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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