HC Deb 20 May 1975 vol 892 cc1367-78

11.26 p.m.

Mr. T. W. Urwin (Houghton-le-Spring)

Now that the symbol of authority has been restored to its place after the Committee proceedings on the Finance (No. 2) Bill, I take some pleasure in addressing myself to the serious problems we have been developing in the construction industry in the Northern Region.

I wish to deal first with the general contracting situation which, as my hon. Friend the Under-Secretary of State for the Environment will recognise, forms a very important part of the work load in the construction industry. The situation is deteriorating as present contracts are rapidly running out with little prospect of those contracts being replaced by new ones. It may be said that this is due partly to loss of forward confidence in industry and commerce, with a consequent deleterious effect on the work load of the building industry. Certainly it is true that the other contributory factor is that of the extensive cuts in public expenditure.

The Department of the Environment's official index of general construction costs estimates that the regional total of work outstanding in the public sector, discounted at March 1974 levels, has fallen from roughly £268 million to £245 million. Work due to start has fallen from £70 million to £30 million. In the private sector there has been a marginal increase in the two categories, respectively, and the total acknowledged fall in forward orders shows a 42 per cent. drop, from £90 million to £52 million.

It has been said that in the Northern Region we have had the advantage of some quite substantial civil engineering contracts in the course of development, including Keilder, the Tyne-Tees aqueduct, the Tyneside Metro, the British Steel Corporation project at Redcar, and many others in connection with petrochemicals, which provide employment prospects. However, it must be recognised that this very fact of necessity distorts comparisons with earlier years from the point of view of the volume of general work available to building contractors in the region. The cuts in educational, social and public projects have been, to say the least, substantial.

I ask my hon. Friend to bear in mind that the Property Services Agency within his Department held back £51 million worth of work during the first six months of 1974, and that only £34 million of this has so far been released to tender. An increasingly severe situation has developed for a number of contractors in the Northern Region in the general contracting sector. This is having dire repercussions on their ability to employ building labour and to continue to provide employment opportunities not only for existing work forces but for apprentices leaving school.

There has been a pleasurable increase in the private sector in the last few months, but it is difficult to estimate what the precise upturn will be. It is variously estimated that it will be between 33⅓ per cent. and 50 per cent. this year. My hon. Friend will accept that even though that is very acceptable it must be set against the catastrophic decline of about 50 per cent. in the private house building sector in the year up to 1974.

Building contractors and employees in the construction industry understandably set great store on the necessity to provide stability in the private sector. This, in common with the rest of the industry, enables them to plan their organisation and their work load and to maintain the vitally important continuity of employment about which we are all deeply concerned.

I ask my hon. Friend to consider the time lag which frequently occurs between the acceptance of a contract under yardstick approval and a firm's gaining access to the site. Apart from the difficulties which have arisen as a result of local government reorganisation, when the whole policy of some authorities was cast into the melting pot, there seems to be an unnecessarily long period between the promulgation of contracts and the starting of work. I ask my hon. Friend to use his good offices to ensure that the minimum delay occurs between the acceptance of tender and the contracting firm's gaining access to the site. An example can be quoted of one firm which gained access to a site late in 1974 when the site was designed in 1971. Many other examples of delays could be quoted which have the effect of accentuating the difficulties of providing employment.

My hon. Friend will know of certain representations which have been made about housing associations and that certain housing societies have sought to become housing associations. I could quote cases from Hartlepool and Sunderland which, it is claimed, are causing extensive delays, especially when the housing association has to buy land. My hon. Friend will be all too well aware of the declining work load in the construction industry in the Northern Region, as in the rest of the country, as a result of the changed criteria for grants for modernisation which in the period 1971–74 provided a tremendous stimulus for employment in the Northern Region.

I do not ask my hon. Friend to use his good offices to increase the amount of money that is available, fully accepting as I do the major responsibility devolving upon the Government to solve the problem of inflation and fully realising, in that context, that it is virtually impossible to receive a further allocation of money in this regard. But it occurs to me that because of the feeling that has been created in the minds of many people about the reduction of grant it might be to the advantage of those concerned if the Department, through the good offices of my hon. Friend, were to conduct a publicity campaign to ensure that people are fully aware of their entitlements for the modernisation of their homes.

The sum and substance of my comments indicate that there is a contraction in the construction industry in the Northern Region. My colleagues and I who represent constituencies in the North lose no opportunity to remind all Government Departments about the dire unemployment situation in that area. We have the unenviable record of having been top of the unemployment league for too long a period, superseding Scotland and Wales, which are our traditional rivals in this field.

There are now 4,364 building craftsmen and 8,865 labourers unemployed in the North. The unemployment figure in the Northern Region is 7.6 per cent. Building trade workers account for more than 21 per cent. of the total unemployed in the area. The ridiculous situation facing people being thrown out of work is that for craftsmen there are only 301 vacancies—a ratio of 14.5 to 1—while for labourers the situation is infinitely worse, with 227 vacancies, representing a ratio of 39 to 1.

The position for school leavers is even more hopeless. Many of them have high hopes of being able to take up apprentices in the construction industry. I understand that building employers have a potential recruitment rate of apprenticeships of about 3,000 per year, but sadly, despite all the pressure which the employers' federation is bringing to bear on its members, the intake of apprentices this year will be considerably less than in the average year.

The information provided by the material supplies section of the industry—the National Federation of Builders and Plumbers Merchants—is that after price adjustments the drop of material supplies in the North-East in 1974 represented the highest turndown for any region in the whole of Great Britain. The figures were minus 27.8 per cent., compared with minus 20.4 per cent. in the country as a whole. The figures for January and February—and especially February—of this year compared with the same period last year show a slight improvement, and that is considered to be due largely to the upturn in private housing.

I think that perhaps the saddest comment on the future is that an analysis which has just been made by the National Federation of Building Trade Employers of replies from a broad cross-section of its members shows that more than 60 per cent. of the firms in membership estimate that they are operating at three quarters or even less of their capacity. About 15 per cent. say that they are operating at half capacity or even less. The results of the inquiry have been supported by a recent survey carried out by the RIBA, which showed that one third of architects had no further work in view after the end of this July.

On Saturday I had the pleasure of addressing the conference of the regional organisation of the Union of Construction, Allied Trades and Technicians, of which I am a member. I told delegates that, despite their protests about increasing unemployment, they could not expect to be isolated from the effects of inflation and the necessity to win this important battle. They could not expect to stand aside from the struggle.

I also said that the construction industry suffers from far too many troughs and not enough peaks—that whatever the economic situation might be from time to time, it was morally wrong to throw people out of work and not be able to guarantee that they would be employed again. But it is also wrong for any Government not to be able to plan, in whatever economic circumstances, a programme of construction which takes account of the requirement to build, each year, sufficient houses in both the public and private sectors and the hospitals, health centres, schools and all the other things which fit into the background of a social programme.

What both employers and the operative staff require is an adequate, planned construction industry which will guarantee a steady work flow for the people who have committed their working lives to it, to be able to provide all the things which people are entitled to expect, measured in terms of provision of construction work throughout the country and not just in the Northern Region.

In extremity, I suggest to my hon. Friend the Minister that he should consult his colleagues with a view to staving off further unemployment and taking up some of the slack in the construction industry, by introducing a crash winter works programme, such as was operated some time ago, with specific priority to development areas where the need is greatest.

I pay full tribute to my Government for allocating 16 new advance factories to the Northern Region, as a major development area, last year, but I ask my hon. Friend to consult his colleagues in the Departments of Trade and Industry to ensure that the construction work on those factories gets under way as quickly as possible. Not only will this programme be able to provide additional jobs for construction workers—craftsmen and unskilled people alike; it will speed the day when plant and equipment can be installed in those factories to make that additional contribution to the relief of unemployment in the region.

11.44 p.m.

The Under-Secretary of State for the Environment (Mr. Gerald Kaufman)

My hon. Friend is known both in the House and in his region as an ardent champion of full employment. He has worked very hard for it on the Front Bench and on the back benches. He is an acknowledged expert on the construction industry, and it is fitting that tonight he should have concentrated on the problems of that industry—problems which no one can deny are extremely severe, not only in his region but throughout the country. Only yesterday I saw a deputation representing Merseyside, which put to me the problems in the construction industry in that part of the country.

Unemployment in the construction industry is going ahead far faster than anyone can accept. It is 42 per cent. up on a year ago. The new orders won by contractors last year were 25 per cent. lower than in the year before, and total output was 8 per cent. lower. The decline in output has to be considered in the context of the boom period of 1972 and 1973, when the industry was grossly overheated. As my hon. Friend has said, there are to many peaks and too many troughs.

The symptoms showed most clearly in shortages of skilled men, large increases in tender prices and the difficulties that some local authorities found in obtaining tenders. The Conservative Government reacted by imposing a moratorium on the letting of public sector contracts in October 1973. That was rapidly followed, in December of the same year, by their very large cuts in public sector capital expenditure in 1974–75. Those are cuts from which the industry has never recovered. As construction accounts for a large proportion of capital expenditure, the industry has inevitably suffered.

Other factors combined to produce a depressing prospect for the industry. Local authority house building slumped because of the Conservative Government's policies. Both starts and completions in their last year of office fell pretty well to the lowest levels since the war. Added to that were the effects of the three-day working week. As we all know, they combined to have a significant impact on both output and confidence. A healthy state of demand for construction in the private sector depends on both, so the industry suffered.

Added to all this there was the prospect of a mortgage famine or a sharp increase in mortgage rates. When we came into office at the beginning of March of last year the outlook for the construction industry was bleak. We had to take measures to deal with that immediately. We injected an extra £350 million into public sector housing. In the financial year which has just ended there has been record expenditure on housing. It is 50 per cent. up on what was planned by the previous Conservative Government. Under our Circular 70/74, which we issued soon after we took office, we encouraged local authorities to buy up new, completed, unsold private dwellings to encourage builders to continue building. We made a £500 million bridging loan to the building societies in an effort to increase their liquidity and to deal with the mortgage famine. In January of this year we introduced a package further to stimulate house purchase, including a scheme for new house purchases. Since then we have made a stabilisation agreement with the building societies to deal with any possible explosion in house prices and to deal precisely with the problem that my hon. Friend has mentioned. We made available an extra £100 million for public sector construction last summer. That is unaffected by the Chancellor's Budget cuts.

The result has been a marked increase in public sector house building. Private sector house building, as my hon. Friend has pointed out, has started to recover. The building societies are now flush with money. The mortgage rate has been frozen in the case of most societies, and public authorities have purchased 13,801 unsold houses.

Of course, all the national problems have had a great effect on the Northern Region. My hon. Friend has made clear the depressing picture which he sees in the region. I do not wish to minimise the problems that he has so movingly described. The Northern Region has consistently shown an unemployment rate in the construction industry higher than the average for Great Britain. Although the number of unemployed in the industry in absolute terms is far too high, unemployment has risen less fast than the national average. Whilst the national total is up 42 per cent., the north eastern region's total is up by 22.8 per cent.

There are some hopeful signs. The percentage was lower last month than the average in recent years, and the percentage of vacancies was higher. Although, as I have said, total new orders in 1974 fell, the Northern Region improved its percentage of the national total. Its percentage increased to a record level of 7.6 per cent. and these orders will provide work on the ground for a considerable period ahead.

The situation is particularly encouraging in the private industrial sector, in which in 1974 the Northern Region accounted for 11.4 per cent. of all new orders. Half a million square feet of industrial buildings, provided through the English Industrial Estates Corporation, are due for completion in the region in 1975. This consists of 16 advance factories and 13 new buildings or extensions for existing firms.

I take my hon. Friend's point about the need to get advance factories started and I shall be contacting the appropriate authorities to find out the prospects. It is not good enough merely to say that it is necessary for these factories to be built.

Furthermore, there is a long list of major projects which will help the industry—projects which are under way or just starting and most of which will go on for three or four years. These include the Kielder Reservoir and Tyne-Tees Aqueduct—£70 million; the Tyneside metro, of which the construction element will be £60 million; the Tyneside Sewerage Scheme—£30 million; the Ekofisk Oil Terminal, Teesside—£100 million; ICI petro-chemical plants on Teesside—£50 million, approximately; the Eldon Square Shopping Development, Newcastle—£45 million; and the phased BSC Red-car complex—£1,000 million. While these schemes will provide little work for local contractors because the schemes are so vast, they will certainly stimulate substantial local employment.

There is an extensive programme of trunk road improvement in progress in the Northern Region. Work is currently being carried out on trunk road schemes worth over £50 million and further schemes, together costing about £22 million, are scheduled to start by the end of 1977. The local highway authorities have principal road schemes valued at about £40 million in progress and hope to start work on further schemes worth over £25 million by the end of 1977.

In my Department I am particularly involved with housing. My hon. Friend will be glad to know that the number of public sector dwellings in tenders approved is up from 92,000 in 1973 to 122,000 in 1974—an increase of 32 per cent. He will be even more pleased to know that the North-Eastern improvement is double that. Public sector dwellings in the North-East in tenders approved are up from 5,422 to 8,103—an increase of 64 per cent. The percentage increase of the national total is well up, and has risen from 5.9 per cent. to 7.3 per cent.

I wish to say to all local authorities in the North-East that one way of increasing building employment is by increasing local authority housing programmes, for which there is a 66 per cent. subsidy.

My hon. Friend referred to delays in PSA work. The value of PSA major new works at working drawing stage in the first six months of 1974, for which tenders were not invited in that period because of public expenditure restrictions, was £51 million. As my hon. Friend said, the position in March was that tenders had been sought for £34 million of this work. These projects are for the whole of the PSA operations and are not confined to the Northern Region. This work is being let by the PSA as quickly as it can, subject to client's requirements and subject to expenditure constraints.

My hon. Friend referred to procedural delays in local authority housing. My Department and the local authorities are conscious of the need to speed up the process and to avoid unnecessary delays. Delays occur due to pressures of work, and these are to be regretted. I assure my hon. Friend that it is the constant concern of the Department that the Northern Region should make progress on all schemes as rapidly as possible.

The Department's Circular 24/75 recommends new forms of procedures to speed up the work. We are currently engaged in discussions to promote these new policies.

As regards the housing association schemes, the problems of which my hon. Friend mentioned, the Housing Corporation has made no policy changes which might lead to delays in housing associations being able to proceed with schemes. As to Hartlepool and Sunderland, the proposed scheme at North Seaton has been delayed because of uncertainty about the future of the neighbouring iron works. The iron works has now had a new lease of life and the corporation has rejected the proposal. However, it is finishing several schemes in Sunderland.

I assure my hon. Friend that the Government accept the need for publicity with regard to improvement grants in the view of the decline in applications for them. For the present, we are looking to local authorities to tailor local publicity to the needs of individual areas. In that connection we have made available copies of an explanatory booklet on the new grants arrangements, together with publicity posters. We are at present considering the possibility of wider publicity measures to improve the grant take-up generally—

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at four minutes to Twelve o'clock.