The Economic Secretary to the Treasury (Kitty Ussher): I beg to move,

It is an honour to serve under your chairmanship, Mr. Hood. In the 2006 pre-Budget report, my right hon. Friend the then Chancellor of the Exchequer announced that to help to kick-start the market for new highly efficient technologies in homes, both for the fabric of the building and in the use of microgeneration, the Government would introduce a relief from stamp duty land tax for new zero-carbon homes.

Budget 2007 announced that the relief would be introduced on 1 October 2007. All qualifying homes under £500,000 would be exempt from stamp duty land tax, and those costing more than £500,000 will have their stamp duty land tax bill reduced by £15,000. The tax relief will be in place until 30 September 2012, but before the end of that time limit we will consider the case for an extension. The relief will help to support the Government's ambition that all new homes be built to a zero-carbon standard by 2016. That ambition will itself help the Government to meet its 2050 target to reduce overall carbon emissions in the UK by 60 per cent. from 1990 levels.

Sections 58B and 58C of the Finance Act 2003, inserted by Finance Act 2007, enable the Government to make regulations that grant relief from stamp duty land tax on the first acquisition of a zero-carbon home. During the Committee and Report stages on the 2007 Finance Bill, as hon. Members will recall, the then Economic Secretary to the Treasury, my right hon. Friend the Member for Normanton (Ed Balls), announced a number of changes to the policy and timetable for introducing the stamp duty land tax relief for new zero-carbon homes. He also wrote to all Members of that Public Bill Committee at that time. In particular, he announced that the Government would conduct an interim review of the stamp duty land tax definition of a zero-carbon home halfway through its five-year life, to ensure that it is working effectively and that we have taken the right steps to tackle tax avoidance. My right hon. Friend said that the Government would consult on the draft regulations, introduce the regulations by affirmative procedure to allow further parliamentary scrutiny, and seek to align the stamp duty land tax definition of a zero-carbon home with the zero-carbon definition under the Department for Communities and Local Government’s code for sustainable homes.

All of these suggestions have, I believe, led to us producing a more effective stamp duty land tax relief for new zero-carbon homes. The draft regulations, which have been introduced after consultation, define a zero-carbon home for the purposes of the relief, quantify the nature of tax relief available, and deal with the administration of the tax relief. I will discuss each of these items briefly in turn, beginning with the definition of a zero-carbon home.

For the stamp duty land tax relief to be effective, it requires a clear legal definition of what will be exempt. My officials have been working with colleagues across Government and beyond to develop a robust definition of a zero-carbon home for stamp duty land tax purposes that also meets wider Government objectives. The definition that we have developed sets a standard that is challenging but, we believe, achievable given current technology. In developing the definition, the Government wanted to encourage the construction of homes that meet three objectives: that they are radically more energy efficient than current new homes; that they incorporate microgeneration of heat and electricity; and that their overall energy use is derived from renewable sources.

There was general consensus among respondents to the consultation on these draft regulations that the definition of a zero-carbon home for the purposes of stamp duty land tax should be aligned with that in the DCLG's code for sustainable homes, as I have mentioned. The draft regulations have therefore been amended to do that. Starting with a common definition will maximize certainty for house builders in these crucial early stages. I shall now set out the key areas where the stamp duty land tax definition has changed.

We have amended the draft regulations to include the provision that a zero-carbon home is allowed to be connected to the gas mains, provided that there is adequate offsetting for the gas burnt through the provision of renewable energy; we have allowed for district heating solutions; and we have allowed development-wide solutions, such as a wind turbine that serves a whole development. We believe that all those changes are consistent with the definition of a zero-carbon home for stamp duty land tax purposes, being achievable but challenging.

I now turn to some of the other details of the tax relief. The relief is restricted to the first sale of a new zero-carbon home from 1 October 2007 until 30 September 2012. It should be noted that anyone who completes a transaction on a new zero-carbon home between 1 October 2007 and the date on which the regulations come into force will be able to claim the stamp duty land tax relief. Individuals who wish to claim relief for transactions made in that period can do so simply by amending their stamp duty land tax return, and Her Majesty’s Revenue and Customs will repay any tax overpaid.

Restricting the relief to the first sale of new homes fits in with the key objective of the measure which is to kick-start the building of zero-carbon homes by stimulating consumer demand. Once these homes are built, we expect that the benefits in terms of energy savings—that is reductions in carbon dioxide emissions—to remain in the home for many years. It would provide no value to the taxpayer to extend the relief to second and subsequent sales.

Finally, I turn to the administrative arrangements we have put in place to verify whether a house meets the zero-carbon standards. Whether a home qualifies for the stamp duty land tax relief is to be determined by an assessment of the home and certification by accredited assessors. In developing the tax relief, we were aware that it would not have been possible for HMRC to administer it without accredited assessors in place. In England and Wales the certification process will be linked to the energy performance certificates for new homes, overseen by the DCLG. The certification system will be administered in Scotland by the Scottish Building Standards Agency, which is an executive agency of the Scottish Executive. In Northern Ireland it will be administered by the Department for Finance and Personnel and the Department for Social Development, both of which are part of the Northern Ireland Executive. On the day that the regulations were laid, I wrote to ministerial colleagues in the Scottish and Northern Ireland Executives thanking them for agreeing to administer the certification system in Scotland and Northern Ireland. I am grateful for their co-operation.

The Government will conduct an interim review of the stamp duty land tax definition halfway through its five-year life, to ensure that the stamp duty land tax relief is working as intended, which is to say that it is incentivising innovation and that we have taken the right steps to tackle tax avoidance. We will also carry out before the end of the five-year time limit a full review to assess whether or not we should extend the tax relief post-2012, and we will give a clear public signal of our future intentions.

I hope that that has been a comprehensive explanation of the effect of the regulations. I commend this instrument to the Committee.

Justine Greening (Putney) (Con): It is an honour and a pleasure for me to serve under your chairmanship, Mr. Hood. As the Economic Secretary has outlined, the statutory instrument sets out the regulatory framework for the stamp duty land tax proposals for zero-carbon homes. The House has debated the matter at length several times already, and it is an important part of the Government’s effort to deliver their 2016 “ambition”, as the Minister described it, which is to make all new homes zero-carbon homes. The Climate Change Bill, which will be introduced in this House next year, is also a critical part of delivering the Government’s agenda on climate change.

The Opposition’s concerns centre on whether the statutory instrument will ultimately be successful and on the Government’s measurement of that success in the five years in which the regulations are in force. We are worried that across the UK carbon emissions are rising, having fallen in the late 1990s. Ironically perhaps, in spite of warm words in 1997 when the Treasury said that it would

the percentage of environmental taxes in relation to GDP has fallen.

Broadly, our aim is to understand what steps the Government will take to make sure that the statutory instrument is successful. When we previously debated the measure, groups including Friends of the Earth and the National Landlords Association expressed concern that it would have only a limited effect in terms of the number of homes that would achieve zero-carbon rating and thus take advantage of the stamp duty land tax relief. Will the Minister give us more details? How many zero-carbon homes have been built, how many are now being built, how many have already received planning permission and how many planning applications for zero-carbon home development are in progress?

Can the Economic Secretary give us a better understanding of what the Government expect the tax relief to amount to over the course of the five years? That was discussed on the Floor of the House during the Committee and Report stages of the 2007 Finance Bill. Questions were asked about whether the £15 million budget that had been set aside to provide the relief would actually be used, given the number of zero-carbon homes that the Government wanted to be built by 2016. We debated the mismatch between those figures and whether the policy did not have enough ambition in itself to deliver 100 per cent. of new housing being zero-carbon homes by 2016. Will the Minister give us realistic figures on how much she expects the relief to be used in the coming five years?

Several years ago, I went to see a project close to my constituency in Putney that had attempted to be a low carbon emission site. It had been relatively successful, but not as successful as hoped. It was not quite zero-carbon, though that had been the original intention. This statutory instrument is quite specific that to be eligible for the relief, the homes have to be zero-carbon, so there is no prize for being five-star or four-star: it has to be six-star—zero-carbon. That is an important point.

Builders will say that it will take some time to design and develop prototype homes, and to have people live in them so that they can understand whether those prototypes actually do deliver zero-carbon homes. After that, they may have to redesign to achieve the actual zero-carbon home that will go into production. To what extent is the Minister aware of builders successfully developing zero-carbon homes? How many are looking at prototypes that the Treasury believes will be able to deliver substantial numbers of zero-carbon homes over the five-year period? When does she expect the first zero-carbon home to be built and successfully to claim the relief? That is important; otherwise, the regulations, well intentioned though they may be, will actually achieve very little. Those of us who are concerned about climate change—the Opposition certainly are—would be disappointed to see this building block not achieve its aims.

We also have a number of questions about the accreditation schemes and the framework against which houses will be assessed. How many accredited assessors are there in place? Does the Minister feel that those that we have are in the right parts of the country to be convenient, and can she tell us more about the training programme for assessors? This would give us a little more confidence about the degree of expertise that they will bring to bear when they assess zero-carbon homes. We have to make sure that that assessment is a rigorous and robust one. The Minister set out some evidence bases for a home to be classed as zero-carbon, so it is important that the people who will gather the evidence and assess it are adequately trained. If she could tell us more about the training procedure, including the length of time that she expects the courses to last, that would be extremely helpful.

The net CO2 emission evidence base refers to CO2 emissions from the dwelling over the course of the year, calculated in accordance with the approved methodology, and the methodology is obviously something for the Secretary of State to approve. Will the Economic Secretary say more about what that methodology will be? I hope it will be rigorous. The definition, or lack of a detailed definition, of a zero-carbon home was debated at some length. I can see that the hon. Lady has tried to put more flesh on the bones, but if she can elaborate on the approved methodology, that would be helpful.

Finally, can the Minister say when she expects the results of the review that is to be carried out halfway through the five-year period? When does she think the review will be finalised? When does she expect to be able to report the outcome of that review to the House? What form will that take—will it be a written or an oral statement—and how does the Treasury plan to elaborate on its assessment? Can the Minister state clearly and specifically the targets for the interim period? How many zero-carbon homes would have to have gained relief for the Treasury to say that, to date, the scheme had been successful?

If the targets could not be or were not met, what would be the Government’s approach to remedial action? If some of the concerns raised across the House ultimately and unfortunately proved to be valid, what steps would be taken to follow up an unsuccessful policy? That is important, because without a clear framework for assessing the effectiveness of this policy mid-way through, remedial steps will be very difficult to take. That is pretty fundamental given the importance of the policy to achieving climate change targets and, of course, the 2016 targets that the Government set themselves. We need to hear from the Minister what she thinks the Government ought to do if we get to 2009-10 and have not seen sufficient progress as a result of this statutory instrument.

Julia Goldsworthy (Falmouth and Camborne) (LD): We had much merriment debating this issue in proceedings on the Finance Bill earlier in the year. All that merriment seemed to focus around whether or not planning permission had been given to a site in the constituency of the then Economic Secretary to the Treasury, how many homes that provide and the whole issue of the definitions. What the whole subject boils down to, however, is supply and demand.

Clearly the tax relief is designed to stimulate demand for zero-carbon properties, but how ambitious is it? The key question is why the measure is narrowly focused only on new zero-carbon homes and on the first acquisition of those new zero-carbon homes. Presumably there is also a large unmet demand out there from people who want to retrofit existing properties with measures to improve energy efficiency. Also, if we really want to stimulate demand, why not carry the relief over to subsequent sales? The Minister said that she did not see how extending the relief would generate value for taxpayers, but that does not seem to make sense when the majority of properties in 50 years’ time will be ones that were built before today. Why are the Government not looking at incentives to improve existing properties?

Setting the threshold for the relief so high does not seem to make sense. We are talking about quite expensive properties—those valued at more than £500,000. Surely the biggest benefit is in respect of affordable homes, not least because of the energy savings that such properties offer and the cost of providing that to the people buying the homes. Will the Minister say why the thresholds have been set at those levels and why the relief is not to be extended to subsequent sales? I am not sure what her definition of value for taxpayers is in the context.

I would be interested to know how many SDLT returns the Minister anticipates will be returned for amendment. Why did she set a time limit of 2012? Surely, to fit into the time frame of having 100 per cent. of all new homes being zero-carbon by 2016, it would make sense to have a time limit that ties in with that—even if it was to be reviewed halfway along.

Thankfully, we have a definition of a zero-carbon home in the regulations—a benefit that we did not have when debating the issue earlier this year. Although it is helpful to have that clearer definition, I am interested in what the Minister said about the relief being extended to houses that are connected to the mains gas supply. I come from a part of the world where a large number of properties simply do not have access to mains gas supply. Will that create a regional differential in the logistical viability of building zero-carbon homes? For homes that have no access to the mains gas supply, the bar is effectively being raised even higher.

I also wonder why there is nothing in the instrument about the construction process. Construction of a new property often has the biggest impact in terms of carbon emissions. I have talked at great length to a constituent of mine who has built some units of work space just outside my constituency. His whole focus was not on trying to achieve a building that would have zero-carbon energy consumption, but to make the construction process as close to being zero-carbon as was possible. For example, rather than ship in cement and sand from different countries, he used rammed earth; all the materials were on site, which was a huge energy saving. I am disappointed that incentives for that kind of ambition and innovation have not been captured. There was an opportunity to do that in this measure, as we saw it in this year’s Finance Bill.

I also have a couple of questions about accredited assessors. The hon. Member for Putney asked how many assessors there are, but what is their geographical spread? What happens if none are available in an area? Would that increase the cost burden? Who will bear the cost of seeking accreditation? Will it be the builder, the seller or the buyer? One can draw parallels with Cornwall’s experience of objective 1 funding, when there was such demand in funding applications for building work space that the Government office for the south-west set higher environmental standards. That was laudable, but two problems were then found: not only was no-one available in the region to assess against those higher standards, but no-one could work out whether it was possible to assess against them. My concern is that there will be similar problems in accessing people who can undertake these assessments. I am also concerned that the goalposts might shift halfway through the process, given that the statutory instrument says that

I would appreciate some comments on that.

Will the Minister comment on how far the measure will help the Government reach their target of all new homes being zero-carbon by 2016? There is nothing to oppose in that target—it is motherhood and apple pie—but having looked at the details of the statutory instrument, I am concerned that it will have an incredibly limited impact and will not stimulate demand in the way that is needed if we are to hit that target. Are the Government considering other measures to run alongside the relief? If the supply side issue and the application of the measure to existing properties and subsequent sales are not tackled, that target will be very difficult to meet.

On the supply side, a critical point that must be dealt with is the fact that local government needs to be able to set higher baseline standards for energy efficiency in the building process. I understand that the hon. Member for Sevenoaks (Mr. Fallon) makes that point in his private Member’s Bill. Are the Government considering co-operating on that? It is tackling supply as well as demand that will fundamentally help the Government to achieve their 2016 target.

Mr. Brooks Newmark (Braintree) (Con): I welcome the Economic Secretary’s contribution to the debate on this subject. As the hon. Member for Falmouth and Camborne said, it was one of the liveliest debates of the last Finance Bill Committee, on which the Minister also served before her well deserved promotion. I am sure that she is grateful for the Government’s amendment, which has allowed that lively debate to continue a little longer by requiring the draft regulations to be considered under the affirmative procedure.

As my hon. Friend the Member for Putney has said, we are wholeheartedly in favour of stamp duty relief for the purchase of new homes, albeit our own policy is somewhat broader and would provide many more first-time buyers with assistance. Nevertheless, we supported a tax relief on zero-carbon homes in this year’s Finance Bill, because we recognised that the policy would, in all probability, help at least some eco-homes to be built.

At the time, however, there was little certainty from Ministers on how the relief would operate, or how much it would cost. No matter how many opportunities the then Economic Secretary had to rehearse his lines, he somehow still managed to fluff them. Now that we have a definition of a zero-carbon home in the draft regulations, will the Minister do what her predecessor could not and give us the Treasury’s best guess of how many zero-carbon homes are expected to make use of the relief in each of the next five years that the regulations are in force?

The cost of the relief given in the Red Book is projected to be £15 million by 2012. Now that the Economic Secretary has had a long summer to look into the details of the projection, can she tell the committee how many zero-carbon homes per annum that figure represents? She will remember that I gave the Finance Bill Committee a back-of-the-envelope calculation of 7,500 new homes, based on an average house price of £200,000 and consequent relief of £2,000. Admittedly, however, that figure is very rough. If all the homes qualify for just the minimum £1,250 relief, the £15 million would pay for relief on 12,000 new homes; but it would pay for only 1,000 homes which qualify for the maximum relief. A detailed analysis of the mix must have been produced by the Treasury. Will she release it to the Committee or write to me?

The standard assessment procedure for the energy rating of dwellings used by assessors will require them to apply a margin of error of approximately 4 per cent. Presumably that is what the former Economic Secretary meant when he defined the desired standard for a zero-carbon home as “zero, or thereabouts.” Now that we have a definition of a zero-carbon home in the regulations, complete with a margin of error, perhaps the present Economic Secretary will be able to answer another dated question: how many zero-carbon homes already exist and what is her best estimate for how many have already qualified for the relief since the 1 October 2007?

The summary of consultation responses from HMRC admits to changes in the draft regulations to remove explicit references to the standard assessment procedure, on the grounds that it is a living document, and replacing it under regulation 7 with an open-ended approval of methodology by the Secretary of State. But if the SAP is a living document, I think that it is presently in hibernation. Version 9—the latest—was published in 2005. We now face basing a tax relief that offers only a five-year window of opportunity for developers in a field of fast-moving technology on guidance that is already two years out of date. I gather that an SAP update is intended to make provision for the energy consumption of appliances and to take account of wind power. When will this revision take place? Is the Economic Secretary able to give some commitments on when the next version will be published and what the next steps will be? Will she also provide me with some information about departmental responsibility for the guidance and any future revision of the present regulations?

The Economic Secretary’s statement on 18 October noted that the

is—

However, the Government’s standard assessment procedure for the energy rating of dwellings was published under the auspices of the Department for Environment, Food and Rural Affairs.

Further, the Treasury’s consultation response to the draft regulations, which was published in October, referred to an aspiration that micro-generation technology would have to comply with the Department of Business, Enterprise and Regulatory Reform’s certification scheme in future versions of the regulations, and that discussions about how to achieve that aspiration were continuing. However, in March, Budget note 26 anticipated the launch of the scheme later in the year, and paragraph 19 unequivocally stated:

What happened to that strong commitment to the certification scheme? Will the Economic Secretary update the Committee on the progress of her continuing discussions with DBERR about the incorporation of micro-generation certification in future?

Under the Economic Secretary’s predecessor, relations between the Treasury and DCLG were completely harmonious, providing a model of constructive marriage between Departments. I am sure that the relationship is still close, but will she confirm whether it will be HMRC, DCLG, DEFRA or DBERR that takes ownership of any future revisions to the regulations, since all four presently have a piece of the pie, or whether developers will continue to be condemned to death by acronym?

Moving on to practical issues, the Treasury’s summary of consultation responses expressed concerns about the number and qualification of accredited assessors. Nevertheless, the Government’s response was confident about both the number and qualification of assessors. I am curious about some of the time scales, so perhaps the Economic Secretary will give me some reassurance about her close relationship with DCLG.

The energy assessor accreditation standards and minimum requirements were published by DCLG only on 26 October—well after the regulations under consideration will be deemed to have been in force. DCLG gave the deadline for the first tranche applicants as 23 November, and the evaluation panel for applicants convened yesterday, with a view to giving approval to the first applicants by next Monday. Has the Economic Secretary had any recent discussions with ministerial colleagues about the issue, and is she still confident that the process is on track and that sufficient assessors will soon be available?

The cost to the vendor of the assessment process is related to the availability of assessors. Will the Economic Secretary estimate the cost of obtaining an energy performance certificate, particularly given that the minimum available relief is just £1,250? I also want to pick up on something that appears in the explanatory memorandum but to which I could not find an explicit reference in the regulations. I am sorry that the hon. Member for Wolverhampton, South-West (Rob Marris) is not present. If I have missed any reference, I hope that the Economic Secretary will correct me. At paragraph 3.2, the memorandum says that the regulations will apply to a house, but that maisonettes and flats do not qualify for SDLT relief. Just as not every house is a home, not every home is a house, and I do not see the rationale behind the distinction.

I am intrigued that the Treasury admits in its consultation response that it has allowed for district heating in order not to prejudice

for on-site generation. The Treasury seems to make an argument for the benefit of high-density housing, but not to make the relief available to much of that same high-density housing. Will the Economic Secretary admit that there are likely to be many more new urban flats and maisonettes than new homes, and that they should all be included in the relief?

Will the Economic Secretary also reassure the Committee about HMRC’s powers under regulation 4(5), whereby the Revenue can refuse relief

Could the Economic Secretary elaborate on what will constitute reasonable grounds for ignoring an EPC that has been produced by an accredited assessor in compliance with the published guidance?

Budget note 26 speaks of the relief applying to

but it is silent as to which homes it anticipates will be excluded. Again, does it mean flats and maisonettes? Likewise, the Treasury’s publication of consultation responses states that:

The only unusual circumstance given is the production of fraudulent certificates. But are any of the circumstances envisaged? The regulatory impact assessment regards this relief as essentially self-policing. But does that confidence in self-policing stand up to the anticipation that there will, inevitably, be some fraudulent claims. What level of fraud is anticipated and what sanctions are available to HMRC beyond the refusal of an EPC and the contingent SDLT relief?

Finally, point 6 of the DCLG’s document “Approval of Energy Assessors Accreditation Schemes for Newly Constructed Dwellings” mandates that operators have a complaints resolution scheme in place; with customers having recourse to an independent third party if they are not satisfied. But I would be interested to know what happens where the HMRC will not accept an EPC that has already been issued by an accredited assessor. Will customers have a right of appeal against the Revenue’s decision and, if so, to whom?

I am conscious that I have spoken at some length and raised a number of issues that the Economic Secretary may not have time to deal with, but this is an issue that I am pleased to be able to follow up from our deliberations on the Finance Bill earlier this year. I would be very grateful if she could write to me in due course if there is anything that she cannot address now.

Kitty Ussher: This has been a useful debate to flush out some of the remaining issues. I have a slight sense of dÃ(c)jà vu having been a Back-Bench Member of the Committee on the Finance Bill and having attended the debate on the Floor of the House too. I am honoured to have the opportunity to try to bring some closure, temporarily, to these issues. I start with the useful contribution from the hon. Member for Putney. Her first question was quite simply whether our policy will be successful.

We think it is the best guess of a successful policy. We realise, however, that we are starting in a vacuum. That is the nub of the point raised by several hon. Members. We believe that by introducing this relief we will boost the supply of zero-carbon new build, which is what we are trying to achieve. We have estimates of what that rate of uptake will look like, but obviously we will not know until we are there. So, to answer in one sentence a number of questions that have been raised, we are introducing this incentive because there are not nearly enough zero-carbon homes at the moment. I do not know what the number is. I suspect it is extremely small. That is rather the point.

As far as I am aware, there have been no applications as a result of the limited publicity that has been generated by the Bill. That is why we are taking action. The Liberal Democrat spokesman described this as one of the most frivolous or amusing sittings on the Finance Bill. I do not find anything amusing in the fact that there is none at the moment. That is precisely why we are taking action. Our ambition is that by 2016, which is admittedly a long way away, all new build homes will be zero-carbon. That is a publicly stated ambition.

The number of new homes that we hope will be achieved by then is in the region of 240,000. We are starting at zero now. Our ambition is that they all should be zero-carbon by then. We are setting the policy in place, along with a number of others to affect the markets in different ways, to help us get there and to boost activity. I could not say how many there will be this year, next year or the year after. We have published estimates in the PBR documents, saying roughly what we believe it will cost the taxpayer. I draw the attention of the hon. Member for Braintree to the fact—indeed, I am sure he already knows—that we think it may cost about £15 million in 2011-12; he can do a back-of-the-envelope calculation to find out how many homes that might be. However, it may be something entirely different. That is our best guess, which is why it is so important to review matters part way through.

Mr. Newmark: I am sure that Treasury officials are fairly wise people, and that they will have used a spreadsheet with an analysis going forward over five years. I suspect it will be some form of J-curve, because these things take off slowly. There must have been a year-by-year analysis in order to come up with the numbers in the report—and, going backwards, it must show how they got there. It would be interesting to find out the sort of uptake they expected and how quickly they saw homes being built in each of the next five years.

Kitty Ussher: The hon. Gentleman is persistent. If I was absolutely confident about the numbers, I would be extremely happy to tell him. The fundamental point is that we are introducing a policy that we believe will have the incentive effect of spurring the supply of the sort of homes that we want, but we do not know the exact shape of that J-curve. I do not want to put a number on record, because I am not confident of what the number is.

I believe that the policy will have a positive effect; the best information available at the moment shows that it will help us achieve our ambition by 2016. However, it is clear from the fact that we are committed to reviewing the scheme halfway through that we do not know the shape of that J-curve—if, indeed, it is a J-curve, as the policy has not yet started. It is right that we should start with publicity, getting the construction industry to respond and getting consumers to want zero-carbon homes, if they are interested financially or for other reasons, and then to consider how things are working and whether we need to take further action.

The hon. Member for Putney asked exactly what action we would take if the review showed that our current policy was not effective enough. Of course, it could be over-effective; we could overshoot the line needed to reach our ambitions. I shall not be specific, because we do not know the numbers—it could be 5 per cent. out, 20 per cent. over, or 30 per cent. under. However, we would obviously consider the number of homes that have been built, the net carbon savings achieved, the cost to the Treasury, the effect on the industry and the value of the policy relative to other carbon-saving schemes.

Justine Greening: I wish to press the Economic Secretary further on that question. It is important that we should understand what the Government hypothesis was, in relation to the building industry and the house-buying behaviour of consumers, and how it led to this policy having a particular budget. We seek only the behind-the-scenes calculations done to have ended up with a £15 million budget. The figure must have come from somewhere; it could not have been pulled out of the air. If nothing else, we are trying find out the basis for that calculation. Will the hon. Lady give us more detail?

Kitty Ussher: The answer to that question is the same as my answer to any question about how policies are developed. We set out our aspirations, and took advice from as many sources as were available on how we could achieve it. Having a price differential between zero-carbon and non-zero-carbon homes will kick-start the market is common sense. We committed ourselves to consulting widely before today’s debate, and we have gathered the best available evidence and expertise from the wider world. We also have anecdotal evidence that it will be extremely effective. A colleague from the Energy Savings Trust has said that the renewables industry will be able suddenly to invest in capacity, as it knows there will be a requirement to use its products. We have had various public responses from building companies saying that they believe that it will have a huge effect. I cite one. Dave Hill, a developer in Upton, Northampton, said:

A lot of the evidence is anecdotal, which is why I am very reluctant to give precise figures. I hope that hon. Members will understand that reasoning. Nevertheless, the Government think that the proposal will help us to achieve our aspiration. We have committed to holding a review at an appropriate time to ensure that we can adjust our policy as and when necessary.

The measure is not the only one that is being proposed. We should ensure that the planning system helps to encourage lower carbon dioxide emissions and does not present a barrier to the development of homes that might differ from those to which we have become accustomed. We are consulting on a planning policy statement on climate change, and we shall publish the final document later this year. Various other initiatives are being proposed by other parts of Government too, so the policy is very much cross-departmental. The code for sustainable homes has been introduced as a voluntary standard in England, and colleagues will know that that allocates star ratings from one to six for new homes, with a rating of six corresponding to the zero-carbon standard. We recently announced our intention to introduce mandatory ratings under the code from April next year and we are consulting on how to take that forward. The policy should not be considered in isolation, therefore.

Justine Greening: Will the consultation consider whether graded relief should be given to different star ratings, rather than there being a step change in relation to the zero-carbon requirement?

Kitty Ussher: That is not our current policy. We simply want to boost the top end and to have a tough standard for that, because that will help us meet our 2016 aspiration.

I am told that we have some 500 accredited assessors. The training process is already up and in place, and the SAP assessors are already trained and in place and are assessing energy efficiency now. The schemes for the EPC energy assessors are being approved by DCLG as we speak. That Department will run training for new assessors, who will need to meet national occupational standards or have their existing experience taken into account when they are certified. The important general point at this stage is that, given the likely shape of the take-up graph, we have no concerns as to the availability of assessors. We shall obviously keep that under review as the policy rolls out.

Regulation 7 concerns the approval of methodology for the definition of zero-carbon homes. The regulation sets out the formal legal position, which is that the Secretary of State makes the approval, although in practice the approval will be by DEFRA working alongside DCLG. The hon. Member for Falmouth and Camborne asked why the relevant date is 2012. The first reason is that that ties in with the timing of the spending review. Secondly, it seems sensible to have a five-year policy that is reviewed half way through, rather than to presume that we can already decide what will help us reach our 2016 ambition.

On existing homes, it is extremely important that the amount of carbon output from them is reduced and that energy efficiency is increased, both from the point of view of meeting our carbon targets and of the important issue of fuel poverty. The Government believe that it will be incredibly difficult to make existing homes zero-carbon, which is why this particular policy does not apply to them. Various policies exist, however, such as the Warm Front scheme of which I am sure all hon. Members are aware. They provide support to the public for reducing carbon emissions in existing homes.

The hon. Lady also mentioned access to the mains gas supply. I am not sure that her logic completely works, because the Government have decided to include homes that have access to that supply within the scope of eligibility for relief, as long as they are overall zero-carbon homes. We believe that, over a year, there can still be zero carbon output even if a little gas is used, provided that it is compensated for by other measures in the house. The fact that someone does not have access to the supply and has other ways of generating their energy should not result in their particularly being discriminated against. Indeed, one could make the superficial argument that such rural properties might have access to other types of renewable generation that are harder to use in urban areas.

With regard to considering the construction energy use when looking at the definition of a zero-carbon home, the hon. Member for Putney is right that that is not included in the current definition. However, during the Budget debate we committed publicly to considering looking at that as part of the review process. Obviously, it would be a good thing to find a way of capturing those energy costs as well.

The hon. Member for Braintree mentioned the issue of flats and how it was rather complicated to work out how shared spaces are accounted for when allocating certificates, which is obviously something that we would like to be able to do. As he said, a lot of people live in flats and a lot of new builds will be flats and shared dwellings, so that will also be included in the review.

Justine Greening: Obviously, developments as a whole will be assessed, so will that be looked at by the Minister?

Kitty Ussher: At the moment, the proposal is for individual houses as homes. However, homes that are part of a development of houses, such as an estate, can be considered. The proposal does not cover shared doorways, roofs and communal spaces of that type, but we hope that it will one day and that will be included in the review. There are simply some complicated definitional issues that we could not resolve in the time available. I hope that I have covered most of the points.

On the issues raised by the hon. Member for Braintree on which bits of the Government are doing what, the only answer that I can give at this stage is that it is a genuinely cross-Government initiative and we are working together extremely well. I may not be married to a Minister in another Department, but they are still very cordial relationships—I would not wish to speculate whether they are more or less cordial. With regard to the issues that he raised on fraud and appeal, those are operational matters for HMRC, and if I have anything further to add I will write to him, as he suggested. I hope that that is sufficient.

Question put and agreed to.

Resolved,

Committee rose at twenty-two minutes past Eleven o ’clock.