Environmental Audit Committee - Minutes of EvidenceHC 202

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Oral Evidence

Taken before the Environmental Audit Committee

on Wednesday 13 July 2011

Members present:

Joan Walley (Chair)

Peter Aldous

Neil Carmichael

Martin Caton

Zac Goldsmith

Simon Kirby

Mark Lazarowicz

Caroline Lucas

Ian Murray

Caroline Nokes

Mr Mark Spencer

Simon Wright

________________

Examination of Witnesses

Witnesses: Gregory Barker MP, Minister of State, Department of Energy and Climate Change, Dr William Jordan, Chief Sustainability Officer, Cabinet Office, and Trevor Hutchings, Head of Strategy and Delivery, Office of National Energy Efficiency, Department of Energy and Climate Change, gave evidence.

Q1 Chair: I think I can safely resume our second session of the afternoon and, indeed, thank our Minister for coming along and for your patience. We apologise for the late start. There was a Division in the middle of our previous session, so that has slightly delayed us. None the less, we want to give DECC an opportunity to come along and talk to the achievements in respect of the objectives in terms of greening Government. We thought it was fitting that you should have an opportunity to come along and speak to the outcomes that have been done.

As a starting point, Minister, it would be helpful for the Committee to know your role in the Ministerial Working Group, and perhaps to have some idea to what extent you were needed to push and challenge individual Departments-whether or not they needed it-and perhaps give us some indication of why some Departments managed to achieve a bigger percentage emission reduction than others. It is an opportunity for the Committee to become familiar with the achievements or shortcomings of the work over the last 12 months.

Gregory Barker: Thank you very much, Chairman. First of all, I have to say there was a huge sigh of relief when we achieved this target because, when it was set by the Prime Minister shortly after the coalition was formed last year, there were many voices, both inside and outside Government, who said that we would not be able to achieve it. It was for exactly that reason that the previous Government had declined to sign up to the 10:10 campaign. There were a number of voices who were not unsympathetic to the idea, or the aim, but who simply felt that it could not be done practicably. You have to remember that it was a very challenging target and it involved 300,000 civil servants across 3,000 buildings, as well as central Whitehall. You are talking about a whole range of buildings-jobcentres, court buildings-not just the departments in a half-mile radius of this building. The amount that we saved was 13.8% in total, so we smashed through the 10% target. Over the 12 months to 13 May, Government reduced carbon emissions from their estate by over 100,000 tonnes of CO2, from a baseline of 764,000 tonnes. We estimate that it saved us about £13 million.

How did we go about doing that, particularly when there was this degree of incredulity that it could be achieved at the outset? Firstly, I spoke to a number of people in the private sector who had been able to achieve that quantum of reduction, in particular Stuart Rose at Marks & Spencer with their Plan A, but also Kingfisher, Tesco and HSBC. All had significant experience of driving very substantial energy reduction in their businesses, and we used them as an exemplar of success. The message from everyone we spoke to in the private sector was that this has to be a project that is owned from the very top of the organisation. It had to have leadership from the front. It could not be a token "Please do this" handed down to the staff. There had to be engagement, right the way through the hierarchy, all the way through.

The way it worked is that we established cross-Whitehall communications involving all 19 Departments, with very strong support and led by the Cabinet Office. On my left I have William Jordan who played a fantastic role in operationalising the programme, and my colleague from DECC, Trevor Hutchings, who oversaw the DECC strategic input into this. We had a Ministerial Working Group that met at regular intervals; monthly to begin with and then quarterly towards the end once we had a degree of momentum. As we went through we used examples from Ministries that were doing well to give them ideas of the sorts of things that they could do. One of the obvious questions that came up at the beginning was, what do we actually do? What is the range of interventions that could be made? We gave them practical examples of things that had already worked in the public sector or that had demonstrably worked in the private sector, and we had presentations to both Ministers and civil servants.

In July, I called in all the facilities managers; not the most glamorous or front-of-house public sector officials that you often see in the headlines but absolutely critical. They played a vital role in enabling us to achieve this. We called them all together. I think it is the first time they had been together. We had them at the Treasury, and provided them with a very clear political imperative that we had to meet this target and that it was something that the Prime Minister was personally committed to.

There was a Cabinet discussion in September. At the end of September, the Prime Minister launched a competition for energy saving between the various Departments. But you have to differentiate between-

Q2 Chair: Who judged?

Gregory Barker: It wasn’t a beauty parade; it was simply-on data-who managed to get the best reductions.

There are two elements. One is the behavioural change and things that people could do; turning off lights, turning down switches and doing without energy-driven appliances. At the same time there were also things where we needed buy-in from facilities management and the people who run the buildings. In some cases they were required to put in new kit. At one end of the spectrum it was turning off lights; at the other end of the spectrum it was introducing voltage optimisers, putting in new boilers, putting in better chillers and putting in light sensors. In DECC now, for example, people will tell you that they walk past and the lights are all on in the middle of the night; that is because my civil servants are working all hours-the moment you stop moving the lights go off.

In October we continued with the regular ministerial updates, and-because we could not get everyone contributing-we called before us those who were laggards and challenged them, and also brought forward those Departments who were-

Q3 Chair: How did you identify that?

Gregory Barker: Because we were keeping a month-to-month tally. We had a projection of where we needed to be. Each Department was given a budget, effectively, that they had to perform against. We could see if they were on track to meet that, and we could see those that were under and those that were off. Obviously there was an aggregated one as well. It was quite nail-biting. It was by no means clear that we would absolutely smash through in the way that we did until quite late, not least because we had had a very stiff winter early on as well.

To complete that, we had the Prime Minister raising it at Cabinet in March. When we still had a couple of months to go, he again raised it in the Cabinet. He wrote to all Cabinet Members telling them they would be accountable for this, as did the Cabinet Secretary.

Have I left anything out? I think that is it.

Q4 Chair: Was the Prime Minister judged in this?

Gregory Barker: Was he judged? No. 10 were a participant in it and they also went through the 10% mark. I think every Department managed more than 10%.

Q5 Chair: In future will Departments be given differential targets?

Gregory Barker: That is a very good question. They all have to meet the 25% reduction so I guess not, is the answer. Is that right, William?

William Jordan: Yes. We have not set differential targets for Departments because of the complexity that would be involved.

I think one of your questions was why have some Departments done better than others. Often that reflects what has been done in previous years. You will see that one of the Departments that has achieved the target, but is not towards the top of the league table, for example, is Defra. You might wonder why that was when Defra is one of the lead Departments on sustainability in Government. The answer is that it had already done a very great deal to push sustainability into its estate, so the target was much harder for that Department than for some others.

Gregory Barker: I should mention that DECC had also done quite a lot under the previous Government, but we managed 21% reduction in emissions.

Q6 Chair: To go on to that, if the targets started from different places, surely some degree of differentiation could be very important?

Gregory Barker: Ultimately, we all have to achieve the targets; nationally we have to achieve the targets. We have to get to that 25%, and that 25% is not the best we hope to achieve. That is the de minimis. We have tried to set a target culture now of under-promising and over-

Chair: The target culture?

Gregory Barker: That is different. No, I haven’t finished the sentence, Chairman. That is under-promising and over-delivering, and with much fewer targets. So people are very clear about what they need to do. We did have a long discussion with certain Departments about this. There was a lot of special pleading but in the end we have had to be quite robust.

Q7 Peter Aldous: It seems as if it has been quite exciting for you over the last year. Can I ask why you have now gone for a 25% target over five years instead of keeping the momentum going and, say, doing another target for the coming year and then for the year after that-doing it on an annual basis?

Gregory Barker: The reason is, obviously, the more you get into it, the harder it gets. You cannot keep taking behavioural change. You can only push these things so far. A lot of the more profound reductions in energy use now have to come from investment; from interventions in the fabric of the building; interventions in the heating systems, which can’t necessarily be done immediately, or, where there is a case that they ought to be done over the cycle, at the point at which it makes sense to replace a boiler, or the point at which it makes sense to upgrade lighting or cooling. It takes longer. The higher you go, the more difficult it gets. But 25% over five years is quite ambitious. I have no doubt that we need to go further than that.

If you look at what has been achieved in other comparable organisations in the private sector, they have achieved beyond that. I think 25% remains very realistic and achievable, but I do not underestimate that it will be quite hard for some of the Departments to achieve. At DECC for example, or Education, where they are already at 20%, clearly it is not going to be very difficult, but across Government it is going to be more difficult. Of course, we are widening the scope of the 25% to beyond those 3,000 buildings. We are going right across Government, including the NDPBs as well.

Q8 Martin Caton: Minister, in your reply you indicated that industry representatives on your working group brought best practice from the private sector to the public sector table. That also gives the possibility of regular comparison between achievements in the private sector and the public sector. Have we reached the stage yet where Government Departments have equivalence with those exemplars from the private sector?

Gregory Barker: It is difficult to say objectively because you are comparing, first, buildings and, secondly, different types of usage, possibly. I think it now buys us the right to talk with credibility to other private sector organisations about the virtues of energy efficiency, and to talk with some authority. When industry or business come to us and complain about targets that we may be setting for them in the context, say, of the CRC or other energy efficiency targets or carbon reduction, we can look them in the eye and say, "We have just reduced emissions in a big, old central London office building by 20%. These things can be done and we will go on and achieve further cuts". I do not think there is a direct comparison, because every building is slightly different and usage is different, but I think it buys the coalition credibility when talking about these issues.

Q9 Martin Caton: In future will you continue to use representatives from private industry to help you?

Gregory Barker: Absolutely. I think exemplars, wherever they come from, are always useful, particularly as you get into the harder target. As you go up the hill, practical examples of what can be done, how it can it be done and the time scale over which it was achieved, are really important to lending credibility to the ask that we are making. It was being able to say to some of those facilities managers, "You can do it, and this is how other people have done it in their buildings, which are just like yours." The practical case studies were the most powerful tool we had.

Q10 Zac Goldsmith: I think the 25% applies just to the 3,000 Government buildings. Are there any targets for the wider public sector? How ambitious could you be there?

Gregory Barker: No. It is going beyond the 3,000 buildings. Trevor, do you want to say something?

Trevor Hutchings: The 25% is wider in scope in a number of aspects. One is it covers all of greenhouse gas emissions and not just carbon, which was what the 10% was based on.

Gregory Barker: There is not a lot of methane coming from them, though.

Trevor Hutchings: No, there is not a lot, but also it is going to be covering a lot more buildings than the 3,000 at 10%-we think something in the order of 50,000 buildings-so it is a much wider scope than 10%, and the previous SOGE targets, as well, that were set for carbon reduction. But it will not cover into the wider public sector or into local authorities.

Q11 Zac Goldsmith: Broadening it out a bit-I may be abusing the fact that you are here-presumably the proposed EMR reforms will make the job easier for the wider public sector, in the sense that they will put energy saved on a par with energy produced. You will be able to have different types of energy contracts, presumably as a first base.

Gregory Barker: Yes. There is not much of a link with EMR. First, because of the time lines, EMR is not going to kick in much before the period. Secondly, the types of energy efficiency measures are not necessarily the ones that you would anticipate being bid into a capacity market. I think we want to see the private sector taking advantage of that rather than the public sector.

Q12 Zac Goldsmith: Under the proposals, would it be possible for an energy company to bid for a contract that included large sections of the public sector? The NHS buildings in the-

Gregory Barker: That does not need EMR. That just needs a different mindset and a different culture in working. One of the things that we do wrestle with-we haven’t yet found a solution to it, because it is a very technical problem-is trying to create a way to allow private finance to effectively come into the public sector and fund, on an ESCO basis, many of the interventions that you refer to. That is not a question of EMR; that is a question of accounting treatment. There are some exemplar projects that have already taken place, but at the moment there is no uniform answer that satisfies the Treasury. We have to do more work to come up with an ESCO model that can work in the private sector, which will satisfy the Treasury that we are not adding to the PSBR. It is quite complex and technical; it is probably a session in itself.

Q13 Caroline Lucas: I want to re-press the point about differential targets. I know we have discussed it, but I just wonder if you could say in your response whether much consideration was given to differential targets into the future, because it does seem to me that it would be much easier to meet more ambitious targets if you were to have differential targets as you move forward.

Gregory Barker: Do you think the targets should have been differentiated with higher targets for some or lower targets for some?

Caroline Lucas: Both, but recognising for those that have already done a lot that it might be fairer to give a lower target, but then also giving others a significantly greater target. Also to do it, as Peter said, on an annual basis, because I think that would have driven the momentum more effectively than a blanket 25%.

Gregory Barker: We will continue to monitor progress on a quarterly basis as well as an annual basis. The reason why we need a longer time span now is that in order to get beyond the measures that we have put in place and the reductions that we have made, you need to make investment decisions that go beyond 12 months, or decisions that you would not make if you only had a 12-month horizon. Some of the things that we need to put in place may have a horizon that goes beyond four years.

In terms of differentiation, do you want to say something, William, because you have dealt directly with the individual Departments?

William Jordan: I think in many ways the best way of effectively setting a differential target is to agree the right baseline year. We are now working with the baseline year just before the start of this Parliament. If we continue to measure against performance in that same baseline year, it means that if you have done particularly well in year one, you do not have to do so well in years two, three and four. If you are a laggard in year one, you need to catch up. I think that is probably the fairest way of setting a target that is uniform but does give credit for early achievement.

Q14 Caroline Lucas: Can I come back on the baseline targets? I have a question that is quite complicated. As far as I understand it, it seems that the 10% initiative allowed Departments’ target baselines to be adjusted for changes in particular Departments’ responsibilities. Would it not have been a bit clearer if you had adjusted the way performance was scored for the effects of things like office closures or reductions in civil servants, for example?

William Jordan: It is a really hard set of questions, which do not have an easy or simple answer. How best to set a target? What we told the Ministerial Working Group we would do at the conclusion of the year when all the data was in was to give our best sense of where, in aggregate, we thought there had been reductions in Civil Service numbers, or in the size of the Civil Service estate, just as a comparator so that you could see how one figure varied against another. We also provided some data on historical movements, looking at performance against the previous Administration, SOGE targets and ONS numbers for the Civil Service.

ONS numbers for the Civil Service this year currently suggest that if you took the Civil Service as a whole-this target does not quite apply to the Civil Service as a whole but to about 300,000 civil servants-numbers have fallen by about 4% across the year. If you average that across the year to see what impact it would have on the target, it is probably about 2 percentage points. If you look instead at office space, where we have done some calculations around the scope of the 10% target, we think we are probably occupying about 6% to 7% less office space than we were a year ago. Once again, if you average that differential over the year, it is probably about 3.5 percentage points.

If you set targets around the carbon per FTE or carbon per square metre, it introduces a whole lot of subsidiary incentives that you might not want. For example, we do want people to rationalise their estates; we do want to cram more people into the same space effectively, which is quite good for working if you are hot-desking. You have colleagues at the next desk and you meet other people in the organisation. But if you are hot-desking on, say, a 10:8 desking ratio, which is the sort of thing we have been recommending, you are heating and lighting less space, you are using fewer buildings but your energy per metre squared has actually gone up.

Gregory Barker: A real lesson that comes out of the last year, though, is simplicity of the target. While I appreciate the logic behind what you are saying about differential targets, having one very clear, easy-to-communicate, success-or-failure target that applied equally across Government really made it very simple. It was a great response to all the special pleading. There were a number of Departments who argued very strongly that it should not apply to them and we argued back and won and that, yes, it should.

Q15 Peter Aldous: Why did they argue?

Gregory Barker: Because it is difficult and it is complex. We argued that they should, and had we had a differential in there I am sure we would have adopted it, but because we made clear from the beginning that we would not, we drove that target. The Ministry of Defence have already made good savings across their estate. They have a very complex estate and a number of buildings that are not like any other buildings you would normally expect. They were very concerned at the outset that they would not be able to meet the 10%. We had some very significant discussions with them. They came through with a 14.8% reduction. They did really well. Seeing is believing. Had that been an option I think we would have ended up going down the differentiation route. Having very clear, very simple targets is certainly one of the lessons that comes out of it.

Q16 Peter Aldous: Just concentrating on this, on the Ministry of Defence buildings. Compared to the SOGE regime, which included 48,000, this one only covered 3,000 offices. I think the main difference was that a number of operational military facilities were excluded. Why was that?

Gregory Barker: Because things like firing ranges are not heated and you have a lot of buildings that do not have conventional or year-round use. Buildings on Army ranges that have only a very occasional use or could be used for mock fighting have a very different application.

Q17 Peter Aldous: Why were they included in the SOGE regime in the first place?

Gregory Barker: I don’t know. Do you know that one?

William Jordan: Once upon a time the Ministry of Defence had a very clear view, which was that it was impossible to differentiate their buildings so they would, "like to report on all of them, please". When we used to monitor the SOGE targets, bodies such as the Sustainable Development Commission, always used to say to us, "It would be much better if you could separate the office estate from the military estate, because they are two different beasts, and report them separately."

This year for the first time we have succeeded with the Ministry of Defence in separating what is essentially the office estate-63 buildings on 23 sites, which were part of the 10% target-from the wider military estate. The wider military estate still forms part of the SOGE target regime, which we will report on later in the year, and it will form part of the 25% target.

Q18 Peter Aldous: Did you decide which buildings were included or excluded, or did they?

William Jordan: We felt they were best judges but we do have a group that meets at official level with representation from DECC, Defra and the Cabinet Office, so that we look independently at Departments and views about what buildings are in or out.

Q19 Chair: Minister, we realise that your time is limited. We have two very quick, final questions. Do you think there is any danger that by concentrating on climate change and carbon reduction, other aspects of water use and biodiversity and so on might be overlooked in terms of the focus being on the climate change reductions?

Gregory Barker: No, I don’t think so. I think you could potentially do that if you were absolutely blinkered.

Q20 Chair: So if not, who is looking out for that?

Gregory Barker: I think, as we go into the next section, people have become much more aware of the impact that their behaviour has and they are also empowered to change the way they use their buildings. I think now, having encouraged people to realise that they can reduce their carbon emissions-that they can heat and light their buildings more effectively-they will be much more receptive to messages about water use, for example. I don’t know how many buildings biodiversity necessarily directly impacts on, but I think that as a result of going through this experience, people are really open minded now about being able to do things that previously they thought were not within their power to do. Certainly I know that colleagues of mine at DECC, because it is the climate change Department, are more environmentally minded, but across the Civil Service, people have been really open to embracing the new ideas. I think having succeeded in this way opens them up to trying new things and being more aware.

Q21 Peter Aldous: Just one thing I wanted to pick up; are there any buildings where facilities management has been outsourced? Where that has happened, has there been any problem in getting those managers to take part in this initiative?

Gregory Barker: There are a lot of buildings that are outsourced or under PFI contracts or have independent-

Q22 Chair: But they are not included are they?

Gregory Barker: Yes, they are.

Chair: They are?

Gregory Barker: Yes. One of the arguments that was posited at the beginning was, "We can’t possibly do this because we have a private contractor." In actual fact, the broad experience is that if you engage the private contractors and give them a very clear remit, of course they will, by and large positively, actually surprise you with the ideas that they come back with.

William Jordan: Standardly, facilities management is provided by third-party suppliers to Government. The critical thing is do you draw up the contracts in such a way that they are incentivised to do better facilities management? A fair number of Departments have done that this year, or have drawn on existing contracts where there are gain-share agreements, so it was one of the three or four main ways in which we have achieved the target.

Q23 Peter Aldous: There are no very old contracts where the companies are dragging their feet?

William Jordan: I could not swear there were no very old contracts. In the nature of things, contracts come up for renewal periodically and when they come up for renewal obviously people draw on the latest ideas as to how to get value for money, so it is an ongoing process to improve facilities management contracts.

Gregory Barker: Most facilities managers realise the way the wind is blowing on this. They want their contracts renewed so they will be flexible, and actually they have been a partner rather than an obstacle.

Q24 Chair: Finally, because we are conscious of your time, from what you have said the Prime Minister has obviously been very involved in the first stage of this. Is that input going to continue, in terms of follow-on targets and making sure that they happen? Is leadership going to come from No. 10 in that way?

Gregory Barker: Absolutely. We will rely on it. Nothing succeeds like success, so I think the fact that we have had this good result will mean that, hopefully, the Prime Minister will be emboldened to carry on in this way.

Chair: Thank you very much indeed. That brings the sitting to a conclusion. We are very happy to have had the opportunity to at least refer to the work that has been done and to the work of the National Audit Office too. Thank you very much indeed for your time.