§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Armstrong.]
§ 11.48 p.m.
§ Mr. T. W. Urwin (Houghton-le-Spring)As the title printed in the Order Paper suggests, I wish to deal with yet another building firm which has gone into voluntary liquidation and some of the general problems arising from such action.
The firm, Dorran (Northern) Ltd., a subsidiary—if I may use the term—of a parent firm in Perth, Scotland, successfully tendered to the North Tyneside Housing Consortium, comprising Newcastle Corporation, Newburn Urban District Council and Seaton Valley Urban District Council, for provision of houses by industrialised building methods to the total value of £2 million.
At the time of liquidation houses were in various stages of completion. I suggest that there can be no more disheartening 1237 and depressing sight than the gaunt shells of houses scattered willy-nilly over a building site. However, in this case one of the local authorities, where the work was not very far advanced, feels that the problem is capable of solution, I understand, by re-advertising the tender either by industrial or by traditional methods but clearly not by the method which is currently in operation.
On coming to the North-East, Dorran erected a factory for the manufacture of components at Consett, in the constituency of my hon. Friend the Member for Consett (Mr. David Watkins), which is an area of somewhat heavy unemployment. The failure of the firm has naturally engendered a great deal of concern in the mind of my hon. Friend, who had warmly welcomed the prospect of some 500 new jobs in his constituency, with the invaluable assistance of the Board of Trade, which was readily available to the firm.
Whilst there is a possibility that the two remaining local authorities may be able to maintain factory production long enough to ensure completion of their respective contracts, this factory, with its job potential, will inevitably be lost to the North-East development area. There can be no doubt that by their initiative the three local authorities will ensure eventual completion of these contracts, but we must accept that by that time they will have been subjected to the necessity to re-plan and perhaps re-advertise—certainly that is so in one case. They will suffer financially from the delayed collection of rent income.
I have no doubt that my hon. Friends the Members for Consett, Blyth (Mr. Milne) and Newcastle-upon-Tyne, West (Mr. Bob Brown), who also have constituency interests, would have dealt with the details of this case much more meticulously than I propose to do. I want to explore the wider avenues arising from this failure and other related matters. I wish to ask my hon. Friend the Joint Parliamentary Secretary if this debacle could have been avoided.
I understand that there are 130 industrial building systems in use in England, mostly for low-rise building, and that 52 of them have received appraisal certificates from the National Building Agency. I was given that information a few days 1238 ago in answer to a Question. But, as the Dorran system is imported from Scotland, had it also been approved by the National Building Agency? What were the antecedents of Dorran? Had it previously contracted for large-scale housing contracts in Scotland? In this, its first unfortunate venture over the border, was it considered to have sufficient expertise to undertake a large, £2 million contract? What advice was given to the North Tyne Consortium by the National Building Agency or by the Ministry of Housing and Local Government's regional office about these matters? What steps were taken to ascertain the financial stability of the firm before its tender was accepted? What relationship was there between the tender price and Ministry cost yardsticks? I trust that my hon. Friend will be able to provide suitable answers to those pertinent questions.
Perhaps I may be forgiven for regarding this issue as a further example of the failure of private enterprise generally in housing. I immediately qualify that statement by explaining that I am fully aware that there are many highly successful contracting firms in Britain. But this is a highly casual industry. There are more than 80,000 firms participating in it and in competition with each other. No qualifications are required to enter the industry. All too often we have the example of firms lacking capital resources and, worse still, without experience or expertise, which is their essential to success.
Last week my right hon. Friend the President of the Board of Trade advised me in reply to a Question that there were 807 bankruptcies in building and construction in 1966. Unsecured liabilities amounted to the staggering total of £2,401,270. These massive failures unfortunately often bring down with them numbers of other innocent people, subcontractors, builders' merchants and other suppliers. I remember quoting some time ago in the House an experience of 1962 of a firm in Peterlee, Milton Hindle Ltd., which similarly went down, leaving behind liabilities of well over £500,000 and bringing with it many other unfortunate people.
This surely is a sad indictment of private enterprise in building and urgently points to the outstanding need for compilation of a national register of 1239 building contractors whose bona fides have been probed and proved beyond doubt. I have painted perhaps a rather sorry picture and hon. Members opposite—unfortunately only one is present—who have in the recent past been vociferous in condemnation of direct labour and are in doctrinaire opposition to any form of public enterprise must seriously pause and reflect whether they are wise in their insistent demands for free competition between direct labour and the private sector in the industry, direct labour more especially the more efficient units—which their opponents usually refrain from mentioning—was responsible only for 9 per cent. of local authority housing in 1966 and would welcome the opportunity of open competition—
§ Mr. Bob Brown (Newcastle-upon-Tyne, West) rose—
§ Mr. UrwinI am sorry but I have a lot to say—more particularly if the range of competition were extended beyond the somewhat limited field of housing. Violent critics of the principle of public enterprise in construction will, I am sure, be delighted to learn that direct labour departments are likely to be entrusted with the responsibility of building a large part of the work remaining to be done by Dorran. Perhaps that is the point my hon. Friend the Member for Newcastle-upon-Tyne, West wanted to make, because this affects part of his constituency. I want to take the question of public ownership a little further. My hon. Friend the Member for Consett in his natural anxiety to safeguard the employment prospects of his constituents, asked my right hon. Friend the President of the Board of Trade if the recently established I.R.C. could take over the Dorran factory. No doubt the question of patent would present a somewhat insurmountable difficulty here, in addition to the liquidator probably having to realise all the available assets.
In any event, my hon. Friend received a completely negative and uncompromising answer. Nevertheless, if there were a national body in existence, for example, a public building corporation, which, in addition to competing with private contractors for building work, and vested with the responsibility of taking full control on the all too-frequent occasions when these circumstances arise, it could 1240 be of distinct advantage to the building owner by maintaining continuity of operations and so considerably minimising the paramount difficulties and possibly reducing the extra cost devolving upon the customer.
In this respect, I trust that my hon. Friend the Joint Parliamentary Secretary to the Ministry of Housing and Local Government will sympathetically use his powers to offset some, if not all, the additional costs the North Tyne Consortium may have to bear as a direct result of this débacle.
Finally, I am in complete accord with the Government's expressed policy for the housing programme. We have repeatedly said that it is our objective, quite properly, to reach a target of 500,000 houses a year by 1970 and I accept in its entirety the premise on which this policy is based, just as the traditional craftsmen in the industry are accepting the necessity to use industrialised building systems in order to achieve this highly desirable objective.
We have said that by 1970 about 40 per cent. of the houses provided in the public sector will be built by industrialised building systems. That is all right so far as it goes. But this obviously means that we must use to the fullest extent all the resources available within the industry. I know that my hon. Friend, and my right hon. Friend, place great reliance on the National Building Agency for purveying advice to local authorities on industrialised building.
I repeat that I have no objection to the supplementation of houses provided by traditional methods through this medium. It does not appear as though all the resources available are being used, however. We have hundreds of millions of bricks stock-piled and we are frequently reminded of this. Perhaps worse still is the fact that there is now a grossly under-used skilled labour force.
It may be of interest to the House to learn, as I have learned to my astonishment and dismay this evening as a result of a further Parliamentary Question to my hon. Friend the Joint Parliamentary Secretary to the Ministry of Labour, that there are 94,001 building operatives unemployed in Great Britain, up to 10th April, 1967. This is a travesty. Included in these figures are 3,968 carpenters, 2,752 bricklayers, 191 masons, 934 plasterers, 1241 6,778 painters and decorators and 1,972 plumbers. All of these are the traditional trades—the backbone of the traditional sector of the building industry.
Even worse, in the Northern Region, which has a rate of unemployment which is far too high, these figures are even worse, as they represent the gross total of 10,886, about 12 per cent. of the total unemployed building force in the whole country. I wonder why it should be considered necessary to place so much emphasis, as we are doing, on industrialised building systems when we have these huge untapped resources available to us? These people could be building houses which are much more attractive, generally speaking, in design, and in many cases, much more durable than the houses built by industrialised systems.
I know that my hon. Friend the Parliamentary Secretary requires some time to answer the questions that I have raised. This is a very serious matter for the northern region. Inevitably it means that the programmes of these three cases will be delayed for some time on completions. This will reflect itself in the overall figures of completions for the northern region for 1967. I trust that my hon. Friend has listened carefully to my comments and criticisms and the questions which I have put to him. I look forward to a satisfactory reply.
§ 12.5 a.m.
§ Mr. Ian MacArthur (Perth and East Perthshire)I am very much obliged to the Joint Parliamentary Secretary for allowing me two minutes to intervene in this debate. I am grateful that the hon. Member for Houghton-le-Spring (Mr. Urwin) has raised this matter which is of great interest to his constituency, because it also affects mine. The headquarters of Dorran Construction Limited are in Perth.
This company took on and developed a system-built method of house building with very great success until a few years ago. After 1964 in which it made a profit of £96,000, it expanded rapidly, one might say too rapidly, and the consequences are the problem which the hon. Member's constituents and those of his hon. Friends face now. Part of the problem may well have been that the firm took on fixed price contracts to far in advance and there were two years between the acceptance of a contract and 1242 its carrying out, The firm in Perth is struggling to survive. The northern factory and the factory in London have closed.
The Minister will know that the firm has National Building Agency approval for construction and that it has built a substantial number of houses. In Scotland it has built 4,000 and it has been very successful there. I have been in touch with the Board of Trade in the hope that something could be done in Perth which the Board has not been able to do in Consett to provide temporary loan facilities to enable the firm to continue. I believe that it can be viable and, from the latest information I have, I believe that it can become profitable again. I trust that from that new hope may arise in future.
§ 12.6 a.m.
§ The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Robert Mellish)The hon. Member for Perth and East Perthshire (Mr. MacArthur) will understand that the comments he has just made relate primarily to the Board of Trade and are therefore not for me to answer. The speech I have to make is in answer to my hon. Friend the Member for Houghton-le-Spring (Mr. Urwin). It is fair that he raised this matter in the way he did because for some time my right hon. Friend and I have been under many attacks from the Opposition on direct labour, and many examples have been quoted to show that direct labour can be inefficient. My right hon. Friend and I refuse to support those authorities who use direct labour inefficiently. But that is only one side of the coin. I am glad that my hon. Friend this evening has drawn attention to the other side of the coin and pointed out that things can go very wrong in building by private enterprise. I take no pleasure in that. Less than 10 per cent. of all houses in the public sector are built by direct labour. Private contractors put up the rest, and their activies are worth at least as much of our attention as those of local authority direct labour organisations.
The failure of Dorrans on Tyneside is a most unfortunate affair. Three members of the North Tyne Housing Consortium signed contracts with the firm for altogether 735 houses, as a result of some very competitive tendering. At that 1243 time the technical ability of the firm to undertake the work was carefully assessed by the National Building Agency and neither they, nor the Department, nor the authorities concerned, had grounds for doubting the firm's viability and standing I am answering the point whether the firm had been approved by the N.B.A. The answer is that it was given careful attention. In the event it seems that the company was beset by management problems which they failed to solve, and a shortage of working capital which held up the flow of components to the three sites.
It became clear last year that the company was not finding it easy to adapt itself to large-scale working, and the National Building Agency stepped in to help. Agency staff were allocated free of charge to advise the company in factory and site procedures, and meetings with the company's directors were held. Following a meeting of creditors on 28th April the firm has gone into voluntary liquidation, leaving 13 completed houses, 136 at various stages of completion, and 95 concrete bases.
I understand that Seaton Valley U.D.C., which had a contract for 440 houses with Dorrans, should have very little difficulty in finding another contractor to finish off the 88 houses for which the shells have been completed and to build the remaining 352 houses. Newburn U.D.C., which had a contract for 209 houses, should be able to complete the 22 shells on the site by direct labour, and I would hope that it can find another contractor to build the remaining 187 houses. Newcastle, which had a contract for 86 houses, is left with 60 shells. I understand that it hopes to be able to complete the whole contract by its direct labour organisation, which normally does only maintenance work.
I should like to stress three points. First of all, here is a case where direct labour is brought in to the rescue, to salvage the worst mess left by a contractor's failure. Secondly, though the three schemes will be completed, they will be late as a result of this failure. Thirdly, the three authorities may well be saddled with extra costs. They are naturally anxious about the financial implications. All the schemes will fall within the Housing Subsidies Bill, so that 1244 the subsidy payable on houses started under the Dorran contracts will be governed by the original tender prices. I am afraid that there is no possibility of stretching the new statutory provisions to take account of supplementary tenders. However, when the local authorities know the full cost of the schemes, I will consider whether there is a case for exploring the possibility of extra-statutory payment. Clearly, I can give no undertaking at this stage, when the outcome is uncertain, but I recognise the exceptional nature of the circumstances and if the local authorities find that their excess costs are heavy, I will consider any representations they make.
I now want to turn to the wider implications of the failure of Dorrans. This case illustrates how very necessary it is for local authorities to entrust housing schemes only to those contractors whose experience is adequate to the scale of operations to be undertaken. That is why we have urged local authorities to adopt selective tendering and to invite tenders only from those firms which, they are satisfied, can do the job in question satisfactorily. In selecting prospective tenderers, authorities must always satisfy themselves of the firms' financial standing. We have urged authorities to watch this point, and we shall reiterate this advice.
Then there is the effect of this failure on industrialised building in the North-East. Dorrans is not the first firm to run into trouble in the area. But the difficulties it has run into do not stem from any basic fault in industrialised building. Some failures were, perhaps, to be expected, but it would be foolish to let them destroy confidence in the part that industrialised building must play in the housing programme. There is ample capacity among industrialised building firms in the North-East to replace Dorrans. The regional programme cannot be achieved without full use of industrialised building systems.
It would be unrealistic for local authorities to think that they can all build all they want by traditional building. Traditional building can be carried out very cheaply and efficiently in the North-East. But the demand for houses in the region is so great that industrialised building must be used to supplement traditional building. It must, however, be used in circumstances in 1245 which it has a reasonable chance of succeeding, and by contractors who have the necessary experience and financial stability to make a success of it.
Our view is that if we are to get 500,000 houses a year by 1970, we cannot expect traditional methods to provide more than 400,000. That leaves 100,000 houses to be built by industrialised building. In practice, these will have to come almost entirely from the public sector, forming, perhaps, 40 per cent. of that sector's output. I entirely agree that all resources and skills available for traditional building should be fully used. I believe that they will be so used as private sector house building goes up again.
My hon. Friend, who referred to what he called the under-use of materials and labour and gave some disturbing figures, may have noted that in March the number of starts in the private sector in England was 27,323, as against 15,000 in February and 12,000 in January. He will, therefore, see that the private sector is picking up and is now doing remarkably well. Alongside this, the improvement, which has been gradual but consistent, in the public sector shows that the house building programme is on the move forward again and is moving upward in a dramatic way.
§ Mr. UrwinI am indebted to my hon. Friend for giving way; I know time is short. I am impressed by what my hon. Friend says about increasing the number of starts, especially in the private sector, but this deals, of course, largely with the public sector. Can he say if local authority consortia are encouraged to pool their resources in traditional building methods as well as being encouraged to build more by industrialised building methods?
§ Mr. MellishIndeed. Let us get this quite clear. My Department know that experience has shown that industrialised building is very successful for high rise, 1246 and there can be no doubt that in the great cities and towns, if our people are to have a decent home, this is what we have to do.
There can be no doubt that industrialised building in this field is a success, but certainly there is no prejudice in my Ministry against traditional building. We want to incorporate traditional building as well.
I say to my hon. Friend again that if he looks at the two sectors of housing he will see that in the private sector almost its entire output will be traditional. When he looks at the public sector, this is a rising sector, and there is no question but that we shall reach the 250,000 by 1970 which we are aiming for. If we can achieve 40 to 50 per cent. industrialised building, this still leaves an enormous field, as my hon. Friend will see, in which traditional building has enormous scope.
My hon. Friend talked about having a national register of reputable firms. Can I say to him that what he has said tonight has alerted my Ministry and we shall take every action possible. We alerted every local authority—and I am making no reflection on authorities in my hon. Friend's constituency—but this is a story where there was not enough capital, the firm became over-stretched and this disaster has occurred.
We have to ensure that local authorities are alerted in order to ensure that when people tender there will be a thorough check so that the financial viability of the firm is assured—
§ The Question having been proposed after half-past Nine o'clock on Monday evening and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
§ Adjourned at eighteen minutes past Twelve o'clock.