To be published as HC 714 iii

House of COMMONS



Environment, Food and Rural Affairs Committee

Rural Communities

Wednesday 12 December 2012

Holly Sims

John Slaughter, Graham Biggs MBE and Sue Chalkley

Evidence heard in Public Questions 202 273



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Oral Evidence

Taken before the Environment, Food and Rural Affairs Committee

on Wednesday 12 December 2012

Members present:

Miss Anne McIntosh (Chair)

Richard Drax

Barry Gardiner

Mrs Mary Glindon

Sheryll Murray

Neil Parish

Ms Margaret Ritchie

Dan Rogerson


Examination of Witness

Witness: Holly Sims, Corporate Affairs Manager, Calor Gas Limited, gave evidence.

Q202 Chair: Good afternoon and welcome, Holly. Thank you very much indeed for agreeing to participate in our Inquiry on Rural Communities. Could I just ask you to say who you are and who you are with for the record?

Holly Sims: Yes, of course. My name is Holly Sims and I am the Corporate Affairs Manager at Calor Gas Limited.

Q203 Chair: Excellent. I know that a lot of people in my constituency are customers, so I am particularly delighted that you are here this afternoon. We have seen the figures for fuel poverty from 2010. Do you have any idea what the current figures for fuel poverty might be?

Holly Sims: No. We do not know. We are waiting on the next stats to come out from DECC. We do expect them to increase. Obviously, we are watching Professor Hill’s Fuel Poverty Review quite closely and we know that that is going to look at redefining the numbers, but I do not think that that is particularly the issue here. I think the numbers are what they are no matter which way you couch it. It is a problem and we know it is a particular problem in rural areas, so we think that that trend is just going to carry on increasing.

Q204 Chair: Excellent. What assessment have you made at Calor Gas of the Green Deal and the Energy Company Obligation? How effective do you think they are in tackling fuel poverty?

Holly Sims: I think, along with everyone else involved with Green Deal, we are still waiting to see what the final legislation looks like. Obviously, there have been delays, which I think perhaps is not helpful for anyone looking to make a commercial decision around whether to invest as a Green Deal supplier, assessor, provider and so on.

In terms of how it will affect rural communities, I think Calor, along with other parties involved in the rural landscape, were very concerned around the ECO. We welcomed the focus on solid wall. However, there was a feeling, I think, within rural areas that there is an awful lot of solid wall in urban areas and we have seen with previous assistance schemes-CERT and CESP-that the vast majority of the funding has gone to urban housing and rural housing has been left behind in those schemes. We know that it has not been effectively delivered.

We were very pleased to see the rural safeguard, the ringfencing of the rural communities’ pot of money. That is a very welcome later amendment to the ECO. I think we are interested to see again how that will work: will it reach the hard core, what we would class as our sorts of customers, those in very rural communities? Or again will the suppliers go for, say, the lower hanging fruit, which are still classed as rural under Government definitions, but are, say, market towns or urban fringes rather than the real rural customers that we serve? So we have concerns around it. We welcome the Obligation, we welcome the focus on solid wall, but I think we are looking to see how that goes.

Q205 Chair: Without having had sight of the details, are you able to hazard a guess at how costly it might be? How would you assess what the costs will be and whether there are going to be obstacles, such as the cost and such as any bureaucracy involved for people to apply to the Green Deal?

Holly Sims: I think it is very difficult to say. Obviously, we know the cost of solid wall insulation. Depending on which type of solid wall insulation you go for, it will run into, in the majority of cases, five figures. We think that ECO will be very useful in, in a way, propping up the Green Deal. So for those people who cannot get the Green Deal to fit within the Golden Rule because of the cost, ECO will be very useful in helping them to fit within the Golden Rule and therefore be able to access both Green Deal and ECO funding.

Some of the barriers to delivery I think are going to be just the marketing of Green Deal. Again, we welcomed the fact that the Government is putting aside money now to market Green Deal, which I know is a recent development. Previously, there was no money put aside and I understand that Green Deal is one of the few to escape the freeze on Government advertising and marketing. We welcome that, but I think there is still a huge amount of uncertainty around Green Deal. I do not think consumers know very much about it and, particularly in rural areas, we know that getting any information out into rural areas is difficult due to things like the lack of broadband.

Communication networks in rural areas just do not exist in the same way as they do in urban areas. The marketing of the scheme and making people aware of not only what is out there but how they can access it will be critical. That is where agencies have a role to play, people like rural community councils: trusted local advisers that are already working in rural communities will be key in spreading the message.

Q206 Chair: I know that we are often compared poorly with other countries. When I visit family in Denmark-and I think sometimes in Belgium as well-any new house is fitted with triple glazing. Is there more that you think we should be doing to encourage better insulation through building regulations, which we are coming on to. Is there more that you would like to see?

Holly Sims: Yes. Where building regulations are concerned, there is an issue with the existing standing stock, which I think is the primary issue that you have in rural areas. New build is very low in rural areas. We know new build as a whole across Great Britain has slowed down. I think annual housing starts were 6% lower in the 12 months to March 2012 than they were in the previous 12 months and I know that rate is declining. So we know that economic factors are having an impact on the rate of new build. That is particularly true in rural areas and so we have to be very careful to weigh up and have a careful balance between energy efficiency demands that we place on new build homes and those building firms that are constructing them and balancing that with affordability.

At Calor-and we have submitted papers on this through the building regulations consultation recently-we are very concerned that we are perhaps going too far too fast in terms of the building regulations and particularly the revisions to Part L of the building regulations. We think that it is perhaps going to put too much cost on to rural new build and that that will slow down and have an impact on an already stunted market. I know you are hearing particularly about housing from the next set of witnesses.

Q207 Ms Ritchie: Are you concerned that Energy Performance Certificates may disadvantage offgrid homeowners and, if so, what measures might be taken to prevent this?

Holly Sims: Absolutely, we are very concerned about the current structure of EPCs. Again it is something that we have written to Government about and talked about in a number of consultation responses. We believe that the current structure of an EPC is written in the wrong way. At the moment, the rating for the building is placed on the cost of the fuel. Obviously, offgrid fuels are more expensive than natural gas and so therefore any home that receives an EPC rating in a rural area will automatically score between one and two grades lower than that exact same fabric of building would score in an urban area.

This is of particular concern when you look at things like Government incentive schemes. We know in the recent FITs review Government was looking at limiting solar PV tariffs to those houses that scored a C or above in their EPC. Now, we know that a number of rural properties will never get to a grade C; it is just not going to be possible because of the way that the EPC is calculated. What we would like to see is a revision of the EPC to be based much more on EPCs they use on the continent-the French and German models-which look at the carbon intensity of the fuel, the energy efficiency of the home and do not place as great an emphasis on the cost of fuel, because in rural areas, where the cost of fuel will always be higher, you will always be pushing those homes down the EPC rating.

That is something to really be considered, particularly in light of things like the RHI. Once we get the domestic tariff coming in for RHI, if again that is based on a minimum EPC rating, you may find that the very homes that the RHI is aimed at simply will not be able to access the funding because of the way that the EPC is structured. It is something that we are urging both DECC and DCLG to take a look at. We struggle slightly, because the EPC and SAP seem to maybe fall between the two Departments. That has been a frustration of ours, going between DECC and DCLG on this, so we would like to see some cohesion between those two Departments to work out how the EPC might be more equitably applied, particularly for rural areas.

Q208 Sheryll Murray: Madam Chairman, I do apologise, but I should have declared a special interest because I use LPG for cooking and heating. Could you just tell me a little bit about fuel poverty and what might be done to address the problem of fuel poverty in rural areas, particularly in places like my village where we do not have mains gas?

Holly Sims: Fuel poverty in rural areas is something that Calor is very concerned about. To that end, we have been undertaking a threeyear project, an initiative called "The Future of Rural Energy in Europe" or the FREE project, as I will refer to it going forward. What that project has done is taken fuel poverty in purely offgrid communities, like your own village, and looked at what the causes and drivers are of rural fuel poverty. We know that they are very different from the drivers of urban fuel poverty, but we wanted to understand exactly what they were. In urban areas you often find fuel poverty aligning with, to a large degree, areas of social deprivation, whereas in rural areas we have discovered that that, in many cases, simply is not true. It applies to a certain extent, but there are many, many other factors.

Top of the list of those is the energy efficiency of the buildings. We know with solid wall, solid floor properties that have not been insulated, it pushes up energy costs. Of course, as I mentioned earlier, fuel costs are higher for offgrid properties and I will not sit here and pretend that they are not. They are, but that is just one of the drivers and it is a whole range of factors that cause rural fuel poverty. We know that benefit uptake in rural areas is much lower than in urban areas. Again, I believe it is down to the lack of communication that I was talking about earlier, the lack of awareness. We know that electricity switching is far lower in rural areas than in urban areas. Again, I believe, down to a lack of awareness and perhaps a lack of broadband and access to sites such as uSwitch. There are lots of complex drivers to rural fuel poverty and I have two reports, which I can share with the Committee afterwards, they are also available on Calor’s website, looking in much more detail at the drivers and the causes of rural fuel poverty.

In terms of what can be done about it, I think sometimes rural is perhaps written off as being too difficult. It comes back to what I was saying earlier: if there are assistance schemes they are often focused on urban areas. I am not saying that is wrong; I am just saying that perhaps rural gets sidelined as a result of that. What we found through our fuel poverty initiative is that when you work on the ground at a local level you get trusted intermediaries on board, you engage with rural community groups. Whether that is a local parish council, a farmers’ market, a mother and toddler group, you really have to get into rural communities at that level and then you can start getting some cohesion and some action. What we found was that umbrella Government schemes-CERT and CESP-simply do not reach into those rural areas and so things that are supposedly there to tackle fuel poverty in general simply do not get to the rural areas.

Q209 Sheryll Murray: Can I just ask, have you heard of the Cornwall Together scheme, which is driven from the local government upwards? It brings a lot of consumers throughout Cornwall together to try to negotiate realistic fuel prices-it is electricity in this instance-through bulk purchase. I know it is the leading scheme and the Government have taken on this example now and are looking to roll it out in other places. Do you know about it and would you like to comment on whether you think schemes like that rolled out on a national basis would help?

Holly Sims: I am not familiar with the detail of that scheme; I am aware of other bulk buying schemes. When the OFT recently did its call for evidence looking at the fairness of service availability in rural areas I know bulk buying was something that they recommended, collective energy switching and we saw recently again with natural gas and electricity the Big Switch scheme that was very successful.

In terms of heating oil, bulk buying schemes exist. There is a very popular kind of franchise scheme that Oxfordshire Rural Community Council piloted and has pioneered throughout rural communities. I know a number of rural community councils have signed up to that and I think that can work very well. In some of the work that we did through the FREE initiative, we surveyed a number of households and out of 200 households on oil fewer than 10% were involved in a bulk buying scheme. Again, there is some low hanging fruit perhaps there to be won.

When it comes to bulk buying with LPG the situation is quite different. The problem that we have is the density of customers. Heating oil is approximately 50% of the rural market and you tend to get whole villages that are on heating oil. When you look at LPG, it is less than 10% of the offgrid market and Calor, as a provider, has around 5% of that. We are looking at a very small number of customers; we have about 80,000 customers in total, so when you try and do bulk buying when you have very disparate customers, it is very difficult to make the savings there.

Q210 Barry Gardiner: You say you do not think the Green Deal is going to work. You are not enamoured of the Energy Performance Certificate because that is going to mitigate against people in terms of the Renewable Heat Incentive and feedin tariffs. You say that it is going to push house building costs up because of the EPC. It is rather convenient for you, is it not, as a fossil fuel supplier that none of these things are going to work and it is going to increase your profits? Is that right?

Holly Sims: No, I would not say that at all.

Q211 Barry Gardiner: Instead of just saying, "Okay, this is all rubbish and my company will be quite happy if it does not work", let us focus on how we can ensure that we get something positive that is going to address rural poverty, because that is what we are really interested in here, okay? It is rural fuel poverty. What positive have you at Calor got to say to this Committee about addressing rural fuel poverty?

Holly Sims: I would like to perhaps make clear-I am sorry if I was not clear earlier-that I do not think the Green Deal is going to fail at all. I said I think we need to wait and see more of the detail so that we can understand it. As a business, we are very interested in the Green Deal. We are looking at becoming involved within Green Deal perhaps as an installer, perhaps as an assessor. Again, we need to wait and see more detail on that. So it is not that I do not think Green Deal is going to work. I think if it does work it will be an excellent mechanism to bring funding into rural communities that previously has not been available.

Q212 Barry Gardiner: So you disagree with ACRE, who said that the Green Deal and ECO will not be effective in tackling fuel poverty. "It is well documented that households in fuel poverty are debt averse and will be reluctant to take out additional Green Deal finance."

Holly Sims: I think that that will be a barrier to uptake of Green Deal; I do not think that will be the case for all people in fuel poverty and for all people who want to get involved with Green Deal. We work very closely with ACRE. Was that in part of their consultation response to the Green Deal consultation or was that part of their evidence to this Committee? I am not familiar with that piece of work.

Barry Gardiner: I will tell you in a second. I think it was-

Chair: It was the Green Deal.

Barry Gardiner: Yes, in response to the Green Deal.

Holly Sims: I have worked closely with ACRE-and we liaised with them with regard to their Green Deal response. I cannot speak on behalf of ACRE, but I think what they are referring to there is the lack of that rural safeguard. I know part of their Green Deal response was to criticise the lack of rural proofing for Green Deal. In subsequent revisions to the Green Deal legislation, we have seen that addressed through the rural communities’ specific funding pot, so I believe that that particular issue may have been addressed.

In terms of the fuel poor being debt averse, yes, I would say that that is true. However, if the Green Deal works as it is supposed to do, then people will not be taking on debt, because they will never be paying more than-

Barry Gardiner: Absolutely, it goes with the property not with the person.

Holly Sims: If the Green Deal functions in the way that the Government has set it up to function, then I do not believe that that will be an issue.

In terms of what Calor can do and is doing, certainly the FREE initiative is a £1 million investment from Calor into trying to tackle rural fuel poverty. We have worked with rural community councils, with ACRE and with National Energy Action over the last three years to try to bring energy efficiency advice, fuel poverty awareness into rural communities. We have trained up advisers; we have an energy champions’ network. We have carried out village energy audits to try and understand where opportunities exist for insulation measures previously under CERT-

Q213 Barry Gardiner: How many households have you taken out of fuel poverty?

Holly Sims: It is not possible to measure that; we cannot say how many households we have personally taken out fuel poverty. The number of households that we have been working with across England runs into the tens of thousands, but as I am sure you are aware, it is impossible to measure the households we have taken out of fuel poverty.

Q214 Dan Rogerson: It is a question that I am sure around the table we would have a view to an answer, but we need to gather as much evidence as possible about the effects around what makes communities sustainable. We are talking about energy here as well, but in terms of the work you and your company has done in rural communities, why is the affordability of housing such a crucial factor in sustainable communities?

Holly Sims: In terms of affordable housing, I think that is part of the wider debate. It is an issue for Calor because a lot of our business comes from new build properties and we put LPG into new builds. There is obviously a commercial market for us there and when that market is depressed or when we see barriers to that market that is of a commercial concern to us. As part of a wider picture, we very much want to work with rural communities, on behalf of rural communities. Calor is probably the best known brand name out there in terms of rural energy. We are certainly not the biggest player, but we are probably the best known brand name and so therefore I believe we have a responsibility to try and represent rural communities within energy policy and housing comes within that.

We are concerned by the revisions to the building regulations. We are concerned that the Government is pushing for zero carbon homes four years ahead of the European targets. Under the Energy Performance of Buildings Directive, it calls for zero or near zero carbon buildings by 2020 with an interim step at 2015. What the current Government is pushing for is this to be achieved by 2016 with an interim step at 2013. Now, that is extremely laudable; however, is it practical to deliver this in the current economic climate where we have already seen house building depressed? At Calor, we have concerns that if you are adding to the cost of a new build then rural builders who often are building low volume housing will simply stop building. We have had conversations with the Federation of Master Builders and other organisations on that.

Q215 Dan Rogerson: Do you think the concept of affordability needs to take into account running costs as well as building costs, though?

Holly Sims: Yes, I think it does. Running costs are an issue; there are ways in which rural properties can reduce their running costs: obviously energy efficiency, and the more efficient that you make the home obviously the lower the running costs will be. However, we do not believe that the current building regulations are the only way to achieve this. A great deal can be done just by fitting condensing boilers combined with, say, a renewable such as solar thermal. That can do a huge amount to reduce costs and improve the energy efficiency of the building without going that full step to near or zero carbon at this stage.

Q216 Dan Rogerson: Finally, as a significant player in the rural market, as you have said, is your business looking at other forms of energy and getting involved in those, bearing in mind what Mr Gardiner was saying earlier on about fossil fuels being something that we are tracking away from?

Holly Sims: Absolutely. Over the last two years we have started retailing renewables, so we sell solar thermal, solar PV. We retail micro combined heat and power units. We have a partnership with a leading insulation provider, so we are now able to provide customers with a full energy efficiency package. One last thing: our sales force is also Energy Saving Trust accredited.

Q217 Neil Parish: I want to move now to the Rural Statement. What is your opinion of it? I see in the evidence that you would like to see rural housing and energy issues addressed in the Rural Statement, so what would you like to see in there?

Holly Sims: Things around the EPC: as we have already mentioned, it is a significant barrier for rural properties. I was pleased to see in the Rural Statement the focus on promoting and publicising things like the Green Deal and the Energy Company Obligation, also other incentive mechanisms such as the feedin tariffs and the RHI. We welcome that in the Rural Statement. We would have liked to see it go further. I believe it is just one bullet point of many within the Rural Statement and I appreciate the Rural Statement has a lot to encompass.

We would have liked to have seen more focus particularly on how Defra intends to promote Green Deal and ECO within rural communities. Certainly we would have liked to see the EPC issues addressed and again with the building regulations. We see the role of the RCPU to bring together Government Departments to look at policy across all Government Departments and I think there is something missing there with DCLG in terms of the building regulations, so we would like to see greater emphasis on that.

Q218 Neil Parish: Just one last point. I think not only on new build but on existing build with solid wall, the insulation and the cost of doing this does not fit into the Green Deal. I rather worry a lot of my constituents will have to pay extra for electricity but still not be able to get Green Deal. Is that your view?

Holly Sims: As long as they can access ECO funding then it can bring them into the Green Deal. Obviously there are quite strict criteria around ECO and again I know the executives responsible for delivering ECO are currently looking at that in great detail. We work with one of the suppliers in looking at ECO. As long as rural residents can access ECO, then it can bring them in under Green Deal. If they cannot access ECO, I do not think they will be able to get solid wall insulation.

Neil Parish: Can I just ask, Madam Chairman, that we have some written evidence on this, if we could-on the ECO deal and what British Gas is doing?

Chair: We did ask that earlier, yes.

Q219 Mrs Glindon: Are you satisfied with the level of engagement you have with the RCPU and that your concerns are taken on board by the Unit?

Holly Sims: Yes, absolutely. We have really welcomed the establishment of the RCPU. We have found them to be very open, very engaging. We were getting frustrated, as I said earlier, with the issues we have found with EPCs and SAP, where it was perhaps falling between DCLG and DECC and we felt that we were not getting anywhere with that. We went to Defra and asked for their assistance.

We went to one of the officials and she brokered a meeting for us that brought together DCLG and DECC, which was extremely helpful and we would not have got that meeting, I believe, without the intervention of the RCPU, so we have been very pleased to see it. We had concerns when the CRC was abolished, for want of a better word. We were concerned that that scrutiny would then not exist and we have seen that through the RCPU that scrutiny does exist and is working very well. We are very pleased with that and very grateful to Defra for the assistance they have given us.

Q220 Mrs Glindon: What does the RCPU need to do in order to ensure the views of the hardest to reach voices in rural communities are heard by Government?

Holly Sims: I think they need to carry on what they are doing, which is engage with the people who can reach those very hardest to reach, so people like Citizens Advice Bureau, National Energy Action, ACRE, the rural community councils.

If there is something that Calor has learnt from our corporate responsibility work in rural areas, it is that you have to dig deep into rural communities. People will not come forward, particularly if they are struggling, because of the stigma that is attached to it. Those people are very difficult to reach and it is through the trusted intermediaries, the people who are working on the ground every day in rural communities that you can engage with those people. So I think it is vital for Defra to keep talking to those groups and make sure that there is twoway communication between the likes of ACRE, the rural community councils and so on with Defra. That is the best way to ensure the hardest to reach are heard.

Q221 Chair: Just to follow up what you said in an earlier question, that there is a lot of toing and froing between I think you said DECC and DCLG. Would you add Defra to that and the fact that there are three different Departments involved? Do you see that that is perhaps not helpful to the policy being applied?

Holly Sims: The issue with DECC and DLCG was a very specific one around EPCs, SAP and building regulations. That is a very, very specific area for us. As far as we are concerned, Defra’s involvement has been vital in brokering that relationship, so I very much welcomed Defra’s involvement. It is fair to say, as a company, we have had far more involvement with Defra over the last couple of years than I think we have ever had previously. I would say that is a direct result of the RCPU. I think it is always difficult when there are different Government Departments involved in making decisions around policy, but I think Defra plays a key role in making sure that that rural voice is heard, because I think too often it is overlooked in policy decisions.

Chair: Excellent. Just in conclusion, if you would like to write to us again in addition when we see more details of the Green Deal, I think the Committee would find that very helpful.

Holly Sims: Yes, we will certainly do that.

Chair: Thank you very much for being with us today and participating in our Inquiry.

Holly Sims: Sure. Thank you very much.

Examination of Witnesses

Witnesses: John Slaughter, Director of External Affairs, Home Builders Federation, Graham Biggs MBE, Chief Executive, Rural Services Network, and Sue Chalkley, Chief Executive, Hastoe Housing Association, gave evidence.

Q222 Chair: If I can just welcome you most warmly to our proceedings this afternoon. Thank you very much indeed for being with us in our evidence session on Rural Communities. Could I invite each of you in turn to say who you are for the record, what you do and who you are with?

Sue Chalkley: My name is Sue Chalkley. I am the Chief Executive of Hastoe Housing Association. I will be speaking on behalf of Hastoe and we are a member of the National Housing Federation with extensive experience of rural issues. Hastoe is a rural specialist-

Chair: That is fine, thank you.

Graham Biggs: Graham Biggs, Chief Executive of the Rural Services Network, which embraces both the local authority side and another public service provider side.

John Slaughter: I am John Slaughter, the Director of External Affairs for the Home Builders Federation, which represents private sector house builders in England and Wales.

Q223 Chair: Excellent. Do you have a view on what the implications are generally for rural communities of building on greenfields and particularly whether it might have an impact on either, potentially, flood risk or food security?

Sue Chalkley: I certainly do have a view, because I happen to also be a Trustee of the National Flood Forum and I have been flooded myself. The risks associated with building on floodplains are perhaps overly focused on, in that I would much rather we all worked to increase general awareness of flood risk and the fact that more than 50% of people who flood do not flood from rivers or coastal flooding. So I think it is a much broader issue.

John Slaughter: Flooding is obviously a massive issue and very topical at the moment. I think, as far as our members are concerned, if you are applying for planning permission it is a standard part of the procedure that you undertake a proper flood risk assessment and that is properly considered and commented on by the Environment Agency. I think our view is that these issues are properly part of the public agenda, but there is an established process for ensuring that we are not going to be building in a way to exacerbate the flood risk or flooding problems.

Q224 Chair: Presumably, Mr Slaughter especially, you will accept that there are some places where it is inappropriate to build.

John Slaughter: Absolutely, yes, which is the purpose of the flood risk assessment.

Q225 Chair: Excellent. How many homes have received planning permission this year that will be built in areas that Environment Agency considers to be at risk of flooding?

John Slaughter: I do not have a figure with me today. There are clearly homes that are built in areas of flood risk, but the permission will always be dependent on putting appropriate mitigation or defence mechanisms in place.

Q226 Chair: Right. But if you take the scenario that Sue Chalkley has identified-I could take you to areas of my constituency that have flooded twice in the last two months from surface water flooding. What appears to be happening is that sewage outflows, sewage pipes are overflowing with surface water flooding from places that should not normally leak into sewage water out pipes. Do you think there should be an end to the automatic right to connect?

John Slaughter: No, we do not think there should be an end to that. That would be a massive problem from the building industry’s perspective and we see no justification for that.

Q227 Chair: Right. But at the moment you are asking people to live in houses that are flooding because the Environment Agency’s advice has not been followed and possibly, I might be in a minority of one here, but I would personally like to see water companies as statutory consultees and then we would avoid this situation in the future.

John Slaughter: Obviously the Environment Agency is a statutory consultee and provides advice. I think there are very few examples where the Environment Agency’s advice is not taken on board.

In terms of the drainage issues, of course I know you have a great interest in the Flood and Water Management Act as well and the new SuDS regime and our members are certainly entirely on board in terms of the need for there to be proper, sustainable urban drainage arrangements in place as part of new development; that is the other side of it. As I say, I think the number of cases where there is a decision to go ahead-which is ultimately the local authority’s decision; it is not the developer who has the ability to say yes or no, it is depending on whether the local authority ultimately decides to go ahead with a development-is very, very small. We would really feel that there is not a significant problem in terms of the types of issues that you are raising.

Q228 Chair: Okay. Well, I might beg to disagree. The lower figure is that in 2010 Government figures show 9,254 new homes were built on floodplains. A more recent figure from a Daily Telegraph article this month is that the Environment Agency has objected to 3,000 separate plans that would lead to 27,923 houses being built in areas prone to flooding. Do you think it is acceptable that when a local authority turns a planning application down because it is worried about being built on a floodplain that it is allowed on appeal by an out of area planning inspector? Do you not think that is giving developers a bad name?

John Slaughter: No, not at all. You would have to have reasonable grounds for appealing and if they were not substantiated the appeal would not be allowed. That is a normal part of the necessary checks and balances of the system. The 9,000 homes, they may be on floodplains but that is not to say that there are not appropriate defence or mitigation measures in place. You cannot just go off the number of homes built on floodplains. There are clearly large parts of the country-

Q229 Chair: What would you go on, then, if you cannot go by that figure?

John Slaughter: Can I just finish my point? The point is that you have large parts of the country where there is probably not an alternative to building on floodplains if you want to provide housing, because historically many settlements were built in-

Chair: Well, then build them somewhere else.

John Slaughter: Well, if the local authority would make these sites available, but they may not want to, because they may be areas of outstanding natural beauty or green belt or not an area of existing settlement. It is not a straightforward question. Looking at flooding is only one aspect of balancing where development should go.

Q230 Chair: What would the cost of a court case be for a local authority to appeal such a decision? You must know.

John Slaughter: I really do not know off the top of my head.

Chair: It is probably about upwards of £10,000.

John Slaughter: It may well be, yes.

Q231 Chair: How is a local authority in the present climate going to afford that?

John Slaughter: Well, I think it is equally an issue for developers; they have to afford the money. Before you ever get to the point of having an appeal, if it a significant development-and we have to be careful here because if the context is rural housing a lot of the developments we are talking about are very, very small ones-

Chair: Sorry, say that again.

John Slaughter: If we are looking at the context of the rural economy, a lot of the developments we are talking about in small communities are going to be-

Chair: Three hundred houses in Muston Road, Filey is not a small development.

John Slaughter: Well, if Filey is within the scope of the Inquiry, that is fine; I was not necessarily sure it was. The point really is that you have gone through a massively long process before you ever get to the stage of the appeal that you are talking about, including, from the developer’s point of view, potentially, for a site of 300 homes you may have invested an extraordinarily larger amount of money than the cost of the appeal in just making the planning application, submitting the consultancy studies, going through the environmental clearance processes. I think you have to see this issue in the context of the wider process.

Q232 Chair: So what explicit information do you, as developers, give to home buyers before they purchase their new home that it is at risk of flooding?

John Slaughter: I am not sure. I could not tell you off the top of my head.

Q233 Chair: That is possibly the problem, is it not?

John Slaughter: Well, I think you would provide any relevant information to a particular development, but if you have undertaken work in all good faith that has been agreed by the authority and the Environment Agency etc. to put in place protections and mitigation, then I guess you would probably inform the consumer of that in the first instance and therefore provide assurance that-

Q234 Chair: So you are prepared to do that. Do you do that?

John Slaughter: I cannot literally answer that, because I have not asked that question of our members.

Q235 Chair: Could you possibly ask that question and submit a written answer?

John Slaughter: Of course, yes.

Q236 Chair: Can I put a question to Mr Biggs and Sue Chalkley? Given this discussion and surface water flooding events since 2007, would you support a stronger planning framework that prohibited development in areas that the Environment Agency specifically considered to be at risk of flooding?

Graham Biggs: Again, I am inclined to the view it depends on the remediation measures and, quite clearly, if the land has flooded. Until three years ago I was a local authority chief executive and I was certainly aware in my own district of areas identified by the Environment Agency that nobody in living memory could recall ever having flooded. But if land has flooded, whether it is from river or from the land, then in my view you have to be very, very, very satisfied that the remediation measures agreed with the Environment Agency are up to the job on the basis of history.

Sue Chalkley: I support Graham Biggs’s response. All I would add is that I would like to see flood resilience built into the design and construction of all new homes, regardless of where they are.

Q237 Barry Gardiner: Mr Slaughter, you said in the HBF’s submission that mortgage availability is the biggest current constraint on supply: "If people cannot buy, builders cannot build." That is nonsense, is it not?

John Slaughter: No, not at all.

Q238 Barry Gardiner: Builders could reduce their prices, could they not?

John Slaughter: You would still have the problem of mortgage availability.

Barry Gardiner: What you have implied is that mortgage availability is the key and only problem here, but in fact if you look at the last 10 years, the house prices have increased by 94% compared to a 29% increase in wages and your labour costs. There is a clear margin here that would enable you to lower your prices and I would suggest to you that you are keeping them artificially high in order to make sure that-you are not building to maintain those prices, rather than saying "there is a need here, let us build them and lower our prices".

John Slaughter: That is absolutely not the case. Prices have come down since the top of the market. They are probably a good 20% lower in real terms than they were.

Barry Gardiner: They are 94% higher than they were 10 years ago.

John Slaughter: That is a reflection of housing shortage, supply and demand and the price of land.

Q239 Barry Gardiner: It would only be a reflection of housing shortage if, in fact, you did not have the problem that you say is causing you constraint, which is the constraint of mortgage supply. You cannot have it both ways, can you? You cannot say that the price is high because so many people want to buy and it is a reflection of the shortage and, at the same time, say that people cannot buy.

John Slaughter: That is not what I said. I said there was a supply and demand situation. I did not say that was about mortgages. The supply and demand situation is about land supply through the planning system. There has not been enough land supply to meet the level of demand that is out there. That is why house prices have increased. Mortgage availability is the thing that has happened since.

Barry Gardiner: That would imply that for every house you can build, that you have land availability, you have no problem in selling it. That is what you are saying to me.

John Slaughter: No, no, I am not saying that. There are two separate things here.

Q240 Barry Gardiner: Otherwise it would not be driving it by supply and demand. It would not be driving those prices up, would it?

John Slaughter: There are two separate things going on here. One is longterm land supply trends and the planning system simply has not delivered enough land. The problem of high prices in the housing market has been building up over 25 years or more in terms of the affordability problem. It is nothing to do with the current mortgage situation. The problem is that in the current mortgage situation it would not matter, frankly, if the prices-

Barry Gardiner: You said that mortgage availability is the biggest current constraint on supply.

John Slaughter: Yes.

Barry Gardiner: I am quoting you here. Do not now tell me that mortgage availability has nothing to do with it.

John Slaughter: I am not. I am trying to explain that there are two completely separate things going on here and you have to understand both and not run them together, because they are separate issues. One is land supply, which I have talked about. The second is mortgage availability. Prices were going up on a very long term trend before 2007, 2008 when the financial markets crashed, so you can quite clearly demonstrate a long term trend in reduced housing affordability for purchase that had nothing to do with the availability of mortgage credit, because mortgage credit was abundant. The problem was the shortage of physical supply. What we now have is a situation where-

Q241 Barry Gardiner: Okay, let me just stop you there then, Mr Slaughter. You say that there is a problem of physical supply, right, and the problem of physical supply means that you are constrained in the number of homes that you can build, is that right?

John Slaughter: That has been a constraint all the way through. What is different now is that you could build more or you could sell more homes faster if the credit was there.

Barry Gardiner: You said do not run them together, so I am trying to go with you and not run them together. Now you want to run them together.

John Slaughter: No, I am not running them together.

Q242 Barry Gardiner: Let us just look at the land supply and the availability of properties that you can build. Now, you said to me just earlier that the reason that the price has gone up by 94% over the past decade is because of supply and demand: that there are more people who want those properties than there are properties available and that is because of the constraint of land supply. Is that correct?

John Slaughter: Yes.

Barry Gardiner: Okay. So, in other words, you should be able to sell every property that you can build.

John Slaughter: No, because you need both.

Q243 Barry Gardiner: There is an over demand and an under supply is what you are saying, otherwise the price would not be going up, would it?

John Slaughter: No, there is a problem that people who would like to buy homes cannot buy homes. It is a question of what demand is realisable in a situation of credit shortage; that is the problem at the moment. What we meant in our evidence-and clearly as a business what you cannot do is invest lots of capital in building product that people then cannot buy because they cannot access credit. What you need to do to solve the housing crisis is both tackle the long term constraints on land supply, to have a better land supply, and to improve the credit position. You need to do both.

Barry Gardiner: So the constraint on land supply tends to put prices up.

John Slaughter: Yes.

Barry Gardiner: The constraint on mortgage availability would tend to depress prices, because it reduces demand.

John Slaughter: Well, it has depressed prices.

Barry Gardiner: Or, to quote you, "If people cannot buy, builders cannot build."

John Slaughter: Yes.

Barry Gardiner: But the third option is that, given that you have raised your prices by 94% and justified that on the basis of a restricted land supply, to cope with the problem of constraint of mortgage supply you could reduce your prices and you do not because you want to maintain them high.

John Slaughter: You cannot build sites on a nonviable basis. You have to make a satisfactory rate of return, so there is a limit to how far you can reduce prices.

Q244 Barry Gardiner: How much have your labour costs gone up?

John Slaughter: In what period?

Barry Gardiner: In the past 10 years.

John Slaughter: I do not know.

Barry Gardiner: By 29%.

John Slaughter: Yes, you said 29%, yes.

Barry Gardiner: How much have your prices gone up? By 94%.

John Slaughter: Yes, but that is supply and demand.

Q245 Dan Rogerson: Building on Mr Gardiner’s line of questioning, we go back one stage further. If you are arguing that you are making a fair and realistic return on the investment you do, the stage before that is the cost of land. There are two schools of thought on how you tackle that. One is to say you take the lid off planning, there is a lot more land available and the cost comes down. I would argue that in areas where that has happened it does not happen for the reason we have said, in that you do not necessarily want to see them get that much cheaper and so what happens is the land is available but it just takes longer to build them and so they sit there.

The other argument is that you go much tighter, so that you take away the hope value from land, particularly in rural areas, which we are talking about, so that land owners do not think "Right, I will sit on it because maybe I will get planning permission next year". They know they are never going to get planning permission unless they do a deal with the local authority to make things more affordable and so on and to provide land at a cheaper price. Which side of that argument would you come down on?

John Slaughter: In all honesty, I do not think that we feel that the hope value approach is one that will probably work on a wide scale basis. It can work in limited circumstances, possibly in small rural communities, but I think on the whole it is unlikely to work because, generally speaking, land owners are not in a hurry to sell land and if the price is not attractive enough they tend to think that they can wait until a period when it may be. The experience of our industry would certainly tend to take the view that ensuring the planning system fairly delivers a sufficient level of land supply to meet assessed requirements is the better way to go. If you go down the hope value route, you will probably end up, necessarily, with a smaller supply of homes than you need.

Q246 Ms Ritchie: According to the RGA, there are currently 400,000 planning permissions that have not seen development. Should land be taken away from developers where construction has not started after a year from permission being granted or if the development is taking too long?

John Slaughter: Well, no and no, but let me give you an analysis of the 400,000 figure, because it has received a lot of currency recently. We have done some analysis of this. First of all, those 400,000 plots are for housing associations as well as developers and some other players, but if you look at what we need to be building, 400,000 plots is not a lot. We are building over 100,000 units a year and we should be building 200,000 units a year, so it is really not a massively long land supply anyway.

Of those 400,000 plots, 62% or 63% are under construction; 75,000 are on sites where there are issues about viability not being sufficient for the site to proceed in current circumstances and there is a balance of about 70,000 for which probably-although we do not have the substantiated analysis on this-the likelihood is that a large part of those are probably on large sites where necessarily you do not start construction on all the units at one time. We have not published this information, but I am happy to share it with the Committee. The analysis of that 400,000 figure simply does not bear out that there is a land banking issue.

Q247 Chair: Could we put that question to Sue Chalkley and Mr Biggs?

Sue Chalkley: Very few housing associations engage in land banking. Certainly Hastoe does not do it at all.

Chair: But on the principle of whether planning permission should be withdrawn if the land is not built on. Do not worry if you do not have a strong view.

Sue Chalkley: I am not sure that we have a view. I cannot really speak on behalf of the National Federation on that one, sorry.

Graham Biggs: I would say it is a massively complicated equation, is it not?

Chair: If you want to say yes, just say yes.

Graham Biggs: Whether planning permission lapsing after five years is too long I think is really open for discussion. What is the purpose of the local authority withdrawing planning permission? It presupposes that it can allocate that planning permission somewhere else that will get developed. In rural areas we know the development time frame is years in the making, particularly if we are talking about exception sites. We need the right sledgehammer to hit the right nut and that may not be it, certainly in rural terms.

John Slaughter: I would just briefly say that you would also be introducing more risk into the whole environment if you went down that route. The likelihood is that you would simply deter people from wanting to come forward. If you were in a situation, for example, where a site was maybe quite difficult to take forward, you would probably be less inclined to proceed with it because you ran the risk of a clawback or some other penalty. You have to think quite carefully about whether any such measures would achieve the overall objective that is required.

Q248 Mrs Glindon: How effective are Section 106 agreements in providing affordable housing in rural areas and to what extent are they blocking housing development in rural areas, as implied by the provisions in the Government’s Growth and Infrastructure Bill?

Sue Chalkley: I think there are two facets to the answer. One is that, clearly, Section 106 is renegotiated to reduce the affordable housing element. Over a period of time there will be less affordable housing delivered. It may well speed up the delivery of housing schemes-there will be more housing overall, it is just the affordable element that will be reduced-but there is a particular thing to do with the Growth and Infrastructure Bill and that renegotiation and exception sites that we are concerned about. That is that a landowner sells an exception site at round about £8,000 per plot. It is just an enhanced agricultural value and he does it because he is making land available to build homes for people who live in the village.

If he thinks there is a possibility that that Section 106 can subsequently be renegotiated to increase the proportion of market homes, he either is not going to release the land at all or he is going to play games with the viability and the planning process. We are quite concerned about that and are lobbying that exception sites are excluded from that particular clause 5 of the Growth and Infrastructure Bill. It could unravel the whole system accidentally without people intending it to.

Graham Biggs: I would support everything Sue said.

John Slaughter: I think the point Sue has raised is probably a valid consideration in terms of the Bill. We have no issue with exception site policy per se. We are not sure it has delivered as much as it should do, but that is another matter. I think that is a fair point to consider in the Bill.

More generally, Section 106 obviously has been an important means of providing affordable housing. It is well established; it is well understood by the industry. I think the clause in the Bill more generally is one that we support, leaving aside the exception site point, simply because we think it is important that there is always an ability or incentive for local authorities to be prepared to have a practical discussion about the level of provision of affordable housing where, in current circumstances, it is an issue in terms of viability.

Q249 Richard Drax: Mr Slaughter, what experience have you had, so far as the Section 106s are concerned, where the terms demanded are so onerous that the development is unlikely to go ahead?

John Slaughter: It has been a fairly significant problem in practice over the last few years and affordable housing is usually the issue on which it focuses. That is because, firstly, affordable housing is very often the biggest single element of a Section 106 financial contribution.

Secondly, because probably, in practice-whereas other aspects of Section 106 may be something that is a necessity in terms of delivering the site that that provision has to be made-affordable housing is something that, in principle, is more negotiable within the legalities of the system. Financially, something like 50% of financial contributions through Section 106 are for affordable housing, so when you have circumstances, as we have had over recent years, where viability is much more stretched, then I think it is fairly likely that that is going to crop up.

I mentioned the analysis of 400,000: 75,000 of those 400,000 are sites that are classified as unviable. I cannot say how many of those relate to affordable housing, but it gives you some sense of the scale of the problem.

Q250 Chair: Just before we leave Mrs Glindon’s question, would you be happy that exception sites be excluded from the Bill, Mr Slaughter?

John Slaughter: I think so, yes. It is not going to be a major concern for our industry if that was the case.

Q251 Dan Rogerson: I have a slightly more arty question now. This is the view that we need to be looking at the quality of the environment a lot more. The planning Minister has talked about more beautiful places, that we do not need to be looking just at unit number, density and so on, but we need to look more at the placeshaping role. What is your view on that?

Sue Chalkley: I strongly agree. Hastoe’s rural specialist model is a different model from a normal development model in that we start with the community and the community ask for help with delivering their affordable housing, so we work alongside them. As a result of that, the scheme goes through many iterations of design and we do have a longer lead in period, but we end up with quite beautiful homes that add value to the community and people are proud to live in them. The long term maintenance and management costs are considerably lower, so whilst they might cost a little bit more upfront the benefit comes through. We have 30year business plans in the housing association sector, so we see the benefit come through over a period of time, so I strongly support that.

Dan Rogerson: Other sectors should probably think in the long term as well a bit more than they do.

Graham Biggs: I agree with Sue absolutely. Certainly in the district of South Shropshire where I was, our local housing association adopted exactly that philosophy. But you are talking about smaller numbers. There are higher infrastructure and development costs in rural areas; good design does cost a bit more. Those things do have to be factored in to the financing of rural housing.

John Slaughter: We support the objective of good quality placemaking. Something that the HBF has supported for over 10 years and we have just recently revised, and I can share the details of this with the Committee if it is of interest, is an initiative called Building for Life, which we work on with CABE, the Design Council and another partner. It is very much about promoting good quality outcomes in the planning process.

I think you have to be clear that it is not so much about the individual buildings, because customer satisfaction levels are very high on individual homes at 90%, but we agree that it is appropriate to have a good focus on placemaking. The NPPF gives a very strong emphasis to that. One of our hopes for the new system is in the way that it encourages a more constructive dialogue at local level. This will enable us to more generally achieve better outcomes.

Q252 Dan Rogerson: To move on to an issue of some importance to me as an MP in Cornwall, particularly North Cornwall-that of second homes and the impact that they have on the communities around them-how big a problem do you think this is and what might be the solution to dealing with it?

Graham Biggs: I think it is a massive problem in many, many rural areas. In fact, you may even regard it as being the thing that kicked off the high property prices in the first instance, with people being able to move out of urban areas and sell their relatively small property for a relatively large amount of money and buy the equivalent of a mansion in a rural area. We even see small cottages now being bought as second homes, so I think it does add demonstrably to the housing crisis.

Now, I have to say that many people who buy a second home eventually come to live there on a permanent basis and add an awful lot to the local community. I do not wish to appear to be entirely critical of the process, but it does add to those housing costs. I do not know what you can do to solve that particular problem. You can take council tax to 100%; fine, but I do not think it would solve the problem. Increasing it to 200% or 300%?

Q253 Dan Rogerson: I quite agree, so the only other tool that we have and one that we attempt to use to structure communities is planning. Matthew Taylor’s report dealt with this, so did Elinor Goodman’s a while before. They both suggested planning use categories as being something that could be done. Do you think there is mileage in that?

Graham Biggs: Yes.

Dan Rogerson: You do, so you would support that.

Graham Biggs: Yes, it was part of our evidence to both of those inquiries.

Q254 Dan Rogerson: Okay, thank you very much, excellent. Can I put the same question to Mr Slaughter?

John Slaughter: About planning use categories?

Dan Rogerson: Yes, in particular, but only if you have any general points.

John Slaughter: I guess we would not start from there. We would start from the principle-I agree that it is very hard to control and legally it is difficult to stop people buying second homes, so our view is that what is needed is positive planning for the community’s requirements. I do not think it would be our preference to go down the Use Classes Orders route, because we have a general view that one does not want to make the Use Class system more complex than it needs to be.

I think there are potentially other ways of working through this. There are tools available through the NPPF and neighbourhood planning. There are other initiatives out there. There is the Community Rights Bill; there is the growing interest in custom build. All these are models that could help meet the needs of areas such as your own.

Q255 Dan Rogerson: The issue is that most of them ultimately end up with inflating housing numbers above and beyond the needs of the local community or, indeed, the local tourist industry. What is to stop those houses then being bought, unless we are looking at affordable to rent or shared ownership, which of course are a particular market, but in terms of the open market it is vulnerable.

Sue Chalkley: Some 2.8% of our population currently have second homes, which is absolutely huge when you think that we are spending money to look at how we can bring empty homes back into use and yet there is such a huge proportion.

I find it ironic that often when we are developing schemes and we are responding to the parish council that has come to us and asked for help, it is very often the people who have second homes in the village who then start objecting. In one of my submissions you will see that I have shown a graph indicating second home ownership by district council and the volume of town and village green applications. I would suggest in a number of cases they are vexatious and they run in parallel. I do wonder whether their first priority is the value of their home or the ongoing viability of the community.

Can I just say that in the last 12 months we have had two people approach us saying, "Can I bequeath my home to Hastoe on condition that you use it for local people in the village, because I really do not want it to end up as a second home and be empty through the winter?"

Q256 Dan Rogerson: The last point you made was about consultation, which is an interesting one. If we are now moving to a process of neighbourhood plans and those going to referendum in a community, do you think it is important that those on the register are those who have a stake in the community rather than those who might just have a property there?

Sue Chalkley: I have not thought of an answer. Instinctively, I would like to agree with you.

Q257 Ms Ritchie: To what extent are rural exception sites the key to providing housing for rural communities and should more market housing be allowed in these sites if this leads to more affordable housing?

Sue Chalkley: The vast majority of our programme is on rural exception sites. They are the real key to unlocking and responding to rural communities, because they feel safe with the exception site policy. It has been a very successful policy from the point of view of responding to individual rural communities and the families that we have been able to help. Hastoe has lobbied and we have developed schemes where we have had two or three open market sales on a scheme where there has not been grant, so that we can crosssubsidise and make the scheme work. It has to be managed very sensitively, because if it goes a little bit too far then you do get the hope value and you do get landowners looking to raise more.

Graham Biggs: That would mirror my experience exactly.

John Slaughter: I have already touched on this. We have no problem with the principle of rural exception sites. Our view is that they have not delivered enough to meet the needs in rural areas. I took part in the discussions on Elinor Goodman’s Affordable Rural Housing Commission some years ago. I took part in a big conference that was held for that and talked to a number of councillors from rural areas around this very question. I was quite surprised that they did not necessarily support the rural exception sites policy themselves. There was quite a lot of discussion about it at that time as to whether it was the best model. Again, not saying it was the wrong principle per se but simply that it was not ever going to deliver enough to meet the scale of need.

Q258 Chair: Can I have a quick yes/no answer to this one? All new houses: will they have access and infrastructure to superfast broadband in rural areas?

John Slaughter: Not as things stand.

Q259 Chair: So what are you going to do? Will you make it a requirement of the planning process that they should?

John Slaughter: You could do.

Chair: We will take that as a yes.

John Slaughter: Can I just say there is one important point here? British Telecom is not necessarily in favour of this as a universal service standard. Therefore, at the moment, from our members’ point of view, we often do put fibre optics into new developments, but it is not mandatory. There is a problem in that BT does not appear to necessarily support it being mandatory, but I think in principle, yes.

Chair: We shall take that up with BT.

Q260 Neil Parish: A fairly straightforward question: why is affordable housing important for sustaining rural communities?

Graham Biggs: Because without it those rural communities will age, the rural shop will close, the school will close-

Neil Parish: They are doing that already-keep going, sorry.

Graham Biggs: Unless you have some affordable housing breathing new life back into the village there is only one alternative to that and that is the village will slowly die. Having lost it, you will not get it back. That is my opinion.

Sue Chalkley: That is the point: a lot of villages still have that intergenerational support network that works so well. It is the Government’s Big Society in action in these rural villages and once you prevent the children of families being able to stay living in their home village they move away and it is gone forever. The schools close, the post offices close.

Neil Parish: That leads you into the school situation, where there are not enough children for the school.

Sue Chalkley: Yes and then there is no hope, it has gone and then it just becomes a retirement village.

Q261 Neil Parish: Before I bring John Slaughter in, can I just ask: rural areas are home to 19% of the population, but will receive only 10% of homes built under the affordable homes schemes. What are we going to do about that?

Sue Chalkley: I am slightly worried as well that the outcome might be even lower than that, because a number of nonspecialist rural housing associations said that they were going to develop rural but are now finding it a bit more complicated than they thought and they are substituting those schemes with urban schemes. I know it is a dirty word to say "target", but because there is no target or there is no particular imperative to deliver the proportion of affordable that was originally in the programme, we may not even achieve the 9% that was there originally.

Q262 Neil Parish: Does John Slaughter want to say anything?

John Slaughter: I support the objective. Again, going back to Elinor Goodman’s work, I heard at firsthand how vital providing affordable solutions for local people is. I totally agree. I think the only question really is the best delivery mechanism, the best method through the planning system and how you can bring finance in to provide it. I guess we would say, look at as diverse a set of solutions to providing affordable solutions as you can.

Q263 Neil Parish: The next question is similar. Under the Affordable Homes Programme the Government have committed to build approximately 80,000 affordable homes by 2015, but only 8,000 of these in rural areas. I suspect it is rather optimistic with the 80,000 and the 8,000. What are your views on that and how do we stimulate it?

Sue Chalkley: From the point of view of proportion, I think some kind of target or monitoring as to what proportion is delivered. The Government is trying to respond with the loan guarantees. There are things that can be done. The simplest answer is one that I know is not going to happen, which is more grant, because a lot of associations are getting very highly geared.

Q264 Neil Parish: Yes, because over the years the grant has been whittled away for housing associations, has it not?

Sue Chalkley: Yes.

Q265 Chair: Does anybody else want to comment?

John Slaughter: You have to bear in mind that is also an issue for our members, because when you talk about Section 106 as the delivery mechanism it is supported by the finance that is available for affordable housing. If the finance is not there it is going to affect all of our ability to deliver.

Q266 Neil Parish: Would it be right to borrow as well, because interest rates are low?

Sue Chalkley: Housing associations do borrow. My association has just gone to the bond market and raised money at a very good rate, so we are doing our best.

Graham Biggs: I just make the point that a number of our members are saying to me that when they go to their funders for new funding they are being told, "Yes, as long as you renegotiate the whole of your historic package", which blows any new schemes out of the water from a financial viability perspective.

Neil Parish: Typical banks.

Q267 Richard Drax: Are you worried that the Affordable Rent model, where rents are tagged at 80% of the market rate, will mean that houses under the scheme remain out of reach for many rural workers?

Graham Biggs: If those rural workers are earning their income in the rural economy, as the question implies, then yes, that 80% will take them outside of affordability in a lot of cases.

Sue Chalkley: Or put them on to partial housing benefit, with the issues that that brings with the welfare reform.

Q268 Richard Drax: Mr Biggs, if I may ask you this question: what impact have neighbourhood plans had on the provision of affordable housing in rural communities?

Graham Biggs: It is too soon to say. There is lots of history in rural areas of village plans, community plans-call them what you will-on an informal basis. Many of you in your constituencies will have had the experience of pretty much everybody in a village supporting the concept of affordable housing and then being opposed to it when a site is identified. I think neighbourhood planning has the opportunity of having that negotiation with the community much, much earlier in the process and an understanding that will lead to better outcomes. Certainly we have done surveys of our members and there is a lot of hope out there for the new system.

Q269 Chair: I have an eye on the clock because we are expecting a vote. You mentioned housing benefit there, Sue Chalkley. Can I just ask if you are concerned about the impact of housing benefit reforms on under occupancy?

Sue Chalkley: Yes, particularly in rural communities. We have a policy of, where we have a young family, allowing them a spare bedroom so that they can grow into their home, because there will be nowhere else for them to live-those eight, perhaps, homes in that village are the only affordable homes. We will not, potentially, be able to do that in future.

Q270 Chair: Am I right in thinking that housing benefit will now be paid for the month?

Sue Chalkley: It will be paid monthly. There is an issue about people having bank accounts and the money going direct to them rather than to us.

Q271 Chair: Have you expressed your concerns to DWP about that?

Sue Chalkley: Putting my National Housing Federation hat on, they have been working very closely with DWP on the development of welfare reform.

Graham Biggs: I think there is one other issue. Sue has referred to the younger families. There is also a big issue for older people living in their family home where there simply is not a house of a smaller size within that village. You are suddenly forcing people who have brought their families up to move perhaps to the nearest market town.

Q272 Chair: Mr Biggs, do you share Sue Chalkley’s concern?

Graham Biggs: Yes, absolutely, and we have made representations.

Chair: It has been raised to me locally and I am sure that it will be the same, that if people spend that money before making its way to the landlord or the housing association, it could pose a potential crisis in rural areas.

Sue Chalkley: The Government is consulting at the moment and there is work looking at how much arrears people can accrue before the benefit can go direct to the landlord, so there might be some movement on that one.

Q273 Dan Rogerson: Briefly, on a different area of policy, and particularly with Mr Biggs in front of us and the work that he and his organisation do on this. Funding in general: an issue that has consistently been raised with us is that whatever the formula might say and the target that the Government say a local authority or a health trust or whatever should get, quite often there is a distance from target and the damping process stops it from happening. I just wanted to give you the opportunity to say something on the record about the damping mechanism and how it affects rural areas.

Graham Biggs: Absolutely. If you look at the proposals from the Government in terms of its latest consultation-next year’s finance settlement is not due out until next week-they consulted on improving the value of sparsity of population within the formula by quite a significant extent. They then immediately, through damping, lost on average 75% of that. It does seem to us blatantly unfair that suddenly, after decades, there is recognition of those extra costs for providing services in rural areas, but then you lop the system off for seven years and before you do that you damp 75% of it away. This is not a transitional release scheme where a bit of it will be clawed back each year; it is going to be lopped off for seven years. I remain hopeful but not expectant about the settlement next week.

Chair: Thank you very much indeed for participating. This is our last formal session before Christmas, so we wish you and all our witnesses the compliments of the season and to the Committee the same. Thank you all for your patience. We have been on quite a tight timetable for reasons you will understand and we are very grateful to you for being with us this afternoon. Thank you very much.

Prepared 27th December 2012