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Orders of the Day — Building (Prescribed Fees)

– in the House of Commons at 7:45 pm on 24th June 1982.

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8 pm

Photo of Mr Edward Graham Mr Edward Graham , Enfield Edmonton

I beg to move, That an humble Address be presented to Her Majesty, praying that the Building (Prescribed Fees) Regulations 1982 (S.I., 1982, No. 577), dated 21st April 1982, a copy of which was laid before this House on 12th May, be annulled. The House needs to be reminded that building control services, which have hitherto formed part of the services that a council has made available to ensure a proper environment, fell under the Government's hammer when they decided to give local government more freedom. That was the freedom to be told by Marsham Street what services to provide and what level of grant aid those services would attract. Even the building control services that a council must provide would be paid for not by the community which benefited from them, but by the user. From the outset it was made clear that under the scheme that was instituted in 1980 the full cost of building control would be transferred from ratepayers and taxpayers generally to the users of the system.

We are now faced with devastation. It is not so much the principle of charging for services, which is one of the cornerstones of the Government's philosophy and of this measure, but the ham-handed and incompetent way in which that philosophy has been put into practice that has enraged local government, the professions and ratepayers. Even judged by the crude yardstick of who benefits from the changes and the charges, the Government have it wrong. There will be higher costs for those who wish to improve their property and lower charges to large developers.

There may be some who will wish to examine the numerous changes, but to me they are cosmetic and designed as a feeble attempt to make sense of a blunt instrument, the purpose of which is to clobber the house builder or improver while seeking to relieve central Government of costs that they have always borne. Robbing Peter to pay Paul is nothing new to the Secretary of State.

The Minister has made much of consultation with interested parties, of reviewing experience and of learning from it. I shall quote what the Royal Institute of Chartered Surveyors has told Members in a letter dated 10 June about the changes proposed in the regulations. It states: The RICS is particularly disappointed that the Government appear to have disregarded the main body of advice given by the relevant professions at the consultation stage. Their main concern, and ours, has been that the problems experienced between developers and owners, on the one hand, and local authorities, on the other, in reaching agreement on the estimated costs of proposed work have not been eliminated. After cataloguing a long list of criticisms of the proposals before the House, the RICS concludes: We believe that most of the advice given to the Department was that the present proposals are unsuitable and would not result in any material advantage over the present unsatisfactory regulations. The present proposals should be abandoned and a more rational system should be drafted, perhaps based on new enabling legislation. If the Minister wants good advice for nothing, why does he not accept the RICS's suggestion, avoid a Division tonight and allow us all to go home? Alas, we live in the real world, which is where I get my next piece of evidence from. It has been supplied by the borough engineers and building inspectors of the London boroughs. Their feeling about the value of consultation is well known to the Department in respect of the present proposals. They consider it to be unnecessary, complicated and diverse. They state: A movement away from the original simple arrangement to a mixture of a sliding scale, flat rate and unit cost would make the collection of fees more complex and unpopular. The association is on record as saying in April: Despite our representations and those of other local authority associations, the Department has now decided to re-lay draft regulations before Parliament. Let us have no false assertions that the views of those concerned have been taken fully into account. The Minister may be very good at listening, but he learns very little from what he hears.

The Minister should be influenced by the financial effects of his proposals on council budgets. He knows that he has made a hash of estimating the income from his fees in the past. His confident prediction that incomes would rise by 10 per cent. has been found to be ludicrous nonsense by those at the sharp end. The press announcement of 20 March 1980 stated: A scheme under which the full cost of building control will be transferred from rates and taxpayers generally to those who actually use the system is absolute poppycock. When the system was introduced in 1980–81, the Minister told authorities that he was assuming—that means that he was guessing—that the first system would bring in a total of £38 million. In reality, it brought in £19·5 million. The Minister was only 100 per cent. out. That knowledge did not stop him blundering on. The estimate of £38 million which produced £19·5 million was upped to £62 million for 1981–82. That turned out to be even more wrong. Instead of an estimated income of £62 million, actual income was £34 million. There was a deficit of £28 million, making a total deficit of £42 million in two years. What possible faith can there be in a system which can be so far out of touch with the real world and which makes such monumental estimating errors?

The deadly serious matter is that these arrogant and erroneous assumptions have left councils with a cut in their rate support grant. To the £42 million in two years has been added an estimated shortfall in the current year, 1982–83, of a further £25 million—£67 million in all. When we add to that the known shortfall in planning application fees, we find that local government has had filched from it £100 million by gross Government ineptitude.

Will the Minister confirm that he is giving serious thought to finding a way to give back to councils the known losses that they have sustained under this system? Will he announce that in future any shortfall in the estimates in one year will be added to any rate support grant settlement in the next year?

If the Minister considers that I speak without evidence or authority, I shall quote an extract from a letter that I received from Mr. Day, the chief executive and town clerk of the London borough of Enfield. I am delighted to see that another recipient of the letter, the hon. Member for Enfield, North (Mr. Eggar), is in his place. The words that I am about to quote will be familiar to him. Mr. Day wrote: Should these new regulations come into force on 1st July as currently proposed, the Council's fee income will be substantially reduced. Under the present fee regulations which have operated successfully in Enfield since 1st April 1980 the Council collected just under £150,000 in the last financial year.The Council's expected income under the proposed regulations in this year will be reduced by approximately £30,000, assuming the number of applications deposited under the Building Regulations 1976 remains comparable with last year's intake. The income to the Council derived from the present fees only just covers the administrative costs of collection. The effect of such a reduction would be an increase in the Council's net expenditure of £30,000 which, in turn, would result in a reduced grant entitlement of a further £30,000. The total effect, therefore, on the Council's finances would be in the region of a £60,000 loss which would need to be borne by the ratepayers. Against this the plan and inspection fee for applicants will only be reduced from approximately £42 to £24 for extensions up to 20 sq. metres and from £68 to £48 for extensions up to 40 sq. metres.The main reason for this reduction is the flat rate fee that will be introduced for extensions under 20 and 40 square metres floor area is far too low when compared with the fee received at the moment which is based on the estimated cost of the works.

Photo of Mr Timothy Eggar Mr Timothy Eggar , Enfield North

Like me, I am sure that the hon. Gentleman has received many representations from constituents who have wished to build extensions to their houses. Under the old scheme, there was a dispute about the cost of the extensions. Does the hon. Gentleman agree that the introduction of a flat fee for extensions up to a certain specified square footage will be welcomed just as much by his constituents as by mine?

Photo of Mr Edward Graham Mr Edward Graham , Enfield Edmonton

Much of the package has rightly been criticised by local authorities. However, such a fee will be beneficial and will help to standardise the system. Nevertheless, if we are to tell Enfield's ratepayers that a comparatively small number of general ratepayers will benefit, the council will not think much of that argument.

The Minister must be aware that the outer London boroughs are dismayed about the proposals, not least because the cost of enforcement is very high. Enfield is not the only London borough to be rightly upset by the changes. The system last year left virtually every authority with a deficit. I am told by the Association of Metropolitan Authorities and the Association of District Councils that, in addition to those deficits, the new system is estimated to produce large decreases in income next year. It is estimated that Hounslow will have an estimated decrease in income of 41 per cent.; Worthing, 16 per cent.; Lewes, 26 per cent.; Hillingdon, 17 per cent.; and Gillingham, 7 per cent. Of course, some authorities will have an increased income, but the global shortfall will not be affected.

The Government have a way out. This is not the place to argue the principles of charges. Primary legislation gives the Government those powers. In the light of the constant clobbering that councils have had to take from the Government, this is no time to add to the burdens. Why not make the process of consultation a purposeful exercise? I suggest that the Government should go back to those at the sharp end—the building inspectors, the professions and the councils—and speak to them, and then come back with more sensible proposals which will relieve councils of these hidden penalties. The Opposition may then view the exercise differently.

Photo of John Stanley John Stanley Minister (Department of Environment) (Housing & Construction) 8:12 pm, 24th June 1982

The hon. Member for Edmonton (Mr. Graham) said that charging is one of the cornerstones of this Government's policy, but he omitted to say that powers to prescribe fees for building control in England and Wales were taken by the Labour Government in the Health and Safety at Work etc. Act 1974. This order has been brought forward under primary legislation that was introduced by the previous Government which no doubt the hon. Member supported. It is true that the implementation of those 1974 Act powers was promulgated by the present Government and the first fees regulations came into effect in April 1980. The hon. Member will also be aware that in other parts of the country, in inner London and Scotland, fees have been charged for many years under different legislation. I assume that the Opposition's prayer against these regulations is not against the principle of building control fees as this order is being brought forward under primary legislation enacted by the previous Government.

In devising a building control fees scheme I considered three possible bases for the fees. Those were a scheme that was based on unit fees—that is, a fixed sum per building—fees based on the area of construction, and fees based on the cost of the work that was subject to building control.

We decided initially that we should introduce building control fees on the basis of cost. The concept of cost has obvious attractions. It is a factor that is common to all types of work subject to building control. It has a close relationship with the amount of work for a local authority in dealing with a given application and a closer one than relating the fee to area. Cost also has a closer relationship than area with the value of the development for the applicant. Cost has worked in inner London and Scotland without great difficulty for some 17 or 18 years. That is why we adopted a cost basis for the first building control fees regulations made in 1980. I acknowledge that in practice the 1980 fees scheme has not proved entirely satisfactory and has created difficulties for the house building industry in particular.

If a cost scheme is to work well, it requires builders to submit realistic estimates of cost and local authorities to accept those estimates without unreasonable delay or argument. Too often that has failed to happen, and the problems have been particularly serious in two very important areas—new house building and home improvement. To help the house building and the home improvement industries we concluded that it was essential to alter the basis of fees for those two areas of building control, and that is the primary objective of the regulations.

The hon. Member for Edmonton said that the changes were cosmetic, but they are far from being so. They represent a shift in the basis of charging fees for two important parts of the construction industry—new house building and home improvement. The new scheme has been designed to cut through the difficulties of the 1980 scheme, by replacing, where possible, cost-based fees by unit fees—that is, a fixed sum per new dwelling or per item of improvement work such as an extension. Of course that will immediately eradicate time-wasting disputes about the reasonableness of the cost estimates. The new regulations therefore specify unit fees for new houses and flats up to three storeys; small domestic extensions and alterations; and small garages.

Taken together, these developments probably account for some 80 per cent. of all applications for building control consent, so this should represent a very substantial measure of simplification for the fee system. For all other types of development we have retained the cost basis for fees and I should like briefly to explain why we have done so instead of moving to an area basis, such as the Royal Institute of Chartered Surveyors favours. On the best analysis that we can make at present, an area-based scheme would not be of any advantage. Indeed, compared with a cost-based scheme there might be some material disadvantages.

An area-based scheme would require many different rates of fee for different types of development. It would certainly not be equitable to apply the same rate of fee for a complex multi-storeyed commercial development as for a straightforward agricultural building or warehouse. That makes for considerable complexities, particularly in mixed-use developments.

Again, area-based fees can take no account of the wide variations in the amount of work required from building control authorities in dealing with buildings of the same use and size—such as offices—but of widely differing sophistication and complexity. It is simply impossible to apply area-based fee systems to those developments such as alterations and refurbishments that involve no change in floor area at all. Yet that is one of the largest single categories of building control applications that local authorities have to deal with.

It is significant that Greater London, after initially trying to use a volume-based system, has—since 1965—moved to a cost-based system, and I am not aware of any professional body that has managed to produce an area-based scheme that has generally been accepted by the industry as practicable.

I do not exclude the possibility of an area-based system, and am ready to consider any further proposals put to me, but for the moment at least I see no practical alternative to maintaining the present cost-based system for all those developments to which our new unit fees will not apply. The new fees, therefore, are in part fixed-unit fees and in part cost-based. Most developments will fall into the categories covered by fixed-unit fees—new house building, domestic extensions and garages.

For everything else, authorities will be using the present cost-based system with one important simplification. Previously, it was for the applicant to indicate what proportion of the total costs of his development he considered "relevant" for fee purposes. In future, again to try to avoid disputes and delay, a fixed 70 per cent. of costs will be assumed to be relevant.

We have also taken great care to try to assist both those in the building industry and those in local authority building control departments in the operation of the new fees scheme. On 12 May, we issued a circular letter containing detailed guidance including a number of worked examples of fee calculations. This has been acknowledged both by the local authorities and by the construction industry to have been very helpful.

I turn to the financial effects of the new fees. The house building industry estimates that on average it will be paying somewhat higher fees, but it believes that the simplicity and certainty of fixed fees is worth paying for. The Association of District Councils believes that some of its members will stand to lose some fee revenue, but certain metropolitan authorities consider that they may gain.

The hon. Member for Edmonton quoted entirely selectively from a sheet that was distributed by the Association of Metropolitan Authorities. He carefully quoted all those authorities which estimated that their fee income would be reduced. He ignored entirely all those authorities shown on the same sheet of paper which estimated that their fee income might well rise. He referred to outer London, and I noted that the sheet from which he quoted refers to Enfield and the estimated large drop in their fee income. The sheet also shows that Merton, Kingston, Haringey and Waltham Forest estimate an increase in their income.

Photo of Mr Edward Graham Mr Edward Graham , Enfield Edmonton

The Minister is perfectly fair to point out that fact. It should go on the record. In making my case I used the illustrations that supported it. Equally, he is entitled to use the illustrations that support his case. To be fair, I pointed out that there would be authorities that would benefit. I gave figures for the estimated global loss. Whether there are winners or losers, overall the Association of Municipal Authorities and the Association of District Councils told me—as I assume they told the Minister—that between them local authorities are likely to be net losers under the new system.

Photo of John Stanley John Stanley Minister (Department of Environment) (Housing & Construction)

That is not a view that we share. Recipients of fees that will be taken into account for rate support grant purposes will possibly tend to be rather modest in terms of their assumptions as to how much income they will generate. No doubt the house building industry will be alive to how much it will pay. The house building industry believes that it will have to pay more. Some local authorities believe that they will receive more and others less. The Association of District Councils has said that there would be a small loss of income overall, but the Department for the Environment believes that the new scheme will be broadly neutral in financial terms compared to the original one.

I should like to refer to a point that the hon. Gentleman raised on the assumption of yields made for rate support grant purposes. I do not deny that there has been a shortfall over the past two years or that there will be a shortfall this year. We had to make assumptions of fee income for 1982–83 while the fee scheme was still in the process of consultation. By the time that the consultations were concluded, if we were to have increased building regulation fees to the level assumed for rate support grant purposes, it would have been necessary almost to double the fees stipulated in this order. When we are trying to hold down the cost of new house building and home improvements to help first time buyers we felt that an increase of fees of that magnitude was out of the question. We recognise that we have a problem with the rate support grant settlement for 1983–84. I can confirm, as my hon. Friend the Under-Secretary said in the debate on planning application fees on 11 May, that we will discuss with local authority associations the matching of the likely income from planning and building regulation fees with the assumptions used for rate support grant purposes.

The hon. Gentleman made considerable play of the shortfall on RSG assumptions so far as income is concerned. I should place on record the fact that, against a shortfall on building regulation fee income in the course of the current year, we estimate that Labour-controlled local authorities that are building control authorities will be overspending on their expenditure targets by about £300 million, which puts in some perspective the hon. Gentleman's remarks about looking after the ratepayers.

I should like, finally, to remind the House of the building control policy context in which these regulations appear. We are engaged in the most fundamental improvement of the building control system overall for 20 years. We are pressing on with preparations to implement the proposals in Command Paper 8179 including our proposals for optional private certification. We have already in this Session brought in legislation, in the Local Government (Miscellaneous Provisions) Bill, for simplified building control procedures in the form of both stage and provisional approval of plans. Last month, I issued for consultation our major proposals for recasting and simplifying the building regulations. The favourable initial response to those proposals has been very encouraging.

Photo of Douglas Hogg Douglas Hogg , Grantham

I apologise for the fact that I was not here to hear my hon. Friend's opening speech. There is one point that troubles me. If one looks at inspection fees for small garages and car parks, one finds that one is dealing with a very modest fee. My concern is that, as there is no obvious sanction for the payment of this fee and as the amount is so small that it would not justify recovery procedure, many people will not pay. That leaves perhaps two choices—to load it on to the plan fee or to get rid of it altogether. My hon. Friend may be able to comment on this.

Photo of John Stanley John Stanley Minister (Department of Environment) (Housing & Construction)

My hon. Friend is right. In the area of small home improvements, the statutory level of fee is very small. One of the proposals put to us is that there should be a higher minimum level of fee. We have, however, been conscious of the needs of those who are seeking to improve their homes. We are not in the business of putting more statutory costs on to the home improvement industry and those whom we are trying to encourage to expand home improvement work. We have felt all along that we should try strictly to apply the levels of fees closely to the scale of work involved for a local authority.

When a local authority, under the highly simplified system that now exists, has simply to look at a plan to see if, for instance, a garage is within the square metreage threshold to qualify for a unit fee, it is such a simple piece of work that we did not feel it was justifiable to pursue what would amount to front-end loading of the fee system against the small individual householder carrying out a small home improvement.

The new fee regulations before the House represent a great improvement both for the house building and for the home improvement industries. The president of the House Builders Federation has made it clear that the passage of these regulations tonight is of the utmost importance to the house building industry. In a letter that he has recently written to me, he says: I know that I have the unanimous support of all house builders in hoping that the regulations will be approved thereby enabling the introduction of the new scheme on 1 July. We have provided your Department with a great deal of evidence of disputes and overcharging caused by the current regulations. We are therefore extremely pleased to see a scheme proposed involving a flat rate fee giving both certainty as to the quantum of the fee and some remission for repetition housing. This will eliminate most of the disputes once and for all, and will greatly improve relations between local authorities and housebuilders as a result. The effect of the Opposition's prayer would be to deny house builders and all individuals and firms engaged in home improvements of the benefit of a much simpler and less contentious basis of calculating building control fees. I therefore ask the House to reject the Opposition's prayer against these regulations.

Photo of Mr Edward Graham Mr Edward Graham , Enfield Edmonton

I am grateful to the Minister for the good news that in future, in the shortfall between reality and the assumptions or estimates of councils' income from the charging of fees, an attempt will be made to match the assumption and the income.

However, I am extremely disappointed with the rest of the Minister's speech. At least, he made it very clear whose side he and the regulations are on. He does not deny that the regulations are not wanted by local authorities, the professions, building inspectors or ratepayers, but he says that they are wanted by the house building industry. That is fair enough. The benefits will go to the house building industry, which is the prime progenitor of the changes. The changes have been criticised by all the bodies that I mentioned. Moreover, the Minister has failed to say what consultation means in the Department of the Environment. I could have quoted letters, minutes and reports of meetings about so-called consultations at which the bodies consulted made it very clear that they strongly resisted the regulations.

The Minister has failed to satisfy me that there is any point in withdrawing our prayer. In our view, local councils deserve an opportunity to protest about the cavalier manner in which the Government, the Department and the Minister have treated them on consultation. I therefore ask my right hon. and hon. Friends to support me in the Lobby.

Photo of Douglas Hogg Douglas Hogg , Grantham

I shall be brief. I have only three points to make.

First, I wish to apologise to both Front Bench spokesmen for not having heard their speeches, because the debate started sooner than I expected.

Secondly, I welcome the drafting of regulation 14. It is vitally important to link the fees with the actual costs incurred by the person carrying out the work, because that ensures that the do-it-yourself person does not have to pay on an assessed fee, based on what contractors might be assessed if they were doing the job. The problem has arisen in the past, under the predecessor of these building regulations, and I am glad that the present formulation is such that the do-it-yourself worker does not have to pay more than otherwise would be the case. I find it extraordinarily offputting to have the Patronage Secretary glaring at me in his customary friendly manner. I shall, therefore, come to my last point, which relates to the issue that I raised a moment ago about inspection fees. There is a serious issue here in relation to small garages and carports, because there are two sets of fees—the plan fee and the inspection fee. With the plan fee, the process of making the application implies sanctions. The fee has to be paid when the application is made. If the application is not granted, the work cannot go ahead. So there is an inherent sanction in the fee.

The inspection fee is payable only at the end of a transaction. As it is such a small sum it is not worth instituting recovery. No offence is committed under the 1961 Public Health Act. I can foresee many circumstances when the person making the application refuses to pay the inspection fee and because it is so small nobody will institute any enforcement procedure.

That leaves one with three choices. One can either do what is being done. If that is what the Miniter wants, so be it. Equally, the inspection fee can be added to the plan fee, which has the inherent sanction to which I have referred. On the other hand, the requirement for an inspection fee can simply be waived.

The Patronage Secretary will be pleased to know that I am now going to sit down.

Question put:

The House divided: Ayes 28, Noes 93.

Division No. 244][8.35 pm
AYES
Beith, A.J.McDonald, Dr Oonagh
Booth, Rt Hon AlbertMorton, George
Cook, Robin F.Moyle, Rt Hon Roland
Deakins, EricPrescott, John
Dean, Joseph (Leeds West)Race, Reg
Dewar, DonaldRobinson, G. (Coventry NW)
Dormand, JackSheldon, Rt Hon R.
Graham, TedSkinner, Dennis
Hamilton, W. W. (C'tral Fife)Snape, Peter
Harrison, Rt Hon WalterSpearing, Nigel
Haynes, FrankWainwright, E. (Dearne V)
Kaufman, Rt Hon GeraldWainwright, R.(Colne V)
Kerr, Russell
Lamond, JamesTellers for the Ayes:
Lyons, Edward (Bradf'd W)Mr. Lawrence Cunliffe and
McCartney, HughMr. Allen McKay.
NOES
Arnold, TomMills, Iain (Meriden)
Atkinson, David (B'm'th, E)Mills, Sir Peter (West Devon)
Beaumont-Dark, AnthonyMoate, Roger
Bendall, VivianMontgomery, Fergus
Berry, Hon AnthonyMoore, John
Bevan, David GilroyMorris, M. (N'hampton S)
Blackburn, JohnMurphy, Christopher
Body, RichardMyles, David
Bright, GrahamNeedham, Richard
Brinton, TimNelson, Anthony
Brooke, Hon PeterNewton, Tony
Bruce-Gardyne, JohnOnslow, Cranley
Cadbury, JocelynOsborn, John
Carlisle, John (Luton West)Page, Richard (SW Herts)
Carlisle, Kenneth (Lincoln)Percival, Sir Ian
Chapman, SydneyPollock, Alexander
Cope, JohnPrentice, Rt Hon Reg
Cranborne, ViscountProctor, K. Harvey
Dorrell, StephenRenton, Tim
du Cann, Rt Hon EdwardRhys Williams, Sir Brandon
Dunn, Robert (Dartford)Ridley, Hon Nicholas
Eggar, TimRumbold, Mrs A. C. R.
Faith, Mrs SheilaSainsbury, Hon Timothy
Fletcher-Cooke, SirCharlesShaw, Sir Michael (Scarb')
Garel-Jones, TristanShepherd, Colin (Hereford)
Goodlad, AlastairSmith, Tim (Beaconsfield)
Griffiths, Peter Portsm'th N)Speller, Tony
Haselhurst, AlanStainton, Keith
Hawkins, Sir PaulStanley, John
Hawksley, WarrenStevens, Martin
Heddle, JohnStradling Thomas, J.
Hogg, Hon Douglas (Gr'th'm)Taylor, Teddy (S'end E)
Howell, Ralph (N Norfolk)Thompson, Donald
Hunt, David (Wirral)Trippier, David
Jopling, Rt Hon MichaelViggers, Peter
Kilfedder, James A.Waller, Gary
Lang, IanWard, John
Lawson, Rt Hon NigelWarren, Kenneth
Lester, Jim (Beeston)Watson, John
Lloyd, Peter (Fareham)Wells, Bowen
MacKay, John (Argyll)Wheeler, John
Major, JohnWickenden, Keith
Marland, PaulWinterton, Nicholas
Marlow, AntonyWolfson, Mark
Marshall, Michael (Arundel)
Mather, CarolTellers for the Noes:
Maude, Rt Hon Sir AngusMr. Selwyn Gummer and
Mellor, DavidMr. Archie Hamilton.
Meyer, Sir Anthony

Question accordingly negatived.