Examination of Witnesses (Questions 80-99)
OFFICE OF
GOVERNMENT COMMERCE
& DEPARTMENT FOR
ENVIRONMENT, FOOD
AND RURAL
AFFAIRS
18 JUNE 2007
Q80 Mr Dunne: What proportion of
those is covered by the annual £3 billion refurbishment programme?
Peter Fanning: All of it will
be covered by the £3 billion.
Helen Ghosh: But much can be done,
of course, by determining how to use the estate, as I think emerges
clearly from the Report.
Q81 Mr Dunne: Let us move to that
in a moment, because my time is limited. I would like to receive
the figures that you just highlighted.
Paragraph 2.27 on page 18 contains what I imagine
to be the rather embarrassing conclusion from the NAO—it
applies to both of you, Mrs Ghosh and Mr Fanning—that there
is insufficient leadership on sustainable construction and refurbishment.
Could you comment on the competence of the officials in both of
your Departments to advise properly on achieving sustainable development
in buildings? How many officers allocated to that task does each
of you have and where are they located?
Helen Ghosh: The first point to
make is that, as I said in my opening statement, we believe that
the clarity of leadership has been significantly increased by
our response to Neville Simms' report. In my Department, the issue
arises specifically in two places. I have a sustainable procurement
unit in my finance team—I can give you precise figures but
the people in that unit number in their tens—and they provide
Government-wide advice on specific issues, including timber and
food procurement, and advice within DEFRA on the refurbishment
and construction programmes that we have. They work with my estates
people in a very integrated team, as the report recommends. In
the Climate Group there is also something called the Environmental
Business and Consumer unit. [4]
Q82 Mr Dunne: Could you send us a
chart that shows how many people there are and where they are
located?
Helen Ghosh: Exactly. There are
not vast numbers of people; there are five or 10. They are the
people who do the product standards.
Q83 Mr Dunne: Are they all in London?
Helen Ghosh: No, a large number
are in York, because that is our relocated centre, and some are
in London. We will send an organisation chart.
Chairman: Within two weeks, please.
Q84 Mr Dunne: An interesting example
is given on page 21—case 4—of the value for money
question in relation to the installation of a wind turbine at
the Grantham testing station of the Vehicle and Operator Services
Agency. Given the 18-year payback for installation of a wind turbine,
do you regard that as good value for money?
Helen Ghosh: I am not going to
second-guess that—
Q85 Mr Dunne: Does that mean yes
or no?
Helen Ghosh: I am not going to
second-guess what appeared to be good value for money to the person
who made that estimate. I am not going to step in.
Q86 Mr Dunne: Will you be recommending,
through your advisers, a different payback period for the installation
of energy efficiency measures, or do you think 18 years is acceptable?
Helen Ghosh: I am not going to
second-guess either the accounting officer or the advice that
would come out of the Green Book.
Q87 Mr Dunne: Do you have criteria
for value for money for the installation of energy efficiency
measures?
Helen Ghosh: What we have is advice
on what are the most likely energy efficiency measures that would
achieve particular outcomes.
Q88 Mr Dunne: Could you set out for
us the criteria that apply to the different energy efficiency
measures? Because there is another example in the Report on page
23 paragraph 3.17, of Nottingham prison, where solar water heating
and grey water recycling at a cost of £2.1 million was scored
out of that redevelopment because it was too expensive. Presumably,
whoever made that decision decided that was not good value for
money.
Helen Ghosh: To go back to your
earlier question, what we will undoubtedly have advice on is in
what period you would expect to get a return. It is then a question
for the Accounting Officer to decide whether or not they are prepared
to spend that much to achieve their overall environmental outcomes.
It comes back to the point that there will always be a limited
amount of money, and the Accounting Officer or the person making
the decision must decide where they want to put their investment.
Q89 Mr Dunne: Exactly. There is a
clear trade-off, as we were discussing earlier, between environmental
concerns and value for money. What comes out of this Report is
that at the moment, value for money, which might be desirable
from this Committee's point of view, seems to win out. Therefore,
the prospects of achieving the goals you have been set seem ever
more distant.
May I have a final question, Mr Chairman? On
page 23, paragraph 3.19 refers to the Carbon Trust setting up
a company, Salix, to provide loans to be matched by local authorities
to encourage energy efficiency. Could you tell us how many loans
have been issued under that scheme?
Helen Ghosh: No, but we will send
you a note.[5]
Q90 Mr Dunne: Are you aware that
any loans have been issued under that scheme?
Helen Ghosh: I believe that loans
have been issued under that scheme.
Q91 Mr Dunne: Could you kindly send
us the number by year and the amount and by which local authority
they have been matched?
Helen Ghosh: Certainly.
Peter Fanning: Perhaps I may make
an observation on the value for money point. The point is that
accounting officers have to make a decision on the best available
information they have at the time, and the information changes.
It gives me an opportunity to make the observation that today
OGC announced a new electricity deal for the public sector, which
gives all parts of the public sector access to green electricity
at no premium. The contract will cover about 33% of the total
volumes until 2011.
I simply make the point that the person who
did the numbers in Nottinghamshire may have had reason to believe
that circumstances would change. Somebody doing the numbers today
would have to take account of today's announcement. The key point
is to focus on the outcomes, and to hold people to account for
them. As I said, OGC will provide information to the Sustainable
Development Commission if we can get agreement to that effect,
which will essentially give yourselves a common framework by which
to judge—
Mr Dunne: Mr Fanning, I am not surprised
to learn that technological advance is driving the cost of energy
efficiency measures down. I think many of us are delighted by
that and would expect it to happen. What has come out of the Report
is that there is a lack of accountability across Government for
this issue, because it does not fall within a particular Department.
We have seen that from the NAO Report.
Chairman: Thank you very much, Mr Dunne.
The last questioner is Ian Lucas.
Q92 Ian Lucas: Picking up on the
green energy point, I should like to talk about energy generation
from renewable sources. Paragraph 2.18 tells us that "35%
of the projects" in the NAO sample "carried out feasibility
studies into on-site energy generation from renewable sources".
Bear in mind the target that we heard about—making the estate
carbon neutral by 2012. That means that 65% of projects do not
even make an assessment. Why is that?
Helen Ghosh: Because making an
assessment, if you look at the BREEAM criteria, is not in itself
a requirement. What people are required to do through the BREEAM
process—this is also driven by the outcome targets that
we have set—is to aim at the best possible reduction in
CO2 outputs that they can get against standard building regulation
targets. In that case, the commissioner might choose to go for
energy generation from renewable sources, but it is not a prerequisite.
For example, it might be much better—we will be encouraging
Departments to do so—for any new building to be powered
using those cross-Government contracts. We are not requiring it.
Q93 Ian Lucas: Yes, but that has
only just been introduced. We are talking about 2005-06, are we
not? Some 65% did not even look at the issue.
Peter Fanning: Perhaps I can help
on that.
Q94 Ian Lucas: Is that right or is
it wrong, Mrs Ghosh?
Helen Ghosh: I am sure that it
is right, because of the—
Q95 Ian Lucas: Is it acceptable that
they did not even look at the issue?
Helen Ghosh: What you would expect
to do when commissioning the building is to ask the person supplying
to say, "This is the outcome that we want. You provide us
with the thing that best produces that outcome." It might
be from renewable sources; it might be from other sources.
Q96 Ian Lucas: Was that done? Can
I have an answer to the question, please?
Helen Ghosh: I am not for one
moment disputing the fact that, as the NAO has found, it was not
done in those particular projects, but it was not a requirement.
That is the point that I am making. It was not a central requirement.
Q97 Ian Lucas: Should it be a requirement?
Peter Fanning: Not unless it is
demonstrably going to generate value for money in a sustainable
way. Perhaps if I can point you to items—
Q98 Ian Lucas: But has anyone looked
at it? What we have heard throughout this session—we have
all listened long and hard—is the patent failure of various
Departments to reach the various targets that were set and to
abide by what are, after all, compulsory assessments. I understand
the difference between the BREEAM assessments, which are compulsory,
and looking at renewable sources, which is not compulsory. But
what is happening is that no one has been ensuring that the compulsory
assessments have been followed.
Peter Fanning: It may not have
been a sensible thing to do, and that may have been obvious from
the calculations. If you look at page 13 of the NAO Report, it
is very clear that there were a large number of small projects
in the sample. For most of those projects, the average cost was
well under £5 million.
Q99 Ian Lucas: Five million or billion?
Peter Fanning: Million. It says
so on page 13. It is pretty clearly the case that if you are going
to go for renewable sources of energy, there is a capital cost.
The smaller the project, the more sensitive the value for money
assessment will be to that capital cost. I am therefore not surprised
that an Accounting Officer or financial advisers looking at a
small project would say that it is simply not worth spending a
lot of time and effort looking at capital investment in order
to use energy from renewable sources, specifically when they know
that energy prices may be so low that it would not be worth it.
You can inspect the numbers and come up with such fairly clear
conclusions at the time.
Helen Ghosh: This comes back to
the essential point: what we are not doing, whether through BREEAM
or the frameworks that we are now setting up, is telling people
how to do things. It may be in certain circumstances that renewable
sources are the best way in which to do it, but that is for the
project to decide, for the construction company to suggest and
for the people making the decision to decide. It would be very
dangerous if we in DEFRA or Peter in OGC said that you must put
in a photovoltaic cell.
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