Examination of Witnesses (Questions 1-19)
PROFESSOR ANNE
POWER
12 NOVEMBER 2007
Q1 Chair: Can I welcome you, Professor
Power. You are the first witness in our inquiry on Existing Housing
and Climate Change. I wonder if I could start by just asking you
this. The Sustainable Development Commission 18 months ago reported
to Government on the developments you felt were required to improve
the existing housing stock's energy efficiency. Do you think the
Government has responded urgently enough to the recommendations
you made and, if not, what do you think the Government should
be doing now as a matter of priority?
Professor Power: The Government
has not yet responded at all to the recommendations we made, even
though they paid for and commissioned our work, and we have actually
asked them to respond. There is a really serious hiatus in their
review of the existing stock and, although they have issued a
very slender initial overview that presented very much the basics,
they have not yet come up with a plan for the existing stock,
other than wanting to push Energy Performance Certificates, which
is good but could be a lot better; carrying on the Decent Homes
programme, which is good but could be a lot better; and generally
wanting things to be more energy efficient. Different Ministers
do refer to the existing stock as being an issue but they have
not announced any special programmes, and in the Comprehensive
Spending Review I think they announced £4 billion extra for
further renovation of homes. They have not issued any details—we
did ask them—and my understanding is that that is very much
within the existing programme planning. I think there is a hiatus
that could be filled. One of the problems was that the review
of existing homes, when David Miliband went to Defra and set up
the Office of Climate Change, Defra was then asked to carry through
some of the review and they have come up with proposals for household
incentives and helping householders to do more but it is one of
those problem areas that I think is still between departments.
Maybe they are planning more than we know but we do not get the
impression that there is actually a plan, and they have not directly
responded to our report.
Q2 Chair: What do you feel the Government
should be doing as a matter of priority that they are not doing
or that you do not know they are doing?
Professor Power: If I wanted to
give it a very simple tag, I would say copy Germany, because in
Germany the government announced in January of this year a very
broad-ranging programme of upgrading all pre-1984 homes to a very
high environmental/energy-efficient standard and it was going
to take up a lot of complex building forms and multi-storey buildings,
which in Germany are much commoner than here, but it was also
going to take up schools and other public buildings and individual
home owners, and they were going to count it as one of the very
major contributors to hitting their 20% reduction target for carbon
by 2020. It has been piloted in several ways over many thousands
of units over the last five years, so they have gone a long way,
and we could at least now start a pilot. They also do it through
a mixture of loans and other incentives, although they do, of
course, subsidise their whole renewable energy industry alongside.
They are much further down the road than we are in recognizing
the existing stock as a major source of both climate change damage
and potential for saving.
Q3 Chair: What do you think are the
main constraints at the moment on improving the existing stock
and what do you think the role of the Government should be as
opposed to home owners or owners of private rented stock, or local
government, for that matter?
Professor Power: There are various
constraints. The main constraint—and this is what when we
were doing Stock Take originally we faced from all the
Building Regulations people in government—it is very complex,
very complicated, and when we were doing the Code for Sustainable
Homes, which originally had been planned to start with the new
and move on to the existing but it has stuck with the new, it
was the same; it is very complicated. There are things that genuinely
make it complicated. It is lots and lots of individual owners,
and it is very varied stock. If you wanted to really simplify
the stock prototypes, you would get it down to maybe 20 or 30
but that would be very crudely reducing the types of stock. That
is a second complication. It is lots of small builders—50,000
or 60,000—and lots of different suppliers and, because we
have not invested very much in that field, in skill-building and
capacity-building in the building industry for that kind of work,
I think there is a serious skills gap, but the really big thing
is that building new is tax-free and repairing is 17.5% tax on
what you do and I just think we cannot escape that very uneven
playing field.
Chair: Can we just explore that last
point?
John Cummings: I would like to pick up
a point on the first question.
Chair: Yes, certainly, but perhaps we
could go to the VAT point after that because the Professor has
just raised that.
Q4 John Cummings: I think it is an
extremely important issue because I understand that you report
directly to the Prime Minister, the First Ministers of the devolved
administrations in Edinburgh and Cardiff.
Professor Power: And Northern
Ireland now.
Q5 John Cummings: You cannot go any
higher than that, yet there seems to have been nothing done for
18 months. Do you not find this extraordinary? Are you upset about
it, having put all of this very valuable work in, for it to perhaps
lie on a desk gathering dust?
Professor Power: We try to make
sure they are not gathering dust. We do keep pushing, and I think
the argument has moved on quite a long way but I do find it frustrating
and I think my colleague, Lizzie Chatterjee, who did a lot of
the work, is probably even more frustrated but we try to be polite
about it. If you wanted me to be impolite, I could be.
Q6 John Cummings: Do I detect that
you are rather more than frustrated with the lack of a response
from the Prime Minister's office?
Professor Power: I think we could
be doing a lot better and it would be a cheap and relatively easy
win. It would have massive social benefits as well as environmental
benefits and it would deliver for the Government a lot of neighbourhood
renewal as well as environmental benefit. It would also release
a lot of infill land within the inner-city areas and the lower
income neighbourhoods that need upgrading which could then be
used for building so we could get a lot of new homes in as well.
I think we could get a triple benefit if we did it: one, upgrading
the existing homes, which would help a lot of moderate to lower
income households; two, renewing neighbourhoods, because the minute
you start reinvesting in an existing neighbourhood you get more
diverse people moving in, you get little shops opening again,
the bus routes become more frequented and the streets are cleaner,
so there are a lot of benefits in the broader sense of neighbourhood
renewal; and, thirdly, the infill sites, of which we have thousands
and thousands of very small ones, half an acre and under, would
suddenly gain value again so that you would not need these big
sites and these out-of-town developments in the way we do now,
or think we do. I think it would have a huge benefit. I cannot
argue strongly enough for how big a benefit it would bring.
Q7 John Cummings: I get the impression
that people are paying lip service to it. Would that be correct?
Professor Power: They are not
giving it sufficient priority. They are really not paying that
much lip service to it. They are not giving it sufficient priority.
Q8 Chair: Is that not giving it priority
in terms of putting money into it or is it not giving it priority
in terms of the policy instruments that would be required?
Professor Power: It is both. I
did not really answer your question on policy instruments, which
would go back to the VAT issue. Do you want me to quickly answer
on that one?
Q9 Chair: Yes. On the VAT, would
you give us an indication of what effect you think it would actually
have if VAT were reduced or equalised.
Professor Power: For the areas
where VAT has been reduced to 5% or even abolished, it has had
a good levering effect, for example, in installing renewable energy,
solar water collectors and that kind of thing, so it is a concession
that is worth having. It is very constrained, so you cannot gain
VAT reduction for do-it-yourself, which you can understand the
logic for; they really do not want to lose tax, so somehow we
have to try and get beyond a not wanting to lose tax/needing to
renew homes balance because it is not a favourable balance and
in other European countries, France and Germany particularly,
they do not levy 17.5% VAT on this kind of work.
Q10 Chair: Have they ever done so?
Professor Power: I would find
it hard to answer that question. In theory, I believe the French
were supposed to, but in practice did not. I honestly am not an
expert on VAT nor do I know, but I could try and check the answer
to that.
Q11 Mr Betts: Professor, if we are
talking about a seismic shift in attitudes and practice, is 17.5%
really going to make the difference?
Professor Power: We had a piece
of work done to put renewable energy and upgrade our house at
£11,000 and the bill was £15,000. It makes a big difference.
Q12 Mr Betts: Does it?
Professor Power: Yes.
Q13 Mr Betts: I am not sure. I might
be suggesting that if we are really going to incentivise people,
grants, where people see cash coming, is much more likely to get
their interest whetted and exploring what might be done but if
you simply say we are going to knock VAT off, or part of VAT off,
is that really going to change the attitudes of millions of people?
Professor Power: I had only got
that far, but on its own it is probably not enough for the more
advanced stuff that you need to do. The other thing that seems
to be very successful is Council Tax rebates. The other thing
that seems to be extremely successful is just clear regulation
and when we were doing the Code for Sustainable Homes the builders
were all screaming "We just want clear regulation on this.
If we have clear regulation ... " They were ahead of the
Government on wanting clarity because then all builders would
do it. What they were worried about was some kind of voluntary
agreement or some kind of aspirational code that would not apply
to everybody. So regulation definitely has a strong role in this,
I think, and then bigger incentives in the way of rebates on other
kinds of tax, like Council Tax. I can understand why the Government
is very reluctant to introduce grants again. They did not have
a very good history, they did have a very distorting effect and
they did massively push up prices. You have to somehow balance
it. What the Germans are doing is offering subsidised loans that
beyond a certain point are remitted, which effectively turns it
into a grant beyond a certain point. Again, I do not know the
exact details of that but it means that you do not get people
in with a grant, you do not get builders in with a grant; you
get them in with a financial costing that makes sense to them.
At the moment our financial costings on investing in renewing
your home often do not make sense because people expect to move
after seven years and you may get the payback after 15 or whatever.
The way we mortgage those kinds of improvements could also be
a very good incentive. The Green Building Council is looking at
that.
Q14 Sir Paul Beresford: One of the
theories is that if you offer sufficient grants for some of the
more exotic stuff, like the solar electric panels, et cetera,
you will increase the production such that it will reduce the
unit costs. Are there any countries doing that and has that had
any effect?
Professor Power: Germany. Their
solar panels are half our price, their insulation of homes is
much cheaper, their external wall cladding is half our price.
So yes, if you incentivise an approach, it does over time.
Q15 Sir Paul Beresford: Any other
countries?
Professor Power: I think Japan
also has much lower prices on solar because it has a million solar
panels programme. France has now introduced a programme but I
think they have not really done very much of the implementing
yet. The Germans have been doing it since 2003.
Q16 Sir Paul Beresford: Has it had
an effect on production costs?
Professor Power: Yes, and the
other thing it has had a very big effect on is jobs, which of
course in Germany is a huge issue. They have created lots of jobs
in renewable energy and places like Leipzig in eastern Germany
have become the biggest solar producing base in Europe now, and
now the Spanish are adopting it, so other countries do have a
lot of experience of doing it. Barcelona introduced a building
code under Catalonian law—they have a lot of devolved power—and
that has now levered the Spanish government to do it.
Q17 Sir Paul Beresford: What about
any countries that are north of here?
Professor Power: The Swedes have
been doing it for a very long time. I do not know about the Swedish
costs.
Q18 Sir Paul Beresford: So the excuse
that there is no sunshine in Britain does not hold?
Professor Power: No, it definitely
does not hold.
Q19 John Pugh: Can I ask you about
landlords? There are big landlords, housing corporations, councils
and so on, who have some kind of incentive. It is in their interests
almost to make sure their homes are more energy-efficient because
they have wider social agendas, they want to stop fuel poverty
and that kind of thing, but your private landlord, who maybe has
a few properties, maybe slightly older properties, quite hard
to heat and so on, why should he bother? He can simply not include
the heating costs in with the rent, get the person renting to
pay their own heating bill, and avoid the unnecessary capital
expenditure which he will see very little return on.
Professor Power: The private landlord
issue in this country is still pretty difficult because generally,
we are short of private renting, so generally private renting
goes at double the rents of social housing. It is very high-cost
and people either get Housing Benefit for it or they have to pay
high rents. If they have lower heating charges, significantly
lower heating charges, at the same time, that would make landlords'
property more attractive to tenants. One of the outcomes of the
German programme, which is targeting landlords very often, is
that their rent income has gone up and their empty property has
gone down.
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