Examination of Witnesses

Levelling-up and Regeneration Bill – in a Public Bill Committee on 23rd June 2022.

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Victoria Hills, Tony Mulhall and David Jackson gave evidence.

Photo of Sheryll Murray Sheryll Murray Conservative, South East Cornwall 11:30 am, 23rd June 2022

We will now take evidence from Victoria Hills, chief executive of the Royal Town Planning Institute; Tony Mulhall, associate director of the Land Professional Group and the Royal Institute of Chartered Surveyors; and David Jackson, head of planning at Savills. Before I call the first Member to ask a question, I remind Members that questions should be limited to matters within the scope of the Bill, and that we must stick to timings in the programme motion that the Committee has agreed. For this session, we have until 12.15 pm. Could I ask the witnesses to introduce themselves for the record, please, starting with Victoria Hills?

Victoria Hills:

Good morning. I am the chief executive of the Royal Town Planning Institute.

David Jackson:

Good morning. I am David Jackson, head of planning at Savills. I also lead our sustainability and environment service, which is called Savills Earth.

Tony Mulhall:

Good morning. Tony Mulhall is my name. I am a chartered surveyor and town planner, and I am a senior specialist at RICS, with a particular focus on land matters.

Photo of Sheryll Murray Sheryll Murray Conservative, South East Cornwall

I now call the shadow Minister, Mr Pennycook, to start the questioning.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

Thank you, Mrs Murray, and thanks to those attending for taking the time to come and speak to us. Could I start with the potential impact of the Bill on the status and functioning of local planning? To what extent do you believe clauses 80 to 84 of the Bill, relating to development plans and national policy, and schedule 7 strike the right balance between the aim of streamlining local planning and the need to allow councils to tailor plans to local circumstances and encourage participationQ95 ?

Victoria Hills:

We think the intention to streamline local plans and take some of the bureaucracy out of them is something to be welcomed. We support that. At the moment, it is not clear to what extent the policies are going to be nationalised or not. We know the intention is there, but if you take an average local plan, we do not know—because we have not seen the detail yet—whether, for example, 10%, 50% or 80% of local policies will be effectively nationalised in this way.

In addition to the streamlining—as I say, we are not against the streamlining; if there is an opportunity to streamline, we support that—one of the areas of interest to us is the extent to which the community and, indeed, both Houses of Parliament will be involved in any consultation on these policies, which are very important policies. If they are to be pulled out of the local plans and put into a national framework, we think it is really important that an element of consultation and engagement, both with the community and across both Houses, is included in that. That is not in the Bill as currently drafted, and we think it is important.

I cannot answer the question exactly, because we have not seen the detail as to what proportion of local policies are going to be nationalised. If it were to be a significant proportion, we would be making the case even more for local consultation, engagement, and involvement of both Houses.

David Jackson:

I entirely support what Victoria has said. There are some significant prizes to be won if we can streamline the process: speeding up decision making, adding certainty for investors and communities alike, and, through that process, building the prosperity and the flourishing communities that the Levelling-up and Regeneration Bill anticipates. But it is in the nature of the planning system and the complex legislative framework that it sits within that there are also downside risks. Victoria has identified those in terms of perhaps less room for discussion and negotiation. I would also put in there the risk of reduced flexibility—we might come on to that under another topic.

The other downside risk I would identify is the inevitable disruption as we go through the transition from the old system to the new system. Indeed, we will see some examples of that, so I think there are some downside risks. Again, I agree with Victoria that we have not seen the detail yet to be specific about the nature of those downside risks in their totality.

Tony Mulhall:

I would like to add to that. We take soundings from our members around the country quite regularly. The sense I get is that members would like to see settled national policy and standards incorporated into these national development management policies, so that the same issues do not keep arising and being reconsidered. It is administratively efficient to do it this way, but it is also in line with the levelling-up agenda, where agreed standards and policies should apply to all areas. Many of the issues that are arising to do with climate change apply across the country. It also avoids the criticism that high planning and development standards can only be had in high-value locations.

In that regard, I refer back to a piece of work that we did called “Placemaking and value”, where we looked at exemplar places in the south-east of England. The criticism that we got about that was that a lot of people in the north of England said, “That would not be possible here because we do not have those land values.” It is very important that when we set national development management policies, we recognise what it is we are doing. We are ensuring that the standards apply to all areas and that all areas get the benefit of these standards.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

Q Can I ask about the NPPF? The review was announced in the White Paper in August 2020. The publication of the final version will not come until 2024, and therefore the revised version will be operational only at that point. Given the number of place makers in the Bill—you have already spoken about the lack of detail in certain areas—that relate to the NPPF, will that delay or have an impact on the legislation? What more needs to be clarified in the Bill in terms of issues such as five-year land supply to ensure the legislation can operate effectively?

Victoria Hills:

I think that any further delay to where we are currently—reminding ourselves that this process of the White Paper initially started back in 2020—is something to be avoided, because it creates uncertainty not only for those preparing local plans, but for those who want to bring forward proposals. We would urge that any changes, including the NPPF, come forward quickly—as soon as possible—to get shot of that uncertainty. It is really important. We have seen the slowdown of local plans already. You will be aware that only somewhere in the region of 60% of local authorities have an up-to-date local plan. There are some really important aspects in the NPPF that we think need to be improved, not least adding in the climate change legal requirement and putting a greater emphasis on that. We would like to see that expedited, and I think that any further delay is not going to be helpful.

David Jackson:

Very briefly, I think that is absolutely right. The Government are now referring to this as a prospectus of changes, multi-level—[Inaudible.] I think in those circumstances, we risk delay. Each component is a crucial part of the overall system. I referred earlier to the complex legislative framework within which planning sits, and it all comes together as a unified process. Any missing component or uncertainty risks being a drag anchor, if I can use that phrase, on the whole system, so we want to see these issues addressed as urgently as possible. Again, we are seeing local planning authorities withdrawing their local plans because of this uncertainty. Given the costs of preparing them, authorities do not particularly want to have to do the process twice. Equally, given the costs that our clients are putting into the local planning process and their commitment to it, any delay is hugely unhelpful.

Tony Mulhall:

I would like to add to that. I am particularly watching this in relation to the infrastructure levy, the implementation of which seems to be quite a long way down the line. The delivery of effective infrastructure is such a critical part of the system, so it would be useful to have a clear picture of the timeframe for implementation, given that there is quite a lengthy testing period associated with that as well.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

Q Tony, you mentioned the infrastructure levy, and I would like to move on to that aspect of the Bill. Again, there is a noticeable lack of detail on the face of the Bill about how the Government arrived at a considered judgment about how the levy will work, but how do you think it might operate in practice? I put it to you that there is the potential for local authorities to set multiple rates and thresholds —probably by means of a cumbersome examination process—and many of the issues around viability already exist.

It strikes me that the levy is not that dissimilar to the current set-up of the community infrastructure levy. Do you think that is fair? If not, what advantage, if any, do you think the levy will provide over the current system? How do you see it operating in practice on complex brownfield sites? Given the ability to vary rates—in the sense that the Government are proposing a new metric for end-use value, not a new flat rate—what will that do for levelling up? Will local authorities in areas with low land value not just set low levy rates that do not afford much public gain?

Tony Mulhall:

Yes, that is a concern we have expressed all along. For the last three or four years, we have expressed the view that a concept of land value capture as a way of funding your infrastructure is not adequate in itself. There are lots of areas where there will not be value to be captured, and we would like to see where the funding is for essential pieces of infrastructure.

One of the interesting aspects of the Bill is that the Secretary of State can intervene if they feel that the levy was set too high and will impact on viability. I think something like that should be directly connected to the alternative infrastructure source for that particular area. The funding for the infrastructure needs to be pointed out by the Secretary of State if they decide to reduce the levy. Quite a lot of small areas of the construction and design of the levy really need to be resolved fully. I know there is a consultation coming, but those details will be very important.

One of the main objectives is to capture additional land value, but also to avoid the contentious area of viability being contested at so many different stages in the process. We are very happy to help the Department to devise a system that will be easy to apply. Being easy to apply means that the metrics being used are easily discoverable and not contentious. That is a fundamental part of an efficiently operating taxation system, which is how this is described. What we are dealing with here is not an assessment of viability for planning purposes; these are valuations for taxation purposes.

You asked about two other issues—one was complex brownfield sites. It is quite understandable that the Government would look for a measure to deal with this subject, and I think something like the section 106 agreements will be the natural fall-back position here. Officials often say that it is amazing how derided these measures are until you try to remove them, but there is a logical reason for using a section 106 agreement on complex sites because the developer is in the best position to phase and programme the necessary infrastructure. The question then will be how this is to be set off against the liabilities that would have accrued under the infrastructure levy. Varying the rate is an important aspect as well, and I think it should be retained.

This is quite a complex proposal, and it sounds as if it is intended to be rolled out in phases, to make sure that lessons are learned in operation, as they had to be for the CIL measures. The real question is: will this be the replacement of one complex system by another complex system that we will have to learn and run simultaneously, because there will be a transition period? There is quite a lot to be resolved with regard to the infrastructure levy and we are quite happy to contribute to resolving it, to make it work better.

Photo of Matthew Pennycook Matthew Pennycook Shadow Minister (Levelling Up, Housing, Communities and Local Government)

Q I think that is an under-statement, Tony, but your response is very useful. Do you have anything to add it that, David?

Photo of Sheryll Murray Sheryll Murray Conservative, South East Cornwall

David, could I ask you to face the microphone please? The sound quality in your last answer was not good, and if you face the microphone, Members may be able to hear your evidence better. Thank you.

David Jackson:

I beg your pardon. I think what Tony has said is correct. There is uncertainty around this new system. Fundamentally, it is one tax being replaced by another form of tax. The benefit of the new system is that it is charged on development value. That is a clearer metric than the rather complex viability assessments that led the CIL process, which was front-loaded in that respect and did not take account of changing market conditions, whether up or down. Clearly, there is a benefit in that simplification of the process based on value.

It is welcome that there is flexibility or variability in the system to take account of different circumstances. Complex brownfield sites are clearly very different from greenfield sites, as the question rightly identifies. The most important thing is that new development, new growth and new investment is facilitated rather than obstructed by the system, because none of those good things can come unless development and growth is facilitated. That is beneficial, whether it is by way of taxation, the CIL, the new infrastructure levy or, indeed, the investment that is brought forward through section 106. We started off with some uncertainty around the future of section 106, and one of the most welcome aspects of the legislation is that section 106 is being retained. It gives both developers and the community certainty about when that new infrastructure—whether it be social, physical or other infrastructure—is to be provided.

One area where there is less certainty, so far as we can see at the moment, is where the infrastructure levy is going to be spent. Previously, under the CIL system, we had regulation 123, which set out local authority priorities for investment and how money should be spent. The emphasis in discussions to date has been on affordable housing, but is this investment going to be directed towards other locally set measures? I think there needs to be transparency in relation to that.

Finally, I agree with Tony’s point about the need for road testing. This is complex new regulation. It needs to be road tested by way of pilot schemes before we invite local authorities across the country to invest resources into this complex process.

Photo of Sheryll Murray Sheryll Murray Conservative, South East Cornwall

We are now 20 minutes into this evidence session. In the interests of time, I will call the Minister. If there is any time left at the end, I will come back to you, Mr Pennycook.

Photo of Stuart Andrew Stuart Andrew Assistant Whip, Minister of State (Minister for Housing)

Q My first question is straightforward: what practical changes do you think the Bill will make to the people you represent?

Victoria Hills:

I represent 27,000 members. Practically, and on a strategic level, we welcomed the Bill, because we welcome the recognition that, rather than having a planning Bill, planning is integral to levelling up and regeneration. That is why we warmly welcomed the Bill: it has elevated the status of planning from being some regulatory thing over there to being fundamentally essential to delivering levelling up. Indeed, we say it is the lead domino; if you get the planning system right, you have the framework and the foundations to deliver regeneration.

That is our starting point. Within that, we have to have a broader conversation—perhaps not today—about how we ensure that local authorities in particular are resourced for the changes. We look forward to the forthcoming consultation on the fees to help to fund some of the additional work. Practically, it will mean that our members are going to be extremely busy—first, with responding to all the consultations, and secondly, moving forward with implementing the new system. There is an urgent need to address the resourcing, as I have highlighted, because local authorities are somewhat struggling at the moment anyway to deliver business as usual.

Some of this will be a bit business as unusual. We have heard that the CIL is potentially a major change. Changing local plans and updating them will take time and resources. It will be a busy period for the members I represent. That said, although we welcome the recognition that planning is integral to levelling up, we do need to have an open and honest conversation with you about how we now move forward quickly to resource local authorities to enable the changes. I hope that answers the question.

David Jackson:

Likewise, given the high profile that has been given to the levelling-up agenda, it is very welcome that planning is so closely associated with such an important part of the Government’s programme. We very much welcome that.

For the people I represent, it is difficult to define exactly what the changes will mean, because they are multifaceted. For people I work directly with, there is a lot to get through and understand about the changes, but we are planning professionals and that is what we direct ourselves towards. That is part of our responsibility. For our clients, there is an expectation of a transition period, and that is a process to be navigated through. We are there to help them through that process. I repeat what I said earlier about the importance of trying to get through that phase as quickly as possible so that we can move on to obtaining the key objectives of building prosperity and creating flourishing communities.

On flourishing communities, in the work that we do as planning professionals we become very much associated with and embedded in communities for the period of a project. It is really important that that process of local engagement and projects being opened to the public scrutiny that leads to improvement—[Inaudible.]

Photo of Sheryll Murray Sheryll Murray Conservative, South East Cornwall

David, you are looking away from the microphone again and we missed what you said.

David Jackson:

Sorry. Public scrutiny is necessary to improve projects and win public trust.

Tony Mulhall:

Chartered surveyors provide their services largely at the level of strategic land preparation and development delivery, so they are acutely aware of the increasing risk associated with development projects proceeding. Planning comes with certain risks—in other words, getting a project through the planning system—so it is very important that we have a system that works well in process terms.

From a development point of view, planning is one of the factors. We have huge pressure on costs at the moment. I have here a document that I have just received from the Building Cost Information Service that says that the materials cost index has continued to grow, with annual growth in excess of 20%, and figures say that the cost of complying with the building regulations is around 6%. Those are cumulative risks, and the planning system is just one of those. It is a very important one, and getting it right is very important, but in a development context the danger is that investors will defer making decisions on taking projects forward until they have greater certainty about the regulatory environment they are heading into and that that regulatory environment can be priced, in a sense—what is it going to cost to get through the regulatory environment?

We need to take account of that, and not just in relation to large house builders. They are capitalised very well, but a lot of small and medium-sized enterprises find it extremely difficult to engage with the planning system at a level they can afford. That impacts on borrowing: you cannot engage a lender if you have what I would describe as planning risk associated with your side. These are the realities that our members face in advising their clients.

Photo of Stuart Andrew Stuart Andrew Assistant Whip, Minister of State (Minister for Housing)

Q Thank you. One of the complaints that I hear quite a lot, not just from my own constituents but from people throughout the country, is that people feel planning is something that happens to them, and we know that public engagement with the planning system is incredibly low. Do you think the measures in the Bill—the neighbourhood planning, the priority statements and the digitisation of the whole system—will help to improve community engagement? Do you think that, in turn, it will help to enlist more support for development within communities?

Victoria Hills:

We welcome all those aspects, and particularly the investment in digital transformation and a bit more structure around what that looks like for local authorities so that they can make the investments in digital that are required. We also absolutely welcome neighbourhood planning, and also, potentially, street votes and all that comes with that.

Something equally important that we are strongly advocating for is that virtual planning committees can continue in the way they did during the pandemic. We are seeking an amendment to the Bill for that purpose, because we think it provided an additional aspect to the ways in which communities could be genuinely engaged, particularly for those people who cannot get to committee meetings in the evenings because of their own commitments.

We welcome all the aspects that have been included in the Bill to broaden engagement. Our top two omissions are the one that I started with—involving the community in the national policies—and enabling them to join in via a virtual committee.

Tony Mulhall:

This is a really important point. Our experience, and what we get reported back, is that the community does not tend to engage with the plan-making process—people need to get a development on the corner of their street before they become exercised—so it is very important for us to understand what is a meaningful way to get feedback from the community about what it is that they do not like and what is top of their list of what they want.

I am not sure that the plans that we put through have the legitimacy we might expect from real engagement with people, because I think they do not fully understand what the plan is saying. We have seen the kind of developments in neighbourhood planning that were really good but probably did not get to the people who need to participate to improve their local communities. There is an interesting measure in the Bill to facilitate that. I would say that we really need to rethink what meaningful participation in plan making is about, because people are coming away from the production of a plan without much knowledge of what is going to turn up in their neighbourhood.

David Jackson:

I agree with that point. What we need is engagement at all levels of the plan-making process, from the SDS—spatial development strategy, the new strategic level of plan making—all the way through. It is down to the profession to go out and do that. That is where the parallel development of the levelling-up agenda, putting planning alongside that as the key delivery mechanism, has some advantages, because it demonstrates exactly the role that planning has in facilitating the benefits that we want to see for those communities. My slight concern is in what I might call the hyper-local, because that allows people to focus just on their immediate areas, but as I say, what we want is a focus across the plan-making portfolio, so that people have that aspiration.

One example of the risk of the hyper-local is footnote 54 in the NPPF, which requires onshore wind turbines to be supported by the local community that is most affected. While onshore wind has overall high levels of public support, a massive drop-off in the delivery of onshore wind has been the result of that particular control. It does not take us away from the need to engage with communities at the local level to win their support, but it does create difficulties—challenges—in that hyper-local environment.

Photo of Stuart Andrew Stuart Andrew Assistant Whip, Minister of State (Minister for Housing)

Q My final question returns to the community infrastructure levy. We have said that we want to take a test-and-learn approach, trialling it with a number of authorities, so I welcome the fact that you want to engage in that process. Do you agree that planning authorities often spend a considerable amount of time in negotiation on CIL or section 106, and often find the negotiations going downwards in terms of investment for the local community? That further erodes trust in the process in respect of what will be delivered on the ground for communities. Will this legislation help to free up the time of some of the planners to do some of the more important strategic stuff? I will go to David first.

David Jackson:

On replacing CIL with the infrastructure levy, the simplification of the infrastructure levy based on value is certainly advantageous. In our experience, we were very engaged in the preparation of CIL on behalf of the Home Builders Federation. We engaged with many local authorities on that basis, and it was indeed a very complex process, looking at viability and trying to project that over a period of time and for a range of development scenarios. That simplification is welcome.

I take a slightly different view on section 106. It goes without saying that where section 106 is engaged, we are dealing in large part with complex, difficult, challenging projects. We have to ensure that local communities have trust in the process and that it will deliver the outcomes they expect to see. Inevitably, there is an element of commercial negotiation, because viability can often be engaged where we have multiple demands on investment in a local community, so it is right that we go through that complex process. I think CIL helps in terms of taking—[Inaudible.] The complexity of section 106 is merely a reflection of the complexity of the projects we are dealing with and the wish on both sides—both the community and the developer—to ensure that the infrastructure that is required to make the project work is actually delivered.

Victoria Hills:

We have been very clear that anything that comes in needs to not overcomplicate an already quite complicated system. As proposed, the infrastructure levies will all go through PINS—the Planning Inspectorate —which we think will add more delay and cost to the system. We are advocating for the new infrastructure levies to get directly agreed by local authorities with the Secretary of State or the Department, to take out some of what I think you are alluding to—the horse trading, the negotiation and all the rest of it. Then, there is one discussion between the directly elected authority and the Department, and that gets agreed. You can take months and significant cost out of the whole system by not running it through PINS.

Another important point, which I could not make earlier, is that it is really important to understand how, in simplifying the system, the new infrastructure levy will sit alongside other statutory requirements—not least biodiversity net gain and affordable housing—and how, in simplifying it, it will balance out those quite complex aspects. The requirement for affordable housing has always been the case, but biodiversity net gain was not a thing before.

At the moment, until we see the detail, we are not convinced that it will all be simplified. There are some important complexities to take on board.

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Digital, Culture, Media and Sport)

In the light of the Government’s proposals and commitment to building 300,000 homes by 2025 and real revision of the planning process, do the witnesses believe that is deliverable? Do they believe we will see homes that are predominantly assets, investments, second homes and Airbnbs?Q

Victoria Hills:

We have always been very clear that the way to deliver great places and great communities is through a robust local plan and framework where the local authority has the opportunity to set out their priorities, which could include some of the aspects you referred to. The elevation of the importance of the local plan in all this is welcome. The detail, which we do not yet have, is on to what extent local authorities will be able to carry on delivering priorities through policy, and to what extent they will get pulled out into the national framework.

We support the principle of the local plan being elevated. We recognise that it is the only way you can move ahead with delivering on agendas including net zero, affordable housing and well-designed, healthy homes. If you are going to have policies against second homes, that may well be something to prioritise in your local plan, or in national guidance—the detail is yet to be seen on that.

Whether or not it meets the housing numbers is still an area for debate. The Government are on the record saying that is very much the plan in action. We will be advocating for local authorities to be well resourced, without delay to the national framework, to enable them to get on with the business of producing local plans as quickly as possible, in order to provide certainty for local communities and the development sector, so that it can get on and start planning and then building. It really just relates to the earlier theme of resourcing.

However, there also needs to be no further delay. There is an urgent need to deliver more homes, as we know. The housing waiting list continues to rise, and more and more people are still desperate to have a place of their own. The need continues to grow, so it is important that we move forward quickly on any regulatory reform and that we move forward with a resourcing package—which surely must include bringing up the planning fees as well, to help to move those things forward as quickly as possible.

Tony Mulhall:

I totally agree with Victoria’s point about the importance of having up-to-date local plans, and the important aspect in the Bill of being able to combine local authorities so that they better match their functional urban region or their socioeconomic hinterland. That is important because we are spending a lot of time and money squeezing the carbon out of our buildings, but there will not be much point in doing that if we have to drive miles to get to our jobs and schools. It is critical that we have a proper planning system linked with the standards of quality construction that will achieve climate change.

On the point as to whether the measures in the Bill will deliver the target of 300,000 houses per annum, the feedback that I get from our members is “No.”

Tony Mulhall:

There are many other factors besides planning that have an impact on the delivery of housing. The market has typically provided a certain level of housing delivery. It has fallen to housing associations and Government to supply what is actually needed. There is a big danger here—we raised this during Sir Oliver Letwin’s review—that if you allow house prices to increase to a certain level, there is nobody who is in favour of them falling. Everybody is invested in them staying at that level. If we continue to have a shortage of supply, which is resulting in price rises, then that is what is pulling up land values. It is the price of the house that is pulling up the value of the land, not the value of the land pushing up the house price.

Those are very important things to understand, because once a certain price level is arrived at in the housing market, nobody is in favour of that falling. Every metric that we are relying on extols the increasing value of property. We need to be very careful about what our expectations are with the affordability of housing if we allow there to be a very tight supply, like there is at the moment. The lending industry is not going to welcome a managed reduction in values. Those are really big issues that are outside of the planning Bill, but are crucial to the delivery of housing.

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Digital, Culture, Media and Sport)

Q Thank you for that answer. Could I ask Mr Jackson and then Ms Hills, is there anything that you think is missing from the Bill that would address housing inequality?

David Jackson:

I will just comment quickly on the target of 300,000 and then come to your question. The 300,000 target is correct; we are in the midst of a housing crisis, so it is right to set that as a national ambition. If we look at vacancy rates for residential property across the country, they are typically very low—between 1% and 2%. That ties in well with what the levelling-up agenda is trying to achieve. If we are seeking to create a stronger economy, then the availability of homes near to the jobs that we are creating is an essential component part of that. Tony was talking about creating sustainable relationships between jobs and homes. We have to boost the delivery of homes, but they have to be related to the availability of jobs and the growth in the economy. As Victoria was saying, the fundamental requirement of the local planning process is to get those balances right and to put in any checks that need to be in place to control the downsides of that—be those downsides secondary homes or whatever else.

Photo of Rachael Maskell Rachael Maskell Shadow Minister (Digital, Culture, Media and Sport)

In view of the time, can I just move quickly over to Ms Hills—[Interruption.]

Photo of Sheryll Murray Sheryll Murray Conservative, South East Cornwall

Order. I am afraid that brings us to the end of the allotted time for the Committee to ask questions. May I thank the witnesses on behalf of the Committee for their evidence? We now move on to the next panel.