Select Committee on Business and Enterprise Minutes of Evidence


Examinatinon of Witnesses (Questions 401-419)

HOME BUILDERS FEDERATION

10 DECEMBER 2007

  Q401 Chairman: Welcome. Thank you very much indeed for your written evidence and thank you for coming. Many years ago when I was in public relations I used to work for something called the House Builders Federation, and I think you may be related quite closely, so what do you do, and why the house not the home? Please introduce yourselves for the record as well.

  Mr Slaughter: I am John Slaughter, Director of External Affairs for the Home Builders Federation.

  Mr Stewart: John Stewart, Director of Economic Affairs at the Home Builders Federation.

  Mr Slaughter: We used to indeed be the House Builders Federation until about two years ago, when we changed our name. The idea of that was to ensure that we better represented what the industry is now doing. We do not simply build houses; we build flats and mixed developments; we are involved in urban regeneration. However, we liked our acronym, so we made the massive shift from House Builders to Home Builders.

  Q402  Chairman: Thank you very much. That is very clear. In a way we are changing gear with you today, because a lot of our work until now on this quite intensive inquiry has been on the larger projects; now we are talking about a very different sector of the market. Can you explain to us in practice how the home building sector differs from the rest of the "constructionists" we have been talking to?

  Mr Slaughter: In a number of ways. The starting point is that essentially it is quite a high-risk industry, with the critical raw material of land supply through the planning system being its lifeblood. That in itself introduces quite a lot of uncertainty. In terms of the scale of operations, which you have touched on, Chairman, it is fair to say that although there are some major home-building projects, they are the minority of what the industry is doing. Statistically, the average development is something like 27 homes; so essentially we have relatively small-scale local output of housing across the country. In fact, the industry is characterised by a very large number of active sites at any one time. Some of the large companies may have as many as 350 or 400 sites in production at any one time across the country. That is one way of characterising the difference. It takes a long time to bring sites through the planning system from the point of view of originally identifying strategic sites that may be developable, then securing planning permission and then being able to start work on site. That introduces uncertainty in the sense that our main customer is you and I, or anyone else in the country who might be looking to buy one of our homes. The market we represent is obviously a volatile market. In the gap between the start of the production process and the end, when you are selling to a final customer, things can change quite a lot. There is a lot of uncertainty and commercial risk in developing house building sites and bringing them to fruition. If we had to characterise ourselves as an industry, we would see ourselves as developers, certainly not contractors, with a lot of risk in the way that I have mentioned, making it essentially a speculative industry, with all the issues that that potentially entails.

  Q403  Chairman: What about fragmentation? What is the size of the largest player in your sector and how does that compare with the rest of the sector?

  Mr Stewart: The largest company now is around 20,000 homes a year, and there are three in the "15,000-20,000 units a year" size band. It is difficult comparing it with the contracting industry because they do not build homes in the same way.

  Q404  Chairman: In terms of the available market do you regard yourself as more or less fragmented than your sister companies elsewhere?

  Mr Stewart: In construction?

  Q405  Chairman: Yes.

  Mr Stewart: I think it would be very difficult to make that comparison, but there is a long tail of smaller companies in house building, just as there is in construction—but whether they are comparable is difficult to say.

  Q406  Miss Kirkbride: In your memorandum you say that the planning system is the principal barrier to building homes and growth in your sector. Are you seeing any signs that Government's Planning Policy Statement PPS3 is beginning to have an impact on the amount of land available?

  Mr Slaughter: It is very early days on that because that new planning policy statement only came into force in April this year, and the whole process of adopting local plans and bringing sites through the system is quite slow. However, we are hopeful that it will make a difference because the new guidance from Government says that once local authorities have identified what their housing needs are, they must identify a rolling five-year supply of land that is truly developable in order to achieve that, and further strategic land supply beyond that for their housing needs. That is a significant difference compared to the requirements of the previous planning guidance that it replaced in April. We are hopeful that that will make a difference. To my understanding there have been a few appeals that have been considered and decided since the new guidance came into force, which have essentially backed up its requirements in the sense that where there was not a clearly identified five-year land supply and a site was being considered under appeal, the inspectors have said that it is reasonable to grant planning permission because the local authority had not fulfilled its requirements to provide the requisite land supply. That is also early days. If you believe in the power of good exemplars, then the action that the planning inspectorate has begun to take may well be significant, and we would like to see that continue.

  Q407  Chairman: We do not want to trample too much on the affairs of our sister committee, the Department for Communities and Local Government Committee because obviously planning matters are primarily for them; but our purpose in this inquiry is to look at public policy issues affecting the construction sector. Is there anything else you would like to say briefly in relation to how the planning system impacts upon you that will be relevant? I am not providing you with an open cheque for an essay; just for a couple of sentences!

  Mr Slaughter: It is such a massive subject. Very, very briefly then—the speed of the planning system decision-taking is a problem, and this is something that we say to Government Ministers and officials in CLG. It takes an average of fifteen and a half months for a residential planning application to be resolved. Also, not overdoing the complexity of the policy requirements is the other big issue. We will probably come back to this later on in terms of questions about sustainability and zero carbon.

  Q408  Chairman: The point I am trying to draw out is that planning is the most important issue for your industry, is it not?

  Mr Slaughter: Yes, because it governs the raw material that the industry depends on to produce output.

  Mr Stewart: Chairman, the distinction I always make is that the planning system is largely outside the control of the home-builders; it is an administrative system run by local authorities. Without planning permission on a piece of land you are not legally able to build, so it can be an absolute constraint if there is not enough land and you cannot produce enough homes. All the other issues, such as skills, materials and production methods, are to a large degree within the control of the industry, so it is qualitatively very different to all the other potential barriers.

  Q409  Mark Hunter: As you say, questions about planning are relevant to a different Select Committee than this, but would it be completely unfair to say that the reason why planning is flagged up by organisations such as yours as being such an issue is because your members tend to favour developments in greenfield sites rather more than brownfield sites?

  Mr Slaughter: No, absolutely not. The industry is now building about three-quarters of its output on brownfield sites, and so it has gone with the grain of Government policy on this. In practice, it is not easier necessarily to get permission for brownfield developments any more than greenfield developments. The biggest overall problem is the amount of land coming through the planning system, which Government figures show has declined by 7% between 1997 and 2003.

  Q410  Mark Hunter: I would love to explore that further. My experience as a former councillor was somewhat different, but we will park that to one side for a moment. Can I bring you on to skills capacity issues, which was covered in your submission to a certain extent. Can you tell us more about your estimate of the growth in the home building workforce that will be required if we are to meet the target increase in housing supply of 240,000 homes a year?

  Mr Slaughter: Based on the research that we jointly commissioned with CITB ConstructionSkills a couple of years ago, as a broad estimate, taking into account potential productivity gains, it is probably in the order of 40,000 extra members of the workforce compared to roughly 280,000 that perhaps we have now.

  Q411  Mark Hunter: To pick up on a point in your evidence, what proportion of that do you think is likely to come from migrant labour?

  Mr Slaughter: I am afraid I do not think we can give any firm estimate. We have no real means of telling. Professor Ball, who carried out the study, said that it might be less than 20,000 of the 40,000, so somewhere less than half—but to be precise about that is very difficult.

  Q412  Mark Hunter: What about skill shortages in particular areas? Do you foresee any specific areas being more problematic than others, and, if so, what work are you undertaking yourselves to plug that particular gap?

  Mr Slaughter: You mean types of skills and particular areas of activity?

  Q413  Chairman: Both would be interesting, both geographically and skills.

  Mr Slaughter: In terms of the types of skill and types of job, I think there are challenges for management, the professions and the traditional trades within the industry. Professor Ball's analysis pointed that out. Certainly key issues in terms of output and productivity and quality are roles such as site managers and site supervision. There is a general shortage not just for home building but across the piece for planners and some of the other professionals. We are definitely going to need more bricklayers, carpenters and people like that. In terms of what we are doing about that, we are trying to work as closely as possible with CITB-Construction Skills to address those shortages. Our major members have taken a number of skills initiatives in recent years. One is to increase the number of apprentices, which is something the industry is keen to do. The major members have signed up to the CSCS objective, the qualified workforce objective. We have also been working to improve the qualifications for some of the key areas, particularly site management, where we have worked through CITB—ConstructionSkills to introduce new qualifications for residential site management and supervision. They are options of existing qualifications that are more fit for purpose for our sector. The big push probably has to come to address the question of numbers overall. A lot of the work has to be through promotion of career opportunities in industry and the industry engaging with that as well. CITB—ConstructionSkills regard that as one of their key requirements, and we fully support them on that. We are trying to work with them on that through upgrading our own website, amongst other things. We and our members are supporting initiatives like the Inspire Scholarships, which are an important way of trying to attract new young professionals and management recruits into the industry. There is a range of things we are trying to do. Geographically—I might ask my colleague to comment on this in a moment, but the market seems to be working to balance requirements reasonably well, but that may in part be related to the inflow of migrant labour from the new accession countries in eastern Europe. Anecdotally there is perhaps more of that labour in the south and east of the country than other parts of the country. Statistics on this are very difficult to gain.

  Mr Stewart: The lack of statistics is a real problem.

  Q414  Chairman: We have heard quite a lot of compelling evidence from other witnesses that that pattern of shortage of skills being addressed by migrant labour in London and the south-east is fairly consistent.

  Mr Slaughter: We have a survey, which John is involved with, which has tracked the degree to which employers in our sector regard labour supply as a constraint on production. Certainly the position has improved in the last few years and that has been regarded as less of a problem than it was three, four or five years ago.

  Q415  Mr Weir: You mentioned the Construction Skills Certification Scheme. I understand that the Home Builders Federation has a target for all site workers to have the CSCS card or equivalent card by the end of 2007. Are you on course to achieve that target?

  Mr Slaughter: We do not know how far we are going to get. We are not going to get to 100%, but I do not think that that is in practice easy to achieve in any state of affairs because of the churn in the labour force. That is the view of many people I have spoken to. We are currently at around 70% from the last audit of sites that was taken out, and our members are pushing very hard to get as far as they can by the end of the year. I cannot predict exactly what the final figure will be because we will have to audit that early in the New Year; but we certainly hope it will be above 70%, and from a starting point of something like 40% 20 months or so ago. We think that is a pretty good improvement.

  Q416  Mr Weir: When was that last audit taken?

  Mr Slaughter: October 2007. There is a very strong push on at the moment, as you appreciate, for the end-of-year deadline, to get as many people signed up as possible. We recognise that probably not everybody will be signed up at the end of the year, and so the companies are thinking ahead about how they can complete the push beyond 1 January with a transitional mechanism to bring people on board.

  Q417  Mark Hunter: How does the performance of the home building sector compare with the rest of the construction industry in this regard?

  Mr Slaughter: My understanding is that the level of card holding—the nearest equivalent would probably be the major contractors' group—as an analogy—which is in the high eighties per cent. When they got the equivalent of 1 January 2008 a year ago in their case I think they were 85/86%. We will not probably have got as far as that by 1 January; but on the other hand the time over which we have been working on this has been considerably shorter.

  Q418  Mr Weir: How many of your members make use of the grants available from the Construction Industry Skills Levy? Are they happy with the way the levy functions?

  Mr Slaughter: Not entirely, is probably the answer. If you do not mind, I will refer to a few figures that I have. It is a problem area for us. We would like to see better performance in terms of grant take-up. I have to be a little bit careful, because I do not think these figures are always necessarily publicly disclosed by ConstructionSkills, who collate them. The home building industry is not generally as successful as some other parts of construction in obtaining a good return on the levy it pays in terms of grant. That is an area that we are particularly looking to improve. There are some interesting perspectives on this. The percentages in terms of payment of levy by HBF members, or companies that are registered by CITB—ConstructionSkills of HBF members is pretty high compared to the industry average. However, the percentage claiming grant is also pretty good—but the overall return is below average for the sector as a whole. There are some issues there which are quite hard to grasp in terms of why the performance is not better. We know circumstantially—and I cannot mention names—that some companies are much better in terms of their performance in this respect than others. This is an issue that we are actually raising and discussing with CITB—ConstructionSkills with a view to seeing how we can improve it.

  Q419  Mr Weir: You say some companies are better than others: does it depend on the size of the company? Are larger or smaller companies any better than others?

  Mr Slaughter: No, it does not. There are some quite large companies that, as far as we understand it, do not have a good return in terms of grant. There are a number of issues: it may be how companies are set up internally and how far they resource the process of trying to secure support. There are concerns on the part of some companies that the procedures are simply too bureaucratic and too difficult, and therefore there is a disincentive to work to get as much support as they might.



 
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