Thursday, 17 July 2014.
Infrastructure Bill [HL]
Committee (5th Day)
Relevant documents: 2nd and 3rd Reports from the Delegated Powers Committee
My Lords, if there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
My Lords, may I raise a procedural issue? I am not sure what the procedure is for Committee but, given that we are talking about zero-carbon homes and climate change and that it is a very hot day, if it gets too hot may we be allowed to relax our standards within Grand Committee—we are not in the Chamber—and remove our jackets? I think I need the Deputy Chairman’s permission to do that in due course.
Clause 25 agreed.
93A: After Clause 25, insert the following new Clause—
“Provision in building regulations for off-site carbon abatement measures
(1) The Building Act 1984 is amended as follows.
(2) In section 1(1A) (matters that may be covered by building regulations) after paragraph (c) insert “;
(d) in relation to a building in England, the action to be taken as a result of the building’s contribution to or effect on emissions of carbon dioxide (whether or not from the building itself).”(3) Schedule 1 (building regulations) is amended as follows.
(4) After paragraph 7 insert—
“7A (1) This paragraph applies if building regulations impose a requirement in relation to a building in England as respects its contribution to or effect on emissions of carbon dioxide (whether or not the requirement relates to emissions from the building itself).
(2) Building regulations may make provision for a person to whom the requirement applies to meet it (in whole or in part) by taking action otherwise than in relation to the building.
(3) Such action may include—
(a) doing things which consist of, or cause or contribute, directly or indirectly to—(i) reductions in emissions of carbon dioxide, or(ii) the removal of carbon dioxide from the atmosphere;(b) agreeing with another person that the person will do things within paragraph (a);(c) making a payment or payments to a fund—(i) which is administered by, or by a person acting on behalf of, the Secretary of State, and (ii) the proceeds of which are used to pay (directly or indirectly) for activities within paragraph (a).(4) Provision made under paragraph 4A for the use of certificates as evidence of compliance with building regulations by virtue of action within sub-paragraph (3) may include provision—
(a) for the creation and maintenance of a register for keeping track of the use of certificates for that purpose;(b) about the administration of the register;(c) for charges to be imposed in connection with the registration of any matter in the register or for the disclosure of information held in the register.(5) If building regulations make provision for the creation and maintenance of a register, building regulations must make provision for the register to be administered by, or by a person acting on behalf of, the Secretary of State.
(6) Building regulations may make provision for the creation and maintenance of a fund of a kind referred to in sub-paragraph (3)(c), including provision about—
(a) the administration of such a fund;(b) the purposes for which proceeds from such a fund may be used.(7) Building regulations may make provision about—
(a) the calculation of payments to be made into a fund of a kind referred to in sub-paragraph (3)(c);(b) the maximum payment which may be required to be made into such a fund in respect of a building.(8) Paragraph 8(2) does not prevent building regulations from providing for action within sub-paragraph (3) to be taken in relation to a building erected before the date on which the regulations come into force.”
(5) In paragraph 8(2) (requirement for building regulations not to apply to buildings erected before regulations come into force, subject to exceptions) after “Subject to sub-paragraphs (3) to (6) below and to” insert “paragraph 7A(8) above and”.”
My Lords, I stand for the first time in this new position. It gives me great pleasure to stand in front of the Committee as the Minister responsible. I do so with a degree of trepidation not least because, as soon as we started, there was an intervention from my noble friend. Nothing can unsettle the nerves more right at the beginning of a new Bill that you have just picked up. My noble friend talked about the heat, and it is not that I am asking for special favours but I have an added challenge, which of course is self-inflicted, because we are in the month of Ramadan. If my throat seems to dry up on occasions, I hope that noble Lords will bear with me.
In moving Amendment 93A, I shall speak also to Amendments 98A and 98B. Nearly half of the UK’s carbon dioxide emissions come from the built environment, so improving the energy efficiency of, and reducing carbon from, buildings is essential in enabling us to meet the carbon budgets to which we are committed as part of our contribution to tackling climate change. As noble Lords will know, the majority of these emissions arise from existing buildings and we are taking action on this through programmes such as the Green Deal. However, if we do not tackle new buildings, we only store up problems for the future. By not taking action now, we may find that we have to take forward expensive retrofit. That is why we are bringing forward the zero-carbon homes standard from 2016.
On a personal note, I suggest that this is an area which is in its infancy. It originated under the famous Merton rule. Of course I had the privilege of serving as a Merton councillor and as the cabinet member for the environment when this rule first emerged. It is great to see how this particular issue has taken on a life of its own, and we are where we are today.
We intend to ensure that, from 2016, there is a framework in place so that all carbon emissions associated with the energy used to heat, light and power building services in new homes will be abated. We recognise, however, as did the previous Government, that it is not always technically feasible or economically viable to achieve zero-carbon emissions through on-site measures only. Therefore, to meet our zero-carbon homes standard, and to maintain cost-effectiveness and flexibility for house-builders, we propose to amend the Building Act to allow for the provision of off-site carbon abatement measures to off-set any residual emissions arising from the use of regulated energy.
The Building Act already provides us with the necessary powers to set the zero-carbon target. However, in its current form, it has no provision for the inclusion of off-site carbon abatement measures. Therefore, the new clause sets out enabling powers for the provision of off-site carbon abatement measures. Our amendments will offer developers the choice of carbon abatement routes consistent with the ones we consulted on, such as carrying out retrofit work to existing properties, contracting with third-party carbon abatement providers and paying into a national fund. This “menu” approach to carbon abatement work received widespread support from consultation responses.
In brief, the new clause establishes the necessary powers for the Secretary of State to make building regulations in relation to off-site measures for abating carbon dioxide emissions. These measures could be taken by the developer or by a person on the developer’s behalf, or consist of payment into a fund that invests in carbon abatement projects. It also provides for administrative provisions to be made to facilitate the offsetting of those emissions against emissions from a building. These include provisions relating to the administration, by or on behalf of the Secretary of State, of funds for carbon abatement measures into which allowable solutions payments can be made, and to establishing a maximum level of payment into a fund. There is also provision for a register of certificates showing compliance with the zero-carbon standard by use of allowable solutions to be set up and maintained by or on behalf of the Secretary of State, and for charges to be made in connection with use of the register.
Amendments 98A and 98B are related to Amendment 93A. Amendment 98A provides for the clause to be commenced two months after Royal Assent. Amendment 98B makes the necessary change to the Long Title of the Bill to encompass the clause. These powers will allow developers to off-set residual emissions in a way that is both cost-effective and flexible, thus meeting our joint objectives of a green and growing economy.
I shall respond later in the debate to the specific amendments put forward by the noble Lords, but I hope that I have given the Committee a good sense of what we want to achieve, which will help the debate as we progress. I beg to move.
Amendment 93AA (to Amendment 93A)
93AA: After Clause 25, line 9, at end insert—
“(2A) Matters covered under subsection (1A)(d) must be applied to—
(a) from the commencement of these provisions, all buildings or developments consisting of five or more properties, or(b) from 2018 all buildings or developments of any size.”
My Lords, I congratulate my noble friend Lord Ahmad on his work today and on his future work on DECC matters. It is excellent to have him with us and to have him involved at this stage of this Bill, which has a long way to go through its parliamentary process. I follow up those congratulations by saying how pleased I was, along with many of my colleagues, to see the Government’s persistence in the Queen’s Speech on this agenda of zero-carbon homes. It is a really important policy and one that started in 2006, under the previous Government. It has been followed through on a trajectory right through to the present day. It is really important.
In Questions in the Chamber earlier today, we had a Question about fuel poverty. We are very aware that the standard of homes that we build now will affect our housing stock for perhaps 50 or 100 years, so it is really important that we get it right now, not just in terms of carbon emissions but in terms of energy costs and the standard of living of our citizens. Therefore, although this is a minor part of the Bill in certain ways, it is very important in terms of future sustainability for our climate and our society.
I congratulate the Government on the DECC side for their publication today, Delivering UK Energy Investment, which I believe is being launched by my right honourable friend Ed Davey, the Secretary of State for Energy and Climate Change. In it, we note that the Government have enabled some £45 billion-worth of investment in electricity generation networks from 2010 up to 2013. That shows the strength of the Government’s policy on energy over the past three years, in the time of the coalition Government.
One problem with this Bill is that, although it talks about zero-carbon homes, just as my noble friend the Minister stated, obviously and clearly—and I looked through the Building Act 1984 this morning in the Library of the House to enlighten myself on its schedules—none of this is required for most zero-carbon homes building regulations to be implemented. They are all within ministerial discretion through the building regulations, but the area of allowable solutions covered by the amendments and this section enables the last piece of that jigsaw to be put into place.
We are coming towards the end of the Parliament. Whatever we decide in this Parliament, how building regulations are delivered subsequently is out of our control. We are here now with a very clear view of where we want to get to in the future, and we need to tie some of these things down rather more than they can be at the moment—hence a number of my amendments. They are not all about allowable solutions; they affect some of the more fundamental areas of zero-carbon homes as well. That is the difficulty. As a Parliament and as a House, we do not have a lot of detail on where this is all going to take us and how it will be interpreted; we have only a strategic understanding of that. I would like the amendments to nail down a little more—to find out from my noble friend the Minister and the Government—the intentions in how we deliver this. I was keen not to degroup the amendments, so I ask the indulgence of the Grand Committee—I shall be as brief as I can—by going through the four amendments that I have tabled. I am talking primarily about Amendment 93AA, but I will also talk to Amendments 93AB, 93AC and 93AD.
I move on to Amendment 93AA. I agree entirely with allowable solutions; they are a legitimate and important part of the zero-carbon homes deal. Clearly in certain types of property—flats, multiple accommodation dwellings and apartments—it is quite difficult to get zero-carbon home solutions within the actual building itself, and it is generally accepted that those are needed. When they were first talked about, it was in a fairly narrow sense. In fact, I shall quote the most recent report of the Committee on Climate Change—the Government’s adviser on this sort of thing—which came out last week, Meeting Carbon Budgets—2014 Progress Report to Parliament. On this general area, it states that:
“For new-build homes, Part L has been tightened twice since 2010, as part of Government commitments to achieving a zero-carbon home standard from 2016 in England … In 2010, a tightening of part L resulted in a 25% improvement in energy efficiency for both new-built and extensions compared to … 2006 … A further tightening of Part L by between 8 and 26% was proposed for 2013, as well as a requirement for consequential improvements for extensions and boiler and window replacements”.
But the important thing stated by the Government’s own adviser is, however, that,
“this policy was delayed and watered down, in the end requiring only a 6% improvement in CO2 emissions for new-built homes from April 2014, with no further improvements to extensions or windows and no requirement for consequential improvements”.
We have that difficulty. Then it states:
“Applied to on-site electricity generation the ‘allowable solutions’ mechanism is sensible, given that large-scale off-site generation is often a cheaper way to provide low-carbon electricity. However, when applied to heat and efficiency measures it is problematic. For all new houses policy should require that either low-carbon heating is installed or efficiency is so high that heating requirements are minimal”.
It is that sort of theme that I want to try to get to to make sure that we ramp this up.
An important principle is that, although allowable solutions should be open to be used, they should be used only as a last resort. However, if they are used, I think that they should be able to be used locally. I shall come on to that when I talk about Amendment 93AB.
What really concerns me is that we have an exemption which has been discussed as part of government policy on small developments. I understand the Government’s policy in terms of deregulation and trying to stop SMEs being clogged up with red tape. I fully and absolutely identify with that, although regulation is important in certain areas, such as buildings regulations. However, in Amendment 93AA I am trying to say that we need to be very careful about how this exemption is used. I have suggested that it should not be used for developments with more than five buildings and that the exclusion should have a sunset clause with a date of 2018.
To be honest, I do not understand why this exemption is really needed. Perhaps I may again quote the Committee on Climate Change. Its report said that,
“the Government has announced that small developments (with the size affected to be consulted on) are to be exempt from part of the zero carbon requirement. There is a risk that a substantial number of homes could be affected. For example, in 2013, 37% of planning applications were for sites of 50 or fewer homes, and 12% for 10 or fewer homes (according to research) … As developers often split developments into several smaller phases, the exemption could affect a significant number of homes. This could ultimately raise the costs and risks of meeting future carbon budgets.
No rationale has been provided for the exemption for small developments. It is not clear why the economics of efficiency measures or low-carbon heating should significantly differ from larger developments”.
Therefore, there are questions about this proposal.
This issue does not relate specifically to SMEs; it could also relate to large housebuilders with small development schemes. However, it is very condescending to small developers. My experience is that small developers are equally able to deliver high-quality products—in fact, perhaps even more so than large developers. Therefore, I do not really understand why this is necessary. Also, it may create a barrier, preventing small businesses growing and making them enter into a new form of quality thereafter. I should like to ask the Minister how that is supposed to work.
In Amendment 93AB, I am saying that the action should,
“take place no more than five miles from the building to which their requirement applies”—
that is, if you are really trying to get some sort of local benefit through allowable solutions, it should be within the local area as much as possible. Specifying that sort of radius would be a good way of doing that.
On Amendment 93AC, there is a real risk in relation to allowable solutions with the low carbon price that we have as part of the European system. Our own carbon price floor is now fixed at £18.08 from 2015. It is easy for developers—it almost gives them a way out—to fund zero carbon by buying European emission system credits at very low prices and saying, “We’ve saved those tonnes of carbon”. That would be a very lazy, although academically and intellectually quite valid, way of doing this. It is very important that we understand more than we do at the moment how this will be implemented. I have suggested through what is really only a probing amendment that we should say that if there is that route to saving carbon elsewhere, it should be priced in at a sum around £90 per tonne, which is the sort of area where you start to get change in the way that the economy works between fossil and non-fossil fuels and carbon emissions. What concerns me most about this area is that allowable solutions, if not done properly, themselves allow the regime of a future Government to drive a coach and horses through these zero-carbon standards.
There is just one other issue. Coming back to fuel poverty, it is intellectually rigorous to have allowable solutions but they should be a last resort because, for one thing, they still mean that those houses are carbon inefficient and therefore probably energy inefficient. So while the individuals in those houses might have the climate change benefit from carbon saved elsewhere, they do not have the energy efficiency benefits. I am sure that is the Minister’s intent, but this whole area needs to be managed and controlled in a very careful way.
My Lords, I strongly support what my noble friend has said about these matters. Can the Minister give us a little more clarity about how we are going to ensure that these changes actually happen? I remember getting terribly excited some years ago about the provision that every new house would have to have a SAP certificate in it. I am forgetting what SAP stands for but it is about the energy efficiency of the house. We passed regulations that said that every new house should have a certificate, but they have never been enforced. If you go into new houses, you will never see one. So when we talk about this, one of my main concerns is: how is it to be regulated?
There is another issue that I have come across. I should declare my interests as a vice-president of the LGA and as president of the Sustainable Energy Association. In my role over the years as a councillor, one problem, particularly when I was in Berwick-upon-Tweed, was that builders would start to build something and then stop. There was nothing we could do to progress it if they did not carry on, so I worry about the abatements. How are we to ensure that they will actually be done? Will there be a timescale? This throws up the problem we have with all this. We are all very keen on it and want it to happen, but most of the detail will be in secondary legislation and regulation. It would be helpful to have indications from the Government about that and to see some of it before we finally pass the Bill.
I am really concerned about how we make sure that it happens. I am told that the building inspectors will of course inspect new buildings. However, supposing that a builder builds a whole block of flats and has not done it properly. What happens to those flats and that builder? If I were doing it, I would quite like to have a few examples of people getting heavy fines if they do not do it in the first place. Again, I do not know how we are going to police that. Regarding the abatement, how are we to ensure that that happens? Will there be a timescale and will people be able to allow that to drift?
I also strongly support my noble friend’s Amendment 93AD, particularly its subsection (d) about community heating. This is a great opportunity to promote community heating and attach people to bigger district heating. I saw that many years ago in Scandinavia, and it is something which I was involved with as a councillor in Southampton, where we set up one of the most successful district heating schemes in the country. It has everything on it from private housing to public housing, schools and hospitals, shops—it has the lot. However, we have been quite slow in getting domestic properties on to community heating schemes, and I hope that what we are proposing here, particularly given the points that my noble friend made, will progress that along the way.
My Lords, we have Amendments 93AAA, 93ZAAA, 93AE and 93AF in this group, which I will speak to as well as commenting on the other amendments. I start by offering my warmest congratulations to the noble Lord, Lord Ahmad, on his promotion. He is not a stranger to CLG matters and certainly not a stranger to local government. We look forward to working with him, at least in the remaining months of this Parliament.
As we have heard, the government amendment facilitates allowable solutions, which are not otherwise already available under the Building Act 1984. However, together with other matters which have gone on, this does not represent the progress on zero-carbon homes that was hoped for and which we believe is achievable. It might be worth quoting from the briefing that I think all noble Lords have had from the UK Green Building Council, just to remind us of the figures, which I think the Minister touched on:
“The UK’s buildings account for 37% of total greenhouse gas emissions, with 66% of buildings’ emissions from homes. The UK is committed to reducing emissions by 50% in 2025 and 80% in 2050. Some of the most cost effective potential carbon savings exist in the buildings sector and Government is looking to this sector to deliver significant levels of carbon savings”.
We would say they have not looked hard enough. In 2006, the previous Government announced that all new homes would be zero carbon from 2016, but this of course will not now happen. It was originally planned for there to be three clear regulatory steps along the way to achieving this, in 2010, 2013 and 2016. The code for sustainable homes, a standard against which all new homes would be rated, was introduced alongside the zero-carbon target. The purpose of the previous Government’s approach was to recognise that small, incremental changes to building regulations from time to time were insufficient to generate the fundamental change that was required within the construction industry, and that clarity was needed on the direction and speed of travel as well as on the ultimate destination. That worked, and it is widely recognised that it had a galvanising effect on the housebuilding industry and on the supply chain, and sparked a bout of innovation in the sector.
After promising early announcements, a series of decisions taken by this Government have reduced the ambition. The zero-carbon target was weakened by one-third when it excluded emissions from plug-in appliances, and they are now allowing a further third to be mitigated off-site through allowable solutions. The standard adopted is also below that recommended by the Zero Carbon Hub. A long-term exemption for small sites is illogical in principle, and we do not yet know how it is to work.
Our Amendment 93AAA would require the Secretary of State to,
“publish a report each year on the progress which has been made towards a carbon dioxide reduction”,
for differing types of dwellings. We propose that the targets should be,
“44% for flats, 56% for semi-detached houses, and 60% for detached homes”.
These are not arbitrary amounts but have been agreed by the Zero Carbon Hub after a significant piece of collaborative work. These are the levels that the industry advises are achievable, and were accepted by the previous Government. By setting the standards at a lower level, as the UK Green Building Council points out, the effect is to transfer more of the carbon savings to allowable solutions, which are generally less easy to verify.
Amendment 93ZAAA, like the amendment of the noble Lord, Lord Teverson, permits a small-site exemption for a limited period. In this case, the exemption threshold is less than 10 units. Let me be clear that we are opposed to ongoing small-development exemptions. Along with the noble Lord, Lord Teverson, we have a degree of equivocation about identifying any threshold, even for a short period. One could advance the argument that because the Government have been tardy in bringing some of this stuff forward smaller developers perhaps need a bit more time to come to grips with it all. Like the noble Lord, I think it is not necessarily right to equate small developments with small builders or ill equipped builders. There is a big question mark, certainly on an ongoing basis, about the risk of sites being deliberately fragmented to avoid these commitments. The Government have a strong case to answer about why they are pursuing this course.
We justify this very limited exemption on the grounds that smaller builders probably would have a greater challenge to adjust to the requirements, and the Government’s dithering with questions still unanswered has cut the lead time for preparation. Additionally, post-May 2015, we hope to offer the prospect of SMEs having better access to sites in any event. The threshold that we use is simply picking up the planning system minor development definition as it has greater merit.
Amendments 93AE and 93AF relate to the regulations enabling allowable solutions. Amendment 93AF requires that the affirmative procedure be adopted. Given the huge significance of these regulations, that seems to be entirely appropriate. It was not clear quite what is currently planned to make it certain. Amendment 93AE in a sense speaks for itself. It requires consultation with the Committee on Climate Change before any regulations are published. Given the very important role that the committee has, that seems the very least that might be expected.
Amendment 93AA, which was tabled by the noble Lord, Lord Teverson, allows a small site exemption, limited until 2018, with a threshold of fewer than five units. We have already addressed those issues. We certainly would not support ongoing exemptions whatever the threshold.
On Amendment 93AB, we accept that there is a strong case for off-siting to be local to ensure that it benefits the communities affected. However, we have some reservations about how practical it may be. It is currently drafted as an absolute requirement, and an alternative might be a best-endeavours approach.
On Amendment 93AC, £90 per tonne of carbon was one of the options canvassed in the Government’s consultation. The other two were £36 a tonne and £60 a tonne. We have some sympathy with the approach, but recognise the inconclusive nature of the consultation, which, the government response concludes,
“brought much conjecture but no new evidence on how the different price caps may impact either on the extent to which allowable solutions measures would be brought forward or on the viability of housebuilding”.
It refers to further analysis being needed. Will the Minister say what is in hand and when it is expected that that further analysis will be completed?
In Amendment 93AD the noble Lord sets out a list of activities which may count as allowable solutions, and they seem entirely reasonable.
Making real progress on zero-carbon homes is vital if we are to meet our commitment to tackling climate change and our emissions targets. We would support a higher standard of zero-carbon homes than the coalition, ensuring that if people pay an uplift on a home due to it being zero carbon, they will benefit from an appropriate higher level of thermal efficiency than at present. The standard should be the one recommended by the Zero Carbon Hub. We oppose an ongoing small developments exemption. We would structure allowable solutions in such a way that developers are incentivised to prioritise onsite measures over external offsets. The noble Lord, Lord Teverson, has an amendment on that in due course. This could be done through the drafting of the primary and secondary legislation. In office, we would produce an energy in building strategy which combined the existing microgeneration energy efficiency and heat strategies. This is a sensible evolution that would ensure consistent priorities across departments.
My Lords, I do not claim the expertise of all those who have spoken in this debate so far, but I would like to make one or two points in commenting on the debate that has just happened. I also begin by congratulating my noble friend Lord Ahmad on his preferment. It is extremely well deserved and we look forward to his increasing activity in this House.
The first point that occurred to me in reading the Government’s amendment and the documents that accompany it is that it is clearly a very different concept to that embodied in the Section 106 provisions of the Planning Acts. In that provision, as a condition of gaining planning permission, a developer has to make some other improvement, perhaps by the provision of affordable housing, public space or something of that sort. Clearly, there are some parallels and the discussion that has been held so far on the amendment suggests that the allowable solutions should be closely associated with the development under consideration. To some extent, that reflects the anxieties that have happened over some of the Section 106 conditions that were imposed, which were intended, sometimes, to promote a closer knit, cohesive community, embracing people of different living standards and backgrounds and so forth within a reasonable neighbourhood. Increasingly, developers found it easier to have their affordable housing some distance away thereby, negating the purpose of the planning condition. I hope that that cannot be regarded in any way as an appropriate solution.
Individuals who have a strong commitment to fight climate change and who engage, for instance, in air travel and wish to be able to say, for their own comfort, that they are offsetting their carbon emissions incurred by air travel is an entirely different operation and personal to the individual. Some people regard that as of great importance, and one has to admire their commitment. How effective it is I have no means of judging. But that is quite different from what we are considering here in the zero-carbon homes policies that the Government are promoting. One needs to recognise that on one side and the other, Section 106 and individual offsetting are quite different from what we are considering here.
It is right to remind ourselves about my second point. I am grateful to the Home Builders Federation, which has provided us with some information, some of which I was unaware of. I would be grateful to know whether the Government accept this statement. The federation states that in the UK:
“New housing built today is amongst the most energy efficient in the world and the process of working towards the implementation in 2016 of a zero carbon standard has led to great strides being made by the industry in reducing emissions from new homes”.
In considering these matters, we need to recognise that a great deal has been achieved already. It is a credit to the housebuilding industry and the building industry as a whole how much they are committed to achieving ever-higher standards and lower emissions in their work.
How much difference does it make to the individual? I am never quite sure. Some years ago, under the CERT programme for carbon emissions, I had my house insulated, cavity walls filled, much more effective loft insulation installed and various other things. It was not done under the Green Deal because it was before that, but it was said that it would reduce bills. It is quite impossible to measure that. As one gets older, one needs more house heating, particularly if one is at home all day like my wife. It may help, but I am never quite sure whether it has conceivably reimbursed what we had to spend. Although we got the insulation free as pensioners, we had to spend quite a lot on scaffolding and such things, which was not included in the CERT scheme.
The noble Lord, Lord McKenzie, asked how far the allowable solutions should be for the benefit of the local community. That needs to be carefully considered. If one can do that, it seems to me that there are advantages to it, but how you measure it I am not sure.
Finally on the question of the exemption of small sites, I do not think that those who have spoken so far recognise that there is a conflict of interest here. The tighter that you make the regulations on carbon, the more likely it is that you will stifle investment in housing. When considering the nature or length of time of the exemption, when this country faces a crisis in housebuilding—an amendment was moved by the noble Lord, Lord Best, that made this point very clearly—we must not risk scaring off people who are anxious to develop small sites but would find the cost of doing so to a high standard of carbon emissions would make it uneconomic, so that they back away and the site is not developed at all.
I should be grateful to hear from my noble friend to what extent the Government are taking account of that conflict in determining the nature of the small sites exemption. As may have already been said, I have been told that there is expected to be a consultation on the definition of the small sites exception, and I should be grateful to hear from my noble friend when that is happening, the nature of the questions that will be asked and the parameters in which it will be considered. All I say at this point is that it is important that we get that right and that, in the housing crisis that we face, we do not risk stifling housebuilding investment that might otherwise happen.
My Lords, I too, welcome the noble Lord, Lord Ahmad, to his new role and welcome the new clauses in the Bill. I want to address the points just made by the noble Lord, Lord Jenkin, and pick up the question of the exemption from the full requirements of the zero-carbon standard for small development, which is not yet fully defined.
First, it is extremely important that we encourage small and medium-sized enterprises to get back into business. They were very hard hit in the recession; they went out of business on a big scale when times were hard following 2008. We need to get them back into business if we are to achieve the 200,000 or 250,000 homes a year, or whatever it is, that we need to build. That almost goes without saying.
The big six housebuilders used to do 46% of all the housebuilding in the UK; they now do 70%. Seventy per cent of all new housebuilding is in the hands of that very small number of builders. We need to bring back those small and medium-sized builders. However, I doubt whether this measure is the way to do that. To think that exempting small sites means that small builders will come back into play is a leap of imagination. First, larger housebuilders of course sometimes develop small sites, particularly if they are profitable; or they develop larger sites but in phases. That means that if we choose a threshold of 10 homes, we will discover a whole series of schemes with nine homes being built over a period. Housebuilders like to do things in phases in any case. We may not address the SMEs when we address this. It is not about small builders; it is about small sites, and it may miss the point.
Secondly, the small builders are not there not because they are incapable of achieving the building regulations standards that we set before them; in fact, they are rather good at getting the building aspect right. Their problems have been finance: the banks have not wanted to back them after the recession. They have not been able to get their hands on the bridging loans to build and develop, and have had problems getting their hands on the land because the big housebuilders surround towns with their own options and agreements. Some smaller builders would say, “We build to a better quality and a higher standard than the big national housebuilders. It is not that we want lower standards; that is not preventing us getting on with the job”. We may be missing the point with this approach.
My final point is that in rural areas, 10 homes is quite a big scheme. We will knock out all the developments in rural areas across the country if we set a threshold of, “We don’t need to worry so much about zero-carbon standards for 10 homes or fewer”. Yet those are areas in which people are keen on having high standards, but in which it is particularly important that insulation standards are high. One should recognise that rural areas may be more exposed to the elements than the middle of a town.
I am not at all sure whether this measure reducing the requirements for zero-carbon standards to be applied to smaller schemes does what it is intended to do, which is to get the SMEs back into business. Other factors would do that, and this might simply mean that an awful lot of housing was excluded in a way that we would all regret, particularly if the bigger housebuilders came into play by phasing their developments.
My Lords, first, I take this opportunity to thank all noble Lords for their kind and warm words of welcome. I assure them that I look forward to working with Members from all sides in my new role. There will be times when I am sure that we will agree; there may be other times when we do not; but all discussions will be done in a manner of listening to and acknowledging the great expertise in this field in your Lordships’ House. On this subject, I have sensed that there is a good consensus on the approach of providing off-site carbon abatement measures, but of course a series of important points have been raised. I shall deal with those in responding to the amendments.
Before doing so, I shall deal with the specific issue raised by my noble friend Lord Teverson on the climate change committee’s recommendations on low-carbon heating, such as heat pumps. Rather than specifying what heating to use, the standards in building regulations are technology neutral, giving builders the flexibility to innovate and choose the most practical and cost-effective heating solutions. As we further strengthen standards, builders will increasingly find that they need to include low-carbon solutions such as heat pumps. Of course, heat pumps work best in well insulated homes, and we have already amended building regulations to require that all new homes are well insulated. There is no reason why low-carbon heating such as heat pumps could not be considered as part of the allowable solutions investment to meet the overall zero-carbon standard.
I thank the Minister for that comment; that is very useful. I point out one thing to him, which I am sure he is aware of: he is absolutely right about heat pumps and all that, but we know that it is really important to put them in when the house is built. It is difficult to do it retrospectively. Yet the biggest incentive for that is the renewable heat initiative, to which new builds are not entitled. Therefore, I ask the Minister to take away to his colleagues the fact that there is a distortion. The renewable heat initiative is fantastic and a great success but it acts as a barrier to things that need to be done on new builds. It is almost more of a problem to do these things retrospectively. It clearly makes sense to do them beforehand, but the renewable heat initiative can have a distorting effect in this area. However, I very much welcome the Minister’s comments on that approach.
I thank my noble friend for his suggestion and I agree with the principle of what he is saying. Quite often when homes are built, we look to put in heating which reflects the direction of travel that we aim to achieve on carbon from homes, and it is inherently sensible that it is done at the time of construction rather than trying to do it through reconstruction. If nothing else, one hesitates on the carbon emissions which are then created through the reconstruction or part reconstruction of properties.
Amendments 93ZAAA and 93AA seek to determine the scope of the exemption that we have proposed for small sites from the requirements to deliver zero-carbon homes from 2016. My noble friend Lord Jenkin and the noble Lords, Lord Best and Lord McKenzie, all mentioned the importance of helping small housebuilders. As we recognise, small housebuilders do not have the resources of larger housebuilders to respond to new regulations. However, it is important that we design an effective exemption. I assure my noble friend Lord Jenkin that we are committed to a consultation on this very issue and we expect that it will be issued shortly.
It would be wrong to nail down the scope of the exemption in primary legislation before we have had a chance to consider the evidence. On that very issue, noble Lords will be interested to know that the Federation of Master Builders has issued a briefing note with its views on the exemption. The FMB represents all small and medium-sized construction firms, as noble Lords know, and it is very supportive of the proposed exemption. I use that only as an illustration of the need to consult. There will be many views that we must listen to from all sides of the debate.
We want to ensure that the exemption is proportionate and targeted to help small builders, that there are clear criteria as to its application and that it is designed to ensure that it helps only those that it is meant to help. I reassure noble Lords that the key questions about site size will sit at the heart of the consultation.
I will follow up with officials after today’s session and, if that is our intention, we will see whether we can deliver on that. I can do no more than reassure the noble Lord in that regard.
I turn to the various questions that were raised. My noble friend Lord Teverson raised the issue of the small sites exemption, which relates to the 50 units per site threshold. The Government recognise the potential impact on smaller homebuilders, and that is why we have decided on an exemption, as I have already said. The principle will be to ensure that the measure is targeted and proportionate to what we are trying to achieve. I have already said that we hope to issue the consultation shortly.
There are a number of issues that we all want to address specifically in the consultation—for example, the threshold and scope of the exemption and how it is applied. Regarding the site threshold, there has been much press speculation that it could be as high as 50 units. However, for the recent consultation on Section 106 agreements, the threshold was 10 units or fewer. This is likely to be nearer the figure that we consult on. In that respect, I cannot anticipate the Government’s final position but I can say that we will be looking closely at the conclusions of the consultation on the Section 106 proposals as we develop our thinking.
In relation to the timing of any exemption, I do not agree that primary legislation should be used—
I was drawing a distinction between the Section 106 conditions of planning permission and what we are considering in this Bill. Do the Government recognise that they are not exactly the same? The Minister referred to them in almost the same breath, but they have rather different considerations.
I accept that, and I am fully aware of the impact and application of Section 106 agreements. There are currently two figures. There is a speculative figure in the press. We are developing our thoughts on this. I mentioned the Section 106 consultation—the figure of 10 is nearer to our thinking than 50—merely to give an indication. We will, of course, keep the situation under review. If it becomes clear that the time is right to review the exemption, we will do so, but we do not want to be tied down to a specific timeframe.
Amendment 93AB seeks to limit the off-site measures that a homebuilder can support to those within a five-mile radius of the development. While we are very keen that local projects are supported through allowable solutions, this proposal is not workable. We asked in our consultation whether there should be a spatial limit on off-site carbon measures. Views were evenly matched, but slightly more of those responding did not think the measures should be limited to just those in the vicinity of the development. While we do not want to prescribe that measures should be local only, we want local authorities to participate and local projects to be supported.
There are clear benefits for developers in supporting off-site carbon abatement measures in the locality of their developments. They give visibility that developers are delivering on their obligations. It can enhance the attractiveness of a development if local people feel that it is leading to carbon reduction in their area. In many cases, these projects may be the most cost-effective option. This will be good for the reputation of homebuilders and beneficial to local areas. What we are proposing will allow for local participation, but prescribing that by reference to a specific spatial limit will not work. Even if sufficient appropriate carbon abatement projects existed within five miles of every new housing development, should we force them to be supported at the expense of more cost-effective strategic projects elsewhere? It is likely to be to the detriment of local communities if it means that larger scale measures, such as larger scale community energy schemes, are missed. It would rule out local authorities working together to offer measures which might span more than one authority. Setting a five-mile radius in primary legislation would also end up in a confusing pattern of concentric circles of potential projects over the country which would be impossible to administer.
My noble friend Lady Maddock asked the obvious question. In building generally, we all ask ourselves whether it will happen. I am sure we could share stories about builders and deliverables. Her question was about allowable solutions and how they will be checked. We will build on existing processes in the first instance, but it will be necessary to consider a self-standing approach, which could happen in a number of ways. For example, retrofit is classified as building work. It will be subject to checks under building regulations as now or will be covered by the existing competent person scheme arrangements. This could be supported by a requirement to provide an updated energy performance certificate to show that the improvements are achieving the desired outcome. A mechanism for validating carbon savings already exists under the energy companies obligation, and there is scope to use this example to investigate a similar proposition to cover allowable solutions. Small-scale energy measures would have to demonstrate that they meet energy performance levels which could be converted to carbon savings. There are other quality assurance schemes for other types of measures which could also be called upon, such as the combined heat and power good quality scheme. There will be further consultation with the industry.
My noble friend also asked about energy efficiency and the fear that the consumer would lose out if the developer chose to use allowable solutions. All consumers will benefit from a minimum national standard of energy efficiency and carbon reductions in homes. They will also have good information on other technology used in homes further to reduce carbon emissions and energy costs. The allowable solutions policy benefits society as a whole by reducing carbon emissions across the country without imposing a disproportionate burden on anybody. I am sure that my noble friend agrees that if we look at how housebuilding, home sales and home rentals have developed over the past decade or so, energy efficiency has been at the forefront of much that is part of the offers which are considered.
Before we move on, I may not have put it very clearly, but one of the questions that I was concerned about was the timescales. If builders are required to agree various abatements, will there be a timescale in which they have to carry them out? It slightly worries me that they could do their small site and agree to do the abatements, but maybe not do them until 10 years later unless there is a timescale on them.
The short answer to that is, yes, there will be timescales, but I will get back to the noble Baroness with details about our thinking. It would seem odd to have a situation whereby conditions are set down which do not have time limitations, otherwise it is an open-ended situation. My understanding at the moment is that we still need to set those timescales, but the idea of a timescale is very much in our current thinking.
Amendment 93AC seeks to set a minimum price of £90 per tonne which homebuilders would need to pay into the fund that we are proposing. This would effectively set a floor price for allowable solutions, something only 22% of those who responded to last summer’s consultation thought the Government should do, compared with 59% who thought the Government should set a ceiling price or price cap for allowable solutions.
The consultation sets out three price cap scenarios for allowable solutions: low, which is £36 per tonne of carbon; a middle rate of £60 per tonne of carbon; and, at the higher end, £90 per tonne. As I am sure all noble Lords will agree, getting the price cap correct is crucial. If we set it too low, there is a risk that carbon abatement measures may not be available at or below that price. However, if we set the price too high, we put at risk housebuilding viability, which could seriously stifle much needed future housebuilding provision. I am sure I speak for all noble Lords when I say that none of us wants that.
We received a great deal of conjecture about the pros and cons of the different price caps from the consultation, but received little new evidence to inform that choice. However, it was clear that homebuilders have strong concerns about potential costs and the impact on housebuilding. The Government have therefore committed to undertake further analysis on these impacts before a decision is made. None the less, we know that a price of £90 per tonne of carbon will mean an allowable solutions cost in the range of £2,000 to £3,000 per dwelling, which is by no means an insignificant sum. It was supported by less than half of the consultation responses, and by only 10% of builders and developers. The majority of those who responded to the consultation said that the price cap should be reviewed every three years. That seems a sensible suggestion, and we have agreed to it. However, setting a price in primary legislation would mean finding parliamentary time and an appropriate legislative vehicle every three years to do so.
Amendment 93AD proposes to include in primary legislation a list of carbon abatement actions that may be supported. Last summer’s consultation sought views on whether the Government should set a statutory list or use a criteria-based approach to identify suitable carbon abatement measures. Of the responses, 74% did not support focusing on particular types of measures, and there was a consensus that being too prescriptive would stifle flexibility within the market for allowable solutions. We would be concerned about describing measures in primary legislation. Indeed, including lists of measures in secondary legislation can also inhibit flexibility. We also discussed whether a criteria-based approach might be adopted, so that if a measure met those criteria, it could be supported.
The criteria proposed were: complementarity, such that measures should complement but not displace projects supported separately by other government programmes; market additionality, meaning measures which would not otherwise have been brought forward by the market; cost effectiveness, whereby measures should bring forward cost-effective carbon abatement; verifiable carbon savings, whereby measures should be capable of delivering verifiable carbon savings; and, finally, being of demonstrable benefit to UK citizens. More than 60% of respondents to the consultation considered that these were appropriate criteria.
We also set out a list of potential measures in the consultation, including three of those suggested in this amendment: retrofitting existing private buildings; retrofitting existing public buildings; and connecting existing private buildings to a community heating scheme. The installation of charging points for vehicles, although not included in the list in the consultation, is another measure which we think would be appropriate. The Government will certainly look to provide further information on measures which could be supported, for example through guidance. However, it is our belief that listing measures in primary legislation could, as I have said, reduce flexibility and potentially stifle new measures being brought forward.
My noble friend Lady Maddock raised the issue of not having information on secondary legislation. We want very much to embed this in building regulations because that is the system which homebuilders understand. It means that we can use existing legislative structures and building controls rather than having to invent new compliance bodies. That is why we are taking powers in the Building Act to amend the regulations rather than developing a completely separate set. This is an innovative approach to delivering carbon abatement measures and, as I have said, we want to avoid being too prescriptive in primary legislation. There was also a question about why no secondary legislation is already available. The Government want to work further with industry and others who would need to be informed on the details of the implementation before we put down secondary legislation. I can look into what further information can be made available for discussion at later stages of the Bill.
The noble Lord, Lord McKenzie, said that often when we look at such issues it is a case of, “Yes, that’s good but should we go further?”. The Government have strengthened energy performance requirements for new homes significantly. Indeed, we have strengthened them by more than 30% since we came into office. We have reduced energy bills by £200 on average and are saving carbon. As part of the journey to zero-carbon homes, we now propose further to improve those energy requirements, typically by 20% across the housing build mix. While some might say that we should go further, we have had to strike a balance between what is feasible to raise standards for new homes without imposing excessive costs and unrealistic levels of ambition on homebuilders.
The noble Lord, Lord McKenzie, quite rightly raised the issue of the environment vis-à-vis growth. Evidence supplied by the UK Green Building Council shows that the cost of delivering a zero-carbon home is between £3,500 and £5,000. This is a significant amount of extra money for developers to find. It would not be right, in a still recovering economy, suddenly to require them to find this extra money for every new home delivered. Since 2010, the Government have taken gradual steps towards delivering zero-carbon homes. From 2016, they will be delivered via the right combination of on-site and off-site measures. We will, of course, keep that combination under review.
The noble Lord, Lord McKenzie, also referred to setting the on-site standard and its watering down and asked whether the Government have proposed a weakened on-site energy performance standard rather than the level recommended by the Zero Carbon Hub in the consultation. We have strengthened the energy performance requirements for new homes significantly since we came into office—I have already alluded to this—and as part of the journey to zero-carbon homes we now propose further to improve these energy requirements, typically by 20% across the housing build mix.
Amendment 93AAA deals with two important aspects of the zero-carbon policy commitment: first, how we will set the carbon compliance standard and, secondly, what action we will take to update the House on that policy. Perhaps I may deal with the issue of reporting first. Noble Lords will know that there is an existing provision in the Sustainable and Secure Buildings Act 2004 which can meet the intent of this amendment and would not need the introduction of additional administrative requirements and costs. Section 6 of that Act requires that a biennial report on the sustainability of the building stock is produced and laid before Parliament. It specifies that the report must include building regulations made in the reporting period, changes in the energy and carbon efficiency of the building stock and an estimate of the number of buildings at the end of the reporting period. The intent and content of this existing reporting requirement under the Sustainable and Secure Buildings Act lends itself to the provision of information about zero-carbon homes, and this could offer a less cumbersome way forward to providing and making available to the House and more widely the information being sought. It is also right—and the opportunity exists—for noble Lords to ask for further information through parliamentary Questions.
In relation to the carbon compliance standards that developers may have to meet before applying any allowable solutions, noble Lords may know that we have already set this in line with the requirements of the code for sustainable homes level 4. Homes built to this level will need to have even better levels of insulation, triple-glazed windows and renewable energy systems, such as solar panels. This will reduce carbon emissions by another 20%, compared to current standards across the range of new home types, and reduce fuel costs for homeowners even further. We anticipate annual fuel bills for new homes to be around £700 less than the average existing home.
Noble Lords must not forget that the requirements of the building regulations are already very demanding to meet from a technical viewpoint, and solutions do not come cheaply, particularly for smaller developers, as noble Lords have said. Although we must meet our environmental obligations, we must do so while increasing housebuilding to help to meet the needs of our growing and ageing population and maintaining economic growth. Proposals to raise the regulatory requirements from 2016 will come at an extra cost, which must be manageable. It is on that basis that I argue that a carbon compliance level set at the code for sustainable homes level 4 is the right approach.
I am aware that some consider that the levels we are proposing from 2016 do not go far enough or that we are watering down our ambitions for delivering zero-carbon homes. These views do not take account of the need to balance our green and growth policy ambitions, as I have explained. I am clear that the steps we are taking achieve that necessary balance. We will, of course, keep the position under review, and it may be appropriate in the future to move further to tighten the on-site requirements.
I turn to Amendments 93AE and 93AF. Amendment 93AF seeks to ensure that all regulations made in relation to the off-site abatement of carbon dioxide will follow the affirmative procedure. As we have discussed, we propose to bring forward new building regulations, which are made under the negative procedure. It is my understanding that the Delegated Powers Committee has considered our amendments and has not expressed any concern regarding legislation that would be delegated from it. In particular, it has not recommended the affirmative procedure. However, I reassure noble Lords that the Government already use well established consultation procedures before laying new building regulations. In fact, the Building Act requires the Secretary of State to consult an independent expert panel, the Building Regulations Advisory Committee, on any new regulations before they are laid. The Secretary of State is required also to consult other bodies representative of the interested parties concerned.
The noble Lord, Lord McKenzie, asked a general point on the price cap and further analysis. Further work will be done over the coming months. It is a complex area, as I am sure that the noble Lord recognises, and we cannot commit to a date, but we recognise the importance of resolving the issue.
On the issue of consultation and the Committee on Climate Change, the committee will undoubtedly be an interested body, and we would welcome its views. It already has a formal role to report each year to Parliament on the extent to which government policies, including zero-carbon homes, are sufficient to meet carbon budget targets. There is already a statutory mechanism for the committee to provide its view on the adequacy or otherwise of the zero-carbon homes standards and other government policies, so there is no need make it a statutory consultee in the Bill.
I trust that I have covered all the questions. My noble friend Lord Jenkin asked about the Home Builders Federation’s statement on new homes. I reassure him that we recognise it and commend it as well.
A raft of issues was covered, and I thank all noble Lords for their contributions. I hope that the explanations I have given have provided some reassurance on the concerns raised and the points made. I recognise that after digesting my detailed explanations, noble Lords may wish to come back at a later stage. We will reflect very carefully on the further information that can be made available to the Committee to help further consideration.
I congratulate the Minister on the depth of his reply, given the short notice that he had of this debate. It was a very useful analysis of everything. House rules now allow us to use our iPads; I can see that the Minister has an impressive track record in this area in local government. This has been an excellent debate.
I thank noble Lords for their contributions on the small developments amendment. My explanation was inadequate in comparison with that of the noble Lord, Lord Best, which highlighted exactly the potential gaining there can be in splitting up developments. I am reassured by the Minister on that area. Clearly the Government are determined that such attempts to reduce the individual tranches of development will not be used.
Like my noble friend Lord Jenkin, I read the authoritative report from the Federation of Master Builders. It struck me as a denigration of its own profession, saying that smaller builders are not able to do this. I find that hugely disappointing. My experience, like that of the noble Lord, Lord Best, is the opposite. Smaller builders are far more able to provide consistent quality and to use local subcontractors for specialist functions, which these energy and emission-savings regulations would require. Rural communities are nearly always small but are also challenged on energy bills because they do not have access to gas. I am in that situation. I do not plead fuel poverty, but many people in my neighbourhood would because we have no access to gas and have to rely on oil, which I use, or bottled gas, if people are really well off. I cannot afford that luxury. It is a real issue. I ask the Minister and the Government to think again about this exemption.
I accept the Minister’s criticism that the very specific five-mile radius is perhaps not appropriate. I think we all agree that it would be preferable if alternative allowable solutions were implemented locally so that local communities and people in the houses concerned would see some of the benefits. I understand that it will be in the interests of the developer to point out local benefits that come through. In this case, would the Government see that that could be enforced?
It would really concern me if, having got permission for a development with allowable solutions, the developer, having done the sale, decides that it is all a little too difficult. We have seen a renegotiation of affordable housing or Section 106 agreements. Then, because of what they have decided to do in a development in Reading that is controversial, say, they decide to plant a forest in Northumberland after all. That is excellent for Northumberland and great for the climate, but not what the residents of Reading were promised. Will there be a preference for local solutions and, if agreed, will they be enforceable? I ask for the Minister’s thoughts in that area.
I think I said in my response that there are two elements to this. The second element is the impact on the locality. I speak as someone who has sat on a planning committee, as have other noble Lords. I know what happens when you consider planning applications. By golly, I have bashed out quite a few Section 106 agreements, and the whole intention is one of local benefit.
First, as for local authorities setting up their own funds, that is still to be decided, but I suppose that there is an argument to be made that setting up a plethora of individual funds may involve higher overheads. On the issue of prescriptive enforcement, in all planning applications we also look to the importance of building regulations. As I have alluded to in some of the detail that I have given, we also hope that the detail will be tied in with the building regulations. It will be for local authorities to ensure that the building regulations are adhered to.
If there is any further detail beyond that, I will certainly make it available to the Committee.
I thank the Minister for that. However, the point I am making is that you can fulfil building regulations by doing something far away; whereas, in a planning permission, there is a specific agreement to do specific things. On the carbon price, going to £90 is one figure. I was trying to make such allowable solutions the last resort and ensure that other solutions—either for the building itself or locally—came first. On electricity charging points for cars, I thank the Minister for his potentially positive reaction; that is excellent.
Clearly, I will not press my amendment. The risk about the price of housing and standards is clear if we look at the automotive industry. It has constantly had regulations on carbon emissions, and there has always been a fight, fight, fight by the automotive industry against all of them. Finally, politicians—at this point, in the single market at the European level—have had the guts to say, “Right, we have had enough of negotiation; we are going to ensure that”. That has happened a number of times on emissions. Has the real price of cars ever gone up over that period? The answer is absolutely not.
The same is true in the area of renewable energy. The cost is constantly coming down. The issue is not the increased price of houses—it may be in the very short term, but I suspect that that may be reflected in the land value rather than the price of the house, because that is the big variable in value and how planning permission works. Before I withdraw my amendment, I sincerely ask the Government not to be completely taken by the argument that the whole of the private industry is centred on efficiency increases and reducing costs. It is completely able to do that; this is not the biggest cost factor; and it is much more important that the future stream of energy costs to the people who live inside—the voters, consumers and citizens—are taken equally into consideration. I think that they should be weighed much higher in the balance. I beg leave to withdraw my amendment.
Amendment 93AA (to Amendment 93A) withdrawn.
Amendments 93ZAAA to 93AF (to Amendment 93A) not moved.
Amendment 93A agreed.
93B: After Clause 25, insert the following new Clause—
“Carbon compliance standard for new homes
(1) The Secretary of State must within six months of the passing of this Act make regulations under section 1(1) of the Building Act 1984 for the purpose of ensuring that all new homes built from 2016 achieve a carbon compliance standard.
(2) For the purpose of subsection (1), “carbon compliance standard” means an improvement on the target carbon dioxide emission rate as set out in the Building Regulations 2006 of—
(a) 60% in the case of detached houses;(b) 56% in the case of attached houses;(c) 44% in the case of flats.(3) Any further regulations made by the Secretary of State requiring persons constructing new homes to achieve reductions in carbon dioxide emissions elsewhere than on the site of such homes shall only be applicable in circumstances where the improvements set out in subsection (2) have been achieved.”
My Lords, I probably will not detain the Grand Committee for too long on this amendment, as in a way the principle has already been discussed on the amendment tabled by the noble Lord, Lord McKenzie. From our debates so far, we realise that the regulations really are not about zero-carbon homes; they are an approximation to that and we can never get to it. However, a great deal of consultation has gone on over the years with the building industry. We are always told—I accept it entirely—that one of the things that we need to do is make changes in regulations predictable and signal them far ahead, so that there is a degree of certainty, the producers can prepare and everything runs smoothly for the industry. With the Government and the industry, the Zero Carbon Hub spent a great deal of time coming to standards that would be accepted for 2016, and I admit to disappointment that we have not really got there at present. We have also removed a requirement about appliances within those homes being taken into consideration.
I talked about hope value in terms of planning just now, and my hope value in terms of the Bill is that the Government might reconsider where they go in this area, as we are still far away from zero carbon. I fully accept that we have to be practical, but this is the trajectory that we were expecting, it was negotiated with a large proportion of the industry, and it would be a good model were we able to pursue it. I beg to move.
My Lords, it is little more than a week since we received notification of the publication of the Government’s response to the outcome of the consultation exercise on zero-carbon homes and the so-called allowable solutions. Already there has been a flurry of government amendments to the Bill in the name of the noble Baroness, Lady Kramer, based ostensibly on these responses. They have been followed by contrary amendments in the names of the noble Lords, Lord Teverson and Lord Tope. There is clearly a division of opinion among the coalition on these issues.
Much in the Government’s document ought to be considered in detail, but at a glance it is easy to recognise its salient characteristics. It exemplifies the doublethink that we have come to expect of the Government in connection with environmental issues. It also illustrates the perspectives of the persons responsible for drafting the legislation, who have given expression to a kind of neoliberal economic thinking that was at the heart of the Energy Bill which we considered last summer. I shall attempt to characterise those perspectives but, for a start, let me talk of doublethink.
The consultation document on zero-carbon homes and the Government’s response both declare an earnest intention of staunching the emissions of carbon dioxide, yet ultimately subvert these intentions.
As we have already heard from my colleague, Lord McKenzie of Luton, it has been calculated that 37% of greenhouse gasses emanate from buildings and, of that quantity, 66% is estimated to come from domestic dwellings. At a time when there is a need to build more houses, there is also an opportunity to ensure that strict limits are imposed on their emissions of carbon dioxide.
Within the Teverson-Tope amendments are the figures for the reduction of emissions that were originally proposed by the Government, but which, now, they wish to alleviate. Again, as we have hard, these were reductions of 60% for detached houses, 50% for attached houses and 44% for flats. These provisions were strongly supported by 70% of respondents to the Government’s consultation. They are quite stringent requirements, and I imagine that there has been strong opposition among members of the Conservative Party to them. The consequence is that the Government have had to find what might be described as wriggle room. This is the latitude to appear to be fulfilling a declared objective, with all the credit that comes from doing so, while in truth allowing the intentions to be utterly subverted in favour of appeasing the opposition within one’s own party.
The wriggle room will be provided by a system of so-called allowable solutions and exemptions that will be the subject of secondary legislation. Housebuilders will be able to compensate for a shortfall in attaining their targets by pursuing other activities that have the appearance of carbon abatements. These may be achieved in other locations, apart from that of the houses in question or, indeed, through other enterprises. To be granted leave to pursue such allowances, I believe that the builders would need to fulfil only 20% of their emissions reduction targets.
Allowances could be obtained in various ways. The housebuilders might claim that they have achieved sufficient carbon abatement on-site via efficient communal heating systems or via low-intensity street lighting. They might obtain allowances by off-site activities, including the retrofitting of existing buildings with extra insulation. The housebuilders could pay another party to deliver carbon abatement or they could pay into a fund that has the ostensible purpose of carbon abatement. Finally, if they are building on a small scale, they can effectively avoid the requirements altogether. All of these allowances detract from the purpose of the Bill, which is to ensure that new homes will be carbon efficient over the long run. They relate to measures that should be pursued in any case. Therefore, there can be no justification for such allowances.
The arrangements proposed by the Government are reminiscent of the scam that accompanied the provisions of the original Kyoto protocol, which was aimed at reducing global emissions of greenhouse gasses. The protocol allowed nations to evade the targets to reduce their emissions by taking offsetting measures aimed at absorbing carbon dioxide. Tree planting was the favourite measure. Forestry programmes that were already under way were taken into account as part of the carbon-offset. Other nations could be paid to undertake forestry projects, which might be a cheaper way. These provisions encouraged acts of duplicity as much as examples of doublethink.
Now I wish to talk briefly of the curious neoliberal economic philosophy that suffuses this part of the Infrastructure Bill as well as other acts of this Government. The philosophy favours economic freedom at all costs, even when universal restraint is called for. The philosophy favours the monetarisation of all manner of social transactions and the establishment of markets where none has previously existed. Thus, in the early stages of the deliberations that have led to the present proposals of the Government, there was thought of establishing a system of marketable emissions permits. The abatement of the emissions would be achieved by limiting the number of permits. A market would be relied on to determine the price at which the permits were traded as well as their eventual distribution. But there are only some dim reflections of those thoughts in the consultation document and in the Government’s response.
The disadvantage of such a liberal system of emissions abatement is the way in which it is bound to invite all manner of infractions. The system needs to be rigorously policed in order to ensure that there is not widespread cheating.
If it is to be effective, such a system of verification is liable to be very costly and highly bureaucratic. Even in their present form, the Government’s proposals would have to rely on such a system if they were to be at all viable.
Instead of the system of allowable solutions favoured by the Government, what is required is a straightforward system of regulation. That is what is called for in Amendment 93B in the name of the noble Lord, Lord Teverson, and I strongly support it.
My Lords, I suspect that my noble friend will again talk about the balance between getting houses built and imposing regulations, particularly on small builders. Perhaps I may say how much I welcome his presence here as our new Minister for the DCLG. It is indeed a pleasure to have somebody who has served in local government doing that job. I did not say anything earlier, although I should have done, because I am really pleased about my noble friend’s appointment.
I want to raise two points concerning the problems for people who are carrying out what we want them to do in relation to zero-carbon homes. As the noble Viscount has just said, there has been a lot of discussion about this. It is not new—builders have been trying to adjust to this for quite a long time. Therefore, if people are starting to cry wolf, we need to be careful, because they have talked about it for a long time and, indeed, have been part of the consultations on how we are going to achieve zero-carbon homes.
One thing that we have been very bad at in this country is taking on new building methods, which can be more efficient and less costly. I particularly remember being involved in this 20 years ago when I was an MP. In a small village in north Dorset, a housing association had tried to put up more energy-efficient homes, using, as much as it could, off-site construction. Off-site construction can be cost effective, and you get accuracy and can build pretty energy-efficient homes. The thing that still sticks in my mind about it is the almost zero waste from the building site while the homes were being built. I do not know whether any consideration has been given in the regulations on zero-carbon homes as to how much waste from sites is produced.
In trying to get the balance right, I hope that the Government will look at these points and say to builders, “You’ve had lots of time. Use your energies in being imaginative about new ways of making energy-efficient homes, because in that way you can probably drastically reduce your costs and reduce the effect on the environment”.
My Lords, I want to make a couple of points. It seems to me that the amendment highlights that, whatever the Government’s claim about improvements in the position since 2010, they have not delivered the trajectory that was expected and consulted on, on which there was a consensus and which is reflected in this amendment. That is to be regretted.
The other point that the amendment focuses on is the extent to which you have to deal with abatement on-site as fully as you can before going down the path of allowable solutions. I may have missed it in what went before but I think that that is a point on which it would be very helpful to have clarification—that you have to do as much as you can in relation to these standards and can only take an alternative allowable solutions option to fulfil the rest of the obligation beyond that.
My Lords, I thank my noble friend for tabling his amendment, which has allowed this, albeit brief, discussion. I will attempt to be equally brief in my response compared with my response on the previous group of amendments.
As I said during the discussion on Amendment 93AAA, the carbon compliance levels put forward are well intentioned and while the Government accept that, we believe them to be unworkable. We all share a desire to see the building of energy-efficient homes that reduce carbon emissions and fuel bills, but we believe that at this time this amendment goes too far. We should not forget that the Government have made significant progress to deliver on the commitments that we and the previous Government made to ensure that zero-carbon homes are built from 2016 onwards. Since we confirmed our commitment to the 2016 target for new homes to be zero carbon, we have further strengthened the requirements of the 2006 building regulations, in 2010 and 2014, achieving a total reduction of 30%. In fact, the most recent changes we made to the building regulations, in 2014, will help save home owners £200 on average on their fuel bills compared to the new homes built before we came to office.
We are not stopping there. As I have said already, we have confirmed that from 2016 all new homes will have to meet even higher standards for on-site measures, to be set out in building regulations. These will be set at a level equivalent to that required for a home built to the level 4 standard of the code for sustainable homes. They will also save home owners on average a further £700 annually, when compared to an existing home.
In order to raise or lower the energy requirements for new homes, it is always necessary to consult carefully with industry. We should not forget that we are talking about a technical area that impacts across the construction sector. It would therefore not be workable to deliver the proposed standard within six months. Even if it were, it is not prudent to have such a rigid timeframe for delivery in the Bill—or to set requirements such as this in primary legislation. If, in the light of the consultation, there needed to be any slight adjustments to requirements, we would not be able to do so without new primary legislation. We have said that we will strengthen standards and deliver zero-carbon homes from 2016. That is a clear government commitment, for which we will be held accountable if we do not deliver. Between now and 2016 we will consult widely on how the new and higher proposed carbon compliance standard should be met. We will share that consultation with noble Lords.
I turn to some specific questions. The noble Viscount, Lord Hanworth, and my noble friend Lady Maddock asked about the on-site standard and the watering down. The type and design of housing built in England varies enormously. Some technical solutions for reducing carbon emissions work well in certain circumstances—for example, solar panels on roofs—but in other cases, the cost of the technology outweighs the benefit. Developers need to have choices about how they meet the zero-carbon policy. This will increase competition in the marketplace and help minimise costs. We need to strike a balance between uplifting energy performance requirements and mitigating any negative burdens on the housebuilding industry.
The noble Viscount also asked about regulation and allowable solutions. It is not technically feasible or economic to try to achieve the emissions from on-site measures alone, as we recognised when the idea of allowable solutions was first introduced. As a point of fact, the concept of allowable solutions was of course first proposed by the previous Administration in 2008.
My noble friend Lady Maddock asked about wastage on zero-carbon sites. The Sustainable and Secure Buildings Act requires the Government to report on the reuse of building materials on the site. If there is further detail on the numbers, I will bring it to her attention. She also raised promoting innovation. The drive to high-energy efficiency is in itself driving innovation, which we encourage. That is being aided by various government programmes.
The noble Lord, Lord McKenzie, spoke about doing much of this on-site. I agree. We want to push on-site measures, but they need to be cost-effective and a balance needs to be struck.
I hope that the approach which I have set out here, and earlier during the brief discussion on Amendment 93AAA, demonstrates why this amendment would be problematic in terms of the increased demands on the homebuilding industry and the mechanics of delivering it. On that basis, I hope that the reassurance provided to my noble friend Lord Teverson is enough to encourage him to withdraw the amendment and work with us to deliver a balanced package of zero-carbon measures from 2016 onwards.
Before the noble Lord responds, perhaps I might come back on a couple of things. At what point in time did the Government move away from the carbon compliance standard that was agreed, and expected to be the consensus, and go to the level 4 alternative? There has been lots of paperwork flying around and, doubtless, we have missed it but can the Minister say exactly when that happened? What was the evidence base behind that, which led the Government to that conclusion? I accept that they may take a view on the imposition of costs and so on, but it is really about the analysis that underpins that. As for allowable solutions, we are not opposed to them; they were reared as a concept under the previous Government, so we have no problem with that. However, I am trying to understand at what point and on the basis of what analysis that change was made.
I think that I have already talked about the analysis, which was based on various consultations and representations that were made. However, the noble Lord was asking specifically about the date. I believe that it was in the Queen’s Speech for this year.
My Lords, I thank everyone who has been involved in this debate, and particularly the noble Lord, Lord McKenzie, for bringing up the finer points of my amendment, which I did not get on to myself. Important questions were answered there.
Clearly, I accept that my noble friend the Minister is absolutely right: this amendment is not appropriate to primary legislation and I shall not pursue it today. However, I feel some disappointment that we have managed to move off what I understood was agreed was part of a trajectory. We will judge that in years to come, because we are so aware of the huge task that the Government had with the Green Deal in trying to re-engineer past building stock, which never caught up to where it needed to be. The last thing that we want to do is to be in that position with the houses that are built over the next decade. We do not want to find that we have to go back and retrofit them in 20 or 25 years’ time. I recognise the Minister’s point that there would be a certain amount of inflexibility if we had this provision in the Bill. Therefore, I beg leave to withdraw the amendment.
Amendment 93B withdrawn.
93C: After Clause 25, insert the following new Clause—
“Zero carbon homes: annual report
(1) The Planning Inspectorate must, before 31 December 2017 and before that date in every subsequent calendar year, prepare a report on compliance with the zero carbon homes standard.
(2) A report under subsection (1) must include, as regards each preceding calendar period—
(a) the number of homes built to the zero carbon standard;(b) the number of certificates issued as evidence of compliance with section 1(1A)(d) of the Building Act 1984 (power to make building regulations);(c) the number of “suitable alternatives” made by people to whom the requirements under paragraph 7A(2) of Schedule 1 to that Act (building regulations);(d) an analysis of the type of “suitable alternatives” made under that paragraph; and(e) the number of instances of failure to comply with the provisions of that paragraph.(3) The Planning Inspectorate must—
(a) present the report to the Secretary of State; and(b) publish the report in a suitable format.(4) The Secretary of State may give the Planning Inspectorate directions regarding—
(a) the form of a report under subsection (1); and(b) the manner in which such a report must be prepared or sent.”
My Lords, this is quite a long amendment but it is trying to do something simple, which my noble friend Lady Maddock has already talked about. It is trying to say that there is a whole set of issues around the management and control of building regulations of the sort that we are talking about here. It is difficult enough with building regulations as they are at the minute. I was in local government for a short period—for four years up until last year—and one question that we kept on coming to was whether, although we have those regulations, they are really being applied. It is great for us and the department to say that these are the right things, however high or low those standards are, but if they are not effectively applied, either through negligence or perhaps even through design, that is not very good at all. However, with what we have on allowable solutions at the moment, it is even more difficult to say whether the policy has been effectively implemented.
My last quote from the Committee on Climate Change report for 2014 on progress is probably something that noble Lords will recognise. It says:
“While the tightening of buildings regulations is important for carbon budgets, the actual delivery of carbon savings is not necessarily assured. There has been increasing evidence of a significant gap between predicted performance and in-use performance, with new buildings rarely delivering the expected savings due to a variety of factors (e.g. poor design and installation)”.
That is a very depressing paragraph for all of us, but I am afraid that we probably all experience and see that out in the real world.
With this amendment, I am trying to probe the Government on more than how we are actually going to manage the new process. I would be interested in the Minister’s comments on how effectively the Government think—dare I say?—bog-standard building regulations are implemented at the moment. What evidence do we have? What lessons can we learn? I shall certainly withdraw my amendment, but what would the Government like to bring forward so that we can rest assured that—whatever we agree and is subsequently agreed in building regulations under the Building Act—a job well done is not only when this legislation is passed but when it is implemented? I beg to move.
My Lords, I thank my noble friend for tabling the amendment. I agree that it is important that we have information on the operation of zero-carbon homes standards. As I said on Amendment 93AAA, we need to ensure that the desire for information is dealt with in a way which does not create unnecessary administration. Usefully, there is an opportunity to use existing reporting mechanisms, which will save the need for extra legislation.
In that respect, I have to point out that it would not be the role of the Planning Inspectorate to be involved in reporting for off-site carbon abatement matters, as proposed in the amendment, as those are dealt with through building control, not planning, which is the remit of the inspectorate. To ask the inspectorate to report would require the creation of new systems for it to ask for information from building control bodies, and that would create unnecessary administrative burdens.
I have already outlined the requirements in the Sustainable and Secure Buildings Act 2004 which can meet the intent of this amendment and would not need the introduction of new requirements. For the benefit of noble Lords, it would be useful to repeat what Section 6 of the Act requires. Under that section, a biennial report on the sustainability of building stock is produced and laid before Parliament. It specifies that the report must include building regulations made in the reporting period, changes in the energy and carbon efficiency of the building stock, and an estimate of the number of dwellings at the end of the reporting period. The intent and content of this existing reporting requirement under the Sustainable and Secure Buildings Act lends itself to the provision of information about zero-carbon homes, and could offer a way forward to provide the information being sought to the House and more widely.
My noble friend also asked for other information about what the Government propose. In this respect, we can augment the information already required to be produced for reports under the Sustainable and Secure Buildings Act with information available from the register for keeping track of those certificates, as proposed in our new clause. Our new clause enables building regulations to be made for the creation, maintenance and administration of a new register to keep records of certificates as evidence of compliance with building regulations when off-site allowable solutions are adopted as part of zero-carbon homes solutions.
As we develop the register, we can certainly look to see that it will enable appropriate information to be available. That would avoid the need for separate reporting requirements and additional administrative burdens and costs, of course.
In terms of enforcement and how this would work, nothing proposed removes the fundamental fact that, before buildings can be used, they have to be signed off by a building control body as meeting building regulation requirements. Therefore, a building control body need not accept a certificate provided for off-site carbon abatement measures if there is any doubt as to, for example, the provenance of certificates or the validity of the off-site carbon abatement measures to which they relate. Of course, in the last resort a local authority could prosecute someone who failed to comply with the zero-carbon standard.
My noble friend also talked specifically about the gap between design and performance. Our zero-carbon homes strategy does not stop at strengthening the building regulations alone. We want to ensure that the homes perform as we expect them to. To that end, we support a wide piece of work with the industry being led by the Zero Carbon Hub to ensure that all new homes, when built, save the amount of energy and carbon expected.
The work led by the Zero Carbon Hub is looking at closing the gap between the design and the as-built performance of new homes, and we will consider how best to take forward its recommendations. In terms of practicalities and how the register will operate, we are currently working up the detail, which will be subject of course to consultation. The key elements could operate in a similar way to the register of the energy performance of buildings—namely, that a copy of the certificate would need to be entered on to the register by the person who had produced it at the same time that it was supplied to the developer. We would of course anticipate that information about the number of certificates on the register would be available more widely, subject to appropriate data protection requirements, as is the case with the EPB register.
As for how allowable solutions will be checked, I think that my noble friend raised a question about that in respect of a previous amendment. I mentioned at that point that measures such as retrofit, which are classified as building works, will be subject to building regulations. We could also support this through a requirement to provide an updated energy certificate, while small-scale energy measures would also have to demonstrate that they met minimum energy performance levels, which would be converted into carbon savings.
My noble friend also asked about the effectiveness of building regulations enforcement. A building control survey in November 2011 showed a significant number of interventions by building control bodies. I can of course send a copy of that report to my noble friend and, indeed, share it with all noble Lords in the Committee.
When I put that report forward, I will also provide additional analysis, if it is available. I hope that my remarks and the approach that I have set out demonstrate that we can make economical use of proposed and existing registers and reporting arrangements, and avoid the burden of additional reporting requirements. On the basis of that detailed explanation and the reassurances that I have provided, I hope that my noble friend will be minded to withdraw his amendment.
My Lords, again, I thank my noble friend for going through that—quite rapidly, I would say. I will diligently read Hansard when the report is available to go through. I am sure that he shares my concern to make sure that these future regulations are delivered and enforced. I would just stress once again that, when we move into the allowable solutions area, this is not necessarily about a physical thing but something rather more difficult to check. That process needs to be checked a lot more carefully than under present conditions. On the basis that there are already procedures—I thank my noble friend for undertaking to distribute that information, which will be of great interest to the Committee more widely—I am very pleased to beg leave to withdraw my amendment.
Amendment 93C withdrawn.
93D: After Clause 25, insert the following new Clause—
“Commencement of planning changes
Section 33 of the Deregulation Act 2014 (Amendment of Planning and Energy Act 2008) may not come into force until the provisions set out in paragraph 7A of Schedule 1 to the Building Act 1984 (building regulations) come into force.”
My Lords, this brings the Committee to an area which I am sure my noble friend is well acquainted with. Currently, Section 1(1)(c) of the 2008 Act is in force. I do not know the full details of the whole Act, but the most important thing in this context is that it is about localism before the age of localism, in that it allows local authorities to ask for and determine standards that are higher than the building regulations that are set nationally. In fact, one could say it is a good example of subsidiarity as well as localism. This was very much identified with Merton.
The Deregulation Bill going through in this parliamentary Session intends, I think quite sadly, to withdraw that aspect of the 2008 Act. Although I recognise that when we get to a zero-carbon standard the provision in the 2008 Act in a way becomes redundant, I am concerned that there should not be a gap between the two so that those local authorities that take advantage of that flexibility suddenly have to stop and then restart once these new building regulations come in.
All this amendment does is to make sure that there is continuity. Coming from a Government who celebrate localism and subsidiarity, I hope that the Minister will be able to consider it favourably, to ensure that this flexibility stays there and that the principles and beliefs which I know he has can be maintained until we have this higher standard across England as a whole. I beg to move.
My Lords, I support this amendment and agree with it for the reasons advanced. I just take the opportunity to say that I think an equivalent amendment was moved in the House of Commons by my colleagues and voted on, sadly without the support of the Liberal Democrats. One would hope that if we tested this in due course, there might be a reversal, although I hesitate to point that out.
My Lords, with that last comment the noble Lord, Lord McKenzie, has demonstrated again the independence of thinking of our coalition colleagues, at least in the House of Lords. I say nothing more.
The other thing to say is that this is the final group for today and it brings to a conclusion for this afternoon much of the Teverson/Ahmad performance, with a sprinkling of McKenzie. We have addressed several important areas and, in the explanations that I have given thus far, I hope that I have put more detail on to what the Government’s thinking is. I repeat that the important element in all this is that although we may perhaps differ on the speed, and sometimes the approach, I think that the intent and principles behind what the Government are seeking to do are supported across the House and the Committee as a whole.
Turning to the amendment, it is perhaps unusual for us to be debating here the commencement of provisions in another Bill which has not yet completed its passage through the House. However, I recognise the interest in this issue. The background to this is the changes we are making to rationalise and simplify changes to housing standards. The Government announced in March that, as far as possible, we will consolidate necessary standards into building regulations. The Planning and Energy Act, among other things, allows local authorities to set planning policies to require energy efficiency standards above those in building regulations. With the introduction of strengthened building regulations and of the zero-carbon homes standard, this has become unnecessary, so we propose in the Deregulation Bill to amend the Act to remove that provision.
The issue of when we will commence changes to the Planning and Energy Act 2008 in support of zero-carbon policy has already been discussed in the other place. At this juncture, I can perhaps do no better than to repeat what my right honourable friend the Minister for Government Policy said recently in the other place. I am happy to do so here for the benefit of the Committee. Referring to zero-carbon policy, he said:
“We are aware that within that framework, the decision on the commencement date for amendments to the Planning and Energy Act 2008, which restrict the ability of local authorities to impose their own special requirements, must be made in such a way that the ending of those abilities to set special requirements knits properly with the start of the operation of standards for zero-carbon homes and allowable solutions”.—[Official Report, Commons, 23/6/14; col. 153.]
That commitment is on the public record and I have repeated it today. It shows clearly that we are conscious of the need for a sensible transition arrangement. With the explanation that I have given, and my repeating the statement of my right honourable friend, I hope that my noble friend has the reassurance he seeks and that he will withdraw his amendment.
My Lords, I am delighted to hear that commitment by the right honourable Oliver Letwin again, representing the positive reaction of the coalition Government of the Conservative Party and the Liberal Democrats to the amendment. I am grateful, too, for the support of the noble Lord, Lord McKenzie, and his Commons colleagues. On that basis, I am pleased to withdraw the amendment.
Amendment 93D withdrawn.
Committee adjourned at 4.05 pm.