HC Deb 09 February 1984 vol 53 cc1113-20

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Garel-Jones.]

10.10 pm
Mr. Michael Latham (Rutland and Melton)

As I shall speak tonight about building matters, I start by declaring my interest, which is of long standing and is known to the House. I am the director of a medium-sized private housebuilding company most of whose work is unrelated to rehabilitation and improvement work, although we have done some such work. I am grateful to my hon. Friend the Under-Secretary of State for coming here to reply to the debate.

For some years there has been growing concern about the standard of workmanship in the building industry in the field of domestic repairs, extensions and improvements. It has been highlighted in programmes such as Esther Rantzen's "That's Life". Most hon. Members could cite constituency cases involving such problems. The rising tide of complaints led the Director General of Fair Trading, Sir Gordon Borrie, to embark on a survey of this area of policy a few years ago. Since then, matters have proceeded at a stately, or even leisurely, pace. A consultation paper appeared in March 1982. There followed 15 months of comment before a substantive report—the topic for tonight's debate—appeared in June 1983. Not much seems to have happened since then.

In a parliamentary answer on 1 November 1983, the Under-Secretary of State said that the Government supported the report's emphasis on self-regulation by the industry. He went on to say: The Government will be taking account of the OFT's recommendations in the wider review of housing improvement policy which is at present under way."—[Official Report, 1 November 1983; Vol. 46, c. 337.] Since the Director General made some specific proposals for legislation, I would have hoped for a stronger and more definite response from Ministers.

First, is there really a problem? Vast numbers of domestic jobs are done in the building industry and related trades, such as double glazing and central heating, every year. Most of them are perfectly satisfactory and are done honourably and efficiently. I myself had some grant-aided repair work done to my house by a small firm recently, and it was done very well.

However, not everyone is so lucky. In his report, the Director General described the level of complaints between 1 October 1981 and 30 September 1982 to local authority trading standards departments. In that period, 26,832 complaints were made by the public about home improvement work—21 per cent. of the total number of complaints made about service industries — and Sir Gordon himself said that that was undoubtedly just the tip of the iceberg of dissatisfied and disillusioned householders.

In his consultation paper, Sir Gordon gave some dreadful examples of how old ladies were ripped off by con-men who knocked on their doors, offered to fix the roof, took a large sum of money and were never seen again. I shall give a couple of examples.

An elderly lady … took up an offer from a man at her door who offered to re-surface her tarmac drive. He told her that if she paid him in advance, he could offer her a reduced rate and do the work the next day. She paid the money, but the contractor did not return and could not be traced. On the basis of a verbal contract a householder … engaged two plumbers to lag his water pipes in preparation for winter, and £38.50 was paid in cash. When, later in the winter, several pipes began to leak, the plumber who repaired them said that the lagging had not in fact been done. However, the original plumbers denied all knowledge of the job. The householder was unable to take action because he had no written evidence. People who take money without doing any work are not builders but robbers. They cannot be dealt with by codes of practice as they do not belong to reputable trade federations. Such activities are probably already criminal and the remedy for them is fines or jail. The only role for the Government in this regard and also for the media, especially Ester Rantzen's "That's Life" and Roger Cook's "Checkpoint", is to stress to householders at every possible opportunity that they should not part with a penny of their money to some totally unknown itinerant jobber who knocks on their door unsolicited, cannot provide any references of satisfied customers, has no business address or telephone number and demands payment in cash and probably in advance. No reputable firm is likely to trade in that way and the best thing to do is to shut the door firmly in the man's face and perhaps ring the police. I shall concentrate on examples when a firm or person is not dishonest but just not much good at the job.

The building industry has taken some positive and constructive steps to regulate this sensitive area of its activities. The Federation of Master Builders has had a warranty scheme for about three years. I understand that 700 of its members have joined the scheme, which involves a 1 per cent. additional levy on the price of the job. At the moment, £11 million-worth of work is covered by the guarantees and I am told that five cases in the past three years have led to payments of £7,000. One interesting if depressing fact is that large numbers of clients have preferred to do without the warranty to save the 1 per cent. That is obviously deeply discouraging for the federation.

The guarantee scheme that has been devised by the National Federation of Building Trades Employers, which has been under consideration and study for nearly four years, is also problematic. The federation wants its scheme to be mandatory on all of its members in the interests of the consumer. Unfortunately, the proposal has fallen foul of the Restrictive Practices Court because about 20 years ago, the court stopped the federation having a recommended set of contract conditions. I hope that this most regrettable legal hang-up, which has prevented the introduction of the scheme for many months, can be resolved soon. I understand that the Office of Fair Trading is ready to support an application to the court to allow the scheme to go ahead. That is not a moment too soon.

I should like to concentrate on some of the recommendations in the Office of Fair Trading's report which ought to be implemented without delay. Work that is grant-aided by a local authority ought to be carried out only by reputable firms which appear on a publicly available list which is kept by the local authority or which are members of a consumer protection scheme. Alternatively, the grants could be made available only when the contract provides for a predetermined and specified retention or maintenance period. It is obvious that any lists of approved contractors would have to be kept up to date to ensure that lively new firms were admitted to them and unsatisfactory performers excluded.

The banks and building societies finance a great deal of home improvement work. Just as the building societies agreed in 1966 to mortgage only new houses which were built by a builder who was registered with the National House Building Council, these great financial institutions could insist that their loans should be used only in respect of firms that belong to a quality insurance scheme. The present arrangements with regard to written contracts leave much to be desired.

I agree with the Office of Fair Trading that there ought to be a firm requirement that contracts of more than a specified value should be in writing. However, I go further than the Office of Fair Trading which wants to leave the details to trade associations or consumer bodies. While I accept that they should be encouraged to draw up standard terms of contract they should always include an adequate description of the work to be done, a specific price and a fair indication of whether that price is subject to fluctuation.

I also hope that any written contract will include a starting and possibly a completion date, and any arrangements regarding staged payments. I agree with the Office of Fair Trading that, if no written contract is produced, the terms of any oral agreement could be made unenforceable by the trader. This would be a clear incentive for proper written agreements

Cooling off periods are essential, particularly where salesmen or tradesmen have visited people's homes, perhaps without a previous appointment. The seven-day period for a householder to change his mind recommended by the OFT seems right and proper. This requirement already exists over certain kinds of consumer credit or insurance agreements, and the Common Market has draft legislation in preparation for doorstep selling.

On emergency repair work, I commend the OFT proposal that traders should have a list of standard charges, including any call-out fee, to be given to the householder when they arrive. Under the present restrictive practices law, trade associations cannot legally draw up such charges, and I do not favour letting them do so, but they could recommend to their members that the firms themselves voluntarily draw up their individual scales, and I think that such an arrangement would be equally helpful to the householders.

There is one proposal by the OFT about which I am more doubtful, and that is that there should be general statutory duty to "trade fairly" in the home improvement sector. This would be backed up by universally applicable codes of practice that would catch traders who do not belong to any trade associations. The Director General of Fair Trading would be able to seek assurances of satisfactory future conduct from bad performers, or the courts could impose disqualification orders on the worst offenders, thus stopping them from trading.

While I am not opposed in principle to such wide powers, I am doubtful as to whether they would be practical in an industry with thousands of one-man businesses. In many cases, it will take years to reach agreement on such codes of practices, if they can ever be reached, and the need for action over the cooling-off periods, the written contracts, the list of contractors and greater involvement of banks and building societies is much more urgent.

In fairness to a great industry, which has many thousands of reputable and efficient firms, it is faced with continuous price competition from black economy moonlighters. The public are very price conscious, especially over the addition of the 15 per cent. VAT.

Whatever restrictions are imposed, or new statutory rights given to householders, citizens would still be able to employ black economy traders for cash transactions conducted in their own home. Eliminating the price advantages of the moonlighter will never be possible, even if repair work were zero-rated. Moonlighters also carry none of the overheads that have to be paid by established businesses and that adds substantially to the price which the reputable firms must charge.

There comes a stage where the law cannot protect people from their own deliberate decisions. If the householder decides deliberately and consciously to employ a moonlighter without a written contract, even with the legal right to one that has been given by Parliament, pays money in advance—minus VAT—and then sees the work done poorly rather paying a bit more to use a reputable firm, there is not very much that can be done to help him. As the OFT itself says, the small claims court procedures could be improved and extended and the law relating to directors of failed businesses setting up again could also be given further attention in the light of the OFT report. The best protection for householders, even if the changes that the OFT wants are brought in is to choose a reputable and well-established local firm, and to follow the seven golden rules in the OFT report. It will cost more than using a cowboy, but it will be money well spent.

The OFT has done the public a considerable service by producing this report. I hope that it will now be energetically followed up by the Government. The Minister should call a high-powered public conference under his chairmanship to put impetus behind the proposals for self-regulation in the report and to show whether the Government intend to act. The industry itself should be there, and so should representatives of local authorities and the financial institutions. A check list should be drawn up and a list of officials in Department of the Environment should be given a progress-chasing role. In this important activity, in which millions of people have a direct financial stake, an urgent and high profile response from the Government is called for.

10.24 pm
The Under-Secretary of State for the Environment (Sir George Young)

My hon. Friend the Member for Rutland and Melton (Mr. Latham) has chosen to debate a subject that is both important and topical and his speech has, as one would expect, displayed a deep knowledge of matters concerned with the building industry. As an avid reader of his column in Building, I found that the thrust of his remarks tonight was not a complete surpise, and I understand his thirst for progress. I hope to explain where the Government have got to on his various recommendations. If at times I sound a little like Jim Hacker, I apologise. I shall certainly take up my hon. Friend's imaginative suggestion for a high-powered conference to see how we can make faster progress.

To put the subject in context, it is worth underlining the size of the home improvement market. Spending on housing improvement and repair is running at about £9 billion a year. About half of that is spent on do-it-yourself and half on employing paid labour. Those are prodigious sums that show the importance of this sector of the economy. As we all know, such spendng is a significant part of the family budget. Spending of £9 billion a year means an average of £500 being spent annually on every house in England.

There are about 100,000 firms in the building industry, a third of them employing only one person. Inevitably, some are more honest than others, and some do a poor job and charge highly for it, as my hon. Friend explained. It is often stated as a truism that there is more consumer dissatisfaction with this sector of the economy than with almost any other. However, the figures need to be set in perspective. The Office of Fair Trading report refers to 27,000 formal complaints in a year. That has to be set alongside the evidence, recently published in part 2 of the 1981 English house condition survey, that two thirds of households employing paid labour for improvement and repair work thought the standard of workmanship and service was very good. Only a small percentage thought it very poor.

The Government very much welcome the OFT report. It was produced after a long period of gestation. Its recommendations range widely. Many are particular to the home improvements sector, while others have broader repercussions. I have in mind here those particular recommendations aimed at the Gove[...].

The then Minister for Housng and [...] itruction wrote to the Director General of Fair Trading in July 1982, with the Government's views on the OFT consultation paper. Following publication of the report last summer, we again wrote to the Director General giving our comments. Officials from my Department are now in touch with OFT about this follow-up work, and its relevance to the Government's own deliberations in this area.

We regard the improvement and repair of the housing stock as a crucial part of their housing policy. Some of the money that is spent on major items of work comes from home improvement grants. Naturally, we are keen to ensure that such spending achieves value for money. It is equally important, however, that owners are assured of getting good quality work when they finance it from their savings or from loans.

The report emphasises the value of greater self-regulation by the industry to help achieve this. The Government support this, and firmly believe that self-regulation is preferable to introducing new statutory schemes which will add to costs and bureaucracy, without any guarantee that they will solve the problem. I welcome the Federation of Master Builders warranty scheme to protect customers, and I am pleased that the National Federation of Building Trades Employers has plans for its own scheme well advanced. My hon. Friend referred to this in his speech.

It is in the industry's interest that the public should know the services it offers and how to use them. The report includes suggestions for better consumer information. I hope that the industry will take up the proposals.

Self-help by consumers is also important. The OFT report contains a good deal of sound advice, including particularly the seven golden rules for householders. We urge those undertaking improvement and repair work to heed this advice. As my hon. Friend pointed out so eloquently, the cheapest job is not necessarily the most satisfactory in the long run. I hope that information based on OFT's advice can be made widely available through citizens advice bureaux, local authorities and the trade associations.

The director general's report suggested that there should be a statutory requirement for all home improvement contracts to be in writing with the exception of some minor works and emergencies. It also recommended that oral contracts should be enforceable only by the householder. The Government are doubtful whether the case for a statutory requirement has been made out. Written contracts, especially in the building industry, can be extremely complicated. The householder might be put off by them, and thus even more inclined to turn to those in the black economy who would ignore the requirement, and not have the work done. There would be practical difficulties, for example, of defining what constitutes an emergency. To make oral contracts enforceable only by one party would be a radical departure from the fundamental principles of contract law which would be difficult to justify. The Government are not convinced of the need to single out the construction industry in this way before an attempt has been made at more rigorous self-regulation.

The report's other recommendations for statutory controls include the provision of a cooling-off period of seven days for all written contracts negotiated away from business premises; increasing the monetary limits for small claims procedures in England, Wales and Northern Ireland from £500[...] 1,000; stricter control over company directors and legal aid for consumer creditors seeking a declaration of a director's personal liability.

All of these recommendations have repercussions that reach beyond the building industry. The provision of a statutory cooling-off period for contracts negotiated away from business premises is—as my hon. Friend said— being considered in connection with the European Community's draft directive on doorstep selling, which is currently under discussion in Brussels. The Government hope that the few outstanding problems on that directive can soon be resolved to our satisfaction and the way will then become clear for its introduction. The monetary limits for actions in the small claims court have only recently been increased to £500 and the bulk of the claims are still below this figure. Those relating to home improvements are a small number of the cases processed. There would not appear, therefore, to be a strong case at the present time for amending the limits that have recently been increased.

The problems associated with insolvency are more far-reaching than just the building industry. But the Government are reviewing the insolvency law, have sought over recent months to gather together all the views on the subject, and will announce their proposals in the very near future.

One of the most interesting of the recommendations was for a statutory general duty to trade fairly, which not surprisingly attracted considerable comment. Since its publication the director general has been consulting further on that aspect of his report and I understand that he made further approaches to interested bodies towards the end of last year. He has also been busy in other directions and is meeting representatives of local authorities and the financial institutions to discuss the recommendations of the home improvements report which are aimed at them. He is now in the final stages of preparing a booklet for consumers on how best to avoid home improvement problems.

I came to the subject of home improvement grants. The Government are at present undertaking a review of private sector housing improvement policy. One important component of that review is as to how to maximise private spending. Ensuring value for money and increasing public confidence are two important ways of doing that and many of the proposals made by the OFT would have exactly that effect.

As part of that review, we are looking at the home improvement grant system. The OFT has suggested that grant-aided work should be carried out only by approved firms. Such a restriction is not possible at present, but we encourage local authorities to maintain lists of reputable firms and to encourage grant applicants to choose from them. In considering a possible new system, we shall certainly by studying the possibility of exercising a stricter control—though we need to be wary of increasing the administrative burden that are placed on local authorities.

Like my hon. Friend, I welcome the job that the OFT has done to highlight this important area. I know that the OFT is following up the report by discussing the proposals with interested organisations. As I hope that I have made clear, we welcome the general approach of the report, and I shall be considering my hon. Friend's suggestion that we now adopt a higher profile to carry it forward. We are giving careful consideration to the proposals for legislation and we will announce our conclusions in due course.

I look forward with some trepidation to reading what my hon. Friend has to say in his column of Building next week about the outcome of this important debate.

Question put and agreed to.

Adjourned accordingly at twenty-seven minutes to Eleven o'clock.