LABOUR-ONLY SUB-CONTRACTING BILL (Hansard, 21 February 1973)

§ Mr. Eric S. Heffer (Liverpool, Walton)
I beg to move, That leave be given to bring in a Bill to prohibit labour-only sub-contracting (self-employment) in the building and construction industry. This is the system otherwise known as lump labour which I wish to see prohibited in the construction industry.
The Bill will not eliminate the specialist sub-contractor from the industry, who has always had an honourable place in that industry, but it will attempt to eliminate those who work in gangs and who receive lump payment for their work. There has been a definite increase in this type of labour during the last 10 years. In fact, it has been steadily increasing since 1948.
The use of lump labour has been particularly prevalent in the South of England, but we now find it spreading throughout the entire country. It used to be thought that once there was a relatively high level of unemployment in the construction industry this type of labour would disappear. This has not proved to be the case. Despite high unemployment, and in many respects because of it, this practice has increased.
Under the lump system workmen receive very high wages indeed, but the important thing the House must understand is that this money is earned at the expense of the safety conditions on building and construction sites. It means virtually ignoring welfare and health arrangements. It also means that families who have suffered because a husband or son has been killed or injured on a construction site have afterwards discovered that under the lump system they receive no compensation.
Another great fault in the system is the failure to pay a worker's national insurance contribution, and under this system there has been widespread tax evasion. The system also leads to bad workmanship, a shoddy product and at times when mixed gangs work on a site there has been violence between lump and non-lump workers. It is a very bad and pernicious system.
484 Most employers put their hands on their hearts and say, "We do not agree with the lump system, and do not operate it." Therefore, it is very strange that the system is growing increasingly and that more and more workers are going on to the lump system. This can happen only if the main contractor allows it to happen.
This subject has been pursued in the House over many years. In 1970 the Labour Government introduced the Construction Industry Contracts Bill which, had Labour not been defeated in the General Election, would have become law. That Bill proposed to establish a register of employers with a levy on payments for construction work made to unregistered contractors. This was intended to offset the benefit they obtained by avoiding national insurance contributions, SET, training levy and all the rest. That legislation may well have eliminated labour-only sub-contracting. Personally, I felt that the provisions were slightly complicated, but had the Bill be enacted that would have been proved one way or another.
The Bill received qualified support from the then Conservative Opposition. Indeed, the hon. Member for Londonderry (Mr. Chichester-Clark), who is now a junior Minister, on 24th February 1970 introduced his own Bill entitled The Regulation of Self-Employment in the Construction Industry Bill. Although that Bill was never published, I understand that it was based on the recommendations of the Phelps-Brown Committee set up by the Labour Government in 1967. That committee examined the problem in depth.
Labour-only self-employment is a bad system, for the following reasons. First it undermines collective bargaining and properly negotiated rates of pay and conditions of employment in the industry. Secondly, it means that the safety, health and welfare regulations are ignored, and that applies particularly to safety. Everyone knows of the large number of people killed in the building industry. It has the highest toll of any industry other than coal mining and the numbers have increased as a result of the lump system.
Thirdly, it means that national insurance cards are not stamped and many workers draw unemployment benefits while they are doing a lump job. If they become unemployed they do not receive their benefits and redundancy payments 485 and employers of course do not pay overheads. These high incomes are gained at the expense of the consumer because of shoddy work resulting from lump labour.
It also means that the number of apprentices is declining in the industry and if this continues we shall find that within a few years there will be a crisis in the building and construction industries because there will be insufficient craftsmen.
I want to give examples of what is happening in our industry—I say "our" industry because I come from it. I know of good workmen and one in particular, an ex-foreman who has been out of work for a year in Liverpool because the only jobs he could have taken were labour-only self-employed ones. He refuses to do it as many other good craftsmen do, and these workers are being penalised as a result.
The Government recognised that something must be done because they endeavoured to deal with the tax evasion. They included provisions in the Finance Act 1971 to deal precisely with the problem. The tax losses to this country have been estimated at between £10 million and £300 million. I do not know what the figure is. All I know is that there has been a hell of a loss to the revenue as a result of tax evasion. But tax evasion has not been eliminated even by the Finance Act. It has not stopped the concept of labour-only sub-contractors to the industry, which has grown since the Act took effect. The situation in the construction industry was summed up by John Matthews in an article in the Sunday Times on 7th May 1972 when he said: Behind the majestic façade of steel girders and slow moving cranes on building sites, behind the handsome profits of contractors with household names … there lies a jungle of industrial relations which has grown unchecked now for more than 20 years. It goes on to say: The lump operates on building sites where unions are weak and inevitably has become a major source of friction between workers, employers and the State. Let me give an example of what Mr. Matthews means. A contractor, the GCT Construction Company Limited, a subsidiary of Northern Development Limited, is building about 1,000 houses adjoining my constituency. Most, if not all, the 486 labour on that site has been lump labour. There has been a great deal of conflict between the trade unions and the main contractors as a result.
The Liverpool Daily Post on 10th February said in a report that a court order had closed the site down. Why? Because the safety regulations had not been adhered to. A building inspector, Mr. Sydney Gower, is reported to have said that there were many hazards on the site including a risk of serious injury to anyone falling from scaffolding on to concrete floors, a serious risk that men were liable to be buried in excavations because the sides were not shored up, and a risk that a house might collapse because its foundations were not as deep as nearby excavations. That site was operated on the basis of labour-only sub-contracting. That is an example of what happens where the lump is in existence. My industry has always suffered from the casual nature of the work, the fact that workers constantly face unemployment.

§ Mr. Speaker
Order. I apologise for interrupting the hon. Member but this is by convention a Ten-Minute Rule Bill and the hon. Member began at seven minutes to the hour.

§ Mr. Heffer
I am awfully sorry and I apologise, Mr. Speaker. I did not think that I had taken 10 minutes and I had assumed on the basis of the notes I had made that I would take just 10 minutes. I apologise and I conclude by saying that this is something the industry has tried to eliminate over the years by agreement between the employers and the trade unions. It has not been successful and up to now the legislation has not worked. Further legislation is now required. We have heard about the 353,000 tax exemption certificates which have been granted, and that means a wholesale increase in labour-only subcontracting.
I hope that the House will agree to let the Bill go through because we need a register which will eliminate this type of labour from the industry in the interests of the consumer, of the nation and, in particular, of those who work and operate in the industry.