§ Order for Second Reading read.
§ 12.14 p.m.
§ Mr. Eric S. Heffer (Liverpool, Walton)
I beg to move, That the Bill be now read a Second time.
First, I should like to thank all those hon. Members who have been exceedingly brief in arguing for the previous Bills, because they have given us an opportunity of reaching the Labour-only Sub-contracting Bill. The Bill has widespread support throughout the country. In fact, as I speak, thousands of building and construction workers are either demonstrating in the large conurbations or have sent delegations to lobby MPs at the House today.
The north-west region of the Union of Construction, Allied Trades and Tech- 1876 nicians, my union, supported by the Transport and General Workers' Union and other unions, has organised two trainloads of delegates. I emphasise that the North West workers are not stopping work. They have elected delegates from their branches and committees to send to London and to the House today. I understand that London, through the regional council of the joint committees of the unions, is having a demonstration this afternoon, and other areas, such as Birmingham and Glasgow, and many other cities have elected delegates and are having demonstrations of one kind or another. This is because the organised working-class trade union movement, rightly in my opinion, sees labour-only operations as a great threat to the organised trade union movement. It is a threat to their interests on both a longand short-term basis.
The Municipal and General Workers Union has put in a nutshell in an advertisement which has been published in various journals its objections to lump labour. I commend anyone to read it because it puts the case succinctly.
The Trades Union Congress has warned against the dangers of lump labour, and representations have been made to the Minister concerning not only the question of the lump but the whole of the various problems, such as decasualisation and so on, which are required to be dealt with in the building industry.
The Labour Party will include in its programme the abolition of the lump system. My right hon. Friend the Member for Grimsby (Mr. Crosland), speaking officially on behalf of the Opposition at many meetings throughout the country and in articles, has made it clear that the Opposition are very much opposed to the continuation of lump labour.
I should also stress that a large number of enlightened employers are against the system of labour-only sub-contracting. Many employers will not contract lump labour at any price or under any circumstances. However, some employers see the lump as a way of avoiding their responsibilities. Unfortunately, this is particularly true of many employers on the house building side of the construction industry. These employers have 1877 made exorbitant profits on the basis of speculative building with the use of lump labour. It avoids overheads of all kinds. The result is that in many cases people are getting a high-priced and shoddy product. Such employers encourage the growth of this type of labour.
The basic objectives of the Bill are contained in Clause 1, which provides thatIt shall be illegal for any person or persons to enter into a contract involving the practice of labour-only subcontracting (which in this Act means permitting persons who are under contract to supply labour to work as self-employed persons) in respect of any construction operations, except those to which section 4 of this Act applies.That clause is perfectly clear.
The employers' federation has circulated a very interesting document to selected Members of this House. I was not one of them. However, I have had a copy passed to me by one of those selected Members and I have had the opportunity of reading it.
§ Mr. James Allason (Hemel Hempstead)
I would remind the hon. Gentleman that the document has also been issued as a Press notice. Therefore, although I received both, I had only to read one.
§ Mr. Heffer
I am glad the hon. Gentleman got both the Press notice and the letter from the federation. I got neither but received a copy through one of my hon. Friends who was sent one. I am not making a big issue of this but am saying in passing that I have seen the document. The federation regards the Bill as a crude piece of legislation, because by its provisions lump labour or labour-only sub-contracting—self-employment—will be eliminated from the building and construction industry. The federation's document does not deny that there is a case to be made against labour-only sub-contracting. It says that something must be done about the situation, but it offers no solution. This Bill, on the other hand, offers a solution.
Many of the provisions in the Bill are similar to those contained in a measure put forward by the Labour Government early in 1970. There are certain differences between the two pieces of legislation, but they are not all that great 1878 and it is interesting to note that the then Conservative Opposition, including also the Liberals, gave the earlier Bill qualified support and did nothing to obstruct it. Indeed, on one occasion a Conservative Member, who is now a junior Minister, put forward a Private Member's Bill which was intended, as he said, to "gee up" the Labour Government to get something done against labour-only subcontractors and to bring the situation under control.
Because of certain misrepresentations, I think I ought to say what the Bill does not do. It does not eliminate the genuine self-employed man who has a traditional rôle in the building and construction industry in carrying out repairs, maintenance and the decoration of residential property. I refer to the man in a residential area who has a workshop at the end of the road and is called in by people to do a certain job. Such people will be safeguarded by Clause 4 of the Bill and a committee will be established consisting of representatives of the employers and trade unions, with a neutral chairman. Those workers will be able to register with that committee provided that it is satisfied that that is the only type of work they are doing.
Nor does the Bill eliminate the genuine specialist sub-contractor in the building and construction industry. A contrary view to this was implied in the employers' documents, although they did not specifically say so. Such sub-contractors have a long and useful history in the industry and under this legislation will be able to register as main contractors because they will be contractors in the accepted sense of the term since they employ people direct and keep to the national working rule agreements and other agreements in the industry. All they will need to do to keep within the provisions of the Bill is to continue to employ workers on a direct basis and to observe the various agreements. I stress that the Bill makes it illegal to employ lump gangs and self-employed workers on major construction work of any kind.
The Prime Minister, in a parliamentary reply the other day, used a phrase which will go down in history when he referred to the ugly face of capitalism. He was referring to one ugly face which had peered round the corner of the capitalist 1879 system. I regard labour-only sub-contracting as another ugly face of the capitalist system, and I hope that this is recognised by everybody in the House.
§ Mr. Heffer
If the hon. Gentleman will bear with me for a few moments, he will hear me give the reasons why I believe that lump labour should be eliminated from the construction industry.
I want now to deal with some of the most important reasons for saying that this Bill is highly necessary. The trade unions in their evidence to the Phelps Brown Committee put the basic reasons in a nutshell. They said:Fundamentally, our objection to labour-only sub-contracting and self-employment is that by its very nature it corrupts, leads to indiscipline, destroys morale and fragments the construction process to the point where management techniques become impossible to implement, and this leads to inefficiency and high costs which in the long run are an unnecessary strain on the economy of the country as a whole.The Phelps Brown report was published in July 1968 and, therefore, those views were expressed in 1967 or 1968. What was true then is even more true today because the situation has become worse.
Let me briefly list the worst features of the system. First, there is widespread tax evasion. The amount lost to the Government cannot be assessed. It has been said—there have been many assessments—that it is something between £10 million and £200 million, or even more. The figure can never really be known.
The Government are obviously concerned about the situation because in the 1971 Finance Bill they included Clauses to 31, which became operative on 5th April last year. Clause 30 allowed exemptions with a tax exemption certificate which supposedly means that the person who has such a certificate pays his tax annually. However, this system is being abused on a large scale. The journal Manpower said that tax deductions of per cent. at source by the main contractors was not popular, so the "lumpers" apply for a tax exemption certificate. That paper quotes the case of a 25-year-old steel fixer who claimed that 1880There are pubs in North London where you can get insurance cards and a certificate for about £150.He went on to say:The tax people are overworked and find it impossible to check information thoroughly in this business. Rather than lose out altogether they are often prepared to split the difference over the tax. So the man gets his certificate and can hire it out to his mates when he is not working.The other big loophole lies in the fact that limited liability companies are automatically excluded from the holding of a certificate, and the growth of such companies has been fantastic since the 1971 Finance Act was passed.
I have some figures for tax exemption certificates during that period. Those applied for up to May 1972 totalled 316,000; 262,000 were issued, 6,000 were refused and 48,000 were under consideration or abandoned. Up to October 1972, 385,000 certificates were applied for and 353,000 were issued.
The number of new limited liability companies that were set up nominally with capital of £100 or less has jumped. The new companies registered between 1971 and 1972 with less than £100 nominal capital were as follows: in January 1971, 1,679; February, 1,640; May, 2,049; August, 2,341; September, 2,132. Figures for 1972 were: January, 2,631; February, 2,630; May, 3,255; August, 4,489; and September, 4,251. These figures show a very big increase. No one is suggesting they are not bona fide firms, but, as Manpower also pointed out, quoting experts in company law,Theoretically a limited company could wind up at the end of the year with outstanding tax liabilities. If the Directors do a flit it is up to the Inland Revenue to try and catch them.Perhaps if the Inland Revenue officials took a boat or an aircraft to New Zealand, Australia or other exotic places, they might have a chance of catching up with them, but in many cases they will never catch up.
The second reason is that, in certain instances, national insurance contributions are not paid. It has been known for men supposedly drawing benefit to be on the lump although I must admit that this is not the usual situation. It has been known and sometimes is very difficult to detect. Third, the health, welfare and safety regulations for the industry are largely ignored. I will not give examples 1881 because many hon. Members wish to speak. I have given an example, which occurred near my constituency only a few months ago, of these regulations being ignored. Eventually, after much pressure from the unions, the site in question was closed down because of the failure to recognise and carry out the safety regulations.
Fourth, the system undermines good collective bargaining. It weakens the trade unions and sets up the law of the jungle in the industry. I know that many workers who are on lump labour believe that, because of the immediate increases they can get, they are on to a good thing. I want to tell those workers that, if they continue along these lines, eventually there will be no collective bargaining in the industry, no basic rates of pay and no inclement weather agreements. They will lose their present protection. Therefore, for short-term advantage they will lose the long-term objectives of decent guaranteed employment in the industry and will lose protection for themselves and their families.
Fifth, the system causes friction between employers and working men and among workers themselves. It has been known on certain jobs for violence to break out between individuals and gangs working lump labour. Sixth, it leads to bad and shoddy workmanship. I can give examples of work having been started by a lump labour gang and not completed. It has then been necessary either to bring in bona fide sub-contractors or to employ other workers directly to complete the contract. Every hon. Member, if honest about it, will know that what I am saying is true.
In a letter to Mr. Paton, the National President of the National Federation of Building Trade Employers, in this month's National Builder, Mr. Peter Carter from Birmingham wrote:One of your members"—the editor says in a note that the name is supplied—has just recorded bumper profits for 1972. A few weeks ago the Birmingham shop stewards committee sent a team of men to examine some of this firm's houses. They found the people who bought the houses very angry. Our investigations found large walls 2 in. out of plumb, internal garage walls in Thermalite as rugged as a Welsh mountain, hardly a tie iron, cavities not cleaned, lintel bearings of 1 in. instead of the minimum 1882 4½ in., Compo used below strength, pointing poor. The inside finish of the house was disgusting. All this could be seen, one dreads to think what went on underground. To my knowledge this firm employs no apprentices.Seventh, the system means—I now come to the point about apprentices— that apprentices are not taken on. Unless this position is dealt with quickly, in less than 10 years the industry will come to a halt because it will have no fully-trained craftsmen. I will give one or two figures about apprenticeship, first concerning carpenters and joiners. In 1967 there were 28,534 apprentices. In 1968 there were 25,947; 1969, 22,781; 1970, 19,237. In the same period the number of bricklayer apprentices droped from just over 11,000 to just over 6,000, and plasterers from 3,187 to 1,729. There is no doubt— this is one of the most important issues— that unless this is dealt with, and unless we can assure that there is proper training and that the lump system is eliminated from industry, we will not have a trained building force in this country in the years to come.
One of the worst sets of figures I have ever seen was that showing that, at the end of 1972, only 191 registered apprentice bricklayers were employed in the whole of the London area, yet there were about 15,000 bricklayers employed in the area. If that is not an indictment of the lump system, I do not know what is.
My eighth point about workers on the lump is that they are too often not covered by insurance. Therefore, when an accident takes place, either the men involved or their families receive no compensation. Perhaps some hon. Members will point to examples of compensation being received. I can give chapter and verse— we have plenty of files—example after example, of families receiving nothing, of widows being left without real compensation because the men were not covered by national insurance.
One further point is of immediate relevance. I have spoken about this matter in the House previously and I shall continue to do so. The system is grossly unfair because it means that those workers who are on the agreed trade union rates of pay and conditions and who are working directly for a contractor or a bona fide sub-contractor are caught under the Counter-Inflation Act. Under the Act, they get rises of only £1 plus 4 per cent. in phase 2. But if a worker is on lump 1883 labour he can earn anything that is going. There is no control under the Act.
One reason why there is now a move towards greater numbers in lump employment is that they are able to get round the Counter-Inflation Act. This blows a hole right through Government policy.
Once again I emphasise the unfairness of this practice. Organisations of trade unionists are caught under the Act, and the unorganised are able to get away with it. We have our mini-Lonrhos, as it were, in the building industry.
Mr. G. F. Smith, the general secretary of UCATT, drew attention to this matter in a letter to The Times published on Wednesday, in which he said:The prevalence of these people within the present house-building sector is such that it is reliably estimated that their earnings have risen by 20 per cent. since the Government's freeze commenced. There has been no increase in the nationally negotiated building rate during this period.As I said when introducing the Bill, the lump has increased in the construction industry until today between one-quarter and one-third of the labour force of 1½ million are employed in this way. Therefore, this is a matter of the gravest importance. It is estimated that the number is about 400,000. When one realises that the Phelps Brown Report, issued in 1968, said that the numbers were between 165,000 and 200,000, one can see the rapid increase that has occurred in the past few years.
There are many reasons for this increase. We had the existence of SET, which certainly led to an increase in lump labour. There was also the Labour Government's wage control, and now we have the present Government's wage control. Many employers are very happy to accept it because they avoid redundancy payments and holiday payments, they do not have to act as tax collectors and they have no similar overheads. They are delighted that this practice should continue.
At the same time, however, some employers put their hands on their hearts and say "We do not really believe it." Some of the bigger contractors say "We do not practise this at all." However, I have copies of contracts signed by some of the biggest employers in Britain with labour-only sub-contracting gangs in 1884 various parts of the country. This is rather like the old Red Indian who says, "White man speak with forked tongue." This certainly applies with many employers in the British building industry.
I should like to refer to a statement which the employers have made. They say that the National Federation of Building Trades Employers does not support the extension of traditional subcontracting under self-employment conditions, which involves evasion of statutory and /or industrial obligations. At the same time, however, they say that they want the answer to this problem to be a negotiated agreement between the employers and the trade unions and they do not want legislation. But we have had this previously. We can look back to the industry in 1950 and the national working rule agreement. Had that been carried out by everyone, clearly that would have eliminated lump labour. We then had a retreat from that agreement in 1964. But we are back to the 1950 position. A declaration of intent was issued on behalf of the national joint council, but it has not stopped this growth.
As The Times pointed out in a very interesting editorial yesterday, all this talk on the part of the employers was just so much talk. The Times said that there was a need now for legislation in order to deal with this matter.
The Bill is a step in the right direction to solve this problem. We may hear from the Government that they are very sympathetic to this way of dealing with it but that this is not the right Bill. That is fine, as long as the Government introduce a Bill which will stop it. The Labour Party will suggest such a Bill at the next General Election if the present Government have not done so. The TUC is convinced that we now need legislation. Its document on this clearly explains why legislation is required.
The time has come to stop this pernicious system throughout the building and construction industry. It is making too many of our good workers into crooks. They are not crooks. They would like the opportunity of earning good wages under good conditions. But many of them are forced to go on to lump labour jobs because there are no openings for them otherwise.
1885 We must deal with this problem in three ways. First, we must have legislation. Secondly, we must ensure that the workers are given opportunities in the building industry to increase their wages through the national joint council. Thirdly, we must have more training and apprenticeship schemes. More employers must take on apprentices so that in the future we have a stable and viable labour force that can build houses and perform construction jobs where needed.
§ 12.47 p.m.
§ Mr. Idris Owen (Stockport, North)
I have listened with profound interest to the hon. Member for Liverpool, Walton (Mr. Heffer). It is not surprising that he has tended to give a one-sided view of the labour-only sub-contracting activity in the construction industry today.
Perhaps it would enable a better appreciation of the hon. Gentleman's very sincere intention to support the people who support him if I read out a notice handed to me by a Manchester employer last weekend. The notice asks Manchester building workers to join in a mass lobby on Friday 18th Mayto support Eric Heffer's Bill to outlaw the lump.The notice goes on to say:The employers' aim is simple—to smash the Unions. It is essential to the survival of the trade union organisations in the industry that Eric Heffer's Bill is passed in Parliament.That is the mood of the trade union representatives who have invited the hon. Member for Walton to present this case today.
§ Mr. Frank Marsden (Liverpool, Scotland)
I thought that I heard the hon. Member say that this was "a Bill to smash the unions." He must know that the unions warmly welcome the Bill.
§ Mr. Owen
I shall repeat the quotation:The employers' aim is simple—to smash the Unions.The hon. Member for Walton has done his best to present the case on behalf of the unions. He has done that admirably. With much of what he said I would not quarrel. Naturally, he has focused attention on the worst aspects of labour-only sub-contracting. He has called it "the lump." I think that this was a London or south-country expres- 1886 sion. Certainly it is only recently that we have heard it. Labour-only subcontracting developed from piece work, a method by which a man was paid by production.
I ought to declare my interest. I am a director of a building and construction company which has been providing building services since before the First World War—indeed, when labour was in receipt of only 6d. per hour for craftsmen.
There have been many changes and devices adopted to create a highly efficient and productive industry. Unfortunately, on far too many occasions, due to the vicissitudes of national situations and politics, the building industry has probably suffered more than any other at the hands of the Government. Building services have frequently been used as regulators for the economy. The Labour Government were no exception to the rule. It is not surprising that during their last tenure of office labour-only sub-contracting gathered greater momentum than ever before.
I must confess that my company employs both forms of labour—directly employed men and labour-only sub-contractors. But both types of labour come under the direct jurisdiction of my company's management. It is responsible for employers' liability, tax deductions, and the normal social security services. Therefore, no member of my organisation should fear not being covered by insurance.
I should like briefly to trace the history of the labour-only sub-contracting system. I dislike it. It creates indiscipline. But I cannot be blinded to its virtues. I say without bitterness that the trade unions have much to be responsible for in the growth of labour-only sub-contracting. In my experience—and I have been in the construction industry for over 40 years—the trade unions have never directed their attention to the question of productivity. All that they have been interested in is getting the maximum amount of money for their operatives. That is not an unworthy motive, but it would have been attractive if occasionally they had been interested in productivity.
§ Mr. Owen
I have never had any representations from trade union officials, with whom I have the friendliest relations, about discussing the subject of productivity.
It is through no trick of fate that labour-only sub-contracting outshines direct labour productivity to a fantastic degree. My managers, and management generally in the construction industry—
§ Mr. Heffer
Perhaps the hon. Gentleman will give way now because plainly he is going on to another point. He said that the trade unions had never been interested in productivity. He points out that he has long experience and knowledge of the industry. Therefore, he must know that as long ago as 1946 or 1947 we agreed that production bonuses should be introduced in the industry. In fact, they became part and parcel of the national working rule agreement. More trouble developed as a result of that than ever before. Nevertheless, the agreement was made at the request of the then Labour Government, and the trade unions were 100 per cent. in support of amending the rules so that productivity agreements could be made.
§ Mr. Owen
I am sure that the hon. Gentleman and I see the industry through the same eyes and I agree that bonuses have been the source of a great deal of trouble and irritation in the industry. However, let us examine the situation. Building managers generally favour labour-only sub-contracting perhaps more than senior people who do not have site management problems. Contract managers see the matter in a different light.
The labour-only system gathered momentum in the craft trades in the 1960s. Although it had been in existence since the last war, the majority of the work was done on the payment-by-results and bonus systems. During the 1960s, with the uncertainties confronting the construction industry, management tried to discover new methods of production 1888 in order to keep down costs and to remain in business. The Opposition, who were then in government, sought to use the construction industry as a regulator and we had a period of stop-go which was deplored by both management and labour. Then we had the last straw— the imposition of selective employment tax.
Let us examine the situation in 1971. It was a fascinating situation for anyone who had to maintain maximum productivity and to keep himself in business. In June 1971 the basic rate for craftsmen was £20 a week. The employer's responsibility, before the operative did an hour's work, amounted to 26 per cent. in addition to that rate of pay, comprising an unemployment and health contribution of £3.35, holiday stamp contribution of £1.25, graduated insurance of 51p and employer's liability of l0p, making a total of £5.21, without any overhead expenses. Before an operative commenced work, the employer was responsible for 26 per cent. of the gross pay of the employee.
It was therefore essential to find a method of productivity which would give a return on that investment. It is no secret that day work production was appallingly low. It is fair to say that, for the trade union negotiated rate in the industry, an employer would be lucky to obtain from those in the craft industries—say, bricklaying—more than 20 to 25 per cent. of the output which employers were accustomed to obtaining in pre-war years. The result was that they were at their wit's end to find a method of ensuring a fair day's work for a fair day's pay. That was the problem which bedevilled the industry.
Bonus systems were introduced which created quarrelling and bitterness. Work on many London sites was held up by bonus disputes. For week after week, major construction projects were at a standstill because of bonus disputes. Companies were obliged to employ armies of bonus clerks, and the overhead expenses were becoming intolerable. There is no doubt—I do not say this in bitterness— that workers were giving management sheer hell. The managers were at their wits' end about how they could resolve their problems. Not unnaturally, they turned to a method of production which would ensure an economic return from 1889 the employee for the amount of money which they paid him.
We have heard much about the need to maintain construction costs within limits which the nation can afford. Only this week we have discussed the vexed subject of yardstick prices for educational establishments. The Opposition have been anxious to invite the Secretary of State for Education and Science to increase the yardstick figures so that schools can be built. But if we cannot guarantee productivity in the industry it is not unlikely that costs will escalate beyond the nation's ability to afford the services of the industry. That is one of the greatest anxieties confronting management. They are not knaves or fools. Nor are those in organised labour.
The Bill is unnecessary in the form in which the hon. Member for Walton has submitted it, but that does not mean that I applaud everything which is going on in the construction industry. This is essentially a matter for the industry itself to resolve, not the Government. Once the Government encourage the industry to get rid of the abuses of the system, it will be up to the industry both organised labour and management, to resolve the problems. Undoubtedly the trade unions have lost a great deal of support in the construction industry.
If the hon. Member for Walton is unhappy about "labour-only", why has he not been able to bring his obvious influence on his own membership, the paid-up members of the union, who indulge in labour-only sub-contracting? There are thousands of carpenters who are far more loyal to the union than are members of the wet trades, as the hon. Member must know, but who nevertheless engage in this practice. Whatever their diversions in the form of labour-only subcontracting, they retain their union cards.
That is not so much true with the bricklayers, but the hon. Member knows full well that the carpenters—he has not been unassociated with that branch of the industry—stay loyal to the union. So why has he not been able to exert his own influence and that of his union on operatives who indulge in labour-only? That would be the first line of attack that I would follow if I were in his position.
1890 Labour-only sub-contracting is gaining momentum and not only in the construction industry. It is a deep-rooted problem. It results from the problems of management to ensure that in times of over-full employment labour offers a fair day's work for a fair day's pay.
Only a week ago, I sat in a hairdresser's chair in one of the largest establishments in Manchester—a very well known establishment—an exceedingly attractive hairdressing salon, and I was surprised to discover that the man who was kind enough to look after my hair was a labour-only sub-contractor. He rented the chair and proceeded to charge his customers as a labour-only sub-contracting hairdresser.
I said that that was staggering, but he said, "It is rife in my profession and it is developing all over the country." There are agencies which rent floor space from companies, such as Harrods, which buy the chairs and then let them to labour-only sub-contracting hairdressers.
Someone told me that I ought not to be surprised by that because many hotels proprietors, including the proprietors of large hotels, let bars to bartenders who operated on a labour-only sub-contracting basis. Whatever the barman sells is his own responsibility after he has paid the rent.
Management has been so sickened by the pressures imposed upon it that it has been looking for some respite from these grave labour problems. Nobody will argue that we have not had more than our fair share of labour problems in this country. No one will argue that the trade unions have been lily white and have never created any problem for anybody, or have been like the Angel Gabriel. In fact, the unions have given industry hell and it is not surprising that management has tried to find solutions that may not always be desirable.
The hon. Member for Kingston upon Hull, North (Mr. McNamara) is smiling. I do not know how many people he is responsible for employing, but I have been at the grass roots of the problem and I have never considered myself to be a bad employer and I do not think that my employees would regard me as a bad employer. I have had the problem of dealing with hundreds of relatively undisciplined people. Lower strata 1891 management has been at its wits' end and many people in management have thrown in the towel and gone to other industries. These are some of the problems that have encouraged the development of labour-only sub-contracting.
Labour-only sub-contracting ensures that management will pay only a fixed price for whatever project is undertaken. The hon. Member for Walton mentioned building a house. Labour-only sub-contractors now work mainly in syndicates. There are few masters of labour today. The men are nearly all equal partners, and the hon. Member knows it.
Bricklayers who have been in the habit of working together for weeks and even months develop a rapport, an understanding of each other's activities, and they are thus enabled to work together as a happy team instead of working with strangers. One knows that in the sporting world, for instance, 11 players who play regularly together give a better performance than if they play together only occasionally.
This is true in construction. Men find that they can work amicably together and, therefore, more profitably when they are happy than if they are unhappy, and more happily if they are able to choose the men with whom they will work. It is therefore not surprising that they form themselves into syndicates, and I must confess that the syndicates work extremely hard.
As I have said, my company operates both systems. I should not be unhappy if the labour-only system evaporated, but I should be fearful of the cost to the nation. The hon. Member for Walton said that contractors did not like the lump, but I have not had any representations from any major national or minor contractor asking me to support the abolition of labour-only sub-contracting. The National Federation of Building Trades Employers is an important representative organisation in the construction industry and a highly responsible body; the Federation of Master Builders, the director of which is an Opposition Member, is similarly responsible; but I have not had any representations from the former or from the hon. Member for Bethnal Green (Mr. Hilton).
The truth of the matter is that labour-only sub-contracting has nothing to gain 1892 and everything to lose, while the operative with a guaranteed week has nothing to lose and something to gain. I recall a recent experience that resulted from the success of operatives in getting a guaranteed week in the construction industry. A guaranteed week means that if inclement weather or other cause prevents their working, the men still get their pay. This was a worthwhile advance for the industry. In the years when I first started the system was terrible, because if there were a keen frost men had to go home without pay.
But whenever there is a social advance, there are always abuses and someone will abuse privileges that have been earned by people such as the hon. Member for Walton. Now if the rain comes—and it may be only a drizzle—the men not interested in productivity, those with a guaranteed week, come off the scaffold. They go into the mess room and out come the cards. That is not unusual, and the hon. Member knows it. If alternative work indoors is offered to them, they will say that the weather will soon become fine, and there are even those who believe that they should go home but still be paid.
The men who sell their labour only and who show endeavour have been able to command 400 per cent. in excess of what has been negotiated by the trade unions. There is some significance in that sort of figure. How is it that trade union workers working on bonuses can take home only £35, while a labour-only subcontractor may earn £80, £90, or £100, and, in some instances, such as Milton Keynes, £120?
There are men on construction projects working for the trade union rate plus a bonus who are laying no more than 250 bricks a day, yet half a mile away the labour-only boys are laying 1,200 bricks a day. They are working like beavers, realising that every brick they lay means a better standard of living for them.
There are 400,000 working men who have shown that they are prepared to work for what they get, and, if I were the hon. Member for Walton, I should not care to face them in the future if they were driven out of business. They have recognised that if a man is prepared to work he will be paid, but if a man is prepared to scrounge there is no future 1893 for him. I do not imagine that the hon. Member for Walton wishes to be seen as supporting that element in the industry.
§ Mr. Owen
I am not saying that. I have on the staff of my company many trade unionists, and many of the labour-only men in our industry are subscribing members of trade unions. But what they have seen as the future for them is that the more they produce the more money they will have.
This is a vital issue for the nation. If the nation is able to secure higher pro-productivity—it happens in American industry and in other industry—with the result that costs are lower, the nation benefits. If that element in the construction industry is destroyed, the effect will be to prejudice to some extent the socially valuable construction and development which hon. Members opposite so dearly desire. Let there be no mistake about it. The housing of the people, education, hospitals and many other services depend in large measures on the construction industry. If we take steps which will deprive the industry of the high productivity which it is enjoying, we shall limit the amount of development which the nation can have. There is a limit to the amount which can be spent on these services, and labour-only subcontracting is one way of ensuring high productivity.
There are abuses in the lump system, of course. There are abuses in all sorts of things. Our object must be to abolish the abuses, not to abolish those aspects of the system which are advantageous for the industry. It is not enough to say, "Out it goes altogether". We should direct our attention to abolishing the abuses and to ensuring that we achieve the aims which the hon. Member for Walton requires.
The hon. Gentleman spoke of the need for greater safety. He ought to know what the various accident figures are. In my other interest, in an insurance company, I saw the figures last week of the accident rate on the housing side. As the hon. Gentleman said, the majority of labour-only work is in housing. The 1894 actuarial figures show that the accident rate in housing is minimal. The significant accident rate is on high-rise buildings and the big construction and civil engineering projects. There are very few accidents on an estate of bungalows, and the premium rates for housing are 50 per cent. less than for general contracting. That shows where the lower risk is, and the hon. Gentleman cannot deny it. The insurance companies will tell him. These are hard facts.
So much, then, for his argument that the risk of accident to operatives is far greater where labour-only sub-contractors are employed. The responsibility for safety on the site still remains with the major contractor or developer.
The hon. Gentleman argues that the labour-only system leads to shoddy workmanship. No doubt he is right, if it is uncontrolled. But so does bonus work lead to shoddy workmanship, and the hon. Gentleman would welcome a bonus system. A bonus is another form of payment by results, and that can just as well lead—it has in fact led—to some degree of shoddy workmanship.
The hon. Gentleman gave some illustrations of shoddy workmanship. Whose responsibility is it? It is a shocking indictment against the inspectors of the National House Builders Registration Council and against the local authority building inspectors if they have allowed that kind of work to pass unchallenged. The hon. Gentleman knows very well that the NHBRC is constantly striking off its register people who carry out bad workmanship.
Many of the points which the hon. Gentleman made would win approval with me. I do not want any man to be at risk as a result of selling his energies in the construction industry. If a man is prepared to work hard for his industry, he should be more applauded than a man who does not want to work hard. He is the last man we should want to deprive of the advantages which have been so hard won by the hon. Member for Walton and his friends.
Let hon. Members opposite criticise labour-only sub-contracting as much as they like. It has much virtue. It has reduced overhead expenses, as the hon. Member said. What is wrong with that? 1895 Is there virtue in having a pile of overhead expenses? [An HON. MEMBER: "At what cost?"] It has increased productivity to fantastic levels.
I do not know how many construction sites the hon. Member for Walton has visited in recent months. I know that he has been a busy member of the Opposition, but I wonder how many labour-only sub-contractors he has met in recent weeks to whom he expressed the views which he has expressed this morning. I should be interested to know, because the labour-only sub-contractors have a view, too. I offer the hon. Gentleman a cordial welcome to come and study at close range the productivity of labour-only sub-contractors. Apparently, his ears are closed to the views of 400,000 working people, many of whom are paid-up members of the union which he so honourably represents.
I find the hon. Gentleman's attitude fascinating. I hazard the guess that he has not met many labour-only subcontractors in close conversation. Let him come and address a meeting and tell them what he thinks.
§ Mr. Heffer
I made absolutely clear that I did not regard the individual workers in labour-only sub-contracting as evil men, as bad men. I made it clear that the system had in many cases forced people who did not want to be labour-only sub-contractors to take up lump work. I am not attacking those individual workers, and I have never done so. I am attacking the system—the system which the hon. Gentleman has devoted the whole of his speech to defending because his profits and his interests benefit as a result of it.
§ Mr. Owen
I hope that I am not as prejudiced as the hon. Gentleman is. Labour-only sub-contracting is growing. Why? It would not grow if the building process which the hon. Gentleman advocates were more successful. He attacks profits as though profit were something evil. In fact, profit is a reward for economy.
§ Mr. Deputy Speaker (Mr. E. L. Mallalieu)
Order. I have not the slightest intention of trying to catch my eye.
§ Mr. McNamara
The hon. Gentleman has given a fascinating and revealing account of his firm. Will he tell us the number of apprentices he employs, and how that number compares with past years? Also, can he tell us the number of apprentices employed by the larger labour-only sub-contractors, and what the standard of education and training is?
§ Mr. Owen
We are part of a joint training scheme and if the hon. Member for Walton cares to inquire in the area in which my company operates he will find that we have a fair record of training apprentices. What has disappointed us is that as soon as those apprentices have developed some skill they leave the company which has looked after them, sent them to college and trained them. They leave. It is not the employer's desire that they should do so but they see opportunities of other Eldorados and, human nature being what it is, they go. This has tended to sicken employers who train. The apprentices go to other employers, lie about their age and claim more money. Many of them work for property repairers with no questions asked about their length of training.
Of course, there are abuses of the labour-only system and I should like them eradicated and I should like to join hands with the hon. Member for Walton in a concerted effort to abolish the abuses— but not the incentives which enable this country to produce lower cost building. We must not destroy that. Let us put right the abuses by all means and the National Federation of Building Trades Employers will state that they are ready and willing to sit round a table with the trade unions with that express object in mind so that the whole system of labour-only sub-contracting can be regularised to the advantage of all. That is vital. I do not believe that the hon. Member for Walton would be human if he were not motivated by the urgent desires of his trade union. We must commend his loyalty, but his blind loyalty can sometimes warp his judgment as to what is right for the industry.
1897 I hope that the hon. Member will not get into that position but will look at the matter more objectively not only through the eyes of his trade union. I am sure that the employers would be only too willing to discuss the means of regularising labour-only sub-contracting. He suggested that there were about 1½ million employed in the industry. I estimate that the figure is less than 1 million, and I suggest that 80 per cent. of the operatives in the wet trades are on labour-only sub-contracting.
There must be something in it. The system must be right for the operatives and for management. The only situation in which we should intrude is to correct the abuses. Management and labour have both discovered that there is a fantastic incentive for real industry. I should not like to see steps taken which would reduce dramatically overnight the productivity of the industry. It is not as good as it should be now and building costs are ever soaring. I should not like to over-burden the social objectives in this country by creating higher construction costs. I respectfully suggest to hon. Members to think twice before they destroy something that has proved to be successful in cost terms.
The majority of the speech of the hon. Member for Walton was directed at saying that the employers like the system because it was profitable. The operatives like it because it gives them high wages.
§ Mr. Owen
That is one of the abuses. But if we accept Clause 1, I can assure my hon. Friends and other hon. Members who are not connected with the industry that labour-only sub-contracting will be abolished completely—and that other devices will take its place, as the hon. Member for Walton knows. An example is that a team of bricklayers on labour-only sub-contracting would have only to buy a load of bricks to become labour and material sub-contractors. There are various means of overcoming such a restriction. I urge the hon. Member to use his undoubted influence and ability and his sincerity to help to join in a scheme which will give us the best of the system and destroy the worst.
§ 1.25 p.m.
§ Mr. Lewis Carter-Jones
I shall not pursue the line adopted by the hon. Member for Stockport (Mr. Idris Owen) who possesses such a wonderful company that it does not appear to come within the terms of the Bill. It was significant that his company did its fair amount of training of apprentices and I am sorry that he loses them all. Judging from the figures we have been given about the number of apprentices trained, his company must be taking on an overwhelming burden. As my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) pointed out, there were 28,000 apprentice joiners in 1967 and the figure has now dropped to 19,000. The number of apprentice bricklayers has dropped from 11,600 in 1967 to 6,800 now. Many of us believe that the lump is the cause of the decline in training. These figures show us the multiplier effect of the lump on that decline in the number of apprentices.
I normally speak about the disabled, and one figure has caused me concern about the lump. Various estimates have been made about the amount of nonpayment of tax by workers on the lump. The figure is about £50 million.
§ Mr. Carter-Jones
I am afraid that the hon. Member for Stockport is living in cloud-cuckoo-land. He should pay close attention to the number of tax exemption certificates and the increase of the number of £100 companies designed specifically for this purpose. The Treasury is passionately worried about the loss of revenue. What could £50 million do under the Alf Morris Act, for a start? Certainly we could provide more vehicles and better access. We could certainly provide better environmental machines. The existence of the lump means that responsibility in these 1899 matters is being avoided and it is the ordinary man and woman who is having to pay. We heard much eulogy by the hon. Member for Stockport about the great productivity, but it is paid for by the public and management is abdicating its responsibility in the matter.
As an illustration, Mr. George Henderson a national officer of my union, tells the story—and he says that the same situation applies all over the country—of how he goes to a building site and asks to see the site book so that he can see who is employed there. Very often that book contains the names of a ghost international soccer team with people such as Bobby Charlton, Willie Henderson, Denis Law and other well-known footballers.
Hon. Members may laugh but the significant point is that the record is not being properly kept. The register should contain the names of those employed on the site so that they pay their income tax and their contribution towards the social services. We may smile at the use of some of these devices, but their effect upon society is deadly. A loss to the Exchequer of income tax amounting to £50 million is a disgraceful condemnation of the system. I hope the House will welcome the Bill so ably introduced by my hon. Friend. He showed deep understanding of the problem and a keen appreciation of what is involved.
I invite the House to look at the increase in the number of tax exemption certificates. About 353,000 were issued in October 1972. What is significant is that one can buy them in the black market. If the hon. Member for Stock-port, North wants to get hold of some of them, I will tell him that they can be obtained in the "Black Horse" in Kilburn by members of the lump so that they need not in the end pay income tax, thereby avoiding their social reponsibilities. In a situation where about one-quarter of a labour force is involved in the non-payment of tax and of contributions, society is bound to suffer.
But perhaps the matter which causes me greatest concern is the absence of apprenticeships and training, because we now have a snowballing, multiplying effect. As the lump increases, the number of apprenticeships goes down sharply. The hon. Gentleman referred to the 1900 poaching and pinching of trained labour. That is done by the lump, and the residual element in the industry has to bear the burden of training.
The figures show the enormity of the problem. Here we have what ought to be an expanding industry, increasing and intensifying its skills but running its potential down instead. The lump must bear a very considerable responsibility for that situation. We are short of bricklayers, plumbers, carpenters and plasterers, yet these people are the key to the building industry and the solution to our long-term housing problem.
The Minister is missing at the moment, but I advised him that I would raise this matter. Often, before building takes place, there has to be demolition, so, to that extent, demolition is part and parcel of the construction industry. In the Contract Journal of 10th May 1973, of which I will let the Minister have a copy, Mr. Les Kemp of the Transport and General Workers Union states that he is most anxious that there shall be some sort of agreement in the demolition trade between bona fide employers and the trade unions in order to do something about the dangers in the trade. The Department of Employment's figures for fatal accidents in 1971 showed that there were 17 fatalities. That does not seem a great deal but it is in fact a substantial proportion of the working force.
I hope that the Minister will meet Mr. Kemp and the employers' representative, Mr. Vincent Powell-Smith, to make sure that in the near future there is agreement on the observing of the working rules agreement and Code of Practice 94 and participation in the safety training scheme run by the Construction Industry Training Board. That would be a measure of the earnest intent of the Government.
My hon. Friend the Member for Liverpool, Walton is prepared to withdraw the Bill if the Government give a firm undertaking to introduce a similar measure in the next session. If the Government do not do so, the next Labour Government will certainly do it. If the Government had the will, they could push it through in this Parliament without great difficulty.
I am concerned about the all-time low in apprentice training. I would refer the 1901 hon. Member for Stockport, North to the Lodden Bridge disaster. That showed the failure to give security when employing the lump. Three men were killed and six taken to hospital in that tragedy. Not one of those men was covered by our insurance scheme because they all belonged to the lump.
The practice is much more widespread than the hon. Gentleman would have us believe. Although he does not know it, the man who thinks he has an advantage in working for the lump loses in the long run. Frequently, however, it is his family who pay. Above all, it is society which loses because taxes and social service contributions are not met. In the end, no amount of economic reasoning disguises the fact that the public pays heavily for the lump.
§ 1.35 p.m.
§ Mr. Peter Trew (Dartford)
I have listened with interest to the hon. Member for Eccles (Mr. Carter-Jones) and I shall touch on one or two points which he raised. First, I declare my interest in the construction industry as a director of a building company. While I cannot compete with the 40 years that my hon. Friend the Member for Stockport, North (Mr. Idris Owen) has spent in the industry, I have nevertheless spent the greater part of my working life in it.
It is important to get one's terms right. The generic term "labour-only subcontracting" embraces two distinct types of employment. First, there is what one might call the genuine labour-only subcontracting, whereby an employer contracts to supply labour on a labour-only basis, but pays his taxes and other statutory contributions, takes his share in training and in all senses complies with the law. It is fair to say that the Bill does not aim to prohibit that form of genuine labour-only sub-contracting. The hon. Member for Liverpool, Walton (Mr. Heffer) spoke about genuine subcontracting and embraced in that term labour and material sub-contraction. I hope he meant to include in that term such labour-only sub-contracting, which is perfectly respectable and should not be the subject of legislation.
Then there is self-employment, which like labour-only sub-contracting has a long history in the building industry. One can go back hundreds of years and find examples of self-employed craftsmen and 1902 types of self-employment which are perfectly respectable and acceptable. Clause 4 specifically provides for certain types of self-employment to be exempt.
I see from the magazine To the Point of 5th May 1973 that labour-only subcontracting seems to be making its appearance in Russia. It reported:A form of embryo capitalism is increasing productivity in the Soviet Union's construction industry—and putting profits in building workers' pockets. The experiment, which has been reviewed favourably in the Soviet press, consists of sub-contracting the completion of housing projects to independent teams of building specialists and skilled workers. The team signs a contract with the official construction organisation and if prices and completion dates are respected the team receives a bonus based on the amount saved over official norms in the Five-Year Plan.I do not know whether the hon. Gentleman would described that as "the ugly and unacceptable face of capitalism", but it does make the point that there is some virtue in organising work on a labour-only basis. But there is good and bad in everything and I do not deny that self-employment or the lump, as it is called, can be abused. At best, it can provide mobility and high productivity. At worst, it can and does mean widespread tax evasion, inferior workmanship, and evasion of social responsibilitiness for health, safety and welfare. Perhaps the most serious effect—this was referred to by the hon. Member for Eccles—is on training. It is true that many of the self-employed and labour only sub-contractors do not make provision for training. Consequently, the number of apprentices in the industry tends to decline. There is a vicious circle because the labour shortage is exacerbated. That is one of the most serious problems in the industry, which, for reasons which I shall explain, is one of the reasons for the increasing prevalence of the lump.
Before considering the remedies to the problem—it is a problem which calls for a solution—it is worth reflecting on the reasons. One reason is that historically over the years there has been an increased tendency in the construction industry towards specialisation and subcontracting.
Twelve years ago I was working on site for a national contractor in Liverpool. There were on the books of the company as direct employees, carpenters, 1903 bricklayers, scaffolders, steel fixers and labourers. Twelve years later that would be unusual. Firms who still employ building workers direct tend to confine themselves to carpenters, bricklayers and labourers. Therefore, there is an increasing tendency towards specialisation.
In the case of house building, it is true to say that before the war this was largely an activity of building companies who regarded estate development as a sideline. In recent times house building has become increasingly the preserve of entrepreneurs and financiers who see building as an assembly process in the chain of events that leads from the initial buying of land to the sale of a completed house. I am not saying that that is necessarily a good or bad thing, but the result has been an increased tendency to sub-contract.
There have been fiscal incentives to labour-only sub-contractors. There have been increases in employers' contributions and, most significant, SET. The introduction of SET was the biggest single fillip to labour-only sub-contracting. Its removal should go some way towards reducing the attractiveness of that form of employment. Then there is the different treatment of earnings under Schedule E for direct employment and Schedule D for self-employment.
The most obvious example is that a self-employed building worker can claim against income tax for his travelling expenses to and from work, whereas somebody who is employed directly by a company cannot do so. That is one of the most important incentives to men to go on to self-employment.
A factor which I have already mentioned is the labour shortage. I first drew attention to the labour shortage in an Adjournment debate on 17th March 1972. At that time I warned that the construction industry was facing a crisis in the shortage of skilled craftsmen. A year later it is apparent that that is increasingly becoming the case. In 1966 the total number of workers in the construction industry was 1,090,000. By 1970 the figure had declined to 835,000. In the context of an increasing work load on the industry because of the policy of maintaining growth, the declining work force has put the individual worker in 1904 a much stronger bargaining position. That is a position which he can exploit more easily if he is self-employed than if he is on the books of a company. The load on the industry is an important factor in encouraging workers to go on to self-employment.
The remedies to the position of self-employment fall into two halves. There are those remedies which are open to the construction industry—including employers and trade unions—and there are those which are the responsibility of the Government. It is not the function of the House to lecture the construction industry or any other industry on how it should run its affairs. That applies to employers and trade unions. However, it seems that there are a number of matters which might receive attention. The first is the possibility of a voluntary form of registration or internal policing with employers and trade unions working in concert. Whether that would work I do not know, but it is something that is worth considering.
Next is the all-important question of training. The outlook for training is much more hopeful than a year ago. More apprentices are now being taken on. However, urgent attention should be given to the possibility of reducing the apprenticeship period from five years to three years. When a young man starts his working life today he is faced with many attractive alternative forms of employment. Five years is a long time for a young man to tie himself up when he sees his friends earning good money in other occupations. It is feasible to teach a young man the greater part of what he needs to know in three years rather than five years. That could have the effect of attracting many more apprentices into the industry.
Many of the senior people in the construction industry started their life on site as craftsmen. I hope that there will be many more. Big companies could do a lot more to provide a career structure. It could be made easier to spot talent on the site at an early stage of a man's career and then to bring that man up the management tree. I should like to see a wider tendency to take promising young men on to the permanent staff. If the career prospects were seen to be better and more interesting, more young men 1905 would be attracted into the construction industry and to work direct for contractors rather than as labour-only subcontractors. Those are some of the things which the industry could do.
Next, what about the Government? The Government could today advise the House to accept the Bill. I hope that the Government will not do that. While I sympathise with a great deal of what the hon. Member for Liverpool, Walton is trying to do, I do not think that his Bill will work. It will be more honoured in the breach than in the observance. That will apply particularly in times of boom and labour shortage.
The House of Commons does itself no good when it passes legislation which cannot be enforced. Apart from that, there are sectors of the industry—particularly house building despite what the hon. Member for Liverpool, Walton said— where there is a case for self-employment. One result of self-employment is to provide mobility and the high productivity which is desirable.
The Government could look at the fiscal factors involved. Reference has been made to exemption certificates and the evasion of income tax. The Government could consider again the provisions of the 1971 Act to satisfy themselves whether there is scope for improvement. Perhaps they could consider limited companies and decide whether loopholes are available. They could consider the schedule D treatment of expenses. That is a difficult matter. If a dentist, a barrister or an architect can be self-employed and claim expenses against income tax, there appears to be no reason for not allowing a building worker to do so. However, there may be a point of principle which could form the basis of a revision.
The genuinely self-employed man in most cases provides his services direct to the customer. A barrister provides his services direct to his client. A dentist works directly on the teeth of his patients. The so-called self-employed building worker does not provide his services direct to the customer but generally via a contractor or another employer.
Clause 4 exempts self-employed craftsmen working on house repairs and decorating. In those instances the craftsmen are often providing their services 1906 direct to the final consumer. There could well be a redefinition of "self-employment" in terms of income tax legislation. Such a redefinition might remove some of the fiscal incentives to the self-employed building worker.
One must also consider the work load on the industry about which the Government could do something. In one sense history is repeating itself. In 1963 and 1964 the industry was in a state of overload and under considerable pressure. The Government responded by encouraging industrialised building. But they went about it the wrong way. They made the grant of loan sanction to local authorities dependent on their using industrialised systems. That led to a proliferation of industrialised systems with the result that normally hard-headed British builders rushed like Gadarene swine into financial difficulties by investing in building systems for which there was no market. Between 1964 and 1970 the building industry went into a slump, and all the bricks which industrialised systems were supposed to replace began to pile up. One achievement of the Labour Government was that we had the biggest stockpile of unused bricks that we had ever seen.
I do not recommend the Government to embark on a course of that kind. But much could be done, bearing in mind the Government's influence as the sponsor of about 60 per cent. of all construction work, by ensuring that buildings are designed in ways which will not be extravagant in the use of site labour. From the junior draftsman to the most distinguished architect, all those engaged in designing buildings are making a substantial contribution to demand inflation by designing buildings which are wasteful and extravagant of site labour. The Department of the Environment could well devise a way of ensuring that when a project is built with the use or partial use of public money it should be designed so as to minimise its demands on site labour by making the maximum use of factory-built components or of construction methods and materials which are not expensive in site labour.
To give a simple illustration, it is possible when designing a retaining wall to satisfy oneself on paper that it might be marginally cheaper to build it in brickwork rather than in concrete. But if it 1907 is being built in a part of the country where it is virtually impossible to get bricklayers, clearly it will be very expensive and will use scarce resources. In such a case the obvious answer is to build in concrete.
It should be possible to draw up a code of practice for design to minimise demands on site labour. The Government should give attention to this and use the machinery of loan sanction and possibly cost yardsticks in order to encourage more economical design. If that promotes the use of industrialised building, so much the better.
But the Government must not follow the advice of many people to turn off the taps and contract their growth programme in order to reduce the load on the building industry. The better part of a life-time spent in the industry convinces me that the only way that the industry will rationalise itself and adopt more economical methods of building is in response to sustained pressure. If the Government cut back demand or introduce building licensing we should be back to the old system of alternating periods of boom and stagnation and the industry would have no incentive to invest capital in new methods.
There is no doubt that the lump system, as it is called, notably self-employment rather than genuine labour-only subcontracting, is being abused and that something must be done about it. A great deal can be done by the industry itself. But the Government have a rôle to play. If they recommend the House today not to accept this Bill, as I hope they will, none the less they ought to give serious consideration to what should be put in its place.
§ 1.55 p.m.
§ Mr. T. W. Urwin (Houghton-le-Spring)
I want first to congratulate my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) on having prepared and introduced the Bill in an attempt at last to deal with what is perhaps one of the most important social questions affecting the building industry. It is a problem revolving round a problem which has been with us since before the last war and it has escalated rapidly, more especially in the past few years.
1908 To those of my hon. Friends who have been present since the debate began and wish to make speeches, I apologise for having been called so early in the debate. I point out in my own defence that I have travelled a very long way since 5.30 this morning in order to be here and to make a contribution to the debate. I hope that my hon. Friends will accept my apology.
The hon. Member for Dartford (Mr. Trew) went to some length when he discussed the increasingly heavy work load on the construction industry. This is a real factor which exacerbates a problem of long duration in the industry. It has been a failure of all Governments that, in deciding on their approach to house building, they have made no attempt to bear in mind the resources of the construction industry. As a result, it has experienced peaks and troughs. In peak times we have insufficient labour and the bargaining power of the brigands and cowboys in the industry is increased because of the heavy demand for their labour.
I cannot help smiling to myself, although it is no joke, when I recall the long-drawn-out strike in the construction industry last year over a few measly pence. That was the wage increase being asked for by the workers in the industry. The employers took a petulant stand when all that was being asked for was an increase to bring wages up to a level still far below what others can demand.
It is time that the National Joint Council for the Building Industry got to grips with this difficult problem. It has been endemic in the industry for the whole of my lifetime. No matter how small the wage increase asked of the employers, they always adopt the same attitude. We have become quite used to going to arbitration for a penny an hour increase and being awarded either nothing or 50 per cent. of the penny. The employers must realise that they are allowing themselves to be blackmailed. Building operatives frequently blackmail their employers by refusing to work under nationally negotiated agreements simply because they can enjoy fatter wage packets by non-observance of the industry's rules.
The hon. Member for Dartford referred to that part of the Bill which 1909 deals with genuine labour-only sub-contractors. It is not my purpose to denigrate all of them. There are those in the industry who are really genuine, who make a good contribution to the industry and who are entitled to continue doing that. But my hon. Friend the Member for Walton seeks to establish by statute the kind of control which has for so long been absent from the industry.
In many respects, I am sorry that Labour lost the General Election in June 1970. It has not been very good for the nation so far. In 1970 the Labour Government prepared and presented a Bill of a similar nature to that introduced by my hon. Friend. It would have become law had the result of the election gone the other way.
Some of my hon. Friends and I tried to persuade the Government to take up that Bill as an earnest of their desire to ensure that we restored order out of the chaos that had for so long existed in the construction industry. But we were always beaten back. The policy of the Government in those days was that there should be no intervention in industry— that matters should be allowed to take their normal and somewhat natural course. [AN HON. MEMBER: "Selsdon man."] Selsdon man.
In 1971 the Chancellor of the Exchequer made some footling attempts to assert control through the medium of the Finance Bill with the tax exemption certificates. It would have been better described as the tax evasion certificate. I understand from my extensive discussions with responsible people in the construction industry that whilst there are many other widespread abuses, this has become one of the biggest swindles of all time. I understand that some building sites are partially operated from public houses in the city of London where tax exemption certificates are changing hands for fees ranging from £5 to £50, or even more. People picking them up in this way go on to building sites and use the names which are written on the tax exemption certificates.
The Chancellor has told us how many tax exemption certificates have been issued—it is an enormously high number —but he cannot tell us—indeed, no attempt appears to have been made to 1910 determine the number—how many are being used honestly. Not only is there tax evasion in this way and through the fiddles for which accountants are responsible, but there is evasion of statutory payments such as national insurance contributions.
What is labour-only sub-contracting all about? The hon. Member for Dartford talked about the importance of high productivity. All employers talk about high productivity. It is economically desirable that productivity should be as high as possible It is also economically desirable for the operative to have as much money as possible in his wage package, but he should earn it within the rules of the industry rather than in the jungle that now exists.
As I came into the Chamber I heard a reference to apprentice training. These people are not concerned about apprentices. They kick apprentices off the scaffold anyway. This is one of the greatest weaknesses of the system. I understand from a reply to a Written Question recently that the number of apprentices has declined by 50 per cent. during the last four years. If we go on at this rate we shall be unable to find the craftsmen not only to carry out the normal work load of the building industry because of lack of training, but also to carry out the maintenance of our wonderful historic buildings, whether in London or any other part of the country. We have many beautiful stone buildings, but there are scarcely any stonemasons about nowadays. I am not suggesting that they are on labour-only sub-contracting, but I should not be surprised if they were. I understand that what used to be called the Ministry of Public Building and Works has not been adverse to employing labour-only sub-contractors to do work which is its direct responsibility.
There is a developing problem in housing and house modernisation. I do not know about the experience of my colleagues, but I receive letters from unfortunate owner-occupiers who, having obtained an improvement grant under the housing Acts, proceed in the statutory way to obtain an estimate, and not knowing the difference between the adventurer and the bona fide contractor, accept the lowest tender, which, of course, measures up to their grant.
1911 All too frequently the contractor gets so far with the modernisation or improvement and then finds that he has not enough cash to finish the job. He is an adventurer in the real sense of the term and is responsible for shoddy workmanship which makes it infinitely worse, because the unfortunate owner-occupier then has to find another builder, if he can, and by the time all this necessary business has been gone through the cost of the building or improvement has increased considerably. I know of one case of an increase of 50 per cent. over an estimate that was first obtained in November last year. Now the unfortunate individual concerned has to find the additional money. A couple of weeks ago one of my constituents told me that he had had to utilise every penny he possessed to remedy the omissions of a contractor who had gone bankrupt. I repeat many of these labour-only sub-contractors are not contractors in the real sense of the term.
Labour-only sub-contracting is an antisocial system to the extent that one seldom sees a man over 50 years of age laying bricks on a building site. I refer to sites where labour-only sub-contracting is in operation. People involved in that system cannot be bothered with the reducing productivity potential of a man as he gets older.
In many instances safety measures are completely ignored. One might facetiously describe bricklayers working on chimney stacks as working on their bootlaces rather than wait for a scaffolder to come along and put up the scaffolding. Sometimes they put up their own and no regard is paid to the safety provisions which are so essential in a high accident rate industry such as the building industry.
Standards of workmanship in many cases have declined. Reference was made to the Bill being honoured more in the breach than in the observance regarding the non-observance of national agreements. However, I think that that is more applicable to the tax exemption certificates.
There is a profitable but sordid racket being practised by many people who in many cases have had no direct connection with the construction industry. They jump on the band wagon and advise in 1912 various ways. I understand that some wages are paid by cheque in public houses to drifters who come in from different parts of the country to a particular centre. I do not know how widespread this practice is, but I have evidence and information that it is certainly profitable for the people who indulge in it. Often the recipient of a cheque for perhaps £100 or £120, which is sometimes not even for a 40-hour week —there are no regular working hours on labour-only sub-contracting—cannot find a bank willing to cash the cheque for him, so the landlord of the pub may advance him £2 or £3 on the pretext that the money is coming from the bank and he can buy a few drinks whilst he is waiting for it. When the percentage has been deducted the man gets substantially less than the amount which allegedly he has earned.
Somebody is making a good deal out of labour-only sub-contracting, and if any protest is made about the raw deal, the man is often told by the hired hands at the back of the pub that if he does not keep quiet about what has happened he will get no money at all.
I know that the Ministers responsible for this matter are interested in what is happening within the construction industry, and I know that they appreciate the extent to which people are being exploited. Therefore, I ask them on this occasion to grasp the nettle because the whole future of the building industry is at stake. Now is the time, rather than some time in the future, to restore sanity in the industry and to ensure that the industry's customers get the best possible service and the best possible end product.
I commented during business questions a week or two ago that even if my hon. Friend the Member for Liverpool, Walton succeeded in getting his Bill on the Floor of the House, it would be a long time before it reached the statute book— unless the Government were prepared to lean towards him and to provide all the facilities and help they could. Therefore, I ask the Government to be sensible and to take over the Bill and, if necessary, to amend it by consultation. If that happens, I shall be as happy, as will my hon. Friend.
§ 2.12 p.m.
§ Mrs. Elaine Kellett-Bowman (Lancaster)
Unlike previous speakers in this 1913 debate, I have neither an employer nor a union axe to grind in this matter, but that does not mean that I do not consider the problem caused by some aspects of the lump to be far more important not only to those directly involved but also to the nation as a whole than today's sparse attendance implies.
The problems vary widely from region to region, and even within the regions, according to the types of construction, size of the site, and so on. Although the hon. Member for Liverpool, Walton (Mr. Heffer) and I both come from the North-West, I must emphasise that the conditions in Liverpool and Lancaster vary vastly.
Labour-only sub-contractors, as my hon. Friend the Member for Dartford (Mr. Trew) pointed out, can be divided sharply into two types. There are those I regard as thoroughly undesirable, the fly-by-night operators who owe no allegiance to anybody. They begin a job and then, when offered better money elsewhere, they leave the original site, having completed only half the job, and leave the main contractor with the problems of a half-completed job and heavy penalties for late completion. It is these gangs who often pay scant regard to the quality of workmanship or safety factors since they may never be in the area again. They care very little whether the work collapses behind them. Furthermore, despite the provisions of the Finance Act 1971, they often manage to avoid tax and fail to pay national insurance contributions.
There is, however, another type of labour-only sub-contractor who is vastly different from the sort of person I have just described. Many of the second type of worker operate in my own area. I refer to what I might call the "local resident sub-contractors", the man who is normally employed for most of his time by the same firm. He cares very much about the standard of his work. He does not turn out the "shoddy product" which was referred to by the hon. Member for Walton, but sticks loyally to his side of any bargain. The great advantage from his point of view is that he works on piece rates—he is paid by the job and not by the hour. If he works hard and long hours, he and his family get the benefit in his wage packet at the end of the week. He is, in effect, 1914 on a profit-sharing basis with his employer.
The type of man to whom I refer is registered under Section 30 of the Finance Act 1971 and he does not evade payment of tax or insurance contributions, although it would be true to say that the introduction of SET was a considerable inducement to men to become self-employed sub-contractors.
There is one problem which relates to both these groups, and which concerns the trade unions, the employers and the nation. This is the important consideration that self-employed labour-only subcontractors do not train apprentices. I was a little surprised when the local branch of the Union of Construction, Allied Trades and Technicians wrote to me on the subject, but did not mention this aspect of the matter—an aspect which I regard as crucial. To say that the position regarding apprentices and the consequent shortage of skilled labour is critical is to put it too mildly. It is desperate. If we do not find some way of training many more skilled building workers in the very near future, our whole building programme for homes, schools, hospitals and factories could grind to a halt in the not-too-distant future.
The training centres in recent years have been trying to fill this gap and the trade unions have been very co-operative in working with the training centres. I would appreciate it very much if my hon. Friend could give me up-to-date figures of the out-turn of these centres in regard to building workers. But however good these figures may be—and I suspect that so far they are not too good —they do not help my district. We have tried repeatedly to get a training centre and have so far not succeeded. There is a long waiting list at our nearest centre for these courses. We have, however, an excellent college of further education which already undertakes some of this training, but it needs vastly more resources if it is to come to grips with this problem on a sufficient scale.
In conjunction with our local branch of the North-West Industrial Development Council, I discussed this matter with the Under-Secretary of State for Trade and Industry when he came to see us in Lancaster on 18th January this 1915 year. We stressed the need for the Government to pump more resources into the college to enable it to undertake much more of this work, particularly with young school-leavers and older workers wishing to improve their skills and prospects.
I have since followed this up with a barrage of letters to the Under-Secretary of State for Trade and Industry, to the Secretary of State for Employment, with whom I also had a long discussion of the problem, and to the Under-Secretary of State for Education and Science whose province this matter properly is. I enlisted the help of other Ministers only in what I might call a "prodding" capacity to get what I wanted for my local college of further education. I have also been writing to the Undersecretary of State for the Environment, and I believe that he appreciates the points I have raised. He accepts that self-employment, labour-only practices can raise serious problems and is anxious to provide a solution to avoid the worst features of it, while preserving what is best.
Although I can see the reason for the anxiety of the hon. Member for Walton —I have listened carefully to the argument today—I cannot support his Bill because I feel that it fails, except to a limited degree in Clause 4, to distinguish between good labour-only subcontractors, who carry out their obligations and their responsibilities and who do a jolly good job to the benefit of their families and the country, and the bad ones who do not. In short, it throws away the baby with the bath water.
I urge the Minister to take action himself about the undesirable features of the practice and to put pressure on the Secretary of State for Education and Science to speed the provision of training facilities for construction trades at colleges of further education in general and that in my constituency in particular.
§ 2.23 p.m.
§ Mr. Frank Marsden (Liverpool, Scotland)
While I support the Bill to prevent labour-only sub-contracting self-employment in the building construction industry, I would have supported a Bill aimed at abolishing this type of labour in all industries. Lump labour is not 1916 peculiar to the building industry. However, we must apply our minds in this debate to the building and construction industry.
I have no great love of statistics, which are heartless—I prefer to speak from the heart—but many figures have been bandied about not only today but outside the House also. One figure that must be highlighted is that 400,000 building workers, about 30 per cent. of the building industry's total work force, are categorised as self-employed. The hon. Member for Stockport, North (Mr. Idris Owen)— I am sorry that he is not in his place— agreed with this figure; in fact, he said that it was far larger.
This serious state of affairs in the building industry in the United Kingdom is not a subject to sweep under the carpet. This kind of self-employment—men on Merseyside and elsewhere call it the lump—is considered to be a loophole in the Industrial Relations Act, the income tax laws and all phases of the prices and incomes legislation. Many people consider it to be a great fiddle. Some of these workers on the lump are irate, annoyed and upset that my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) should seek to legislate against them or seek to influence the House of Commons to legislate against them. They say "We are doing all right, Jack. Leave us alone." "The lump" is a good description; I could not find a better or lower word. The lump workers are exempt from the need to contribute to national insurance or the redundancy fund or to pay VAT and training board levies, yet they still enjoy tax advantages.
These gangs of men work quickly—it pays them to do so—but very often the work they produce is of poor quality. They hawk themselves from site to site, responsible only to themselves. Many of them do not belong to trade unions and tout themselves to the highest bidder. I know that some of the language I use could be described as extravagant. It is not. It is the truth of the situation. Some workers, especially younger ones, are attracted by high earnings and perhaps even driven into the lump because of the Government's prices and incomes policy.
Nevertheless the lump is a cancer in the building and construction industry that must be cut out if that industry is 1917 to keep its self-respect and prosper and grow in the proper manner. The lump man is not interested in carrying an apprentice. He wants no part of it. An apprentice will slow him down. So apprentice schemes are suffering and now there is a shortage of skilled labour in a growing number of areas.
The lump is damaging the quality of construction work and is undermining the industry's already shaky collective bargaining machinery. Most employers encourage the lump system because it works to their advantage. Lump men are not too worried about safety regulations or lavatory, washing and canteen facilities. The lump man is an easily and readily available source of labour. It is a sordid business, and the unions demand action.
The Prime Minister has talked about fairness in the labour sector and has said that the Industrial Relations Act should apply to every section of the working community. So it should, if that Act is to be fair to all. In the words of the trade union poster, "End the lump".
§ 2.28 p.m.
§ Mr. James Allason (Hemel Hempstead)
I agree that labour-only sub-contracting presents a real problem. I do not agree with those who say that it is possible to deal with it simply in discussions with the industry. I believe that the Government have to take some action. The size of that action is what we are discusing this afternoon.
The hon. Member for Liverpool, Walton (Mr. Heffer) goes too far in seeking to abolish labour-only sub-contracting altogether. His hon. Friend the Member for Houghton-le-Spring (Mr. Urwin) admitted that there were some good types of labour-only sub-contracting, yet he seemed to support the Bill and to be prepared to see those types disappear if it were possible to cause them to do so, which I doubt.
There are severe problems. The first is the tax problem. It is intolerable that, when these very high wages are being paid, tax should be avoided. The trade in exemption certificates is thoroughly objectionable, but it is difficult to see an immediate solution. One hopes that some tax sleuths might take a little interest in that direction, although that is probably not the complete answer.
1918 Apprentice training is a real problem in the industry and labour-only subcontractors are too busy to think about it. They want to get on with the job, on the principle of "sufficient unto the day". We must ensure that apprentice training takes place in the building industry; this is where the Government have a real duty to fulfil. This will not come about simply from discussions within the industry.
But the real problem is productivity. If the hon. Member for Walton were offering as an alternative a productivity deal, if all the men on the lump moved into the unions, what would happen? They certainly would not want to accept current union rates or productivity agreements.
§ Mr. Allason
I agree that it is not an argument for doing nothing about this practice, but it is a grave problem. Both the industry and the nation need productivity. The type of productivity which lays 250 bricks a day does not help the nation.
The hon. Member for Walton called in aid the Phelps Brown Report and quoted —somewhat selectively—from the report to indicate that labour-only sub-contracting was thoroughly unsatisfactory. I looked at the conclusions on this practice as a working arrangement, contained in paragraph 381, and I draw attention to the closing words:The evidence we have assembled, however, leads us to conclude that were it possible to outlaw labour-only sub-contracting altogether, the present effect on the working arrangements of the industry would on balance be disadvantageous.That is clearly not the type of thing that the hon. Gentleman was suggesting.
§ Mr. Alfred Morris (Manchester, Wythenshawe)
The hon. Gentleman has been referring to the very important matter of pay and incentives. Is he satisfied that stage 2 of the Government's prices and incomes policy—namely, an increase of £1 plus 4 per cent.—can be applied to those who are in the lump? If it cannot, how fair is the policy to trade unionists in the building industry?
§ Mr. Allason
The difficulty is that labour-only sub-contractors are working on piece rates. As far as I know, there 1919 is no restriction on earning more by increased piece-rate work, whereas if one is not on piece rates obviously one is confined to the £1 plus 4 per cent. Phase 2 does not affect piece rates.
§ Mr. Morris
Does the hon. Gentleman agree that his hon. Friend the Minister should clarify this important matter when he replies to the debate?
§ Mr. Allason
I am sure that my hon. Friend the Minister has noted the point.
Reverting to the Phelps Brown proposals in relation to labour-only sub-contracting, the report said particularly that it was necessary to safeguard those who were genuinely in business on their own account. The report suggested a register, presumably similar to the register proposed in the Bill, but a much more generous register. For example, the hon. Gentleman has suggested that specialists would be safeguarded under the Bill. I do not see how that can be so. The exemption is contained in Clause 4 and relates to those engaged in smaller house repairs and decorations. But what about the example which we have had of the self-employed stonemason, a real craftsman who produces some magnificent work? Surely he ought to be preserved as a single specialist. I connot believe that he could possibly fall within Clause 4, because he is not dealing with small house repairs and internal decorations.
Then there is the question of those engaged in improvements, which must fall outside the normal repairs and interior decorations. They are carrying out constructive work within houses. They would fall outside the scope of the clause. But these are the types of useful craftsmen whom we would wish to see exempted as single, personal contractors. When the Construction Industry Contracts Bill was in Standing Committee there was always the difficulty of seeking to define the single craftsman in order to preserve him.
Equally, we have to think of the other parts of labour-only sub-contracting which are beneficial. Those are not protected, so I do not believe that this is a satisfactory way of dealing with the problem. I hope that my hon. Friend the Minister has a satisfactory way of dealing with it, because there clearly should be such a way.
1920 All of us are consumers and it is we who have to suffer from the present difficulties of the building industry and its very high costs, in both new construction and repairs. Therefore, something must be done to deal with the scandals which are taking place in the industry, but the Bill is not the right way to deal with it.
§ 2.36 p.m.
§ Mr. Giles Radice (Chester-le-Street)
In supporting the Bill so ably introduced by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), I ought to mention that I speak as a sponsored Member for the General and Municipal Workers Union, one of the main unions in the industry. The aim of my union, like that of other unions, is that workers in the building industry should obtain regular and profitable employment, should secure the benefits which come from trade unionism and collective bargaining and should achieve the basic industrial rights which are common for other industries but not for this industry. Hon. Members on the Government side of the House would not disagree with those objectives.
However, all those objectives are frustrated by the spread of the lump, which now amounts to at least one worker in four, and perhaps even more. It has doubled since 1966 and has nearly doubled since the publication of the Phelps Brown Report.
I want to deal briefly with the effects of the lump on workers, employers, and the community. In the short term it may mean higher wages. It may mean more freedom for workers to change their employers at will. But this is at the cost of serious disadvantages. The safety factor has been mentioned. The lump is an incentive to dangerous work methods. The speed of the work means that safety precautions are very often forgotten.
As regards security, under the lump there is no security of employment, not even the minimum rights given under the Contracts of Employment Act. There is no right to redundancy pay, no entitlement to holiday pay under the holiday credit scheme, no entitlement to pension rights under occupational pension schemes and no right to industrial injury benefits. All those are rights common in other industries, but under the lump the 1921 workers in the construction industry do not have them.
There is also the problem of the decline in skills. A worker's skill is his main protection. It is his meal ticket. There is strong evidence that the lump works against the acquiring of skills. In the end this will weaken the work force.
The effect of the lump on collective bargaining and trade unionism has been mentioned. It is clear that the lump has undermined collective bargaining and the democratic protection which trade unionism offers. Despite the short-term benefits, those who work on the lump are returning to the nineteenth century.
There are certainly short-term profits for the employer, but these are at the expense of his social obligations as an employer and of his long-term interests, because the lump will mean in the end a lack of stable workers. It will mean shoddy workmanship, which so often gives the industry a bad name. The lump means a lack of skilled workers in the end. Therefore, unless we stop the lump, employers will in the near future find themselves in an extremely critical and dangerous situation as regards skilled workers. Despite the short-term profits, the employer who acquiesces in the lump is biting off his nose to spite his face.
The lump also creates bottlenecks in the building industry at times when we should not have them. Vital community projects in housing, hospitals and education are slowed down. The payment of income tax is evaded and there is abuse of social benefits, as the Fisher Report pointed out. Therefore, the lump is a scourge to the community.
It is clear that the Finance Act 1971 was not a solution, despite what has been said by Conservative hon. Members. There is plenty of evidence to show that it has proved inadequate. I am sure that the Inland Revenue did not expect to have 400,000 exemption certificates. The growth of the £100 companies, which numbered 26,000 in 1971 and 40,000 in 1972, shows the kind of thing which is happening.
As my hon. Friend the Member for Walton said, the Bill may not be perfect, but it is clear that some form of registration is necessary. I agree that 1922 there is a problem of definition, but we must have some form of registration if the industry is to be decasualised, as it must be if there is to be security of employment. Registration must be accompanied by a steady flow of work associated with the planning and scheduling of public contracts, with the introduction of effective training and the building up of collective bargaining in trade unionism.
Whatever happens today, the Government have a responsibility and, like my hon. Friends, I hope to hear what they intend to do about this matter.
§ 2.43 p.m.
§ The Minister for Housing and Construction (Mr. Paul Channon)
Although several hon. Members wish to take part in the debate, it might be helpful if I were to intervene at this stage. All of us, regardless of our views, are grateful to the hon. Member for Liverpool, Walton (Mr. Heffer) for bringing the Bill before us. The subject with which it deals, the lump, causes concern in the construction industry, and it is a proper concern of this House. In the few months that I have held my present office I have become very much aware of the concern felt by many in the construction industry about some aspects of the lump.
I have had the opportunity of discussing with the Trades Union Congress Construction Industry Committee, together with my hon. Friend the Minister of State, Department of Employment, a wide range of problems in the industry, including those with which we are concerned today. I shall wish to remain in touch with the committee about this and other matters. Many employers are concerned with some aspects of the present problem. Both sides of the industry have discussed them recently in the forum of the National Joint Council of the Building Industry. I also see from my postbag a more general and increasing interest in the problem.
In a sense, "the lump" is an unfortunate phrase because recently it has become imprecise. The chief danger is that it has become associated with the supply of services on a labour-only basis. The Bill does not perpetuate the confusion, but there is a genuine distinction between labour-only sub-contracting as 1923 a working arrangement and self-employment as a status. There has been some confusion among hon. Members today about the differences between labour-only sub-contracting and self-employment.
Under a labour-only sub-contract, the main contractor provides the materials and most of the equipment required for some part of his task. The main contractor pays the sub-contractor for carrying out the work. Thus, the labour-only sub-contract is distinguished from the normal form of sub-contract known as "supply and fix". In the latter form of contract the sub-contractor provides the material and equipment as well as the labour needed to perform a specified part of the whole task under the main contract.
The payment which is made to the labour-only sub-contractor may take various forms. A lump sum may be paid for completion of a specified task— hence the origin of the phrase "the lump"—or a piece rate may be paid for a measured amount of work, for example the laying of a number of bricks. The Phelps Brown Report found that, while the most common method of payment was a piece-work rate and that payments made under this were usually made weekly, there was a great variety of practice. Hon. Members will know of the differences in their areas.
In practice, the labour-only subcontract can be used in a variety of ways. The Phelps Brown Committee listed four which cover the main points. First, at one end of the spectrum is the subcontractor which is a firm, probably a limited liability company, with an established business with continuity of operations, a fixed address and a name of repute. The company or the proprietor is a proper employer bearing all the responsibilities of an employer and all the firm's workers are employees in the ordinarily accepted sense of the word. The firm may also do supply and fix as well as labour-only work.
Secondly, there is a less formal version of the first, usually smaller in size, of a gang under a leader or labour master, who takes the sub-contract himself and pays the other members of the gang and bears an employer's responsibilities for them. This arrangement can cover large 1924 gangs approximating to the more formal arrangement or very small groups indeed. The traditionally self-employed tiler who employs only one labourer is perhaps the best example.
The third arrangement is the gang which, although it may have a leader who negotiates on their behalf with the main contractor, consists entirely of self-employed men. These gangs may in practice be stable working partnerships to which their members have a great deal of loyalty or they may be a convenient means of doing short-term work and break up when the work is completed.
Finally, there is the self-employed individual who makes his own labour-only sub-contract with the main contractor, or who may be paid at an hourly rate by an agency which sends him out to work for particular contractors, who remit to the agency the payment due for the work they do. The agency in turn makes payments to the self-employed individual.
It is, I think, very difficult to argue against the general proposition that labour-only sub-contracting as a working arrangements is, or can be, highly efficient and advantageous to both workers and employers. This derives from the two major characteristics of construction work: first, that work is done on many thousands of sites, all of which have limited lives; and secondly, any individual project is essentially an assembly job using many different materials and skills.
Since each project is completed on its own particular site, construction workers must necessarily be more mobile than those who work in factories or offices. Labour-only sub-contracting at the top end of the spectrum offers the opportunity of a mechanism for workers moving smoothly from one site to another. Individual firms faced with a number of particular projects at a particular time have to assemble the skills required in the right mix and the right volume at the various sites so that building can progress smoothly. They cannot be realistically expected to guarantee, such is the nature of the tendering system in the industry, that they will be able to provide the same kind of work continuously for the same number of men with specialised skills.
1925 The alternative to labour-only subcontracting for them is either to maintain a labour force equal to peak demands, which inevitably is costly and wasteful, and so unattractive, or to hire and fire at short notice the extra labour needed for extra demands above basic level, which is hardly attractive to skilled or, indeed, any workers Thus, labour-only sub-contracting is much more complicated and diffuse than has been suggested and as a working arrangement can offer to the worker the possibility of continuous work and to the contractor the possibility of efficient use of scarce manpower resources. This arrangement of labour-only sub-contracting might in fact become more common as construction increasingly moves over to the use of factory-made components, the effect of which is to concentrate the site work even more on the assembly aspects of building.
In fact, the real complaints are not about labour-only sub-contracting at all but about the status of self-employment. Labour-only sub-contracting can take an employed form and is not subject to the same sort of criticisms which are often made against it in its self-employed form. It is the latter which the Bill seeks to tackle. I say that to avoid considerable confusion.
One should not rush to assume without evidence that self-employment in the construction industry is in some way bogus. Self-employment may be a quite proper wish not only in the construction industry but in other walks of life. It was put very well by The Times in the leader dealing with this matter yesterday when it said:The question of abolition of self-employment raises some difficult issues. Is it fair, in equity, to deny to building labour a choice (self-employment) which is open to many others in the trades and professions?The leader went on to say that it was arguable that self-employment in the building industry had never been more than a legal fiction.
But it is difficult to maintain that argument across the board. There are many trades in construction where it has been normal to have self-employment, and has been so for many years. A good example is that of tilers and another is that of steeplejacks, the classic case of a highly specialised job done on an individual basis. All I am saying at this 1926 stage is that one ought not to have a blanket approach and say that self-employment in the construction industry of itself is obviously bogus.
The crux of the whole argument is the abuses and bad effects which are alleged to be associated with labour-only sub-contracting in its self-employed form. We all know of the main allegations, some of which hon. Members on both sides of the House have outlined this afternoon. I should like to look at these allegations because they are crucial in determining our attitude to the problem and the Bill.
It is argued that the lump does not train its successors in the way that firms do and that, therefore, if the proportion of the lump to workers increases, the training effort in the industry must be relatively falling. It is said that the self-employed evade wholly or in part their obligations to pay income tax and their obligations to pay national insurance contributions; that health, safety and welfare regulations are ignored; that the work done by the self-employed is shoddy and often needs to be completed by permanently employed workers at an eventual higher cost, and that the self-employed often abandon work in mid-course.
It is also argued that the existence of a large number of self-employed in the industry leads to bad industrial relations and weakens the joint negotiating machinery of the industry and that the increases in the pay of the self-employed in the construction industry create a hole in the Government's counter-inflation policy. Those are the main arguments that are put both by the supporters of the Bill and by many others who do not support the hon. Member for Walton.
We are very concerned about training, not only in relation to self-employment. As the House is well aware, there are now widespread shortages of skilled craftsmen in the construction industry, particularly carpenters, joiners, bricklayers and plasterers. In every region in Great Britain there is now an excess of vacancies notified to the Department of Employment over unemployed in each of these categories, and everyone in the industry and outside with knowledge of these matters is concerned about the shortage of craftsmen.
1927 The picture for unskilled workers is quite different. There were still 77,000 registered unemployed unskilled workers in the construction industry in April this year.
If it is true—and hon. Members have made a strong case in this connection— that a move towards self-employment means a reduction in training, that is serious, but, curiously enough, it is not possible to make that deduction from the historical facts. The rate of registration for training has been governed far more by what has gone on in the industry, by the slumps and booms of the past few years.
It is not surprising if in a time of slump firms find themselves not exactly eager to expand training efforts. Unfortunately, one consequence is that in a cyclical industry, as this industry has been in the past, with an apprenticeship period of four years, if the industry cuts training at the bottom of the trough, that is exactly the point at which one needs to expand because, by the time the apprentices are trained, the industry is in a boom again.
This has been the case for the past few years. The industry suffered a comparative slump in 1969 and 1970 and there was steady decline in the number of apprentices registered in the years from 1968 until an upturn came in 1972. No doubt a major cause of that turnabout was the change in the expectations and fortunes of the industry and not particularly the expense and growth of self-employment, although it is impossible to discount that entirely and I do not wish to do so.
But the argument is that, if self-employment grows, training may be less extensive than it would have been if the men had been directly employed. I also understand that employers would be reluctant to take on apprentices who, when they gain their skills, move on to self-employment, and my hon. Friend the Member for Stockport, North (Mr. Idris Owen) mentioned that.
This is an important area and it must be looked at carefully. It is something that we must consider as part and parcel of the training problem as a whole rather than treating it as justification for separate action on self-employment. I am looking at the whole question of 1928 training in the light of the present shortages of skilled craftsmen in close consultation with all my colleagues, and we shall be discussing with both sides of industry what needs to be done and who may do it and how.
§ Mr. McNamara
Can the hon. Gentleman give figures showing the upturn in apprenticeships? That is a most important part of the argument?
§ Mr. Channon
I cannot do so at this moment, but I will arrange for the figures to be given later.
The second subject with which I want to deal is that of tax evasion. In the past there was always some scope for evasion by the self-employed in the construction industry. The Government recognised the need to deal with the problem and in 1971 they legislated for a new system to deal with payments to sub-contractors in order to stamp out income tax evasion. I shall not weary the House with the details of those provisions, which are well known to hon. Members.
It has been suggested that the system is not working, and I have heard figures bandied about purporting to represent the sums lost to the Exchequer through tax evasion. Invariably these figures are very high, or they have a wide range, and I am not surprised because I believe them to be entirely based on guesswork rather than evidence. The hon. Member for Walton himself said that there was no hard evidence about it.
It is said that certificate holders do not use their certificates if they can avoid the 30 per cent. deduction in lieu of tax. But all contractors have a statutory duty to report payments to sub-contractors, and the penalties for avoidance are severe. It is claimed also that there is a black market in exemption certificates and that, if one were to go into certain public houses in various parts of the country, one could pick up exemption certificates without much difficulty. However, from the point of view of the seller, if that happens he is likely to be in trouble later because the original holder is liable for tax incurred by later holders of the certificate.
It is argued also that the large number of certificates issued points in some way to the failure of the system. I do not accept that. The opposite, surely, is true. 1929 The Inland Revenue issues certificates only to those whom it considers to have a good tax record, and the high numbers reflect the fact that almost everybody who undertakes sub-contract work is now a certificate holder and is, therefore, within the tax system and paying tax. I accept that there has been a large number of certificates—about 350,000—issued to individuals who, in the opinion of the Inland Revenue, are people in good standing with the tax collection system. A significant number, however, have been refused, on the ground that the applicants are not considered to be bona-fide taxpayers.
In the opinion of the Inland Revenue, the number of certificates issued is about what the Department would have expected on the basis of its assessment of the number of self-employed persons in the industry directly assessable to tax prior to the introduction of the new scheme.
§ Mr. Andrew Bowden (Brighton, Kemptown)
My hon. Friend has already quoted from the editorial in The Times yesterday. Will he comment on what is said a little later in that editorial, which is directly relevant to the point he is now making? It states:A flourishing black market has grown up in tax exemption certificates—the instrument by which the Government sought to stop evasion. The only result of the Government's measures would seem to be that lump men arc now breaking two laws instead of one.
§ Mr. Channon
I am just coming to that, I was about to say that I do not wish to give the impression that the Government are complacent about the problem. I am not unaware of some advertisements—indeed, I think they were sent to me by an Opposition Member—appearing in certain construction journals and offering so-called tax-free jobs. The Inland Revenue is looking into this as well as other aspects of the working of the system.
If the review shows the need for further steps, they will have to be seriously considered.
§ Mr. Idris Owen
Is my hon. Friend aware that, in addition to the exemption certificate, it is now necessary to demand and receive from the recipient of the money a formal Inland Revenue receipt, which is then gathered by the major em- 1930 ployer and sent to the Department of Inland Revenue?
§ Mr. Channon
I am grateful to my hon. Friend for making that point. The main drive against misdemeanours by sub-contractors will come as assessments are made later this year. A number of cases have already come under scrutiny, with a view to possible criminal proceedings. However, this will take some time, and the effects of these prosecutions will not be felt until a little later.
I have heard also of ingenious subcontractors of self-employed labour trying to bypass the certificate scheme by turning themselves into limited companies. There has been a considerable increase in the number of new company registrations, leading to delays in the business of the registrar. But much of this has nothing to do with the construction industry. It is difficult to estimate the number of companies formed by sub-contractors in the industry recently, but I suspect that a figure of 5,000 would probably be on the high side, and many of these will have been legitimate and not contrived for tax evasion.
I quite understand the view of hon. Members, however, that there is a body of men in the industry who are prepared to try such methods out, and I think they may well need to be dealt with in future Finance Acts. On the other hand, there are many entirely respectable law-abiding people in the industry as self-employed sub-contractors. As I say, the Inland Revenue is reviewing this problem.
I come now to the allegations regarding social security, with specific reference to the lump. I shall not deal with this in detail, in order not to waste the time of the House, unless hon. Members wish me to. The whole question of the abuse of social security was dealt with by the committee chaired by Sir Henry Fisher to which the hon. Member for Chester-le-Street (Mr. Radice) referred. All of us agree that people with sizeable earnings should be prevented from evading their statutory responsibilities in respect of tax and national insurance. We shall have to weigh in the balance the various factors here and the fact that there is a small minority of workers in the building industry who are evading their national insurance liabilities. However, 1931 as I say, I shall not spend time on that now, because I wish to answer the question which was put to me about Government training centre apprenticeships and then pass at once to the question of safety.
Government training centre figures for the construction industry show that there were 5,000 apprentices in 1972. It is hoped that the figure will increase to 6,500 in 1973. I can give the hon. Member more detailed information if he wishes later or if he will put down a Question.
Safety is an issue of very great importance to all those concerned with the construction industry because the number of deaths and injuries in it is unacceptably high. There have been considerable improvements in recent years due to the work of the unions, the employers, the training board and the Factory Inspectorate. The number of fatal accidents in construction reported to the Chief Inspector of Factories fell from 288 in 1966 to 196 in 1971. But of course none of us can be satisfied, since no accident can be regarded with any degree of satisfaction. Nevertheless, we have to be convinced that the self-employed on building sites are more dangerous or more at risk than the other men who work there. It is an allegation which needs carefully-considered proof.
I should like further evidence if anyone can throw light on the issue. There are strongly-held and even conflicting views on the subject. I know that the unions and some supporters of the Bill think that men on the lump are comparatively unsafe. On the other hand, I have heard arguments that the growth of self-employment has not led to an increase in industrial accidents, and the number of fatal accidents has fallen. My hon. Friend the Member for Stockport, North pointed out that the number of accidents among these people is comparatively low. and we all know that in house building the lump is a very important factor.
§ Mr. Heffer
Perhaps the Minister is not aware of this because he has not worked in the building industry, as I have done, but it has been possible over the years to work on jobs where the safety regulations were not adhered to, where the scaffolding was not safe and sound, and yet where there were few 1932 accidents, although the risk of accidents increased because the regulations were not enforced. It is also possible to work on a site where the regulations are strictly enforced and where the risk of accidents is considerably reduced. The point made by the trade unions is that where there is extensive lump labour the regulations are not adhered to and it is a miracle that the accident rate has not increased.
§ Mr. Channon
I know that the hon. Member has strong views about this and I understand them. I merely state what I think to be the position at the present time and that we are lucky that accidents have decreased in recent years.
The hon. Member for Eccles (Mr. Carter-Jones) referred to the article in the Contract Journal on 10th May about safety in demolition. I would propose to write to him about it unless he would prefer to have an answer now. I have studied that article and I will be in touch with him about the matters raised in it.
§ Mr. John Silkin (Deptford)
I shall not make a long intervention because I have not heard the whole debate. There is, however, one thing which is most important. The Phelps Brown Report, which was the work of a committee set up under the aegis of the Labour Government five years ago, recommended that a register should be established, and it gave as one of the reasons for such a register the question of public liability insurance. While the Minister has dealt with safety and the reduction in accidents, which is of course to be welcomed, nothing he has said gives us any hope that proper insurance will be available—not National Health insurance, but public liability insurance—in the industry.
§ Mr. Channon
That is a very important point and if I have time I may return to it.
Another important argument advanced by hon. Members is that labour-only sub-contractors usually—and this is alleged to apply both to employed and to self-employed—produce poor quality work which has to be put right by permanently employed men, thus leading to much higher total costs. It is suggested that they have every incentive to skimp their work once they have obtained the contract, since they work for a lump sum 1933 for a specific amount of work. This varies from place to place very much, depending on management practice and the building up of close relationships, which often exist with specific labour-only sub-contractors.
There are cases in which contractors have built up relationships with specific labour-only sub-contractors which would obviously not survive shoddy work, people moving irresponsibly from job to job, or half-skilled men doing a job calling for skilled labour. Of course, no one takes on a half-skilled worker to do a skilled job because of the labour-only system. If a contractor is forced into doing that, it is because of the present shortage of skilled labour.
The Phelps Brown report had a long passage on skimping which I will not read because of time, but it is certainly of interest to hon. Members in view of the various standards which have been referred to. The report also pointed out:There are of course already powerful sanctions designed to ensure that site management maintains an adequate control of quality of work. … In speculative housebuilding, where labour-only sub-contracting is most prevalent the National House Builders' Registration Council play an important role by laying down detailed requirements for houses, by inspecting houses, and by ensuring that builders warrant to remedy minor defects for two years and major defects for 10 years. The scheme clearly imposes strong pressures on builders to maintain quality of work whether it is carried out by their own employees or by sub-contractors.I hope in my future consultations on this subject to obtain some precise indication of the employers' attitude on the quality of work, but, as I have said, this is another aspect where evidence is very difficult to come by. Often it is conflicting. In this connection, I was interested to hear the views of my hon. Friend the Member for Stockport, North.
I turn now to the question of industrial relations, together with the structure of the negotiating machinery in the industry. The last thing I wish to do is to suggest that the unions and employers most closely concerned have an easy job. That is palpably not the case, and to a great extent I am sure that the difficulties derive from the nature of the industry— its fragmentation, its diversity, its dispersion and its size. Certainly there are large numbers of self-employed labour- 1934 only sub-contractors working outside the conditions laid down by the industry's joint negotiating machinery, and this reduces the value of that machinery and makes it more difficult to operate.
The rôle of national negotiating machinery in the construction industry has been more limited on the pay side because, as the Phelps Brown Committee noted, nationally agreed rates are greatly supplemented by site bargaining. To the extent that self-employment grows, the job of the unions in organising labour in a rational and comprehensive way becomes all the more difficult. I understand and sympathise with their feelings, and the Government will take their views into account in the next few months.
I turn now to our counter-inflation policy and its relationship to the construction industry. The Government have always recognised that in terms of counter-inflation policy the construction industry provides very great difficulties because it has so many special characteristics. One of them undoubtedly is the extent of self-employment.
Because of the whole range of special features of the industry, the Government proposed that a special construction panel should be established to consider how the requirements of the Price and Pay Code could most effectively be applied to it. The chairman was appointed recently and the other members will be announced shortly by the Pay Board and the Price Commission.
These two agencies are responsible for the application of the code, and the construction panel will give what advice is required to the agencies on how that might be done in stage 2. It is not for me to speculate on how the agencies and their advisory body will approach any of the undoubtedly problems in stage 2. They have their guide lines and it is now up to them to exercise their powers.
I recognise the concern and fears of hon. Members and accept what my hon. Friend the Member for Hemel Hempstead (Mr. Allason) said—that this is something that the Government have to take seriously. But the evidence is conflicting. Many of the factors I have described are not new. There have been many proposals to try to provide a comprehensive solution for the alleged problems of the 1935 casual nature of the industry—labour-only sub-contracting and self-employment. These questions are linked to consideration of the Bill and we need to keep the difficulties in mind.
I have considered what has been attempted during the past years. I shall not weary the House with all the information. The matter goes right back to the Foster Report of 1919. Many attempts have been made since then in a variety of ways to tackle the problem. Indeed, the right hon. Member for Grimsby (Mr. Crosland) introduced a Bill. That was the last attempt at legislation. There have been other attempts to deal with the matter in different ways. There was the addition of Working Rule 8 to the National Working Rule Agreements of the National Joint Council of the Building Industry. There have been many other attempts. There was also the report of the Phelps Brown Committee.
The Phelps Brown Committee was an independent committee of inquiry set up following discussions with the industry in 1966. It was set up for the principal task of conducting an examination into labour-only sub-contracting in the construction industry. The committee concluded that, at its best, labour-only subcontracting combined—the contribution of the specialist subcontractor to the organisation of production and the continuity of employment of the worker, with a simple and effective form of wage incentive.The committee concluded that, at its worst, labour-only sub-contracting produced faulty work by irresponsible men concerned only with wresting the greatest possible gain from the industry.
One of the committee's main proposals was that a register should be kept by employers in the construction industry. It set out a number of other proposals. Then there was introduced the Construction Industry Contracts Bill. It was decided not to pursue that legislation because, as my right hon. Friend announced in 1970, the system of registration proposed under the Bill would have imposed additional financial and administrative burdens on the industry and would have penalised genuinely self-employed craftsmen. Further, at that time we were committed to the abolition of SET, evasion of which was an in- 1936 centive towards self-employment. SET had the dramatic effect of increasing self-employment during the late 1960s. A few months later we announced the present tax-exemption certificate system to deal with another abuse.
I must advise the House that this Bill cannot be accepted. The main provisions of the Bill are contained in Clause 1. They are sweeping and Draconian. Clause 1 provides thatIt shall be illegal for any person or persons to enter into a contract involving the practice of labour-only sub-contracting.There are other ways of dealing with the problem. One approach, which in practice has been adopted, is to deal with each abuse on its merits as it is revealed. If the Government were to conclude, which we have not done yet, that the system of self-employment in the construction industry is so inherently bad that it should be abolished or cut down drastically, I am doubtful that a declaration of illegality would be the best way to approach the matter. I am not sure how that would work. I am not sure how it would be enforced in the courts. Further, I am not sure whether such an approach would meet the aims of the sponsors of the Bill.
There is an alternative—namely, to approach the problem from this point of view: why is it attractive to those who indulge in it? Is it attractive because it gives more independence? Is the attraction the gain derived from the abuse of the tax system? If that gain were found to be the attraction, the way to deal with the problem would be to tighten up on the abuses so that the treatment of the self-employed would be more realistic and would be on a fairer basis compared with direct employment.
I was interested in the remarks made by my hon. Friend the Member for Dart-ford (Mr. Trew). I shall consider his remarks in the studies which are now proceeding. If a need is shown for a tightening up, that approach can be directed towards where it hurts—the pocket-on the basis of the provisions of the Finance Act 1971. I do not wish to object to the Bill on detailed drafting points. That would be ridiculous.
Another point of substance which I find unacceptable is the provision that labour-only self-employed sub-contracting 1937 should be illegal. Clause 4 deals with the exemption of certain self-employed persons. The clause provides:This section applies to construction operations which are solely concerned with the minor repair or decoration of private dwellings or other domestic accommodation.We must recognise that there are genuine one-man businesses engaged on minor construction operations against which the operation of the clause would be inappropriate—for example, the local corner shop and the pub in the next street. There are hundreds and thousands of examples and there is no clear basis on which to draw distinction.
§ Mr. Heffer
The Minister said that he did not want to argue about drafting matters but he went on to do just that. If he is prepared to accept the Bill in principle, obviously the Government can then bring forward amendments to deal with the matters he has raised. I am not arguing that the Bill is the most wonderfully drafted piece of legislation in the world. It was drafted largely by amateurs, after all. But surely the hon. Gentleman can accept it and then table amendments to meet his criticisms.
§ Mr. Channon
That is very helpful with regard to Clause 4 and the matter that I have raised. However it is the whole question of Clause 1, which is the operative clause, and its way of dealing with illegality which is difficult for me to accept at present.
I know there are many who feel that some sort of system of registration is essential before we can make any progress. That is a proposal that we shall have to consider seriously. But the aims and methods of any register must be precisely thought out. The Government accept the need to look urgently at these problems, and I have a good deal of sympathy with those who are concerned about what they believe to be the present abuses. On the other side I can see that there are probably great advantages in terms of efficiency in self-employed labour-only sub-contracting when it is properly operated.
We need to tread very carefully, especially in regard to the precise effect of any decisions eventually taken. Let us think of the likely effect, for example, of making the practice of labour-only self-employed sub-contracting illegal 1938 overnight. Would not this lead to very serious short-term difficulties? Demand for construction services is now very high and almost at a record level. We may have to distinguish between the long-term and short-term effects of taking any action on the lump. The short-term effects, which would be very serious now, have to be weighed against possible long-term effects of the system, such as the claimed diminution in training.
What would be the precise short-term effects on housing if the Bill were accepted? The lump is probably more important in housing than in any other sector. Are hon. Members encouraging me to rush into action and to take the risk of driving even a small number of skilled men out of the industry at a time when we need to expand house building? It is precisely that small number of men at the margin who are so crucial to our efforts to produce houses, and my concern for more houses is overriding.
There will be those who say that the long-term benefits outweigh the short-term disadvantages. We should always attempt to distinguish between the long-term and short-term effects of taking any action on the lump. A long-term effect might be to deal with the claimed diminution in training. But I must look also at the potential short-term effects. Any such effects which slowed up the housing programme would be disastrous and wholly unacceptable. There is evidence that the employers agree with that view. The NFBTE concludes that this Bill would drive craftsmen out of the industry and that housebuilding would be the sector first and most seriously affected.
Although I cannot accept this Bill, I am very much aware of all the worries and fears which have been so vociferously expressed. Recognising those feelings and recognising our own concern about the subject, the Government intend to look at the problem urgently over the next few months. I hope that we shall be able to discuss it with both sides of the industry and, by discovering what are the precise needs and worries of all those concerned, to isolate the steps that may need to be taken. If there are any, the Government will not hesitate to take them. I hope that the present discussions between unions and employers in the context of the National Joint Council which necessarily involve the subject 1939 now under discussion will produce an approach in which both sides of the industry can feel confidence.
At this stage, I cannot advise the House to approve the Bill, though I congratulate the hon. Member for Walton on the work which has gone into it. This is a subject to which the Government are paying urgent attention. It is one to which I shall devote a great deal of attention in the next few months. I shall discuss it with both sides of the industry hoping that we can tackle the difficult problems arising here while not making a situation where we create more disadvantages than exist at present.
§ 3.25 p.m.
§ Mr. Reg Prentice (East Ham, North)
We have been having an excellent debate because hon. Members on both sides of the House have contributed from their own experience within the building industry and have brought to bear a common concern. Their assessment of the concern and what needs to be done has varied, but throughout the House there has been a general feeling that we are facing a critical situation—in some ways getting worse—that requires action.
I should like to add a lighter note. I find myself in a somewhat nostalgic position as ex-Minister of Public Building and Works—a feeling shared by my right hon. Friends the Members for Leeds, West (Mr. C. Pannell) and Deptford (Mr. John Silkin)—particularly as the Minister, in the days when we were in Government, spoke on these matters from the Opposition Front Bench, as did his hon. Friend the Minister of State, Department of Employment, who was sitting beside him just now.
I cannot say much of a kindly nature about the speech to which we have just listened. The Minister has given us a certain amount of analysis as to detail, but what he had to put to the House in terms of constructive proposals was absolutely nil. When he asked the rhetorical question, "Are hon. Members rushing me to do something?", the answer must surely be "Yes."
The Government have been in office for almost three years, during which time the matters that we have been discussing have been getting steadily worse. The lump is larger than it was three years ago, 1940 and every problem brought forward in the debate has deteriorated during that period.
In 1970 the Government inherited a Bill which had gone through some of its stages. They dropped that Bill. They decided instead to rely on one single measure—the tax exemption certificate. I was proposing to quote The Times leader on that, but it has been quoted so much I will put it to one side. However, I will quote from the employers' statement:The new tax-exemption certificate system introduced by the Finance Act 1971 has aggravated the situation, not improved it.There is still no answer. The Minister said that the Bill introduced by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) is unacceptable, and gave reasons why he found it unacceptable. The hon. Gentleman has at least three possibilities open to him. The first is that the Bill goes through and is amended in Committee where the Government could produce their own amendments.
The second is to take out of the pigeonhole the Bill introduced by the Labour Government in 1970 which has differences from my hon. Friend's Bill, but is about 90 per cent. the same in its overlapping provisions.
The third possibility is that, after three years in office, the Minister could produce his own Bill and proposals.
None of these possibilities has been put forward by the Government. The Minister has simply told us that he is looking at some of the urgent problems that have been raised, but has said nothing about any action that will be taken.
I repeat the assurance that has been given by my right hon. Friend the Member for Grimsby (Mr. Crosland) at this Box, and by others of my hon. Friends, that the next Labour Government will legislate on these matters. Indeed, if I am giving away a party secret I am sorry, but it is an open secret that the policy document that we have been discussing this week contains a proposal for legislative action to deal with these matters.
I put it to hon. Gentlemen opposite who have spoken—particularly the hon. Members for Stockport, North (Mr. Idris Owen) and Dartford (Mr. Trew)—that 1941 they are in a rather confused state and must sort out their confusion. They are facing both ways on this matter. So, for that matter, was the recent statement by the National Federation of Building Trades Employers.
It can be said—it was said by the Phelps Brown Committee—that some aspects of self-employment are healthy and others lead to abuse. This is what hon. Gentlemen seem to be saying, but a choice must be made where to draw the line. This matter has been studied again and again in recent years not only by the Phelps Brown Committee, but in other ways. My hon. Friend the Member for Liverpool, Walton has suggested in his Bill a way of drawing this line. The Bill seeks to exempt from its provisions the self-employed man engaged on maintenance, interior decoration, or any work of that kind. It also seeks to exempt specialist sub-contracting. There may be an argument for drawing the line in a slightly different place. The Labour Government's Bill drew the line in a different place—closer to the Phelps Brown position—but it is essential that we now try to draw that line and act on the problems facing us.
I do not need to go over all the abuses which have arisen from this system of bogus self-employment which exists on such a large scale. The Minister said that there were other reasons besides the existence of the lump for the poor training record of the industry. But surely he will accept that one of the major causes which has been identified is the lump system. Trainees are rarely taken on under this system because it is not consistent with the way the system works. There is not that kind of relationship that encourages people to take on trainees. A revolutionary improvement is overdue for training in the construction industry. If that improvement is to be made it must include many other methods which the Minister said he is examining. It must also include the drastic reduction of the self-employed element in the industry.
I want to add one further thought to what has been said by many of my hon. Friends about safety. The Government at the moment are studying the report of the Robens Committee on Safety and Health at Work—and indeed we shall debate this matter on Monday 1942 in Private Members' Time. It is basic to the Robens proposals that the radical improvement of safety in industry should be largely founded on joint action between employers and trade unions. Every industry, and indeed every firm, is called on to have a safety policy. This matter is to be written into agreements within the industry; it is to be a subject which will appear on the list of every shareholder's report and so on. That presupposes a stable structure in the industry.
We are now talking about an industry with the second worst safety record in the country—and this is an industry which involves 30 per cent. or more of those workers covered by the Robens proposals. How can one think in terms of radical improvements in safety and health in an industry organised on the lines of the construction industry?
We in this House should expect every major industry in Britain to meet certain tests. One of these tests is that an industry should meet its social costs and obligations. That means that it should provide reasonable security of employment and pay its share of taxation; that it should provide for the cost of insuring its employees through the National Insurance system; that it should make proper redundancy payments and all the rest. Secondly, it should provide a stable state of employment and a stable relationship between employer and employee so that the individual can develop his talents within that framework, so that standards of good workmanship can be improved and so that the managers within the system can be identified and their skills developed. The industry should also aim at redeployment of the old or disabled workers in lighter forms of employment. My hon. Friend the Member for Houghton-le-Spring (Mr. Urwin) talked about the lack of elderly bricklayers, and in this context that is. an important point.
Thirdly, the organisation of this industry or any major industry should lend itself to vigorous trade union organisation so that the trade unions can recruit and organise and genuinely represent the people in the industry. The weakening of the construction unions because of the existence of the lump is not only bad for those who work in the industry but is bad for the country. Above all, in this period of turmoil and uncertainty in 1943 industrial relations we need strong trade unionism in Britain and a system of industry which enables strong trade unionism to develop.
The fourth point is that any major industry should co-operate with the Government in meeting public requirements whereby the leaders of the industry can talk to Ministers. The way in which the lump system is destroying the Government's counter-inflation policy is one example of the fact that Government policies and social priorities cannot prevail so long as we have this degree of chaos and jumble in an industry as vital to the country as this is.
The construction industry is perfectly entitled to say to the Government—to any Government, Labour or Conservative— that it has not always had a fair deal from Governments. It is entitled to say to us as politicians that successive Governments have used the construction industry too much as an economic regulator. Indeed we should have learned a lesson from that, because it is not a good economic regulator and using it as such too much is not good for the ecnomy or for the construction industry.
What we need is a situation in which the industry can play its part in the economic expansion that we all want to see. I remember that part of the official view in what was the Ministry of Public Building and Works when I was there was that, if we were to have in the economy a growth rate of x, it had to be at least x+1 in the construction industry. That industry had to be growing faster than the economy as a whole, if the country wanted balanced growth.
The industry can say to the Government that there are many things which the Government can do to help it. Equally, we in this House should say that we expect to see the industry organised along more rational lines, an industry meeting its social obligations and, above all, an industry meeting its training obligations, because skilled men are the very essence of the industry. They are the essence of most industries, but this is particularly true of construction with its high proportion of skilled tradesmen.
If we are not getting an adequate amount of training or an adequate standard of training in this industry we 1944 shall not have a construction industry in the future. It needs to measure up to the needs of society and I put it to the House that this is a matter of urgency. The Minister has failed the House. In advising the rejection of my hon. Friend's Bill he has not put one word of constructive alternative before us, after three years in which he and his colleagues have had a chance to consider these problems.
§ 3.38 p.m.
§ Mr. Andrew Bowden (Brighton, Kemptown)
I apologise to the hon. Member for Liverpool, Walton (Mr. Heffer) for not having heard seven to ten minutes of his opening comments. I do not claim to have anything like the experience or the knowledge of the building industry of the hon. Member for Walton or of my hon. Friend the Member for Stockport, North (Mr. Idris Owen), but I have listened to virtually the whole debate.
I was disappointed with the speech from the Minister. I had hoped that we should have something positive from him, so that the hon. Member for Walton would be able to withdrawn his Bill and allow the Government to come forward with early and positive proposals. I do not support all parts of the hon. Member's Bill—indeed, I feel that Clause 1 needs substantial alteration—but if there is a vote, it is my intention to go into the Lobby in support of the Bill as it stands because I firmly believe that major amendments can and would be made in Committee and while the Bill was passing through its stages in the House.
In my area of Brighton and Hove I have received estimates that over 40 per cent. of the men in the building industry are self-employed. This cannot be working to the best interests of the industry in that part of the world because it must be distorting operations, particularly in relation to the larger and often better building employers who are unable to get men they so desperately need.
Few hon. Members on either side of the House would argue that, whatever the other merits might have been of the selective employment tax—I personally regard it as one of the most pernicious taxes we have seen in this country since the window tax—it acted as a catalyst to self-employment. I know a number of individual cases in which men 1945 left a building firm, with which they had been for many years, in order, first, to obtain redundancy payments and then to go back to work for that same firm as self-employed men. They were certainly not getting the advantages of the system and, in the long run, they were working to the detriment of the industry.
I wish to deal briefly with one major point. I have no doubt that the system as it is working at present is having a catastrophic effect upon apprentices. Two cases have been brought to my attention in Brighton, in the last six months.
One apprentice had completed more than three-quarters of his course but was so fed up that he threw it in and became a self-employed person earning over £50 a week. The other apprentice had not been on his course very long when the temptations of big, easy money at this point in his working life were too great.
This must mean that many other potential apprentices will never go through the training that they need in order to make them effective, highly skilled craftsmen in the industry, because they want to obtain the short-term benefits which exist due to the present situation in the industry. These people may get financial benefits for some years to come, but there is no guarantee that such a situation will exist for the greater part of their working life.
I am convinced that this situation is not good for the industry or for the individual. Over a period it will lead to a grave shortage of craftsmen. I ask my hon. Friend the Minister to think again very carefully and very quickly. The lump system is bad and urgent action is required.
§ 3.42 p.m.
§ Mr. Kevin McNamara (Kingston upon Hull, North)
We all listened with interest to what the Minister said in reply to the Bill so ably moved by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer). We listened—and we listened. We heard very little that would in any way encourage us to think that the Government were seized of this problem and were prepared to do anything to try to deal with a problem which has doubled since the Phelps Brown Report and which is having a disastrous effect upon quality and standards in the construction industry 1946 and, above all, upon the supply of skilled manpower in the industry.
That is what we are concerned about— whether or not members of our trade unions, such as mine, the Transport and General Workers' Union, are actively engaged in construction or are at the receiving end of it. We all live in houses and walk on roads, we all need hospitals, schools and factories, and the 101 types of construction with which the industry is concerned and in relation to which this vice is rife.
Some people seem to think that the lump works only in the construction of housing, but it goes right through the whole of the industry, in the building of factories, hotels and other constructions. It affects all concerned with this. The Minister was suggesting that there would certainly be a catastrophic fall in housing figures if we dealt with the lump. But the Government could not get figures which were any lower. They are the lowest figures for the past 10 years. One cannot accept that proposition when it comes from the present Government, with their Housing Finance Act, the appalling housing figures, and the gazumping after gazumping by Tory local authorities and Tory builders. One cannot accept that as an argument from the Minister why he is not prepared to deal properly with this problem.
§ Mr. Channon
Perhaps the hon. Gentleman will tell us his estimate of the effect on the house building situation at the present time if one made it illegal overnight?
§ Mr. McNamara
The Minister gave his guess based on his own assumptions. My view is that under this Government the housing situation could not be much worse. We are entitled to say that if, as we would under the Bill, we had proper, regular security of employment, a work force which knew what its wages would be at the end of the week, and a force which consisted of highly skilled well-trained labour we would get more and better houses built than we would by depending, as the hon. Gentleman said, on the lump and the inflationary wages which are a betrayal of the working class and of the people involved in the industry, because ultimately in that way they have nothing left to them.
1947 We on this side of the House spoke for a long time about the catastrophic fall in the number of apprentices in the industry. In 1967 there were roughly 79,000 but within four years that figure had dropped to about 56,500. The Minister tried to suggest that the taking on and discarding of apprentices was cyclical, like the industry itself, but that is not the case. We asked for some figures, and I suggested to the hon. Gentleman that if what he said was correct we must in 1972 have had a big intake of apprentices. He replied: "Yes, we had 5,000 coming out of Government training centres". That is not the point we seek to make. Apprentices coming out of those training centres are not being trained by the industry as a whole, and that is our concern. We can get people trained by the Government and the taxpayers, but they should be learning their trades profitably and equitably within the industry itself.
A further point arising from the catastrophic fall in the number of apprentices is that even if one is prepared to go along with the Government and accept the numbers of mature people coming into the industry on a semi-skilled basis from Government training centres, the overall degree of skill and education within the industry as a whole falls when the number of apprentices falls.
Emerging over the past two or three years, or perhaps even longer, with the use of combined apprenticeships within the industry and the development of special basic courses at the colleges of technology and the building schools in the various centres, we have had accumulating a general caucus of knowledge which will be coming into the industry and which will enable apprentices who have served their full term to come out better trained, better educated and better skilled than ever before has been the case in the history of the industry.
What, instead, has been happening is, as the hon. Member for Brighton, Kemp-town (Mr. Bowden) said, that apprentices are going into the schools, learning a few basic skills and then being attracted by the lump. This is very much the case in the big growing suburban areas—in the great sprawling masses of buildings in South Lancashire, the West Riding, the London area and the Midlands. It 1948 happens again and again. A person gets perhaps a year's training in a skill and then he is off—off because of the high wages being offered, to the detriment to the people in the industry as a whole who are attempting to maintain civilised standards of behaviour. Therefore, we shall find our skilled apprentices, not in private industry, but only in the local authorities and nationalised industries where the same pressures for high profits and quick turnovers do not apply.
The justification for the Bill was given by the hon. Member for Stockport, North (Mr. Idris Owen). He conceded every one of our arguments. By justifying the lump he condemned himself. He said, "I have a wonderful firm. We train our apprentices. However, I employ them on the lump. Other nasty people on the lump steal my apprentices. The only way in which we can achieve productivity and incentives is by the lump." Then he said, "But I employ many men who are not on the lump. The people responsible for the present situation are the trade unions. They have never talked about productivity." He had forgotten about the productivity agreement made in 1947—the first made in the building industry. The hon. Member cannot adduce all those different arguments and then say that there is not a case to be answered and no reason for the Government to deal with the terrible abuse of the lump.
The Minister spoke about the question of tax avoidance and social security problems. In many ways, they are the kernel of the argument. My hon. Friend the Member for Eccles (Mr. Carter-Jones) pointed out that by failing to face their social responsibilities employers are defrauding the rest of society. The Minister did not deal with the point about the fiddles. He suggested that there was no correlation between the tremendous increase which had taken place in the number of private limited companies with capital of less than £100 and the introduction of the tax exemption certificate. He may be right, but the situation is very suspicious.
It is a well-known fact that people can buy such a company quite readily. Articles and memoranda are prepared and they put down a couple of pounds to ensure that there is a division of capital between two shareholders. They can register the 1949 company, say what they propose to do and quietly forget to file accounts. We all know that it is wrong not to file accounts, but companies, and particularly the small private limited companies, do not file accounts year in and year out. The Board of Trade does nothing about it because it does not have the power to do anything about it.
The Government suggested when introducing the new regulations that tax exemption certificates would be issued only with considerable stringency, but it is plain from the number of refusals that that has not been so. In October 1972, 385,000 tax exemption certificates were applied for in the industry; 353,000 were issued and 9,500 were refused, while the number abandoned or still under consideration was 22,000. That means that of all the applications fewer than 3 per cent. were refused. The percentage has not increased during the time the certificates have existed.
It is not true that there has been a careful examination by the Inland Revenue of claims for exemption. There are places where one may purchase exemption certificates, for instance, many well known public houses in and around London. The Minister tried to get round that by saying that when the Inland Revenue caught up with offenders, they would have to pay all the tax that everyone else had had to pay.
That is true, but he knows, as I do, that in the building industry these tax exemption tickets will go from hand to hand like a dollar bill, or the old pound note when it was worth something under a Labour Government, and it will be impossible to trace to whom it was originally
§ issued and to whom it ultimately goes, for when it gets to its ultimate hand it will disappear, as do those labourers who arrive on sites and sign themselves in as Mickey Mouse, Bobby Charlton, or George Best and then disappear at the end of five months so that they do not have to pay any tax but appear on the site next door where they sign in as Paul Channon or Edward Heath and register for another five months.
§ That is how the situation will go on. In the interests of equity among society as a whole, in the interests of providing training for a proper work force and investing in the skill of the workers, and, above all, in the interests of the country as a whole and providing a proper housing policy and a sensible and well-organised building industry, my hon. Friend's Bill should have the support of the whole House.
§ Mr. T. G. D. Galbraith (Glasgow, Hillhead) rose——
§ Hon. Members: Disgraceful.
§ Mr. Heffer rose in his place and claimed to move, That the Question be now put.
§ Question put. That the Question be now put:—
§ The House proceeded to a Division.
§ Mr. Galbraith (seated and covered)
On a point of order. I was on my feet when you put the Question, Mr. Deputy Speaker. Surely you ought not to put the Question when I am on my feet.
§ The House divided: Ayes 56, Noes, 16.1951
|Division No. 140.]||AYES||[3.59 p.m.|
|Archer, Peter (Rowley Regis)||Hart, Rt. Hn. Judith||O'Halloran, Michael|
|Barnett, Guy (Greenwich)||Heffer, Eric S.||Pannell, Rt. Hn. Charles|
|Bidwell, Sydney||Houghton, Rt. Hn. Douglas||Parker, John (Dagenham)|
|Blenkinsop, Arthur||Irvine, Rt. Hn. Sir Arthur (Edge Hill)||Perry, Ernest G.|
|Bowden, Andrew||Jenkins, Hugh (Putney)||Prentice, Rt. Hn. Reg.|
|Carter, Ray (Birmingh'm, Northfield)||Jones, Rt.Hn.Sir Etwyn(W.Ham,S.)||Radice, Giles|
|Carter-Jones, Lewis (Eccles)||Kaufman, Gerald||Sheldon, Robert (Ashton-under-Lyne)|
|Castle, Rt. Hn. Barbara||Kelley, Richard||Silkin, Rt. Hn. John (Deptford)|
|Cocks, Michael (Bristol, S.)||Kinnock, Neil||Silkin, Hn. S. C. (Dulwich)|
|Concannon, J. D.||Lamborn, Harry||Spearing, Nigel|
|Davidson, Arthur||Lawson, George||Stallard, A. W.|
|Davis, Terry (Bromsgrove)||McCartney, Hugh||Stewart, Donald (Western Isles)|
|Deakins, Eric||Mackenzie, Gregor||Strang, Gavin|
|Dell, Rt. Hn. Edmund||McNamara, J. Kevin||Urwin, T. W.|
|Douglas, Dick (Stirlingshire, E.)||Marquand, David||White, James (Glasgow, Pollok)|
|Douglas-Mann, Bruce||Marsden, F.||Williams, W. T. (Warrington)|
|Driberg, Tom||Mellish, Rt. Hn. Robert|
|Edwards, Robert (Bilston)||Mikardo, Ian||TELLERS FOR THE AYES:|
|Fraser, John (Norwood)||Mitchell, R. C. (S'hampton, Itchen)||Mr. Michael English and|
|Ginsburg, David (Dewsbury)||Morris, Alfred (Wythenshawe)||Mr. William Hamling.|
|Channon, Paul||Kellett-Bowman, Mrs. Elaine||Trew, Peter|
|Drayson, G. B.||Kirk, Peter||Weatherill, Bernard|
|Fox, Marcus||Moate, Roger|
|Galbraith, Hn. T. G. D.||Rhys Williams, Sir Brandon||TELLERS FOR THE NOES:|
|Grant, Anthony (Harrow, C.)||Russell, Sir Ronald||MR. R. A. McCrindle and|
|Hill, John E. B. (Norfolk, S.)||Sinclair, Sir George||Mr. Norman Miscampbell.|
|Hornsby-Smith,Rt.Hn.Dame Patricia||Thomas. John Stradling (Monmouth)|
§ Whereupon Mr. DEPUTY SPEAKER declared that the Question was not decided in the affirmative, because it was not supported by the majority prescribed by Standing Order No. 31 (Majority for Closure).
§ It being after Four o'clock, the debate stood adjourned.
§ Debate to be resumed upon Friday next.