Budget Statement

Lord O'Neill of Clackmannan Excerpts

Monday 4th December 2017 Lords Chamber

[Lord O'Neill of Clackmannan (Lab)]

My Lords, I do not wish to follow the remarks of the noble Lord, Lord Farmer, in their entirety. I wish to comment on homes and construction, which play a fundamental part in supporting families.

This Budget was somewhat strange in so far as, in the run-up to it, there were very few leaks and very few promises. It was very modest in effect. In fact, when the forecasts were announced in the Budget Statement, it became quite clear why they did not contain very many promises—there was not much to go round. Brexit is understandably once again sucking the air out of the political room, but other considerations such as housing, construction and engineering deserve our attention.

I have declared interests in this area, which are in the register, and I want to talk about those because they feature in the industrial strategy. It is quite clear why we need to have consideration of construction and engineering in an industrial strategy. It is also fairly clear where we want to go. Unfortunately, in the middle is the “how”, and there is precious little about that in the Budget Statement. It is understandable that a right-wing Government would not wish to appear unduly dirigiste or to deal with some of the challenges which a sensible Government pursuing a strategy would need to consider. Construction is about far more than housebuilding, yet we need more homes. There is the generational gap, council waiting lists, and high private-sector rents. The nature of the problem with these issues is spelled out in statistics relating to the increasing age of first-time buyers.

The Chancellor seems to suggest that a tweak here, and a reduction in tax such as stamp duty there, will lead to a golden age of housebuilding—that we will be back to the 1950s and Supermac. There is a caveat here: the first thing that Harold Macmillan did when he sought to pursue the target of 300,000 houses was to reduce housing standards. He said that the programme set in place by Nye Bevan was too ambitious. Part of the problem with our existing housing stock is that, throughout the 1950s, we built poorer houses than we could have because we were pursuing statistical objectives that were not properly defined.

Construction is not an industry where you can just turn the tap and it comes on. For a start, there are supply chains with different business models and skill sets. During the most recent major housing recession, in the 1990s, 50% of the men—it was pretty well always men—who left the building sites never returned. As a consequence, we had to take advantage of the stream of labour from the European Union. If we had not, we would not have been able to build even the few houses that we did. As well as that, the threat of Brexit and the feeling that a lot of the construction workers on whom we depend are no longer welcome in this country means that they are thinking twice about coming here.

Looking at the structure of the construction industry, 95% of its businesses employ fewer than 10 people. Many are reluctant to expand; they are happy to tick along as they are. Sometimes this is because of late payment. Sometimes it is because of the retention system, which I have spoken about in this House. The Government have produced a report on this which they have lodged very carefully in the long grass and we might not see it for some time. These issues of payment create great difficulties, particularly for small businesses. Yet there are housebuilding opportunities, such as greater prefabrication and more efficient insulation and heating systems. Additional efficiencies are offered by BIM—building information modelling—which is the application of IT to conduct, construction and contractual arrangements in the building industry. Acceptance of that has a considerable way to go.

New build is only one area of the industry. As I said, the existing housing stock, built in part in the 1950s and 1960s, was not built to the highest possible standards. It has been suggested that 14 million homes out the housing stock of 26 million are badly insulated and hard to heat, particularly those in the private rented sector. Next year, that sector will be given some shock treatment: if it does not measure up to the standards, the houses will be taken out of availability to rent.

At the same time as this housing construction challenge, we also have ambitious projects such as HS2 and the power station programme, to say nothing of the many works that are going to be carried out within the M25. All of this will require the same skilled staff and inspections conducted by those responsible for ensuring that building regulations are followed. For some time this year I was privileged to chair a working group established by the Association of Plumbing and Heating Contractors. Using freedom of information legislation, we were able to get a picture of the extent of building control in England and Wales. It became abundantly clear that most local authorities did not have the appropriate number of people. They could not afford to pay them, so you had men with joinery skills looking at electrical work; men with plumbing skills looking at other forms of construction. Profoundly dangerous situations could arise. I do not doubt the Government’s ambition, but they ignore the staff shortages; competition from other parts of the construction industry; the limitation of financial incentives; the weakness of the business model of many small firms; and the lack of proper regulation of construction through inadequate building control. If—and it is a big if—we can address these challenges, then the ambitions of that part of the industrial strategy for housebuilding may be of benefit and our wishes realised. I will not proceed, because I have already taken up more than my time. The needs of engineering will be addressed another day, not this evening.