Official Report: Minutes of Evidence

The Chairperson (Mrs Erskine): I welcome Mr Mark Spence, chief executive of the Construction Employers Federation (CEF); Mr Martin Mallon, the chair of CEF's housing committee; Mr Ciarán Fox, director, Royal Society of Ulster Architects (RSUA); Mrs Joan McCoy, White Ink Architects and RSUA past president and honorary secretary; and Mr Mark Todd, owner of Mark Todd Architects.

Are members content that the evidence be recorded by Hansard?

The Chairperson (Mrs Erskine): We have your written evidence and looked at it before the meeting, so I invite you to give a brief opening statement of 10 minutes, and we will then go to members' questions, if that is OK.

Mr Mark Spence (Construction Employers Federation): Thank you very much. I will make some opening remarks, and Ciarán will supplement them. We will get that done within the time.

Thank you, Chair and members, for the opportunity to brief you today on the issues facing the construction sector in Northern Ireland as a result of the underfunding of NI Water. I am joined by Martin Mallon, who is managing director of South Bank Square and chair of our housing committee.

For some 15 years, Northern Ireland has built only around 50% of its new-build housing need annually. That has resulted in a dearth of new supply of housing of all tenure types, exacerbating our social housing waiting lists and the difficulties that many have in moving from home rental to home ownership. Earlier this year, the CEF conducted a survey of our homebuilders. That made it clear that the current waste water capacity constraints are holding back some 8,500 homes, which equates to about £1 billion of investment. When coupled with the proposals of housing associations and other developers, that figure goes up to around 19,000 homes that are unable to proceed. The figure doubles again to 37,000 if we factor in the number of housing enquiries that NI Water has received. That gives us a 60-year low in housing completions in 2023. The figure is likely to be even lower in 2024.

We are undoubtedly in the middle of a housing crisis in Northern Ireland. The commitment in the draft Programme for Government (PFG) to provide more social, affordable and sustainable housing is welcome but falls drastically short of what is needed to deal with our housing crisis. Although the forthcoming DFC-led housing supply strategy will, rightly, deal with the detail of how we deliver our homebuilding targets, it is clear to us that we need the Executive to set a much stronger statement of intent and intervention. That is why, in our response to the draft Programme for Government, we will argue that how we sustainably fund our water and waste water system is more than worthy of being a stand-alone tenth priority, underpinning and enabling the entire strategy. It is also clear to us at this stage that, without NI Water, the Executive's investment strategy will similarly fail to outline a sustainable, realistic path to delivering the huge uplift in investment in the Northern Ireland economy that we need.

As we understand it, the new investment strategy will detail a proposal to spend some £26 billion of capital funding on our infrastructure over the next 10 years. However, when that figure is considered in real terms, it is simply this year's capital budget of around £2 billion, which is the same in cash terms as that of 17 years ago, in 2007-08, adding reinvestment and reform initiative (RRI) borrowing and a modest inflationary uplift to each year, multiplied by 10. In our view, that does not represent a strategic infrastructure plan. It is a spending plan that lacks ambition or strategy whilst, perhaps, being realistic.

While much of the focus on the underfunding of NI Water has been on the impact on housebuilding, it is vital that we do not overlook the immediate impact that it has had on the local civil engineering industry. As price control 21 (PC21) was being developed, NI Water worked closely with the industry to put in place a series of frameworks to deliver the significant uplift in work that would be required. With much of that now halted, many firms have had to go into sharp reverse. That has resulted in a significant number of job losses and a race for new work outside Northern Ireland. When such processes are set in train, it can be incredibly hard to reverse them. It is likely that this year of PC21 underfunding may result in two to three years' delay, should funding even become available later.

I will turn to potential solutions. Of the 19,000 homes currently being held back, homebuilder-funded solutions such as storm water offsetting may be advanced, but only where NI Water and the Northern Ireland Environment Agency (NIEA) are satisfied with the proposal. That approach, already at significant cost to homebuilders, must be expedited to ensure that the much-needed investment in development continues. Waste water impact assessments regularly take unnecessary months or even years even though solutions to enable homebuilding have been readily identified. There is an ongoing need for NI Water to be wholly transparent with homebuilders about the condition of the network when reasonable requests for information and modelling data are made. That is not currently common practice.

Linked to that, we must also make sure, in common with NI Water and the NIEA, that all assets are fully utilised and that permits for discharge consent are granted where they are reasonable and cause no detriment. Looking to the other 18,000 homes that are proposed for upwards of 25 cities and towns where no existing connection or solution is feasible due to budgetary constraints, it is important that the Department take forward a legislative change that would enable homebuilders to fund waste water upgrades. However, we must be very clear about what that change would mean and what it would not mean. Considered on a site-by-site basis, it is our view that such a change would lead to a relatively small number of sites being able to proceed. The overwhelming majority of waste water system upgrades required in the 25 towns and cities run into costs of millions, if not tens of millions, of pounds. When any homebuilder puts that into the overall costs, the viability of any specific site is, therefore, extremely unlikely.

We must, therefore, continue to fund NI Water's PC21-27 business plan, but we must find a way of doing that sustainably to meet its £600 million-plus annual requirement. In the context of the NI Executive's constrained capital budget, our view is that that can be achieved by moving to a mutual, cooperative or public corporation model, which, along with other reforms to the existing suboptimal governance model, would enable NI Water to borrow to its full potential, effectively funding its capital plans in the same way that the Executive currently do with the social housing development plan. We support the Executive's recent decisions on funding for the Housing Executive.

Crucial to that will be giving NI Water a defined income stream, as that was identified in the Northern Ireland Audit Office (NIAO) report, 'Funding water infrastructure in Northern Ireland' in March this year. A defined income stream is the fundamental missing element of the overall price control process. Without a guaranteed, long-term defined income stream from the Executive — the ability to fund against its assets — we are drastically curtailing the ability of NI Water to fund the infrastructure and, therefore, the economy. We do not believe that that change requires the introduction of individual household billed water charging or, indeed, any uplift in the existing rates bills paid by domestic consumers. Rather, from the existing rates bills, a direct hypothecated income stream to NI Water could be created, along with additional legislation in respect of its governance model. That would enable it to fully borrow against its assets. Short of a fundamental reform of that nature, we fail to see how the Northern Ireland Executive can sustainably fund NI Water's needs, given how crucial that investment is to wider economic activity.

Therefore, we support the call in the Audit Office report of March 2024 for the Department to establish a comprehensive review, to be led by suitably qualified experts, of alternative arrangements. Whether in addition to that or in the event that the Department decide not to commission such a review, we believe that it is vital that the work of this Committee and of the Public Accounts Committee look at an analysis of the Audit Office's report and undertake an inquiry into the options for a fundamental governance and funding review of NI Water. As we sought to highlight in our briefing note, the consequences of not doing that could be catastrophic to the economy of Northern Ireland. We are very happy to answer any questions that the Committee may have, and I invite Ciarán to supplement my comments with his.

Mr Ciarán Fox (Royal Society of Ulster Architects): Thank you, Mark. Thank you, Chair, for the opportunity to present today. The RSUA is the professional body for architects in Northern Ireland, and we certainly want to see a built environment that works in harmony with our natural environment. I am joined by Joan McCoy, who represents a medium-sized practice based in Belfast, and Mark Todd, who represents a smaller practice. That is to give members of the Committee an opportunity to hear what life is like at the coalface for architects working in this very difficult circumstance.

The NI Water waste water infrastructure situation is a fiasco. It really is a case of the good, the bad and the ugly for architects who work with developers at the moment. The good is that you could be extremely fortunate in the postcode lottery, in that you happen to be developing in an area where there is the ability to connect and, therefore, no particular cost. Obviously, there is the normal development cost, but there is no cost for waste water connection. There is the bad, which is where you are told that you can develop but that there will be considerable cost to you for that. Those are the offsetting costs, and they can run into many, many thousands. The ugly is where you are told that it is a black-and-white no and that there will be no development here for x number of years.

We certainly feel that the current model with that postcode lottery needs to be addressed. Why should somebody get it for free when somebody else has to pay, and who is making the decisions about where future investment goes? That becomes critical. Waste water investment results in development being able to proceed. Where is the transparency around where gets the upgrade next? That means who gets housing next, what school is able to proceed and what business investment is able to proceed.

There needs to be, because of the public impact, much greater transparency around that decision-making process.

The second thing to mention is bureaucracy. The bureaucracy in the system is, in our view, preventing some reasonable solutions. We have cases in small-scale developments where solutions are being brought forward that would result in water being discharged into rivers and streams, which meets EU standards and is what we want to see. Those solutions are being turned down by NI Water. We have young architects coming back to work in Northern Ireland after, maybe, studying abroad, but they can no longer work in Northern Ireland: every project that they bring forward is hitting the buffers. We know that people are being forced to work in England and the Republic of Ireland, for instance. It is a real shame that we are not able to support our young emerging talent. Of course, the danger in the long term is that we lose that talent.

Every town and city in Northern Ireland is faced with problems around dereliction. We have all these initiatives, such as the Living over the Shop scheme and the strategy to bring buildings back into use, but, time and time again, we see proposals that come forward to convert use from, say, an old office into a set of apartments — that is what we all want to see — hit the buffers. Where are they hitting the buffers? Primarily, through NI Water connection issues. We even have examples of where the number of WCs in a building is not changing, but NI Water is giving a refusal. It seems hard to understand.

We then get on to the cost and delay. There is processing in behind all of this: everybody is being asked to carry out pre-development enquiries (PDEs) and waste water impact assessments. That is a direct cost where you pay a fee to NI Water, but you also have to pay a fee to an engineer to prepare a report. For small-scale development, that fee can be substantial — certainly, thousands of pounds. Recently, we had a case in which a member reported sending in their fee of £2,500 and getting a response almost immediately. That clearly demonstrated that nothing had been considered, but the fee was still taken. There are issues in the current system that can, we feel, can be sorted out.

We very much advocate nature-based solutions, and we think that NI Water should, where there is the possibility of one, be doing the same. That should be its number-one priority. Instead, we are seeing hard engineering solutions being the preference.

Finally, reinforcing the point that Mark made on funding, we believe that a cooperative model has many benefits. The Executive have agreed to the move towards a cooperative model for funding the Housing Executive, so, as a principle, there seems to be an acknowledgement that that is an acceptable model. Why not for NI Water too, if it would enable some of those issues to be addressed more quickly? In advance of this meeting, we did a call-out to members asking for examples of their day-to-day experiences and the number of projects impacted on. I will not run through them now, but I can provide an update to the Committee afterwards. Across Northern Ireland, there are examples of housing and community buildings. One practice alone has £400 million worth of projects held up in the system. There are real concerns across the sector that this is a critical moment and that we need to see short- and long-term action to address it.

The Chairperson (Mrs Erskine): Thank you. That is why we have you here today. We are aware that NI Water did some engagement work over the summer with a vast number of stakeholders. Obviously, the Committee cannot have every stakeholder from Northern Ireland here, unfortunately, but we felt that it was important to have some representative bodies from the industry brief us on the situation across Northern Ireland. Ciarán, if you would not mind, it would be useful for the Committee to see some of the written evidence that you collated from some of your members.

Mark, you referenced the investment strategy and said that it will fail. Have you had input into it?

Mr Spence: No, we had early briefings with the Strategic Investment Board (SIB), but we had not seen the detail of it. Obviously, we have been made aware of the sum involved: the 10-year spend at £26 billion. As I said, that does not represent an increase from where we are today. That is 10 years of doing what we do currently, which, this year, is underfunding NI Water — I refer to that particularly because it is the topic of the day — in-year by around £300 million. If we continue to underfund NI Water for the span of the investment strategy by the same amount, we are heading into an economic wasteland. We require that water infrastructure to support the economy. That is our concern about the investment strategy. We understand that a lot of good work has been done, and we have been briefed by Construction and Procurement Delivery (CPD) on that. The diligence and good work that have gone into that will present in the form of a robust spending plan, but it does not present as a strategic, planned strategy. It should involve looking at all options. This investment strategy does not look at any options; it assumes that we will get the same pocket money every week for the next 10 years — it is insufficient now and will not get better; it will get worse. The investment strategy fails simply because it is not strategic.

The Chairperson (Mrs Erskine): It is really down to strategy, then. Do you believe that the funding is sufficient?

Mr Spence: No. That is the point.

The Chairperson (Mrs Erskine): You said that you believe that Northern Ireland Water should be mutualised. What other aspects should be —?

Mr Spence: No, we have not said that. We support the Audit Office's recommendation that all options be on the table. Mutualisation may be one of those. A cooperative model may be one. A public corporation may be another. We are saying that the status quo is unsustainable. The status quo is the huge underfunding of NI Water, which undermines the full investment strategy. We hear not just about housing, which is very important to all of us around the table, but we are very aware of school projects in the pipeline that will cease if they have extra requirements. We have specific information on special educational needs (SEN) school enhancements. We are aware of some health projects that are at risk. We very much know about commercial projects. We know that factories that failed in their attempts to set up in Northern Ireland relocated to other countries, taking jobs with them. Our concern is the wider economic piece. The investment strategy assumes that we will continue to do 10 more years of what we are doing today, which is hugely underfunding NI Water. That is our concern. The strategy should have been broader. The word "strategy" suggests that all options should be looked at. Nothing should be off the table. Nothing has been decided, but it seems negligent not to consider all options. We can look at the options, come to a shortlist and come to a preference, and it would then be up to the powers that be to decide whether that was something to pursue, but to not consider all options in the current circumstances is reprehensible.

The Chairperson (Mrs Erskine): The written evidence refers to bureaucracy, and you talked about that today in relation to NI Water and DAERA. You said that that has resulted in reasonable solutions being declined. You touched on what some of those reasonable solutions may be and mentioned dereliction and so on. Who is responsible for installing on-site treatment facilities in small developments? That was referenced in your written submission.

Mr Fox: Mark has a good example. Maybe you want to talk a little bit about that, Mark.

Mr Mark Todd (Mark Todd Architects): Yes. I have various projects, one of which is a small rural development. NI Water's policy is that anything more than two houses in a rural environment require a fully adoptable NI Water treatment facility, which costs between £180,000 and £200,000. It takes up substantial space and is, essentially, a hammer to kill a fly. No engineer worth their salt would seriously consider infrastructure of that scale for such a small development, but that is presented by NI Water as a viable solution for that site. That site then gets presented in NI Water's results as having a viable solution, but it clearly is not a solution: it is a complete non-starter.

At the coalface, what I find so frustrating is NI Water's policy changes. They change all the time. It is hard to keep track. I appreciate that there has been public consultation and stakeholder engagement in recent years, but the policy changes predate that. It appears to sole practitioners like me that policies have been implemented with no stakeholder engagement, political approval or transparency. We are trying to second-guess what the next policy change will be. It is impossible to keep track and advise clients on how sites should be developed, if they can be developed, when things evolve monthly.

There are two examples of that. One is where two houses or more in a rural environment require a waste water treatment facility such as the one that I just described. When and how did that come into place? Who approved that? What was the process? The other example is five-year occupancy. If any unoccupied building is unoccupied for five years or more, it loses its rights to connect. Even if you want a change of use for an unoccupied building — for example, a shop on a main street that you want to convert into a restaurant or a coffee shop — if it has been empty for five years, it loses its rights to connection. Where did that come from? Who approved it? Why five years? There is no trail of evidence or correspondence with the industry as to how those things were decided.

The Chairperson (Mrs Erskine): You said that policy changes can happen monthly.

Mr Todd: It evolves constantly. One minute, you are advised one thing by NI Water; then, a couple of months down the line, the circumstances can change and the approach is different. My experience is that it is consistently inconsistent.

The Chairperson (Mrs Erskine): We have introduced checklists and, obviously, NI Water is a statutory consultee, so how difficult does that make it when you are going through the planning process and you have to meet the checklist, yet there are policy changes?

Mr Todd: It is hard to understand what the policy changes are. For example, if I am doing a planning application and there is very clear planning policy guidance and the preamble talks about stakeholder engagement and changes in legislation, I can navigate a planning application using policies that are appropriately documented. With NI Water, when you ask for a policy, the policy does not exist. It has not been through any rigorous process or consultation, so you get long-winded advice and guidelines. Furthermore, the guidelines on the website have changed across the years. There is no definitive place to go to in order to find a list of policies that has been fed into by stakeholders so that we understand the consequences of the changes and what impact they are having on small housing developments in rural environments. It is pretty much impossible, particularly in my field, to get going with small sites that range from around two to seven houses.

Mr Martin Mallon (Construction Employers Federation): I think that it is more that they are Northern Ireland Water internal procedures as opposed to what you might consider policy. It is not policy as such; they are internal procedures. The first response that we always get to planning applications is from Northern Ireland Water, and it is a refusal, so that is the checklist done.

The Chairperson (Mrs Erskine): OK. Thank you. I will not take up any more time. I will go to other members.

Mr Stewart: Thanks very much, folks, for coming along today. First, I echo and agree with your notion about restructuring and the funding model. Every option needs to be on the table, and simply doing nothing is not an option, given the impacts and how difficult things are, as we know.

The first issue that I want to touch on is developer contributions. Suggestions have been mooted about legislative change, and the information around that is quite scant at this stage. First, what are your thoughts on that? Secondly, it is already being done in some respects, as I am aware. Can you outline to what extent that is happening, how proportionate it is and how impactful any contribution changes might be?

Mr Spence: I will start and then ask Martin, as a developer, to make it real for you. You are quite right that developer contributions are current and have been going on for many, many years in different forms. The legislative changes that the Minister is talking about are at a different level, and, as I touched on, that is at the level of possibly tens of millions of pounds for individual projects for NI Water to which developers could contribute. However, given the scale of that investment, it is highly unlikely that there will be more than a handful of sites in Northern Ireland where that will make a real impact. We welcome it, but we caution that it is a very small part of the jigsaw. Martin can outline his experience of the day-to-day developer contributions.

Mr Mallon: It is good to have it as an option. It already happens or does not happen, as the case primarily is. I cannot think of more than maybe a handful of scenarios where a developer-funded solution has been delivered. That is the reality of it.

The figures that were mentioned will work only for the prime sites and areas. That will not work for social housing sites or sites in suburban or provincial locations. That is not going to work. Adding £15,000 or £20,000 as, effectively, a roof tax will not be a solution, I am afraid to say. It might be a solution in some limited cases in those prime areas or outside such areas where you simply lump it on to the price of the house. All that will do is penalise the people who are buying new houses. I do not think that that is a very fair system either. You would then have the scenario of the haves and have-nots: those who have a house and those who do not.

Mrs Joan McCoy (White Ink Architects): The RSUA would be very much behind the idea that that is an issue. Mark talked about taking a strategic look at how to solve the problem. Any solution that means that the richest sites win is untenable in Northern Ireland. One of the big challenges in getting a solution is about how to not only prioritise where the money is spent but spread the money and justify to developers that, while they will pay the money, you will spend it somewhere else. There are challenges around those big solutions, but anything that says, "If you charge a whole lot of money for a house, you will get a solution" will create great inequality across Northern Ireland. That is a very dangerous path.

Mr Fox: We are particularly concerned about the impact on social housing. It is great that the big, four-bedroom, detached houses are getting built. That is fantastic, but what about all the social housing that needs to be built? Sorry, we do not have the extra funds to do that, so that falls down the pecking order. I do not think that anybody in the Assembly wants to see that solution, but we have to be careful about drifting towards something that seems like a quick fix.

Mr Stewart: Yes, exactly. We had a debate last week about the social and affordable housing crisis. The reality is that social housing associations, for example, are at a standstill financially. They quite simply do not have the bandwidth in their budgets to take the developer-led approach for smaller projects. It is not viable.

Mr Mallon: The figure that has been mentioned was 8% of the typical house price in Northern Ireland. You cannot just add 8% on. In the social housing sphere, where do you find that among the total cost indicator, which is their funding model? That model struggles with small increases. It struggled with inflation over the past few years. We have had 25% inflation in build and labour costs over the past three or four years, and we are now talking about a potential 10% increase in one go. That will not work.

Mr Durkan: The housing association grant is also only 44%.

Mr Stewart: Is there evidence from where developer-led contributions are happening? Are they invariably being passed to the cost of the house, meaning that, ultimately, the consumer and the buyer is paying for it indirectly? Is it developer-led and mortgage-owner-paid?

Mr Spence: Yes.

Mr Mallon: It is typically absorbed into the build costs. I will not get into the technical detail of storm water offsetting. We could start trying to explain what that is as a solution, but, if you are thinking about big engineering solutions, such as a developer paying for a new treatment plant or something like that, even adding £15,000 or £20,000 to a house would not touch the sides of what those things cost. That is not the type of solution that is envisaged. It is about softer solutions, such as storm water offsetting and stuff like that or upsizing pipes.

We are talking about housing here, but the issue affects all sorts of developments, not just all types of housing, be it private or social. It is important to say that all new housing sites have fully separated systems. They have a storm water system, which tends to cost millions of pounds on bigger sites because you are holding back all that capacity on-site. They also have a foul sewage system. Those sites have up-to-date, 21st-century, separated systems. The issue is not there; it is further down the networks in an old combined sewer somewhere. That is why, I suppose, housebuilders in particular feel that it is a wee bit unfair that they are where the blockage is, yet they are spending hundreds of thousands or millions of pounds on the sites to put in proper sewage systems.

Mr Stewart: Exactly.

Mr Fox: John, we have an example of 15 houses in Dungannon, with a project value of about £2·7 million. That has been delayed for two years as they try to work out an offsetting solution. You might get there eventually, but there is the whole rigmarole of just trying to get 15 houses built. At the moment, they are stuck in a procedural issue between an article 161 and a street works licence. One says that you need the other, and the other says that you need to have that one first. It is a bit of a chicken-and-egg situation. It may get resolved, ultimately, and they might be able to proceed, but then there will be the cost of that offsetting. What we are seeing, at times, is that there can be an agreement, in principle, with NI Water about what the offsetting will be. Then, people will go and see what the actual cost is, and, suddenly, it turns out that you cannot do it. We see that on every scale, whether it is a larger development or a couple of houses.

Mark and I were talking about often having to look to other properties nearby, where you would take the rainwater off their house. It is like knocking on doors and asking, "Can we have some of your rainwater and redirect it away from the sewer?". Why would anybody want somebody else coming on to their property to redirect their rainwater? It seems like a bizarre situation that we are in, and the amount of rainwater that we are talking about, at times, is the amount that would fall on the size of one car parking space.

We feel that, at the smaller scale, there needs to be some sort of de minimis approach and a better way of getting all those small developments through. We have family homes, where someone is looking to build on the family land, unable to proceed because of the additional costs. At the upper scale, where we are talking about £20 million or £30 million projects, there is just a straight no.

Mrs McCoy: It is not just houses, though. We are talking about people's jobs and their plans for development. There are hairdressers who cannot expand their shops. There are coffee shop owners who cannot change a betting shop into a coffee shop. All sorts of people's small economic plans are affected. These are people's lives, and they cannot move on, and they cannot make decisions, because they cannot get a water connection.

Mr Stewart: We could talk all day about that, and I am sure that others will tease it out, but I want to come back to the point that you, Ciarán, and the Chair made about the bureaucracy limiting progress. I want to be constituency based on that and take Larne as an example. My office is in Larne. There is a blanket ban, as I see it, from NI Water to just say no to everything. In your experience, is that a standardised objection, or do they actually assess it? I ask because there is an SEN school in my constituency in Larne that wants to put in two new mobiles. Despite the fact that those young people would be at home in Larne if they were not in the school, NI Water has turned it down. At the end of the day, they cannot be in two places at once. That has not been assessed. They have just said no. Is that the experience, or do they assess the applications on their merit and look at the genuine impact that it will have on the system?

Mr Fox: Certainly, what we have heard from all our members is that that is the case in certain areas. In Larne, you would have 20 social houses. They have just been told no; a straight, blanket no, and 2027 would be the earliest, but it will depend on whether NI Water gets the budget to upgrade the treatment facility works in the 2027-2030 Budget period. It is almost like, "Don't talk to us until then". That is the answer that we are hearing back in the Larne area.

Mr Mallon: There are different levels. In those 20 or 30 towns, there is just a blanket no now. Typically, you get the refusal at planning stage, and then you enter the waste water impact assessment process. That could take — well, that is the first that I have ever heard this morning about the one taking 24 hours. Typically, it takes a year or two years, or whatever, and it is in that process that you tease out what the solution might be. Then, you have to price the solution to see whether it works or not. All of that takes an awful lot of time. That time costs jobs, houses, livelihoods — everything. Northern Ireland Water needs more money, but the bureaucracy behind it and the procedures need to be addressed as well.

Mr Spence: It is fair to say that we do have a sense that Northern Ireland Water is being extremely prudent, which, in terms of its governance, is quite the correct thing to do. However, sometimes that generates the no without its looking at the tolerance within its models.

We continually say that we fully understand the need for more funding, but, at the moment, what they will do with the blanket no response and their modelling is to bring all construction to a halt. Where there might be tolerances in the model, and there have been one or two instances where independent engineering reports have found that it could proceed, they have then allowed it to proceed. We do not want to be in that space of contesting every decision, but it is important for us that NI Water works with homebuilders, commercial premises and all types of economic development on the very micro scale. Some of those decisions will not make one bit of difference to the overall model, but it could make a huge difference to an SME or a family business, so we do ask for tolerance from NI Water in that regard.

Mr Fox: I will give you an example of how things really are not working. The architects submitted a fee of £2,800 to NI Water for a development at Upper Cross Street in Larne and got a return, pretty much immediately, saying no. NI Water took the fee anyway, which was to assess the waste water impact assessment. It had not even looked at the assessment, and yet it said no. There is something wrong in that system.

Mr Stewart: Yes, absolutely.

The Chairperson (Mrs Erskine): Thank you. I have quite a list of members to get through. I am very conscious that it has been just me and the Deputy Chair so far. I ask the panel, if you do not mind, to answer as quickly as possible so that we can get through the questions that we have. This is a very important issue, and I do not want to curtail the conversation, but we need to get some questions answered.

Mr Dunne: Thank you for your presentation. I appreciate the far-reaching impacts beyond homes, as you have very eloquently stated. What engagement has your sector had with the Department and the Minister? With that in mind, do you feel that the Minister fully recognises the scale and the challenge of how significant this is for now and the future in Northern Ireland?

Mr Spence: I will speak for CEF, and Ciarán will, no doubt, want to answer in a moment. We have had a number of meetings with the Minister, who is very well briefed and fully understands the constraints that this imposes. What we are seeking from the Minister is some movement around looking at all options. Earlier in the year, it appeared that other options were not under consideration, but I think that that view has slightly changed now, and I hope that it has. The Minister attended our awards night recently and spoke to the assembled audience of contractors. I think that there is some movement there. We do have to get to a situation where the Assembly can at least consider options before ruling them out. We would be very concerned if options were ruled out without due process.

We fully support the Audit Office's recommendation that this should be done by an independent, expert-led inquiry. We do not believe that this is something that can be done in-house. There are good and bad examples to be learnt from in other jurisdictions, and we think that all of that should be done in real time. We know that there are a number of historical reports, but this is an issue of such a magnitude for the economy here that, we think, it is deserving of an up-to-date review by those independent experts.

The Minister has been very candid and frank with us, as is his style. He has, obviously, done what he can this year within the funding envelope. The funding envelope is not his sole responsibility: that is an Executive-wide responsibility. As we have said, it is having an impact on the Programme for Government. Each Minister is trying to deliver on their agenda: Conor Murphy has spoken to the topic, as well, in regard to how water infrastructure is holding back his plans for the economy when it comes to factories and other infrastructure. It is understood, and I hope that all Ministers understand it to the same level. I hope that they all lend their support to the Infrastructure Minister to take forward a review of all options.

Mr Fox: We spoke to the Infrastructure Minister informally in May on this and other issues. We had a formal meeting scheduled for July, but that has been put back three times now, and we are waiting for a new date. We are struggling a little to get the engagement that we would like. Mark and I and others met the Finance Minister, and it was very useful to be able to raise the importance of these things with her. Ultimately, if NI Water has an allocated price control budget and is not even getting that base level of funding, it is no surprise that these issues are not just bad but getting worse. Hopefully, we will get that engagement with the Infrastructure Minister in the next couple of weeks or months.

Mr Dunne: OK. Hopefully, that can be accommodated.

Finally, I am keen to hear more about the mutualisation or cooperative-type model. How do you see that working in terms of best practice in other parts of the UK or beyond?

Mr Spence: There are different options, and mutualisation is an option. The cooperative model may be more palatable to some, and there are public corporation models. There are subtle differences between them all, but the important thing to say is that there is a fear of privatisation. The Minister has been very clear that that is not a road to go down, and we fully support that. We do not see any good models of privatisation out there, and we are not calling for that. What we are calling for is a model that looks quite similar in nature and scope to what has already been achieved with the Housing Executive.

Our social housing development programme is 50% funded by private funders. That does not make them any less of a public asset or any less for the public good. We think that the Assembly is on board with how we fund that. The Housing Executive's proposals, we understand, are with the Treasury at the moment to allow it to increase its borrowing, which is hugely needed for its retrofit programme to reduce carbon emissions and energy use. We think that, already within this Building, there is an understanding of a model that works for the housing sector. Why not, therefore, look at that for the water sector?

There are other models, as you say, in other legislatures and jurisdictions. I think that it needs to be independently expert-led. We all have some knowledge of it: I would not pretend to be an expert. A lot is required in there. The important thing, to give comfort to the public and to elected Members, is that it can only ever become what the Assembly decides it is. There are concerns that this is a first step on a road to somewhere else. No, you all know the huge effort and diligence that goes into legislation. Nothing can happen by accident. It will be whatever the elected Members decide it shall be. It can be very tightly defined. It seems to us, as interested parties, that, if there is an availability of funding that does not necessarily lose control at all of the public asset and still delivers the public good, we should at least look at that. We would not understand why we cannot at least look at those options.

Mr Dunne: Thank you.

Mr K Buchanan: Thanks for coming along. I have a few questions. I will go through them quickly.

You referred to the "good", the "bad" and the "ugly". If you were to give me a synopsis across NI, with responses from NI Water, what percentage would you put in each of those three categories?

Mr Fox: NI Water has published its own figures on that for housing units. It said that 37,000 units were under consideration and facing problems, and there were 18,000 or 19,000 where there were potential solutions, and the rest were given a blanket ban.

Mr K Buchanan: In the architectural world, what workload is falling into that, if you are guesstimating the three brackets?

Mr Fox: It is pretty similar, if you look at those —.

Mr K Buchanan: OK.

Mr Fox: It is very geographically based now: there are towns that have been identified as the "blanket no" towns, and then there are areas where there is still the potential for solutions. Or, if you started the process, as some did, two years ago, you could be in the ongoing process of trying to agree a solution.

Mrs McCoy: It is a wee bit more than that, though. You cannot say what the "ugly" are. We do a lot of our work outside Northern Ireland, and we have Northern Ireland people who are developers who want to come home and do development in Northern Ireland. For every site that they have looked at, they have said, "I am not even going to consider it", because the first thing is that they will not get a sewerage connection. So, they are all in the "ugly" category, but they do not exist, and there are thousands of those.

Mr Fox: We get that all the time. It is one of the most frustrating things: the idea of people wanting to come to Northern Ireland to invest funding, and then they are told what the obstacles are going to be, and they say, "Well, there is no point".

Mr K Buchanan: I have another question. In all the documentation, we read about "capacity constraints". Do you, as an industry, call it "capacity constraints" or "treatment constraints"? Yes, we have pipe size; we have waste water treatment capacity. Who is looking at those solutions? Is it purely NI Water internally? Or does NI Water harvest that out to anybody and say, "Come and try to solve my problem for me, to give me five years on this plant". It seems to be tens of millions. Are there other solutions that other people are looking at? You need to look at Denmark and Finland: those countries seem to be the experts in this, broadly. My question is this: is NI Water asking for help outside of itself?

Mr Mallon: NI Water farms out the modelling. It has its own in-house modelling team, and external consultants help with the modelling as well. We have some concerns around the modelling and the inputs to that model, because it is predictive. Like any model, it is really only as good as the information that goes into it, but we do not have a full picture, so we do not know.

I do not think that NI Water is looking at other types of solution. I know that it has talked about sustainable drainage systems (SuDS) and other softer, engineering solutions for storm water, but I am not sure on the sewerage side.

Mr K Buchanan: Who does it ask for help? Is it purely in-house?

Mr Mallon: I do not know. The first step — the first part of the issue that needs to be resolved — is the modelling and how that is all arrived at. It is really that that is giving the red flag on each of the areas. To go back to the earlier point about the good, the bad and the ugly, I would say that, from the direction of travel, it looks to me as though everywhere is going to be closed, and that is our fear. At the minute, it is half of Northern Ireland, or whatever, but our fear is that it is going to be a complete shutdown.

Mr K Buchanan: OK. I have one final question. I will use Dungannon as a good example from a treatment point of view. There is a lot of not so much industry but food processing etc feeding into those treatment plants, which is putting a serious loading on those plants. In previous work life, we had to put in our own treatment plants to reduce loading. Is enough of that happening? I am not blaming food processing. I am using that as an example, but they are putting a serious loading on the treatment plants. One factory could be equivalent to so many houses. Is NI Water doing enough to help those who are putting the biggest loading on the treatment plant? It is not a house; a house can do only so much. What are your thoughts on that?

Mr Spence: That is the concern that Martin raised earlier. That is now becoming a commodity that, ultimately, housebuilders are having the privilege of paying for other industries or farming or cattle marts.

Mr K Buchanan: You can blame the farmers for that one, then.

Mr Spence: Yes, I know. [Laughter.]

It is an issue.

Mr Boylan: There we go. Rural people being picked on again.

Mr K Buchanan: Yes, but you understand my point.

Mr Spence: Polluter pays is another way of looking at it.

Mr K Buchanan: You can have a lot of inputs into one treatment plant, and one or two businesses could have a massive impact on the size of that plant.

Mr Mallon: It is cumulative. It is at the moment in time when you go to look for a connection. If the treatment plant in Dungannon is at capacity, and it has been for a number of years, then, unfortunately, you are held and cannot build in Dungannon. It is as simple as that. I do not know what they are doing to look at existing industries.

Mr K Buchanan: I have more questions, but I do not know whether I will be allowed to ask them.

The Chairperson (Mrs Erskine): Very quickly.

Mr K Buchanan: What is your opinion on the nature-based solutions that they are being so negative towards?

Mr Fox: To be honest, we do not understand. I gave the example of the tiny, car parking space-sized area of rainfall. That means, surely, that you could take a piece of hardstanding, like a parking space, and turn it into a flowerbed. That is going to absorb; it is not going to go into the drain system; yet, for some reason, that is getting turned down. That is at the tiniest scale, but then you scale that up and ask, "Why aren't we doing this?".

There has been a long-term issue around the adoption of sustainable urban drainage systems. I understand that the Department is bringing forward a consultation maybe this autumn. Is that right? I do not know. There certainly has been talk of that coming, but there has been talk of that coming for about a decade. In a sense, it has been around the houses, but we have never got over the line. It seems that this is certainly the time to push on that to try to make sure that sustainable urban drainage systems are the number-one way of doing it. If that does not work, we can then look to other more hard engineering solutions.

Mr Mallon: The long-term maintenance and so on of SuDS systems would be a fraction of the cost of the concrete, PVC or whatever the current alternative options are. The sooner that that legislation comes in and Northern Ireland Water has the ability to adopt those as solutions the better.

Mr McReynolds: Thank you to the panel for coming today and for the presentation. A number of the points that I was going to make about mutualisation and developer contributions have been made already. Mark, you spoke about Northern Ireland Water having the opportunity to borrow against its assets. I have tried to rationalise that in my own head over the past number of months in terms of housing associations, which are able borrow against their assets. Will you expand on what that could that look like in practice for Northern Ireland Water?

Mr Spence: When we talk about assets, we are actually talking about an income stream. You are borrowing against an itemised income stream. At the moment, our domestic rates bills do not itemise, but we know that, to some degree, they are subventing water costs. There is an annual cost there for DFI, which is being paid anyway, so the identification of that becomes a security against which you can borrow.

NI Water already borrows against its physical asset base. This is borrowing against income stream, and, if you were a lender, you would regard that as a secure income stream because it is underwritten by the Assembly. It is the same for social housing: the income stream is underwritten by the social housing development plan, housing benefit and rent from occupiers. It is simply leveraging that secure income stream, but we first need to identify it separately. That is the encumbrance; that is the change in legislation. The ability to do that has been proven with the social housing development plan. You can then open a door to third-party lending at very good rates because it is considered to be a secure income stream.

The model is entirely possible. The due diligence that would need to go into it is important. The legislation around it will take a long time to get right, and it needs to be absolutely robust and to satisfy everybody, but we think that the models exist.

Mr McReynolds: Has that ever been discussed with the Department? I pushed officials on that a couple of weeks ago, and they said that there was something internally and that it had not been published. Is that a conversation that has taken place?

Mr Spence: We have had the discussion with the Minister. We have met the Minister a number of times this year. I think that it was very clear that mutualisation was not something that he was considering at the start of the year.

In our most recent discussion with him, he was ruling out privatisation. We therefore have to think about having something that sits between privatisation and mutualisation. There are other models, such as the cooperative model and the public corporation model. All the models need to be examined very carefully in order for us to understand the implications. Again, in supporting the Audit Office's recommendation to consider all options, we think that it is a very worthy piece of work. The outcome can be decided only when the work is done. We should not pre-empt the outcome, but there is certainly opportunity to be had.

Mr McReynolds: I agree. I will touch loosely on something that the Deputy Chair raised. I asked the Minister yesterday about developers' contributions. Where that could go is potentially becoming a bit woollier. He said that he hopes to introduce new legislation on sustainable urban drainage to help store storm water so that it releases more slowly into the waste water network. What are your initial thoughts on that, and what would you want the legislation to reflect?

Mr Spence: Martin is the expert on SuDS.

Mr Mallon: We have it on a site, and other developers have it on their sites more and more now. The solution is just a natural one: a grassy slope with some pipework in it to catch rainwater. The rainwater will filter away as opposed to all of it flowing down the pipe at the one time. It is a natural way in which to hold back storm water. The issue with some sewers is that, during heavy rainfall, they get deluged by storm water. That causes the problems. In practice, the drainage will hold back the water and therefore alleviate the problems somewhat.

The issue at the moment, however, is that NI Water cannot adopt those systems. Even though there is very little engineering involved and they are more straightforward than some of the stuff that it does adopt, it does not have the ability to adopt them. I believe that the legislation is designed to fix that so that NI Water can adopt them. NI Water's adopting them would make it more attractive to all sorts of developers to use those types of systems as opposed to using concrete pipes or whatever they typically use now. It would be a good thing for that legislation to be implemented, and NI Water would welcome it as well.

Mr Spence: It is worth mentioning that doing that will assist only with not making future capacity constraints even worse. It will apply only to new homes. Last year, we built 5,300 homes. This year, we think that the figure will be less than 4,000, which is probably the fewest houses that we have built since the Second World War. Any legislation will therefore only stave off an increase in an area in which we are already at overcapacity. It will not be retrospective and will therefore not solve any of the problems that we have today. It will probably just slow down making the problem worse.

It is not a solution that will help us retrospectively. As I said, it will simply stave off the problem for new homes that can be built, but so few are being built now anyway owing to the general capacity constraint. It is a nice thing to have in the toolkit, but it is not a game changer.

Mrs McCoy: It is worth saying that, as a solution, it is tried and tested. Northern Ireland is very behind the game. We have been doing that in the UK for 20 to 30 years. Every single project that we do in England includes SuDS, no matter what size it is. It is just what we do. There is no risk associated with it for NI Water because all the problems have long been solved. It is a no-brainer to put it in the toolkit.

Mr McReynolds: That is really helpful. Thank you.

The Chairperson (Mrs Erskine): I was just checking something there. There was a consultation undertaken on water, flooding and sustainable drainage, to which you responded to. Its findings will come through the Committee at some stage, so you will no doubt be back before us when we have the legislation.

Mr McMurray: Thank you for presenting to us today. You have already touched on this, but what are the differences in the financial numbers from doing nothing, which is where we are at, and from doing something, which is where we want to be? What are the economic multipliers from doing something, or the economic divisors should we do nothing?

Mr Fox: Doing nothing means that things will just get worse. That is where we are at. We met Sarah Venning from NI Water in the summer of 2023, and the meeting was all about how such things could be addressed in the short term, medium term and long term. We met again a year later, in 2024, to get an update, and things were worse. We are now looking ahead to 2025 and wondering whether things are going to be worse again. Each time that there is a slowdown in development, that has a clear-cut economic impact. In some ways, a really straightforward example to give is what happens in the construction sector. Projects do not go ahead, people do not get paid and jobs start to dry up. It is not necessarily the case that people lose their job, but they are forced to work elsewhere. We already have a fantastically strong industry in England, Scotland, Wales and the Republic of Ireland, but people want to be working back home. If houses are not being developed, the impact from that is that businesses and the whole supply chain are affected.

One example is start-up businesses. They have to pay an assessment fee, but they are saying that they cannot even pay the fee to get the assessment done. As a result, they are not putting their start-up in a particular location. If you want start-ups in your constituency, but you happen to be in a constituency that has a real problem with waste water treatment, those start-ups will instead go to a constituency where they do not have to pay the fee. It therefore becomes an enormously impactful economic issue that forces money into different places.

As Joan said, we are not really seeing the full picture, because we do not see the money that does not come in as a result of people just being put off. I am sure that you often hear in Committee how investors look at Northern Ireland's planning system and say, "No, thanks. It is just too difficult. We are not going to wait for all those years only to get turned down". This, however, is a new thing on top of all that. It is another obstacle for people who are looking to invest.

It is therefore hard to put any sort of million pound figure on it. When we went out to our members, however, one practice was able to come back with a list of projects totalling £400 million that are all on hold. That is from one architect's practice, and it is not the biggest practice in Northern Ireland. The scale is phenomenal. All that we know is that, unless things start to move, the situation will get worse.

Mr Spence: There are some immediate impacts. In the housebuilding space, we have members who are telling us that the sites that they are building at the moment are their last sites. Those are perhaps second- or third-generation family businesses. We have contractors who are saying that they are going to stop building here and are moving to Scotland. We have civil engineering contractors who, last year, delivered £300 million of work for NI Water and believed that they were on a framework for several years at that level, yet, this year, their work has been cut almost to zero. Those individuals are now having to work in Scotland or in the South.

The Minister for the Economy is on the record as saying that there are factories in his constituency that are being held back because of NI Water. We know of one 2,000-job factory that will now be built in Poland instead of here. It is therefore very hard to parcel everything out as individual figures, but, anecdotally, the amounts really start to add up. That is inevitable.

We were talking to the Education Authority (EA) recently as well, and its programme for new schools and SEN provision is all at risk. That affects families, children, lives and jobs. The totality of what is at risk here is vast. It is very hard to pin a figure on it. It is not a selfish interest from the construction industry. The construction industry is the enabler of economic development, be it foreign direct investment or organic growth of SMEs in this place. If we are not busy, the economy is stagnant.

Mr Mallon: Northern Ireland Water has put on its website the figure of 37,000 houses and ancillaries, but that does not include the stuff that Joan was talking about, where people look at here and decide that they are not going to bother to come and develop a site. There are plenty of big sites that, for various reasons, cannot be developed, but one of the main reasons is a lack of infrastructure.

Mrs McCoy: You have got —.

Mr Mallon: Sorry, Joan. On a related matter, I believe that we are at the start of a housing crisis. We already have a housing crisis, but we are at the start of its getting really bad. We cannot build social housing, because we cannot connect to the infrastructure, and that is before we talk about developers contributing to the cost of the infrastructure.

Not enough private houses are being built, so their prices have spiked, and you will notice that they keep spiking. Added to that, there are no houses available to rent, so rents have absolutely spiked over the past few years. All of that is thrown into the mix. People who have a house now are very lucky, but the next generation will not be able to afford one unless we do something. We are here this morning to talk about that, and I appreciate that, but that is the crux of the housing issue.

Mrs McCoy: Belfast City Council has identified that it wants to build 31,600 homes by 2035. That is 11 years away. The council is out to tender at the minute for a development partner, and it will announce that development partner at the end of November. It has a plan to build 1,500 homes in the next couple of years as the first phase of that development, but those homes cannot be build if there is no sewerage to connect them to. There are huge things sitting in the pipeline that cannot happen, but, as they are not included in the statistics at the minute, they do not exist.

The Chairperson (Mrs Erskine): Andrew, do you have another question?

Mr McMurray: I have two or three more questions. [Laughter.]

The Chairperson (Mrs Erskine): Go ahead. We are running out of time, so keep them brief.

Mr McMurray: I will put the two questions to you. You can respond first to the one that you can answer the quicker. If you have time, you can answer the other one. On the housing issue, Mr Fox, you touched on the fact that derelict buildings cannot be developed. What is your assessment of how many such buildings can be progressed? How would they be progressed?

As I said, I will ask both questions together to accommodate the Chair. Are there other benefits, aside from water accommodation, if that makes sense, to having nature-based solutions? The water in the gullies at the sides of roads goes into the drainage system, but that will contain dirt from cars and what have you. Can nature-based solutions filter out some of the dirt? Those are my two questions. The first is about derelict houses, while the second is about whether nature-based solutions can filter out dirt from the water.

Mr Fox: Nature-based solutions can be applied to almost any situation. Great public realm schemes in other cities use that thinking. The number-one thought in public realm schemes is how to divert rainwater away from the system. That is one of the big drivers behind such schemes.

I will you one example of a Living over the Shop conversion. It was a really small project, costing £200,000, so the architect thought that it would be straightforward. He had to get a report produced, however, and pay £1,250 to demonstrate that the new proposal would have less of an impact than the existing one. He said, "It's really obvious that the impact's going to be less" but was told, "You have to pay to prove that". Of course, he paid the money and showed that the new proposal would have less of an impact, and, eventually, it went ahead. The whole thing was delayed, however. Given that we are faced with an enormous difficulty, let us make sure that, where things are allowed to proceed, we make the process smoother.

It is impossible to get numbers on dereliction, because it affects 30 areas. Think about every town centre. Our big concern is that dereliction tends to lead to increased dereliction. It brings down a neighbourhood. You can have a town centre strategy and a Living over the Shop strategy. If, however, you do not start the ball rolling and get some momentum behind bringing an area back up, with people living there and shops being live, the area beside it will not come back to life again, nor will the one beside that. Dereliction brings the whole area down. That is why we mentioned dereliction, because it has a knock-on effect. It is not just about the impact on the one property that does not get connected but about the impact on the whole street.

The Chairperson (Mrs Erskine): Cathal is next.

Mr Boylan: Thanks, Chair. I thought that I was not going to get in there. All the questions have been asked, so I will try to put this succinctly. From the conversations, we all understand that there are planning and funding problems. As elected reps, we have dealt with sites and have asked questions about spec tanks, or whatever it is that developers want to introduce. I am familiar with all of that. You have presented some good arguments today, and you are part of the solution. Do you know what I mean? That is the way in which I look at it.

It was interesting to hear about your conversation with NIW. The Department gave NIW 40% of its budget this year. I think that we have the Utility Regulator coming before the Committee in the next couple of weeks to talk about the mid-term review.

The Chairperson (Mrs Erskine): Yes.

Mr Boylan: It will be interesting to see how far we have got. I am trying to move to finding a solution to where we are at now. What are your key asks for what we can do now? To be fair, Mark, I agree with the strategy stuff, because it cuts across the economy and everything else. Realistically, this is where we are at. You are here today to present your arguments based on what you contribute to NIW, housing and everything else. What are your key asks of the Committee? We have talked about most of the things that members wanted to raise. I agree with SuDS and all —.

The Chairperson (Mrs Erskine): Cathal, sorry, but we do need to get —.

Mr Boylan: No, Chair. To be fair, other members got to ask three or four questions.

What are your key asks?

Mr Spence: I will try to be very quick, Chair. There are a couple of parallel asks that can be addressed at the same time. The first is to start the independent, expert-led review. Whether it is done by the Department, the Committee, which has powers to look at things, or the Audit Office, do start the appraisal process, because it will take time, and the solutions will take a long time. There is, however, no time like the present to say, "Right, this is the path we're going down". Start that review.

In the interim, we need NI Water to be open and transparent with the industry, housebuilders and all types of planners. Where there is capacity in its model, we need to have access to that. The blanket no is killing all economic development. We need NI Water to be open with us, work with us and help us understand its models better. We have had good engagement with it, but we still do not really understand some of what is going on. We therefore need full tolerance from NI Water in a partnership approach. The Minister's approach is one of partnership and of working within the limited envelope that we have. That approach is fine, but we need, with that longer-term vision, to start a review immediately of the possible options. We know that there is not sufficient money coming through the block grant. That seems fairly clear at this point, so we have to find other solutions.

It is absolutely up for discussion whether what NI Water is asking for is a legitimate amount of money to ask for or whether a lesser amount would enable something to proceed — that all forms part of the options appraisal — but, to be clear, if it does not get at least some of it, and nothing is done, from what you are hearing, the architects who are ahead of us in that sausage machine of development will stop getting enquiries, people will not come to this place or develop their businesses here, and the economy will die.

Mr Fox: I like that question. It is a really difficult question, but it is on what we all need to focus. There is no point in our having just a big list of problems from top to toe and saying how bad everything is, because lots of areas are really struggling. On Mark's point, the key thing to say about the expert-led review is that it needs to have a timetable. It needs to have an urgent timetable and an end date by which we will see a report. It cannot be like one of those reviews that we have seen in other areas, which take a year and the outcome is to say that another year is needed to do an actual detailed review.

The second thing to say is that we need to have equality. We need to see an end to the postcode lottery. Why should it be that, in one area, people get free connection but that, in another area, they effectively have to pay for their connection? That is what is happening right now. We need increased transparency in decision-making. Who will make decisions about which areas come into use in the next year, three years or five years? That will impact on which school and housing developments can go ahead and will affect constituencies across Northern Ireland. That will have a direct impact. We therefore need to have greater transparency.

Finally, even in the midst of all the difficulty, operational improvements can be made. We talked about the use of nature-based solutions. We talked about smaller-scale projects and about not forcing people to pay those fees. One person pays a fee and does not even get their thing looked at. Such operational issues could be really tightened up. They may not have a massive impact in the grand scheme of things like those other issues do, but they will make a big difference for that one house or those two houses here. When you get those issues sorted out, at least those houses will still be built. It is much better that that happen than not.

Mr Durkan: Thanks, everyone, for the presentation and for the answers that you have given to quite a range of questions.

In how NI Water is responding to consultations, there is the good, the bad and the cosmetically different. I have been warned before. I do not dispute that Northern Ireland Water needs a lot more money, but is there any suspicion that, as we have talked about today, that is being used by it as a bit of leverage to amplify that point?

Mr Fox: One thing that is clear-cut is that the price control process that has been gone through independently has found that NI Water needs x amount of money, and it is not getting x amount of money. NI Water may say that it needs much more than that, but it is not even getting the amount that it has been told that it needs by somebody independent. From our perspective, that is just black and white, and the funding need needs to be met. It is one of the most basic things.

We see from Paddy Brow's report on what is happening with Belfast lough the amount of raw sewage that is going directly into it and the impact that that is having on water quality. It is hard to believe that there is not a need to increase funding. Does that mean that increased funding cannot go hand in hand with taking a proper look at governance, delivery or the frustrations that Mark is experiencing, where policies are shifting or there are internal working documents and nobody really understands who came up with a certain policy or why an idea takes five years to implement? Who decides that? Does it go through the Department? Does somebody have to rubber-stamp it? Is it the Utility Regulator's responsibility?

The two things go hand in hand. Yes, there needs to be more money provided now, but we have to look at how operational and governance improvements can be made at the same time.

Mr Durkan: Absolutely. What involvement have you guys had with the forthcoming housing supply strategy? There has not been great engagement with the Minister for Communities to date, but it is worrying if the strategy's publication is imminent yet you have not been involved, because the house fairy will not deliver those houses. Have you had an input into the strategy?

Mr Fox: Mark can speak for the CEF, but our engagement was through the public consultation at the time. We felt that the housing supply strategy needed to be more ambitious. When we looked at the previous period, we found that we had delivered more houses than were proposed for the next housing supply strategy period, which we thought was odd, considering that the number of people facing housing stress has increased. We have not heard anything since, however. We are waiting, like everyone else, to see the publication of the final strategy.

Mr Spence: We were involved in the draft strategy about two years ago, which did not quite get to the Assembly. We were behind some of the data that resulted in the 10,000-house-a-year target figure. In the past few days, we have had a response from the Communities Minister, and we will be meeting him in the coming days, no doubt to discuss that. We were involved in the housing supply strategy, but, without a resolution to the NI Water issue, delivering on the 10,000 figure looks hopelessly ambitious. This year, pro rata to the housing completions that have been reported to date, we may be looking at a figure of under 4,000 houses a year. Last year was our worst figure for 60 years. The housing supply strategy is worthy, and its ambition is to be supported. As Ciarán said, we might even wish for more, because, when we are not delivering, the backlog increases, and we believe that there are 50,000 or so on the waiting list, which, pro rata, will create a worse housing crisis than we have seen south of the border. The housing supply strategy is therefore vital, but without the machinery of NI Water behind it, it becomes relatively meaningless.

Mr Durkan: Yes.

Mr Mallon: With modelling for an area, be it Derry, Belfast or wherever, if developers are being told that there is no capacity or that a site cannot be connected, all that they are asking for is transparency. Show us where the problems are. Open the books and show us what the model entails and where the issue lies. The developer, the local representatives, NI Water and the other stakeholders can then at least get together. That will probably work only for larger sites, but if there is transparency and if everybody understands that there is a big problem and the extent of it, we can look at how to fix it. Ultimately, we might not be able to fix it, but at least if there were openness, that, from the developer's point of view, would be a start.

Mr Fox: Mark, linked to your question, the situation could wreak havoc with local development plans, which are going through the system at the moment. Those plans contain housing allocations, which have to be based on reality. At the moment, people want x, y and z in council areas, and there is, of course, real ambition for growth and development, but the numbers are not going to stack up. As the local development plans come through for approval, that will make things really difficult.

Mr Mallon: We are talking about sites that were zoned 25 years ago.

Mr Durkan: Mark, you said earlier:

if we continue to underfund Northern Ireland Water by the same amount.

Given other Executive capital commitments, is there a fear or an inevitability that we may be heading into a period of more underfunding of Northern Ireland Water? Do you see a role for an infrastructure commission? The Executive Office took responsibility for moving forward with a commission to oversee major infrastructure projects. It is hard to think of anything more major than the upgrading of our water system.

Mr Spence: Very quickly, the capital budget is Barnett consequentials to us. Some major capital projects in GB are being abandoned. We will wait to see what comes to us on 30 October and beyond. It is by no means certain that we will even retain what we have. If we do retain what we have, it will certainly not increase. As you know, we are on record as strongly supporting the establishment of an independent infrastructure commissioner role, and that has strong business support as well.

There has been good work done and cooperation shown among all the Departments on the investment strategy and on prioritising projects. One point that I will make on that, however, is that, although there may be prioritised projects, they sit within what is believed to be a finite defined budget, and we do not accept that that budget is reasonable for delivering what needs to be delivered. More ambition needs to be demonstrated to look for alternative sources of funding.

Mr Durkan: I have one final, quick question.

The Chairperson (Mrs Erskine): A very quick one.

Mr Durkan: Northern Ireland Water has an income stream from commercial rates. Is it able to borrow against that income? If so, does it borrow against it?

Mr Spence: I am unclear as to whether it does, but, yes, it would be equally fundable. That may be part of NI Water's current capacity that it may be utilising. The element that we believe can be defined off domestic bills could become an additional securitised funding stream in parallel with that.

Mr Durkan: Thank you.

The Chairperson (Mrs Erskine): OK. Thank you very much for your time. It was important for us to hear about capacity constraints and how the issues impact on your respective industries. The Committee is concerned, because they impact on so much. Infrastructure is the bedrock of society. We appreciate your time. I know that we ran over, but we appreciate your coming to give evidence.