Written evidence submitted by the Federation of Master Builders (FMB) (DHH0134)

1. About the Federation of Master Builders and reason for response

1.1.  The FMB is the largest trade association in the construction industry, representing nearly 7,500 micro, small and medium-sized (SME) construction firms across the UK. The majority of Master Builder companies operate in the repair, maintenance and improvement sector, with half offering new build housing as all or part of what they do. A smaller proportion of members operate in the public sector supply chain, and in commercial, industrial and heritage projects. The FMB’s mission is to increase quality in the built environment.

1.2.  The FMB welcomes the Committee’s inquiry into decarbonising heat in homes, a timely and important investigation. The FMB has consistently advocated for the development of public policy that stimulates demand in the energy efficiency retrofit market. In 2008, the FMB published its seminal research report ‘Building a Greener Britain’ which set out a strategy for how to make low-carbon home refurbishments mainstream.[1] In 2013, the FMB set-up a route for members to achieve Green Deal Installer status, however uptake was very low due to poor business confidence in the scheme. The FMB has also worked with the Retrofit Academy and its partners to develop a Level 5 diploma in Retrofit Co-ordination and Risk Management in response to the Bonfield Review (Each Home Counts) and to underpin PAS2035.

1.3.  More recently, the FMB called for a national retrofit strategy in its ‘Programme for Government 2019 – 2024’.[2] Through our work on the Construction Leadership Council we have been developing the structure for a national strategy, and are in the process of submitting this for approval and wider support. As a TrustMark provider, the FMB has also established a pathway for members to become accredited with PAS2030 to be able to deliver measures funded by the Green Homes Grant scheme.

1.4.  The FMB would be very pleased to provide oral evidence to the Committee if invited and to provide any further information in writing relating to decarbonising heat in homes.

2. What has been the impact of past and current policies for low carbon heat, and what lessons can be learnt, including examples from devolved administrations and international comparators?

2.1.  As a representative of thousands of general builders, the FMB set up a route for its members in 2013 to access Green Deal Installer status, however uptake was very low due to poor consumer and business confidence in the scheme. FMB members (some specialists and some general builders) typically undertake energy efficiency works for their clients as part of wider home improvement projects to comply with building regulations outside of the Green Deal framework. FMB members view retrofit-specific schemes with scepticism, with one member describing the green agenda as a ‘plaything’ for administrations, leading to boom-and-bust cycles. The FMB is fully committed to supporting is members to engage with the Green Homes Grant scheme, and the green agenda more widely, and provides regular communications as the schemes available and how to access them. Nonetheless, it is important to understand these attitudes that members have formed from past experience of short-term initiatives.

2.2.  There were several barriers to the successful implementation of the Green Deal, and these reflections should be incorporated into future schemes. The first barrier relates to the way that the scheme did not accommodate for the business models of most local builders. The Green Deal Provider status was inaccessible to SMEs, so they were required to contract with larger companies to be able to deliver the works. However, most members of the FMB would typically not enter a contractual relationship such as this, as they are typically the main contractor with the client, and in the current economic climate and risk to businesses this becomes even less favourable. Schemes must be accessible to local builders, with whom households have existing trusted relationships. Targeting investment in a larger number of small businesses will help stimulate growth in local communities, and unlock additional apprenticeships as 71% of apprentices in construction are trained by SMEs.[3]

2.3.  The second barrier related to the lack of minimum standards, and the high risk of consumer detriment and mistrust as a result. In a 2017 response to the Department for Business, Energy and Industrial Strategy call for evidence on the Green Deal, the FMB supported greater synthesis between energy efficiency schemes like the Green Deal and TrustMark. The FMB was therefore pleased to see TrustMark as a minimum requirement as part of the Green Homes Grant scheme, as this should help to raise minimum standards and strengthen consumer protection.

2.4.  The third barrier to success was the fact that energy efficiency measures were not supported as part of more general home improvement works. Just one tenth of households upgrade the energy efficiency of their properties as a standalone measure.[4] Homeowners will seek to add-on retrofit measures to a new extension, kitchen, loft conversion and so on. Any scheme must account for this, as it is essential to securing consumer buy-in, reducing perceived hassle, and maintaining consumer choice.

2.5.  Finally, while finance was made available, the loans were expensive, and not viable for most households. The Green Homes Grant scheme is a welcome evolution of this, in the sense that it provides grants, but given the requirement for households to contribute, the scheme remains exclusively accessible to the able to pay market. Future schemes must incorporate a wider range of fiscal policies underpinning grants in order to unlock available finance to more consumers.

2.6.  In terms of current policy, the FMB set up a pathway for its members to become accredited on to the Green Homes Grant scheme, in partnership with the Insulation Assurance Authority (IAA). The FMB surveyed members in August as to whether their clients had inquired about the Green Homes Grant scheme. Of those operating in the private repair, maintenance, and improvement sector, 1 in 5 (18%) said that they had. The IAA support FMB members by providing accreditation for some of the measures, and by coaching businesses as to how they should update their processes and quality management systems to achieve PAS accreditation.

2.7.  Since the Green Homes Grant scheme has been announced, the FMB has passed on around 160 enquiries from members to the IAA, of which six firms are proceeding with the PAS accreditation process. Just one firm has completed this process. The anecdotal feedback we have received from members as to why the majority have not continued with the accreditation process is because of the short duration of the scheme, and the conclusion that this does not merit the time nor financial investment required of the firm. While the recent extension of the scheme is welcome, reservations remain, especially around the cost burden of training falling on small businesses. For example, one FMB member based in the Wirral is pursuing the accreditation process. Accreditation to deliver several grant-funded measures has cost him £6,000 and 160 hours of unpaid work. The member would not recommend the scheme to builders who do not have dedicated administrative staff. Any future scheme must be longer-term, to grow business confidence, and be more accessible still to the SMEs.

2.8.  The 2050 net zero carbon emissions obligation is for the UK as a whole and therefore the Government must work with the Devolved Nation Governments to share best practice and learning. For example, the Energy Savings Trust in Scotland provides landlords in the private rented sector with free information and property assessment as well as Schemes including the Private Rented Sector Landlord Loan. Landlords with up to five properties can access interest-free loans, and those with six or more properties can access loans with an interest rate of 3.5% APR. The impact of this scheme should be closely monitored, and learning shared across the UK.

2.9.  Similarly, the recently announced additional £10 million investment by Welsh Government in upgrading the energy efficiency of social housing should be closely monitored.[5] The outcome of this investment can help to determine the scope for leveraging upgrades to social housing in England as a means of building capacity and reducing cost in the retrofit market.

3. What key policies, priorities and timelines should be included in the Government’s forthcoming ‘Buildings and Heat Strategy’ to ensure that the UK is on track to deliver net zero? What are the most urgent decisions and actions that need to be taken over the course of this Parliament (by 2024)?

3.1.  The FMB welcomes the Government’s plans to deliver a Buildings and Heat Strategy. The strategy must plot the roadmap for retrofit over the long-term to build business confidence and capacity in the building industry. It should therefore cover this Parliament, as well as the next ten years at least.

3.2.  The strategy must have local builders at its heart. Leveraging local markets and identifying policy solutions that unleash the potential of SME building contractors is key to creating organic growth and fostering trust in the market. The Centre for Sustainable Energy (CSE) advocates approaching a retrofit programme by setting the target of first upgrading just one million homes to make them truly low carbon. The CSE argues that retrofitting early adopters’ homes will normalise this behaviour and encourage others, including the private sector, to invest.[6] The supply chain then follows an equally organic pattern of upskilling and mobilisation. To boost demand and supply in local markets, the CSE advocates testing small stimulus on a local level, creating networks of local tradespeople and supporting them to acquire appropriate training and qualifications. Scaling-up the retrofit market slowly to begin with, followed by a period of acceleration, will help make time for businesses to adapt, train highly skilled tradespeople, and secure client support.

3.3.  The strategy must include a comprehensive skills strategy that identifies skills gaps within the industry, and sets out concrete steps for how to plug these. In terms of those already in the industry, most retrofit works can be completed by highly-skilled tradespeople. However, Site Managers require upskilling into Retrofit Co-ordinator roles to support a whole house retrofit approach. Gas engineers should also receive targeted support to gain heat pump installation skills. Surveyors must also be provided with retrofit-specific training so that they can complete thorough assessments of the home in advance.

3.4.  In terms of new entrants into the construction industry, SME construction firms must be at the centre of this strategy, as they train 71% of apprentices in the industry. Emphasis on bringing people into the industry is essential. The construction industry has a skills shortage, where one third of builders are struggling to hire bricklayers and carpenters.[7] As output increases in other sectors, particularly private new build, the demand for skills will become greater.[8] This element of the strategy should take a longer-term view. Cutting short apprenticeship training will only yield low quality outcomes. SMEs train apprentices, on average, over a three-year period, and these individuals will then require several years more on-site experience to become highly skilled tradespeople. Investing in apprenticeships now will build greater capacity for retrofit in five to ten years’ time.

3.5.  The strategy should also incorporate support for SME business skills, so that the smallest firms can be supported to achieve PAS accreditation. Mobilising the thousands of SME firms in the building industry will help retrofit works to happen at pace. Any steps to streamline and speed-up this accreditation process, without reducing the quality or standards required, through establishing something like a multi-measure accreditation process would further assist businesses to move into this sector.

4. What incentives and regulatory measures should be employed to encourage and ensure households take up low carbon heat, and how will these need to vary for different household types?

4.1.  Any long-term strategy must be underpinned by fiscal policies that help unlock private finance and provide consumers with the finance they need to secure these measures. Cutting VAT to 5% on the labour element of all domestic repair and renovation projects for a period of 5 years, with the requirement that more ambitious energy efficiency measures are implemented under Building Regulations, would immediately increase the level of retrofit currently taking place. Research by Experian found that in the first year of cutting VAT, a potential saving could be generated of up to 36,358 tonnes of CO2 by the retrofitting of 14,000 homes.[9] Projected over five years, this could lead to an additional £1.08bn spent on energy efficiency measures. This is because cutting VAT would save households money on their home improvement projects, making finance available cover the cost of more comprehensive energy efficiency measures. Linking retrofit works to existing home improvement projects also maintains a degree of consumer choice and empowerment in this strategy. Finally, cutting VAT would bring repair and renovation into line with taxation policy on new builds, removing any incentive to conserve and convert existing buildings.

4.2.  Stamp Duty calculations that incorporate the EPC rating of a property will create new incentives to upgrade homes. Think tank The Green Alliance and the Aldersgate Group have both recommended introducing a rebate on Stamp Duty on homes with good EPC ratings, and the FMB supports such a move. This policy will also encourage thorough retrofit works to take place at the point of sale when the property is more likely to be vacant. This minimises disruption for the household.

5. Where should responsibility lie for the governance, coordination and delivery of low carbon heating? What will these organisations need in order to deliver such responsibilities?

5.1.  The FMB welcomed the BEIS and Department for Education’s Green Jobs Task Force, which will take a cross-departmental approach to developing a skills strategy to support net zero carbon emissions.

5.2.  An inter-departmental Government Task Force, or a delivery agency, that oversees the implementation of the Buildings and Heat Strategy would help ensure that it adopts a holistic approach to retrofit. The Energy Minister has spoken about the need for greater collaboration to understand this challenge, and the Committee on Climate Change has also recommended that the Treasury be linked-in with policy development.[10] The FMB would support the creation of a Task Force and would provide information and assistance.

5.3.  A Task Force would also provide a mechanism to centrally coordinate investment to a plurality of local, tried and tested initiatives such as The Green Register, that co-ordinates demand and supply in Bristol, and Parity Projects, that delivers whole house solutions in South East London. A platform that communicates information, guidance and support for both customers and suppliers of retrofit would help to bring this plurality of local solutions together and would help drive-up confidence through a Government-backed campaign, hosted on a Government-backed website.

5.4.  The Government must work closely with the construction industry to successfully deliver low carbon heating. Industry buy-in and consultation on any plan is essential. The FMB has been leading the development of a national retrofit strategy under the umbrella of the Construction Leadership Council (CLC).[11] The FMB has convened a cross-industry group of organisations with interests in the domestic repair, maintenance and improvement sector. These organisations have worked collaboratively to develop a strategy, and is now seeking wider consensus from across the industry. The group will then seek endorsement from the CLC before presenting this plan to the Government.

December 2020