Zero-carbon Homes
Brooks Newmark considers stamp duty exemptions on zero-carbon homes and calls for graded reliefs for properties that meet intermediate levels but are not strictly zero-carbon as an incentive to builders to invest in new technology.
Mr. Brooks Newmark (Braintree) (Con): I am delighted to return to the subject of stamp duty exemptions on zero-carbon homes, as provided for under clause 90 and the amendments proposed by my hon. Friend the Member for Putney (Justine Greening). I have some interest in the issue, having been fortunate enough to encounter it during the Committee stage of last year's Finance Bill and, by happy coincidence, when I joined my hon. Friend during the subsequent debate on the statutory instrument in December. Some members of the Committee may also have been present last year and will remember that we had great fun in the debate, largely at the expense of the then Economic Secretary, the right hon. Member for Normanton (Ed Balls). However much we teased him and laughed at his ability to tie himself in knots, there was a broad consensus that we wanted the policy to work in practice.
Stamp duty is a considerable expense for anyone trying to get on the housing ladder and last year's revenues reached some £6.4 billion-a 40 per cent. increase on the previous year. It is quite right for the Government to seek to influence behaviour by reducing some of the burdens of that huge rise in taxation. In that respect, the potential benefits of the policy are wrapped up with how it is perceived by home buyers-and, of course, home builders.
In the same constructive spirit, I welcome the change proposed in clause 19, which will extend the relief to registered flats-something that I asked for when we debated the statutory instrument and the then Economic Secretary gave the Government's favourite answer: that it would be reviewed. To give credit where it is due-it is right to do that sometimes-it has not only been reviewed but acted upon and duly extended, so I am delighted that once again the Government seem to be listening to the Conservative party; but it is a shame that neither the Economic Secretary nor the Chief Secretary, who I am sure would have been particularly well briefed on the subject, could be here for today's debate. It is a shame because there is already a sense of discontinuity creeping into the way in which the zero-carbon homes agenda is being dealt with and there is a sense in which the Government's lofty aspirations are not being matched by the reality of delivery.
As my hon. Friend the Member for Putney has already mentioned, parliamentary questions have done what endless questions in Committee could not: they have elicited the number of zero-carbon certificates that have actually been issued. Unfortunately, it is a very small number indeed-my right hon. Friend the Member for Wokingham (Mr. Redwood) made that point. Will the Exchequer Secretary update us as to what is the latest number?
That matter worries me less, however, than does the caveat that appears at the end of a couple of parliamentary answers. As the Exchequer Secretary stated in one of them:
"We expect the number of qualifying transactions to rise as more properties eligible to claim the relief go on the market."-[ Official Report, 19 March 2008; Vol. 473, c. 1223W.]
I am sure that the number of transactions will rise given that we are starting from a very low base, but it seems that the Government expect some magic exponential effect to occur, and they always seem to expect it to occur soon rather than now.
Last year, the then Economic Secretary proposed the same kind of optimistic but ill-defined acceleration as is now appearing in such parliamentary answers. He said-in the way that only he can-that
"there will be a non-linear, progressive, accelerating build-up over time on the basis of which we will get to a figure of 200,000 by 2016."-[ Official Report, 26 June 2007; Vol. 462, c. 198.]
However, he also admitted that the pace of the acceleration depended on the definition that was adopted for zero-carbon homes.
I do not wish to plough the same ground too many times, but the Government have never given satisfactory answers in the repeated questioning over the costing of this measure. There still seems to be a disparity between the £15 million that was set aside for stamp duty rebate and the 200,000 houses that the Government aspire will benefit from it by 2016. My hon. Friend the Member for Putney made that point in her excellent speech at the beginning of the debate. Can the Minister confirm the total value of the stamp duty land tax relief for new zero-carbon homes that has so far been claimed, and whether that figure fits in with the projected cost to the taxpayer of £15 million by 2011-12? Moreover, since clause 90 extends eligibility for the relief to flats, may we have an updated costing? It will, presumably, be in excess of £15 million, but by how much? I ask that as there does not appear to be a figure in the Red Book that reflects the extension.
Given the low initial take-up, the ongoing scepticism about the definition, the uncertainty over costing, and the damage that all this does to the public perception of the policy, do the Government propose to undertake a full review of the operation of the policy in its first six months, and will they publish the results? We called for regular such reviews last year, but the only information on progress since then has been provided by sporadic parliamentary questions. The Government's seemingly boundless optimism cannot compensate for lack of detail on how the policy is working in practice and how it is expected to evolve over time.
I shall now return to the question of the public perception of the zero-carbon standard. The National House-Building Council Foundation has recently published a research paper en titled, "Zero carbon: what does it mean for homeowners and housebuilders?" which presents a detailed investigation of public expectation and reaction. The first challenge that the Government face is that only 4 per cent. of those polled had any knowledge of the stamp duty exemption that we are discussing today. The NHBCF also suggests that that is unsurprising, given the very low uptake revealed in parliamentary answers. If the policy is to be a success, awareness and uptake will need to feed off each another, and raising awareness is a huge challenge. Part of the reason for these issues is simple scepticism about what the standards mean, what they will cost to implement and how they will affect homebuyers' lifestyle choices.
The NHBC Foundation's chairman, the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), stated in the report's press release:
"It is vital for homebuyers to actually want to live in zero carbon homes if they are to be a successful reality. If this does not happen, there is the distinct possibility that purchasers will decide against buying newly-built, low carbon properties."
The report found that home owners tended to view the 2016 zero-carbon aspiration as laudable, but did not believe it to be at all realistic.
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Furthermore, home buyers tend to view energy efficiency in stark economic terms; if it saves them money, they will buy it. For example, nearly half those polled were open to the £700 additional cost of meeting the code level 1 standard, because it generates savings of about £50 per annum, but fewer than one in 10 believe that a £400 saving is sufficient return on the £35,000 additional investment needed to meet the code level 6 standard, which reflects a true zero-carbon home. If the cost of qualifying for the zero-carbon stamp duty exemption is an additional £35,000, as the Government estimate, and the maximum stamp duty rebate is £15,000 on a £500,000 property, clearly a significant amount of additional cost must still be met from elsewhere.
Perhaps that gap explains why opinion on the house builders' side is, if anything, less favourable. Although there is widespread awareness of the code for sustainable homes, the report found that
"the perception of the industry is that, whatever the merits of the Code itself, it is being severely undermined by the muddled and incoherent way in which the Code agenda is being driven."
The construction industry will ultimately determine whether the zero-carbon aspiration is a success or a failure. When confidence in the 2016 target was assessed, only 26 per cent. of house builders polled believed in their technical ability to deliver the standard and just 14 per cent. had confidence in the commercial sense in doing so. The following quote from one builder is indicative of the tone of the study:
"I have no confidence in it whatsoever. We are currently involved in building a Code Level 6. If the Government expects Code Level 6 houses in 2016 with the technology that's available today then there won't be any houses built in 2016. It's so complex and expensive."
That is the background to this issue, and it is the challenge that the Government must meet. The process of meeting that challenge is not helped by the level of uncertainty surrounding both the zero-carbon standard and all the Government's sums, which are contingent on it. Perhaps that is why the report concluded that many builders wanted to pause for breath at the code level 4 standard, and that they tended to view the huge additional investment required to create a genuine zero-carbon home as impractical and inefficient.
The Government have committed to review the operation of the stamp duty incentive in 2012, which is midway between now and the 2016 deadline for all new homes being zero-carbon. May I draw the Minister on whether the Government will reconsider offering graded reliefs to properties that meet one of the intermediate code levels but are not strictly zero-carbon? Such an incentive structure might help builders to commit to further costly investment in new technology.
The Budget announced new pump-priming funding for a new 2016 delivery unit to guide, monitor and co-ordinate the zero-carbon programme. That is welcome, but will the new unit have within its remit the ability to re-evaluate the operation of the incentive structure? Even more importantly, will the unit act decisively to end the confusion about the zero-carbon standard?
The NHBC Foundation found, rather like the hon. Member for Wolverhampton, South-West (Rob Marris), who had his own non-linear, progressive, accelerating build-up to this point, that
"some confusion does exist, however, with the fundamental issue of what ‘zero carbon' actually means".
That is the focus of today's debate. I appreciate that the draft Stamp Duty Land Tax (Zero-Carbon Homes Relief) Regulations 2007, which the House approved in December, had been amended to bring them in line with the code for sustainable homes and that issues like connection to gas mains were cleared up. Nevertheless, there is evidently still a degree of confusion within the industry, which is why it is paramount that the Government act quickly.
One house builder in the NHBC Foundation study is quoted as saying:
"The Building Research Establishment...assessors do not know whether a 2016 carbon neutral home is carbon neutral for the whole house or is it just for the energy and lighting in the house. If the BRE assessors don't know, how are the housebuilders supposed to know?"
The Red Book does include a commitment-in the Treasury's usual and modestly named "utopia-regular" font-that a definition of a zero-carbon home for the purposes of the 2016 ambition will be forthcoming at the end of the year following further consultation. But that being so, I see no reason why the Government will not accept amendment No. 20, which would commit them to laying regulations on the long-term definition before the House by the end of December.
This policy and its associated definitional problems have now had a very long gestation period and things are still changing in fits and starts. In its first six months of operation, the stamp duty exemption has been used a mere handful of times. Nevertheless, it has already been the subject of one backdated statutory instrument, in December, and now another backdated clause in this Bill to extend its remit. We have now debated it several times and come at it from so many angles that I am beginning to feel as though this is groundhog day.
Every month that goes by without certainty is a month in which the confidence of the building sector and the general public in this policy will be further eroded. This policy is becoming the very definition of spin over substance. The time has surely now come to make a commitment in the Bill to get the long-term definition right once and for all, and I welcome our amendment to that effect.