other point was whether the Code is less than the EcoHomes Standards. I do not accept that. The Code is very much built on the work of the EcoHomes and has obviously involved a lot of work with BRE around the EcoHomes Standards. It is just not true to say that the Code is somehow watering down EcoHomes. The Code does look at buildings but it does not look at the location of homes because that is something you should look at in the planning system. So it does not give you a lot of points for building a home on top of a Tube station but actually not doing very much in terms of the standard of the home and the actual standard of the building. It simply looks at what the improvements that you can make to the building are and it makes sure that you cannot reduce your building standards but still get a good score simply for the location of the home. The top level of the Code is all about carbon neutral technologies and it certainly does set out clear improvements compared to the existing standards that are in Building Regulations, so I do not think that is true. On the Part L that you raised, the issue with the existing buildings I think is more complex. The main consultation around Part L has been about the standards for new build, which is what is being implemented. There had not been proper consultation on the issue that had been proposed for existing buildings and that is why we wanted to look at the whole of existing buildings as part of a wider review.

Q241 David Howarth: I think it would help on all those points if ODPM had some sort of climate change target that it applied to all of its policies so that the difference between the EcoHomes and the Code is about the whole environmental impact of the development as opposed to one particular part of it. I was just wondering whether ODPM is signed up to any PSAs on climate change and, if it is not, whether it would be a good thing for it to have some commitment?

Yvette Cooper: Obviously we are part of the government-wide targets around climate change and we are involved with Defra in a whole series of programmes. For example, I met with Elliot Morley this morning to talk about the next phase of work around the climate change work that Defra is leading, so we see ourselves very much as being part of that. We already have work under way not just on the new buildings but also on existing buildings. A lot of the Decent Homes work is about cutting carbon emissions from homes. We have got work going on around existing buildings and also the work of the planning system. PPS1, the main planning guidance, makes it very clear that sustainable development has to be at the heart of the planning system as well. I think we are bound by the government-wide target to reduce emissions and that then feeds through into a whole series of different programmes of work.

Q242 David Howarth: Would it help to have some kind of harder target? DfT has signed up to help Defra in its target in particular ways and I think DTI also, but my understanding is that there is nothing as clear as that with ODPM. Would it help to have something more quantitative and more direct?

Yvette Cooper: I do not think any of us are able to forget our obligations towards the cross-government work on this. We have enough meetings at a cross-government level, including Cabinet committee meetings on this where these things are raised continually, so I do not think there is any doubt in the Department about our obligations to work with other departments and to contribute towards the overall targets.

Q243 Mr Vaizey: I want to go back to making the Code mandatory and ask whether or not you or the industry have made any cost estimates about what it would cost the industry if you made the Code mandatory?

Yvette Cooper: It is certainly true that costs are taken into account when we look at the Building Regulations. There is always a Regulatory Impact Assessment that is done on any change to Building Regulations. We do have figures about the additional cost for complying with Code Level 1 and we would be very happy to send those to you.

Q244 Colin Challen: In the context of where we build new houses, how would you characterise ODPM's research into the environmental limits of different regions?

Yvette Cooper: Do you mean is it done as part of the Barker Review or the work as part of the planning system?

Q245 Colin Challen: Across the board. Was it deep, was it significant, was it specific or did it rely on other people to provide a few short answers?

Yvette Cooper: There are different kinds of research that have been done. We obviously commissioned some very extensive research as part of the analysis in the run up to the Barker Review about the environmental impact of new homes. You will probably be aware of the report that we published as part of the Barker Review and also some of the summaries that we did in terms of the Government's conclusions on the basis of that research.

Q246 Colin Challen: Kate Barker herself did not feel that the environment was part of her brief.

Yvette Cooper: You will be aware of this one entitled "The Sustainability Impact Study of Additional Housing Scenarios in England". This is a hefty report that was done and it involved NTEC and others in order to look at the Barker Review.

Q247 Colin Challen: Did that look at issues like water and resources, for example?

Yvette Cooper: Yes. That looked at issues around water, at land, construction materials, the generation of waste, energy use, the demand for water, the demand for transport, regional and local economies and social issues as well. Obviously there are some limitations to that research and it models some quite abstract scenarios. We were clear from the beginning there were some limitations to this modelling. We have set out our own conclusions on the basis of this modelling and how you then apply that to the conclusions that we came to as part of the Barker Review, but it is probably the most extensive work that has been done.

Q248 Colin Challen: To what extent has that work moderated the Government's enthusiasm for the Barker Review and its approach to a market-based regional approach to housing?

Yvette Cooper: I think we have been very clear that we need to build more housing in order to meet the demand for housing. We have a situation at the moment where there are around 190,000 new households being formed each year and only 150,000 new homes being built. Under those circumstances what you see is rising house prices, pressures in terms of overcrowding, pressures on social housing and pressures on homelessness. If we carry on at the current rate of building - and we have already seen big drops in house building - then over the next 20 years we will see only a third of two-owner couples in their 30s able to afford to buy their own home on the basis of their earnings and I do not think that is sustainable at all. We are also clear that as part of building the new homes we need to make sure that there are greater environmental safeguards and so we did dedicate our response to the Barker Review to new environmental safeguards and to the fact that there needs to be proper environmental assessments in terms of where the new homes are built, not just the Code but also the location of new buildings and the way in which they are designed. By building new homes closer to jobs you can prevent some of the long commutes that people get into because of high house prices.

Q249 Colin Challen: Last week Clive Betts, who is a member of the ODPM Select Committee, asked you about these regional differences and you said that there is not too much difference in terms of urbanisation and congestion between the South East and the North West. Earlier today we had evidence from the Chartered Institute of Water and Environmental Management who I thought said quite alarmingly that rainfall in London and, by extension, inside the M25 is less here than that which falls in Istanbul, Dallas and Rome. I cannot imagine that being true of being inside the M60! Did you consider water resources? There is no point building somebody a house, with the 42-inch plasma screen TVs and dishwashers, if there is no water coming out of the tap. These guys were telling us 20 minutes ago that they are anticipating more droughts. They are obviously worried about it. They were trying to give us a very glib and confident answer. Are you confident that we are going to have the water resource in the South East to guarantee that these people buying houses in the South East will not have a problem?

Yvette Cooper: Water is clearly different in different regions. It is because of the debate around water that we have introduced as part of the Barker Review specific proposals to tighten the water regulations and these would not be voluntary, they would be compulsory. We are just looking at the detail with Defra at the moment to see what combination of water fitting regulations and also Building Regulations would be needed to achieve this. We think you need to do greater demand management in terms of water because that is clearly an issue.

Q250 Colin Challen: They agreed with that. If Thames Water had a conflict with the Mayor of London over their desalination plan, would the Government step in and sort it out?

Yvette Cooper: The planning process means that you have to take that kind of thing into account. You would have to have that sort of debate about how you sort out water issues. OFWAT takes account of long-term plans in terms of water need. We have said, as part of the additional new homes that we need in response to the Barker Review, the Environment Agency would be central to the consultation about what the locations might be. We are asking local authorities to come forward proposing new growth points. One of the key issues for looking at whether those points would be suitable will be around what the water availability is and what the water considerations are, but there are things you can do. Ashford is one of the areas where water has been a big issue and they have come up with a whole series of proposals and plans, working with the Environment Agency and other organisations, as to how to manage the water pressures they face. So there are ways in which you can do it both in supply terms and in demand terms. Yes, you have to be sensitive to it and you have to build that into your planning process, but there are ways in which you can manage the problem.

Q251 Colin Challen: Was the increase in projected house building from 150,000 to 200,000 subject to an Environmental Impact Assessment?

Yvette Cooper: That is exactly what this was, yes. It looked at what the sustainability impact would be for a whole series of different scenarios. It went considerably higher than the scenarios that we set out to look at what the different impacts would be of house building.

Q252 Colin Challen: The Association of British Insurers has sent us evidence which suggests that there are more things at work than simply house prices as being a guide to the health of the housing market. For example, they say that no matter what we promise in terms of flood prevention measures it may be difficult to insure or uninsurable. How are we responding to that?

Yvette Cooper: We have got the new PPS25 which strengthens the planning guidance around flood risk areas. Clearly it would be absurd to put a moratorium on building in areas like London or York, especially when there are flood defence measures that you can take. What we have said is that we think the Environment Agency should be much more heavily involved in planning applications and that there should be a clear process of direction, which we are consulting on at the moment, for cases where the local authority still wants to improve a development and the Environment Agency still has an objection, for deciding whether that should be called in and decided on the basis of a public inquiry in order to strengthen those protections.

Q253 Mr Chaytor: When the decision was taken to increase the annual rate of house building to 200,000, was there a formal assessment of the implications for enhanced infrastructure?

Yvette Cooper: Clearly there is a lot of work done on different infrastructure needs in different areas and it does vary. If you are talking about the Thames Gateway or a big development on brownfield land that may not have been used for housing before, that may be very different in terms of infrastructure needs to a small amount of infill development in different areas where there is plenty of infrastructure already. There are very different kinds of infrastructure requirements in different areas. We have said that we think we should increase the level of house building from 150,000 to 200,000 a year by 2016, but we have not specified the timetable for that increase and the reason for that is because we want to do that assessment in terms of the infrastructure investment that is needed as part of the Comprehensive Spending Review and set out what infrastructure investment we can fund and over what timescale. It was a deliberate decision not to set out the timescale and not to do it in isolation from an infrastructure analysis and investment plan.

Q254 Mr Chaytor: So a series of formal assessments were done to justify the increase to 150,000 a year, but the further increase in response to the Barker Review which was made in December of the additional 50,000, was there no formal assessment of the likely infrastructure implications of that?

Yvette Cooper: You are right that the Sustainable Communities Plan, which precedes our response to the Barker Review, has included a whole series of increases in funding for infrastructure investment. We also said that the aim to get up to 200,000 will require additional infrastructure investment on top of that, so that is absolutely clear. We have proposed two ways to fund that: one is a consultation on the Planning Gain Supplement and the other is the cost-cutting review to take place as part of the Spending Review process. So we are very clear that there are additional infrastructure investment requirements. We have obviously done some preliminary work on scoping those and in what direction we need to move on that, but we have very deliberately not set out the timetable without a more detailed assessment of what the infrastructure investment programme can be.

Q255 Mr Chaytor: I want to pursue two aspects. The first aspect is the timescale for implementation of the infrastructure and the second is really the question of the budget allocation. There is a pot of money at the moment that local authorities can bid for which amounts to £40 million.

Yvette Cooper: That is for the new growth. That is in addition to the infrastructure, things like the growth fund that exists for the growth areas and for the Thames Gateway.

Q256 Mr Chaytor: As far as the 200,000 a year target goes, the main mechanism there is the planning development gain that you are now consulting on. Surely the problem is that there is a time lag there, is there not?

Yvette Cooper: There is. We said that the Planning Gain Supplement could not be brought in before 2008. The £40 million for the new growth points is for new growth areas as part of the current Spending Review. As part of the current Spending Review we have the substantial investment programmes for the Thames Gateway and for the other growth areas such as Milton Keynes. In addition, Milton Keynes has developed an interesting idea that is usually referred to as the tariff, where developers and the local authority and English Partnerships have come together to find a way (it is a version of a 106 Agreement) of putting additional funding in and we are encouraging growth areas in particular to develop those kinds of tariff programmes in the mean time in advance of the 2008 Planning Gain Supplement. You are completely right that a lot of this infrastructure investment needs to take place before developments can take place, but that is exactly why we have not yet specified the timetable to reach the additional increases.

Q257 Mr Chaytor: Is not the problem with the Planning Gain Supplement that it is impossible for these infrastructure developments to be done before the housing developments because of the longer timescales? If we are talking about building new roads, new railways and schools, it takes much longer to plan and build those than it does to build a new housing estate. Is there not a lack of synchronisation here?

Yvette Cooper: We are talking about a ten-year period in terms of the trajectory that we have set out. Yes, some of the funding needs to take place in advance and some of the funding can take place later on. If you are talking about funding a community centre, for example, that might be slightly later down the line or regenerating a town centre might be at a different pace. It is possible to put in the investment at an earlier stage using some of the existing revenue streams that we have. One of the other things we are looking at in relation to the Planning Gain Supplement is the way in which it might interact with prudential borrowing for local authorities. So if the local authorities know they have got some resources to come through a Planning Gain Supplement in two years' time they can think about what role prudential borrowing can play in the mean time.

Q258 Mr Chaytor: So that will deal with some cash flow difficulties.

Yvette Cooper: That is another possibility we are looking at.

Q259 Chairman: Your fact sheet refers to capturing a "modest proportion of the increase in land value that occurs when full planning permission is granted". What percentage of the total value is this modest amount supposed to be?

Yvette Cooper: Are you talking about the level of the Planning Gain Supplement?

Q260 Chairman: I am referring to your fact sheet. You say that you are planning to capture a "modest proportion of the increase in land value that occurs when full planning permission is granted".

Yvette Cooper: Unsurprisingly, you will not find me about to set any level of a Planning Gain Supplement. Obviously that will be a matter for the Chancellor.

Q261 Chairman: I suppose you are not going to tell us what it means when it says a "significant majority of PGS revenues would go back to the local level to help local communities share the benefits of growth and manage its impacts ...".

Yvette Cooper: That is one of the things we are consulting on. One of the difficulties here is how you deal with infrastructure which might cut across local authority boundaries. Do you recycle that resource back to those local authorities and allow those local authorities to work in partnerships themselves or do you hold it at a regional level or a sub-regional level? Those are the sorts of questions that we are asking.

Q262 Chairman: They are very relevant. As with everything, it depends on whether you want to trust the district council with the decision or whether you want to take it regionally.

Yvette Cooper: It also depends on whether district councils think that they want to do it themselves locally or whether they think it is better done regionally.

Q263 Chairman: Have you got large numbers of district councils queuing up saying, "Please don't let us decide this"?

Yvette Cooper: There are a lot of different views on this. Some of the infrastructure that you are talking about might be strategic. It might not simply be about something that straddles a couple of local authority boundaries, it might be something which has a major impact on a whole area or a whole region and so that is the kind of thing that you might want to look at on a more regional basis than you would within a local authority area.

Q264 Chairman: Given you are still consulting on this and there will be some delay before we know what the answers are, are you concerned at all that you are going to be building 200,000 houses a year by 2016? We have just had Thames Water saying the earliest date a new reservoir can come in is 2020. Other infrastructure will have very long lead times. Are you worried about the gap that is going to occur? We have seen the disaster at Docklands under the last government where a huge development took place and there was no infrastructure and the result was a complete catastrophe. Are you not heading for exactly the same situation?

Yvette Cooper: That is why we have actually deliberately not specified the timescale in order to get to the 200,000 a year, it is exactly because we think the infrastructure is important. We are already putting a lot of infrastructure in. We are already seeing increases in the levels of new house building taking place because of additional investment that is going in. We recognise this is an issue, infrastructure investment matters and that is why we do not want to pin ourselves down to a particular timescale and a particular level of house growth every year before we have set out what the additional levels of investment are that are needed and whether we can support it. That is a virtue of the position we have taken.

Q265 David Howarth: I want to go back to your answer to David Chaytor about the timing of infrastructure. Is it not absolutely crucial, especially with public transport infrastructure, that that goes in first before the housing development because otherwise people develop habits of using the private car and it is almost impossible then to get them back on to public transport? That means that the finance of this is crucial. Are you saying that in effect the Government will lend these projects money from its own resources and then get that money back later through a PGS? Is that the idea that has been put forward?

Yvette Cooper: There is a range of options. Bear in mind that there is a lot of transport infrastructure already being invested in. Look at the Channel Tunnel Rail Link, for example, and the domestic services on the Channel Tunnel Rail Link, there is huge investment going into those already in advance of a lot of the Thames Gateway housing growth. The fact that there are additional resources that might be raised through a Planning Gain Supplement does not mean that there is not already substantial infrastructure investment taking place which could make possible housing growth in particular areas. There are other areas where there is very extensive transport investment already and where the kind of infrastructure investment you might need might be water infrastructure or where the infrastructure you needed might be the community facilities and where actually the physical infrastructure might already be extremely good. There are all sorts of areas across the country where that might be the case already. I do not think it is right to say that we cannot do any of the additional increases in new homes that are badly needed in order to help the first-time buyers or in order to address problems of homelessness and overcrowding because we have not introduced yet a Planning Gain Supplement. The point I was making to David was that there are other things that you can look at at the local level about the ways in which local authorities might be able to use prudential borrowing if there are other resources still to come through, but that is just something that we are looking at this stage and we have not set out a precise position on it.

David Howarth: The way this has been done in other countries is that local government would be able to issue bonds, but you can only issue bonds if you have got a revenue stream. Prudential borrowing does not solve that problem because the revenue streams we are talking about, PGS and so on, are national government revenue streams and not local government revenue streams. Are you looking at ways of trying to change that so that local government will be able to invest now in things like local public transport? In my own area the problem is that the roads are going to go in first and the public transport some time later and it might not work because of that.

Mr Vaizey: At least you are getting the roads!

Q266 David Howarth: If we can come up with a solution to that problem then I think some of these developments will work a lot better over the next ten or 20 years.

Yvette Cooper: Yes, we are looking at the relationship between local government prudential borrowing and things like a Planning Gain Supplement and that is in the context of looking at the Planning Gain Supplement which is obviously still out for consultation. We are still at an early stage of looking at the way in which that would work. Do we agree with the principle which says that there is an infrastructure investment that is needed in advance? Yes, we do, which is exactly why that is the approach that we are taking to things like the Channel Tunnel Rail Link and a lot of the developments in the Thames Gateway.

Q267 David Howarth: Are you worried about the interaction between the 106s and the Planning Gain Supplement? The obvious thing to worry about is that if you have got a very efficient local government 106 capturing system, so some local authorities are already doing this tariff system and doing it well, the PGS will simply subtract from the 106 and the total amount of money available will go down.

Yvette Cooper: Section 106 is very patchy across the country in that some areas do it well, but in other areas Section 106 has either had the problem where not very much value was gained by the local authority in an area or, alternatively, where the negotiations and the delays and the attitudes of the local authority ended up hindering the development or making it very hard for a development to go ahead. We think there are some serious limitations to the Section 106 system. The right approach would be to say that Section 106 should be restricted just to the infrastructure that is specifically on the site, so social housing maybe on the site and maybe particular road infrastructure on the site. The Section 106 would continue in a reduced form and then the Planning Gain Supplement, as set out in the consultation, would apply across the board. The intention certainly would be to raise additional resources as part of the process. The view generally seems to be that it is possible overall to raise additional resources whilst still keeping the rate at a modest level, which does not deter development, but obviously these are the issues that we are consulting on.

Q268 David Howarth: If that is going to be the system, that upsets what many local authorities are already planning on. I would ask you to go back and look at the South Cambridgeshire Sub-Regional Plan which assumes it is going to get lots of money from 106 and extra money from Government. If you restrict 106 to the onsite matters then you have taken away certainty of the funding because, as you say, there are lots of things to be decided about the Planning Gain Supplement and you are in danger of undermining that entire sub-regional plan.

Yvette Cooper: Bear in mind that any planning permissions that are granted before a Planning Gain Supplement was brought in would clearly be subject to all the Section 106 Agreements anyway. One of the reasons that Milton Keynes was so determined to go ahead with the tariff approach, even with the possibility of the Planning Gain Supplement, was because, as English Partnerships and others told us, a huge amount of the planning permissions for Milton Keynes will have been granted well in advance of a Planning Gain Supplement coming in. Even though they might take a long time to build out, the planning decisions would be taken at an earlier stage. In those areas where the planning decisions will be taken over the next few years in advance of any PGS then clearly they will have exactly the same framework as exists now. All we can say in terms of the longer-term planning is that the intention of the PGS is to raise additional resources to fund that infrastructure. Yes, we have got to consult on the detail and the way it works. We cannot set out with certainty how it is going to work in advance of consultation, but I do not think you would expect us to. You would expect us to have a proper consultation and to ask people their views.

Q269 David Howarth: There is a need for urgency because otherwise you will end up with a fiscal version of planning blight and I hope that has been taken into account.

Yvette Cooper: Clearly we want to be able to make decisions, but you also want to be able to have proper consultation.

Q270 Chairman: Let us go back to this problem about the apparent reluctance of consumers to choose the most environmentally-friendly types of housing. There is a certain amount of scepticism in the building industry and in this Committee about the willingness of people to pay extra and indeed the effectiveness of the current incentives. One way forward, however, would seem to be direct fiscal incentives for energy efficient buildings. Have you had discussions with the Treasury about that?

Yvette Cooper: There are DTI grants available for improving the renewable energy use of things. That is obviously one fiscal incentive that already exists. There are others in terms of the warm home grants and some of the home insulation programmes and things as well. We are keen to look further at different ways of incentivising more environmentally sustainable development, but this is something that we are discussing across the government, not just with the Treasury, with Defra and we are looking at a wide range of issues here.

Q271 Chairman: Let us look at some of the more obvious and high profile ones. Now that Stamp Duty has become a significant cost certainly for any home buyer in the South East but really across the country, organisations like the Association for the Conservation of Energy have suggested that a rebate could be given to buyers of homes that reach a certain energy performance standard. Is that something which the ODPM would look on favourably?

Yvette Cooper: We have not put forward any specific proposals. We are having a more general discussion across the Government looking at different possibilities in terms of incentives. We think incentives are an interesting issue, but clearly there are a lot of factors that have to be taken into account.

Q272 Chairman: What are those factors, apart from the loss of revenue?

Yvette Cooper: The impact on whether you create incentives in other ways and what the incentives between different things are. You have to look at the interaction between things, the costs of them, whether particular amounts of investment could be better used in other ways and have the same environmental impact more cost effectively, that kind of thing.

Q273 Chairman: Are there studies taking place on the relative effectiveness of different types of incentive?

Yvette Cooper: What we are looking at, particularly as part of the sustainability of existing buildings, is the issue of what potential there might be as part of broader frameworks, but I cannot give you any more details than that at this stage.

Q274 Chairman: Have you considered allowing developments which meet a particular energy performance standard a reduction in the Planning Gain Supplement that they would be liable for?

Yvette Cooper: If the Committee wanted to propose that, we would certainly look at it. What we have said is we want to consult on different rates for brownfield and greenfield development. You want to make sure you have a relatively simple structure for this rather than introduce too much complexity, but certainly we will look at any proposal that comes forward in the consultation.

Q275 Mr Hurd: Minister, you gave us a relatively safe answer on the question of fiscal incentives, but do you accept the argument that consumer apathy is the major roadblock here towards making greater progress and transforming the housing stock in this country? If you do, should we not be hearing a bit more urgency from your Department that takes lead responsibility for sustainable communities?

Yvette Cooper: There is an issue about consumer awareness. I think there are ways in which you can address that. One of the points that I was making earlier was that I think there has been a very big change in attitudes towards recycling that has taken place over the last ten years. There is a series of reasons for that which has included incentives, but it has also included different approaches to regulation, different awareness raising campaigns and simply making it easier for people. I think there are different ways of changing public attitudes and you need to look at all of them, not simply individual bits in isolation. One of the things which might change people's attitudes is the wider debate that has been taking place increasingly about climate change. Another might be information on the sustainability of their home being included in Home Information Packs, for example, or when people are buying or selling homes, actually having that information about what the impacts are going to be on fuel bills in future or whether this home has got a boiler that is a real mess and is going to need replacing in a couple of years' time anyway. There are different ways of increasing consumer awareness. Yes, we do accept that we want to increase consumer awareness in this area but we would need to look at a wide range of ways of doing so.

Q276 Chairman: Given that new building enjoys a zero VAT rate, do you think it is sensible to draw absolutely no distinction between buildings that are built to very high energy performance standards and those that are built to the very minimum? Would not another possible incentive be to restrict the zero rate to those which achieved a certain premium standard?

Yvette Cooper: Certainly if the Select Committee wanted to propose that, I am sure the Chancellor would accept it as a Budget representation. We have made changes to the VAT regime around the refurbishment of homes that have been empty for more than three years in order to provide a greater incentive for the refurbishment of empty homes.

Q277 Chairman: Are there any other incentives at all that ODPM is looking at which might encourage either developers or consumers to choose a more sustainable home rather than a less sustainable home?

Yvette Cooper: One of the things that we are doing is providing people with more information through things like the Home Information Packs. If you can find ways of providing people with information that is meaningful in terms of future energy bills and things then I think that does make a difference to people. As I have said, we are looking at this issue quite widely as part of the existing buildings review. I am not really in a position to say any more detail at this stage.

Q278 Ms Barlow: You may be aware that our Sub-Committee has just published their report on sustainable timber. Our vice-chair, Joan Walley, wrote to you back in November asking various questions but we have yet to receive a response to it. I wondered if you knew the background to the lack of response within the time-frame.

Yvette Cooper: I have a draft response which I was about to sign off today and which I should have signed off yesterday in order to make sure you had a copy of it before I came to the Committee, so I apologise for that. Sustainable timber is one of the issues that were picked up as part of the Code for Sustainable Homes, but we will also provide you with a full reply on that issue and on the other points that were raised.

Q279 Ms Barlow: Could you tell us how your Department is engaging with local authorities to encourage them to buy legal and sustainable timber? How are you making them aware of the guidelines?

Yvette Cooper: We have best practice procurement guidance ourselves which obviously looks at sustainability and which includes sustainable timber from the Department. There is also the National Procurement Strategy for Local Government which was published in October 2003 which encourages councils to achieve better value for money but also to build sustainability into procurement strategies. The IDEA, which does a lot of the promotion of best practice in local government, has also published guidance on sustainability and on local government procurement in order to try and promote that sort of best practice within local authorities across the country.

Q280 Ms Barlow: Are you considering placing an obligation on them of buying only legal timber?

Yvette Cooper: We are not proposing additional duties on local government in this area at the moment.

Q281 Ms Barlow: I find it hard to understand how you can defend allowing local authorities to purchase illegal goods and encourage the damage in trade. We have already got a Code for central government. Would it not be relatively simple to regulate this by saying that local authorities only had to provide legal timber?

Yvette Cooper: We have the procurement strategy that is in place and that does set out the way in which procurement is supposed to take place. We do try to give local authorities as much flexibility as possible in terms of the way in which we respond because they are democratically accountable to their local communities. We are not proposing additional obligations on them at the moment, but I will go back and look further into the detail of the procurement strategy that is in place for local government at the moment on the basis of your question.

Q282 Ms Barlow: Have you been talking to Defra on the issue?

Yvette Cooper: Obviously there were discussions with Defra before the procurement strategies and so on were introduced. The discussions we have had most recently with Defra have been around the Code for Sustainable Homes which obviously does include a reference to sustainable timber as well.

Q283 Ms Barlow: It is a reference, but should it not have a minimum requirement for at least legal timber? We have been told there is no problem with supplies of certified soft wood timber and it is not expensive.

Yvette Cooper: In the Code for Sustainable Homes?

Q284 Ms Barlow: Yes.

Yvette Cooper: We will certainly look at that as part of the responses to the consultation which we are consulting on at the moment. If you wanted to send in a submission on behalf of the Committee, obviously that would be taken very seriously. It is out for consultation at the moment.

Q285 Mr Caton: Let us go back to transport infrastructure, Minister, which you have already mentioned. This Committee heard from Sir John Egan during a previous inquiry that the reason for building new communities in the Four Growth Areas was to house people drawn to London to work. He was particularly concerned that transport systems for the Thames Gateway should be established as a matter of urgency and that is not just about providing infrastructure in the communities themselves but also the road and rail infrastructure that takes people into the centre for work, which I think you have recognised in what you have already said. Existing systems are already at breaking point during peak hours. Given the lead-in time needed for new roads or for increased rail activity, what is your Department doing now to address this?

Yvette Cooper: Obviously one of the major programmes of investment is around the Channel Tunnel Rail Link, and the domestic services from Ebbsfleet through to Stratford and King's Cross are obviously extremely important and I think they also explain why the private investment in Stratford is now coming into Stratford, because that infrastructure is already being put in. We have things like the Fast Track Programme in Kent and also the extension of the DLR to City Airport. I think there is a wide range of investment in infrastructure for the Thames Gateway already taking place at the moment and there would be areas of the Thames Gateway which it would not be possible to develop without that underpinning infrastructure, that is certainly the case.

Q286 Mr Caton: So Sir John Egan should not be worried that the transport infrastructure is not going to be there when the houses are built?

Yvette Cooper: We do have transport infrastructure under way. It is certainly true that we want to be able to increase investment in infrastructure, we have always said this and I said that earlier to the Committee, but in the Thames Gateway there is a huge amount of investment in infrastructure going on already and in transport infrastructure in particular.

Q287 David Howarth: Let me make one last point on sustainable communities and it is something we have had some representations on so it would be useful to hear your comments. It is simply the question of demolitions and the policy which appears to be that the Government wants to see houses in the North demolished and built in the South. I do not want to get into the whole thing about Ringo Starr's childhood home and certainly I do not want to get into criticising Liverpool City Council. I was just wondering what your present thoughts on that were and whether there is any monitoring of its effect. The Royal Town Planning Institute said to us that it appears to be a waste and it cannot really be justified in environmental terms. In environmental terms and resources terms it looks to be a peculiar policy.

Yvette Cooper: There has been a ridiculous amount of exaggeration about this whole issue. The Pathfinder programmes are dealing with areas which are suffering from serious long-term low demand, where often you have seen long-term population decline, where former industries have moved out, jobs have moved out and people have moved out as well. Liverpool itself, for example, has seen about a 50 per cent population decline since the war. When you have those sorts of big population changes that has an impact on housing markets as well and so there are some areas where you see serious low demand which leads to streets of boarded up houses or streets with intermittent boarded up houses and all sorts of problems with crime and vandalism as well. The challenge for the Pathfinders is in how to bring people back into those areas, how to make those communities thrive again, how to get the housing market going in those areas. The majority of homes that are affected by the Pathfinder programmes are being refurbished and so they are putting the majority of the approach into the refurbishment of homes. Sometimes they are looking at quite radical refurbishment, things like knocking two houses into one or doing complete redesigns inside. Some of the work that Urban Splash and Tom Bloxham have been doing in Manchester is obviously one way of doing refurbishment. In some areas they have taken the decision to put lots of investment into refurbishment already and they have decided that part of the problem is they might have houses where there are no gardens, for example, or some of the Sixties tower blocks have been set out for demolition and so on. I think it is right that the Pathfinders should be able to take sensible decisions about what is the best way forward for those areas, but certainly the emphasis is on refurbishment rather than demolition.

Q288 David Howarth: Some people say that this policy is a kind of poor substitute to having a proper regional policy and all of that is right but that is not sometimes said. I am just wondering what evaluation is being done of this policy as opposed to other sorts of regeneration policy. Does it work to get people back into city centres compared to other possible policy options?

Yvette Cooper: What the Pathfinder programmes are doing is they are looking at the housing market and the local economy and local social issues as well. They are not simply looking at what has happened to the bricks and mortar, it is just that that is the bit that happens to get reported in the papers. The Pathfinders themselves are looking at a wide range of issues. What you find with a lot of the economic regeneration schemes is if you do it in isolation then in the long run it is not sustainable. So you have examples where you do a lot of work to support economic regeneration in an area, you give local people skills and improve training and what happens is they get a job and move out because they do not want to live in that area because of problems with housing and so on. So you have to deal with the housing and the economic regeneration at the same time. Equally, if you just improve the housing and do not do anything to get people jobs you are still not going to solve the problem. You have to look at the two things together. I think we have a strong regional policy and regional approach and that included the Regional Development Agencies, which are critical, and the Northern Way Strategy, which is all about boosting the economic development of the North. We are seeing people move back into the North and we are seeing population growth in the northern regions which is partly as a result.

Q289 Chairman: Thank you very much indeed. We have covered a lot of ground. We are most grateful to you. You have invited us to make some additional submissions. We will certainly make some strong recommendations and suggest that you were the instigator of all this!

Yvette Cooper: Thank you very much.