Construction Sector Deal

Lord Harrington of Watford Excerpts

Thursday 5th July 2018 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)]

I note with respect, Mr Speaker, that you are wearing the same badge as I am, and I therefore hope you will join me in wishing the NHS a very happy birthday. That, of course, is also relevant to the construction sector deal, because the NHS is responsible for a large amount of construction.

With permission, Mr Speaker, I will make a statement in response to the Government’s publication of the sector deal for construction. Sector deals, in which industries are invited to come forward with plans for their future, embody the ethos of our collaborative approach. They show how industry and the Government, working in partnership, can boost the productivity and earning power of specific sectors. We have already struck ambitious deals with the artificial intelligence, life sciences, automotive and creative industries sectors, and the nuclear sector deal was announced last week. We look forward to building on that in the months ahead.

In keeping with the ethos to which I have referred, today’s deal represents a joint vision agreed by the Government and the construction sector which aims to transform the sector’s productivity through innovative technologies and a more highly skilled workforce.

Construction underpins our economy and society. Few sectors have such an impact on communities across the UK, or have the same potential to provide large numbers of high-skilled, well-paid jobs. The construction sector, encompassing contracting, product manufacturing and professional services, had a turnover of about £370 billion in 2016, and employs 3.1 million people. Given its size and importance, the sector has a vital role to play in achieving the vision set out in our industrial strategy: strengthening the foundations of our economy, achieving the grand challenges of putting the UK at the forefront of the artificial intelligence and data revolution, maximising the advantages from the global shift to clean growth, becoming a world leader in the future of mobility, and meeting the needs of an ageing society.

We are in the early days of what is one of the greatest construction programmes in our history, from delivering more affordable and safer homes in places where people want to live, to major infrastructure projects such as Crossrail and the third runway at Heathrow. This infrastructure pipeline represents more than £600 billion over the next decade, including at least £44 billion for housing. The pace of that change, and its size, demands a construction sector that is the best in the world, and today’s deal sets out to make that a reality.

First, the sector and the Government are making a joint £420 million investment to develop and commercialise digital design and offsite manufacturing technologies. We aim to reduce the cost of new buildings by a third, and to halve the time taken to deliver them. That will ensure that we get value for money from the Government’s national infrastructure and construction pipeline. The current projections are for about £600 billion of public and private investment in infrastructure over the next 10 years, as well as a doubling of expenditure on economic infrastructure in the decade to 2022-23. The investment will also support the Government’s aspiration to deliver 1.5 million new homes by 2022.

Secondly, we will ensure that the construction sector is able to attract, train and retain the workforce that it needs both now and in the future, as it meets the demographic challenge of a workforce in which nearly a third of workers are over 50. That includes working with the Construction Industry Training Board to ensure that there is a strategic focus on future skills needs, and to increase significantly the number of approved apprenticeship standards. The sector will also aspire to increase the number of apprenticeship starts to 25,000 a year by 2020, and will work with professional institutions and the higher and further education sectors to ensure that all those training for or working in the industry are able to develop and increase their skills.

Finally, to ensure that the construction sector is home to more sustainable, profitable businesses, the standard business model needs to change to one that is based on strong integrated supply chains and higher levels of collaboration. Key to that is a boost in the sector’s exporting capability, driven by our new investments in digital and manufacturing technologies to make the most of a market that is estimated to be worth £49 trillion between now and 2030. We will also ensure that construction firms have better access to the capital that the industry needs to invest and grow. That will include taking account of existing funding streams and the conclusions of the patient capital review, which aims to increase the availability of long-term finance to innovative firms.

History shows that the business community is best placed to identify what firms really need, and the Government will be there to support them. Sector deals rely on committed and visionary leadership. I therefore thank Andrew Wolstenholme, the sector deal champion, and the whole Construction Leadership Council, without whom this ambitious deal would not have been possible. After the statement I shall be visiting Battersea power station, where I will meet the leading members of the sector who have been so influential in bringing the deal to fruition.

The sector deal will drive economic growth, create well-paid, highly-skilled jobs in every part of the UK, and improve lives across the country. It represents a shared commitment to achieve those goals by establishing a strategic partnership between the Government and the sector, which we will seek to strengthen in the years ahead.

[Bill Esterson (Sefton Central) (Lab)]

I thank the Minister for early sight of the statement. It is welcome that there is a sector deal for construction, although the promised “a few weeks” from last November have become nine months.

Like last week’s nuclear deal statement, this appears to be a series of reannouncements of previous ministerial policies. The announcement about reducing emissions, although welcome, would be more credible if it were not so starkly at odds with other Government policies, such as last week’s cancellation of the Swansea Bay tidal lagoon. The steel, retail and rail industries are still awaiting responses to the proposals that they made last September. Perhaps the Minister will tell us when other sector deals will be agreed.

The collapse of Carillion of course caused at least some of the delay in today’s announcement, but that in turn was caused by the Government’s own lack of oversight, so what assurances will the Minister give to the sector that there will be no more Carillions, and that suppliers and workers can have confidence that Government will support them on Government-funded contracts? And what in this deal will address the concerns around late payment and retentions that the Carillion fiasco highlighted, with 30,000 suppliers owed £2 billion? What was changed during the review of this sector deal from what was announced last year? There appears to be nothing to tackle the problems endemic in public sector construction procurement.

The commitments in this sector deal on productivity and the speed of building are welcome, but they need to be matched by a significant increase in Government investment in infrastructure and house building projects. That is how we can properly support the construction industry. The TUC has shown that the £31 billion through the national productivity fund increases public investment to 2.9% of GDP, whereas the average spent on investment by leading industrial nations in the OECD is higher, at 3.5%. Labour is committed to a national transformation fund of £250 billion of capital investment over 10 years. Comparing those figures, we have to question whether the Government’s commitment to investment is meaningful. Similarly, the rhetoric about skills and technical education is welcome, but can the Minister give the sector an assurance that those skills will be developed to enable the radical transformation of construction that this country desperately needs?

There are great concerns about the exploitation of construction workers, often by the use of bogus self-employment, and the abuses of human rights and risks to the safety of too many workers through the behaviour of some unscrupulous employers. What are the Government’s plans to protect workers through this deal?

The deal appears to ignore the important role played by smaller firms. What is in the deal for small builders, for whom accessing investment in new technology is likely to be a challenge?

This week’s Jaguar Land Rover announcement that it might move production out of the UK and re-evaluate its planned £80 billion of investment is deeply worrying, not least for the 40,000 workers directly employed. JLR’s is just the latest in a string of warnings from manufacturers vital to the success of British industry, and the same warnings apply in construction and throughout the construction supply chain. The Government’s mishandling of Brexit makes a mockery of their industrial strategy; they must listen to businesses and place workers and our economy ahead of ideology.

[Richard Harrington]

I thank the shadow spokesman for taking us on a wider canter through industrial strategy and mentioning Brexit. I will try to answer his questions, but I will also do my best to stick to the sector deal, Mr Speaker, as I know you would like to make progress.

I make no excuses about the time this has taken because we wanted to get it right. We are always pressed on occasions like this to use words and phrases like “soon”, “imminently” and “at the end of the year”.

[Bill Esterson]

A few weeks?

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[Richard Harrington]

Well, this is a few weeks: we are talking about nine months, and nine times four is about 36 weeks, which is a few weeks compared with 5,000 weeks. But the hon. Gentleman makes a serious point, and we did want to get this right.

Sector deals are no longer just Government edicts. They are true partnerships with not just the usual suspects but lots of companies in industry, and we have done our best to get this right and make it as comprehensive as possible. I am sorry that the delay has put the hon. Gentleman out, but I believe we have got it right, and I welcome the more positive comments he made, among quite a lot of negative ones.

I would make the same point about the other sector deals the hon. Gentleman mentioned, such as that for rail. We are working on them: there is no go-slow; Ministers are not off playing golf. These are very important to me; this is a big chunk of my portfolio and I do hope that at least privately the hon. Gentleman will accept that I do my best with diligence to try to get to the bottom of these things. But they are very comprehensive: the documents may contain a few graphics and things in colour, but they are serious documents, and, more importantly, the deals behind them are very serious.

The hon. Gentleman rightly raises Carillion as that is an important matter. There are a lot of things to be learned for the future from what happened. The Government have worked very well with banks and other institutions. We have taken on board the wider lessons to do with the Insolvency Service and so forth, we have consulted a lot of people on Carillion, and we are on the way to showing companies like Carillion that directors cannot behave irresponsibly, because the consequences are very significant. They affect not only shareholders and banks; they can affect millions of people and small and large businesses alike.

The hon. Gentleman mentioned the Government’s attitude to research and development expenditure. I am proud of our aspiration of 2.9% of GDP for research and development. In dealing now with these bids for the industrial strategy challenge fund and so forth, we are seeing a very significant increase in Government expenditure on research and development. It is a very large part of BEIS’s budget.

The hon. Gentleman mentioned the Labour party’s view that everything should happen now or more quickly: well, it did not do so in all the years Labour was in power. I try not to make party political points if I can possibly avoid it, but I think history will show that our record in increasing research and development spending is very good, and in practice sector deals are the conduit through which it is used. Gone are the days when Government Departments and institutions like the National Economic Development Council, which I remember visiting as an A-level economics student at school, did this; gone are the days when civil servants and Ministers decided where this money was invested. There is now a thoughtful process, independently held, in our case through Sir Mark Walport, and I am very hopeful that in the future more money will be spent through this process.

The hon. Gentleman asked a reasonable question about how significant a part of the agenda skills were. For construction, skills are without doubt critical. Most people in construction currently talk about skills shortages, and the increased number of apprentices that is aspired to in this sector deal certainly cannot be taken lightly. I have seen the way young people are being trained up through apprenticeships, and there is also the retraining of older people, the T-levels and all the other related educational matters that I do not have time to go into today. They will all make a significant difference to skills.

It is true, too, that different skills will be needed in the future, as I saw from the type of skills being used during a recent visit I made to Skanska, in Rickmansworth near my constituency. Computers are now used not just to make the design we are so used to in building but in the detailed technicalities for each part of the project. I was shown an example in Paddington station where every material for every panel will be passed to owners of the future, because part of the sector deal is about the whole life of buildings, not just the original construction which was traditionally the most important aspect.

Finally, the hon. Gentleman mentioned workers’ conditions, and who is and who is not an employee and so forth. He will know about the Taylor review and that the Government are accepting almost every recommendation Taylor makes. That will make a significant difference to people’s lives.

[Several hon. Members rose—]

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I welcome the statement. It mentions the patient capital review, which aims to increase the availability of long-term finance for innovative firms, so will the Minister confirm that that will be targeted at small and medium-sized construction companies?

[Richard Harrington]

I will try not to mention a constituency example here, Mr Speaker.

I thank my hon. Friend for that question. Capital is important. It is often spoken about in terms of large fundraising exercises, such as bond issues and initial public offerings, but it is important that small firm financing is also taken into account. The banks are proud of the fact that they are significantly increasing their small business lending, and we intend to monitor that carefully.

[Ronnie Cowan (Inverclyde) (SNP)]

I thank the Minister for advance sight of the statement. I noted with interest that the statement refers to

“a joint £420 million investment from the sector and government”

and

“£600 billion of public and private investment in infrastructure over the next 10 years”.

I was wondering about the split between public and private money. With Carillion in mind, where will the risk lie in such joint ventures? It would be remiss of me not to ask how much of the new money will be given to the Scottish Government to spend, because they have a good track record on major infrastructure builds.

The statement also says that 1.5 million new homes will be built. Will the Minister guarantee that, within the specifications for the new builds, every effort will be made to ensure that buildings are environmentally-friendly to build and energy-efficient to run? There are remarkable examples from around the globe that can be taken on board and copied. The efficiency and longevity of new buildings is crucial.

I welcome the intention to create more apprenticeships, which have been much neglected since the 1980s—hence why a third of the workforce are over 50. The Scottish Government have been leading the way in creating meaningful apprentice schemes, and I am really pleased that this place has decided to follow.

Finally, given that export capability has rightly been identified as so important, will the Minister fight for tariff-free access to European markets at tomorrow’s Cabinet showdown on Brexit?

[Richard Harrington]

I will do best to answer without the global canter that you so politely reprimanded me for using, Mr Speaker. There will be no more cantering, or indeed galloping for that matter. I shall do my best to trot, if that is possible—I promise the hon. Member for Inverclyde (Ronnie Cowan) that I am not trying to cut my answer down.

The SNP spokesman’s first question was about the mixture of public and private capital, but that depends on the projects that are available. We know what money is in the current spending plans, but we also know about projects that are coming through, such as Heathrow. I cannot give him an exact split, but we are certain that the total amount that was mentioned will come to fruition, and I am conscious of the fact that Scotland must get its share. That point was well put and well noted. I am certain that Scottish Conservative Members—[Interruption.] They are in Scotland. I am sure that all Scottish Members will take me and other Ministers to task if Scotland does not get its fair share.

[Several hon. Members rose—]

[Richard Harrington]

Scotland will get its fair share—[Interruption.] Ah, I thank the shadow Minister for pointing out what was happening behind me, because we do not yet have eyes in the backs of our heads, although I am sure that a Labour Government would give them out free to everybody.

The hon. Member for Inverclyde made a good point about fire safety and energy-efficiency specifications for new homes. I have visited the Building Research Establishment in my constituency—I thought you might be interested to know that, Mr Speaker—where state-of-the-art work is going on. If the hon. Gentleman was referring to the terrible tragedy at Grenfell, I am sure that lessons about construction types will be learnt.

Apprenticeships are an important part of the sector deal, and they mean a lot. Apprenticeships do not have to be for school leavers, which has been the tradition. There will be a lot of retraining, and the Government recognise that in their policies, but the purely physical tasks that made up the majority of construction jobs in the past are slowly being replaced with jobs that require a significant amount of training and a lot less physical effort.

Finally, the hon. Gentleman asks me to ensure that the Prime Minister makes it certain at tomorrow’s Chequers awayday that UK companies will be able to export their products to the European Union. I can happily assure him that that is very much the case.

[John Howell (Henley) (Con)]

I welcome what the Minister says about the 25,000 apprenticeships, but one of the grand challenges facing the Government is helping to meet the needs of an ageing population. How does the deal help to meet that need?

[Richard Harrington]

I thank my hon. Friend for his question. The answer is that the type of apprenticeships will be commensurate with the new types of skills within building. As I explained in answer to the hon. Member for Inverclyde, that will involve retraining at different ages, as well as jobs that involve skills other than physical skills, which were complex but were done just by young men in the past. In fact, I am pleased to say that many more women are now involved in construction apprenticeships, and we will start to see people of my age doing apprenticeships—quite a few people in my constituency probably hope that that will be me in a few years’ time.

[John Spellar (Warley) (Lab)]

I congratulate the Minister on his pre-reshuffle tour d’horizon of the industry and on a statement that is welcome in both its intentions and its aspirations. However, without any detailed measures, it is frankly just more waffle. For example, the Minister rightly drew attention to the forthcoming infrastructure programme, where local and national Government have huge clout as the client, so will the Government be using that influence to put into their contracts requirements for the prompt payment of subcontractors? In addition, will they demand proper ratios of apprentices on sites, by which I mean real craft apprenticeships to fill the huge skill gaps and to provide career opportunities for our youngsters?

[Richard Harrington]

I shall send the right hon. Gentleman a copy of the construction sector deal so that he knows that it is not just meaningless waffle, [Interruption] I am delighted he has one and I will do my best to respond to the numerous points that he made. He asked whether the Government would use their power over those things that they fund to ensure that small businesses are used—that is correct. The Government are keen on using their power in that way, such as by mandating the use of level 2 building information modelling for all construction projects to encourage the adoption of digital technologies. The Government will also be at the forefront of the manufacturing of buildings off-site for suitable projects, such as schools and NHS buildings.

The right hon. Gentleman was concerned that the Government should not use such powers to affect the number of apprenticeships on site. That is very much our policy, and it will be part of the tender documents to come. However, I hope that that will not be necessary, because the industry is desperate for apprentices and we will see a lot of the new types of apprenticeships.

[Vicky Ford (Chelmsford) (Con)]

In Chelmsford last week, local councillors approved a local plan that includes 8,800 homes on new sites, and 11,700 homes have already been approved. We are building schools, GP surgeries, community centres and the amazing new medical school, so masses of construction is ongoing. The sector deal is welcome, but Chelmsford College has two issues. One is finding tutors with the experience to teach apprenticeships; the other is getting apprentices placed with smaller businesses such as electricians. Can you focus on addressing those two pinch points?

[Richard Harrington]

Mr Speaker, I thought you were going to reprimand my hon. Friend for referring to me as “you”; thank you for forgiving her.

I accept that finding more tutors is a problem, and the Construction Industry Training Board is cognisant of that. The Government are making sure everything is done with the training board and there will be new apprenticeship standards. The number of starts will increase to about 25,000, which is a 15% increase. I regularly meet the training board, and I will happily ensure that it is aware of the specific points raised about Chelmsford.

[Tom Brake (Carshalton and Wallington) (LD)]

The Minister will be aware that 30% of people who work in the construction sector in London are EU nationals and that they are younger than their UK equivalents. Meanwhile, the number of apprenticeships has plummeted, particularly for under-25s. What guarantee can he give that we will have sufficient skilled people available, particularly given that the construction sector will be in competition with sectors such as agriculture for those employees? I expect, of course, a very comprehensive reply from the Minister.

[Richard Harrington]

I will do my best—under your supervision, Mr Speaker—to make sure that my reply is comprehensive.

Skilled labour from the European Union is critical to the construction industry, which already competes with all the other industries. Mr Speaker, you will be delighted to hear that last week I visited a wonderful business: Gateville in Watford, which was started by a Romanian gentleman, Bogdan Catargiu. The company is using his skills, and those of his colleagues from this country and the European Union, to build social housing in the UK. Following Brexit, I cannot envisage a situation in which we will not allow people with the necessary skills, such as those in the construction industry, to come to this country to work, and to provide a lot of prosperity to this country—and, I hope, to themselves—as they have over the past few decades.

[Mr Speaker]

It is always a great pleasure to listen to the mellifluous tones of the Minister, who I know from personal experience to be an extremely agreeable fellow, but I gently point out to the House that the statement has now run for half an hour and we have heard from only five Back Benchers. Perhaps there is scope for an improvement in productivity, to be brilliantly exemplified, I feel sure, by Mr Eddie Hughes.

[Mr Speaker]

We often hear from the hon. Gentleman about this blockchain business. I feel I ought to educate myself on the matter.

[Richard Harrington]

Mr Speaker, I feel you are asking me to produce a sector deal for brevity of statements by junior Ministers—I will start work immediately.

The type of skills we need are changing, as we see more modular building and so on. I am sure that the skills that my hon. Friend the Member for Walsall North (Eddie Hughes) and I are aware of now will be very different from the skills needed by generations to come. I expect that he and I will use some skills in our 80s that we did not use 30 years ago. The important part of the sector deal is to make sure that apprenticeships are appropriate for a sector in which one third of the construction workforce are now over 50. Under this fantastic sector deal, the training board and the standards will evolve as the building industry evolves.

[Diana Johnson (Kingston upon Hull North) (Lab)]

I urge the Minister to get a gallop on and announce the sector deal for renewables, which is an important industry for us in East Yorkshire. We are keen to see that sector deal announced. When will he provide details on the local sector deals, which were first announced at the end of last year?

[Richard Harrington]

We have another horse analogy. I said that I would trot, and I have been accused of cantering, but now I will try to gallop. I note the hon. Lady’s point about the local sector deals, and her area is one of our higher priorities. I cannot answer her question about renewables because that is not one of my sectors, but perhaps I can drop her a line or meet her to discuss it.

[Michelle Donelan (Chippenham) (Con)]

I strongly welcome the construction sector deal. With productivity in the construction sector on average 21% lower than in the rest of the economy, it is vital that we tackle that to increase our housing stock. Does the Minister agree that investing in digital and off-site manufacturing technologies will also boost our STEM sector? That is vital for constituencies such as mine, which is a hub of engineering, design and technology.

[Richard Harrington]

The sector deal shows that those types of skills will be adapted to building. Digital technology, artificial intelligence and precisely the STEM skills that my hon. Friend mentions are an important part of the sector deal and of the future construction industry.

[Jim Shannon (Strangford) (DUP)]

What discussions have there been with the devolved Assemblies on match funding for energy-efficient new builds? What is being done to encourage every region to make full use of this initiative?

--- Later in debate ---

[Richard Harrington]

The devolved authorities are very much part of all our thinking. We will continue to work closely with them. I would be happy to meet the hon. Gentleman to discuss Northern Ireland in this context. I congratulate him on his question—and on the questions he has asked at every single statement I have given and every single urgent question I have answered in Parliament.

[Huw Merriman (Bexhill and Battle) (Con)]

Is it not the case that if there were further incentives for construction companies and developers to build out, they would be forced, as it were, to recruit and train more people, because they would need them, rather than moving people from one site to another? Is it possible for the Government to consider compulsory purchase powers for local authorities if developers do not build after a couple of years or, indeed, to consider charging council tax 12 months after a planning application is approved, rather than when the build-out occurs?

[Richard Harrington]

The review by my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) is considering those points, and I am sure that we will be delighted to report the review’s progress to the House.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

As a chartered civil engineer, I welcome the principle of the construction sector deal. On protecting the supply chain, the Government must deal with two key issues: the elimination of cash retentions; and, as the Minister knows from his previous role, the effect that multi-employer pensions are having on subcontractors, particularly plumbers. Will the Minister review the Multi-employer Pension Schemes Bill—my private Member’s Bill—and have a word with the Under-Secretary of State for Work and Pensions, the hon. Member for Hexham (Guy Opperman), to ask him to take on board the measures in my Bill?

[Richard Harrington]

We are currently considering the entire policy on retentions, as I am sure that the hon. Gentleman knows. We are reviewing the responses to our consultation and considering the options for future policy.

[Maggie Throup (Erewash) (Con)]

When we consider construction, we often think about only what we see above ground. Saint-Gobain and Stanton Bonna in my constituency make pressed concrete and cast pipework. Can the Minister reassure the House that his statement on the construction sector deal will benefit all aspects of construction, whether invisible or visible?

[Richard Harrington]

Absolutely; I can reassure my hon. Friend on that point.

[Mr Philip Hollobone (Kettering) (Con)]

What is there in the construction sector deal to encourage small builders in Kettering?

[Richard Harrington]

My hon. Friend, as always, speaks up for Kettering, and he does so well. Kettering is typical of many places in the country where small businesses are the core of the construction industry. The sector deal is not silent about that. [Interruption.] The shadow Minister is chuntering that he made that point—he did, and he is absolutely right.

Small businesses are the core of the construction industry. On every visit I have made to the tier 1 large contractors, they have been very conscious that small businesses are part of the industry. We have to make sure that those small businesses get their share of the expenditure on apprenticeships, as they are getting, and make it easier for them to get apprentices, which we are doing. The training board and the industry bodies we work with are conscious of that.