Lord O’Neill of Clackmannan
That this House takes note of the contribution of the construction industry to the United Kingdom economy, with particular reference to housing.
Lord O’Neill of Clackmannan (Lab)
My Lords, in opening the debate, I declare my interests as recorded in the register. I am currently the president of the Specialist Engineering Contractors Group, which is an umbrella organisation for trade associations in the mechanical and engineering sector of the construction industry. As its nominee, I served for two years, from 2010 to 2012, as chairman of the Strategic Forum Construction, which the Government established. That organisation represents second-tier contractors and, in the main, they are micro-businesses employing fewer than 10 people. That business model accounts for more than 95% of the construction industry as a whole. The size of those businesses is critical when we consider that most significant contributor to our national economy. The Chartered Institute of Building estimates that total employment in construction exceeds 2.3 million workers—1.3 million employees and just under 1 million self-employed; 2 million men and almost 300,000 women. Its output exceeds £120 billion a year, and there are about 257,000 firms engaged in the industry, which purchase £170 million-worth of goods, services and materials. Together, they add £85.4 billion GVA to the economy, which is 6.3% of national economic output. When you take account of the multiplier effect, the University of Westminster has suggested that construction as a whole contributes more than 15% of our gross domestic product.
When I was first allocated this debate in July—it had to be set aside for other pressing business—there was a mood of some fragile optimism about an economic recovery. Alongside that was the impact of the coalition’s announcement of help to first-time buyers. The link between an economic upturn and improvements in the state of construction is almost always assumed to be a given. The assumption implies that there is a vast army of businesses, workers and suppliers all ready and willing to start building houses as soon as the public are economically self-confident enough and have access to borrowing through cheap enough mortgages either to buy for the first time or to move up the housing scale to find properties better suited to their needs.
While that emphasis on housebuilding is vital to the sustenance of the construction industry, it is not the only element of it. We need the industry to maintain and expand both our rail and road links. We need the transportation not only of goods but of electricity and gas through the pipes and wires from our generating facilities. No longer do we have to think purely about small power stations or very large ones; we now have a vast array of options, including renewable technologies and the like, all of which have to be accommodated into our power systems.
As well as building new homes, we need to refurbish our existing housing stock to make it more energy efficient and more decently habitable for many of the poorest and most vulnerable people in our country. Moreover, we need to build homes to rent and improve the quality in the private rented sector.
These, then, are the challenges facing the industry in an economy that is slowly and uncertainly coming out of recession. One can see from the latest set of figures that there have been hiccups and there have been drops. When we are coming out of a recession, progress will not necessarily be steady. It is not my job today to derive ill considered glee from the embarrassment of a hiccup in the statistics. We know that the general trends are improving. It is how we can take advantage of that and how we can correct some of the errors of the past that I want to dwell on today.
Certainly, it is the fact that in our industry there are a number of challenges. Housing is a significant one. I should like to look at that later in the context of the Lyons report, which my party published last week. In the days running up to this debate, I received a plethora of helpful briefing documents, too numerous to mention, but all stressing the significance of construction for the economy. It is certainly true that when the economy is doing well, construction is also doing well. We tend to forget that in the last economic boom, in the final years of the Conservative Government and under the Labour Government, precious little attention was given to housing. It was assumed that everything was for the best in all possible worlds. This Panglossian approach has resulted in statistics which, from a Labour man’s point of view, I find extremely embarrassing. That last Labour Government achieved low levels of public housing and low levels of construction across the board. What was clear was that prices for houses that were built were far in advance of wages and other indices in the economy. In the last year before the slump in 2007-08, we had the highest construction figures—figures that are yet to be matched in any year by the present Administration.
It could be said that the present Administration has tried. Indeed, there was no financial announcement that did not have a nod in the direction of construction. There was a bit of help here and a bit of help there; somebody was being assisted. More often than not the money was being recycled and more often than not it was old money, but there was always a token gesture made towards the construction industry. Frankly, however, the dribbling of support, which was the hallmark of successive Governments, has to be done in a more concerted, better thought-out way than we have seen recently.
Certainly, as a consequence of our failure to build sufficient houses, we have seen owner-occupation falling. It is now back to the 1993 figure of 68.3%—so much for the property-owning democracy. We also have an increasing number of people living in the private rented sector. There are many good landlords in the private rented sector who are a credit to the work that they undertake. There are others who are a disgrace. We know this from the big cities, where we do not quite have the Rachmanism of the 1960s but we have unacceptable treatment of tenants, disgraceful housing and an indifference towards the condition of these homes in respect of the refurbishment that they dramatically require.
Equally, it has to be said, in the social housing field we now find that there are probably more lower-carbon and more energy-efficient households being built by social housing organisations than by any other part of the construction industry. Certainly, around Westminster, there are many hundreds of houses that, by and large, start at £1.5 million. That seems to be the lowest price at which you can enter the housing market if you want to buy a new flat within spitting distance of this building. We seem to have a distorted sense of priority. If we have a large service industry in which people are paid low wages and a large part of their outgoings are accounted for by transport costs, they need to be near the people whom they are serving in these industries. We have singularly failed across the country to do much about that.
As I said earlier, the Lyons Housing Review appeared last week and it has had a pretty good press. Your Lordships may say, “Not another report in the year of a general election. Is it just a wish list made up by a party fan club?”, but it is rather more than that. For a start, it is rather longer than the usual slick document from a party publications system. It is 180 pages long and has been written by a group of the most distinguished specialists from the construction and related industries in the UK. This took a long time; it is no back-of-the-envelope job, in any sense of the term. The report makes a series of recommendations, which I will not deal with in detail because there are 180 pages in total. That would be stretching the good will of the House a lot further than I have time for.
The report stresses that local communities should be given the power to build homes that are needed in places where people want to live; that councils should provide a plan for housebuilding in their area and allocate land for development to meet this; that first-time buyers from an area should be given priority access to purchase in the area in which they stay; and that, along with this, there should be powers for local authorities to collaborate in forming the kinds of consortia that were formed for the Olympics, whereby a group of local authorities see a problem jointly and can deal with it in that area. On the one hand, this is obviously an urban problem but it is also an issue for the smaller, rural authorities, which do not always have the resources to marshal their efforts in a coherent and effective way.
The report says that there should also be measures to increase the capacity of the small firms, which I mentioned earlier, to build—to give them the guarantee that they will have the resources to do that and, as a consequence, we should see an increase in competition. It says that there should be a help-to-build scheme to underwrite loans for small builders; fast-track planning for small sites, which they can handle and manage quickly; and financial incentives for local authorities to deliver what may be rather more grandiose garden city and suburb concepts. This is increasingly becoming a consensus view: we need to get out of the big housing estates or large blocks and try to get more attractive forms of housing. These are ambitious proposals, which have been drafted by people who know the industry. They seem confident that if an incoming Government next year were to adapt the programme and the priorities that they suggest, 200,000 houses could be built per annum by 2020.
One of the first challenges would obviously be to get a labour force capable of undertaking that work. In the recession of the 1990s, for every two men who left the industry—by and large, they were men—only one returned when things picked up. The gap was filled by immigrant workers. Now when an economy is booming, people do not mind immigrants or see them as a threat. When wage rates are high, they do not see that as a problem. Unfortunately, the Polish plumbers are unlikely to return because many are now in a country whose economy is equally healthy. They have learnt new tricks for their trade and are able to continue them there, so we will not have them.
We will therefore have to be far more dependent on an apprenticeship scheme, but apprenticeships take four years and, for the first two years, the businesses make very little money from them. In year three they make a bit, and in year four the youngsters are probably getting paid less than they should be. It is a four-year investment for small businesses and they need more assistance with the problems of bureaucracy. I know that there is a trailblazing initiative on the part of the Government, which they might announce today. However, the essence of that trailblazing initiative must be assistance for small businesses to get their act together. The problem, as I understand it, is that this scheme, although ambitious, is woefully underfunded. Perhaps the Minister could comment on this because I have already heard people say that their scheme was rejected on the grounds that it would use too much of the department’s resource.
The industry is not all gloom and doom. There are problems with payment systems. We know that the Government would like to see a 30-day rule implemented. Many departments are doing that. Other agencies of government or the recipients of public funds are not in a position to do it. By the same token, we need better quality training and to get away from the very short term.
I realise that time is at a premium here and one always takes up too much time on other matters, but I want to say that there are opportunities for building information modelling. Computing, which is used in engineering across the country is not being used in construction in anything like the way it could be. There are better systems available: this is not a wholly doom-and-gloom industry. There are a lot of opportunities but if we do not learn the lessons of the past, we will repeat mistakes in the future. We cannot afford to do that. Housing, the roads and the construction of the factories we require are dependent on this industry and I urge the Government and the House to give it the attention it deserves and which it has been denied for too long.
Baroness Jolly (LD)
I remind noble Lords that timing for this debate is really tight and when the clock says seven minutes, that means that your time is over.
Lord Selsdon (Con)
My Lords, I am very honoured to be following the noble Lord, Lord O’Neill of Clackmannan. As he knows well, a large part of my family came from Clackmannan before they found that there was more profit to be made internationally, outside the United Kingdom. However, with the noble Lord, Lord Prescott, following me, I feel that I have to be slightly careful.
I have been involved in the construction industry and financing projects for most of my life. When my father died, I found that I did not have enough money to buy a house, so I found an old site and, having worked in the construction industry, I built, or rebuilt, my own house. I have done that throughout my life. When I look at the construction industry in the United Kingdom, having been a director of a quoted company for many years, I find that the biggest problem is finding sites and then helping to finance the owner-occupiers who one hopes will follow.
Construction of houses is, of course, a very difficult and sensitive area and the difficulty of funding is usually considerable. One needs to look at the life cycle of the family—of the couple who borrow money, after they get married, to buy a house, then have children. As the children grow up, they want to have a house themselves. Within the United Kingdom economy the biggest single growth in added value over the last 15 to 20 years has been those who own their own house, which creates a problem. How can those who, in theory, have assets of large value release funds to help their own families and others on the road to owner-occupation?
We can look at the tax situation, but I ask noble Lords to read the very good report prepared by the Library as background to this debate. It strays far beyond this ground, but it is the building of a home for the owner-occupier that becomes important. When you get the problems associated with families, regrettably—the split-up marriages, divorce, all sorts of situations where pressure comes upon people—how can we find a way to release funds, which might be called equity release, for people with property, or to assist them? It is very difficult from the tax point of view. I often felt, historically, that if you took out a mortgage you should take out the biggest mortgage you possibly could and gamble that the value of property would rise. When I bought my first house with a 90% mortgage for £6,300 it started me on that ladder. Is there a way to look at the whole family cycle of father, grandfather, children and others and work out some concessions that Government might make, not least in relation to borrowing? In the early days, historically, if you borrowed money for a particular thing you could often get tax allowances. I wonder whether today, instead of simply looking for increased grants, there might be some formula that would allow some form of tax allowance to take place.
We also have to look at the ageing population. We know that building societies and banks in general are reluctant to extend loans to people once they reach the age of 70 and require them to be repaid, which places a large pressure on the grandfather, as he probably is by then, who is looking to help the family into home ownership over a period of time. One needs to look at the economics and finances—then one finds that these banks often require people at the age of 70 to repay their mortgages, which is a very difficult scenario to solve. People may in general underestimate or overestimate the value of their house just to say how much it has gone up in value. But it is the transfer from the owner-occupier—from the husband and wife to the children and then grandchildren—that needs to be looked at.
These days we also have to look at the whole question, which is raised again and again, of how you release equity from your home if you wish to help to finance your children or grandchildren further down the line. This is something that the Government should look at more closely, and look at what form of benefits and allowances might be made available.
I do not need to say much more on this. I just point out that, in looking at the United Kingdom—and I urge your Lordships to read the report—we find ourselves to be one of the most attractive countries in the world for foreigners to come and work. My Polish plumber has been with me for five or six years and intends to stay. One looks at the immigrant population that comes and works on building sites and elsewhere and one wonders how we can increase the construction of houses for owner-occupation. This is where government can perhaps play a greater role. In a person’s life the highest added value, and their own growth of assets, is almost entirely related not to their savings from work but to the increased value of their property. Then estate duty is brought in later on in life and is payable without allowances according to the number of children or grandchildren who might be able to be accredited.
I suggest that in this area we should look carefully at the financial aspects. I do not disagree with the noble Lord, Lord O’Neill, or with anything else. We are doing extremely well worldwide in contracting, with £500 million of services and contracting, and we have a great team with new technologies in the construction world. It is a simple matter of asking the Government to put forward some proposals.
Lord Prescott (Lab)
My Lords, this is a very important debate and I congratulate my noble friend Lord O’Neill on getting it. There is no doubt that there are many things to be said on this subject and that there is insufficient time to go into them all. I want to concentrate my remarks on what is called the affordable home. It is all right talking about raising money in different ways, but what if people cannot afford the price? That is one of the major difficulties, and we have an obligation in housing policy to produce affordable homes. All Governments have failed—and I must put my hand up as a Minister in charge of housing that I was not able to double the housing stock, because that is what we have to do. Largely, it should be done by local authorities, but all Governments have capital controls on local authorities, whatever is happening in the economy, which restricts the building of social housing by local authorities. That needs to change.
The report on housing out this week is very important. It looks at all the blame reasons—that there is not enough land or that people are slow in planning—and gives a reasonable response to them. The reality is that all Governments must have a housing policy. I think that we have to agree—and this is me, talking about agreeing across the Chambers—to find a common housing policy. We can no longer keep arguing about the ideological case of whether it should be public or private; we just need houses for people, whether they are privately owned or to rent or whether they are affordable homes. That is the challenge for us.
The Labour Party asked the Lyons commission to look at those problems, and its recent report is excellent. It starts to rethink the multitudes of housing policy covering the final result. Sir Michael Lyons lays down something for common discussion and, more importantly, a common policy to achieve those aims.
Everyone is agreed on the need to double housing supply—it is really about how you achieve that, and whether the people who want to buy those houses can afford the product. You can produce the houses today at a price that many people cannot afford, and therefore we need to look at affordable housing; I concentrate my remarks on this, in view of the time.
I want to look at possible deals with the volume builders. If you look at the building sector, there are only about seven or eight of them; 14 is the latest figure. They control more than 75% of the market. How they deal with the affordable house programme is absolutely critical. That has usually been done in the past by Section 106 agreements. Local authorities come to an agreement with a builder to build so many social houses in the large building project for which they have asked for planning permission. Increasingly, we have now seen those Section 106 agreements ignored by the building industry. They say that it is not affordable to have subsidised housing in the affordable sense for which they receive a Section 106 subsidy, so they are now leaving them and that is what is causing me concern.
It is an industry that I know from my experience as a Minister is highly conservative; it does not really want to change. I think it is something that has to change. Let me give a couple of examples. Looking at the price argument, I thought, “Why cannot they produce a cheaper house that people can afford?”. I came up with the idea of a £60,000 house: namely, that the Government own the land in a joint ownership with the purchaser and you build a house for £60,000. The building industry told me that it could not be done; I had two or three dinners with them and I could see that it was a waste of time talking to them. I eventually went to an Irish builder, who built it for me for £60,000 and I produced it in Manchester. I then had the land: the importance of land is one of the conditions. If I then owned the land, as I did, and I was prepared to have joint ownership, I could say to the builders, “I want so many of them to be £60,000 houses”, and they could say, “Okay, you are the owner of the land; you lay out that condition; we want the rest of it to make our profits”.
We came to an agreement and I will talk about one of them: Oxley Woods in Milton Keynes. The agreement was to build a £60,000 house. The Taylor Wimpey company, which is not poor, made a lot of great profits, but has now decided that it no longer wants to continue the contract that involves the £60,000 houses. What has it done with the £60,000 houses? It is now selling them for a quarter of a million pounds. The affordable housing is gone, so now what motivates the company? Is it the desire to provide affordable housing or just the aim to make a lot more bloody money? Put your money on it: it is to make money. It is now selling that £60,000 house, which had a government land condition with it; it has thrown out the Section 106 agreement; I protested strongly about that, but that means that we have fewer affordable homes. It ditched the Section 106 agreement, which worked to a certain extent, and the £60,000 house is gone.
That is one way that a number of the companies are going. Some of them are saying, “We will do a deal—not on the 25% or 30% social housing, which was the normal contract; it has to be 10%”. That means you get fewer affordable houses; you are not getting the houses that you want or at the price that people can afford. Let me give you another example. It is right to say that people want to buy their homes. I bought my home; it is an asset; it is a development and the number of houses for ownership increased under the period of Labour. Now it has gone down considerably. I will not get into the party point except to say, since the noble Lord, Lord Selsdon, raised this problem, which is facing lots of people in this country, how were my sons and daughters helped to get access to a house? To raise the big mortgage, usually under very tight conditions, the Government brought in a scheme rightfully called Help to Buy. That says, “We will reduce the interest payments; we will make the mortgage easier”. It is a higher-priced house and it is available only to those on quite high household income.
There is another scheme about which I have tried to persuade the Government and it is a Genie product produced by Gentoo, a not-for-profit housing association in the north-east. You can buy a house there by renting. You do not pay a deposit; you do not need a mortgage and you are not affected by high interest rates. A joint household income of £18,000 will enable you to buy the house and it becomes yours in 25 to 30 years. Why do the Government not extend that Help to Buy to non-profit associations that have already built 60 of these houses? They want the private sector to bring the money in. The guarantee from the Government is the way you get the private sector money in, so the Government are right, but they should extend it—not to the high-income people paying £600,000: they should bring it down to the people who want to buy a house but do not have the income, cannot afford the mortgage and the interest rates are too high. Let us look at these kinds of schemes.
What is being produced as the policy today—recommending what you have to do to get 240,000 houses, which is the very least recommended—shows the way. It is a step forward to a common-sense, good policy, meeting the various needs of people for housing, whether private, owned or using community land or social housing. Let us put all that together: all Governments can do it; we have to do it otherwise we will continue to fail and let our people down.
Lord Shipley (LD)
My Lords, I thank the noble Lord, Lord O’Neill of Clackmannan, for initiating this very important debate and pay tribute to the widely acknowledged efforts over many years of the noble Lord, Lord Prescott, to build affordable homes.
I welcome the debate. The recession led to at least one benefit, particularly for social housing providers, in that construction-related activity became scarcer and, as a consequence, contractors reduced their costs significantly as tendering became increasingly competitive. However, there were serious downsides to the recession, one being that company workforces were reduced. Many small and medium-sized companies went out of business or became smaller and the industry as a whole lost experienced, skilled workers—some 400,000 according to the Construction Industry Training Board—which led to its ability to increase its capacity when an upturn came being seriously diminished. I suggest to the Minister that it would be beneficial to the sector if the Government would look at whether there are any ways to provide a more stable construction sector which is more resilient to upturns and downturns in the economy.
Despite the construction market recovering right across the UK, many social housing providers in particular have faced capacity problems with both labour and materials—for example, a shortage of bricklayers, bricks and roofing materials. As manufacturers of building materials also cut capacity during the recession, the ability to get production up to meet market demand has proved difficult and prices have risen. The labour shortage has been compounded by the lack of apprentices trained in recent years due to the competitive nature of the industry and the lack of incentives to take them on. I see the labour shortage as a problem for the construction industry itself to sort out, not just the Government. It must invest more in training. I welcome a number of the Government’s actions to help expand construction—for example, their Construction 2025 strategy paper, and not least their creation of the Construction Leadership Council, with its emphasis on training, getting sufficient numbers into the sector, reducing costs and delivering buildings more quickly. These are all commendable actions, as is the drive to higher exports to help reduce our trade gap and the use of advanced technologies, particularly in sustainable, low-carbon and green construction.
I have spoken previously in your Lordships’ House on the subject of procurement. I hope that the Minister will confirm that the Government are keeping under careful review the impact of government policies on the SME construction sector. There is a government pledge to award at least 25% of contracts to SME construction firms and the same figure appears in the Lyons report. There are benefits to using small companies: profits accrue locally, training is provided locally and local labour is recruited—there is a local legacy. However, the pre-qualification questionnaire process is still a very time-and resource-intensive process and can prove a big burden for small companies. There are various PQQ schemes and I wonder whether we could look at greater standardisation of that process. I wonder, too, whether the Government are content with the current operation of framework agreements. I understand that they can offer cost savings. The trouble is that SMEs trying to win public sector work can find these agreements a barrier, not least because public sector organisations tend to prefer big firms when assessing firms’ capacity to deliver a contract. Awarding points in a tick-box exercise for the size of a firm’s turnover will always disadvantage smaller companies. Those smaller companies can, of course, be part of the supply chain to a main contractor but quality second-tier firms which are local or regional, but not national, can easily lose out to firms outside the area which accept poorer terms and conditions, poorer payment practices and may have poorer training opportunities in the locality. I agree entirely with the point made by the noble Lord, Lord O’Neill of Clackmannan, about late payment. That is an endemic problem in the industry and the enforcement of payment within 30 days should be made a government priority.
I will refer briefly to the borrowing cap on local councils. I have wanted to see the cap lifted but I hope, at the very least, that the Government can introduce a greater degree of flexibility, set against some clear targets. For example, for many local authorities, maintaining the existing housing stock can require all of their borrowing capacity. Their ability to build new homes is therefore significantly reduced. If the Government were minded to allow local authorities to exceed the cap in certain circumstances, that would increase the amount of construction activity.
There are also issues around planning: we have heard some of them and some are shown in the Lyons report. I hope the Minister will take a look at what is being said. I am now clear that the planning system is holding back some development. It is very important that local councils do not impose unreasonable conditions, and 18 months to get permission through to start on site is simply too long, particularly for social housing.
Will the Minister also look at regional differences in housing market areas? As a mechanism to deliver affordable housing, Section 106 is effective in areas with high land values but less so in areas with low ones. It would make sense to devolve more policy on housing down to the sub-regions of England where measures can be tailored to meet local housing conditions.
Finally, I am a keen advocate of a housing investment bank, as they have in the Netherlands. This could increase the amount available for investment in housing, particularly from pension funds. Together with the possibility of incentives for brownfield development, that would build more houses. The Lyons report is a very valuable report, with an important set of proposals. There is a lot there that I hope the Government will pay very close attention to.
Lord Rooker (Lab)
My Lords, I am pro-development, pro-quality, pro-sustainability and, indeed, pro-countryside. Politically, housing is so unsexy it is rare for the leader of any political party to devote a major speech to the subject. On housebuilding methods, we are miles behind in the use of modern technology. I recall the Minister taking my then boss, my noble friend Lord Prescott, to the Building Research Establishment to see half a dozen modern methods in action. There are plenty to choose from across the housing price range and it was partly out of that process that the £60,000 house appeared. There can be much better quality control in a factory than on a building site although you do, of course, have to be very careful how the assembly takes place.
In 1984-85, the Duke of Edinburgh chaired an inquiry into British housing and I was present at its launch. A calculation was made that, given the existing housing stock, the rate of new building and the rate of demolition, the average home in Britain would have to last 800 years. When Kate Barker produced her report in 2004, the same calculation produced a figure of 1,200 years. I have seen more recent, unofficial, private calculations showing the figure is way above 1,200 years. It is worth pointing out that in EU member states the figures are around 25% to 50% of the UK figure because they invest more in replacement. It is clear that we are handing massive problems to future generations. We have relied for decades on the investment of the Victorians and we are so selfish that we are handing problems into the future. I feel very uneasy about that, from a moral point of view.
I am not in favour of leaving decisions to local communities. That is high-level political cowardice. The situation is so serious that, although we have to be considerate and listen to communities, the state we are in requires high-level decisions and tough central management across the electoral cycles. Local authorities of course have a key, massive strategic role, but they should never have been allowed to be landlords. In short, adult politics is required.
There are always arguments about land—that we are not making more of it. I am not so sure about that. Taking into account the capacity to build upwards and to build on stilts on the flood plains by design, there is extra capacity. It is quite easy. There are parts of the country where people have built on the flood plain because they know that it will flood. Their houses do not get damaged because the flooding has been planned for. The latest figures for England were given in Hansard on 15 July at col. WA 114. Our 10 national parks take up 9% of the land; we have 33 areas of outstanding natural beauty which take up 15% of the land; the green belt occupies 13% of the land; while urban and developed land, including gardens, occupies 9%. That adds up to 46%, leaving 54% of land as undesignated or farmland, and some of that 54% is much more environmentally significant than the green belt. By definition, there is no green belt in the national parks or areas of outstanding natural beauty.
A lot of green belt land is rubbish land from an environmental point of view as it is on the urban fringe—which is exactly the area where we should build because it already has the infrastructure for communities in place. We can designate more land for green belt: the previous Labour Government left more green belt land than they inherited because they designated more. We can still prevent linear development—which I am opposed to, as most people are. We can use the green belt to stop those areas joining up. However, we need to grow the existing urban areas. I remember saying as much when I was the shadow, and then the real, Housing Minister. It does not go down very well. You are met with the juvenile comment, “Oh, he wants to concrete over the Downs”. There is enough spare land. As I said, if we increased the percentage of urban developed land from 9% to 11% we could solve all the problems at a stroke, without affecting any of the areas we care about.
It is a great pity that Nick Boles—who was repeating some of my speeches—was moved and replaced by someone who speaks before he reads the facts. The new Minister should be required to read the four pages on the green belt in last Sunday’s Observer, and then to think about the issue, and then to speak. He should even be encouraged to think aloud.
I am not sucking up to my noble friend Lord Prescott but I pay a massive tribute to what he did when I worked with him. I still think that the framework in the 2003 Sustainable Communities Plan which he developed contains much of the answer. Designated growth areas should be sustainable but we should also encourage small developments in villages and hamlets. They should not be massive but they would relieve local pressures across the country.
Last month I was privileged to open six new affordable rent dwellings for Shropshire Housing Group at Onibury, a small parish between Ludlow and Craven Arms. It was a first-class location and demonstrated the high quality that the group has repeated elsewhere. The land for the six dwellings had come from a planning obligation resulting from a larger private development somewhere else. That is a provision which the Government are seeking to abolish as part of the Deregulation Bill. I said to the stakeholders that houses like those six should be among not only the 4,000 houses opened in Britain that week but also the new houses which would be opened in the following week and the week following that. That can be done and is vitally needed.
Of course we need to use planning, but changes are needed. I would move planning policy and operations to the Department for Business, Innovation and Skills and get it away from the housing and local government department. In the same way, the Deregulation Bill places a growth duty on non-economic regulators. It is perfectly possible to do that, as I know from my time at the Food Standards Agency. A non-economic regulator can still share the growth duty. I would put a growth duty on the planners to grow the housing stock. It can still be done in a democratic way and will cut through some of the many problems that we now have. We have to break the link between planning and the housing and communities local government mafia, and put it into the area where we really will get some growth.
Baroness Prosser (Lab)
My Lords, I, too, add my thanks to my noble friend Lord O’Neill of Clackmannan for putting this debate on today’s Order Paper. It is both timely and important. I am announcing to the House a small claim to fame. Over 25 years ago, I became the first woman to take a seat on the Construction Industry Training Board. It was a mixed experience, but it gave me a lasting interest in and a respect for the industry, with all its faults and foibles.
My first meeting happened to be the last for the then chairman. To mark his retirement and celebrate his contribution we all repaired to the Connaught Rooms in Holborn for a slap-up lunch. The chairman called order and said, “Welcome, lady and gentlemen”. He then said, “I am happy to say that this is the first and last time I will have to say that”. Needless to say, I did not take the welcome to refer to me. However, I stuck it out and, I hope, went on to make a contribution to the work of the board.
The industry still does not have a good reputation in the equalities arena. While things have moved on since my CITB experience, there remains much room for improvement. In spite of the sterling efforts of Women and Manual Trades and the more recently established Women into Construction Project, women represent only 11% of the construction workforce. Most of them are in office-based jobs, with only 2% working in manual occupations. The Women into Construction Project, entitled Be Onsite, grew out of the work of the Olympics in Stratford and is supported by CITB Construction Skills. Two years of funding will help broker work placements, job opportunities, and training and support for women in the construction and property sectors.
In February this year a cross-party parliamentary inquiry looked into the question of creating construction jobs for young people. It made a number of recommendations, many of which were about better training, but a number of which also addressed the need for improvements in public-sector contracts and procurement arrangements, and improved employment experiences. The preponderance of so-called self-employment is hardly designed to attract the best talent and continues to be a reputational risk for the industry.
There are, however, some very exciting construction projects coming through. The controversial Hinkley Point development, which is likely to go ahead between 2014 and 2023, will provide 25,000 job opportunities over that time, with 5,600 on-site workers at the peak of the construction. The development will involve the investment of over £6 million into West Country training facilities. The nuclear power development in Anglesey will create 6,000 jobs, and in Moorside, adjacent to Sellafield, 5,000 jobs are expected during construction.
To prepare for future nuclear decommissioning in west Cumbria, a new construction skills centre has opened, ready to provide people with the skills needed to deliver a wide variety of construction projects, including public buildings and homes. This is being funded by Nuclear Management Partners to the tune of £4 million. The Nuclear Decommissioning Authority is putting in £2 million and the local college £1 million. By any standards these are significant sums of money that will provide the industry and the economy with much-needed skills for the future, and will enable the industry to move forward.
It is an accepted view that construction acts as a generator at the heart of the economy, and in no sector is this more true than housing, where the knock-on effect from the supply chain sends positive ripples through the furniture industry, white goods, carpeting and flooring, soft furnishing and transportation. The case for increasing the supply of social housing—in other words, by building more homes—has been well made and is well understood. The economic effects, directly and via the supply chain, are pretty clear.
Savings would also be made via the reduction of housing benefit paid directly into the pockets of private landlords—not to speak of the reduction in misery and anxiety brought about by the uncertain and often shoddy nature of private renting. The Government’s apparent aversion to the building and provision of more social housing cannot be excused by economic arguments, because it just is not so. A perceived aversion to all things public is costing us money, not saving it.
The Earl of Listowel (CB)
My Lords, as someone who is something of an outsider to this debate, I hesitate to comment but, having listened to it so far, it seems that what is needed is to find a Minister or a Prime Minister who is prepared to stand up and say, “This is vital to the success of our nation. This is vital to our future. We need to address housing supply. We have let it fall for far too long”.
I am grateful to the noble Lord for tabling this important debate. I declare an interest as the owner of land with potential for development in London and Nottinghamshire. I am also treasurer of the All-Party Parliamentary Group for Children. I rise to speak because, to my mind, this issue has blighted the lives of generations of children and continues to do so. This debate is about the contribution that the construction industry makes to the UK economy, and I should like to highlight how we shoot ourselves in the foot by not meeting the housing needs of our people, particularly our poorest families, pregnant mothers and mothers with infants in the first year or two of their lives.
I draw noble Lords’ attention to a report published just this week. It was commissioned by the Maternity Mental Health Alliance and authored by the LSE, the Centre for Mental Health and one other organisation. It was funded by Comic Relief. The report tells us that we spend about £8 billion each year through failing to meet the needs of, or provide adequate perinatal care for, women who are pregnant or are about to give birth. That is equivalent to about £10,000 for each birth in this country because we do not meet the mental health needs of mothers.
Nearly three-quarters of those costs relate to the adverse impact on children of not meeting those needs. The average cost to society of one case of perinatal depression is around £74,000. Between 10% and 20% of women develop a mental illness during pregnancy or within the first year of having a baby. Suicide is a leading cause of death for women during pregnancy or in the year after birth. Although there are of course many factors in that, one important factor is the poor housing that we allow many of our mothers to live in.
At the launch of the report, Andrea Leadsom MP, Economic Secretary to the Treasury, spoke about her long desire, gained through working with the Oxford Parent Infant Project, to see that pregnant women and mothers with very young infants have a secure attachment to their child. More recently, with Frank Field MP and two other MPs she set up a parliamentary group to look at children’s first 1,001 days, covering the period from conception through the first two years of life. Graham Allen MP has been a huge champion in recognising the vital importance of nurturing that first bond between mother and child. The right honourable Iain Duncan Smith has also shown great support for this area, as has my noble friend Lord Northbourne. It is vital to the later success of our children that a good, strong bond is built between child and mother at the earliest possible time but, if a mother’s mental health is poor, that bond is thrown into question.
Barnardo’s used to run a project—it no longer has the funding to do so—for mothers in temporary accommodation. Visiting mothers living in temporary accommodation in London, I have had an opportunity to talk to them about the challenges of that experience. What has particularly come out in those conversations is the isolation that they experience because of the shortage of housing. In his opening speech, the noble Lord referred to the importance of proximity to labour, but it is also important to have proximity to one’s family, one’s friends, one’s community and one’s faith group.
I am currently in contact with a mother whose daughter is about to give birth early—she is seven months pregnant. The mother is spending all her time with her daughter, as of course is bound to happen. When I speak to mothers who need to take two buses to get to see their family and friends—because in London they are just scattered around wherever the housing is available—it really brings home to me that we need to think much more carefully about supplying housing so that people can be in the community they need to be in. When I visit parents in Sure Start children’s centres I hear from them how important it has been to have coffee regularly with other parents and to build relationships with other parents. They say how important it has been for their own mental health to break down the isolation they have experienced. More and more we need to be sure that there are communities available, with housing available, to make these things happen.
I have had the privilege of visiting with health visitors in Redbridge in east London and Walthamstow in Waltham Forest. There I saw families—often mothers quite possibly on their own—in private accommodation which was overcrowded and unhygienic, with the walls dripping with damp. One family showed me their basement, which had been flooded for a long while but the landlord had been unprepared to do anything about it.
We cannot afford as a nation to keep on shooting ourselves in the foot by not providing the stable base that families need to make a good and successful start. I really am encouraged by what I have heard in this debate about a growing cross-party consensus that something needs to be done. I hope that we may find a Minister or Prime Minister who is prepared to stand up, to put his head above the parapet and say, “This is an issue we need to address as a nation. It concerns us all. It concerns our children and families. We need to provide adequate homes”. That is what we need to do.
Baroness Dean of Thornton-le-Fylde (Lab)
My Lords, I, too, join others in thanking my noble friend Lord O’Neill of Clackmannan for this debate, and particularly for putting in the element about housing. There is no doubt that our construction industry and some of the major engineering and construction projects going on at the moment in the UK are something to be proud of and deserve a debate in their own right. I declare an interest as a former non-executive director of Taylor Wimpey at the time when the £60,000 house was built.
I think my noble friend Lord Prescott was a bit too mea culpa. Those who worked closely with him while he was Secretary of State covering housing know that he achieved an awful lot. He inherited a social housing stock that had been severely diminished by the sell-off of local authority housing without the requirement to replenish it. He doubled the money we had at the Housing Corporation, where I was chairman. However, the issue of shortage of housing in this country is not new. It has been creeping up on us for decades. Certainly, the recent report from the House of Commons says that if current trends continue—it takes into account government policy—in the next six years the gap between supply of housing and demand will be 1.3 million. That is a very scary figure. We all know the impact of that on house prices—although not all over the country.
A number of reports have been mentioned this morning. I agree with what has been said about the Lyons report but there is another report from Alan Milburn’s Social Mobility and Child Poverty Commission, which is interesting to read. It says that home ownership for 25 year-olds has reduced from 45% to 21%. A quarter of adults up to the age of 35 are now having to live with their parents, and in London the average age of a first-time house buyer is over 40. Those are very serious indications for us. It is not good. The social damage to our country’s cohesion, stability, independence and aspiration is enormous.
As I know that a lot of noble Lords will be dealing with those impacts, I will concentrate on the impact on our economy. The Home Builders Federation says that every new house built creates 4.5 jobs—2.3 of them directly. So, for every 100,000 homes we build—and we need 200,000 a year—we create something like 250,000 jobs. National Housing Federation research says that every £1 spent on housing generates £2.40 in the wider economy. The Office for National Statistics says that every job filled creates a gross added value of £44,000 and that building 100,000 houses adds something like £28 billion of growth to our GDP. The facts are absolutely clear. We are losing out not just socially but economically. In September, the CBI in Housing Britain analysed the crisis. It said that businesses were affected by £3.2 billion a year in housing-related costs and £770 million a year in transport-related costs.
I asked myself in preparation for this debate why developments in aviation, transport such as HS2 and Crossrail, and energy are not required to go to local authorities, which are involved in consultation, but are considered part of the national UK infrastructure and have to go to the infrastructure planning committee, yet housing does not. I am not talking about 25 houses here and there. In my humble view, all the proposals that have been made will not solve our housing problem individually. We need a whole panacea of developments. This has to include large housing developments. I know that is unpopular and controversial, but I do not believe that infill housing will respond to the problems we have.
I agreed very much with my noble friend Lord Rooker when he talked about urban expansion. He was absolutely right; we need to look at that. I know the concerns about the design and quality of large infrastructure. I am currently a non-executive director of the regulated board of Places for People, which is a large registered social landlord. We have a development in Milton Keynes that is 10,000 plots. If you went there today, the 10,000 properties have not been built but the roads have, the 10,000 trees are in, a school has been built and another school is due next year. The infrastructure has to be there when the people move in, not after they go and live in those areas.
The Milburn commission also talks about green belt swaps. The Royal Institution of Chartered Surveyors in its September report, Property in Politics, recommends a new description—amberfield. This touches on the point made by my noble friend Lord Rooker. The green belt policy legislation is more than 60 years old. We need to return to it. I know that is controversial. It needs political leadership and we are lacking that at the moment. I have always been amazed that we build on school playing fields and get a hoo-hah, yet down the road can be a shut-down pig farm with dreadful land quality that we leave and protect. There is something wrong somewhere in that. The Wolfson economics prize—the second largest economics prize after the Nobel prize—asked this year:
“How would you deliver a new Garden City which is visionary, economically viable, and popular?”.
There were more than 300 ideas. Two of the five judges came from the housing industry—Tony Pidgley from the private sector and David Cowans from Places for People. They said that you cannot do it in one place; it has to be across the board. As well as a social crisis this is an economic crisis that we will have to pick up, and we will rue the day that we lacked leadership in making sure we changed the situation.
Lord Macdonald of Tradeston (Lab)
My Lords, as my noble friend Lord O’Neill of Clackmannan said in opening this splendid and vigorous debate, construction across the UK has a workforce of around 2 million, and a need for a constant supply of new labour with vocational skills and technical expertise to meet the demands of architecture and infrastructure that can be on the frontiers of radical design.
In the UK we are not short of ambitious projects. We on these Benches also welcome the promise of job creation implied by Labour’s commitment in support of the Lyons report target of increasing housebuilding and new homes. However, the urgent question is: how will the industry recruit enough workers, given the widening skills gap? The forecasts are alarming, as my noble friend Lady Prosser said in her excellent contribution.
Earlier this year, a cross-party group of parliamentarians, co-chaired by the noble Lord, Lord Best, and Nick Raynsford MP, published a report, No More Lost Generations—Creating Construction Jobs for Young People, which concluded that the expansion of construction over the next four years would create 180,000 new jobs. It also warned that about 400,000 building workers would retire over the next four years and would have to be replaced. That potential recruitment of almost 600,000 workers on present trends, across the next Parliament, is a huge challenge but also a great opportunity.
Many noble Lords will, I am sure, share my admiration and appreciation of the contribution made by migrant workers to our construction industry, particularly those from central and eastern Europe who are presently concentrated in London and the south-east. However, the years ahead offer a real opportunity to ensure the increased recruitment of young people from the UK. There is support now, across all parties, for more vocational training and for more apprenticeships, as we will no doubt hear in the debate that follows this one.
The annual apprenticeship starts now total just under 500,000 a year overall in the UK. Regrettably, the construction industry’s contribution to that total last year was just 7,300, which was only half the number for 2009. As my noble friend Lord O’Neill said, these are thorough four-year apprenticeships, and very desirable for young people. The Best-Raynsford report, which has the support of the Chartered Institute of Building and the Construction Industry Training Board, also points out that construction employs a smaller proportion of younger people than the UK economy as a whole—only 10% of those in the industry are aged between 19 and 24. The report suggests that the public sector should make more use of the levers available to it through procurement contracts and through planning processes to require training and employment commitment to apprenticeships from employers—a strategy that I trust a Labour Government would support. This route could also be used to explore a move towards greater diversity in gender and ethnicity in construction—a priority, given the very small proportion of young women being recruited.
Perhaps a positive initiative is the setting up of an apprenticeship commission, again with cross-party leadership, under Robert Halfon MP and my noble friend Lord Glasman, with backing from the Construction Industry Training Board, serviced by the think tank Demos. The chief executive of the training board, Adrian Belton, wants to see 120,000 new apprenticeship starts over the coming five years. That would be an average of 24,000 starts a year, which is certainly an improvement on the current 7,000 a year. The recently published review of innovation and industry strategy by my noble friend Lord Adonis, Mending the Fractured Economy, recommends devolving £6 billion from Whitehall, partly to strengthen local enterprise partnerships and increase investment in local housing, transport and adult skills.
Commitment to the key policies in the Adonis review will no doubt feature in the manifesto of the Labour Party next year, and I hope that it will then be implemented to boost construction of housebuilding and infrastructure, and to offer apprenticeships to the many thousands more young people whom the industry should be aspiring to employ and train. Will the Minister please update the House on what progress the Government believe they are making to address the growing skills gap through recruitment and training and the provision of apprenticeships?
Lord Borwick (Con)
My Lords, I declare an interest in several housebuilding projects: in Bicester, in Scotland and in Sussex. The scheme in Bicester is for 2,600 houses, and because it was not controversial, it took only 10 years to get through planning and cost only £4 million in professional fees.
I welcome this debate, as building more housing will probably do more than anything else to help poor people. Relaxing planning laws is the key to unlocking real growth in housebuilding. When I was a building contractor some time ago, I used to argue that the best thing for expansion is contracting. Some very good work has been done by the Government in this area. The National Planning Policy Framework has simplified planning policy down from 1,500 pages to fewer than 50 pages. I congratulate my noble friend Lord Taylor of Goss Moor, who I know worked extremely hard for many months to get this done. The new practice guidance has consolidated 7,000 pages of guidance into simple guidance available online.
Simplification is always welcome, but at present we still have planning laws that are too restrictive. Of course, the resulting lack of housing supply raises the cost of rents and mortgages. It costs taxpayers dear, too. In 2013, the Government spent around £24 billion on housing benefit—almost double the sum paid out 10 years earlier. By limiting the supply of new homes and subsidising rents through housing benefit, the only people who benefit are landlords and homeowners who are looking to sell—not to mention the civil servants who administer it. It is those on lower incomes who lose out. So if we were to relax the most restrictive planning laws, we would see construction companies build houses where people actually want and need them. This would cut housing costs, which make up a quarter of outgoings for those on the lowest incomes.
There is evidence from overseas that restrictive planning increases poverty as well. The US Census Bureau has produced state-by-state estimates of poverty, which account for various types of benefit programmes and cost of living differences. Once we adjust for a range of variables, states such as Texas, with fewer restrictions on housebuilding, have a lower rate of poverty than those such as California that have restrictive housebuilding laws.
Housing is simply too expensive. A recent report showed that the ratio of median house prices to median incomes is lower in Washington DC and Chicago than it is in Swansea and Stoke-on-Trent. Perhaps we have the previous Government to thank for that. Between 1997 and 2010 the ratio of median house prices to median incomes rose from 3.5 to 7. Since 2010, the ratio has gone down, but by only a little, to 6.72. So relaxing planning and encouraging more housebuilding could therefore lower house prices and rents directly. This, of course, would be a huge boost to the construction industry, too, which is a sector that did not pick up nearly as quickly as others through the recovery.
There are reasons to be positive; 480,000 new homes have been built since April 2010. Equally impressive is the fact that the Government have helped to get construction on sites restarted where it had previously stalled, which has led to more than 80,000 new homes. Lots of work is being done to improve our infrastructure, too, which will be a shot in the arm for the construction industry. The Government have set out plans to improve roads, energy infrastructure and more to provide certainty for investors and businesses in the supply chain. That is to be welcomed. But in the housing sector there are still a few things to improve. The reason for localism is for people to have a say in where houses are built—but it is being misused by people to decide whether houses are built.
For most people, the investment in their house is by far the biggest in their life. They feel, therefore, that the creation of new houses must reduce the price of their biggest investment. If I live next door to an open field, I have a great view that I do not own. If the owner of the field applies for planning permission to fill it with houses, I will object because that proposal will reduce the value of my house and remove my calm and peaceful view. There should be some way in which negotiations can take place between the field owner and his next door neighbour to encourage agreement. Unfortunately, however, the Government’s planning laws take so much benefit for the state that that never gets done.
The planning system is a yes/no structure. One can effectively either object to a planning application, or stay silent. The truth is that change is not a black and white decision. There should be ways in which neighbours could say that they accepted a proposal, provided they had some specific benefit from it. Not a benefit to their local council, which they do not feel part of, but to them personally.
The new homes bonus is an extra payment introduced to encourage local authorities to give planning permission for new houses. Like any bonus, it is supposed to change short-term behaviour; but I am not sure that it has worked well. Perhaps the reason is that it is paid to a council over a period of six years, rather than all at once. The department has a bonus scheme for high-performing civil servants, which is absolutely right. Can the Minister tell me whether any bonus paid to civil servants has been paid in the same way as the new homes bonus—that is, over six years?
Baroness Donaghy (Lab)
My Lords, I congratulate my noble friend Lord O’Neill of Clackmannan on securing this debate. I share his interest in the construction industry and want it to be safer and even more successful. Noble Lords may know that I produced a report for the DWP outlining the underlying causes of fatal accidents in construction, entitled One Death is Too Many. I met 70 organisations in preparation and that gave me an insight into the construction industry as a whole.
The UK construction industry deserves credit for being a world leader for professional services and innovation. The proportion of employees in construction with a degree or equivalent qualification has almost doubled in 10 years, albeit from a very low base. Yet the industry has long-standing issues, such as skill shortages, image and lack of government focus, which stubbornly remain over decades.
I believe that government focus on the construction industry is dissipated and should be improved. I accept that it is not possible to have one government department. Construction covers 10 government departments with a strong policy interest as client, regulator and provider of funding. However, a political overview is essential and has been lacking. At the very least, there should be a full-time Construction Minister in government and firm promises in manifestos, which my party pledges.
When the Government, the industry and trade unions work together—for example, on the Olympic Games—it shows what can be achieved. London 2012 was the first modern Olympic Games without a construction fatality, delivered on time and within budget. That did not just happen: it was the result of years of pre-planning and co-operation, led by the then Labour Government and continued into implementation by the coalition Government. If only housebuilding could be given the same treatment. Regrettably, the subject has not been an election priority for a very long time and that represents staggering public policy failure over decades.
Government grants to Britain’s housing associations were cut by the Chancellor, which was a disgrace. Council house building has ground to a halt and even the phrase “affordable housing” has taken on a new meaning, in that it is not actually affordable to most people. If the next Government were to take housing by the scruff of the neck I am sure that the construction industry would play its part. However, the industry is not a social worker and it will not solve a political crisis. As the Lyons housing review stated:
“House builders’ shareholders’ interests are in whether their firms meet announced targets for sales and return on capital rather than on the number of homes built”.
Therefore the Government must take a lead if we are to make progress.
Lyons pointed to the increased concentration in construction of housebuilding by the larger companies and the dramatic decrease in the number of small companies being involved in it, because of their inability to access funding from banks and their vulnerability to being at the end of the supply chain. While SME builders may never regain their former volume of building, they are important because they will develop sites that the larger companies will not touch. One way of avoiding the inevitable decline of SMEs in construction would be to deal with the issue of cash retention. That is a 19th-century practice that occurs only in the construction industry. It is a bad practice: it is estimated that over £3 billion of cash retention, funded by small business, is outstanding. If I had time I would say more about that.
Lyons called for the Government to provide confidence that in future fluctuations in the economic cycle those involved in volume housebuilding should be given greater certainty. The Labour Party proposes a help-to-build scheme that would allow SME housebuilders to access lower-cost banking, supported by an Exchequer guarantee, subject to careful oversight. That would be a great step forward.
Although the construction industry prides itself on its flexibility, quite rightly, that does not work when it comes to skills training. The majority of the workforce—approximately 55%—has skills below NVQ level 2 or equivalent, and approximately 11% hold low or no qualifications. Countless reports, going back to those of Sir Michael Latham and Sir John Egan, have referred to the industry’s poor image and the reluctance of parents to encourage entry to it for their children. The financial structure of the training industry means that it is easier to poach from other companies than to train people itself. There is a desperate shortage of some skills, including project management and brick-laying. Construction apprenticeships, as my noble friend Lord Macdonald of Tradeston has already said, are now below 8,000, which is a disgrace.
One of the major drawbacks to improving skills training is the extent of self-employment and bogus self-employment in the industry. The self-employed do not take up apprenticeships or go on safety training courses. It is assumed that they are fully fledged in their skills before going on site, which is a nonsense in many areas.
There are some success stories, of course, which we must build on—including those of the university technology colleges, about which I know that the noble Lord, Lord Baker of Dorking, will be speaking in a later debate today. There is the example of the Labour-run London Borough of Haringey’s Building Lives programme, which works in partnership with local builders to launch a new academy. Apprenticeships have been awarded to 50 local people, who will learn their trades working on homes for Haringey’s social housing sites. Mulalley construction company and Keepmoat homes have both promised to take on 25 apprentices each, ensuring that the skills they learn can be transferred to jobs.
Finally, it is an enormous job, but we will be failing our young people if we do not provide them with homes, jobs and proper training. If the political will is there, we can succeed.
Lord Hunt of Chesterton (Lab)
My Lords, this welcome debate, secured by my noble friend Lord O’Neill of Clackmannan, is about the future of the UK construction industry to the economy. I am an honorary fellow of the Institution of Civil Engineers and director of a small—perhaps not micro—consultancy. I have been engaged in research on building construction since the 1960s, when civil engineers realised, following the famous collapse of three cooling towers during a tea break on a construction site in Yorkshire, that new designs were needed. I remember clambering along the edges of a tall skyscraper to study the wobbling of the tubes, because a few months later the Queen was going to open that building.
In fact, UK technology has played a leading role in the construction of many advanced buildings around the world. I would mention some of the bridges in Hong Kong and, whatever one might think of the aesthetics, the skyscrapers of London. These construction projects have certainly contributed to the economy and have created jobs in the capital. Basic research in the UK has made a contribution, a notable example of which was the invention in the 1960s of the float glass process by Pilkington. That glass is now used in every tall building around the world. Much work has also been done to solve problems with turbulence through the creation of complex flow structures to combat wobbling in the wind or being buffeted in the wake created by wind turbines.
Other countries in Europe have also advanced their building technologies and practices, especially in the areas of thermal comfort, noise and damp, all of which have been mentioned in the debate and which I saw when I visited a German public housing project. The noble Lord, Lord Roper, made the comment that local authorities may not be the best landlords, but the Germans were using the housing association model long before it became prevalent here.
An important role for the construction industry is ensuring adequate flood defences in our cities, but much more funding needs to be provided in this area in order to achieve higher standards. Our Dutch colleagues were not impressed by what they saw in the UK this winter. I hope that the Minister can tell us how EU programmes can benefit UK construction and whether they will be expanded under the next EU programme for research and development, known as Horizon 2020. Some UK building companies have made good use of the open and more or less freely available information produced by the German Fraunhofer Institutes. Such information is no longer available from the Building Research Establishment, which in the view of many UK practitioners has become excessively privatised. Indeed, the micro element of construction which has been a feature of many contributions requires free or cheap advice to enable people to use the technologies. A notable piece in this morning’s newspapers is the fact that Homebase is to close many of its stores because fewer and fewer people either know about or can apply these skills.
The purpose of this debate is to look forward. I welcome the Government’s policy document, Construction 2025: Strategy. It points out that there has been a great increase in research and development over the past 10 years, with a deeper commitment on the part of the Engineering and Physical Sciences Research Council to the needs of the construction industry, which is very welcome. But the report also emphasises the need to improve the effectiveness of putting UK research into practice. This requires working with big business and of course it is difficult, given that traditionally this is a rather fragmented industry. The chief scientific adviser in BIS, Professor Brian Collins, has commented on the importance of design and systems engineering. However, a contribution from the continent has come in the form of greater use of more advanced building materials, although the UK is also now moving in this direction.
Some of these new technologies are proving very important in the design and construction of green buildings and green cities, a point which has been made by a number of other speakers. One of the nicest examples of a green environment was the building of the Olympic site. Before work began there was a process of detailed planning of exactly how the green areas, water areas and building areas would look and how they would develop over time. It is interesting to note that how a locality is designed will affect the local temperature and humidity, as well as other aspects of comfort. The UK has made considerable advances in these areas. I should say that other cities around the world have encountered big problems in this regard. Heat waves in New York and Paris have led to high mortality rates in some of the less green areas of those cities. The development of cities is important in terms of maintaining health, and it is something that the chief scientific adviser will be aware of. We can expect to see more of these difficulties in the future as we experience longer periods of extreme weather. That will present a great challenge to the construction industry.
One way in which I hope we are contributing towards a reduction in the rate of climate change over the long term is by having a vigorous nuclear power station programme. The Government are to be congratulated on moving forward in this direction. Noble Lords have pointed out that the programme will be a big boost to the construction industry. Other planners and representatives of the construction industry who are considering the future of cities must realise that probably the most environmentally successful cities will not be megacities; rather, they will be cities that have been broken up so that they can incorporate large green areas. The Germans more or less invented this concept and we should look to the continent to see how we can develop it.
Lord Jones of Cheltenham (LD)
My Lords, I congratulate the noble Lord, Lord O’Neill, on securing this timely debate and on his wonderful introduction to the topic. The Chartered Institute of Building believes that by 2022 there will be a shortfall of 1 million homes in the UK. The Liberal Democrats believe that the United Kingdom needs to aim for an ambitious 300,000 new homes per year, a figure supported by the Royal Institute of British Architects, the Westminster policy think tank and trade bodies working in and around housing. As we have heard, we also need the infrastructure to support all these new homes. Roads, drainage, telecoms, power and other requirements such as transport links, schools, shops and doctors’ surgeries for a city the size of Nottingham need to be provided every year for the next seven to 10 years if we are to solve this problem.
The recession had a huge effect on UK construction. The industry is one of the truly labour driven sectors, but it lost some 400,000 skilled personnel after the 2008 crash and will lose another 400,000 through retirement over the next four or five years. This is leading to a critical shortage which some are calling a “skills time bomb”. Construction wages were up by an annual rate of 4% in July. We are returning to the age of the “loadsamoney” plumbers, plasterers and painters that plagued the Thatcher era and are symptomatic of a cost-push inflationary spiral affecting housebuilding costs. While a number of government-funded apprenticeship schemes are in place, they are not enough to meet the labour demand required to build 300,000 new homes per year. I had a conversation recently with Cheltenham’s leading building materials supplier. He told me that he doubted whether we could build the number of homes needed because we are not producing enough bricks. As a result, I tabled a Parliamentary Question—HL 254—and received what I thought was a rather complacent reply from the Minister.
Around 600,000 houses were built in 1952-53 under Harold Macmillan’s tenure as Housing Minister. We need to get back to that level to overcome the housing crisis, particularly the acute shortage of affordable or social housing. To achieve that, we should be repeating the garden city model which has proved so successful in the past. According to the Office for National Statistics, construction output figures in August came in at 3.9% lower than in July this year and 0.3% lower than last year. Private housing dropped by 5.5%, with repair and maintenance also down, although all areas seem to have dipped. There were some screaming headlines about this. We are now in late October and frankly the August figures are ancient history. Construction is a volatile industry which has been on a meteoric trajectory over the past 18 months or so, but those of us who can still remember life before the iPhone and have some experience of recessionary cycles know that there needs to be at least another month or two of figures of decline before we start to worry that a downward trend is emerging.
What is more pertinent is the view from the ground. Construction output is most likely to be negatively affected by the lack of contractors available to build or the number of sub-contractors who are still disappearing due to cash flow issues caused by late payment problems. A survey published by StreetwiseSubbie.com, a lobby group that works on behalf of sub-contractors, is alarming. The report claims that over 90% of specialist contractors are being paid after more than 30 days on publicly funded projects and that 4.7% have had to wait longer than 90 days. Of those surveyed, 84% said that government initiatives such as the Prompt Payment Code, the Construction Act and the Construction Supply Chain Charter had made no difference. Again according to ONS, the highest number of company liquidations is still in the construction sector. In the 12 months ending quarter 3, 2013, the number going out of business was 2,819, adding to the 5,000 firms which had already disappeared between 2010 and 2012, according to PricewaterhouseCoopers.
It is not good business practice to starve your suppliers of cash. The contractors cannot operate without the sub-contractors working beneath them. This is no longer the 1970s world, where hoarding cash and starving suppliers was regarded as common business practice. We are now supposed to live in a more enlightened working environment, where you partner with suppliers and build a team working towards a common goal. If you do not pay them, they cannot work; if they cannot work, they walk; and if they walk, their suppliers put them on stop. Everyone suffers. This Government and the next must tackle this serious housing shortage through enough skills, enough materials and prompt payment.
Lord Haskel (Lab)
My Lords, I recently had a significant birthday. At the party, I was asked why I joined the Labour Party 60 years ago. I replied that I joined because I saw it as a crusade for equality. Today, nowhere is inequality more visible than in housing. It was perhaps easier to overlook this inequality in more prosperous times, when credit was easier and prices were lower, but rising inequality tells us that it is time for a change. Without change, inequality in housing will cause yet more hardship, and more people’s lives to become precarious and more threadbare.
Some may dismiss this as sour grapes. Like my noble friend Lady Dean, I see it as saving our social fabric. We have to act before this rankles enough to cause yet more social problems. Danny Dorling, in his recent book, tells us that there were four times as many big demonstrations in 2013 as in 2006, mostly inspired by rising inequality.
My noble friend Lord Prescott told us that we all know the issues. We all know the remedy. We all agree on the need for more housing. I put it to the Minister that the same Labour crusade that attracted me 60 years ago must be applied to housing. Proper housing is one of our freedoms and freedom warrants a crusade, instead of the token gestures mentioned by my noble friend who opened the debate, for which I thank him.
How do we do it? We do not need to go back 60 years. We have to go back only to the report published last week by Sir Michael Lyons and his team, to which many noble Lords have referred. That tells us how to do it; we in politics have to provide the crusade. We must see that houses are for living in, not just for buying and selling. We must see that housing land is for building on, not for hoarding or trading. We must see that local families take priority over speculators. We have to balance the economic interests of existing householders and landowners with those of prospective householders and landowners. The crusade to build 200,000 new houses a year must be clearly championed and given clear priority by the Government, as many noble Lords have said.
All this can be signalled, for a start, by raising the status, for instance, of the Secretary of State for Local Government and the Minister for Housing. They must be given a task force to carry out the mission of seeking the necessary powers to designate areas for housing growth and new homes, if necessary; to get over some of the planning problems mentioned by the noble Lord, Lord Borwick; to update legislation for compulsory purchase orders; and to give local authorities the power to levy council tax from developers on unbuilt plots.
The Chancellor must support this with the consolidation of housing funding streams as part of economic development devolved to local areas. The Chancellor can use government guarantee schemes, including a help-to-build scheme to support not only the large builders but small local builders, and co-ordinate this with the revolving infrastructure funds.
Local councils and planning authorities have to play their part. They must produce five-year targets based on demand. They should empower the Planning Inspectorate to intervene if a plan is not produced. All this is designed to ensure that, once planning has been agreed, housebuilding will proceed, and there could be penalties if developers do not go ahead. In this way, a community can provide for its future and for that of its residents. More houses will be built, making them more affordable. Planning can include garden cities, which will raise our quality of life. Alongside this, we will have to increase our capacity to build homes, as the noble Lord, Lord Shipley, emphasised. I agree with him. Not only do we need more small companies building homes, we need to raise the number of skilled people in the industry. Achieving this must also be the responsibility of the task force. Right to buy will have to be revisited so that there will have to be a genuine one-for-one replacement by social landlords. The existing scheme has barely replaced half the homes sold.
My noble friend Lord Rooker spoke about the green belt. Reviewing the green belt legislation has to be part of this. Much green belt land is used for intensive agriculture with little environmental value. Most of the best bits are protected anyway. A crusading Government will grasp the nettle and review the designations.
Hand in hand with more powers will come more openness. Who owns what land? Which developers have taken out options? Developers will make sure that homes are built within a reasonable timescale, because the council tax will become payable anyway. This may mean more regulation. For instance, regulation of crowdfunding of the buy-to-let industry certainly needs a closer look. Indispensable to all this is an informed understanding of what makes homes environmentally suitable while improving the quality of people’s lives. The recent recommendations by Terry Farrell make powerful proposals.
If we are to build 200,000 homes a year and have the benefits of adequate housing in the right places, at affordable prices, to the benefit of our economy, to society and to our quality of life, it can best be achieved in the form of a crusade—a crusade similar to the one that attracted me to the Labour Party 60 years ago.
Lord Morris of Handsworth (Lab)
My Lords, I start by recognising the efforts of my noble friend Lord O’Neill in securing this important and timely debate. I declare an interest as the recently retired chairman of the Midland Heart housing association.
The three elements of our debate are the construction industry, the UK economy and, of course, housing. Taken together, those elements can build a ladder of opportunity that provides the potential to change people’s lives. However, a robust construction industry and a thriving economy do not automatically transfer to good housing. We need the political will to deliver; in housing, that is what the Government lack. That is why I welcome the Lyons review, which is not only timely but asks the difficult housing questions. The review points to the systemic failure over many years to build the homes that our country needs. It highlights the need to tackle the deep and underlying causes of the crisis. Although it is early days in the debate on the Lyons review, I see it not as a game changer on housing but as a modest start towards change. It will refocus the priority in house construction from the speculative commercial tower blocks in and around our cities to the housing needs of local communities.
I welcome the curbs on development land held as a speculative investment when local people need homes. The message from the next Labour Government must be clear: “You did not make the land, you acquired it. So use it or lose it”. I also welcome the Lyons package in other respects. There is the dimension that I would describe as community involvement: local communities being given the opportunity and power to build homes where people want to live; councils producing a plan for homebuilding; and first-time buyers being given priority rights when new homes are up for sale.
However, today’s debate is also about the contribution of the construction industry. Construction is not just about building houses. The construction industry is literally the burden-bearer of our national infrastructure, including roads, railways, bridges and tunnels, and not forgetting local shops, hospitals and schools.
As we seek to change attitudes and culture in the British economy, we must also examine the methods and behaviour of some of the stakeholders, including employers and, of course, trade unions. The worst example of behaviour that we have experienced in the construction industry is the blacklisting of workers, which was, frankly, not just disgraceful but totally unacceptable—but widespread. That story goes to the core of our political system, involving some of the biggest names in the construction industry, who engaged with and participated in the blacklisting of hundreds of construction workers through the infamous organisation, the Consulting Association. That blacklisting organisation was consulted by some of the biggest names in the industry. The information that it provided to the construction companies resulted individuals being blacklisted and excluded from any chance or opportunity of gainful employment in the industry. Many of the biggest names have since apologised, and some have said that they will compensate the victims, but we all want to know who in those companies felt blacklisting to be an acceptable form of running a business.
Last year, a report on blacklisting in employment was conducted by the Scottish Affairs Committee, who considered how best practice could be taken forward to ensure that blacklisting could not occur in future. It argued that employers who engaged in such corrupt practices should not have the benefit of publicly funded contracts.
In 2010, the blacklisting regulation was introduced by a Labour Government. As a result, a blacklisted person does not have to be an employee of the company, and companies have a responsibility to justify any decision they take not to employ such people. I am sure that construction workers will be mindful of their responsibility to deliver not just for the UK economy but for the thousands seeking homes, the thousands on a waiting list that gets longer, never shorter, a waiting list that ensures that some people at the top of the list have choice; at the bottom of the list, there is no choice. I say that those people will find hope from the Lyons review and will serve the British people by building the homes that people need, because construction workers, by their tradition, are builders, not destroyers. I therefore again congratulate my noble friend on bringing this debate forward.
Lord Young of Norwood Green (Lab)
My Lords, I, too, congratulate my noble friend Lord O’Neill on bringing this debate to the House today. It has been a fascinating debate. I cannot possibly hope to respond to all the various aspects that have been raised. I wish the Minister luck in trying to deal with them.
This debate has exposed an issue that is vital for the economy of the country and the social well-being of our communities. When I listened to my noble friend Lord Prescott talking about what he tried to do, I could not help reflecting that he did not mention refurbishment—if he did, I did not hear him. Of course, we put a lot of capital, time and effort into ensuring that properties that had been neglected for tens of years were brought up to a reasonable standard. It did not solve the problem of ensuring that affordable housing was available not just for those in desperate need but for a wide range of people across the country.
An issue that has been raised that is dear to my heart is the question of skills in the industry. It is one of the key challenges if we are to try to deliver. If we form the next Government, we intend to adopt the recommendations of the Lyons housing review on renewing skills. Once again, we had a good briefing pack from the Library. The comment on people and skills—because of the shortage of time, I shall refer only to a bit of it—states:
“Global and domestic opportunities in construction mean that a skilled and flexible workforce will be vital to the UK construction sector’s future performance and competitiveness. Evidence on qualifications is positive, showing increasing proportions of individuals with higher level qualifications”.
That is the good news.
“However, there has been a substantial fall in apprenticeship completions in construction related industries in the last three years while completions in other sectors have continued to grow”.
That point was made by several contributors to the debate today. My noble friends Lady Dean and Lord Macdonald of Tradeston mentioned the fact that we face not only the low number of completions but the demographic challenge of about 400,000 people retiring. It is a huge challenge to ensure that we get those skills.
There is still a job of work to do in trying to encourage young people to understand that not all of them need to go to university to get a good career and that there is real potential in engineering and construction out there to provide them with valuable careers and a lifetime of valuable work. When I go into schools and speak to 16 year-olds, I see little or no awareness of apprenticeship schemes, and little or no awareness of jobs like engineering and construction. There is a huge job of work to do in convincing not only young people but, I suspect, parents and teachers as well. Teachers are still too focused on thinking that the solution to all our problems is to send all young people to university, regardless of whether it will suit them. That is a key part of solving this problem.
It is perhaps right that there has been such a lot of focus on planning in this debate. I always enjoy hearing my noble friend Lord Rooker remind us in his robust manner about the reality of what we mean by green belt, and about how much of that land probably should not be described as green belt and ought to be available to be built on. Of course we need to set it in the right planning context, but what we have at the moment simply will not enable us to produce the number of houses required.
We face the biggest housing crisis in a generation. Levels of housebuilding have dropped under this Government to the lowest in peacetime since the 1920s. For many years there has been a systematic failure to build the homes that our country needs. We need to tackle the deep and underlying causes of this crisis. We have a housing market that is not working, insufficient land coming forward, a decline in housebuilding capacity and communities feeling that they have no influence over where new homes will go.
Labour has endorsed the comprehensive plans set out today by Sir Michael Lyons’ housing review—an independent review, the first of its kind in a generation. My noble friend Lord Morris called it a modest start. Well, it may be modest, but if we can achieve just some of the recommendations then we will have made real progress. It sets out how Labour will meet its commitment of building 200,000 homes a year by 2020. One noble Lord said that it ought to be 300,000. Well, if we can hit the 200,000 it will be a significant achievement. It sets a course for doubling the number of first time buyers by 2025. We believe that only Labour has a plan to tackle the housing crisis.
Today, Labour is announcing three key policies. These will make sure that local communities have the power to build the homes that are needed in the places that people want to live; that local councils produce a plan for home building in their area and allocate sufficient land for development to meet the needs of people in the area—there are still too many local authorities that have not produced the development plans; and that first-time buyers from the area can get priority access rights when these new homes go on sale. We know that in many cases that just does not happen.
Other major recommendations include powers for groups of local authorities to collaborate and form Olympics-style new homes corporations to build on our designated land at pace. The Olympics was mentioned. It is a good example to quote for a number of reasons. My noble friend Lady Donaghy pointed out how safe a construction site that was, with not even one fatality. One other point about the Olympic site has been mentioned as regards the technology employed, the comprehensive analysis made of the site and the fact that we insisted that apprenticeships ought to be part of that process. Three hundred apprentices were employed. We have been telling the Government again and again, “If you are going to have large public procurement contracts, training and apprenticeships ought to be part of that contract”. I await a positive response on that but I am not holding my breath.
Other recommendations include measures to drive competition in the housebuilding industry and increase capacity, thereby expanding the number of small firms rather than the depletion that we are seeing at the moment. A number of noble Lords mentioned the very real problem of late payment, and I think it was my noble friend Lady Donaghy who reminded us about the unfortunate fact that there are still too many examples of bogus self-employment in the construction industry.
Other recommendations include a help to build scheme to underwrite loans to small builders to get them building again, fast-track planning on small sites and financial incentives to local authorities so that they deliver a programme of new garden cities and garden suburbs to help unlock 500,000 homes.
Those are ambitious targets. My noble friend Lord Haskel talked about a crusade. The word is not a piece of hyperbole—he is right: we need a crusade. We need to do something about the situation where young people are beginning to feel that, no matter how hard they save, no matter how they strive, they will not be able to get a foot on the housing ladder. We have a situation where, as my noble friend Lady Dean reminded us, more and more young people are still living with their parents and their dream of owning a home of their own is fast disappearing.
Building more homes will not simply revive our stagnating construction industry; it will also change the lives of families across the country. At the moment, because of the pressure on housing supply, rents are impossibly high. When you add to this the rising utility bills that households are experiencing, it is easy to see why many across the country are struggling. I shall pick out just one example. The latest figures reveal that the south London borough of Croydon has been worst affected. Croydon has seen the highest increase in working families who are having to claim housing benefit because they cannot afford the higher rents. Before Labour took control of the council in May, the number of claimants had increased from 1,050 to an astonishing 12,500. It is not just a London problem, it is happening across the UK. Take Fareham in the south-east, for example, where the number of working families claiming housing benefit has increased from 113 to 1,111, or Pendle in the north-west, where the number increased from 134 to 1,175. What does the Minister have to say to the 12,500 people in Croydon, and the thousands of other households across the UK, who are being forced to claim housing benefit on top of their wages to pay the rent? Does he really think that this is an economy that is working for everyone?
Lord Popat (Con)
My Lords, I am grateful to the noble Lord, Lord O’Neill, for initiating this very important and timely debate. I say “timely” because the construction industry is very much at a crossroads. It is recovering from the double-dip recession in 2008 and the infrastructure projects we have in the pipeline will result in growth in this industry over the next five to 10 years. The noble Lord, Lord Morris, put it very well: this debate is about the construction industry, the economy and politics.
The construction industry serves very diverse markets. From minor maintenance work on our homes—replacing the washer on a dripping tap, which typically would be covered by a call-out charge of £60 or—to constructing the largest infrastructure project currently under way in Europe. Crossrail is estimated to cost £15 billion. It is not surprising, therefore, that an industry serving such diverse markets should itself be diverse. It is also large. There are 280,000 businesses in the industry, big and small. Construction contracting, services and products contribute more than 6% of GDP and contributed £90 billion in gross value added in 2013. As the noble Lord, Lord O’Neill, said, there are 3.2 million jobs in construction—about 10% of our total workforce. However, the industry’s importance is greater than these figures. It builds and maintains our places of work, our schools, our hospitals, our economic infrastructure and, of course, our homes. That is why construction is one of the sectors covered by industrial strategy. Whatever the particular market, four factors are essential to the longer-term vitality of the industry.
First, the industry needs a favourable regulatory, fiscal and economic environment where government supports sustainable development through creating the right conditions for business to flourish. Secondly, the industry needs a clear and healthy workload. Thirdly, it needs a strong and resilient supply chain. Fourthly, it must adopt emerging technologies and new processes. I will deal with each of these in turn and finish by saying a little more about housing in particular and construction more generally.
First, on having a favourable fiscal and economic environment, the UK now has the lowest headline corporate tax rate in the G7 and the fourth lowest in the G20. The World Bank rates the UK tax system as the fourth least burdensome in the OECD. Excluding EU regulation, the estimated net cost of regulation to UK business has fallen by £1.5 billion since 2011, so we are making real progress.
Secondly, on having a clear and healthy workload, the construction industry was hard hit by the recession but is now benefiting from the economic recovery. More investment will come forward as confidence in the wider economic recovery grows further. The strength of that recovery is key to the construction industry. While the industry is currently 9% below its pre-recession peak in the first quarter of 2008, which was a historic high point, key construction markets are recovering. Construction output was up by 5.6% in the second quarter of 2014, compared with the second quarter of 2013. This was driven by an 18.6% rise in new private housing and an 8.3% rise in non-housing repair and maintenance.
The forecasts are also positive. The Construction Products Association forecasts a rise in construction output of 4.7% in 2014, and a further 4.8% rise in 2015. The Institution of Civil Engineers report The State of the Nation acknowledges that annual investment in our economic infrastructure is higher on average in this Parliament than in the previous one. However, as that report made clear, the job is not yet done. This is why the Government have committed to long-term funding settlements in key sectors such as roads and flood defences. We have committed to spend more than £70 billion up to 2021 on all forms of transport. Councils are receiving £10 billion for local highway maintenance over this Parliament and the next. We have also introduced the biggest reforms to energy markets since privatisation.
Thirdly, on the need for a strong and resilient supply chain, the Government are working in partnership with the construction industry to tackle key supply-side issues. It is now a little over a year since Construction 2025, our industrial strategy for construction, was launched. That strategy is being taken forward by the Construction Leadership Council co-chaired by Sir David Higgins, the chairman of HS2. The right people with the right skills are essential for a healthy supply chain. It is a fact that during the recession the construction industry lost 360,000 skilled workers, with the training and recruitment of graduates and apprentices also significantly reduced. We are now forecasting more than 14,000 construction apprentice starts this year, the highest for four years. Ideally, as the noble Lords, Lord Macdonald and Lord Young said, we should have a lot more—maybe as many as the 100,000 mentioned by the noble Lord, Lord Macdonald. We saw that report on the lost generation; I think that the Government are looking at that report in addressing the issue of having more apprentices.
My noble friend Lord Deighton, the Commercial Secretary to the Treasury, has also recently announced a joint Government, clients and contractors group to work together to produce a skills map for the construction and infrastructure programme.
The noble Lord, Lord Young, also mentioned the huge number of jobs lost during the recession in the construction industry. Our employer ownership pilots are supporting innovative construction skills programmes such as those for high-integrity welding, site supervision and steel erection at Hinkley Point. The noble Baroness, Lady Prosser, spoke about having more women in the construction industry. We recently announced a successor programme, the Employer Ownership Fund. The initial focus here is on engineers, getting more women into the sector and engineering shortages among SMEs. We are supporting employer-led trailblazers to develop and implement new apprenticeship standards. Higher skills are also important so we are setting up national colleges—the high-speed rail college, for instance, which will be established over two sites in Birmingham and Doncaster. The public sector is a significant customer for construction and is giving the industry greater confidence to invest in skills, and new technologies and processes, by setting out a clear view of the forward pipeline of government work.
The fourth item concerns emerging technologies and new processes. The big technology drive for the construction sector is building information modelling, which is about the effective use of modern communication and information technology in construction projects to reduce waste and increase efficiency across the design, construction, commissioning and operation phases of a building or infrastructure asset’s lifetime. As we have seen from Cookham Wood prison, where this BIM drove cost savings of 20%, it is a genuinely transformational approach.
I turn now to the specific question of housing, about which the noble Lord, Lord O’Neill, spoke passionately. We swept aside the old regional housing targets imposed by Whitehall, instead bringing radical reform to the planning system, not least through our National Planning Policy Framework. The noble Lords, Lord Haskel and Lord Rooker, emphasised planning in the green belt. Our planning reforms are making a real difference. Permissions for 230,000 new homes were approved by this June, which is 14% higher than in the same period last year. Relaxing planning is the key to unlocking real growth in the housing market.
Starts on new homes in the past year totalled nearly 140,000, which is up by 22% on the previous year and the highest since 2007. This Government are emphasising the use of brownfield land for development. In our National Planning Policy Framework, we ask local authorities to encourage the re-use of brownfield land unless it is of high environmental value. Our new brownfield package, announced in June, could lead to the provision of around 200,000 new homes. Our aim is that by 2020, more than 90% of brownfield land suitable for housing will have planning permissions in place, either in response to planning applications or when granted by local development orders. We are providing £400 million of recoverable investment funding, which will go towards the creation of around 20 new housing zones. Around £200 million of this investment will go to London to create 10 housing zones, with the GLA investing an additional £200 million to create a further 20 zones.
The noble Baroness, Lady Dean, mentioned garden cities. Alongside our work to support the delivery of large-scale housing developments, we announced the establishment of an Urban Development Corporation to create a garden city of up to 15,000 homes at Ebbsfleet and have made available up to £200 million for infrastructure to support it. In April, we published our prospectus Locally-led Garden Cities, offering a broad support package for which expressions of interest were invited. We recognise that these schemes are complex infrastructure projects which take time to work up. However, positive discussions with a number of localities are ongoing and we expect expressions of interest to be submitted once proposals are fully worked up.
The noble Lord, Lord Jones, and the noble Earl, Lord Listowel, mentioned the importance of more housing in our construction industry. New housing construction orders have more than doubled since 2009. Registrations of new homes across the country are also at their highest since 2007. The noble Lord, Lord O’Neill, asked for more support for small builders. We are supporting builders through a number of programmes, including Get Britain Building, our Large Sites Infrastructure Fund and the Builders Finance Fund. These schemes ensure that sites are developed by large, medium-sized and small developers. Trailblazers will help small developers to get their act together.
Our housing guarantee schemes are now open for business, supporting up to £10 billion of investment in large-scale private rented projects and additional affordable housing. These debt guarantees use the Government’s fiscal credibility to reduce the cost of lending. We know that the private rented sector is currently dominated by small-scale landlords, with larger landlords owning 10 or more properties accounting for only 1% of the market. We know that if we are to realise our ambitions for the sector we need institutional investment and we are taking bold steps to make this happen.
Following Sir Adrian Montague’s review that looked at how we should encourage institutional investment back into the private rented sector, we have set up an innovative Build to Rent Fund, originally worth £200 million but extended to £1 billion due to the strength of demand. This will finance the construction of large-scale, purpose-built, private sector developments and demonstrate that PRS works as a long-term investment proposition.
The noble Lord, Lord Prescott, spoke about affordable housing. We have introduced a new business model for the funding of affordable housing. The affordable rent maximises private investment, so with the current affordable homes programme, £4.5 billion of government grant levered in £15 billion of private investment. This will have delivered 170,000 affordable homes by March 2015. In this spending round we announced a further £3.3 billion of Government money, which, together with receipts from right-to-buy sales, will help lever in up to £20 billion of private finance on top, providing a further 165,000 homes in the three years to 2018. This will be the fastest rate of affordable housebuilding for at least 20 years.
We are starting to see the benefit of these measures through increased economic activity. This is being driven by local communities as well as businesses, including small and medium-sized enterprises. The figures speak for themselves in terms of the increased pace of economic activity in the housing industry. We have seen nearly 480,000 homes built since 2010, including over 200,000 affordable homes. Of course, housing, public and private, accounts for roughly 20% of all construction output and this debate is about the whole construction industry.
The quality of a nation’s economic infrastructure is one of the foundations of its rate of growth and the living standards of its people. That is why we have put long-term investment in roads, railways, energy, telecommunications and flood defences at the heart of our growth plan. We recognise that meeting the UK’s infrastructure ambitions requires a long-term, sustainable plan. That is why we published the first ever national infrastructure plan and have continued to update it. The £380 billion investment in the latest plan includes priority projects and programmes such as the Thames tideway tunnel, the Environment Agency’s flooding and coastal erosion programme, Hinkley Point C and offshore wind, HS2 and Crossrail and—who knows?—HS3.
On roads, we have taken funding decisions that will enable us to build at least 52 major road projects by 2020-21 and add over 750 lane miles of capacity to our busiest motorways and trunk roads. We have extended this approach to social infrastructure. In July 2014 we published a Government construction pipeline of forward work which included £116 billion of opportunities to 2020 and beyond.
We are not complacent. The noble Lord, Lord O’Neill, spoke very patiently on a subject he knows very well. So did the noble Lord, Lord Prescott, who was very much at the forefront of affordable housing in his time as a Minister. Through our comprehensive programme of reforms and investment we are laying the foundations for a sustained improvement in our housing supply and the wider construction market. Of course, we cannot do this alone—we need the support of communities, investors and industry—but together we can build more homes and a better built environment for generations to come. I thank the noble Lord, Lord O’Neill, for initiating this very important debate and I thank all Peers for their contributions. I have not been able to respond to all the issues raised, but I will be happy to write in response to the questions raised.
Lord O'Neill of Clackmannan
My Lords, I thank all those who have participated in this debate. When I finished speaking, I realised that there were still a lot of things I wanted to say and I was greatly relieved to find that my colleagues filled most of the gaps I had left. I also thank my noble friend Lord Young and I hope that the Minister will get another chance on another day to reply to the debate in a more extensive manner than he was able to do in the 20 minutes he had at his disposal.