Construction Industry

Lord Selsdon Excerpts

Thursday 23rd October 2014 Lords Chamber

[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.