Clause 32

Infrastructure Bill [Lords] – in a Public Bill Committee at 12:00 pm on 8th January 2015.

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Provision in building regulations for off-site carbon abatement measures

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government)

I beg to move amendment 60, in clause 32, page 34, line 23, at end insert

“and shall relate to buildings or developments of any size”.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

With this it will be convenient to discuss amendment 34, in clause 32, page 36, line 5, at end insert—

‘(7) No variation to the requirement of the building regulations in respect of a building‘s contribution to or effect on emissions of carbon dioxide may be made solely by regard to the number of buildings on any particular building site.”

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government)

Before I begin, I want to thank the right hon. Member for North East Bedfordshire for requesting a suspension to our proceedings earlier. I forgot to say that when I was last on my feet, but I am sure the Committee appreciates his action.

Clause 32 is probably one of the most pernicious provisions in the Bill. The amendment would prevent exclusions under the clause or subsequent regulations that allowed small sites to be exempted from the building regulation standards for zero-carbon homes or from the allowable solutions obligations that should be applied to development sites.

It is most unfortunate that the matter has come so late in our consideration of the Bill and that we are debating it when the Government’s consultation on it has only just closed, which means that the outcome is not in the public domain.

In its briefing to the Committee, the UK Green Building Council tells us that it has yet to see any evidence that exemption from the zero-carbon requirements or allowable solutions obligations would stimulate more house building by small builders. The business challenges for small builders were summarised in a National House Building Council report published in October 2014. In a qualitative survey, the report identified the top barriers as planning and process obligations, obtaining funds, the availability and cost of land and skilled labour, and the cost of labour. Legislation and red tape were named by only 4% of the 363 companies surveyed.

It is a little odd, to say the least, therefore, that the Government have chosen to concentrate on exempting small sites from the allowable solutions obligations, rather than on trying to make it easier for small companies to obtain funds or, more critically, on addressing the availability and cost of land, which is the top reason small companies give for being unable to build houses. However, as we discussed when we last sat, the Government say nothing about that.

It appears, therefore, that the whole premise for exempting small sites from the allowable solutions obligations is completely wrong. That raises the question why the Government are consulting on whether the exemption should be for small sites or small builders, never mind setting out various options, which get increasingly complicated.

The Government have missed a fundamental point. Does someone buying a house really want it to be less energy efficient than a similar house built down the road by a larger builder or on a larger site? That is clearly nonsense.

The Government say that all houses will need to be built to code level 4, wherever they are and regardless of the size of the company that builds them. However, the consultation paper appears to allow for circumstances in which that might not be the case. I would be grateful if the Minister could clarify that point, because the Green Building Council—and others—have said:

“Although the preferred option in the consultation is for an exemption from effort over and above the on-site standard, the Government does worryingly also consult on the possibility of a lower on-site standard for homes built on a small site, creating a two-tiered approach to Building Regulations.”

That is something that the Government say they do not wish to do. Additional clarity and significant reassurance on that point from that Minister would be helpful.

Have the Government analysed whether the provisions would have a particularly negative impact on rural areas? Rural communities often have additional costs for transport, for example. As most of these small development sites are in rural areas, it would be unhelpful if this measure gave them higher energy costs as well as other additional costs.

This measure appears to be extremely short-sighted. The Government acknowledge that not all small sites are built by small building companies. Rather than realising that an exemption for small sites and small builders is wrong, the Government appear to be considering making the system even more complicated by putting in  size restriction. The example mentioned in the consultation paper is less than 1,000 square metres of floor space for a 10-unit development.

The alternative is to limit the exemption to small builders with 49 employees or fewer. Does the Government know how many firms come into that category? What about businesses that subcontract most of their work, or businesses that have subsidiaries? The Government are consulting on both an exemption for small firms and an exemption for small sites with a limited area of floor space.

As I said earlier, this is starting to look like a very complicated measure and scheme. Will the Minister tell us who is going to check all of this? The situation that will trigger an exemption will be what the builder says it is. Have the Government estimated what the costs will be for whoever carries out the assessment?

Does anybody across the sector think this is a good idea? The Solar Trade Association, the Campaign to Protect Rural England and the Green Building Council are all totally against this proposal. The Green Building Council says:

“The allowable solutions mechanism was designed specifically to enable the costs of meeting the full zero carbon standard to be reduced for sites that are unfairly burdened due to physical constraints, such as size. Smaller building sites are specifically the types of development that the allowable solutions mechanism was designed to support towards delivering zero carbon. It therefore seems perverse that these sites are now to be exempt from the part of the definition designed to ensure they can cost effectively comply.”

It also says:

“We see no reason why a development of 10 units should be treated differently from one of 11.”

I agree. Its written submission goes on:

“Creating a disparity between the treatment of different sites opens up the possibility of unforeseen and undesirable outcomes, and possibly exploitation, where larger sites are broken down to qualify for the exemption. The artificial division or staging of sites to attract an exemption could slow down the building of new homes, as well as impact fundamental design, orientation and place-making principles.

The proposed exemption of sites of 10 units or fewer is shown by the figures presented in the consultation to affect as much as one fifth of all homes proposed…This is clearly a considerable proportion of the stock. We believe that an exemption for such a large proportion of the stock will create confusion in the house buying market. If a house buyer cannot expect the same standard of a new home built on a small site to that built on a large site, the value of a highly efficient new home will be undermined.”

Indeed, it is hardly an effective marketing tool to say that houses are being built to a lower energy efficiency standard than similar properties just down the road.

The Green Building Council also says that an exemption would

“create fragmentation in the supply chains delivering products and services for differently defined ‘zero carbon’ new homes. Fragmentation leads to a lower potential for cost reduction through the whole supply chain. With small builders making up the smaller part of the demand it is logical that this market will be less well served, suffering from smaller and slower cost reductions. Therefore a perverse outcome of higher costs for the smaller builder is created.”

I hope that the Minister gets the gist of what I am saying, which is that there does not seem to be any support for exempting small sites or smaller builders from allowable solution obligations. A number of  clarifications need to be made, and simply saying that the Government will have a review after five years is not good enough.

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich 12:15 pm, 8th January 2015

I rise to speak briefly in support of amendment 34, which would have a similar—not identical, but similar—effect to amendment 59, which was tabled by my hon. Friend the Member for City of Durham. That effect is simply to make it impossible for exemptions from the building regulations to be applied solely by reference to the number of units being built on any particular site. In other words, it would not preclude the scope for allowable solutions in appropriate circumstances, but would require other factors to be present, such as that the builder is a small company that needs to be assisted or that the nature of the site makes it impossible to meet the full building regulations. Either of those would still be possible. If this amendment were accepted, it would simply not be possible for exemptions to be granted solely by reference to the number of units on the site, for very good reasons which have already been spelt out by my hon. Friend and which I have no need to repeat.

It is a simple issue of doing our best to meet the higher standards of energy efficiency. Everyone knows we must do that if we are to meet our carbon reduction obligations. We must do it in a practical and pragmatic way and assist builders to comply with these higher standards. At the same time, we need to avoid the problem of potential abuses of loopholes. We need to avoid this leading to outcomes of lower standards of housing or creating the risk, which my hon. Friend referred to, of a two-tier housing market in which different standards apply to different types of scheme. That would be thoroughly unsatisfactory for the consumer, who would be at risk of a substandard outcome on one particular site simply because of the size of the site.

We know, as the evidence already exists, that it is intellectually completely indefensible to make an exemption solely on the basis of the size of the site. It is intellectually justified to think about exemptions where it is simply not practical to comply with the full standard because of the nature of the site. When I pressed the Minister on this issue on Second Reading, he agreed that principle. I am sure he agreed with it because his predecessor, the right hon. Member for Hazel Grove (Sir Andrew Stunell), said in that debate:

“The right hon. Gentleman and I—” he was referring to me—

“have had opportunities to disagree about things, but on this matter I wholeheartedly agree with him. Does he agree that there is no benefit—either to builders or the users of the buildings, let alone to the Government—in backtracking in any way whatever on the recommendations of the zero-carbon hub?”—[Official Report, 8 December 2014; Vol. 589, c. 681.]

There is a new clause coming up later that was tabled by the hon. Member for Taunton Deane and this issue can probably be covered again there because I know the right hon. Member for Hazel Grove has also put his name to it.

However, when there is such a clear consensus about the objective we should be meeting and the need to avoid loopholes and intellectually incoherent policy proposals, I ask the Government to have second thoughts on this matter. It is not a sensible way forward and will be open to abuse. There will be larger builders who  parcel their developments up into smaller groups in order to get their number of units below the threshold, whatever that threshold is. If it is 10, as I think the Government are currently thinking about, then there will be, in my experience, a large number of builders who build detached houses on quite modest sites and who will be able to parcel those sites in such a way as to ensure that every single home comes in a grouping of 10 or fewer. That kind of game playing will simply put the overall objective at risk and serve no useful purpose at all.

I urge the Government to reconsider this matter and I wholly support amendments 59 and 34.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I rise briefly to support both of those amendments. I do not want to add to what has been clearly and succinctly put forward by my colleagues also supporting them, but to underline what is a proposal that might well not work. It could potentially produce a quagmire of competing attempts to get round the exemption level and, possibly, a lawyer’s paradise on the basis of who is dealing with what site, what number of houses are being put up on what site, who is the guiding hand behind each site and whether they are the same company or not. That appears not to have been addressed or thought out at all in introducing this exemption.

Secondly, it is a rather breathtaking move to introduce legislation, which we are discussing this morning and that will presumably—if the amendments are overthrown—become full legislation shortly, at the same time as a consultation is under way to decide whether there should be legislation and if so, what kind. The consultation that my hon. Friend the Member for City of Durham says has just finished actually finished on 7 January 2015—that is, yesterday. It has a number of options for what might be done as far as exemptions for small sites are concerned, but even that consultation makes an interesting point that is at the heart of some of the arguments about whether a small site exemption is necessary at all. It says:

“Costs of delivering zero carbon homes are expected to come down, and the impact of this would need to be analysed. The expectations on the reduced cost of delivering a zero carbon home may help bolster the case for a time limited exemption.”

But of course there is not a time-limited exemption. We are perhaps about to decide that we will go full tilt for an exemption on the basis of a housing number of 10, and, as the consultation states, in terms of the most recent figures for sites of this size, exempt 21% of the new homes being built. That is not an insignificant number, but a substantial number of homes produced over the period.

Such homes will not only be at a slightly lower level of code development, but effectively exempt from that code development, and therefore for a considerable period of time exempted from that code. At a future date those homes could be substantially retrofitted according to any future policy to uprate our housing standards.

So it seems to me that this proposal is fundamentally misconceived at this stage in the proceedings. That is not to say that, as my right hon. Friend the Member for Greenwich and Woolwich emphasised, there should be  no such things as allowable solutions. That is not to say that protocols to enable allowable solutions to be worked out should not be undertaken. However, to do it on the basis of 10 homes with virtually no other factors being considered, while other factors are considered in consultation with the public, is not a way forward that any member of the Committee ought to support. The proposal should not be rushed through when people believe that they should have the opportunity to consult and decide on what should be the way forward. Indeed, as my hon. Friends have mentioned, if such a consultation were to be taken seriously, it would reveal that there is virtually no support for the proposal among those who might conceivably be consulted. It would reveal substantial support for different forms of allowable solutions that move us forward as far as the energy efficiency of homes is concerned. We should not downgrade the whole process, which appears to be part and parcel of what is happening to the zero-carbon homes policy at the moment.

Photo of Stephen Williams Stephen Williams The Parliamentary Under-Secretary of State for Communities and Local Government 12:30 pm, 8th January 2015

We have quite a few amendments tabled for clause 32, Mr Hood, which is why I seek your guidance on whether we will have a stand part debate or whether it will be helpful for me now to give a little context to help the Committee on what we are trying to achieve.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

I will be guided by the Committee. If the Committee wishes to have a stand part debate, that might be sensible. If there is a demand for a single stand part debate, I would like to know now before I give a ruling.

Photo of Brooks Newmark Brooks Newmark Conservative, Braintree

Will there be a stand part debate at the end of all the amendments, or is it just with this group?

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

The Minister wants to know whether there will be a stand part debate. If you can express your views on stand part on the clause during the debates on the amendments, that will be acceptable to me. So we will not have a stand part debate. You can make your views known during the discussion on the amendments.

Photo of Stephen Williams Stephen Williams The Parliamentary Under-Secretary of State for Communities and Local Government

Thank you, Mr Hood. I want to start by giving some context. The shadow Minister and her colleagues have used technical language about allowable solutions, code 4 and what is done off-site and what is done on-site. It would be useful to say what we are trying to achieve in clause 32.

The clause introduces the concept of allowable solutions to allow for that concept to be introduced under the Building Act. At the moment, building regulation is amended purely by secondary legislation and is then uniform all around the country, so there is no scope for variation at the moment. The clause introduces the concept of allowable solutions, for which I heard support from all three Opposition speakers—I do not think there was any demurring from that. The concept has been around for a long time, going all the way back to 2006, in a decade during which the previous Administration first mentioned achieving zero-carbon homes by 2016.  An allowable solutions scheme has always been part of the furniture for what we are trying to achieve, and that is what the clause will introduce.

I mentioned 2006, which is essentially the baseline year for all the changes that have been made to the energy efficiency of homes. To give some context, the building regulations that we are discussing are technologically neutral: they do not prescribe what someone has to do, but simply give the standards that must be met. It is up to the house builder and the building industry to come forward with proposals to meet those standards. We must remember that we are discussing new houses, and the baseline for those built from 2006 onwards was, typically, a B-rated boiler, 75% low-energy lighting, double-glazed windows, and 100 mm of wall insulation, with natural ventilation.

This Government introduced the first uplift to that baseline: a 25% increase to code level 3 of the code for sustainable homes. That code is voluntary, not a Government code as such, but everyone recognises it. Most houses currently under construction will be built to code level 3, with an A-rated boiler, 100% low-energy lighting, double-glazed windows, and 130 mm of wall insulation. The most recent change, which was introduced last year, sees the same boiler and lighting specifications, but double-glazed windows with thermally efficient glass and 160 mm of wall insulation, with natural insulation. Houses that have most recently been granted permission may well be being built under the most recent 2014 standards.

Although it is distinct from what we are discussing today, if we proceed, via secondary legislation, with uprating part L of the building regulations to the equivalent of code level 4 of the code for sustainable homes, which we will, right across the country and with no exceptions—I will deal with this point in more detail in a moment, but although the hon. Member for City of Durham was trying to give the impression that houses in different parts of the country will be built to different energy standards, that will simply not happen; all houses will have to be built to the equivalent of code level 4—then that will be a 44% uplift on the 2006 baseline. Over a decade, the house building industry will have to have coped with three significant rises in what it is expected to deliver on the ground for every new house that is built.

As I said, the building regulations do not specify the technical solutions—it is up to the industry—but we anticipate that the main changes required to achieve that 44% uplift in standards for every new house, with no exceptions, will be a shift to triple-glazed windows, 200 mm of wall insulation, and more attention to thermal bridging. I know rather more about the latter now than I did a year ago. It is where builders have to be very careful to ensure that joins—particularly where the floor meets ground level and below—are insulated as much as possible to avoid leakage. Various house building bodies have published reports to show that, despite the tightening up that we have done so far, there is still some way to go before house builders build to the expected standard, so they will have to pay special attention to avoiding thermal bridging and, possibly, some mechanical ventilation in place of natural ventilation.

So, over a decade, there will be a huge shift from the 2006 baseline standards to those in the new houses that our constituents will expect to see being built around the country.

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich

I do not depart from what the Minister said about the improvement, but I do not wish him to avoid the issue about the code level to be met by 2016. In the original 2006 prospectus, the expectation was that code level 6, which was seen as ultimately zero carbon, would be achieved by 2016. The current Government’s proposals have watered down that commitment and that should be made clear to the Committee.

Photo of Stephen Williams Stephen Williams The Parliamentary Under-Secretary of State for Communities and Local Government

I think we will come to that in the next string or the one after. I am dealing with some stand part issues as I go along, but I will hold that one until we get to it. Perhaps the right hon. Gentleman will speak at greater length about it then.

The amendments before us are mainly about whether there should be an exemption for the allowable solutions part of what we are proposing in the clause. That is the very important point I want to get across, which is why I gave the context. Via building regulations and secondary legislation, we intend to raise, without exception, to the equivalent of code level 4 on the ground every single new home that has permission to be built from 2016. We are introducing a concept of allowable solutions and the consultation we have undertaken is purely about that allowable solutions top-up, to put it that way, on top of the uplift we are expecting for every new home built.

We will not see around the country a two-tier system, as the hon. Member for City of Durham implied. In Bristol, Durham and everywhere else, every single new house, flat or whatever will be required to be built to the same energy efficiency standards, no matter the size of the site. The only area where we are considering an exemption is from the allowable solutions scheme, which takes us to another level over and above the uplift to code level 4. I wrote to several members of the Committee at the time of Second Reading because it was raised several times then. I hope I have now provided that clarification again.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Will the Minister make clear that the uplift is to code level 5, with code level 4 being on the basis of a contribution for allowable solutions elsewhere? Whichever way it is cut, it is actually a reduction in what was originally proposed in the previous period.

Photo of Stephen Williams Stephen Williams The Parliamentary Under-Secretary of State for Communities and Local Government

I will answer, though we are being tempted into the next string of amendments. The original code for sustainable homes, which is not a Government code but a voluntary one published in 2006, had a code level 6 standard, but that included all sorts of discretionary items in houses, such as television sets, white goods and so on. We concluded that it was unreasonable to expect house builders to know what internal consumer decisions people would make once they had bought their houses. House builders should know that they have to build a house to certain dimensions, standard of insulation and so on, but they cannot possibly know how many television sets will be installed or whether someone will have a freezer and eat only frozen food. We decided that it was  unreasonable to expect a house builder to know what the purchaser or tenant of their property would do. It would also be difficult to enforce. We have come up with a different definition, not because we want to water down what was an aspiration in 2006, but to make it more realistic that we will get a significant uplift in home energy efficiency, covering the things that every house purchaser will have to deal with such as the cost of heating and lighting their home, but not the discretionary items.

I live in a Victorian terraced house in Bristol, which is identical to its neighbours in layout, but I have one TV set and do not have a freezer. I minimise my carbon impact, leaving aside the fact that I do not live there for part of the week. Bristol is my home, not London, so in recess, when I am there all of the time, my energy use is perhaps lower than some of my neighbours because I do not have children, I do not have television sets in every room and I do not use gaming machines. It is very difficult to expect a house builder to build to a uniform standard in anticipation that every purchaser of house they build will be maxing out those sorts of consumer choice within their property.

Finally—this is a slight diversion, but I just want to close this down—it is not just that it would be unreasonable to expect house builders to build to that maximum expectation of what a property owner might use. There are other ways we can get energy efficiency, which have changed since 2006. I bought a new television set to watch the Olympics on in 2012. I have one television, so I replaced my old 1995 television set. I had all the separate units; it was attached with a video player, a DVD player and a set-top box; it did not turn itself off if I was not doing anything to it for half an hour. It is now all in one. Technology has enabled us to have these home energy efficiencies in the white goods and discretionary goods that we might buy, so it is unreasonable to design the building regulations to have to be uniform around the country in order to deal with that.

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government)

I hesitate to interrupt the Minister’s description of his television viewing habits, but is he actually saying that it will always be difficult to implement code 6? From his description, I cannot see how in five years’ time we would know things about people’s electricity consumption that we do not know now. I suggest that this is nonsense.

Photo of Stephen Williams Stephen Williams The Parliamentary Under-Secretary of State for Communities and Local Government

The hon. Lady says that it is nonsense, but I do not think that I have described something that none of us can associate ourselves with or understand has happened. Technology has moved on in the last decade since 2006. Although it was reasonable to write a code at that time that said televisions do not turn themselves off or other consumer units might take a lot of charging to get a battery up to full strength, technology has moved on. It would be absurd were the Government not to recognise that there are now other ways in which the consumer electronics industry can reduce energy demand. That is what this is all about: reducing the electricity consumption demand from our houses. Some of the demand reduction will come from the design of the products themselves; some of it will come from the energy efficiency of the fabric of the house, which is what we are concerned about here.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Order. I ask the Committee to be careful not to stray into the next group of amendments.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

On the specific issue of allowable solutions and the exemption of 10 houses which the Minister proposes, I would be grateful if he confirmed my understanding of how the whole process will work. The general idea is that homes are now built not to code 6 but code 5. Under allowable solutions, they can be built to code level 4, provided they make a contribution which allows for the very energy efficiency action that he talks about to be undertaken off site for other properties, so that the overall effect is the same. However, if buildings on sites of 10 houses or fewer are exempted, none of that money goes out—indeed, it is quite a prize for a builder to not have to do that. The question of the quantum of energy efficiency, which was central to the original concept of the building code, is therefore substantially overthrown. Is that a correct understanding or am I being misled?

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Order. I remind hon. Members that interventions need to be shorter than that.

Photo of Stephen Williams Stephen Williams The Parliamentary Under-Secretary of State for Communities and Local Government

I will briefly deal with that question and then I will get back to the amendments themselves, Mr Hood. We are seeking, by secondary legislation, to uplift part L of the building regulations so that every new property is built to the equivalent of code level 4 on-site with no exemptions. There will not be a housing estate of 11 houses with a different on-site energy efficiency standard from a housing estate of 9 houses. That will not happen. It will be uniform around the country to code level 4.

Via the allowable solutions schemes, we want where possible on-site to get to the equivalent of code 5, but we recognise that that will not be possible in many cases for reasons beyond the house builder’s control—it could be that the site is in a valley and does not got much sunlight. Whatever it might be, there will be practicalities on the ground, so to pay into an allowable solutions scheme either will reduce the energy demand from another property somewhere else or could generate low-carbon energy that will be of benefit to the whole country. There will be a menu of what allowable solutions might be, which I am sure we are going to get into later. So everywhere in England, all new homes will get tighter energy efficiency standards on the ground from 2016, but there will also be a series of schemes that house builders can pay into to effectively deliver the equivalent of code level 5.

I hope that is enough of a clarification, but I think we now need to return to the amendments.

Photo of Nick Raynsford Nick Raynsford Labour, Greenwich and Woolwich

Can the Minister clarify that further? If a builder on a small site of fewer than 10 units could meet code level 5, because there is no technical reason why they could not, will they benefit from the exemption that will allow them to consider allowable solutions elsewhere solely by reference to the number of units on the site? If so, does that not breach entirely the principle that there should be no allowable solutions other than where it is impossible to meet the standard on-site?

Photo of Stephen Williams Stephen Williams The Parliamentary Under-Secretary of State for Communities and Local Government

I thank the right hon. Gentleman for that intervention. We are now returning directly to why there should be an exemption and how that exemption  will be designed, so I will carry on with my prepared remarks. I have extemporised quite enough in trying to identify hon. Members’ questions.

The consultation on the design of the exemption did indeed close yesterday. It will be helpful to say here that we did that consultation because there was an awful lot of speculation out there about what might be proposed. The figures that I was hearing from people were that the Government were considering exempting sites of 50 houses, and that was never our intention. We have consulted on what the exemption should be. I can tell the Committee—this is the most recent information because the consultation only closed yesterday—that we have had 122 responses, of which 90% agree that there should be an exemption for small sites set at the level of 10 or fewer and that the exemption should apply only to the allowable solutions.

The consultation was open, so people have to be allowed to say things that the Government were never really contemplating, otherwise it would be a fairly meaningless consultation. It is not our intention to exempt on site size or firm size for getting to code level 4 on-site; that is not our intention at all, and it is pleasing to see that 90% of respondees agree with us that that is not something we should do. However, they do agree that the allowable solutions top-up should have some sort of exemption.

Various questions were raised about whether the measure will facilitate gaming of the system. Will house builders deliberately design new housing developments so that they can fragment them into parcels of 10 units to take advantage of the allowable solutions top-up, which will be only a marginal part of the cost of building the whole site in the first place? I have mentioned Finance Bills already and, certainly when designing tax legislation, it is important to try to anticipate how people might game a new allowance or a new threshold and to design anti-avoidance measures to pre-empt, as far as possible, any anticipated gaming. I give the Committee an undertaking that, now that we have the consultation responses, which we will go through carefully over the next few days, we will ensure, as far as we reasonably can, that the design of any exemption does not permit any house builder trying to game the system.

On a practical basis, it would be quite perverse for a national house building firm that wants to build several new houses in the City of Durham to submit more planning applications than it needs to, simply to get out of making a financial contribution into the allowable solutions scheme, given that it will have to build the homes to a higher standard to meet code for on-site, anyway. Common sense suggests that firms probably would not do it, but we have heard those concerns and will design the system to ensure that we try to pre-empt—

Photo of Stephen Williams Stephen Williams The Parliamentary Under-Secretary of State for Communities and Local Government

No Minister, whether in my Department or in the Treasury, can ever say that no one will ever succeed in avoiding carefully drafted legislation. No one can say that, but we will try our level best to ensure that we design the scheme so that it does prevent gaming of the system. For building physically obvious, tangible assets such as housing, it ought to be a lot  easier to design an anti-avoidance scheme for than something that is rather less tangible, such as money and taxes. I hope that I have given as much reassurance as I can on the first day after that consultation that we will design the scheme that way. Hon. Members have asked why there should be an exemption at all from the top-up allowable solutions scheme.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

The Minister is talking about preventing gaming the system. Does he intend to ensure that the allowable solutions fund, which may develop as a result of the depositing of money for the downgrading of code building generally, should not be available to improve the properties of builders who are building on sites of fewer than 10, as if they were off-site restitution of energy efficiency levels?

Photo of Stephen Williams Stephen Williams The Parliamentary Under-Secretary of State for Communities and Local Government

This is straying into the next section. We should return to that when we get to it. I could answer every point about clause 32 in this section, but then may as well not have the discussion about the subsequent amendments. I will deal with why they should be an exemption at all, which is the subject of this amendment.

Research published by the National House Building Council showed that there had been a significant decline in the number of small firms that have been active in house building in recent years: the number has halved between 2007 and 2013, with only 2,710 estimated to have been building in the housing market 2013. That is a dramatic fall from what the case had been before. The NHBC found that despite encouraging signs of renewed house building growth in the economy, which I am sure that we all welcome, the early stages of that recovery do not appear to show improved prospects and activity for small builders, which is something that we have discussed generally in the Department. We want more small builders to enter the market to give more flexibility in choice for house purchasers. A lot of the people who were crunched out of the construction industry from 2007 for the next three or four years have gone on to do something else; their skills have been lost to the house building industry altogether and they are not coming back, so it is going to require new entrants. The Government have a raft of policies in place to encourage new small house builders back. This is one of the measures that we hope will improve prospects for smaller builders.

The study also reported that focus groups with small house-building firms indicated that they rely on an ability to identify and redevelop small sites, or assembling small parcels of land into larger opportunities. Small house-building firms were concerned that the availability of suitable small sites, which they prefer, was declining. It is clear that we must do whatever is necessary to support the recovery of this sector. We have consulted on whether there should be an exemption based on site size or on the size of developers, or both. Square metreage and other things appear as options in the consultation. I am sure there will be comments in the findings when we study them over the next few days.

The Government’s preference has been for a site exemption based on 10 units or fewer, as we think that will be easier to monitor by building control bodies. A site size of 10 units or fewer is the right size of development.  There are a significant number of smaller builders operating on sites of less than 10, and the exemption would capture most of them. As I have said several times in response to interventions, the exemption would be only for the requirements to go further than the on-site enhancement in the building regulations that we are proposing. Only the allowable solutions part of the zero-carbon policy would not apply to smaller developers. Such an approach will offset some of the initial cost of delivering zero-carbon homes and will ensure that all homes are more energy efficient than they are being built to at the moment. I emphasise again that there will not be two sets of building regulations standards for different homes. It will simply not happen anywhere in the country.

Finally, we have set out clearly that we propose to review the exemption after five years. I mentioned earlier that once this tightening in part L takes place in order to reach the equivalent of code level 4, that will be the third tightening in a decade, so it is quite a big set of changes for the house-building industry to cope with. We will review the exemption for small builders from the allowable solutions scheme after five years, when we will be able to see what effect it is having on the ground.

Having given those prepared remarks and answers to interventions, and after some diversions into what people might watch at home or might have in their fridge, I hope I can encourage the Opposition to withdraw the amendment.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East 1:00 pm, 8th January 2015

Does the Whip wish to move the Adjournment motion?

Photo of Therese Coffey Therese Coffey Assistant Whip (HM Treasury)

Mr Hood, I had assumed that the hon. Member for City of Durham would briefly reply so that we finish this group.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

It was a fair assumption, but you will not get any lunch.

Photo of Roberta Blackman-Woods Roberta Blackman-Woods Shadow Minister (Communities and Local Government)

Once again, I am not convinced by what the Minister has said. I am surprised that he used the NHBC survey in support of his case. The survey actually showed that the main issue that deters small builders from building is the cost of land and the access to land. We know that the number of small builders building houses has been declining for three decades, so it has nothing to do with having to fulfil zero-carbon measures. That is why the premise for this measure is completely wrong.

We need more time to reflect on the Government’s consultation and the outcome. Because of that, I beg to ask leave to withdraw the amendment.

Photo of Therese Coffey Therese Coffey Assistant Whip (HM Treasury)

Mr Hood, I had assumed the right hon. Member for Greenwich and Woolwich would speak to his amendment.

Photo of Jimmy Hood Jimmy Hood Labour, Lanark and Hamilton East

Mr Raynsford does not have to speak—although he may wish to—but if you do not move the Adjournment, Dr Coffey, he will speak and we will not have lunch.

Ordered, That the debate be now adjourned.— (Dr Coffey.)

Adjourned till this day at Two o’clock.