Construction Industry

Susan Elan Jones Excerpts

Tuesday 28th June 2011 Westminster Hall

[Steve Rotheram (Liverpool, Walton) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Caton. I am delighted to have secured a debate about an issue on which, for once, I believe I can actually speak with some authority.

I started my working life as an apprentice bricklayer under a scheme administered by the Construction Industry Training Board in the late 1970s. In those days, under the CITB training programme, people were given six months off the site to get relevant tools experience, site understanding and health and safety training, before being placed with the company under an indentured apprenticeship agreement. My placement was with Fairclough Civil Engineering, and after completing my three years, I worked for Fairclough International—it is now part of the AMEC group—in the Falkland Islands. That was in 1983, just a few months after the cessation of hostilities with Argentina.

On my return, I started my own construction business. After surviving two Tory-led recessions in the 1980s, I was persuaded to go into training to pass on my skills to a new generation of construction trainees. Eventually, I took up a post as a business manager at the now defunct Learning and Skills Council, where I oversaw funding for—yes, you guessed it—construction training programmes across Merseyside.

During that period, I graduated in construction studies from Liverpool John Moores university and began a master’s degree in contemporary urban renaissance. Although I did not manage to complete it, it gave me an insight into many different, and sometimes tangential, construction perspectives. Although there are far more eminent construction commentators than me, I can speak with a degree of understanding on this issue, given my broad personal experience.

I want to record my interest as a member of the Union of Construction, Allied Trades and Technicians and as one of its sponsored MPs, although I receive no remuneration for that. I would also like it noted that my son, Steven, is an apprentice electrician with M. J. Quinn. For the purpose of clarification, I should also say that I have previously proudly professed that I am the only brickie in Parliament, although my hon. Friend the Member for Derby North (Chris Williamson) also lays claim to that most sought-after designation because of his trade background.

In recent weeks and months, much of the business, innovation and skills debate has been about ways to improve the opportunities for a high-skilled work force in a low-skill economy. One of the previous Labour Government’s greatest achievements was to give those who wanted to do so the chance to go on to further education through the introduction of the education maintenance allowance and the university loans system. As a result, Britain now has the most talented generation in recent history. Job opportunities in science and technology, graphic design and public relations, which were the preserve of the well connected, are now at the fingertips of this more industrious generation of Britons. Real progress has been made in diversifying the skills sets offered to young people across the country, but in areas such as my constituency, traditional industries such as construction also have a real part to play.

I am pleased that the Minister, who is responsible for construction, recently said:

“An efficient, effective and profitable construction industry is at the heart of any growing economy.”

That is why urgent action is needed from the Government to save the industry from the brink. The Government’s approach must change, because it is clearly not working, as we saw from the previous quarter’s growth figures. We already knew that construction had been hit extremely hard in the global financial crisis, but the 3.3% fall in output—the steepest the industry has suffered since the financial crisis of 2008—is all the evidence we need that things need to change.

I have given Members an insight into my background in the industry, and although I do not profess to be an expert, my interest in the sector spans three decades. That is why I know there is a fundamental problem with the Government’s thinking when the Construction Products Association’s economics director, Noble Francis, says:

“It is likely that construction output will fall 2% in 2011 and this will inevitably hold back economic recovery given that construction accounts for around 10% of the UK economy.”

[Susan Elan Jones (Clwyd South) (Lab)]

Does my hon. Friend agree that the VAT rise is having a significant effect on the construction industry and making life extremely hard for the many small and medium-sized construction firms in many of our constituencies?

[Steve Rotheram]

My hon. Friend is absolutely correct. That is certainly true of the refurb and maintenance sector. At the end of my speech, I hope to come up with some suggestions, which the Minister might like to take away to contemplate, given this issue with VAT.

I can almost predict what the Minister will say in reply to my comment about economic stagnation. I will try to pre-empt him by simply pointing out that although last winter’s adverse weather conditions will have had an adverse effect on construction, the weather was bad the year before, and we saw nothing like the fall in output that we did this year. The fall has more to do with a lack of confidence than with too much snow or the wrong kind of snow.

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[Chris Williamson]

That is another valid point and the Government need to consider it; it is a source of some concern. As I say, we are in a fortunate position at the moment, in that 80% of construction materials used in the UK are procured within the borders of the UK, but that might not always be the case. As my hon. Friend suggests, the Government need to be alive to the potential for change as the ownership of firms passes to multinational conglomerates. If that trend continues, the percentage of construction materials procured within the UK could diminish quite rapidly and quite significantly, and we need to be vigilant about that.

[Susan Elan Jones]

Does my hon. Friend agree that another important factor in this debate is the employment of young men in the construction industry? If we are to accept—as I think, at times, the Government seem to be accepting—a high level of young male unemployment, there are serious social consequences to that as well.

[Chris Williamson]

Yes, there most certainly are. My hon. Friend puts her finger on another important element of the construction industry. Clearly, it is a very labour-intensive industry. A vibrant, thriving and growing construction sector provides plenty of training opportunities, as she points out. That has significant social implications, because we all know the detrimental consequences—both for individuals personally and for the wider community—of large-scale unemployment. When we consider some of the Government’s other targets, supporting the construction industry and creating training opportunities in the industry would have huge beneficial impacts well beyond the obvious impacts, which I think are clear for all to see.

I wanted to make a point about housing and the importance of having a vibrant housing sector. In particular, I wanted to say why I am so disappointed with the decision to get rid of the housing targets. I have already mentioned the procurement of construction materials from within the UK, but a vibrant housing market also has much wider beneficial impacts, in that people are moving house and buying new carpets, curtains, furnishings and so on, which also benefits all the people employed in those sectors. At the moment, all those sectors are in significant decline.

I would like to talk again parochially for a moment, this time about the commercial sector. In Derby, we have 1.25 million square feet of office space that has planning permission. Those development sites are now standing empty; some have been cleared and some are just a dilapidated eyesore. We were looking forward to those sites being developed, possibly with a view to civil servants moving into them as part of the Lyons review. At the time of that review, developers were talking about building speculatively, but that will not happen at the moment. Derby is not the only example of a town or city where there is a plentiful supply of commercial space available. In the current climate, no developer will build speculatively; they need end-users and certainty. In fact, they need certainty to get a development funded for a start.

I will be interested in hearing the Minister’s response to that point, because I plead with him to say what assistance the Government are prepared to provide to give that stimulus to the construction sector. There is one very simple thing the Government could do that would achieve another one of their targets, which is reducing public spending. That simple thing is to move civil servants from extremely expensive central London locations and out into the regions. When the Government are looking at the relocation of civil servants, I hope that they will consider Derby, because developing a prestigious site in Derby could be achieved at around £20 to £25 per square foot and I know for a fact that in central London some of the prices that some of the Government agencies are paying are in excess of £100 per square foot; indeed, they might be up towards £150 per square foot. Clearly, relocating those agencies and staff to Derby would be hugely beneficial, not only to Derby and the construction sector but to the Government’s own target of reducing public spending. In fact, it will reduce public spending in a way that will not hit front-line services. However, it seems that that relocation process has stalled. I do not know why that is and I would be interested to hear the Government’s thoughts on that.

I am pleased that the Minister is here today for this debate and I know that he is considering locations for the green bank. I have written to him to say that Derby would make a perfect location for the green bank and I hope that he will consider Derby, particularly as Barclaycard has moved out of significant premises in the city. Derby would be an ideal location for the green bank and I hope that he will bear that in mind when he makes his final decision on that issue.

The Government are going in the wrong direction at the moment—the opposite direction to the one they need to go in. What they need to do is to create an economic virtuous circle and construction can play a really important role in delivering that virtuous circle. That means investing in the economy to create the growth that my hon. Friend the Member for Liverpool, Walton referred to, which will have a knock-on impact. I think that he said that growth begets growth, or growth generates more growth, and clearly it does.

My hon. Friend and I are not the only ones saying that. I myself am a humble bricklayer—what do I know about economics? But I just look at my history books. I look at what President Roosevelt did in the 1930s, when there was 25% unemployment in the US during the great depression. A lot of the recovery from the depression was built on the back of construction, including huge construction projects such as dams, roads and housing. We saw that happen again in 1945 in this country, with the efforts of the post-war Labour Government.

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[Mr Jackson]

We all know that there were limits to the concept of localism. It would be foolish for any Secretary of State or any Minister in the Department for Communities and Local Government or the Department for Business, Innovation and Skills to say that they could second-guess the development control—to use the old term—or the planning policy of each of the 400-odd local authorities. In densely populated areas of the south-east of England local authorities might feel that they have reached an equilibrium in quality of life and do not want more house building. There are large parts of the north of England, however, for example County Durham, Northumberland and the north-west, where better quality housing perhaps is needed.

[Susan Elan Jones]

Will the hon. Gentleman give way?

[Mr Jackson]

If the hon. Lady will forgive me, I will not give way for the time being because I have quite a few points to make and others might wish to speak. I will let her in later.

It is not possible to design a system that delivers the same result in every part of the country, and the experts the hon. Gentleman mentioned will be disproved, I believe, by the impact. Six years’ matched funding for infrastructure, giving genuine fiscal power to local authorities, will deliver, using the market mechanism, the right kind of quality housing in the right place. None of us can prejudge that until we have seen it in action. The new homes bonus will work, based on a council tax band D of £1,414, and the Home Builders Federation projects that that will bring £1.2 billion into local authorities each year. That is income to the local economy of each authority that builds new homes, which can only be good, and it is 215,000 jobs.

The wider context of the Government’s construction policies is about rebalancing an over-reliance, in some parts of the country in particular, on the public sector, and trying to encourage, with tax policies and a regulatory regime, more private sector growth in jobs. We have already begun to see that. We are not steaming ahead with the creation of private sector jobs, but the trend is in the right direction, and I expect more jobs to be created in the construction industry.

[Mr Charles Walker in the Chair]

The Government’s plan for growth, published in March at the same time as the Budget, introduced significant changes that will help the construction industry. Of course, it makes a presumption in favour of sustainable development, and the wording was criticised for being opaque, but it is now in place and subject to consultation and discussion. The national planning policy framework is coming forward. I have some concerns about it. I am particularly mindful of the possibility of a watering down of the primacy of town centres over out-of-town shopping centres, and the Treasury needs to be mindful of it too. It is all very well creating Asdas and Tescos on the fringes of towns, but that effectively destroys the viability of niche retailers in town centres.

Generally, however, the national planning policy framework will de-clutter the governance of planning, which can only be good. The hon. Member for Liverpool, Walton is right that certainty and the ability to plan properly are absolutely integral to a successful construction industry. That is why this Government’s remit includes simplifying generic planning policy.

To my mind, we are not going fast enough in piloting local land auction models, but we are going in the right direction. Public land will be the first to be auctioned. There is a myth about the availability of land, and a lack of available land clearly contributed to the overheating of the housing market between 2006 and 2009. However, even in the south-east of England, only 12% of land is used for housing, and 10% is used across England as a whole.

The conversion of commercial premises to residential premises and a duty to co-operate would meet some of the objections made by the hon. Member for Derby North about regional spatial strategies. The Local Government Association and others, including KPMG in its report on regional governance, found that regional development agencies did not alleviate differences between regions, or even within regions. He will know that there is a world of difference between Rutland and Melton and inner-city Nottingham or Derby. We as a Government believe—I cannot speak for the Minister—that there are sub-regional economies that were not reflected in regional development agency boundaries. We believe that it is much more practical and flexible to consider a duty to co-operate, particularly in the development of infrastructure.

We are proceeding with a major infrastructure planning system overhaul and consulting on the liberalisation of use classes as a way forward, but the hon. Member for Ochil and South Perthshire (Gordon Banks) is absolutely right that the principal issue is mortgage finance and the capital available for the development of housing. None of us can deny that—it is absolutely the case—but he must concede that the Minister for Housing and Local Government, my right hon. Friend the Member for Welwyn Hatfield (Grant Shapps), did an extremely good job in raising with the Treasury the importance of not throwing the baby out with the bathwater in terms of the Financial Services Authority’s mortgage market review. Both the Chancellor and the Secretary of State for Business, Innovation and Skills are mindful that the FSA review must get the balance right. Without reckless spending, they must make available the mortgage moneys that young people need to buy their first property.

To give my own local authority a plug and pay tribute to it, Peterborough city council voted just last week to put £10 million aside for a local authority mortgage scheme. Without wanting to be too partisan, I must say that I am slightly disappointed that the Labour group on Peterborough city council has seen fit to call in that decision, which will delay the process of getting young people the finance that they need to buy property. Not everything that the previous Government did was wrong. The HomeBuy Direct scheme was good, and we have built on it pragmatically and practically with the Firstbuy scheme, which will put about £1 billion into the system and help 10,000 first-time buyers.

The other issue is the planning system. We cannot get away from the fact that the planning system in this country can be construed as dysfunctional. One hears anecdotes all the time. Developers bring an expensive, costed plan for the development of a few hundred houses to a planning department and an officer says, “Yes, that’s a good plan. We can run with that.” He leaves, and another officer comes in and says, “Hmm, I don’t really like the aesthetics. Will you do it again?” Time is money, and that takes an enormous amount of time. It is extremely frustrating, and it is not fair on shareholders or on the people who want to buy the new houses.

We must develop a way to break through the shroud of mystery around town planners, as we used to call them in the old days. They are a bit like hospital consultants: “Don’t question my professionalism on this.” However, it matters to economic growth and people’s jobs and livelihoods that planners expedite decisions. We must develop a way to incentivise them to get inherently viable projects off the ground. They must work much more closely with developers on things such as section 106 and focus on the affordability of individual projects. The evidence that has been presented shows that it is complex. Some supplementary planning documents for large-scale developments can take 18 months to two years. With core strategies, site allocation plans and consultation on local development frameworks, the process can be frustrating for developers. We must find a way to simplify the system.

A report by Michael Ball of Reading university, “The labour needs of extra housing output”, suggests that the costs associated with development control could be up to £3 billion a year. That is not acceptable if we are committed to a pro-growth agenda. Since January 2005, 3,250 pages of national planning policy guidance have been issued. The complexity and cost of development are significant. The hon. Member for Derby North made the point that the gross cost of regulation, the cost of construction and the market price of floor space are significantly greater in London and other UK cities than elsewhere.

I am being admonished by you, Mr Walker, to conclude my remarks, but I will say that we need to see construction policy holistically. We need to consider residential real estate investment trusts and what the Treasury can do to simplify them. We need to consider how EU procurement rules affect large-scale regeneration. We need to consider brownfield remediation to make it simpler for construction companies to build. We need to encourage special purpose vehicles through the tax system so that local authorities can work with developers. We need to push forward tax increment financing so that there is a fiscal incentive to regenerate town centres and other areas. We also need to concentrate on empty properties.

We must find a way to deal with land banking by people who hold land but will not release it—

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[Mr Prisk]

Concerns have been raised. The Construction Products Association, which has been mentioned, has asked whether the strength of the sector is in fact underplayed. That issue is being considered by the ONS.

The hon. Member for Liverpool, Walton will not agree on this analysis, but I did not hear from him any recognition of the enormous financial deficit that we inherited and therefore the tough decisions that we had to take. What I heard from him was the suggestion that we are not investing at all. I do not accept that. Let me highlight how, despite those difficulties, we have set out the first national infrastructure plan and shown how £200 billion of public and private funding will be put into the sector—into infrastructure and construction—over the next five years.

The spending review has started to spell out how that will work. There will be £10 billion additional funding for roads and maintenance, which is crucial, and £14 billion additional funding for rail. Of course, Crossrail is going ahead and we intend to proceed with High Speed 2. That is crucial for the overall sector. In the hon. Gentleman’s area, the Mersey Gateway is a £600 million project that will create 460 direct jobs. The project should open some important opportunities in the area and generate around 4,500 jobs. In difficult circumstances, we are making an investment that could help.

Several hon. Members mentioned the question of how we can help the economy and the construction sector more broadly. The Government can do a number of things. My hon. Friend the Member for Peterborough (Mr Jackson), the hon. Member for Derby North (Chris Williamson) and others talked about the planning system, which is a sclerotic system that needs to change. That is why we are progressing with a presumption in favour of sustainable development, so that the default answer is yes and the burden of proof is moved to those who seek to oppose development. We are streamlining the planning process and the consents that go with it and stripping back the 3,250 additional pages of planning guidance of the past five years to around 100.

We want to speed up the system and to get developments under way by setting a time limit. That important issue has not been raised in the debate. If we establish a clear 12-month deadline, including appeals, it will give business, construction and corporate clients the certainty of knowing that there is a timeline within which planning will progress. That is a vital part of the process.

[Susan Elan Jones]

Will the Minister give way?

[Mr Prisk]

I am not going to give way because, with respect, the hon. Lady did not make a speech and I am trying to respond to those who have.

The construction strategy is important because it provides certainty about the future pipeline of public projects. Several hon. Members said, “Let’s have some action, not talk.” I agree. That is why, from this autumn, we are rolling out a two-year programme of pipeline projects that are funded. Therefore, the industry—infrastructure and construction projects—will know what is coming, can plan for it, invest for it and put money into the skills. That is crucial. We have never had that before. It seems painfully obvious now that that is what the industry wants. We are doing that, and we are doing it for the first time. Such an approach will make an important shift.

That brings me to the question of public procurement. We recognise that many public procurement costs have been way over what they should be, which is why we have set a target of a 20% reduction. I pay tribute to the industry because it is great that it has stepped up to the plate and said, “Yes, we agree. We want to be part of this.” We have set out a clear process of how we are going to eliminate waste and duplication, and introduce a whole new way of procurement that will not only reduce the costs, waste and duplication, but open the market to newer entrants—small and medium-sized enterprises—who perhaps in the past have felt shut out.