Clause 19

Finance Bill – in a Public Bill Committee at 10:45 am on 15th May 2007.

Alert me about debates like this

SDLT relief for new zero-carbon homes

Question proposed, That the clause stand part of the Bill.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

This clause covers relief for new zero-carbon homes and as you know, Mr. Gale, Friends of the Earth and the National Landlords Association do not always find cause to unite them, but this clause seems to have done the trick. Friends of the Earth said that it would affect

“a tiny number of new properties”,

while the National Landlords Association said that

“the impact of the tax break is likely to be relatively limited.”

Clearly, they agree on that. I am sure that both organisations, none the less, welcome the proposal, which we will not be opposing. However, their reaction suggests some useful lines of inquiry.

The clause empowers the Treasury to make regulations granting relief on zero-carbon homes, which may take the form of an exemption from charge or a reduction in the amount of tax chargeable. As the House of Commons Library points out—I went to the Library to see what it had to say—

“the budget report itself does not give an estimate, stating the Exchequer impact to be ‘negligible’. Item A.90 in the budget measures shows the cost as...less than £3 million a year”.

This is what the Red Book describes as a relief to

“kick-start the market for new highly efficient technologies in homes.”

The Library also says that

“at this stage it is difficult to estimate how many homes would qualify for the tax relief, and much will depend on the projected number of new homes that may be built during the qualifying period.. .at this stage there does not appear to be any reliable estimate or figure of the likely number of houses to be covered and how much this will cost the Government until 2012”.

That is the Library’s assessment.

So it is not at once apparent how this welcome but modest measure can accurately be described as “likely to kick-start” a market, or how exactly it will make a substantial contribution towards the Chancellor’s goal announced last weekend of five eco-towns, containing 100,000 carbon-neutral homes.

When I say “announced”, of course I mean“re-announced”, since that goal was first announced, according to my researches, by the Minister for Housing and Planning almost exactly a year ago, on 17 May 2006. [Hon. Members: “Hear, hear.”] I hear Government Members say “Hear, hear” but I was about to go on to remark that the process of passing this information on to the Economic Secretary, with whom I believe the Minister in question is acquainted, and then for him to pass the information on to the Chancellor, with whom he is also acquainted—though not, of course, in the same way—has taken the best part of the year.

When I say “re-announced”, I mean, of course,“re-announced and slightly modified”, since the Housing Minister’s original speech, as the Economic Secretary will know, referred to 120,000 homes, not 100,000, so there has been a net loss of 20,000 homes. When I say “re-announced”, I mean, “re-re-announced”, since the Government apparently announced that they would build seven new eco-communities, with 9,000 new homes 10 years ago, and have to date built only one in 10 of those homes.

A number of questions obviously follow. First, how many zero-carbon homes exist at present? The Chief Secretary told the shadow Chief Secretary, my hon. Friend the Member for Chipping Barnet, in the  Chamber that the answer is “a very small number”. He was a bit more forthcoming on “Newsnight”, when he told Jeremy Paxman that the answer is

“I think a couple of dozen”.

I will spare the Committee the whole exchange, because it makes for painful reading. However, because it is obviously unsatisfactory for “Newsnight” to have the precise figure when the House does not have it, we are confident that the Chief Secretary will respond appropriately.

Secondly, what estimate has the Treasury made of the number of additional zero-carbon homes that it expects to be in place by 2012 as a result of this measure? Thirdly, what estimate has the Treasury made of the number of zero-carbon homes that it expects to qualify for this tax relief? What proportion does it expect to be exempted from charging altogether?

Fourthly, can the Minister give us an idea where these homes are expected to be built and which local authorities have expressed an interest in seeing them built? The Chief Secretary said on Second Reading:

“a development of zero-carbon homes is going forward at Gallions Park in my constituency.”—[Official Report, 23 April 2007; Vol. 459, c. 661.]

Can the Economic Secretary confirm that, as common sense would suggest, “going forward” means that planning permission for these homes has been given? Fifthly, what carbon saving does the Treasury expect as a result of the measure? Finally, does the estimate in the table contribute to the cost of the five eco-towns and 100,000 zero-carbon homes and where in the Red Book are those costs covered?

The clause gives rise to a number of more specific questions as its main effect is to give the Treasury the power to make regulations granting relief on zero-carbon homes. Picking up on an exchange on the last clause, I may be at fault but I am not aware of having seen the regulations that will offer a definition of zero-carbon homes, that may extend the relevant tax concessions beyond 2012, that may set up a process of certification under the home information pack regime which could affect take-up, and that may, although not necessarily, provide for relief to be withheld where a person acquires more than one zero-carbon home within a specified period. Obviously those are important regulations. If they have not been published, when will they be published?

Can the Economic Secretary tell the Committee whether the definition of zero-carbon home will include carbon emitted during construction or in the manufacture of building materials? What evidence on the carbon neutrality of their homes will people be required to provide and through what process will they do so? Above all, can he guarantee that the House will get the opportunity to debate the regulations which, by their nature, will be unamendable under the affirmative procedure?

Finally, may I offer some good news? Speaking of acquaintances of the Economic Secretary, the hon. Member for Morley and Rothwell (Colin Challen)—the future Lord Challen, as my colleagues insist on  calling him—is on the case. I received from him only yesterday an invitation to a meeting entitled “Zero-carbon homes: how we can meet housing costs and protect the environment.” His letter begins: “Dear Helen Goodman”. I look forward to the Chief Secretary’s response.

Photo of Roger Gale Roger Gale Conservative, North Thanet 11:00 am, 15th May 2007

Before we proceed, I am slightly concerned by the hon. Gentleman’s remark that he has not had sight of the regulations. I was under the impression that copies had been mailed out to all members. My co-Chairman and I have received them. If they have not been made available, are they available on the table? If not, why not, and could all Members on both sides of the Committee have them as swiftly as possible?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

On a point of order, Mr. Gale. I told the hon. Gentleman at the end of last week that we would send him the draft regulations. As I understand it they were mailed out at the end of last week. If hon. Members have not received them, I apologise, but I had them mailed out at the end of last week.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

Further to that point of order, Mr. Gale. I was sent a copy of the letter that was sent to you, which I received this morning. I understand that my office was forwarding it on to my hon. Friend. The error may lie with me rather than the Minister. If so, I apologise.

Photo of Roger Gale Roger Gale Conservative, North Thanet

I will respond to the points of order. It would appear that my co-Chairman and I have received the documents. While I am grateful for them, I am concerned that they do not appear to have been made available to all hon. Members. Perhaps the Minister could ask his officials if they would be kind enough to run off copies immediately and have them distributed to all members of the Committee, so that everyone on both sides has the same information as I have before me.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

The regulations may have arrived with my mail this morning, but it had not been processed by the time I arrived here today. They may be sitting in my in-tray, but I have not had a chance to look at them yet. In any event, there was hardly a huge amount of time to scrutinise them before the debate.

As the hon. Member for Wycombe said, we do not know what impact clause 19 will have on Treasury revenues. My key concern is that although it will provide a demand-side incentive for people to purchase new zero-carbon homes, there will not be a similar incentive for builders to build them. That lack of symmetry may mean that demand will not be met, thus there will be no opportunity to take advantage of the tax incentive.

Given that the announcement was made in the pre-Budget report, I wonder if there have been any applications since then for zero-carbon homes. Proposed new section 58B(5) states:

“The relief may take the form of—

(a) exemption from charge, or

(b) a reduction in the amount of tax chargeable.”

Do I take it that it depends on the price of the property—that if it is above the £500,000 threshold it will result in a reduction, but if it is below that threshold it will result in an exemption? Exactly how will the measure operate? Will the Economic Secretary explain why it should apply only to the first time that the new building is sold? Why are not the Government extending it to future sales, as that will clearly have an impact on the price?

I mentioned regulations, but my concerns revolve around the impact that the proposal will have on affordable housing. A couple of years ago, there was a high-profile demonstration in my constituency of a zero-carbon house, a BedZED property, that could be built for less than £70,000, which still puts it out of reach for people on an average household income, which in my constituency is just below £20,000 a year. The £70,000 is just the price of the property; the key expense will be the plot of land. What impact does the Economic Secretary think the measure will have on the entire price scale, not just on the most expensive properties? People who want to buy new, affordable housing will still find it very difficult to buy a zero-carbon home.

What impact will the measure have on social housing stock? It would be excellent if new social housing could be built on a zero-carbon basis. The fundamental problem is that the proposal will apply only to new properties when, as the Chief Secretary said earlier, one third of all emissions from the UK are from the housing stock. How does that break down between projected new housing stock and existing housing stock? Three quarters of the stock that is standing today will still be standing in 2050, and on that basis the key target must be existing stock, not least because that is where fuel poverty, for example, is at its worst.

In my constituency, there is very poor, usually very old, housing stock, a high incidence of fuel poverty and a poor take-up of the Warm Front scheme, not least because there are no installers anywhere in the county of Cornwall. That deprived group of people cannot access the environmental benefits of the clause or take advantage of provisions that would have an impact on their pockets and save them money. The problem is that those people, whether they are in rented or privately owned housing stock, will not be in a position to benefit from the proposal.

There is great innovation out there, but I am worried that the measure is a very limited way of stimulating increased development. In my constituency there is a hot rocks project—technologies investigating making use of disused mines as a way of cutting down on heating costs. Carrick Housing is being innovative in retrofitting those technologies to its existing social housing stock. The proposed incentive sits outside that framework, however. What plans are there for incentives not only for people looking to buy new houses, but for developers and builders? Ultimately, if using more energy-efficient materials increases costs, the builder who uses them faces increased risk. What plans do the Government have to tackle the inherent inefficiencies in the existing housing stock?

Photo of Roger Gale Roger Gale Conservative, North Thanet

Before we proceed, I confirm that I am arranging to have the relevant document printed and circulated, within the timescale of the debate, I hope.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

On a point of order, Mr. Gale. In Committee last Thursday, I said to the hon. Member for Wycombe that I, rather than the Chief Secretary, would respond for the Government on these clauses, and that I would ensure that the regulations were circulated in draft. I cleared them on Thursday. I understand that they went from our office to the shadow Chief Secretary, the hon. Member for Chipping Barnet, in the normal way on Friday. I should have endeavoured to ensure that they got to the hon. Member for Wycombe directly as well, so I appreciate the generosity of the shadow Chief Secretary. If we were remiss, I apologise.

I shall re-examine the procedural point that the hon. Member for Wycombe made. This is an important part of the Bill, which creates a regulation-making power on which we will consult. In that light, and given that we intend to conclude the consultation by July and publish a further set of regulations, I would be happy—subject to agreement from the business managers—if we could deal with the regulations under the affirmative, rather than the negative, procedure, to ensure that the House has a further opportunity to scrutinise the detail of the regulations before they come into effect.

For the purposes of today’s debate, it would be good to have the regulations in front of us. Some of us have them and some do not. I hope that there will be an opportunity for the House to debate the regulations further in due course, to satisfy the Committee that we are treating this issue with the seriousness it deserves.

Photo of Roger Gale Roger Gale Conservative, North Thanet

That is not strictly a point of order for me. As the Economic Secretary said, it is a matter for discussion by the business managers of the Government and the Opposition. I am sure that the Committee appreciates the courtesy of the Economic Secretary’s statement and will find his remarks helpful.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

In an attempt to give the Clerks time to print off whatever documents are necessary, I have a number of points to make.

Photo of Roger Gale Roger Gale Conservative, North Thanet

Order. I am sure that the hon. Gentleman’s remarks will be in order; I would hate to think that he was proposing a filibuster.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

My points are always in order and relevant, Mr. Gale.

Photo of Roger Gale Roger Gale Conservative, North Thanet

I shall be the judge of that.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

I welcome the initiative in the light of the 27 per cent. of the UK’s greenhouse gas emissions, or 40 million tonnes a year, that are attributable to households. I am concerned that from the outset there is a limited window of opportunity—five years—attached to the scheme, however. As a business man, I point out that the technology required to approach the standard of a true zero-carbon home will require significant capital investment from developers to reduce the high unit cost of microgeneration technology.

If the Treasury is committed to achieving a culture of change within the building industry, which I wholly support, it is unhelpful that these provisions will be curtailed in 2012. I do not think that proposed new section 58B(7), which mentions the possibility that the Treasury will extend its largesse, will be reassuring to the building industry when looking at long-term investment decisions. The Chancellor’s record shows too many examples of initiatives that are cancelled once they have begun to become effective—the home computing initiative springs to mind.

The rationale seems to be that stamp duty relief will act as a catalyst for change, after which it can be reassessed and presumably quietly scrapped. However, a five-year window for that process to occur is almost hopelessly optimistic; just how optimistic is shown by the fact that the zero-carbon home is not so much an endangered species as a mythical beast. Although the Chief Secretary says that some zero-carbon homes have now popped up in his constituency, they are hardly widespread. My point is that, even if developers make the decision to develop zero-carbon homes, there will be such a long lead time that the relief will have expired before such homes begin to appear in meaningful numbers.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury 11:15 am, 15th May 2007

What the Chief Secretary said was that a development of zero-carbon homes is “going forward” at Gallions Park in his constituency. Is my hon. Friend entirely clear—I am not—about what “going forward” means?

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

I am not sure if the Chief Secretary is talking about a new eco-friendly mobile home; perhaps he has the Foreign Secretary in mind.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

If I could broaden the debate for a moment, the hon. Gentleman was talking about lead times. Is it not the case that, for individual planning applications, it may well be possible to go ahead and submit a planning application for a very small development? The problem is that there are very large developments on the cards for the coming years which are exactly the type of developments that need to be zero-carbon, but they will probably not go ahead on that basis.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

The hon. Lady makes a good point in support of my argument, and I thank her. As I said, my point is that, even if developers make the decision to develop zero-carbon homes, there will be such long lead times that the relief will have expired before such homes start to appear in meaningful numbers.

Aberdeen-based developers the Stuart Milne group have already unveiled a prototype for a low-carbon home. The prototype includes microgeneration technology, such as solar panels and wind turbines, together with reuse of grey water and so on. However, it is telling that the plans still fall short of the desired six-star zero-carbon rating. Quite simply, it will take time to reach the required standard and to roll out both the technology and best practice across the industry. The managing director of the Stuart Milne group had this to say:

“The single biggest impact on our business will be climate change and we felt we should take an industry lead by building a  commercially viable house that reflected the Government’s objective to achieve zero carbon houses within a decade.”

However, the key remains that the project must be commercially viable. It is no good making such projects commercially viable for five years, then pulling the rug from under the developers just when they are beginning to catch on.

I have one further point to make on the envisaged time scale. As we have all heard, the Chancellor has recently announced the construction of 100,000 new eco-homes that will meet the zero-carbon standard. Perhaps we should welcome the prospect that 100,000 new home owners will be able to buy homes that benefit from clause 19, but precedent suggests that it will take far longer than five years to deliver those homes. The last time that this policy was launched was 10 years ago, as we heard from my hon. Friend the Member for Wycombe. Then, there were high expectations of the Government. Now, we know better.

Some £130 million has been spent on the seven millennium communities, delivering homes to the excellence standard. I was amused to see—perhaps this is what my hon. Friend was alluding to—that one of the seven communities, which is in east Manchester, was in true new Labour fashion named New Islington. It is a wonder that the Chancellor did not go the whole hog and call it New Jerusalem, but I hope that he can at least name a street after the Granita. The fact remains that after 10 years the homes have not been delivered, so the idea that a large number of homes will be built in time to take advantage of clause 19 is, once again, optimistic.

We have a zero-carbon standard that many people think is unattainable, we have a very limited window of opportunity to take advantage of tax relief, and we have a Government with a strong track record of scrapping tax reliefs that are actually used. If the Chancellor’s 100,000 houses were to go on the market at an average price of £200,000 each, the Treasury would forgo £200 million in stamp duty. In contrast—I note that paragraph A2.10 on page 230 of the Red Book predicts that “The Exchequer cost” of clause 19

“is expected to rise to around £15 million by 2011-12.”

I know that the Chancellor is strong on mathematics, but that is an anticipated uptake of only 7,500 carbon-free homes by 2012. Even if the Chief Secretary cannot answer the question asked by my hon. Friend the Member for Wycombe, I hope that I have.

Photo of Adam Afriyie Adam Afriyie Conservative, Windsor

I have now had the pleasure, or the disappointment, of reading the Stamp Duty Land Tax (Zero-Carbon Homes Relief) Regulations 2007, and it is interesting to note that, under regulation 14(4), the amount of tax chargeable will be reduced by £15,000, which would mean that the £15 million going to the Exchequer would represent only 1,000 homes.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

I am sure that my hon. Friend, in true fashion, makes an even more conservative analysis of the numbers than I have, but I was trying to be generous to the Government in my analysis.

To put it another way, if the Treasury’s projections of revenue impact are not underestimated, it would take roughly 13 years to build the Chancellor’s 100,000  eco-homes alone. In Second Reading, the Chief Secretary was unable to tell my hon. Friend the Member for Buckingham (John Bercow) how much clause 19 would cost each year. Perhaps now that he has had time to reflect and do his homework he can tell us the answer.

Photo of Wayne David Wayne David Labour, Caerphilly

The hon. Gentleman has talked eloquently and at length about these new homes, but does he anticipate Conservative local authorities supporting these new homes?

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

A mere Back Bencher, I am not here to make Conservative policy on the hoof. However, I know that my own council in Braintree is incredibly innovative when it comes to the use of innovative financing and support for eco-friendly homes.

I want to conclude with a plea to the Government for a commitment that clause 19 will become a valued tool to effect a long-term culture change in the construction industry and not just another short-term gimmick.

Photo of Philip Dunne Philip Dunne Conservative, Ludlow

Like my hon. Friend, I support the construction of energy-efficient housing and the Government’s objective in that respect. To help out in response to the intervention from the hon. Member for Caerphilly, there are a number of projects around the country, including in my south Shropshire constituency, where imaginative, creative construction engineers are coming up with projects to develop energy-efficient homes. They are not necessarily all new homes. Many of them include energy efficiency measures for existing homes that we discussed under earlier clauses.

That brings me to the point of my contribution to this part of the debate. The title of the clause that we are considering is not only misleading but a misnomer. As my hon. Friend the Member for Wycombe mentioned, the measure defines zero-carbon homes in terms of energy efficiency in ongoing maintenance and running costs once the property has been constructed. Nothing in the definition in the Bill or in the draft statutory instrument covers the construction costs of such homes. They are not, therefore, zero-carbon, but they are energy efficient going forward. It is unfortunate that the Government have chosen to cloak the clause in green credentials by claiming for it something that it will not actually deliver.

A much more effective means of encouraging energy efficiency than the intended relief from stamp duty would be the introduction of a zero rate of VAT on energy efficiency measures. What work was done by the Treasury to compare the cost of the measure before us and the cost of introduction a zero rate of VAT? That would seem to be a much more effective way of kick-starting the development of such properties, which is the Government’s objective.

In the Red Book, paragraph 7.70 on page 183 includes a reminder of the Government’s ambition

“to ensure that, within a decade, all new homes will be zero carbon.”

That is a very ambitious objective. The proposed measure will go only a modest way towards achieving it—such a modest way, in fact, that I have been unable  to find out from the analysis of policy decisions what revenue impact it will have. There is no line setting out the impact of zero-carbon homes on Government revenues this year, next year or the following year. By their own admission, the Government anticipate that this will be a puny measure and will contribute little to the achievement of their objective.

It is no surprise to those who have studied Government measures for energy efficiency and VAT that a zero rate has not been introduced. Only last year, the Government decided to apply VAT to grants given by the Energy Saving Trust, which advises households on energy efficiency. Its chairman told the BBC last July:

“We collect about £25m that we spend on energy efficiency measures and reducing carbon, and we will now take about £5m of those and return it back to the Treasury'”.

So the Government are using energy efficiency measures as a revenue-raising mechanism rather than to encourage increased energy efficiency. This measure smacks of green gestures rather than of a genuine commitment to greater energy efficiency in housing construction.

Photo of Adam Afriyie Adam Afriyie Conservative, Windsor

I was not intending to speak to this clause, so I shall be brief. I was stunned when I looked a few moments ago through the regulations that have just arrived in front of us. Thank you for ensuring their swift delivery, Mr. Gale.

Since 1997, carbon emissions have risen, green taxes have fallen as a percentage of overall tax take, and the Chancellor has missed his target on renewable energy. The question to which all that gives rise is: why should we have confidence in this new measure, which has suddenly—miraculously—appeared in the Finance Bill, almost as a knee-jerk reaction to pressure from other parties?

My hon. Friend the Member for Braintree mentioned the figure of £15 million, which appears on page 230 of the Red Book in paragraph A2.10. That says:

“The Exchequer cost is expected to rise to around £15 million by 2011-12.”

Although I might be misreading the regulations because I have looked at them so quickly, it is clear that paragraph 14(3) on linked transactions including the first acquisition of a zero-carbon home says:

“The amount of tax chargeable shall be reduced by £15,000 in respect of each first acquisition of a zero-carbon home”.

From a quick calculation, it appears that the Government are allowing for only 1,000 homes to be sold under this regime. Where do the 100,000 zero-carbon homes fit in? Where is the incentive to kick-start the market? How many zero-carbon homes are expected to be built as a result of this measure? It is trumpeted as being a wonderful thing, but as soon as one looks at the detail, it appears almost trivial and irrelevant.

Finally could the Economic Secretary give us one or two tangible reasons why we should have confidence in the measure, given that the regulations seem to be working against the picture that the Government try to paint and we do not even know at the moment whether a single zero-carbon home exists?

Photo of David Gauke David Gauke Conservative, South West Hertfordshire 11:30 am, 15th May 2007

I think it would be fair to summarise the Opposition’s contributions as welcoming the principle behind the clause while expressing concern that its provisions may not be used very frequently. We can examine whether one or two developments might come under the clause, given the time frame. Unless it is extended, the provisions of the clause will come to an end on 30 September 2012.

The first and most obvious example of a potential development was referred to by a number of hon. Members, including my hon. Friend the Member for Wycombe, namely the proposals made by the Chancellor over the weekend for five new eco-towns, each consisting of 20,000 homes. My hon. Friend described that as a re-announcement and he may be correct, but let me for the moment assume that it is an exciting, new and wholly original proposal. If so, the time frame—less than five and a half years—is, as my hon. Friend the Member for Braintree pointed out, a somewhat short period in which to benefit from the proposals in the clause. Will there be time? If there is time, it suggests that sites have already been identified. Perhaps there has been some consultation with local authorities already. Perhaps local authorities will not have a role within this area and planning will be done at a central or regional level.

I would be grateful to know what stage these proposals have reached. Perhaps, to be fair, they rely on the work undertaken by the Minister for Housing and Planning. May I say how pleased I am to see the spouse of a member of this Committee feature in our deliberations, particularly when it is someone else’s spouse?

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

I am well aware of that.

My hon. Friend the Member for Wycombe referred to the announcement made in May 2006. Perhaps I can focus on two other announcements made by the Minister for Housing and Planning. In October 2006, she announced 45 new developments as part of the new growth points programme. She described it as

“a significant opportunity for the new communities to become exemplars of sustainability by pioneering eco-development and encapsulating high design standards in parallel with meeting the housing needs of local communities.”

Perhaps that work might be useful in assisting the Chancellor in his exciting, new and wholly original proposals that he announced at the weekend. Perhaps even more relevant would be the announcement made in March this year about new towns. As the Minister said:

“Now is the time for us to look at new eco-towns”.

As a £2 million fund was also announced for the purposes of these new eco-towns in March, will the Chancellor be making use of that fund for his new proposals?

The appointment of David Lock, chair of the Town and Country Planning Association, was also announced; he will report to the Government on further developing the criteria for eco-towns. Will Professor Lock’s report be used for the Chancellor’s new proposals? If the£2 million fund and Professor Lock’s report will indeed be used for those purposes, it may well increase the  chance of those five new eco-towns being developed before October 2012, but it might bring into question just how poor the original proposals were.

My hon. Friend the Member for Braintree alluded to an important point, which is that the Treasury tends to propose exemptions in order to encourage particular behaviour. However, if that behaviour is actually carried out on a much greater scale, that exemption and encouragement tends to be withdrawn. The home computing initiative to which my hon. Friend referred was a good example.

We know that, within the provisions of the clause, the Treasury has the opportunity to extend the stamp duty land tax relief available for zero-carbon homes. Does the Economic Secretary have any criteria in mind that might be used in deciding whether to do so? Given that, by 2016, as we have heard, all new homes are supposed to be zero-carbon, if there are, in fact, many developments by 2012 would it indicate to the Treasury that the relief is successful and should therefore be continued, or would it then constitute too great a cost to the Exchequer and be withdrawn? Conversely, if it is little used—and, as my hon. Friend the Member for Windsor pointed out, there are such indications—would that be an argument for abandoning the relief, because it proves to be useless, or for maintaining it? I am conscious that the Economic Secretary cannot bind his successors and that, by the time that we come to make this decision, I shall perhaps be referring my questions to those sitting on my Front Bench rather than to this Government. None the less, I should be grateful for an indication of what the criteria will be.

Finally, as this relief will apply only to properties of less than £500,000, if house prices continue to grow substantially in the years ahead, a home of £500,000 might not be that exceptional by 2012. Indeed, in some parts of the south-east of England, it is already not that exceptional a price. Would the Government then look at reviewing the figure of £500,000, as that may preclude a lot of new properties by 2012?

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I am very grateful to you, Mr. Gale, for ensuring that all Committee members have been provided with drafts of the regulations and for giving me the opportunity to speak again. Looking through the draft regulations conjured up concerns borne out of my experience from working as a regeneration officer for Carrick district council before being elected to Parliament. The area of my work was in helping small businesses to access objective 1 funds, and part of the funding available was for work and business space. Because there was a real shortage of business space in Cornwall, it was one of the few areas where private developers could access objective 1 funds. Because there was such demand, tight environmental standards were set for the buildings, so only those applications with the highest environmental standards went forward.

Two things arose from that. First, concerns arose from the fact that the goalposts kept moving, which echoes the concerns of other Members about how people can have confidence that the scheme will not be withdrawn or that higher standards will be set. The moving goalposts undermined confidence in that scheme. Secondly, there was a total lack of capacity to assess the environmental standards that had been set.  Even for those projects that were entirely compliant with all the restrictions that had been specified by the objective 1 partnership, it was impossible to find someone in the whole of the south-west region—not just in Cornwall—who was qualified to say whether the criteria had been met.

The concern here is that an accredited assessor will be appointed, but it is not clear from these regulations whether all members of the accreditation scheme for the energy performance and buildings regulations will be eligible to assess whether a home is a zero-carbon home. I suspect that the experience will be the same as mine when I worked for the Carrick regeneration team. Particular people will be specifically qualified to comment on whether a property is zero-carbon, but it is difficult to find such people and, in practice, it could prove impossible.

I would appreciate the Economic Secretary’s comments on how many people he thinks will be accredited, and what the spread will be across the country. My concern is that it will end up being impossible to accredit anyone and that we will encounter exactly the same problems that came up during my experience working for the Carrick regeneration team. I therefore urge him to hold a conversation with the objective 1 partnership office in Cornwall to discuss the problems that it encountered and to find some practical solution. If he does not, the regulations may encounter problems in terms of delivery.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

Thank you, Mr. Gale, for your generosity in dealing earlier with the points of order. It is a privilege to serve under your chairmanship for the first time in a Finance Bill, and I hope that we will be able to continue to have such a co-operative relationship as we move towards the “thank yous”? As I said in my point of order, to the extent that an error was made on my part, I apologise in particular to the hon. Member for Wycombe, with whom I had a direct conversation.

The comments just made by the hon. Member for Falmouth and Camborne, which drew on her own experience, show that it would be desirable to debate the regulations under the affirmative procedure if that can be done. In the policy area in which I have been active in the Treasury, I always welcome the use of the affirmative procedure. When important areas of policy are taken forward, it is right that there should be an opportunity to discuss the detail in the House. I think that sensible Ministers welcome such opportunities. In this case, both because of the problem that we have had this morning but because of the importance of the issues, that would be desirable. I should also say—I shall some back to this in a moment—that these are genuinely draft regulations for consultation.

The consultation process over the next few months will be conducted properly. There may well be changes, as an opportunity to revisit some of the issues would be welcome if that could be achieved. I also think that a debate would provide a welcome opportunity for Conservative members to have a further chance to debate these matters. So far, I have felt a sense of confusion among Conservative Members about the measure. I cannot work out whether they think that it is a good thing, or a bad thing; whether they think that it is insufficiently generous or far too demanding; and  whether they believe that the objective of zero-carbon homes is beyond reach or whether the measures are insufficient to the task.

I have also noted the regular tendency of Conservative Members, when talking about the environment, to return to questions of presentation. When an announcement is made and if we are to take forward an agenda on the environment or housing, the important thing is to get beyond the presentation and start talking about the substance. That is what the regulations are about.

The problem with matters of substance is that, when it comes to housing and the building of new houses for first-time buyers, Conservative Members have been consistent in their local opposition to building new houses. When it comes to the measures that we have taken forward since 1997 on the environment, such as the climate change levy, Conservative Members have been consistent in their opposition to taking forward concrete action on the environment. It would be my guess that over the next two years, there will be an increasing debate, not simply about presentation but about substance. Labour Members will relish those debates, because the more we focus on substance, the more people will see that it is this party that produces concrete proposals that deliver for hard-working families. For all their spin and bluster, Opposition Members consistently oppose measures to take forward policies for hard-working families.

The clause, which deals with exemption from stamp duty and land tax for new zero-carbon homes, will take effect from 1 October 2007. It will kick-start the technologies and techniques needed to build zero-carbon homes to meet our ambition that from 2016 all new homes should meet the zero-carbon standard and make no net contribution to carbon emissions. As hon. Members have noted, that has been a subject of much debate lately. The issue has been with me day and night in recent days—

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

And months. As Opposition Members point out, to take an idea, to build support not only in Parliament but among voluntary organisations and house builders, to discuss it with local authorities and the wider public, and to persuade what looks likely to be the next Prime Minister to back it in public is the process of policy-making that delivers hard outcomes. That is what has been going on over the past year. I cannot work out whether Opposition Members support the proposal or oppose it, or whether they are just confused. When people read the Hansard report, they will conclude—

Photo of David Gauke David Gauke Conservative, South West Hertfordshire

The Economic Secretary places great significance on being able to persuade the next Prime Minister to back a proposal that was publicly made under the present Prime Minister. Is the hon. Gentleman therefore saying that until the Chancellor publicly backs announcements that were made under the previous Prime Minister, we cannot necessarily assume that the Chancellor supports them?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

As I said, a notable feature of the debate is that one listens hard but ends up being very confused by the contributions of Opposition Members. The Chancellor of the Exchequer announced in the Budget a tax measure to back our zero-carbon homes plans, so he has clearly been backing the proposal for some time. It was prefigured in the pre-Budget report.

My point is that when the putative Prime Minister backs a measure on the campaign trail it increases the substance and salience of the issue. Over the next two years there will be two potential Prime Ministers—one in office, and the Leader of the Opposition. Debates of substance on these issues will be very much welcomed on the Labour Benches.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

The Economic Secretary is very focused on concrete outcomes, but so far the concrete outcome of the measure is that the Government cannot tell us that there are any zero-carbon homes at all.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

I was expecting you to allow your indulgence to be stretched only so far, Mr. Gale, to encourage us to get back to the substance of the debate.

Photo of Roger Gale Roger Gale Conservative, North Thanet

Order. The hon. Gentleman is very impressive; he has hit the nail exactly on the head.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

Encouraged by your good self, Mr. Gale, and by the hon. Lady, I shall continue. I am happy to respond in detail to the questions asked by the hon. Member for Wycombe and others.

I shall briefly put the proposal in context. We set ourselves a target to reduce overall carbon emissions in the UK by 60 per cent. from 1990 levels by 2050. More than 25 per cent. of all carbon emissions in the UK result from energy use in the home. In 2050, about one third of all homes will have been built after 2016. If we can ensure that all homes built after 2016 are zero carbon and that they will make no net carbon emissions, it will make a very significant contribution towards the 2050 objectives. In answer to a question asked by Opposition Members, if all new homes were zero carbon by 2016 the annual carbon saving would be 8 million tonnes a year, amounting to 90 million tonnes saved by 2050, which is a substantial potential contribution to meeting our environmental challenge.

I encourage Opposition Members, particularly the hon. Member for Ludlow, to be more confident and ambitious in backing our objective for zero-carbon homes, rather than starting from a position of scepticism and conservatism. Our ambition to have zero-carbon homes from 2016 is bold and radical, but I believe that it is deliverable and I shall explain why.

In recent years, we have used building regulations to improve the energy efficiency of new homes. Changes to the building regulations in 2006 achieved a 40 per cent. improvement on pre-2002 standards, and a 70 per cent. improvement on pre-1990 standards in the efficiency of new homes. However, this Government want to go further. In part, we will do that through regulations that require that by 2016 new build houses will meet the zero-carbon standard. As the hon. Gentleman knows—this is outside the scope of the Committee, but relevant to the debate—a consultation  process on building regulations and the definition of zero-carbon homes is under way, led by the Department for Communities and Local Government.

Guidance on six different levels of sustainability has been issued to help the industry. The strategy of the DCLG is to build the regulations up over time toward the level that will ensure the building of zero-carbon homes. Building regulations will play an important part in our achieving our objective. We will also, as we heard in the announcements that were made at the weekend, depend on local leadership. The Government’s objective is not to impose new planning requirements or new eco-towns on local communities but to encourage proposals for eco-towns to be made locally.

I urge hon. Members on both sides of the House to back such proposals rather than to be sceptical about them. It is crucial to build a cross-party consensus in our country on the importance of building sustainable homes. I am continually frustrated that, for all the talk, Opposition Members all too often appear to stand in the way of such developments. The right way forward is not to impose from the centre but to encourage local leadership. That is our objective in the eco-towns proposal.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

On the subject of frustration, I am waiting for the Economic Secretary to answer some of the questions that were asked. For example, given that he was able a few moments ago to give us a figure for carbon savings, surely he can tell us how many zero-carbon homes the Treasury estimates will be built as a result of this measure. What is the answer?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

The hon. Gentleman will have to hold back his impatience and wait for me to answer his question. I said that I would do so and I meant what I said, so I will—in due course and in my own time.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

I am pleased to hear the Economic Secretary speaking about the need for local leadership. However, I do not understand how he can square that with the position that the Government took on the Local Planning Authorities (Energy and Energy Efficiency) Bill—the private Member’s Bill that came after Second Reading of the Sustainable Communities Bill—which specifically allows local authorities to set higher environmental standards when giving planning permission for properties. Why did the Government take that position and how does he resolve the contradiction?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

That point goes well outside the responsibility of the Treasury or the scope of this Committee. However, a consultation is under way on building regulations for interim steps to improve standards between 2010 and 2013, before we go to full zero-carbon homes by 2016. The Government have launched the code for sustainable homes in England as a voluntary standard. It will allocate a star rating from one to six for new homes by assessing their overall sustainability and setting out aspirations for new build housing. Progress is being made.

It is important that we make progress on social housing, too. We have announced that the minimum requirement on all homes built with social housing  grant or on English Partnerships-developed land will be to meet code level three. That is a 25 per cent. improvement on current building regulations for energy performance. Obviously, we want to go further in that area, too. The lead on that, however, will be taken by the Minister for Housing and Planning rather than by me. My role is to talk about the tax measure that we are introducing today, which I shall turn to now.

The clause amends the stamp duty land tax legislation in the Finance Act 2003 by inserting new sections to deal with relief or exemption for the first sale of new zero-carbon homes. They will enable the Government to make regulations to define zero-carbon homes, to quantify the amount of relief or exemption and to deal with administrative matters. The regulations will cease to have effect at the end of a five-year period, on 30 September 2012, unless we decide to extend that relief further. In the Budget, we said that we will review the effectiveness of the relief before the end of that period to see whether it should be extended. We will make that decision in the light of the circumstances at the time and the effectiveness and cost of the measure.

To the hon. Member for South-West Hertfordshire, I say that we will use a range of criteria to assess the measure. If it turns out that the objective has already been reached by the time of the assessment and every home is zero-carbon, that might suggest that we do not need to continue with the measure. If, as I anticipate, developments are proceeding apace but there is still further to go, it might be right to extend the relief, subject to cost considerations, which the Chancellor of the day will have to consider carefully. In this area, it is sensible to make policy by setting out regulations for five years, to assess performance along the way and to give a clear, public signal of our future intentions well in advance of the end of that five-year period. That is what we will do.

Photo of Adam Afriyie Adam Afriyie Conservative, Windsor

From my business background, and given how long it takes to build properties, it seems to me that putting a short time limit on the tax relief sends a signal that the Government are uncertain whether the relief will continue. What confidence does that inspire in builders, who have to invest hundreds of millions of pounds developing new homes? It sends no confidence signal at all.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

I have great respect for the hon. Gentleman’s business background. Let me quote from Stewart Baseley, the executive chairman of the Home Builders Federation:

“We welcome this package of measures in setting both the goal and direction for achieving more and greener homes. Progress will be achieved most effectively through a framework in which Government sets clear objectives, industry is given the space to deliver and consumers are on board.”

That is exactly what we will achieve with these measures. Dave Hill, a developer in Upton, Northampton, said:

“The costs of making a conventional home into a zero-carbon home aren’t as bad as I thought. It gives me confidence that, in 10 years’ time, we will be building them for the mass market.”

Hon. Members do not have to take my word; they can take the word of the business men who made those contributions.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

I want to make a bit more progress, then I shall take the intervention.

The regulations that we set out are in draft. For reasons of good policy making and wider politics, we welcome the opportunity to have a further debate if the business managers allow. We genuinely intend to consult on the regulations. The Department for Communities and Local Government is currently consulting on the definition of zero-carbon homes by 2016, which is part of the reason why our approach must be consultative. Our regulations are running in parallel, and it desirable that those consultations end up with aligned definitions. That is our hope and expectation. The regulations will therefore have to be considered in the light of those wider consultations.

The first exemption will be complete for all new homes priced at less than £500,000; purchases above that level will benefit by £15,000. Stamp duty land tax will be paid only on the balance, which is equivalent to stamp duty at £500,000. The regulations set out a technical definition of a zero-carbon home, but that is in draft and for consultation.

As the hon. Member for Falmouth and Camborne said, the regulations provide for operational matters, particularly certification. Stamp duty is a one-off tax, so it is important to ensure that the certification is robust and protects us against avoidance when we levy it, and that is partly why we need to ensure that we get the consultation right. Finally, the regulations also contain rules about microgeneration and dealing with linked transactions.

Let me now turn to the questions that hon. Members put to me. The first relates to current developments and costing, which I am happy to discuss. There is much discussion of the Gallions Park development in the Chief Secretary’s constituency, and that development is moving forwards, not backwards.

Mr. Goodman rose—

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury 12:00 pm, 15th May 2007

Shall I make the point first, or does the hon. Gentleman want to intervene before I do so?

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I would like to intervene first. The Economic Secretary says that things are moving forward, but will he clarify whether that means that planning permission has been given?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

The hon. Gentleman has intervened to make exactly the same point that he made in his speech. Given that it is the same, I will answer both his speech and his intervention now. The London Development Agency has earmarked the site for the development of a zero—[Hon. Members: “Ah!”] Ah? The agency has earmarked the site for the development of a zero-carbon house—[Hon. Members: “A house?”] Sorry, homes. A developer has been announced since the pre-Budget report, and the GLA has appointed an approved contractor. The development is within GLA guidelines, as the hon. Gentleman knows. In due  course, under the present process, planning permission will be considered. Has planning permission been granted at this stage? As I understand it, it has not. The reason is that the development is going through the planning process. That is what happens when we build houses: we go through a planning process, and that is what is going on with that development.

There is also a development on surplus public land at Northstowe in Cambridgeshire, which is intended to be an exemplar growth-area development. The development aims to be low carbon, but I do not believe that it is intended to be zero carbon at this stage.

As I explained earlier, the ambition is to move towards all homes being zero carbon by 2016. The starting point today is that few or no homes are zero carbon. We have set out to achieve our objective by 2016 and we believe that it can be achieved by steadily building up building regulations and using a tax incentive to encourage developers to take the necessary steps. That objective can be achieved by 2016, but it is not being achieved today. We are taking the proposed steps so that we can save a further 8 million tonnes by 2016.

There are few or no zero-carbon homes today. As the Chief Secretary said on the Floor of the House, there is intended to be a development in his constituency and there are small demonstration projects around the country. However, we are starting with no or few zero-carbon homes and we intend to get to the point where 200,000 such homes are built each year by 2016—that is the ambition. When hon. Members say that there are no zero-carbon homes today and say “Ah!”, they are right, which is why we are introducing a policy of regulations and tax incentives to achieve our objective. Opposition Members were very sceptical about whether our objective is deliverable, and I understand that, but I disagree. By taking the right action, we can deliver on our objective of moving from zero homes to 200,000 over the next eight years.

Photo of Mark Francois Mark Francois Shadow Paymaster General

Let us return to Gallions Park as an example of the process that is under way. If I heard the Economic Secretary correctly, he said that planning permission had not yet been granted for zero-carbon homes at that location. However, he implied, although did not state, that a planning application had been submitted. If so, it would have to specify how many zero-carbon homes were proposed. Will he confirm whether a planning application has been submitted for zero-carbon homes at Gallions Park and, if so, how many are to be zero carbon?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

It would be inappropriate in a Finance Bill debate for a Minister to set out the details of a particular planning application, or to give indications of its contents—[Interruption.]

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

As for its content or its chances of success, the question was raised with me, and I said that as I understand it, the proposal is going through the  planning process but a decision on its acceptability or otherwise has not been made. That decision would never, in any event, be made by a Treasury Minister, so it would be inappropriate of me to comment.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

I shall finish the point first. The development intends to deliver zero-carbon homes—that is its objective, as I understand it. I also said that the proposal is within GLA guidelines and a contractor has been approved. It is a good job that it is in a constituency that has a Labour Member of Parliament. I fear that if it had had an Opposition Member of Parliament, there would have been local objections on the hon. Gentleman’s website.

Photo of Mark Francois Mark Francois Shadow Paymaster General

This doctrine that the Economic Secretary has developed that Members of Parliament and Ministers do not comment on planning applications is a revelation to me. The Secretary of State for Communities and Local Government has a great history of commenting on planning applications—usually to object to them in her own constituency. He has reinvented parliamentary doctrine on his feet.

To come back to the point, a planning application, by definition, is a publicly available document—under the planning process, it has to be. Given that it is a publicly available document, there should be no problem about the Economic Secretary’s commenting on it. Has a planning application been submitted at Gallions Park and, if so, how many zero-carbon homes are in it? Will he answer those two simple questions?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

As I said, it would be entirely inappropriate for a Treasury Minister, during proceedings on a Finance Bill, to comment on a particular housing development. I am not going to comment on what individual Members do in their constituencies. That is a matter for them. I shall just point out that, as it happens, hon. Members opposite consistently oppose housing developments in their constituencies.

In the case of Gallions Park, I am advised that the planning process is under way. I do not know what stage it is at, and there is no reason for me to know that. All I know is that the intention is that it will be a development of zero-carbon homes. The hon. Gentleman is trying to make the point that there are currently no zero-carbon homes. I would say that he is right. There are none. That is why we are legislating in the Finance Bill, with public money, for an incentive to deliver such homes—in fact, for all homes to be zero carbon by 2016.

As I said to the hon. Member for Wycombe last week, I cannot understand the point that hon. Members are making. If they are claiming that there are no zero-carbon homes today, they are correct. Luckily, we have a Government with the confidence and commitment to set an objective to deliver zero-carbon homes by 2016 and to take the actions on tax and regulation to achieve that. If the hon. Gentleman would clarify his point, it would help me very much.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I can certainly clarify it. We are trying get a clear answer from the Economic Secretary as to whether the figure is a couple of dozen, as the Chief Secretary claimed on “Newsnight”, or, as he said today, very few or none. Very few and none are not the same, so which is it?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

The answer is that, to all intents and purposes—given that our objective is to get to 200,000 a year by 2016, and we are currently consulting on regulation changes and legislating on tax so that we can start the process of getting zero-carbon homes—so far as I am concerned, today there may well be none.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

In a moment.

I do not know the answer to the hon. Gentleman’s question. It may well be that there are a number—a small number—of lower-carbon homes around the country. Given that the Department for Communities and Local Government is currently consulting on what the definition of zero-carbon homes should be, and given that we are consulting on draft regulations about what the definition of zero-carbon homes for tax purposes should be, I am afraid that the answer to the question of how many zero-carbon homes there are rather depends on the outcome of those two consultations.

The point that the hon. Gentleman seems to enjoy making is unbelievably obscure, and therefore we might as well all agree that we are starting from a position whereby the number of zero-carbon homes is low or zero and our objective is to get to 200,000 a year. Perhaps we should get on to the substance of whether we are taking the right decisions on regulation and tax to reach that objective, rather than engaging in this seemingly obscure and meaningless debate.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

I will help the Minister to move on, passing over the point that he has just given us a fourth answer, which is that he does not know. The question that I would like to ask him is can he tell us how many homes will be built as a result of this measure?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

I will come on to the costing of the measure in a second. I do not think that there is a single member of the Committee who knows how many zero-carbon homes there are. We are currently consulting on what the definitions should be exactly, for regulatory and tax purposes.

Julia Goldsworthy rose—

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

Perhaps some clarity can be provided by the Liberal Democrats, because we are getting none from the Conservatives.

Photo of Julia Goldsworthy Julia Goldsworthy Shadow Chief Secretary To the Treasury, Treasury

Because the definition of a zero-carbon home has not been set—the clause establishes how that definition will be achieved and what the tax reliefs will be—surely that means that there are no zero-carbon homes at present? There may  be some energy-efficient homes out there; I can think of some in my constituency. However, if the definition has not been set, one cannot say how many exist. Is that not straightforward?

Ed Balls rose—

Photo of Roger Gale Roger Gale Conservative, North Thanet

Order. I have listened carefully—probably rather more carefully than some other people in the room—for quite a long time to this debate. It strikes me that it is going round in circles.

When I first entered the House, there were devices called parliamentary questions, which enabled Back Benchers in particular to obtain information of the kind that is being sought in the Committee. It seems to me that we are getting to the point at which the Economic Secretary is being asked questions that are probably, and properly, outside his ministerial remit. I would be grateful if the Committee could return to clause 19 and the economic substance of the Finance Bill.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

I shall come on to the substance of the hon. Gentleman’s question, which is about the costings.

As I said, we start from a position where a small number, or zero, homes are zero carbon. We are consulting on exactly what the definition of zero-carbon homes should be for tax purposes; it is a genuine consultation, and it was conducted mainly to change the regulations following that consultation. Our aim is to get from zero to 200,000 zero-carbon homes a year by 2016. At this stage, given that this is uncharted territory, we do not know what the pace of build-up will be. It will depend on the way in which the regulations are calibrated and ratcheted up, and also on the success of this tax measure. It is not easy for us to make a forecast. Therefore, the Treasury has to make a decision as to how we sensibly cost this measure in the Finance Bill, when we do not know exactly what the outcome is likely to be. There is not really any sensible basis for a forecast, because we are starting, essentially, from zero.

We took the view that we start from zero and will get to 200,000 in 2016, and that the build-up will not be linear, or like a straight line, but that there will be a progressive acceleration over that period. On the basis of that, from nought today to 200,000 a year by 2016, and on the basis of the stamp duty relief that we have set out today, we will produce a costing.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

In a second.

On the basis of the costing, as set out in the Red Book, for the build-up that we have estimated or projected, the costing by 2012 will be around £15million.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

In a second.

On that basis, costing by 2012 will be around£15 million a year. It may well be that the target will be  reached faster than in that non-linear projection; it may well be that that happens more slowly. If it happens more slowly, we will either have a later acceleration or miss the target. We may need to make the relief more generous. If it happens faster, it may well be that the cost of the measure will exceed our estimates—a very desirable thing indeed. This is one of those areas where the Treasury would be pleased if the cost of the measure exceeded our expectations. We have projected forward from zero to 200,000 on a curve, and produced some costings on that basis.

Given the nature of the exercise, it would not be sensible for us to set out in detail the actual numbers at each point along the curve because that would give the impression that the process was based on science and forecasting, and that it was an objective. Frankly, it does not have that status. We do not know what the take-up will be, but we will have much more evidence in a year or two. It is a sensible, projected way to cost, and that is what we have done.

I am sorry if that does not satisfy the hon. Member for Wycombe, but it is the best way to proceed, given that what we are doing is so innovative. It has not been done before, and there is no sensible way of making a forecast. He asked what my forecast was for 2012. We do not have a forecast, but our objective is to get from zero to 200,000 a year by 2016.

Photo of Stewart Hosie Stewart Hosie Shadow Spokesperson (Women), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (Treasury) 12:15 pm, 15th May 2007

I like the Minister’s honesty in saying that this is not based on science and that there is no sensible way of making a forecast. However, given the consultation on the definition and that only after the outcome of that will we know what the real cost of a low or zero-carbon house will be, surely that should be the point at which to determine what tax incentives might be necessary to provide the correct incentive for a large number of such properties to be built. Would not that be the correct approach?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

I understand the hon. Gentleman’s point, but we are using language carefully, which hon. Members mocked, and kick-starting a process. If something like a motor bike is kick-started, it is because it is stationary and one wants it to move forward. There are very few carbon-zero homes and we want to kick-start the process by saying that as well as regulatory change there will also be a tax incentive on the table. That is what we are legislating for, and consulting on in the case of the regulations, so that we can kick-start a path towards 200,000 such houses a year by 2016.

The hon. Gentleman is absolutely right to say that as we gain more experience we will be able to see whether the stamp duty exemption—it is only part of the package; the regulations are also important—is sufficient. We do not know the answer, which is why we must return to the matter following a debate in Committee on future Budgets. We may need to make the measure more generous, or we may find when we look in advance of 2012 that we were more generous that we needed to be and that there is a lot of dead-weight cost.

The problem is that because we are at the start of the process, we do not know the answers to the questions. After five years’ experience we may know how we could have kick-started the initiative, but logically that is beyond us. We must set out a sensible incentive and use it to deliver our goal.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

As I said at the beginning of my speech, I support the aspirations and ambitions of the clause, as I believe we all do, but we are questioning the detail. One question that the Minister has not answered is about the time frame. He set an ambitious target for 2016 and, as a business man, I have said that 2012 will be challenging, given the planning challenges and so on. How many business men did he consult in coming up with the 2012 and 2016 figures, and what feedback did he receive on 200,000 a year being realistic, which I would support if he could get there?

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

That point was also well made by the hon. Member for South-West Hertfordshire, who asked in particular about 2012, and I answered the question then. Clearly, it is sensible at the beginning of a process to set out tax relief over five years and then to assess its effectiveness clearly before the end of that time frame. I have said that if we have not achieved our objective but the tax incentive is working, the sensible thing for us to do would be to extend it—[Interruption.]

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

We will do that in plenty of time. I answered that point carefully.

The hon. Member for Braintree, again citing his business credentials, asked about businesses being consulted and I read out two quotes from business people who have given their views. We are now consulting on the basis of the regulations for the stamp duty exemption. Consultations on the wider zero-carbon homes initiative are being taken forward by the Department for Communities and Local Government, and the Treasury is part of that process.

I assure the hon. Gentleman that in order to meet our objectives, we will be consulting the business and wider communities in the coming months. As I said, we have also consulted on the preparation of the policy. I was confused because Opposition Members seemed to claim that the objective was both trivial and unachievable. They had no coherence of view.

We are setting out a bold, innovative, radical, coherent policy in which tax can play a part in contributing to the wider objective of every home being a zero-carbon home by 2016. I hope that it will be possible to have a debate in Committee on the regulations because Labour Members relish debates on housing and the environment. A further opportunity to set out thinking following consultation on some of the detailed points would be welcome and desirable. I hope that the Committee will allow us to move forward.

Question put and agreed to.

Clause 19 ordered to stand part of the Bill.