HC Deb 22 April 1998 vol 310 cc792-800 1.30 pm
Mr. Brian White (Milton Keynes, North-East)

Before I came into this place, I was the chair of the Local Government Association planning committee, and I worked for Abbey National designing its mortgage system. Since I have been elected, a couple of new estates have been built in my constituency, so Milton Keynes has a large number of new homes. We are having this debate in the context of the Government's policy that 60 per cent. of new development should be on brown-field sites, as was mentioned in the previous debate. That policy raises issues about the quality of that development, contaminated land, affordability and a number of other issues.

I congratulate the Government on the initiatives that they have already taken, the reviews that they have done, the updating of the planning legislation, the recent announcement on design for the disabled, and a number of other initiatives taken by colleagues, such as private Members' Bills on energy efficiency. In this debate, I shall try to be reasonable, but I suspect that some of the victims of defects in house building would be less than charitable.

Last week, a television programme called "On the House" looked at an estate in my constituency, where a few houses had serious defects and others had major problems, but most had problems of the niggly variety. The programme damned the whole estate because there is not an adequate system for remedying problems.

The National Association of New Home Owners estimates that about 1,000 to 1,500 new homes have serious defects, by which it means roof supports that do not support roofs and that kind of thing.

Mr. Jim Dobbin (Heywood and Middleton)

I thank my hon. Friend for giving way at this juncture. I congratulate him on securing this debate at a timely moment in the Government's period of office. I also congratulate my hon. Friend the Minister on his recent consultation document "Combating Cowboy Builders". A recent Granada Television programme called "Builders from Hell" highlighted some of the serious problems created by rogue builders in various parts of the country.

If hon. Members had viewed that programme, they would have seen 20 minutes dedicated to the Kiely brothers, who have built sub-standard properties in my constituency and around greater Manchester. They are mainly new-built homes with plumbing deficiencies, insulation deficiencies and major structural defects. The builders have left streets unfinished, and failed to provide street lighting or even proper drainage.

One estate in particular—Victoria mews in Bury—has cost the National House-Building Council £750,000 in insurance claims to correct the mistakes. No national insurer will now insure that company. It encouraged clients to use its own firm of solicitors for conveyancing. It provides marketing services—

Mr. Deputy Speaker (Mr. Michael J. Martin)

Order. The hon. Gentleman's intervention is far too long. The hon. Gentleman, with the agreement of his hon. Friend, may make a short speech later. That may be the best way to proceed.

Mr. White

My hon. Friend has dealt with cowboy builders, and I agree entirely with him. Defects can occur with any builder. A large reason for that is the system of subcontracting. The National House-Building Council vets builders, but there is no way in which it can vet subcontractors. The system of competitive tendering, the penalties system and the low skills of the work force that many subcontractors use mean that we have a real problem of poor workmanship.

In my constituency, a reputable builder used a subcontractor from the Confederation of Registered Gas Installers to install gas pipes in houses eight or nine years ago. This year, a number of those gas pipes were found not to have been lagged. Home owners in that street are now worried that they will have major problems with their gas supply, and gas leaks.

There is a real problem with inspections. There is no agreement about how many inspections are needed. Local authorities argue that there about seven points at which new homes ought to be inspected. The NHBC argues that there are four, and does only two. A "Dispatches" programme last November highlighted what happened when half an estate was inspected by local authority inspectors and the other half by NHBC inspectors. In the first half there were few problems, and in the other there were substantial problems in many of the houses. The same programme identified a national survey that showed that many houses had blatant defects.

One builder in my constituency told the home owner that he had forgotten to put the foundations into the porch, and that it would have to be rebuilt. A former NHBC inspector told the "Dispatches" programme that he was constantly told not to upset the builders.

The NHBC gives quality awards to various builders. Despite its denials, I have a letter from a major builder saying that the NHBC tells the builders when the inspection will take place, and how to get round it. Another major concern is the time taken to inspect a house—in general, it is only a few minutes. It is easy to skimp on inspections, because profits are high and penalties almost non-existent for not doing them properly.

My major concern in this debate is the conflict of interests between the inspection and the NHBC warranty. A little while ago, the previous Government forced local authorities to separate their client and contractor roles. With hindsight, I think that that was a good decision. The same applies to the NHBC. There should be a distinct split between the inspection role and the provision of warranties. One company should not do both.

Very few people understand warranties. If one gets one at all, it arrives weeks after moving in to the new home. It is not a guarantee, although most people believe it is. It starts on the day of the final inspection, not when one moves in to the house. Many people do not realise that. If the house has been empty for six or nine months, people have lost that amount of the warranty in the crucial first two years.

Zurich Municipal does have a buy-back scheme for local authorities, but the NHBC does not. That is a source of contention. Many people confuse the warranty system with the mortgage provider's building insurance. If people get a problem, the first response is a denial. The second is to shift the responsibility either from the NHBC to the builder or vice versa. The whole system seems to be delay, delay, delay, especially after that crucial two-year period. The timing of the claim can affect how much compensation people get.

One thing that really worries me about the NHBC is that everyone trusts the Consumers Association, which stands up for consumers' rights in everything except house purchases, which is the single biggest purchase that most people make. I do not accuse the Consumers Association of being corrupt, but if it investigated its role with regard to the NHBC, it would be less than complimentary if the investigation was about anyone other than itself. The Consumers Association should ask itself some serious questions about its role.

I have no faith in the NHBC's proposed consumer council. We ought to have such a council, but it ought to be independent, and have some teeth. Housing logbooks have been talked about for a long time. My hon. Friend the Minister has spoken about them in the past. It is long past the time when we should introduce them. They should be one of the top priorities for the Government.

If most new building is to be on brown-field sites, the warranty system must be extended to refurbishments, alterations, improvements and renovation, for example, of blocks of flats. In addition, the problem of the speed with which most problems are resolved and claims dealt with needs to be addressed, and an independent disputes resolution procedure—perhaps an ombudsman—introduced.

The Government must tackle the monopolistic aspects of the warranty system and the NHBC's role. It makes an operating profit of £10 million, and has reserves of £600 million. It pays out, on average, £15 million a year—although, if my hon. Friend the Member for Heywood and Middleton (Mr. Dobbin) is correct, this year's figure may be slightly higher—which means that only a small proportion of its reserves are used to pay out.

On the issue of building control, local authority fees are set by the Government, although the local authority associations came within a whisker of persuading the previous Government to devolve fee setting to local authorities. I hope that I can persuade the Minister to go one step further than the previous Government, and permit that devolution.

Independent structural surveys are crucial to proper inspection. There should be a full survey by an independent structural engineer immediately before warranty—I am sure that the issue of who pays for that can be resolved. If the housing logbook was be made valid by starting with that structural survey, it would build confidence among new home owners.

Before mortgage, purchasers should be required to get an independent structural survey, which would offer them the protection of knowing what they were buying. It would be possible to introduce into that process matters such as the energy rating and other environmental audit aspects of the house. Either the seller or, in the case of a new house, the builder could be made responsible for the first survey, which would help to increase confidence in the system.

There should be an audit mechanism for the inspection process. My preferred solution would be to return the inspection process to the sole control of local authorities, although I am not sure that I can persuade my hon. Friend the Minister to go that far today.

A 1996 Justice report made several recommendations. I urge the my hon. Friend to implement the updating of the Defective Premises Act 1972, so that it is possible to ensure that work is done with good workmanship, using proper materials, and that a dwelling is fit for habitation; and to extend the period in which builders can be sued from six years to, say, 12 or 15 years. In addition, section 38 of the Building Act 1984, which would allow a breach of building regulations to be actionable, has never been implemented, and I urge my hon. Friend to consider implementing such a measure.

So as to allow my hon. Friend the Member for Heywood and Middleton to contribute, I shall end my speech. The problem is complex, as the Minister is aware, but there is an urgent need for comprehensive reform. Given that it is the Government's policy to build on brown-field sites, which is a welcome development, the problem needs to be addressed quickly so that house purchasers—especially new house purchasers—can have a degree of confidence.

Mr. Deputy Speaker

May I take it that the Minister has no objection to the hon. Member for Heywood and Middleton (Mr. Dobbin) addressing the House?

The Minister for London and Construction (Mr. Nick Raynsford)

indicated assent.

1.42 pm
Mr. Jim Dobbin (Heywood and Middleton)

I thank you, Mr. Deputy Speaker, for your earlier advice. I also thank my hon. Friend the Member for Milton Keynes, North-East (Mr. White) for allowing me a couple of minutes in which to speak. I agree with much of what he has said.

The company I mentioned earlier encouraged clients to use for conveyancing a firm of solicitors which are the company's own solicitors; it also provides mortgages from firms linked to the company. How can that be allowed in 1998? It is obvious that tighter legislation to protect home buyers is urgently required. Raising the profile of this serious problem is one of the reasons that I submitted early-day motion 1146. I received a letter from the chief executive of the NHBC supporting that early-day motion.

As part of the consultation process, I shall offer the Minister some proposals put together by my local trading standards department in the borough of Rochdale. In addition, there was a meeting yesterday of Manchester building control officers, who are considering the problem. I am confident that the Government will tackle this serious issue, and I await legislation to protect home buyers and to rid the country of rogue builders.

1.44 pm
The Minister for London and Construction (Mr. Nick Raynsford)

I congratulate my hon. Friend the Member for Milton Keynes, North-East (Mr. White) on his success in securing the debate, and on choosing a subject of real concern—the standard of new houses and the importance of ensuring that there is real redress when members of the public have acquired a house that proves to be defective.

I share my hon. Friend's concern that there are far too many defects in new houses, and that, when such defects arise, the response is not always as effective as it should be. We should be encouraging in the house-building industry and in the construction industry generally a culture that seeks to ensure zero defects on handover, and guarantees effective remedies when defects are found. If it is properly structured and managed, a new home warranty system can be a powerful force for pushing up standards of construction and after-sales service, and giving the public reassurance that they will be covered.

In my response to the points raised by my hon. Friends the Members for Milton Keynes, North-East and for Heywood and Middleton (Mr. Dobbin), I shall concentrate on three issues: first, the role of the National House-Building Council in respect of new homes and warranties; secondly, the operation of the building control function; and, thirdly, cowboy builders, to which my hon. Friend the Member for Heywood and Middleton referred. The NHBC's role in the building of new homes falls into two main areas: first, the provision of building control services by its subsidiary company NHBC Building Control Services Ltd.; secondly, the provision of a new homes warranty under its non-statutory Buildmark warranty scheme.

Before I address the concerns raised about the NHBC's Buildmark warranty scheme, it is important to outline the cover it provides. The scheme provides a 10-year warranty consisting of two parts. The first part covers any defects that arise during the first two years as a result of the builder not keeping to any of the NHBC's standards for materials and workmanship. The second entitles the owner to claim against damage caused by defined structural defects within years three to 10.

When a defect covered by the scheme is discovered within the first two years of the warranty and the builder fails to carry out remedial work, the NHBC provides a free conciliation service. Should that prove unsatisfactory, or if a dispute arises between the owner and the builder or the owner and the NHBC at any time in the 10-year period of the warranty, the scheme also provides an arbitration service. That is an independent procedure, with the arbitrator appointed by the chairman or a vice-president of the Chartered Institute of Arbitrators.

From correspondence received by my Department, recent television and radio programmes, issues raised by my hon. Friends in the debate and my own personal experience over many years, I know that there are real concerns about the effectiveness of the NHBC warranty scheme. Many representations have been made by bodies such as the National Association of New Homeowners about the failure of the scheme in certain cases to provide adequate safeguards for home owners whose homes have proved unsatisfactory.

I share those concerns, and I am determined that positive action should be taken to address them. That is why I have on three separate occasions in the past year met the chief executive and senior officials of the NHBC, and why I am closely monitoring the NHBC's review of its warranty service. I have not ruled out Government action to improve consumer protection in this area, but I should prefer action to be taken voluntarily

At my most recent meeting with the NHBC's chief executive, on 24 March, I acknowledged that the NHBC has done a great deal of useful work since its review was launched last year. I am encouraged by the progress that the NHBC has made in several areas, and I hope that its efforts bear fruit. However, I believe that the NHBC can make further progress on several other matters; I am especially interested in what proposals it has for improving the conciliation and arbitration arrangements, and for putting into the public domain information on the performance of builders in terms of reliability and after-sales service.

There is a question whether the NHBC should more clearly separate its various roles. I believe that it accepts that there is a need for its roles as standard setter, as independent regulator and as insurance provider to be more clearly defined and demarcated. For example, it accepts that owners need to be assured that the person dealing with a claim under the warranty or carrying out a conciliation between the owner and the builder is from a different part of the NHBC's operations than that which undertook initial inspection of the property for warranty purposes, or for the purposes of building control.

To address that issue, the NHBC has informed me that, from 1 July, all its claims staff will report to the director of claims at NHBC head office. That will ensure management lines which are clearly separate from the inspection function. In addition, the NHBC is undertaking a major overhaul of its conciliation service, so that it, too, will be distanced from the claims-handling function. I await more details, but I hope that those management reforms will help to make the NHBC services more transparent, more impartial and more responsive to consumer concerns.

I hope that reforms to the conciliation service will also include greater powers for the NHBC to step in directly and put matters right. The NHBC has said that its revised conciliation service will be backed by a new finishing standard and after-sales protocol for house builders.

Ms Tess Kingham (Gloucester)

A constituent in Gloucester has had an on-going problem with a 10-year warranty for almost 10 years. During the arbitration process with the NHBC, he has been expected to pay for every arbitration case that has been brought. There is a list of about 65 different items, from the roof going wrong to the floor needing to be dug up, and he has been expected to pay his own costs for every arbitration claim. Will that issue be addressed in the review?

Mr. Raynsford

I am grateful to my hon. Friend for drawing my attention to that case. As I emphasised earlier, I believe that the NHBC must address the effectiveness of both the conciliation and the arbitration service, because, although in principle the mechanism appears to amount to a sensible approach, I have heard too many cases, such as the one that my hon. Friend has raised, in which people have found it unsatisfactory in practice.

We do not want arrangements that, although they work in theory, do not provide effective reassurance and redress for members of the public who suffer experiences similar to those suffered by my hon. Friend's constituent. If my hon. Friend wants to write to me about that individual case, I shall undertake to raise it with the NHBC, but I give her the assurance that we are seeking general improvements in both the conciliation and the arbitration services, to ensure that the public can rely on them and not feel intimidated by costs or any other factor.

I shall await the NHBC's response to the outcome of our latest meeting, and to the letter that I sent to its chief executive afterwards, and the overhaul of its conciliation service, before considering whether the Government need to take further action in that area. I hope that my hon. Friends will accept, therefore, that I cannot say much more today on the subject, other than to reassure them that I am taking, and shall continue to take, a close interest in the matter.

In the past year, I have spoken to the other major provider of warranties for new home owners, Zurich Municipal, and to the Council of Mortgage Lenders. I have made it clear that warranties, from whatever source, should offer home owners comparable quality of protection and service in dealing with complains and sorting out problems.

I have also encouraged closer liaison between the NHBC and Zurich Municipal, to ensure that, although they are commercial competitors, they can work together against poor performance by house builders. Naturally, there was concern that if either company refused to accept a builder on to its register, it could lose business if the other company automatically took that builder on to its register. It is a legitimate concern, which I fully understand, and I want common standards to ensure that bad builders who fail to meet proper standards will be unacceptable to both main warranty providers. It is still early days, but I am hopeful that the dialogue will lead to effective action.

There is a question about potential conflict between the NHBC's role in providing warranties and its role as an approved inspector. In my view, there need not be conflict between those roles. It is not in the interests of the NHBC as a warranty provider that defects should appear that could lead to claims. For its part, the building control subsidiary has a statutory duty to take reasonable steps to satisfy itself that building work satisfies the building regulations. It also has a commercial interest in maintaining a reputation for effective inspection services against the background of growing competition from other approved inspectors and local authority building control.

I acknowledge the argument that if defects arise, NHBC staff may be more inclined to downplay them or argue that the defects were not initially present in the house as built, because to acknowledge defects would cast doubt on the NHBC's inspection role. However, I believe that the risk can be lessened by the management restructuring that the NHBC is undertaking. I await additional details of the NHBC's plans to put in place effective Chinese walls between the initial inspection staff and claims evaluation staff.

The NHBC's second role in relation to the building of new homes is the provision of building control services. It is important to see that aspect of the NHBC's work in the context of the framework provided by the building regulations. The construction of any new home is subject to the requirements of the building regulations in force at the time of construction. Those regulations are primarily concerned with protecting the health and safety of those in and around buildings. They place responsibilities on the various parties involved in the construction of new buildings, and allow for action to be taken against them when they fail to comply with requirements.

A builder or developer intending to construct a new home is required by law to obtain building control approval. The general function of building control—whether provided by a local authority or an approved inspector—is to ensure, as far as possible, that building regulations are complied with.

I have no doubt that competition between different agencies involved in building control can help to ensure good value and choice to the public. My hon. Friend the Member for Milton Keynes, North-East mentioned the problem of fee setting by local authority building control. I have announced that I am working on regulations that will allow for the devolution of fee setting. I hope to make further progress on that soon.

I should like to reassure my hon. Friend that I am determined to ensure that competition in the provision of building control does not drive down standards; it must be seen to maintain and improve them. That is why I have consulted the Local Government Association, the Construction Industry Council and the Association of Corporate Approved Inspectors on ways of securing consistent building control standards and better conditions for competition, throughout the public and private sectors of building control. That is why I have welcomed the establishment of a steering group by those three bodies to draw up recommended standards and monitoring arrangements.

However, it should be remembered that building control—whoever provides it—can be only a checking process. It does not remove from the person carrying out building work the primary responsibility for ensuring that the work complies with the regulations.

My hon. Friend mentioned the number of inspections carried out by local authorities and by the NHBC. It is true that, where local authorities carry out building control, there are several stages at which the authority must be given an opportunity to inspect. However, it is for each local authority to decide how many inspections to make in each case.

Approved inspectors must also decide in each case what inspections to make to fulfil their duties. I understand that, on average, the NHBC inspects properties 11 times in cases where it is carrying out both warranty inspections and building control inspections.

I believe that we should concentrate on ways of consolidating and improving standards of building control in both sectors. Building control can be only a checking process, not a substitute for builders' own quality control, but I want building control to provide the best realistic level of confidence that the regulations have been complied with.

My hon. Friend the Member for Milton Keynes, North-East mentioned various matters involving the conveyancing system, including surveys and logbooks. My hon. Friend the Minister for Local Government and Housing has set up a working party, with the Lord Chancellor's Department and other interested parties, to review the house purchase process. That will consider these and other relevant matters, and will, I hope, report later in the year.

My hon. Friend the Member for Heywood and Middleton mentioned cowboy builders. He rightly highlighted the serious problems encountered by members of the public as a result of the behaviour of disreputable and rogue traders, who provide a poor standard of service and poor value for money, and who often fail to provide any remedy when their failings are brought to light.

It is essential that effective measures are in place to tackle the problems of cowboys, so we published our consultation paper on the subject earlier this month. The paper sets out several options for tackling the problem and providing better information to the public on reputable builders. We intend to drive forward those proposals, but we shall do so very much in the light of the evidence submitted to us as a result of the consultation.

I know that my hon. Friend the Member for Heywood and Middleton intends to submit his views and those of related organisations; I very much look forward to reading them. We shall take full account of his views and others submitted in the consultation, to ensure that we have really effective measures to tackle the problem of cowboy builders.

It being Two o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Sitting suspended, pursuant to Standing Order No. 10 (Wednesday sittings), till half-past Two o'clock.