Building Industry: Trends (Hansard, 23 May 1990)

§ The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh)
My Lords, since 1981 there have been eight consecutive years of sustained growth in construction output in Great Britain. Output increased by 4 per cent. last year in constant price terms despite a reduction in housebuilding activity. Published forecasts predict a downturn of between 3.5 per cent. and 6 per cent. this year, with an upturn in 1991 and beyond.

§ Lord Dean of Beswick
My Lords, is the Minister aware that naturally I welcome the fact that over the past few years the building industry has done rather well? Is the Minister also aware that the predictions of the building industry do not accord with the latter part of his Answer? They state that only 39 per cent. of firms are working at near capacity as against 71 per cent. last year, and that significant pockets of spare capacity are now appearing in the South-East outside of London. However, is not the most disturbing fact that private industrial work is 897 declining at a rapid rate because manufacturers are no longer investing due to the high interest rates? When can we expect an end to the high interest rates and once again an upturn in the building industry?

§ Lord Hesketh
My Lords, the noble Lord, Lord Dean, paints a picture of doom and gloom but I have to say that looking out of the top floor at Marsham Street I see nothing but a forest of cranes looking down to the east of this capital of ours.
As I Said in my Answer, there has been a projected reduction which does not in any way disagree with the noble Lord, Lord Dean, because his figure relates to assumed levels of activity within firms rather than output or orders placed. We should remember that it is most important for the future of our country that we get on top of inflation rather than preserve levels of expansion in the building industry.

§ The Earl of Kimberley
My Lords, is the Minister aware that if he lived near Swindon, as I do, he would find it absolutely impossible to persuade a builder to do anything for months and months because they have so much work?

§ Lord Hesketh
My Lords, I am aware of my noble friend's remarks because that point has been drawn to my attention on previous occasions. It is also true to say that in the South-East there will be some reduction in activity. That is hardly surprising bearing in mind the enormous level of growth in commercial activity since 1985 which equates to an increase in real terms of about 90 per cent.

§ Lord Mellish
My Lords, the Minister will be aware that the buoyancy of the construction industry is a barometer for the nation as a whole. If the industry is doing well, so is the nation. That is a fact of life. Can the Minister give details of the present position and state how he sees the future in regard to house building in particular?

§ Lord Hesketh
My Lords, the cumulative figures which I gave earlier to the noble Lord, Lord Dean, refer of course to a combination of civil engineering and house building. House building figures have dropped and that is hardly surprising because they always respond to the level of mortgage interest rates. However, it is a fact that we must curb inflation and that is why we have high levels of interest.

§ Lord Williams of Elvel
My Lords, has the noble Lord taken on board the fact that the interest rate policy which he just described hits specific sectors and geographical areas? That policy does not hit across the economic spectrum—witness the appalling trade figures we have seen today. Will the Government now review their counter-inflation policy, seeking not just to influence sectors such as the building industry in specific areas but seeking to get demand back across the whole economy?

§ Lord Hesketh
My Lords, the Government are acutely aware of the fact that the real losers under inflation are the poor, the weak and those on fixed incomes. They need to be protected.

§ Baroness Fisher of Rednal
My Lords, will the noble Lord tell the House what activity in the building industry is concentrated on housing for local authorities and housing associations? In other words, I refer to housing that will help those he has just listed as being perhaps in the lower income groups in the community.

§ Lord Hesketh
My Lords, the noble Baroness may remember my earlier remarks; for example, the Housing Corporation's gross capital expenditure will rise from just over £900 million to £1-7 billion by 1992-93—an increase of nearly 100 per cent. That shows the Government's commitment in regard to providing subsidised housing.

§ Lord Boyd-Carpenter
My Lords, will my noble friend make it quite clear that the Government will not be diverted from their anti-inflation policy for the sort of considerations that have been suggested by, among others, the noble Lord, Lord Williams of Elvel?

§ Lord Hesketh
My Lords, I can give my noble friend that assurance.

§ Lord Williams of Elvel
My Lords, will the noble Lord accept my suggestion that the counter-inflation policy of the Government is wholly ineffective? It has no effect at the moment on the core rate of inflation. It has no effect on the trade balance. Is it not about time that the noble Lord, Lord Boyd-Carpenter, woke up to the fact that a different and stronger policy is necessary?

§ Lord Hesketh
My Lords, I disagree strongly with the noble Lord, Lord Williams of Elvel, but, rather more important, I feel that he is now straying into an area where my noble friend the Paymaster General may be able to provide a more satisfactory reply, rather than now delaying the House on a rather difficult and technical subject which is not entirely to do with the rate of construction activity in the United Kingdom.

§ Baroness Fisher of Rednal
My Lords, I asked the Minister for details of present activity but he gave the estimate for 1991-92. I hardly think that that is present activity.

§ Lord Hesketh
My Lords, the figures I gave to the noble Baroness, Lady Fisher of Rednal, were to show the Government's level of commitment. For the first quarter of 1990 the total number of housing starts was 33, 900. That is a provisional figure.

§ Lord Monkswell
My Lords, do the Government agree that two of the more significant indicators in terms of the building industry are, first, the number of dwellings that are constructed by the building industry and, secondly, the amount of manufacturing capacity built by the building industry? On those two categories, can the Government advise the House of the difference between the figures that applied in 1979 and the figures that applied in 1989?

§ Lord Hesketh
My Lords, I do not have the figures for 1979 relating to the noble Lord's question. However, I can assure the noble Lord that the construction activity to which the Question relates is the total level of construction activity, and is not for house building as a separate item. It is running at a record level, and even if there is a downturn it will still be running at a record level this year.

The Earl of Halsbury
My Lords, perhaps I may draw the attention of our noble Leader of the House to the fact that the clock now shows 16 minutes and that we are only halfway through Questions?

§ The Lord Privy Seal (Lord Belstead)
My Lords, I am grateful to the noble Earl. I suggest that we take a question from the noble Lord, Lord Dean, and then move on.

§ Lord Dean of Beswick
My Lords, I shall be brief. If, as the building industry states, there is a substantial cutback in private industrial building, does that not augur badly for our future? We are now trying to regain our position as a major manufacturing country on the same basis as our contemporaries and business rivals in Europe. Surely the cutback will adversely affect any attempt to correct the balance of payments in manufacturing.

§ Lord Hesketh
My Lords, the noble Lord, Lord Dean, now drifts of f into following the noble Lord, Lord Williams, in regard to manufacturing industry. That is another question for another day. However, it is interesting to note that the Benches opposite are not interested in the level of expenditure and growth in capital projects that will come from central government, which this year will be about 22 per cent.