Building Industry: Statutory Requirements (Hansard, 18 March 1985)

§ Lord Dean of Beswick
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ Lord Skelmersdale
My Lords, the Government are always concerned to ensure that all those in the building industry fully comply with their statutory duties. However, assuming that the noble Lord's concern in asking this Question is fiscal, Her Majesty's Government are deploying more staff and simplifying the system to reduce tax evasion.

§ Lord Dean of Beswick
My Lords, I am grateful to the noble Lord for that reply, but is he aware that calculations are that last year in total householders in this country spent on building extensions and improvements to their homes approximately £5 billion and that £2 billion of that was on the black economy, resulting in a loss of £800 million in income tax to the Chancellor of the Exchequer? Can he give an undertaking that this type of thing will be looked at with the utmost thoroughness in order to recoup such money at a time when local authorities are having their own money withheld from them which could be used for building purposes?

§ Lord Skelmersdale
Yes, my Lords, I fully agree with the noble Lord. Tax evasion is a very serious problem. As I said in my original Answer, we are taking steps to deal with it. In the past two years an extra 400 staff have been redeployed by the Customs and Excise and in the period from 1979 to 1988 approximately 1,700 additional Revenue staff will have been redeployed in local tax offices, the PAYE audit force and the board's investigation office on anti-evasion work to combat the black economy, which, as I said, is a very serious problem.

§ Lord Broxbourne
My Lords, in the context of the Question of the noble Lord opposite, will Ministers continue their support for the work of the National Housebuilding Council and, where possible, reinforce it in prescribing suitable standards of house building and construction, particularly in view of their new status and responsibilities accorded under recent legislation?

§ Lord Skelmersdale
Yes, my Lords, I am most certainly ready to praise the work of the National Housebuilding Council, and the Government are fully 320 in accord with the work that it is seeking to do, especially its recently announced insurance work.

Viscount St. Davids
My Lords, when my noble friend uses the word "redeployed", does he mean that extra staff have been taken on or that these people have been taken from work elsewhere? Can he, if possible, in that case tell us where they have been taken from?

§ Lord Skelmersdale
My Lords, I understand that the Customs officers to whom I referred are extra staff, whereas the 1,700 additional Inland Revenue staff will have come from other posts. But the point is that their great knowledge and experience will be brought to bear on this problem in those areas, whereas before they were more widely deployed, if I may use the word.

§ Lord Graham of Edmonton
My Lords, is the Minister aware that action by his department in these matters will be applauded by all legitimate builders and building organisations such as the Institute of Maintenance and Building Management, the Building Employers' Confederation and the Federation of Master Builders? Will he bear in mind that what are required are incentives to comply with the taxation system and that what we do not want to see in the Budget this year is that which appeared last year—the imposition of VAT on building extensions, which certainly led to an increase in cowboys and the black economy syndrome?

§ Lord Skelmersdale
My Lords, I cannot pre-empt my right honourable friend's Budget Statement tomorrow, but last year's Budget brought an equalisation of tax effects between VAT and other taxes—for example, income tax and corporation tax—so I do not think that the noble Lord is right in saying that it was all bad.

§ Lord Graham of Edmonton
It increased the black economy, my Lords.

Lord Bruce of Donington
My Lords, will the noble Lord confirm that he understood the phrase, "statutory requirements", in the Question tabled by my noble friend to include the observance of safety standards and other such matters?

§ Lord Skelmersdale
Yes, my Lords, I am well aware of that, and it also includes training. So far as health and safety are concerned, the Factory Inspectorate deploys about 90 inspectors on construction works. They visit sites and head offices of all sizes of construction firms. They have substantial powers, including powers in magistrates' courts, against firms and individuals who seriously contravene legal requirements. Their effort will be continuous, especially in the small firm sector where there is a particular problem.

§ Lord Diamond
My Lords, when the noble Lord said in reply to the supplementary question of the noble Lord, Lord Dean, that he fully agreed with him, did he mean that he was endorsing the estimates of the extent of black market tax evasion? If not, what is his estimate?

§ Lord Skelmersdale
My Lords, I have no personal estimate, but Sir Lawrence Airey has estimated that it is between 6 and 8 per cent. of gross domestic product. If it was 7 per cent. of last year's GDP, the tax loss on that sum could have been as high as £6 billion. The £800 million to which the noble Lord, Lord Dean, referred is a particular amount for those people who have been—dare I use the phrase?—quasi-identified. In other words, it is what we actually know is going on. The other figures are gross estimates.

§ Lord Dean of Beswick
My Lords, may I ask the Minister whether it is not also a fact that there are other statutory financial obligations that this kind of builder is escaping, such as NHI contributions, training board levies, and so on? The £800 million about which I am talking is only part of a wider picture.

§ Lord Skelmersdale
Yes, my Lords, that is absolutely right. By definition the term "cowboy" means that the people in question are operating outside the law. The great worry is that by tightening the law in this respect you will increase the cowboy element.