Construction Industry

Baroness Donaghy Excerpts

Thursday 23rd October 2014 Lords Chamber

[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.