WEDNESDAY 30 OCTOBER 2002
Andrew Bennett, in the Chair
Memoranda submitted by Yorkon and John Miles
Examination of Witnesses
MR KEITH BLANSHARD, Director & General Manager, and MR MIKE SHERWOOD, Marketing Officer, Yorkon; and MR JOHN MILES, formerly Member of the Housing Forum, Board and Chairman Off-Site Working Party, examined.
(Mr Blanshard) I am Keith Blanshard from Yorkon Limited.
(Mr Sherwood) Mike Sherwood from Yorkon Limited.
(Mr Miles) John Miles from ARUP.
Chairman: Do any of you want to say anything by way of introduction or are you happy for us to go straight to questions? Then we will go straight to questions.
(Mr Blanshard) First of all, off-site manufacturing has an incredible amount of opportunity to actually deliver things in half the time with the right quality. You actually mentioned the words "temporary homes" but that is not something which Yorkon has concentrated on, it has really been looking at modular construction, using steel frame and actually producing rooms down the production line in the same way as you produce cars. So, as far as opportunity is concerned, it is considerable. It really depends on how much investment the commercial world is prepared to put into it.
(Mr Miles) I would only add to that from a different perspective, the opportunity is to fulfill the need, which really comes about because the industry as it is currently structured probably does not have the capacity to fulfil the need, so there is a need to do it in a different way. The bottom line is that there is lots of opportunity for high quality permanent jobs. Temporary housing is not particularly high on that agenda.
(Mr Miles) As it stands at the moment, it does not have the capacity to deliver hundreds of thousands. It might stretch to a capacity of 10,000 or so. What we are looking at really is the opportunity to develop that industry in order that it can fulfill up to 100,000 or thereabouts, given that we expect the build rates in this country over the next 20 years to move upwards from 150,000 rather than downwards, and perhaps a signification portion of that volume could be built out of factories quite realistically to a very high standard.
(Mr Blanshard) We have committed ourselves to a leap of faith. We have put a new production line down for producing 600 apartments a year. That is very small in relation to what John Miles is saying but it is a demonstration of the future.
(Mr Sherwood) Up to now, only a certain number of players out there have been prepared to put their toe in the water, so to speak, but we certainly believe that it has been proved to those who have that they have made the right choice and that they are happy with what they have received, but it is only a few players who have been prepared to do it so far.
(Mr Sherwood) That is correct.
(Mr Blanshard) It is not just the Housing Corporation, it is that you around this table need to enthuse about off-site manufacture. What we are not trying to do is copy traditional construction which is slow, out of date and pathetic really because the customers are always late with their builds. So, you need to enthuse about off-site manufacture and we need to encourage people -
(Mr Blanshard) There is a way of convincing you and that is for you to go and look at the production line and go from flat steel to finished product inside two hours and then to a block of flats and actually talk to the people using it. That is one way you will achieve it.
(Mr Blanshard) If you produce a module which is a large room or rooms all in one module, then it means you can do the internal fit-out as well, so you do bathrooms, kitchens, carpets and you can even put the picture on the wall. That is down the production line. You then transport that module to site and bolt all that steelwork together and therefore you have created a large building. You then clad it on-site to whatever the planner wants or whatever the client wants. So, you are still making a building using traditional materials but what we are doing is changing the process, we are not changing the materials.
(Mr Sherwood) And there is a lot more that suppliers can do to help this happen. They are not doing it yet because building things in a factory is very different to building things in the muddy field. We could actually handle a piece of plasterboard the size of that wall, but of course a building site cannot because it has to handle sheets that can be lifted by two people and taken into a property. We can actually handle that size and, if our suppliers supplied us with that size, that would greatly assist the process. There are a number of other examples of the types of things that can be supplied: wiring looms for the electrics; and the plumbing could be made in a totally different way to what it is now.
(Mr Blanshard) We still buy a radiator from one supplier and a thermostatic valve from another, which is quite pathetic really, and I need a plumber to put the two together. I am restricted with the size of plasterboard sheets that we buy in British gypsum because they are only interested in eight feet by four feet sheets of plasterboards. I am not really interested in that; I want something that is a lot bigger. Opportunities are considerable from the supply chain.
(Mr Blanshard) The history of putting up the ones that we have done from Murray Grove and one or two others is that it is about 50 per cent faster than what you may define as traditional construction. It takes us about five days to put up a five-storey block of 12 apartments and we have done that.
(Mr Blanshard) I do not know what the size of the market we have is. We have never really measured it.
(Mr Blanshard) No. We find it quite difficult. You can add up how many houses people want and things like that, but then you can add up how much we produce and it is so small in relation to the two.
(Mr Blanshard) The definition of prefabricated ... You can have a panel system or you can have a modular system; it is just very small percentages at the moment.
(Mr Miles) I have looked at this from a pan-industry point of view and the percentage of the market that is taken by off-site fabrication at the moment is very small. Although there are certain systems, like some of the timber-framed systems. They do have a significant hold in the market, but they are only partial off-site solutions as opposed to a full off-site solution that Keith Blanshard was talking about. The big picture at the moment is that there is very small penetration of the market by off-site fabrication methods and producers and that is why there is opportunity for great expansion of that sector and the only question is, why would you want to expand it? I think there are probably three key drivers as to why it might be something that we are going to see expanding very rapidly over the next few years. The first is simply strangulation, that there is not the capacity in the industry as it stands at the moment to deliver the number of houses that we know we are going to need. That really comes about because of a decline of on-site skills and the lack of apprenticeships over a period of 20 years, which is now an endemic shortage and is very difficult to repair. So, if we are going to deliver at the rate that we know we need houses, even maintain the current rate, we have to do something to increase productivity. So, issue number one is strangulation and off-site fabrication hugely increases the productivity per worker. Secondly, there are some issues which have to do with the standards that we set for our housing and there is both legislation and planning guidance which are setting higher and higher standards progressively, which is a good thing, but it takes beyond the reach of conventional building technology some of those issues, like sound insulation and thermal insulation. Again, off-site fabrication offers the opportunity for fully engineered products to be delivered which do meet those requirements in the same way that fully engineered products like cars and white goods have met inexorably higher standards and actually reduced real costs over many years historically. The third reason why we think there is an opportunity for this segment to be hugely expanded is simply because of customer expectation. Customers are aware of the fact that they get much improved products today for prices that are no more than they used to pay in real terms 20 years ago and they are beginning to expect the same from their houses. The Housing Forum, of which I have until recently been a director, conducted a number of user surveys and set up now a site full of user surveys, which will be annual or bi-annual, and it is clear from those that league tables for house builders, rather like the JD power league tables for car manufacturers, will become the vogue and issues like quality, reliability and performance are high on the customer agenda. So, those three reasons are the things that are driving this particular issue at the moment, but the thing that is holding it back is the point Keith Blanshard made which is capital investment. There needs to be a state of confidence on behalf of the emergent suppliers that will allow them to put the money in at the front of what we hope will be a burgeoning activity, but that climate of confidence needs to exist and that, at the moment, is the issue which is holding it back.
(Mr Blanshard) I think one thing you have to start off with is the quality of the design. What was designed before was rubbish and you were delivering to site pieces of wall, bits of panels and things like that. We are not talking of doing that. We are actually making the building down the production line, so you are in a more controlled environment. So, you have to start off with a quality design and CABE is on board now with the Housing Forum, so they have an advice to give to that side of it, to the Housing Corporation and things like that. We have history, so we can look back at these sort of things.
(Mr Blanshard) Definitely, absolutely, and I think technology is around now, where materials and testing and all these sort of things are going on which are a great deal more sophisticated now than they were in those days. My opinion is that we will not be reproducing the rubbish that we produced before.
(Mr Miles) There is a context to that question which should not be forgotten and that is, if we do nothing in this country to change the way in which we deliver housing, there probably will be, on the one hand, a slowdown in the delivery of houses because of the shortage of skills and, on the other hand, a dilution of quality for the same reason. So, we are looking at a situation which is far from perfect if we look at the status quo and continuation of the status quo. I think that your question has to be seen in that context. Nothing is perfect. I think we would be foolish to say that there are no problems that cannot be anticipated. My point is that there are plenty of problems that can be anticipated by an extension of the status quo and therefore it is a balanced judgment.
(Mr Miles) We would not call it mass production for exactly that reason because, when Henry Ford made his famous statement, the economies of producing in a factory was because you did the same thing every single time and it was because of that that you had repeatable quality and a reduction of error. If you look at that same industry now, the car building industry, most manufacturers will say that they never build the same car twice because there is an almost infinite permutation of customer options.
(Mr Miles) We could have a long discussion on this point. They certainly do not all perform in the same way. The point is that, with today's manufacturing systems, it is not necessary for them all to look the same. That has to be a key attribute of any product that comes out of the factory that is designed for housing. It cannot possibly be that that only can look the same every time it is repeated. The systems that are being designed now with which I am familiar, what I might call generation two systems - generation one system is a product that we developed for some other reason and have now brought to housing - are beginning to come through now and have been developed specifically for housing in the first instance right from the drawing board, and one of the key requirements is that it should be flexible both in terms of exterior appearance and interior layout.
(Mr Blanshard) We have the components which have the building regulations, they have the sound, fire and insulation, all these sort of things and they are all in place. It is really the clients and the planning officer and that sort of environment which will drive the external fenestration. A client's internal fit-out will be driven by his requirements, but the production line and the standardisation of making walls and floors and rooms in any shape possible is already there.
(Mr Sherwood) The choice of external treatments is to the imagination.
(Mr Blanshard) We do not have a choice, do we? The planners will drive it, the clients will drive the different external fenestration of the building.
(Mr Miles) I do not think it is a problem in the factory context because the numbers of people required in a factory are fewer than the number of people required on-site. My point about shortage of people is shortage of skilled labour in the traditional building skills on-site, like plumbers, carpenters and bricklayers. Those skills are on a downward trend and it will take a generation to replace the gap that is opening up.
(Mr Miles) I think in design this country has an excellent armoury of skills. I think Britain is actually recognised as a design leader in many areas of product and engineering, so I think there is no shortage of skills in that area.
(Mr Miles) Yes. There are a number from the 1970s that have not had major structural problems, but they are not widely publicised of course. I can take you outside this room and show you some.
(Mr Miles) Yes.
(Mr Miles) I cannot name them offhand but I could arrange to show them to you.
(Mr Miles) Yes, of course. There was not an endemic problem within the systems in the 1970s in the sense that off-site fabrication led to these problems. The problem of the 1970s was that some were done well and some were done not so well and the ones that were done not so well became very newsworthy. There were some that, in a technical sense, were executed very well indeed and have required very little maintenance.
(Mr Miles) Yes.
(Mr Miles) Yes, absolutely right and therefore the rational response to that is to recognise it as a problem and to minimise that which is left on-site and to try and supervise that which is left on-site to the best possible extent.
(Mr Blanshard) We would offer the client the total package.
(Mr Miles) May I just make it clear that Yorkon are here as a producer. I am here as a designer and also as a member of the Housing Forum, so I have more of a pan-industry view than a particular quadrant and my colleagues can answer that question.
(Mr Miles) Because it has not been at all fashionable to become a skilled apprentice over the last 20 years and there has been nothing done that has been of material benefit to right that. It just is not fashionable for kids to leave school and become an apprentice and it has not been for a long time.
(Mr Miles) Maybe they would now but I do not think they did 15 years ago when this problem first started because it was becoming very attractive to do other things.
Chairman: I do not think we want to have too long a discussion.
(Mr Miles) Absolutely. It has to.
(Mr Blanshard) We have not, we have only done them for housing associations, but I definitely see that.
(Mr Miles) I know of several builders who are active in pursuing these systems now.
(Mr Miles) Yes, beginning to develop new systems that are what I would call generation two systems specifically designed for housing.
(Mr Miles) Let me right that. The industry interest is across the board and, when I spoke of 150,000 houses a year or north of that number in future, it is about 20,000 for social housing and, if you do not deal with the balance of 130,000, then you are not dealing with the issue, so you have to, and we as a nation have to, address that much bigger section which is the private build and these pressures of strangulation, increased standards and customer demand affect the private build sector as much as they do the social build.
(Mr Blanshard) We do have service vehicles around but the idea is that we would have local people being able and trained to do that. Can I just remind you that we are not changing materials. A plumber can still take a radiator off -
(Mr Blanshard) No, once it gets in the dwelling, it gets fixed to the wall and I do not need a plasterer to plaster it.
(Mr Miles) From a repair point of view, it is no different to drill a hole in a big piece of plasterboard or a small piece of plasterboard. That is the point. So the repair of systems subsequently does not require any new skills. It is the assembly of the systems in the first place that is addressed by off-site manufacture.
Mr O'Brien: Mr Blanshard, in your written submission, you list a number of awards that you have achieved, but there is nothing there about energy efficiency. A number of the tenants and people in properties and the Government too are pressing for energy efficiency. Why do you have no awards for energy efficiency?
(Mr Blanshard) On the question of efficiencies, the way that the modules are made are really insulated individual rooms and we end up with higher insulation levels than the actual building regulations and we were not nervous when the Government were trying to lift the insulation levels because we were already there, it was only the masonry world out there who became suddenly nervous. Coming back to the awards for energy efficiency, what we have done is that instead of an engineer producing a document with us with lots of stat ratings and new values and all this sort of thing which really the man in the street does not understand, what we really need to do is ask, is this thing going to do 50 miles to the gallon or is it going to do 100 miles to the gallon? What we are doing is actually monitoring electricity bills. What people are telling me from the block in Hackney is that it hardly costs anything to run their flat. So, we now have permission to collect their electricity bills and produce some really strong data from two or three winters and summers.
(Mr Blanshard) By electricity.
(Mr Blanshard) Thank you for your interest.
Memorandum submitted by Housing Corporation
Examination of Witnesses
DR NORMAN PERRY, Chief Executive, and MR NEIL HADDEN, Assistant Chief Executive (Investment and Regeneration), Housing Corporation, examined.
(Dr Perry) I am Norman Perry, the Chief Executive of the Housing Corporation, and I am accompanied by Neil Haddon, the Assistant Chief Executive for Investment and Regeneration.
(Dr Perry) We have submitted a memorandum to the Committee, so we are very happy to answer questions.
(Dr Perry) If I can take the latter first. The decision to have a single Housing Inspectorate was one that was announced in the spending review and, as you will know, the Deputy Prime Minister decided that it should be located within the Audit Commission. However, the regulatory function of the Housing Corporation remains unimpaired and the reports which the Housing Inspectorate produced on the services to tenants provided by housing associations will be reported to us in order that we can use them in forming regulatory judgments about housing associations. On the investment side, clearly the White Paper on the English regions envisages elected regional assemblies as having housing functions. There is an issue of when that happens and the parliamentary timetable has yet to be established, but we have at least a clear five years run of continuing to be the Government's main vehicle for housing investment and even then, when regional assemblies are in being, the Government of the day will need to consider how it wishes to deliver a national housing policy. So, we are fairly bullish about the future.
(Dr Perry) I am sorry, the future of housing associations or the Corporation?
(Dr Perry) On the future of the Corporation, since we are an executive non-departmental public body, we follow whatever instructions we get from the Government.
(Dr Perry) That is right.
(Dr Perry) No, not really. We are the regulator of the 2,000 housing associations and we have -
(Dr Perry) No. We carry out the inspections at the moment.
(Dr Perry) It is a new function that we established over the last 18 months and we have a threefold regulatory system: we look at the financial viability of housing associations, we look at the effectiveness of -
(Dr Perry) Not really because the Housing Inspectorate is not a regulator, it is carrying out -
(Dr Perry) We do, but our staff -
(Dr Perry) No, not at all because our inspection staff are relatively small in number and they will be transferred across to the Audit Commission and will report from there to us.
(Dr Perry) Nothing has gone wrong. The real world has intervened in response to changing patterns of housing demand. More of our programme has now been investing in the south of England and in London and land costs and building costs are higher there than in the Midlands and the North and effectively the way in which land and building costs have risen has meant that the number of units which we can deliver through the funding(?) programme, as you rightly say, has not kept pace, but then that is an issue which actually underpins some of the discussions you had a moment ago about off-site manufacturing because, over the long term, we do think there is scope to bring down building costs but not immediately.
(Dr Perry) We do not set ourselves rates because we are set public service targets by the ODPM and the Treasury and we achieve 100 per cent of those every year, so there is always an agreed set of output targets which we achieve. In terms of are we seriously addressing some of the issues in the South East, I think we are all aware that there is an affordable housing problem in the South East, a solution to which our programme contributes but is nowhere near being the whole part of the solution.
(Mr Hadden) We anticipate a programme of 22,000/23,000 homes next year.
(Mr Hadden) Yes. We are overbid by a factor of four; we have developed schemes that we can choose from to fund.
(Mr Hadden) Yes. A very important part of the bidding process is the delivery of the scheme to make sure we meet our completions target which Dr Perry has talked about.
Sir Paul Beresford
(Dr Perry) I think it is doing both. Certainly in the Challenge Fund, the bids we have had in are spread across the South East and, with the best will in the world, it will be a few years before the big strategic sites come on stream. There is a lot of infrastructure that needs to be put in first and we are seeing at the moment in response to that Challenge Fund that people are using ingenuity. There is quite a lot of land still around. In the Housing Corporation, we do not yet believe that there is a land constraint on providing affordable housing as a resource constraint -
(Dr Perry) They are not making any more but the rate of re-use of what we have already can be higher and in fact under the pressure of the sorts of issues with which you are familiar in the Committee, there is quite a lot of land coming forward and some that is still available. So, 85 per cent of the housing that we fund is built on brownfield sites.
(Dr Perry) We agree those figures with ministers, so in effect it reflects the policies of the Government. We are increasing quite substantially the amounts on low cost home ownership because, for the current year, we are up to about 18 to 20 per cent of the homes which will result in the programme that will be low cost home ownership.
(Dr Perry) "Yes" is the answer. There is always a balance to be struck because there is very strongly still the traditional rented housing for people on low incomes and we should not forget that but, under the pressure of demand in the South East, our programmes of low cost home ownership and shared ownership are extremely popular and we could really buy as much as the Government are willing for us to buy.
(Mr Hadden) Within the Challenge Fund that was referred to earlier, we are testing out two models to help key workers access affordable housing, intermediate renting and new build home buy projects, in order that we can test the market.
(Mr Hadden) One of the things that we are also doing through the Challenge Fund is working closely with the NHS housing co-ordinator, John Yates, and we have bids which involve contributions from NHS Trusts which will help to bring down the costs and therefore will make these schemes much more affordable to nurses and other people in the health sector.
(Mr Hadden) It varies depending on where you are in the country with the costs of building that scheme and the incomes people have, so is not easy to generalise.
(Mr Hadden) No. The intention of the Challenge Fund is to get in proposals from housing associations working in conjunction with others, so that we can then sift through those proposals and go for the ones that we think best meet the needs that we identify alongside these other bodies like the NHS, local authorities and other regional bodies.
(Mr Hadden) Correct, we will look at them.
(Dr Perry) The Challenge Fund, by definition, was challenging the housing associations and their private development partners to come up with ideas that would give us the maximum amount of output for the resource that we had. It might have sounded as if we were trying to dodge the question on house prices but, quite honestly, whether or not land has come into the equation free or at a discounted price from a local authority or a public body and whether or not there are resources coming in from housing associations' reserves all affect the price which a purchaser has to pay and the exact -
(Mr Hadden) The targets are high level ones. We are expected to produce over 4,000 -
(Mr Hadden) We do not have them. It is not part of the Challenge Fund, as has been explained. We have invited proposals. We are testing new markets. We want to see what good ideas are out there and we will be putting together a package to take to ministers and officials before any announcements are made on the project.
(Dr Perry) To try and be helpful, Chairman, if you took a nurse or a teacher on about £20,000 a year and took a normal multiplier, maybe three times salary for mortgage, and then talk about a 50 per cent equity share/50 per cent paying rent, then you are talking about a house which would have a headline price of about £100,000 which is about what it costs to provide a house for a housing association in London at the moment.
(Dr Perry) I think it is inevitable, certainly in London and the South East, that people are going to pay a higher proportion of their income in housing costs than they would in other parts of the country. Social rents less so, but certainly for any form of owner occupation, it will be relatively high.
(Mr Hadden) And this is the reason why we have brought in the intermediate rent aspect of the programme where we are targeting rents at around 80 per cent of market rents for a lower level of social housing grant, so therefore trying to bridge the gap between ownership and social renting.
(Dr Perry) We have regional housing statements. Our colleagues in our field offices around the country work with the Government offices, with the regional assemblies and with the regional development agencies to try and sort out housing need in that area in relation to the economic strategy and other strategies, and then they come up with a series of requirements and then we do our best to fund them to the extent that we have the resources. So, the thing is built up from a regional base.
(Dr Perry) Not transferring. There was controversy last year when we did, midway through the year at ministerial request, transfer £15 million from northern allocations down to London and the South East, but -
(Dr Perry) We restored it fully this year.
(Dr Perry) Yes.
(Dr Perry) That was a temporary transfer that we made in order to try and stimulate more starts in the South East. It succeeded in doing that. So, for 2003/2004, we have been able to completely restore the allocations to the northern areas.
(Dr Perry) We work very closely with the ODPM and -
(Dr Perry) Ye...
(Dr Perry) The short answer is "yes".
(Dr Perry) You are not losing anything at the moment.
(Dr Perry) There was an event last year which we have restored and the Challenge Fund, which is top-sliced from the whole programme, relates to London and the South East, but the rest of the £1 billion is being allocated in terms of regional strategies.
(Dr Perry) That is correct.
(Dr Perry) That is right. Even that transfer was actually quite a technical thing, it was called cash backing. It was not an actual transfer of allocations, it was a transfer of something called cash backing.
(Dr Perry) Temporarily.
(Mr Hadden) Not necessarily.
(Dr Perry) No. That is why I said that it was quite a highly technical thing. It did cause some political controversy, but it did not actually affect the allocations to the North. It was about the amount of the programme which had cash backing in a particular year.
(Dr Perry) Can I say that there are other ways of funding social housing because there is the local authority social housing grant which is quite substantial and also it is not often noticed that housing associations build about 4,000 homes a year entirely from their own resources without subsidy. So, if you take those three things together, that adds to the pot.
(Dr Perry) That could be another debate, Chairman. We do not think that the sector as a whole has a level of reserves which is anything more than prudent - the planning system, section 106.
(Mr Hadden) No, that is not a consideration that we take into account. The allocations for each of the regions are set by reference to the housing need index.
(Mr Hadden) Not in setting the allocation in the first place, no.
(Mr Hadden) Yes and -
(Mr Hadden) Yes, it was but -
(Mr Hadden) Yes.
(Dr Perry) If I can answer that, the planning system, section 106, does not necessarily add to the total stock of social housing. There is some research that has been published recently. What it does is to ensure that affordable housing and social housing is built in places where the market would not normally provide it.
(Dr Perry) Not in that sense because most of it requires social housing grant and the amount of housing that can be -
(Dr Perry) That is mostly not money, it is mainly just the reserving of a chunk of a site for social housing units.
(Dr Perry) It varies from area to area because it depends how good a deal the local planning authority has done with the developer but, generally speaking, we are talking about the geography of social housing rather than net additions to the supply.
(Mr Hadden) Yes, very much, and indeed our procedures indicate that we will only be funding schemes on Section 106 sites where the housing association involved has been involved in discussions when the planning arrangements -
(Mr Hadden) It varies around the country. Local authorities have different arrangements, different -
(Mr Hadden) Yes. We issued advice on bringing housing and planning together.
(Mr Hadden) Local authorities are independent.
(Dr Perry) We have produced training packs for local authorities on how to ensure that housing got into Section 106 agreements.
(Dr Perry) In future they all will be. We now, as a matter of principle, would not want to see any more single tenure estates and that is where Section 106 helps as well because that helps to get a little more diversity.
(Dr Perry) No, not at all. Actually, we would like to see more of that. What we see at the moment is that housing associations are being brought in fairly late in the day into a private development. Some of the bigger housing associations are well capable of acting as lead developers themselves and bring in private sector partners.
(Dr Perry) I do not think there is anything that stems from our regulation. It is mainly a question of their own financial strength and their own skills. There are one or two associations that we could name who actually do act as lead developers and are very good at it, but they are pretty big, they are pretty sophisticated and they can do it. Not every housing association would have the muscle to do it.
(Mr Hadden) But it is true that most schemes with planning permission Section 106 agreements are controlled by the developer rather than the housing association.
(Mr Hadden) It is not a permissible purpose for most associations to build for outright sale.
(Mr Hadden) It is something that we are looking at and indeed -
(Mr Hadden) We have been looking at it over the last year or so as we have been reviewing our low cost home ownership policy and indeed, within the Challenge Fund, we are testing, as I said earlier, this concept of new build for home buy and that is almost tantamount to building for outright sale.
(Dr Perry) Some associations meet the issue by setting up an unregistered subsidiary, so that companies which are not regulated by the Housing Corporation can carry out commercial building for sale development and they would keep that sealed off from the social housing activity, but I do agree with the implication of the question, that it would be better if we allowed it to become part of their main purpose.
(Dr Perry) We certainly will. The monolithic estates were council estates, so were built by local authorities and therefore the issue of mixed tenure did not arise. For the future, I think we can say pretty categorically that any largish development built in the future will be of mixed tenure, some houses for sale, some for rent, some for shared ownership, and we are building that deliberately into the kinds of schemes that we hope are going to be approved.
(Mr Hadden) With any scheme of over 25 homes, we ask the question, "Why is there not a mix of different types of tenure on that estate?" There would have to be a very good reason for us to -
(Dr Perry) We have something called a sustainability toolkit and no association can get resources from us without working with our sustainability toolkit which is intended to look at the long-term survivability of a neighbourhood that is funded by us.
(Dr Perry) The density issue usually comes through the planning system and certainly the Deputy Prime Minister interviewed in the press today has talked again about higher densities. There is actually the relationship between higher densities and quality of design. Some of the innovative housing associations are finding that by radically increasing densities, they can afford very high class architects and build to very high design standards.
(Dr Perry) I think that is a debate which society has to have in general really rather than just one for us. I think it varies. There are situations in which high densities are quite acceptable especially when you have the demographic shift in society where a large proportion of people are going to be older and living by themselves. You are going to have very high densities there. Families with two or three children might not be such a good idea. I was in Amsterdam recently and 87 per cent of all families in Amsterdam live in rented flats.
(Dr Perry) I think you are assuming that there will only be high density developments and there will be low density developments and I think the implication of what you were saying before about good design is that actually they would find bits of high density in an area and then the gardens and the houses for families. We are getting better at it!
(Mr Hadden) No, we do not agree. We think our scheme development standards set minimum standards which associations are expected to meet or beat and, if you talked to house builders, they would tell everybody that our standards are too high. So, it depends to whom you talk.
(Dr Perry) We do have a debate with the house builders who quite often say, "Why is it that housing associations do not just buy our standard products? That way they could get them cheaper and we could actually produce more of them." Part of the reason is that socially rented housing is not the subject of home improvements - people do not move in and add a conservatory. Also, the occupancy rate in social housing is often quite high because, for reasons you will understand, housing associations do not like to see under- occupation for social housing whereas, in the owner occupied sector, there is quite often technical over(?) occupation.
(Mr Hadden) We do not at the moment. At the moment, our regime is based on upfront capital cost subsidies. It is something we are conscious of and we are due to have discussions with some researchers and other bodies looking at this area. It is a complicated area. We do not know where this is going to lead us but it is on our agenda.
(Dr Perry) We are very keen to do it especially for people on lower incomes because the actual costs of living in a home, the utility costs and heating, lighting and whatever, are quite important to them and are a big proportion of their income, so we think we have a vested interest in trying to minimise the costs of occupation of our homes. So, we are very keen on lifetime costs.
(Mr Hadden) First of all, I am not sure whether the premise is right, whether it does increase costs. I think associations have standards that we expect them to meet in terms of managing housing association properties and they can spread their costs over the whole stock.
(Mr Hadden) It depends what clients you are selling to.
(Dr Perry) For lifts, our grant system has extra in it for height. So, if you build a multi-storey building that needs lifts, then the costs do allow for that.
(Dr Perry) That must be for the association to determine. We do not give grants for management. They are an independent social business; they work out what their costs need to be. In a high density scheme, they will have done their calculations of what their management costs will be per unit and built those into their long-term arrangement.
(Dr Perry) I am not clear, Chairman. Social tenants do not pay service charges, they pay a rent.
(Dr Perry) Yes, it is.
(Mr Hadden) Total cost indicators are an amalgam of build costs and land values and inevitably for any particular local authority area are an average and therefore there are high cost parts of local authorities and low cost parts of local authorities and trying to accommodate that is very difficult. We start with an average, there is some flexibility. We can still approve up to 30 per cent of TCI and we review the TCI levels every year in conjunction with the Department and other bodies.
(Dr Perry) No. I am surprised they said that because we are monitoring the situation very closely and, at present, we have no reason to think that the housing association sector will not meet the decent homes standard by 2010. A lot of the stock is newer than conventional council stock and standards of maintenance have traditionally been higher. So we think that is not going to be a problem.
(Mr Hadden) There may be an issue that, through the approved development programme, we only have a very small amount of money available to fund major repairs and that may be what they are getting at. The reason why we only have a very small amount to fund major repairs is because we are trying to meet the targets set for us by Government in terms of the new homes scheme provided.
(Mr Hadden) That is correct.
(Mr Hadden) Not necessarily because, as Dr Perry said, most associations are on target to meet the decent homes standard.
(Dr Perry) It would be nice to have more resources. Essentially - and this goes back to Mr Mole's question about TCIs - we are in a rationing situation. We have the resources which the Government make available, we have the targets which the Government set for us and basically we try and balance the resources against the targets and TCIs are part of that rationing mechanism rather than some completely objective measure of how much it really costs to build a house.
(Mr Hadden) As part of our submission for the spending review, we did say that we could spend more money on major repairs because there is a demand there, but we have to balance up the different needs in terms of the need for producing new homes as well as providing -
(Dr Perry) Yes, we certainly would. The "decent homes" standard is a very high priority for the Government. If we felt that the sector that we regulate did not need that target, yes, we would go to the Government and tell them.
(Dr Perry) No. In Telford, having received new town housing stock with some unconventional building methods in the past, they have a particular problem that we recognise and we are working with them to try to do something about it.
(Dr Perry) It is something that relates to new towns, but for the majority of housing associations around the country, we do not think, on the evidence that we have, that that is an issue at the moment.
Chairman: On that note I thank you for your evidence.
THE RT HON LORD ROOKER, a Member of the House of Lords, Minister of State for Housing, Planning, Regeneration and Regulatory Reform, examined.
(Lord Rooker) I am Geoff Rooker, Minister of State, ODPM.
(Lord Rooker) You have received two memoranda from the department, and anything that I say in an introductory statement I shall only probably repeat in answers to questions, so I am happy to go straight to the questions.
(Lord Rooker) No, I do not have any figure that I can give you this morning. One reason for that is that we have announced, for example, on the first of the three years in the Comprehensive Spending Review for the ADP, the development grant for the Housing Corporation. We shall come back to Parliament, as the Deputy Prime Minister has said, around the turn of the year, which is a euphemism in "Minister speak" for December or January, with a major statement. At the moment we call it a Communities Plan. That is a simple working title. By then we shall have "divi-ed" up the rest of the Comprehensive Spending Review money and outsiders might then be able to put a figure for housing on it. But at the moment we do not have a figure that we can put on it.
(Lord Rooker) No. At this point in time the answer is no, simply because we are still working on how we "divi" up the money. John has made it absolutely clear in the statement that he made on 18 July to the House of Commons that he is looking for a step change in output. We do not mean fiddling marginal figures; we are looking for a step change in housing production in this country, which by and large has fallen behind what we need to produce by a very long margin indeed. We need to get the best value for the money that we receive from the Treasury, using all innovative schemes that we can, such as issues related to the Challenge Fund that you have heard about this morning.
(Lord Rooker) Let me make this point absolutely clear. I understand the thrust of what Bill was saying. Firstly, in the year 2003/4, which we have already announced for the development programme of the Housing Corporation, every region will receive more. That is after we have top-sliced the £2 million for the Challenge Fund. Everybody will get more that year than the previous year. Norman Perry gave you the reasons for the £15 million - it looked like a cashflow situation - but it did not deprive anybody of anything. So every region will receive more. We are concerned that because the biggest amount of pressure is on London and the wider South East - by the "wider South East" I mean going beyond what we normally mean by that term to include as far north as Northampton and the Milton Keynes area - and because the numbers are bigger, the prices are bigger and it is what most people talk about. That does not mean to say that the department and Ministers are not concerned with national responsibilities and the abandonment in the North. Of course, there are hot spots in the North where it is very difficult for first-time buyers to get into the market. So we have some major problems of national importance. Unfortunately, this is an unequal country in terms of our economic regions. Nevertheless because of the pressures and the numbers being bigger in the South East, people may tend to think that we are ignoring the North and the Midlands, but far from it. Every region will receive more. We have to deal with the pathfinder areas in terms of abandonment and find ways of rebuilding those housing economies that have collapsed. Recently I have stood in streets in some northern towns that are full of abandoned houses. Literally every house is empty for three or four streets around; no one knows where the people have gone; and the houses have been sold in pubs sometimes by crooked landlords for £1,000 a time. There are some major problems to deal with. We are not ignoring the problems of the North and the Midlands. The necessity is because of the pressure on the South East and the sheer numbers and it tends to be what the media and Ministers talk about.
(Lord Rooker) Yes. Particularly for the pathfinder areas and for growth areas designated in the South East, we are looking at the way in which the department will organise itself to manage and to push that forward, including ministerial accountability for those areas.
(Lord Rooker) the Housing Corporation does what we ask it to do. It is a very good deliverer and we have absolute confidence in it being able to deliver and to be a lever of change for the Government or the department. There is no question about that. They have a good track record of governance in the area that they look after. There is a huge amount of private money going into it in the Housing associations - some £24 billion of private sector investment. So it is fundamental that we have good regulation and that we do not have any problems that frighten off private investors. This is not just a matter of public money. There is a big mixture. We have confidence that they will be able to deliver what we require and when we set targets they have a track record of delivering on them.
(Lord Rooker) I have a view on some of the background as to why it has happened.
(Lord Rooker) I served for 27 years on the governing body of what used to be called Upton College and is now called Birmingham College in Birmingham. Essentially it is a building FE college. I know what happened when the further education funding council came along under the aegis of the previous Government. Virtually all the building courses disappeared, as they did out of most colleges because it was cheaper to run paper-based courses. We virtually snuffed out training in the FE sector in that way. That was a real problem. Notwithstanding that, the industry was not queuing up to send apprentices and trainees. That is a real issue. On the other hand, I see headlines in the media saying that bricklayers can earn £70,000 in Birmingham. So there is a future; there is money to be earned. It is a peripatetic industry; but it is less peripatetic if some modern construction methods are involved. People need to have faith in the future. If they know that there is confidence, that we want a step change, that we will fund it, that we will make sure that we get other funding and not just from the public sector, and that we change the structure so that there is confidence in the future, people are likely to invest in land, development, building and training and people will then invest their futures in it.
(Lord Rooker) I do not think that there is enough done. I do not think that there has ever been enough done. You are talking to a formerly indentured apprentice toolmaker - true, he has lost his way! For people to go into manufacturing at any time, whether construction or conventional manufacturing, is difficult. Not enough people push or extol the benefits or the joys of creating things and making things, as well as making things happen in terms of management. We have a problem here.
Mr Clive Betts
(Lord Rooker) Absolutely. I took the advantage of reading some of the evidence that you have received - by the way I recommend that you all do that. I have the advantage in particular of Surrey County Council and local government associations, and the benefit of representations from a colleague in the House from one of the cities in Surrey. I looked at some of their documentation, and at what they have been doing as employers and facilitators and not just as an authority, to try to encourage the creation of affordable housing and to do it in such a way that they do not run the risk of subsidising the employee, so that the Inland Revenue comes along and says, "Benefit in kind". It is worth considering that, subject to your own deliberations.
(Lord Rooker) No. The department is in constant discussion with the Treasury about fiscal arrangements. The fact of the matter is that even the private sector has woken up to the fact in relation to key workers that they do not want to become landlords, or get involved in housing, but some companies want to be able to facilitate housing for their employees. Sometimes they do that through housing associations and through having nomination rights. In your own evidence you have examples of where that has happened. There are opportunities for doing that on a larger scale in the public and the private sectors.
Mr Clive Betts
(Lord Rooker) There are incentives now. Any employer, public or private, looking over a three or four-year period at their recruitment and retention costs can see the money wasted on that. If they could direct some of that money into some kind of housing pot or fund, as in examples given when people have taken a couple of years of pension payments and the employer has put it into a pot for housing. That is happening without extra incentives. There is always the possibility that the Treasury and others can find other ways of generating fiscal incentives. I think it would be a wrong strategy on my part to speculate on that.
(Lord Rooker) No, there is not. We said in our note to you that the definition of affordable housing meant different things to different people at different times. I notice that the Committee, when it issued its press notice calling for evidence, did not say what it meant by affordable housing, which is probably why we have such a variety of submissions.
(Lord Rooker) It depends - this is not a fudge - on the location in the country and on the type of housing. Say, we have a mixed geographical situation as regards housing costs, wage costs and other factors, we are looking for affordable housing for those who have incomes lower than the average - but maybe not the lowest - and we are looking at housing that may be at sub-market rent, low cost home ownership, shared housing, and a whole range of issues provided from different sources. If you want to put a figure on it, I suppose we would argue in terms, for example, of planning applications and looking at some of the figures in the planning guidance, and generally speaking we would expect perhaps a quarter of the kind of figures that we would use to be affordable housing. Then we know what we should be building on a regional basis according to the planning guidance; we know what we are building in total, which is somewhat less than the figures in the planning guidance, and, therefore, it is easy to work out a theoretical shortfall of affordable housing.
(Lord Rooker) All I can give is the figures from our published documents. In London we reckon we have delivered 4,000 affordable dwellings and 6,000 in the South East, compared with what we would have expected in London of 6,000 and 13,000 in the South East. I get those figures only because the 6,000 and the 13,0000 are roughly 25 per cent of what the planning guidance figures would have given. London was about 24,000 and the wider south East was round about 39,000.
Mr Clive Betts
(Lord Rooker) Yes, based on what was in the planning guidance we could. I would be happy to provide that. You have to have a figure otherwise you cannot have a meaningful discussion.
(Lord Rooker) Yes.
Sir Paul Beresford
(Lord Rooker) Everyone is a key worker.
(Lord Rooker) I do not accept that there is any such thing as an unskilled worker. I do not accept that as a moral approach. On the other hand, in more general terms key workers are taken to be workers in the health service, primarily in the National Health Service, teachers, police officers and in some respects those in the fire service and in social services. On the other hand, one could argue that the Government does not necessarily do that, but there is no such thing as a public sector nursing home and yet nurses in nursing homes are as much key workers as nurses in hospitals, but that does not come under the general definition. The starter homes initiative, for example, goes a bit wider than the public sector for stage one. Stage two is confined to the public sector employees. It is horses for courses.
(Lord Rooker) Or the person who stops your car being stolen, or someone who comes into this building early in the day to switch on the heating.
Mr Bill O'Brien
(Lord Rooker) It would be to everyone's advantage if we had a more balanced regional economy in the country, so that inward investment had its first port of call in the Midlands and the North, rather than in the over-pressured South East. However, some years ago we gave up trying to redirect industry. From my own experience I know that industry was directed away from Birmingham but later failed in many respects. It does not work that way. There is the argument that if industry and development cannot go where it wants it may not come here and it will go somewhere else. At the moment there is pressure on the South East, simply because of the geographical location in Europe. We need to improve vastly the transport infrastructure, as we are on course to do, and the serious work on river crossings with the Thames Gateway programme, which is a national not a regional issue, will be as vital for the North and the Midlands as it is for the South East. The rail and traffic infrastructure will be phenomenally improved for investment. In the mean time we have to deal with the situation as we find it. Therefore, there is pressure in the South East. It is not a matter of all of the South East. We have designated four growth areas: the Stansted-Cambridge corridor, the Thames Gateway, which was designated a long time ago by Michael Heseltine, Ashford, where I made a brief visit on Monday, and the Milton Keynes-south Midlands area. Those areas have been so designated so that we can develop the growth in the South East in those areas and stop it happening in an unplanned urban sprawl manner in the rest of the South East. That is not to say that there will not be any building, but we will have growth policies in growth areas, so that we can grow communities and not just housing estates. They have to be job led rather than just housing led. Therefore, we can get a better balance and ease the pressure in particularly the London area of the South East. There is not one policy that you can operate on the basis that it will solve the problem simply by saying, "Well, we will build in the North and put all the jobs in the North". There is not the directional power, and in the past it did not work.
(Lord Rooker) Yes.
(Lord Rooker) Yes, I do. But I want to get rid of it or knock it on the head, although I may want to take further advice on this. We have not robbed housing provision in the North for the South. As was made absolutely clear, there was a technical transition. The money was put back and this year every region will gain, even though we have top-sliced the £200 million Challenge Fund for London and the South East. You are quite right, there has to be a programme in the Midlands and the North of the country, and there will be a programme, but that has to be tied in with the other issue that is not a phenomenon in London and the South East and that is of large-scale, massive housing abandonment and total collapse of housing markets in areas where people are trapped in dwellings. They may have a mortgage of £89,000 and the dwelling is worth £2,000. There is absolute collapse. We have to deal with that and that is why we set up the nine pathfinder areas to find ways of achieving that.
(Lord Rooker) I suppose at the end of the day it will be Ministers. We are looking through the nine pathfinder areas - they are all very different as you can appreciate from looking at the geographical locations - and some have been faster off the mark than others, but it is early days. There have been some difficulties in drawing up boundaries because Members of Parliament have been arguing about not wanting boundaries drawn. We have to be serious about this. There is a real problem and we want to move as fast as we can to get action on the ground as quickly as we can, particularly in 2003 and 2004. On the management of it, we shall set up the partnership arrangements. As I have said, we shall appoint Ministers to have an oversight and a liaison function with the pathfinders so that if hurdles need to be jumped or doors kicked open there is someone in Whitehall if there are difficulties. Each pathfinder area will probably operate in an entirely different way because the problems are different although the endemic thing that affects them all is the abandonment of housing on a large scale.
(Lord Rooker) Yes, I did.
(Lord Rooker) We have changed the remit of English Partnerships and they have a much more pro-active remit for helping us to assemble packages for land and also for working in closer co-operation with the Housing Corporation. We consider English Partnerships and the Housing Corporation to be the two key levers that the department has to pull. As a department, as a Government, we do not build homes, but we have these two well run levers of change. We want them to work more closely together. English Partnerships has an arrangement and the remit for putting together a better idea of the brownfield land in the country in the public and sometimes in the private sector, so that we can plan better and push ahead faster. I cannot say in detail that English Partnerships will be involved in each of the pathfinder areas. It is too early to tell that.
(Lord Rooker) That is one of the difficulties. We need to operate the pathfinder areas as quickly possible to find out the mechanisms for rebuilding the housing economies in the wider North where there is abandonment on a large scale. In some respects we have to ensure that we give value for money and rebuild communities. It is not just a matter of doing up some houses or knocking down some houses and building some more. In some cases there is a vast over-supply. Ten per cent of the housing stock in Burnley is empty, for example; 10 per cent is virtually abandoned and not just empty. A lot of empty housing is empty because it is transitionally empty; whereas the abandoned houses are literally abandoned and there is no transition involved. Until we can learn the lessons as to what we can do to generate and regenerate those economies in the pathfinder areas, it is no good me saying that in the mean time we will pump loads of public money into other areas of abandonment because we do not have a plan or a policy for doing that.
(Lord Rooker) It is worse than that: it is living in a street next to three or four streets of abandoned houses. That is what I actually saw.
(Lord Rooker) As I understand it, the large scale abandonment in the scale that has arisen now, has occurred in the past three years. It has occurred very quickly. I know that abandoned houses have been around for a while in the North. I first saw large scale abandonment of 200 houses in Sunderland in the early 1980s. I hope that we can learn the lessons and start to turn matters around at the same amount of time in which the abandonment occurred in the first place. We have to find out why the abandonment has arisen, looking at the nature of the houses that have been abandoned, and we need to learn some lessons so that we can create a policy to get value for money from the public and private sector. Also this is not just a matter of dealing with the housing. If we just deal with the housing we will not solve the problem. We have to deal with the jobs in those areas as well.
Sir Paul Beresford
(Lord Rooker) No. Someone told me that a lot of the abandonment had been the result of the Government getting people back to work so quickly in the past couple of years, that the minute that people acquired a job, they moved out of the old, tatty housing in the middle of Burnley or Blackpool and went to live in more decent housing on the outskirts of the town. The people who were living in those houses two or three years ago have gone somewhere.
Chairman: Certainly the committee report on empty homes made the point that in Liverpool there was some evidence of that. Worryingly people in Liverpool were abandoning houses which, if situated in Islington or Fulham, would have been sold for a quarter of a million pounds.
Mr David Clelland
(Lord Rooker) Basically, by introducing what we have twice promised now, the selective licensing of landlords in the areas of low demand. We shall do that as quickly as we can. As soon as we can get some legislation in front of the House it will be done as quickly as possible. It is not as though the will is not there nor the policy or the manifesto commitment. We shall push that as quickly as possible.
Dr John Pugh
(Lord Rooker) Some research has been carried out. One figure that comes to mind in terms of exit interviews, I suppose, of key workers who have left the South East and the London area is that about one in five key workers, which I have described as nurses and people in teaching, have left for housing cost reasons. Either they could not find a place or could not afford to rent, let alone to buy. That is a very high figure. One in five is a lot of people when one looks at the population in London and the South East. We know that we have a problem on our hands. That figure alone tells us that we have a difficulty. There may be people in London and the South East who do not give too much thought to key workers until they find that their children do not have a teacher or when they go to hospital they find that the staff are not present. They then start to wake up to the fact that there is a mismatch in housing provision and costs. In terms of the totality of housing, we are under-providing and within that we are not providing enough affordable housing.
(Lord Rooker) Over a period of time we know that there is a whole range of policies. That is one of the reasons why we have the guidance and the planning policies. They may be much criticised; whether it is Section 106 or our policies regarding density and when we decide to call in applications. Within the planning system there is a range of activities that we take, borne out of other experience of knowing what can work. There is of course the issue of the increase in homelessness. We accept that. We have of course just widened the category of homelessness for people in vulnerable categories. That will have a knock-on effect of raising the numbers of the homeless. We know we have many homeless people who are trapped.
(Lord Rooker) A whole range of research has been carried out that has told us that there is a range of problems, but it does not lead to one single policy, saying that we can solve it.
(Lord Rooker) We started off with a question about the large increase in the provision in the Comprehensive Spending Review. The Government have changed direction and the Deputy Prime Minister has talked about a step change in housing production. I cannot put a figure on that this morning because of decisions that are still to be taken between now and when the Communities Plan comes before Parliament. There will be a step change in the development of sustainable communities, a step change in the increasing housing production for rent, to buy and for low cost. We have looked at our strategic plans with the Housing Corporation; we are revamping the planning system and subject to the Queen's Speech we shall bring forward proposals to the House that will bring about faster decision making as well. We are looking at activities in the private sector. There are a quarter of a million empty houses in the country that have been empty for more than a year. We are jacking up our activities.
Dr John Pugh
(Lord Rooker) I can give you more if you want.
(Lord Rooker) You have asked me whether I am keen to put in more public money into private enterprise to find key workers. In fact, employers are already doing things and they could do more. I do not want to mention particular companies because that would be unfair. I read the press like anyone else. Employers are waking up to the fact that they need to take some action. As I say, they do not necessarily want to become landlords. They want to do what they do best, which is making or selling things. That is their role in life. Through the housing associations, very successful landlords, and other providers, they can take action themselves regarding their own employees. It is in their vested interest to do that. They can do that without necessarily looking for public subsidy. One piece of your already published evidence makes it quite clear that public money is not required. It can be done without public funds. You can provide housing for key workers on an affordable basis without using public funds. It is in your own evidence.
(Lord Rooker) I shall answer yes to that.
(Lord Rooker) I shall say yes to having a look at it.
(Lord Rooker) I have heard university lecturers claim that they are paid less than FE lecturers and other teachers. There is an issue in the teaching profession. That is accepted. I shall have a look at it, but the emphasis has been on staff in compulsory education.
(Lord Rooker) Shared ownership was invented in Birmingham. We called it the "half and half scheme" in the late 1960s. The answer is yes. It was taken over by London and was wrecked, and therefore delayed. The answer is yes, it is a good idea. It can work. It has provided good housing for many people, although probably not enough because people have not done enough to promote it and make it work.
(Lord Rooker) No, I do not blame the Housing Corporation at all.
(Lord Rooker) Birmingham is a local authority. It was nothing to do with the Housing Corporation. It was a local authority initiative.
(Lord Rooker) That is unfortunate. I cannot for the life of me see why there cannot be model arrangements and model contracts. Going back to the analogy that I think was used earlier regarding factories, you have a platform for the basic product and you add a little bit to make it different. The basic platform is the same and that reduces costs. That can equally be the same in contracts for shared ownership for the legal profession as it is for the manufacturing industry.
(Lord Rooker) Yes, I shall do that.
Mr Bill O'Brien
(Lord Rooker) No. Regulation and inspection are entirely different functions.
(Lord Rooker) There are different functions carried out by different people. Transferring the small number of people doing inspection from the Housing Corporation to the Audit Commission is not duplication at all. The regulation will continue as a separate function.
(Lord Rooker) I do not accept that it is duplication in the way that you put it. Perhaps we have not explained it sufficiently. The Comprehensive Spending Review announced that there would be a single inspectorate; it did not make any announcement about where it would go. That announcement was made only on 30 September, that it would go to the Audit Commission. Regulation and corporate governance of housing associations will remain with the Housing Corporation and the inspectors - in that sense the same people - will be reporting on the inspection to the corporate governance regulators in the Housing Corporation in the same way as they did before. Therefore, it is not a mater of duplication.
(Lord Rooker) Because we took a decision to have a single housing inspectorate. Therefore, the issue was whether to create a brand new quango, a single housing inspectorate, take it away from the Audit Commission doing it for local government and the Housing Corporation doing it for the voluntary sector, if I can put it that way, and set up a brand new organisation. That was one alternative. The other alternatives were obvious: to put it all with the Housing Corporation or with the Audit Commission. We had to take a view on which was the best way. We listened and had discussions with the Audit Commission and the Housing Corporation about it. There were no turf wars about it. Both organisations have different functions in respect of their other activities. It had to go somewhere once we decided on a single housing inspectorate. We took an early view not to set up a brand new organisation. Therefore, it was a matter of whether it sat with one or the other. The Housing Corporation was younger in the day in terms of the inspection than the Audit Commission. I do not know the numbers of people involved in the Audit Commission. In the Housing Corporation I think there are some 40 odd people. Therefore, it had to sit with one of them. It was not a matter of one organisation failing. That was not the issue. The issue was to get a single housing inspectorate.
(Lord Rooker) Why should there be? Why should the local authorities have the right to appeal against the Audit Commission? They are auditors.
Mr Bill O'Brien: Not according to the information that we have received.
(Lord Rooker) Less contentious than the road we were about to go down!
(Lord Rooker) I shall have to fall back on saying that we are looking at the issue. At the present time we are having some research carried out, which will not be available to Ministers until November or December. I imagine that it will be when John comes back to the House and announces the Community Plan and he will announce what we are proposing to do. I say "what we are proposing to do" rather than whether we are proposing anything at all. In the evidence that you have already published there is evidence about the rules for "right to buy", good though they may be, for good reasons. Introducing the right to buy is probably the largest single transfer of wealth that has ever occurred in this country and before it was a national policy it was done first in Birmingham. Therefore, we had some early experience of it. For example, the announcement in the King's note about the Ocean estate in your evidence, completely put to the sword such schemes because the right to buy would have taken up all the money. There are of course financial manipulators - I suppose some might call them entrepreneurs - involved in the process of encouraging people to have what might be called deferred sales in some areas, where people buy but not with a view to living there. The idea of the "right to buy" schemes was so that the tenant could have the right to buy, and not necessarily for the buyer to become peripatetic or a landlord. On the other hand, one has only to look at the legislation for the right to buy, much of which is primary legislation. In order to achieve any change in primary legislation one has to say what one intends to do and one needs a Bill to go through the House. That can take the best part of two to three years. By the way we have no intention of stopping the right to buy. I want to put that on the record. We have no intention of abandoning the right to buy as a principle. If one wanted to be really radical, if you consider the many changes that would be required to primary legislation because of people using their lawful rights, including the manipulators, there may not be anything to buy at the end if one is not careful. Some action can be taken by secondary legislation and we are considering some of these options at the present time. We have to make a judgment on this, that in some hot spot areas the manipulation of the right to buy is causing a serious problem and in others it is not. Therefore, one has to take that view. There are different rules between rural and urban areas on right to buy as it exists today. We are looking at a range of options and I am not able to discuss them with you this morning. We have not reached any decisions at all, but we shall reach a point where it is likely, by the publication of the Communities Plan, that we will say whether we need a tweak here or there, either on the financial basis or on a geographical basis. At the moment we have not made any decisions.
(Lord Rooker) No. I go back to something I said in answer to an earlier question. There has been a fundamental misunderstanding of the structure of the voluntary sector of housing associations. One of the reasons why regulation and corporate governance is important to just over 2,500 housing associations is that they have borrowed some £24 billion of private money - not public money but private money. We want the lenders to carry on lending. Indeed, one of the discussions that I had before we made the decision about the single housing inspectorate was with the lenders to assure them that the corporate governance of regulation of managers would remain the same, so that their lenders would have comfort in a system with which they are very comfortable. To say to a group of organisations that have borrowed so much money - some £23 billion - "By the way, with regard to the asset on which your lenders have lent and on which they receive an income stream back, we are going to force you to sell at less than market prices" - that is the assumption - "with possible discounts". You only have to say that to show what a nonsense it would be to the private lenders. That is a fundamental misunderstanding that this was not like council housing. It was not funded in the same way. If one wants to scare off private lenders into the voluntary sector you start talking about selling off their assets cheaper than they are. Therefore the answer to your question is no.
Mr David Clelland
(Lord Rooker) No. I think the Government would be fundamentally opposed to that. That would be a return to pre-1980 when it was up to local authorities. As I have already said, Birmingham was selling council houses before the right to buy scheme started. It was up to local authorities whether they sold their assets or not. Sometimes there was the approach of the public landlord knows best, whatever the situation and they would not sell, following decisions taken by councillors, all of whom were owner-occupiers, I might add.
(Lord Rooker) I do not believe that all the expertise is vested in our department. Whitehall does not necessarily know best on everything. The argument is that that would be a return to pre-1980 and in effect that would cause a blanket removal of the right to buy. That is something that we are not prepared to do.
(Lord Rooker) It would not in some local authorities. It could be done on reasons not related to housing need. You would have to set up a whole range of issues. If you give local authorities choice, as we wanted to, there would be less ring-fencing of funds and there would be less argument about the policy. It would be put back to local government and would be fraught with difficulties. That would be turning the clock back to pre-1980. That is something that we have said we would not do.
(Lord Rooker) There are schemes now that are not very well advertised. I accept that.
(Lord Rooker) I know. When I went to the launch of a project in the summer I met people who have gone from London boroughs to live in the Midlands and the North. They said, "I did not know that this part of England existed". A great problem is that everyone thinks that the world is like the place where they live. Because of the concentration on this capital city they do not realise that the rest of the country is a lot better.
(Lord Rooker) People are encouraged to have a look, even with rented properties. It does not necessarily have to be done through the right to acquire. We do not have enough mobility and people in under-occupied, rented, public sector dwellings in the South East are not forced out due to under-occupation. The rules in the tenancy agreement do not operate in that sense so do not encourage them to do that. I do not want to throw in a red herring, but it may be that changes in housing benefit will be a catalyst for people in some cases to say, "Yes, I could take a smaller dwelling and keep the same amount of housing benefit if it was done on a flat rate basis". That would enable people to move to smaller dwellings.
Mr Clive Betts
(Lord Rooker) We have to do that. Having dropped the idea of tariffs it is incumbent upon us to put some flesh on 106. We dropped tariffs for a variety of reasons. Some were technical reasons as well as practical reasons. We think that we can get what we want out of a re-worked 106 with better guidance issued on 106 which we hope to do before the turn of the year or it may be early next year. These things never happen as quickly as Ministers want. We shall have to consult on it anyway. We want to encourage more councils to operate 106. We have to issue another circular and some guidance on it, as my officials said to you last week. We have to make Section 106 a reality, having dropped the idea of tariffs. We have to make it more transparent, so that people do not think that businesses have bought planning permission with deals behind closed doors and things like that. It has to be more transparent. From the developer's point of view, the advantage of tariffs was that it would be more predictable, but somehow we have to put into the advice on operating Section 106 something that is more predictable for developers so that we do not have protracted negotiations. Sometimes it takes longer to negotiate the Section 106 agreement than the actual planning permission for the development. That is an absolute nonsense.
(Lord Rooker) I think there should be more flexibility. At the moment Section 106 has to be tied or connected to the actual site or development, which is very restrictive. It depends on the geographical location and what is available in an area. Some developers baulk at that and just pay over a sum of money to the authority to spend elsewhere. There are not enough authorities using Section 106. The other thing is that it is sometimes only on big schemes where 106 is used. One advantage of the tariffs would have been that we could apply tariffs to more developments than 106 has traditionally been applied to. Therefore, with our new guidance we had to ensure that Section 106 applies to more developments than it has done hitherto.
(Lord Rooker) Yes.
(Lord Rooker) We are going to take that forward. We certainly see no reason why commercial developments in the widest sense, with retail and everything else, should not be making some contribution under 106 arrangements to the wider community in which that development is located.
(Lord Rooker) It would be in the sense that we would have to consult on the guidance for 106 anyway. Not everything will be done in that guidance. I am hoping to get some planning legislation, but as I say there is not one single factor. We have to drive it forward so that we get some planning gain out of commercial developments.
(Lord Rooker) You cannot seriously expect me to give an answer to that. I cannot give you a figure for that.
(Lord Rooker) No. I am not in a position to speculate on that. The planning gain will come in many different ways.
(Lord Rooker) In the words of the Deputy Prime Minister we have to get a step change in the contribution of the planning gain to affordable housing. I shall not go beyond that. We have to have a step change in the way that we operate it, given the fact that we have abandoned the plan for tariffs because we think that we can get to where we would have with tariffs by re-working...
(Lord Rooker) With more flexibility, more transparency and apply it to more developments and go way beyond simple housing developments as well.
(Lord Rooker) That may be one way of doing it. It would vary according to the development. There is nothing free in this world. People talk about free houses and free land. It is not free. There is a cost to it somewhere. In some areas your own evidence gives a couple of good examples where developers can end up without any public subsidy, providing affordable housing. It is there in your documentary evidence. We need to widen that approach, take a more radical view, if you like, and be a little more free thinking. I hope that in some respects the Challenge Fund is what it is meant to be. It is only one year and it is a pilot. We want to learn from it. Next week I shall see the kind of response that we have had to it. The response is being sifted at the moment. I am told that it is excellent and we shall build on that. You cannot be specific, I do not think, to every site. In the wider South East it will be slightly different in the growth areas because that is a different kettle of fish altogether when we are talking about Ashford and the Thames Gateway. This is not small development, this is like mega, tens of thousands of homes, tens of thousands of new jobs, literally hundreds and hundreds of hectares of brownfield land, that is much more mega.
(Lord Rooker) That may have been the case in the past. I can remember once saying to a national conference of a political party that I wanted to be able to walk down every street in the country and not know by looking at the dwellings what the tenure was and I was booed from some quarters of the audience.
(Lord Rooker) We have no need to put the clock back, we have moved on a bit since then. I will give you an example, Chris, of where I was recently. I was actually in Docklands and I was about to do the Gateway visit which I wanted to do anyway because I do it by air to look at more brownfield sites. I was looking at a couple of Docklands developments with literally new waterfront dwellings in sight of Canary Wharf, the Dome, etc, and it was pointed out to me that the development I was looking at was completely mixed. There was owner occupation, there was housing association, registered social landlord there and you did not know from looking at it. I do not know what the cost of the owner occupied dwellings were, they would have been phenomenal, I would imagine, but it was a mixed development. We are hell bent on getting mixed developments. I take your point, it depends. The history is 20 odd million dwellings, we are only building a small number of new each year on sites and you might get the concentrations that you talk about but there will be pockets in the South East, and indeed elsewhere in the country, where the more expensive side of the market can sit cheek by jowl with well designed, good quality, sustainable, affordable housing. There should not really be any problem about that.
Sir Paul Beresford
(Lord Rooker) You see on the one hand you have got authorities like that and you have authorities like the one just across the river there - because I have dealt with some of the planning applications - who say "We have not got any need for key worker housing or affordable housing in our borough and therefore on this particular site ..." - it is the old Price's candleworks - "...there is no need for any affordable housing. That is one extreme. On the other extreme you have got other authorities who say "We want all affordable housing to be social rented", well we do not accept that. Those two extremes are basically from a bygone age. I do not support either of them and neither does the Government and, therefore, those two extremes are out.
(Lord Rooker) Probably the boot is the other way round in a way, given the nature of building in this country of new dwellings - we are building, what, 130/140,000 a year private and 20/30,000 odd public - it is a question of making sure the vast majority of course are private sector for owner occupation which is what most people aspire to. The major thing is to make sure within those areas we get mixed tenure, shared ownership and rented housing in those developments rather than the other way round. The scale of it is such as to make sure we get the mixture.
(Lord Rooker) I have no ideological problem about that. As I think Norman Perry said there are some housing associations which vary enormously. There are well over 2,000. There are only about a quarter, I think, involved in development. Some of them are very, very small, some are huge. They are developing all over the country, nationally. They are outbidding the private sector for development land and doing it very successfully and making sure they are building mixed sustainable communities. They can do that but, of course, they are big enough to set up the necessary subsidiaries or arms of their organisation to be able to do that. The chief executive of one of them happens to be the former director of housing in Birmingham and they are big, developing nationally. That can be done but, of course, I do not think it would be desirable for every housing association to be a developer for a start, you would have to be duplicating expertise and skills and they would be too small.
(Lord Rooker) On the evidence you have had of that, I have not actually seen, I have only read as I say the written evidence so I am not familiar with the details that you may have been given because it does vary. It depends how the mixed tenure came about. If the mixed tenure came about because of right to buy of people who were buying a property they were living in, there is a service charge implied in that and in some ways that is part of the costs of right to buy. There are some difficulties there. On the other hand, there has been discussion, I think maybe some of the questioning you have had relates to possible changes in Housing Benefits of desegregating service charges from the rent. We have made it absolutely clear, the DSS or the Department of Works and Pensions has, that what is covered by Housing Benefit now will be covered by housing benefit after the desegregation. There is no intention of changing the rules of the tenants who have changed. In terms of service charges, which you asked about, I am not familiar with the detail. It would depend to a large extent on the circumstances of the development.
(Lord Rooker) Yes. This is why you tend to get better maintenance, better security, less voids, less aggravation and therefore people queuing up to live there rather than queuing up to get out of those places like many of my former constituents did. Generally speaking though in the housing associations people will pay more in their rent. I have not got any evidence, and I have not seen any paperwork, relating to the particular issue that you raise in the way you raise it to be honest.
(Lord Rooker) No, not because of that, although I have to say the stock transfer, the last one I saw was yesterday and that was 87 per cent vote of the tenants in favour, one of our northern towns or cities. There have been some votes one way and some the other. In respect of the decent homes standard, I do not think that will be the reason. We expect on current evidence certainly to meet our interim target of making sure we get a third of the dwellings up to decent standard by 2004. On the current trends and the current work as I sit here in 2002 we estimate - as I say I am estimating eight years forward - we will fall short by about ten per cent. We have got about 1.6 million dwellings and currently, looking at it, we could miss out by about 150,000 across a range of authorities. Now, knowing that eight years ahead, I am fairly confident that if we make the entry target of 2004, certainly we can take the necessary steps to do that. I do not say that is because of stock transfer policies, it is not a consequence necessarily of not transferring stock, the stock transfer policy continues. I realise there is a hiatus at the moment.
(Lord Rooker) We have just announced the relaxation of the setting up of ALMOs for local authorities, two star and improving rather than three star. There is an issue, of course, and at the end of the day the local authority still owns the stock and it is a question of how one looks at the financing of the arrangements. I would not make the connection between, if you like, the stock transfer policy as you started your question, that some tenants have voted "no" and therefore we would meet the decent homes standard, given the fact that as I say I can say now we reckon we can get to within just a ten per cent shortfall at the present time.
(Lord Rooker) I hope there will be flexibility but at the end of the day we have still got to look at how the financing arrangements are done for this. At the present time under the ALMO arrangements the stock still lies in the public sector and therefore the normal conventional rules are such that we cannot get access to some of the other funds that we would like to. As I have said there are daily ongoing discussions between my Department and our friends in the Treasury over this and a range of other issues.
(Lord Rooker) I think you had better send for the Chancellor then because I do not think I will be able to go much further than I have gone.
Chairman: We would very much like to talk to the Treasury on occasions but they always insist that spending departments know the answers.
(Lord Rooker) How can I put it? It is more than just improving the stock, is it not? Improving the stock and getting the decent homes is one thing but changing the culture is another part of the policy. Another part of the policy is changing the way we look and the way we deal and the way we manage social rented housing in this country. Arms' length management companies, which is a similar arrangement as what happens in Scandinavia with the municipal housing companies, and the voluntary sector housing associations, the registered social landlords, is one way of encouraging local authorities to do what they do best. What they do best is to deal with the strategic housing issues of their area and not necessarily be the narrow public sector landlord. There are two sides to the policy strand, there are probably more than two. It is not just about getting the money for the decent standards although the mechanism of transfer, converting it from the column of public to private is such that it is easier to get public sector money into bringing this stock up to decent standards for the tenants. At the end of the day they are the king, they are paying the rent.
(Lord Rooker) I am in front, I realise, of a great number of local authority experts. I was never a councillor. I do not claim to be an expert and I do not want the Committee to think I am antagonistic towards local authorities but they have not got a good track record in housing management in this country, to be honest.
Chairman: This is supposed to be questions.
(Lord Rooker) That is right in some cases. They have got more flexible arrangements for financing. That is much to their credit. They have been able to use that to a great advantage.
(Lord Rooker) The short answer to that is yes, we are, because the fact of the matter is it would be totally unfair, or immoral rather than unfair, if tenants were deprived of the chance of a decent homes standards because we could not organise the finances in order to achieve that because of some hang up about whether it was public or private or arguing about the definition. The fact is we want to meet the decent homes target. Doing it the way we have tried to do it with some authorities - and it would be unfair for me to name particular authorities because none of you has done that - the finances do not stack up for transfer anyway. Now that is not the fault of the tenants, it is the historical baggage that today's tenants have got to carry. We have to find a way round that and that is something we are considering actively.
(Lord Rooker) The first thing we are going to do, of course, is put some money into local authorities specifically for planning, that was announced in the Comprehensive Spending Review, £350 million over three years. We will not ring-fence it. It will be tied to an improvement in the output of planning.
(Lord Rooker) Part and parcel of it is but we do not want to speed up applications at the cost of poor quality, either in visual amenity or in terms of sustainability, the two things go together. You have already, I understand, had CABE give evidence. I am very keen that they be involved, particularly in the growth areas where we have to have a step change to make sure that we do get on a good basis good quality design where we are stepping up density. On the other hand, of course, we want good quality design whatever the level of density. In the last decade in the South East 40 per cent of dwellings have been four bedroomed detached houses, that is part of the problem, they are not very low density. We are nowhere near the density figures given in the planning guidance, if we had been we would have several tens of thousands more homes in this country today than we have got. We do intend to take action and the Deputy Prime Minister has already forecast that he intends to take some action to see that the densities are delivered, in fact when he was asked how would he do that I think his first answer was at a press conference "I will put on my dark glasses". We do intend to take action on density but we need to do it in part and parcel and make sure we have good quality design. There is no shortage of examples, by the way, all around the country you can see both CABE's literature and other literature, good examples of densities 70, 80 even 100 dwellings per hectare where people are queuing up to get in there to live, very, very few voids and good sustainable communities.
(Lord Rooker) I think we have made clear that we intend to take some action on this but I am not in a position to announce what it will be at the moment. Nevertheless it will be action that actually, as it were, forces the pace on the density. We have got already arrangements, of course, for calling in planning applications where they are drawn to our attention by the Government Offices of the Regions but we are looking at ways of, as it were, spreading our tentacles to find out about more of the applications so less of them slip through at low density.
(Lord Rooker) I can say, also, there is another issue. Planning authorities in the last four or five years have lost about a third of their resources, I understand, and therefore we do need to rebuild those authorities both for the councillors and for the planning staff themselves so that such developments are not able to slip through without all the scrutiny that they do deserve. As I say, we are going to take some steps to ensure they will have a little more power.
(Lord Rooker) Yes.
(Lord Rooker) It would be very seductive - having met the target of 60 per cent I think some eight years earlier than was planned - to say up the target but I have to say to you the target was met on a very low level of output, much too low for this country. As I have said repeatedly we are not building enough new homes yet. We build and we knock a few down, our net figure is appalling compared with our European partners. If we up the target from 60 per cent at a time when we are going to up production as well we would be really stretched. In fact we will be stretched to maintain the 60 per cent target by a step change in production, although I have to say, particularly in the growth areas, particularly in the Thames Gateway, we could probably virtually meet the whole of the South East target for brownfield in the Gateway itself. That is not to say we are going to allow everybody to build on greenfields by the way. It is seductive to say put the target up but I think if we can get a step change in housing production and still meet the target we will be doing extremely well in the next few years.
(Lord Rooker) It is very early days in rent restructuring at the moment do not forget, 2002, it is a ten year programme and I do not think it is rigid. It has passed me by for the last 18 months in the Home Office, by the way, I have no constituents as well now by the way so one does not get alerted to these things as quickly as in the past. I do not think the ten year figure is rigid. Where in fact, for example, some specialist housing associations had already forecast they were going to be in difficulty, and had done so to try to fault that, particularly the black and ethnic minority groups, we have taken some action on that. It is early days but we have to make sure it is a direct result of rent restructuring. Nothing is crossing my desk about major problems for specific or housing associations in general relating to it.
(Lord Rooker) If it is only a general comment ---
(Lord Rooker) Yes, but if it is a general comment then I cannot give you a specific answer to it at the moment.
Chris Mole: Lord Rooker, you were talking about a step change in production just now. Earlier on we were taking evidence from witnesses about the use of offsite fabrication and indeed you were saying yourself about the shortages in new construction industry. Do you believe you have a role as the witnesses were requesting to promote offsite fabrication?
(Lord Rooker) Enthuse, yes. I will enthuse about modern methods of construction. Because of - how can I say - the yellow journalism in this country, the only description I am ever going to use is modern methods of construction. Everybody knows modern methods as opposed to traditional methods. The headlines are frightening to people because of what happened in the past, as you said when you were talking to your previous witnesses. Two or three television programmes wrecked a generation of housing construction, which would not be modern methods in the sense you are discussing today, they are very much wet trades on site, simply because modern methods of construction require an investment which the building industry does not make. The building industry is peripatetic. It has got land, it pulls in contractors and orders supplies from all over the country, it builds and disappears. There is no factory that requires an infrastructure and a capital investment as you heard from the previous witnesses and therefore the one thing they need to know for modern methods of construction is that there is a plan, that they have got confidence, that we ourselves are confident in the techniques. I think the Deputy Prime Minister has made it absolutely clear - he will do so I might add at the Urban Summit in Birmingham in the next couple of days - we will do so by our visits and our pronouncements and we will do so by the very fact of setting up the Challenge Fund and structuring it the way we have with an emphasis on modern methods of manufacture to give a real push. Now I think one of the questions you asked was about examples. There are plenty of good examples around this country by the way. I have seen adverts for "housebuilder of the year" but it was not traditional construction and it was foreign, I might add, in the sense of non British, but it was here in this country so it had been imported. People were more than willing to pay the prices, having secured the land, for what would have been non traditional modern methods of manufacture so they can work and they can provide housing that lasts for generations. If others can do it, I am sure we can. Then to get them smeared by headlines in language I am not going to use, to put people off, negates what is the technology of the industry. I think what you heard from the witnesses today could have been repeated by other members of their industry and other manufacturers that they are waiting to get going and we are going to give them the green light. Is that enthusing enough?
(Lord Rooker) When I say it is an anecdotal basis, it is the result of planning casework. I do London, South East and Eastern minus the Dome, another minister will do that, and therefore I see the casework. I have seen examples, on the basis of either calling a decision to be made or deciding whether or not to give it to an inspector, I have seen arguments about a piece of land which have been put forward by a local authority which said "Oh, we have had this reserved for industry" and it turns out it has been reserved for industry for a decade or more. Someone has come along and put an application for housing in and by and large I have tended to go in favour of development. I am pro development rather than anti development, I have to say, that is my predilection. Yes, I have seen examples of that. I have said to developers and house builders where they have got examples of that "Write to me". It is good that we have land set aside for industry. We are not building enough factories, if you like, because we do not make as many things as we should do, but nevertheless to use it as an excuse for stopping a housing development, which sometimes is what it is, is unacceptable. Where we can we will take decisions, based on advice, it is true, to go for a housing development where it is quite clear land is not going to be used for industry. There are plenty of brownfield sites around where people have said "Oh, we are hoping that it will come back to industrial use" but clearly it has not.
(Lord Rooker) The private sector makes a major contribution of housing in this country and, of course, most of the worst housing in the country, in which most of the most vulnerable people live, is private sector rented, there is no question about that. Therefore the Government has programmes for putting money in for housing renewal and refurbishment and even in the Comprehensive Spending Review we have been able to allocate some more money for that. I think once we get to the point of selectively registering - I have to use that word, that is the point - the landlords and also bringing in the registration of homes in multiple occupation even though that will not cover all of them, it will cover the areas that are vulnerable. Relooking at the way housing standards are measured in the private sector will have the effect of building up the standards but what I cannot say in answer to your question is simply that we will include them in the decent homes standard in the same way we have got the public sector involved in that.
Chairman: Right, on that note, can I thank you very much for your evidence.