The Building Industry

HL Deb 03 March 1993 vol 543 cc704-40

5.37 p.m.

Lord Dean of Beswick rose to call attention to the state of the building industry; and to move for Papers.

The noble Lord said: My Lords, I rise to move the Motion standing in my name on the Order Paper. I am extremely grateful to be given the opportunity to debate the situation in which the building and construction industry finds itself today. I raise the matter not in a carping and over-critical sense, but in the hope that this great industry will be able to attract some further assistance from the Government when Members of the House have put the case to them. That is my main reason for putting forward this Motion. I believe it is quite a while since we had a debate solely related to the building and construction industry.

How did I go about obtaining the information that I thought should be placed before noble Lords? I contacted the usual people: the Building Employers Confederation and the Federation of Master Builders. I also contacted two or three of the larger building companies that are usually identified with success, such as Wiltshire's and Laing's, in order to see the situation from an individual point of view. I regard the building industry as a barometer of how the country is doing and see it as closely related to the manufacturing industry. I believe it is accepted by anybody involved in this particular discussion that the building industry provides the first measure of how a country is doing economically. I say it is interrelated with the manufacturing industry because, if one starts to prime up the building industry (houses, new factories, etc.), the results feed out into various manufacturing industries and the benefits are immense.

It has been said, quite rightly, that approaching half a million building operatives have been made unemployed since the present recession started. Unfortunately there is no sign that that number will diminish. Everybody I have spoken to expects the situation to be exacerbated further during this year.

One of the disturbing figures that I was able to pluck out from the usual technical journals—it does not come from any political source—was that during that period almost 50 per cent. of the architects involved in the building and construction industry and the people termed "technicians" (I take it that that means surveyors, quantity surveyors, clerks of works, and so on) have lost their jobs and been made redundant. It is shocking that the country has allowed itself to drift into such an appalling state of affairs that no use can be found for people of such talent. As I said, my figures come from two different places which are not political. They are associated with the architectural profession; namely, the RIBA and the Association of Consultant Architects.

There is another point I wish to raise that has not been widely mentioned. My information comes from the Building magazine, which is a contractors' journal. There is a danger that has begun to surface more clearly than ever before. Because of the need to obtain work and keep teams together, firms are now bidding at 10 per cent. below costs. That is not my figure but comes from the trade magazine. It is a very dangerous situation when, in order to keep themselves afloat and keep going, normally successful companies have to buy work. That cannot be judged a success by anybody.

We might be told—it has proved wrong—that the Chancellor's Autumn Statement contained measures that would help the building industry. It was supposed to be able to raise £1.5 billion by a further sale of capital receipts. But that did not mature, as some of us said would happen, because most of the best assets had already been sold. We called for the release of substantial sums of money from the funds held in reserve. We did not believe in the mythical new sales, which in fact did not occur. Before the debate this afternoon I spoke to a Member from the other side who has a close relationship at a high level with the building industry. Unfortunately he could not speak in this debate. He said that my conclusions were right and bang on that particular situation.

I also took the trouble to check with the public sector. Sometimes some Members of the Government give the impression that local authorities are the worst people in the world at operating in this field. However, in the local authority building departments, it appears that contracts that are also let out to the private sector will have to be drastically reduced because, to use a well worn phrase, the rate-capping and financial straitjackets that have been placed on local authorities will once again have the effect of contracting the building industry.

There is another point which does not concern the Government as such. The banks continually tell us how things are improving in their field. My figures show that the banks do not come out very well at all. Only last week one of the banks announced record profits; but from information given to me by someone involved in the building industry, once again in the private sector, it appears that in 1991–92, when interest rates stood at 15 per cent., the borrowing rate was plus 2 per cent. or 3 per cent. That equals a mark up of 13.34 per cent. or 20 per cent., depending on which figure is used from the basket. At present the interest rates stand at 6 per cent. But the banks are still charging a borrowing rate of 2 per cent. or 3 per cent., which is a mark up of 35 per cent. to 50 per cent. That is a financial rip off. No one could accuse the banks of trying to help the present situation by treating the building industry in such an ungenerous manner. I think it would make sense to treat it better.

A survey dated 8th February from the Federation of Master Builders and the Building Employers Confederation found that there were the slightest of signs that the situation appeared to be getting a little better. But it is so fragile that it would be speculative to put a great deal of reliance on it. There are other denominators which indicate the other way. For instance, the figures which were issued today by the Halifax Building Society showed that house prices had dropped by only one quarter of 1 per cent. But they are still dropping. Prices are not holding and not rising. Even if they are going down by such a small percentage, that feeds into the industry and has a very adverse effect.

The Federation of Master Builders' quarterly trade journal notes that the workload of 45 per cent. of firms remained at the same level, and 45 per cent. of the rest recorded a decrease. It says: Reviewing 1992, 62 per cent. of members reported a below average or low workload. Expectations for 1993 are not high. Seventy-seven per cent. of our members expect their workload to remain at the same level or less". The national president of that association, Mr. Ted Evans, says: No further fall in workload is reported in the survey overall. However, members' firms remain at a particularly low level of work with only 19 per cent. working to full capacity". Such figures are relevant to the comments of the Building Employers Confederation. I have no time to go through all the figures, which I am sure your Lordships will appreciate. Under their new chairman, Sir Brian Hill, substantially the same figures were produced. Unless something is done, the little glimmers of light that appear will be blown out very quickly.

Let us put the question: what can be done to deal with the situation? Before introducing this debate to your Lordships today I naturally consulted the biggest trade union involved; namely, UCATT. That union says almost the same as the building employers. It is the same right across the board: there is very little difference in any of the percentages or in the picture they paint. Together with the building industry employers, it has a programme, most of which makes sense even to people who do not like to see too much government intervention.

Having speculated £7.5 billion in one day, trying to save the so-called economy of the country, the Government surely must understand the reports coming in over the years, not from the political arena by any means but from some of the names mentioned by my noble friend and colleague, Lord Carter, when he opened the previous debate this afternoon; namely, the Duke of Edinburgh scheme, the archbishops and the Audit Commission. They all draw attention to the appalling deterioration that is taking place in our housing stock, our schools and our hospitals. That is what they were saying. It is not what people in your Lordships' House invented. Surely a government that can speculate £7.5 billion on the roulette table of the money markets, can find resources from somewhere, somehow, when attention is drawn to such a serious issue.

I shall quickly skip through some of the proposals. A further cut in interest rates to 5 per cent. is suggested to stimulate business confidence in the housing market. Most people, and even many Conservative supporters, would agree with that. The Government should restore cuts in funding to youth and adult training and reintroduce an apprenticeship registration grant to employers so that they will train people; and they should raise the contribution which should be made to keep young people in training. The Government should start a local authority housebuilding, repair and maintenance programme—I shall probably be told by the Minister that local authorities can already repair—using the £5 billion in capital receipts that already exist, rather than the £1.5 billion that we knew from the start was a gamble. They should bring forward the vital multi-million pound transport improvements such as the West Coast main line improvement and the high-speed Channel Tunnel rail link. Those schemes are essential if we are to obtain our fair share of what is to take place in Europe.

The Government could remove the restrictions on local authorities which prevents them from borrowing on the open market to fund capital investment programmes. That will enable them to begin work immediately on the £4.3 billion repair and maintenance system. Our crumbling school buildings are only one section of that. Anyone who, as a Member in another place, has represented an area with crumbling school buildings, will know what it is like. I had what I may call the "disprivilege" to do that for a long time. Finally, the Government should start a temporary work programme to bring unemployed building workers back into the labour market.

In fairness to other noble Lords who have put down their names to speak—I am glad that they have—I believe that we can have a debate which is objective in a way that may help the building industry. More than one Member from the other side has said to me, "The building industry? You mean what is left of the building industry". I ask the Government, in the name of sanity, to listen to what is said today. If they cannot give us a basket of proposals, they must do something urgently that will at least allow our great building industry to move forward once again and play its part in creating the social fabric that we want in this nation of ours. My Lords, I beg to move for Papers.

5.53 p.m.

Lord Auckland

My Lords, the House is obliged to the noble Lord, Lord Dean of Beswick, for initiating this debate in a thoughtful and thought-provoking manner. Nobody with a grain of common sense or intellect will deny that the building industry is facing horrendous times—not only in this country. I have much to do with Scandinavia, particularly Denmark and Finland, and with the old Commonwealth countries—Australia and New Zealand. They are all facing the same problems. That is no compensation for the many who are unemployed in the industry here and I would not wish the point I have just stressed to be used to camouflage any of those problems.

I must declare an interest as a non-executive director of a small firm of civil contracting engineers. I have a son-in-law who is a project manager for one of the world's largest construction companies. However, as my speech may well show, I have never been employed in the building industry.

It is an industry where one can be high on diagnosis of the problems but face extreme difficulties as to remedies. Obviously there are a number of theoretical remedies that one could produce. One involves value added tax, particularly on building improvements. That is a considerable disincentive, particularly to small builders. It would be wrong for me or anybody else to anticipate the Budget. But one hopes that whatever happens in a week or so, some consideration will be given to changes at least in value added tax, particularly for small builders. They are the ones who are really suffering.

I should like also to say a word on tourism. One Scottish hotel group in its annual report for 1992 revealed a 67 per cent. room occupancy for the whole year. That is a tribute to the hotel industry. One hopes that the Government can give some incentive to tourist development areas. Some is already given, but more is needed.

I am not a believer in the handing out of subsidies, particularly when they go to the wrong people. But it is almost ingenuous to say that the construction industry is the main industry in this country. No factory, no commercial concern, can operate without a roof over its head.

Speaking as one who spent all his working life in the City of London, I was aware that there was a great deal of overbuilding in the 1970s and 1980s. One only needs to visit the City of London—not only London; almost any major city in the world—to see the number of unoccupied buildings due to the worldwide recession. We must all face the fact that the recession will be with us for some time to come under any government. I cannot see—admittedly it is a pessimistic view—that any government can produce short-term major remedies for the building industry. But that does not mean that a start should not be made.

I am old enough to remember the well-known Conservative Party conference some years ago where there was a plea for 300,000 houses. And 300,000 houses were built. Alas, we are not seeing that nowadays, not only under the present Government but I suggest under any government. There is not the capacity.

We must ensure that the labour is available. What is happening—certainly in the small company of which I am a non-executive director—is that site managers and engineers are taking a cut in wages as are the executive directors because the laying-off of essential people who work on building sites can be countermanding. One of the real difficulties is that once a site engineer is made redundant, it is extremely difficult to replace him. He may well feel bitter and say that once is enough and go in for some other industry. Solutions are very difficult here but I hope that, particularly for areas of special development and areas of tourism, the Government will give some sympathetic consideration to those in the industry, especially small builders who are involved in the construction of buildings which increase our exports and our trade. Tourism is an important export and I believe that the Government can be of some help.

We have a challenge—all parties face a challenge here—but to expect that politicians alone can solve the problem is being very naive. It will take an overwhelming effort all round. Let us hope that that can be achieved.

6 p.m.

Lord Bruce of Donington

My Lords, I observed with some concern in the evening press that the Prime Minister is complaining that there is too much gloom around and that part of our problem is that the gloomsters seem to have taken over the means of public expression. I can understand the Prime Minister's anxiety. When he looks round his own Cabinet table it cannot give him much cause for joy. I therefore hasten to inform the Government that my few remarks this evening are designed to help them to develop those green shoots of recovery, which apparently are once again trying to poke through, and to see that they reach full fruition. I hope, therefore, that the Government will take a constructive attitude towards these matters instead of becoming suicidally depressed, as they appear to be at the moment.

My noble friend Lord Dean of Beswick pointed out that there are at present some 450,000 people unemployed, formerly of the construction industry, comprising joiners, carpenters, bricklayers, electricians, glaziers, plumbers, roofers, tilers, drivers, operators of concrete machines and so on. It is envisaged that a further few thousand will to come onto the unemployment register at any time. All that is happening at a time when it is quite clear that the national requirement for the services of the building industry is clamant in terms of improving the infrastructure—roads, sewers and, above all, housing. I shall not refer to commercial buildings, of which there appear to be a surfeit at the moment. It must depress the Prime Minister to realise that, on the one hand, there will be close to 500,000 unemployed people in the building industry while, on the other hand, there are clamant needs, particularly in the field of housing.

Your Lordships will appreciate that last year there were I million houses unfit for human habitation and that drastic repairs and alterations were required to a further 1.5 million to bring them up to an acceptable building standard. There are a number of homeless people. I shall not put a figure on it. Figures seem to vary, according to taste, between 100,000 and 250,000. There are also those in bed and breakfast accommodation. It must therefore depress the Prime Minister to look at wasted resources on one hand and the clamant need on the other.

Apparently, the Treasury and the Prime Minister's economic thinkers do not seem to be able to solve this problem for him. We all know perfectly well that the 450,000 unemployed people in the building industry represent an addition of some £4 billion to the public sector borrowing requirement. The PSBR, in its turn, is an inhibition on further public expenditure. How, therefore, do we get out of the situation without exacerbating the threat of inflation which the Treasury seems to think would arise if we put more public expenditure into housing and into the construction of new housing in particular? I have deliberately omitted other forms of construction whose needs are also clamant.

Surely it is far better to employ people—skilled people in the main but some unskilled as well—to produce something really useful than to pay them out of social security for doing nothing. To pay them for doing something must be less inflationary than paying them for doing nothing. I should have thought that even the pessimism of the noble Lord, Lord Strathclyde, would enable him to see that. If we begin to put people to work in the building industry, although the multiplier effect is rather less than that in manufacturing industry, for every person who is put back to work one can reckon that over a phased time another 2.5 jobs will be created. That is the conventional figure.

Why not put people back to work? The building industry is essentially an assembly operation. It does not need vast capital expenditure to equip it with new and sophisticated machinery or anything of that kind. Most of its machinery and plant is already there—where it is not rusting through not being properly covered. It therefore does not require any vast investment because a house is the end product of 100 different trades. It needs glass, hardware; and there is a fall-out too in the semi-durable field. That is the obvious thing to do, so why do not the Government do it?

We all know perfectly well that local authorities have at their disposal large capital sums that they are not allowed to use which are the proceeds of the sale of council houses. That money could be put to use very quickly. The Government's classic answer, to which I have listened now on three or four occasions to a point where it becomes tedious, is that all local authorities do not have these resources and that therefore it would be unfair to allow any of them to use the resources at their disposal. I sincerely hope that we shall not have that answer trotted out again today.

It would be far better for the Government to use their own funds to provide local authorities with the necessary money. The local authorities are the real instruments to use. A little time ago the noble Lord was injudicious enough to say that housing construction in the United Kingdom was at an all time high. On reflection, he will realise that that is not the case. Indeed, I have the Government's figures in front of me.

In 1979 local authorities in Great Britain produced 75,573 houses. Last year it was 8,073—a shortfall of 67,500. If one takes together the house construction in new towns under the Government's own departments of housing, the total public housing provision at the end of 1991 was about 77,000 less than it was at the end of 1979. Even housing association residential accommodation was 2,000 houses less and housing provided by the private sector was 15,000 less. At the end of 1991 the total housing per annum was reduced from 244,504 in 1979 to a mere 188,120 at the end of 1991, which is a shortfall of 96,884, with 1 million properties still unfit for human habitation and 1.5 million still requiring extensive work for them to be brought up to a civilised standard.

Quite clearly the Government's duty is simply to go ahead with public housing. They have nothing to lose but their own prejudices which have become so closely ingrained that they appear almost incapable of thinking. Why do they not adopt a commonsense attitude toward these matters and use all the instruments at their disposal to avoid the terrible spiral into which they are getting themselves and which—and I say this with the utmost regret—will before very long, unless they are very careful, precipitate them from office.

6.12 p.m.

Lord Davies

My Lords, I declare an interest in that I own and run a construction company in mid-Wales. I have spent my whole life in the industry and started with one of the illustrious companies which the noble Lord, Lord Dean, mentioned.

In preparing for this debate, I looked back at the record of our debate on the construction industry which took place in January 1992, which was the last time, I believe when we debated the subject. Again, it was introduced by the noble Lord, Lord Dean of Beswick, to whom I am most grateful for bringing to your Lordships' attention a vital industry, crucial to the economy and to the well-being of our citizens.

It is interesting—indeed depressing—how little has changed in the past year. Then, as now, we were hoping for a small improvement during the coming year. During that debate, I said: interest rates, which were coming down with inflation, are now stuck, in real terms allowing for inflation, at an all-time high, and may have to go up again. We are told that rates must stay up to support the pound. But can the pound be at the correct level if interest rates have to be kept well above those of our competitors even when inflation is down to their levels? I do not know the answers to those questions, but I do know that if nothing is done we may be in for a further downturn which will be a disaster for our industry".—[Official Report, 15/1/92; col. 266.] We were told by Government Ministers that leaving the ERM would cause interest rates to rise and that the economic consequences would be disastrous. During the debates in your Lordships' House on the economy, I was surprised to hear several illustrious speakers, all of whom thought we had gone into the ERM at the wrong rate, castigating the speculators for getting us out. Thank God for speculators, I say! They did what the Government seemed incapable of doing. Just try to imagine the state of the economy and the construction industry if we still had interest rates at a level necessary to sustain the pound at the ERM exchange rate, and the effect on our exporters of coping with that rate. At least our interest rates have been allowed to fall with inflation again, although real interest rates (base rate less the inflation rate) are still at historically high levels.

The Government urge us to have confidence in their policies and in the future of the economy, in an effort to restore confidence. But confidence will not return to the businessman who wishes to build a new factory or to a family which wishes to buy a new home, until they can be reasonably sure of three key factors: first, that their new asset will not go down in value; secondly, that their interest payments will stay at a level that they can afford and will not be pushed up again to the horrendous levels seen in recent years; and, thirdly, that their anticipated income stream will continue or grow.

How can they have that confidence when the Government's policy—if it can be called a policy—seems to indicate that interest rates are as likely to go up as down? Ministerial statements on interest rates still seem to be aimed more at the foreign exchanges than at the domestic economy. But the foreign exchanges do not believe what Ministers say; after all, they are the same people who said that we had to stay in the ERM and that we would not devalue. But they react to what Ministers do and to the underlying economy.

What must be tackled by the Government is the revival of the economy and the health of the manufacturing and construction industries. They must develop and put into action a coherent policy, including interest rates, to achieve that end. If they do not, our balance of payments, exchange rate and thus inflation, will all go the wrong way. So far, there has been very little sign of such a policy.

Until that policy is put in place and made to work, there are palliative measures which can help the construction industry to pull through this awful recession. At the moment there is very little sign of an increase in workload, but in the past few months there has been a faint and frail revival at the lower end of the housing market. That revival must be nurtured and supported and not stamped on by, for instance, the imposition of VAT on new housing which some people have talked about.

Housing renovation grants are providing much needed labour-intensive work for the smaller builders while also giving a valuable improvement to the poorer housing stock. However, the scheme does have some room for improvement. Under the regulations the householder can insist that the grant is paid to him or her rather than direct to the builder, even where this has previously been agreed, and can then sit on the grant for six months or so until the cumbersome and slow-moving legal system extracts the grant for the builder in payment for his work done—indeed, if the money is still there.

Councils have used the agency system to alleviate that problem but have, in some cases, been paying late themselves due to dwindling funds towards the end of the financial year. For many firms in present circumstances, such delay can be devastating. It is essential that funds made available for this scheme are not further reduced, as has been indicated that they are to be reduced in the coming year.

Another measure which would be of great help, and which has been mentioned before, is the reduction of VAT on house renovation and alteration work now allowed by the EC regulations down to 5 per cent; That would increase the value for money to householders, while reducing the advantage that unregistered operators have over properly set up and VAT-registered firms, while at the same time providing an added stimulus to the workload.

The construction industry is a vital element in the national economy, employing 1.3 million people and producing 7 per cent. of GDP. It is crucial to the well-being of us all, providing and maintaining our homes and places of work, among much else. This recession has caused unemployment in the industry to approach half a million. And it is a recession brought about by the pursuit of goals which proved illusory. "If it isn't working, it isn't hurting".

Now that the game has been lost, we implore the Government to pursue the new goal to turning round the economy with a great deal more zeal and determination than they have shown so far. The control of inflation is desirable, but it is not an end in itself; it is only of use if it is a means of realising the goal of greater prosperity for the nation. The construction industry wishes to be allowed to play its part in that endeavour.

6.18 p.m.

Lord Sefton of Garston

My Lords, every time we engage in a debate such as this one looks through all the official figures for statistics and therein lies a problem. Everyone in the debate gives statistics but everyone seems to have different statistics. It was notoriously difficult in the past to get the real truth of the situation in the building industry. I remember in 1929, when I first joined the building industry, one of the older members of our community saying to me, "It is a funny thing; you have got to recognise that we are now building houses in exactly the same way as they were built when they built Rome. There has not been much change". It does not seem to me that there has been much change as regards our attitude to assist the building industry.

From one of the statistics I gleaned today, the percentage of growth of the national product that the building industry accounts for is between 7 per cent. and 10 per cent. That is an important element. Frankly, I do not know how that is going to be affected if foreign and continental firms make further penetration into British firms. I should have thought there would be an adverse effect, but, as I say, I am not an expert. However, I know a little bit about the building industry.

The changes that took place in the building industry in the 1930s had something to do with the growth of technology. Finally, after the Second World War, we reached the situation when the do-it-yourself trade practically killed thousands of small builders because nobody any longer could afford the cost of employing decorators or individuals in the building trade. With the growth of do-it-yourself, people began to do many things for themselves, and that accounted for the major decline in the building industry.

On the other hand, the scale of the construction industry became so great that there had to be large wealthy firms with all the resources and investment to plough into the machines that were needed to do the job. And so the industry almost became divided into two separate industries: the industry that catered for the home user, the home dweller and do-it-yourself, and the industry which catered for international development on a large scale.

There is no doubt also that we seem to have had a figure of 300,000 or 400,000 unemployed in the building industry. In 1919 4,700 firms went bankrupt. Seven thousand firms went bankrupt in 1991. Tarmac's profits were down 81 per cent.; Wimpey's profits were down 98 per cent.; and Barratts had a deficit of £100 million. That is hard luck for the private company but it is worse news still for the Exchequer. I understand that the Exchequer, according to statistics produced by the Institute of Housing, lost £1,000 million in that year. We can hardly afford that, and I do not want to go through the long list of things that can be done to get people back into work in the building industry. We have already heard some of them, so I will not take up time by repeating them.

In housing ownership there has occurred the growth of so-called negative equity: that is having a tremendous effect on ownership. It is leading to a situation where we need rented accommodation. Essentially, rented accommodation could be provided by buying in all the repossessions and allowing the small builder to get in on the act and make the houses fit for renting, especially to local authorities. No one is going to dispute the need for that kind of accommodation provided by local authorities to house the homeless if for nothing else.

Lately the Chancellor of the Exchequer, the Prime Minister or the Cabinet decided that it would be helpful if we were to employ a "brains trust" to help the Chancellor. It does not seem as if that brains trust has had a collective view. It seems that they get into a room and have an argument about what ought to be put in the public sector. So the Chancellor is left in a very invidious position.

I should have thought that perhaps the Government ought to do something about the building industry. It may be that if we forget our prejudices from one side or the other and if the employers and the employed sit round a table, such as they used to be able to do in NEDO, they may well come up with a solution that will not impose too much of a burden on our economy. If they could do that we would be half-way towards meeting the plea made by the noble Lord, Lord Bruce of Donington. He asked: why can we not solve this apparently insoluble problem by getting together? That is the question.

I feel sorry for the noble Lord on the Front Bench opposite: it seems that in this Chamber whatever subject comes up we have the noble Lord, Lord Strathclyde, to give an answer. However, perhaps he could answer the question which was put by the noble Lord, Lord Bruce. Why can we not get together and why cannot the Government issue a very clear and concise statement about what they intend to do in the matter of the building industry? There is no doubt about the need for a statement or about the need for the Government to activate a programme that will lead to the solution of some of the so-simple problems that everybody has enunciated.

Your Lordships will not be surprised if I look at the building industry against the background of the place I come from. I do, and will continue to do that, because one of the major problems in the building industry will be the unequal distribution of resources inside the industry when the upturn comes. I have no doubt that the upturn is coming, and I have no doubt at all where it is going to be. It will not be much further than a couple of miles from this building. So, on the question of statistics, I put down to the Government a Question for Written Answer. I did not want to take up the time of the Chamber by putting down an oral Question. My Question was a simple one: how much money have the Government spent in refurbishing and decorating buildings within one mile of Whitehall? The answer was, "Sorry, we cannot tell you because it would take too much trouble to get the figures." I could therefore ask them for the figures in regard to each building. I could ask the Government how many buildings they have and why they have had to spend £80 million having bought a brand-new building costing £100 million for the Secret Service. It may be that I would not get an answer, because it is such a secret service inside Whitehall. That all goes to underline what is going to happen when the upturn comes. It will not be an upturn in places like Northern Ireland, Merseyside and the North East; so that needs looking at in advance.

I do not really wish to pose the problems of Merseyside—not too often anyway—because people get the idea that there are always problems on Merseyside. There are. So, in advance, I say this to the Government. You have heard the reasons. I could have defined the problem as being the state of the building industry. I could have defined that quite easily: it is in a hell of a state. But the Government know that. They have now heard reasons and will hear more before the end of the debate about the problems facing building, together with some of the proposed solutions.

So I say to the Government: get your act together and realise that you are talking about 10 per cent. of the gross domestic product. Realise that you are in a single market and that there is a very great danger that the British building industry and construction industry will face extinction. It will instead become a European one. I ask the Government to face those problems and at least take the nation into their confidence. Have an inquiry, have a Royal Commission—although it would take too long—but have an inquiry, get a judge to preside over people from the employers and the employed. Get them together and have a brains trust. I only hope that any brains trust the Government finally get is a better one than the Chancellor has had. At least that would give us some confidence that even out of that small inquiry and meeting the Government could perhaps put forward just one scheme. They may say, "We are going to take a chance and plough in the necessary money, first, to deal with homelessness; secondly, to deal with the question of negative equity; and, thirdly, to provide other people with the homes they need." The Government should say that they will take a chance and plough in millions of pounds to start the building industry on a process of recovery because there is no doubt at all that the building industry is ill and that it needs immediate resuscitation.

6.29 p.m.

Lord Blease

My Lords, I join other noble Lords in commending my noble friend Lord Dean of Beswick for initiating this debate and for the positive way in which he has drawn attention to the crucially depressed state of the building industry in the United Kingdom. The building and construction industry throughout the United Kingdom is very much influenced and controlled by overall government capital development policies and by fiscal measures.

I recognise—and in some detail—the do-it-yourself and the master building operations that were referred to by my noble friend Lord Sefton of Garston. However, I should like to deal with the main elements of the building and construction industry within which there are nationwide organisational links and contractual arrangements between companies, management, professionals and employees. I should like us to build upon the organisational links which exist throughout the United Kingdom.

The tremendous changes that have already been referred to in building and civil engineering technology, with modern hi-tech plant, machinery and working equipment, are widely developed with skills and working practices and are closely adapted by individual companies throughout the United Kingdom. A vast amount of private and public capital finance, as well as significant workforce skills, talents and vocational commitment is vested in the industry. That is something of which we should he proud in the United Kingdom. We are second to none. I know that Northern Ireland exports advanced computer design techniques to companies throughout the world and that we have taken a lead in that area.

Arising from the ongoing recession are the appalling pattern of unemployment, the rising wave of closures and the depressing drop in business confidence. These stark features are woven deeply across the diminishing tapestry of the construction industry. Those features cast dark shadows over all regions of England, Scotland, Wales and Northern Ireland.

When I rise to speak in your Lordships' House, it is assumed that I shall deal mainly with Northern Ireland affairs, just as my noble friend Lord Sefton deals mainly with Liverpudlian matters. Indeed, on this occasion my remarks will refer directly to the affairs of Northern Ireland because I believe that they reflect the situation in other areas of the United Kingdom. I know that some issues relate solely to Northern Ireland, but the main thrust of my remarks relates to features that can also be identified in other parts of the United Kingdom. I hasten to add that the matters that I shall raise are outside the direct remit of the noble Lord, Lord Strathclyde, who is to respond to the debate. As I have not given the noble Lord any notice of the points that I propose to raise, I do not expect him to respond directly on the affairs of Northern Ireland. However, perhaps he will take them on board and relay the substance or the gist of this part of the debate to the Northern Ireland Ministers and the Secretary of State.

In June 1985 Northern Ireland had 25,000 employees in the construction and building industry. By September 1992 that figure had fallen to 21,130 employees in employment, with 1,820 registered as unemployed. The figures show that in a six-year period some 2,000 employees left the industry and that almost 2,000 were unemployed. That is a loss of some 16 per cent. of construction employees in seven years. Yesterday I spoke to the Northern Ireland official of the Union of Construction, Allied Trades & Technicians—UCATT for short—who indicated that since September last the employment situation has worsened considerably and the outlook for the industry is grim.

A feature worth noting is the Government's official figure for output in the industry. In financial terms, output from the industry in Northern Ireland rose from a base figure of 100 in 1985 to 142 in 1991. In financial terms, this is an output increase of 7 per cent. per year. With the reduced workforce of some 16 per cent. and the rise in output of some 49 per cent. over the period, this indicates, in my opinion, that the industry is strong in its efforts to encourage performance, competitiveness and innovation.

Sadly, like the rest of the United Kingdom, during the past six years business failures in Northern Ireland have increased dramatically. Figures from Dun & Bradstreet, the business information company which publishes Stubbs Gazette, show a record of 578 business failures in Northern Ireland in 1992. That compares with a business failure rate of 258 in 1987. The building and construction industry suffered highly in those closures, with 105 closures in 1991 and 100 in 1992.

I turn now to the views of the Northern Ireland Construction Employers Federation and of its executive director, Mr. Gordon Burnison, as quoted in a Business Telegraph report of 2nd February, which stated: Mr. Gordon Burnison, Director of the Construction Employers Federation, drew together the conclusions from the first survey of the state of the building and civil engineering industry in the early days of 1993 in Northern Ireland. Two features stand out. First, the continuing high level of unemployment in construction … This is a major cause for concern and suggests that measures to reduce it should be 'implemented immediately'. Second, most of the evidence points to the continued existence of a large amount of unused capacity in the firms in the industry. In six months time, 57 pc of the firms expect to be working at not more than 50 pc of their capacity". The article continues by referring to two matters, which may create some caution. First, the continuing rise in unemployment and the fears of redundancy will restrain people who might otherwise have traded up in the housing market. Second, the large amount of empty commercial property in Belfast will continue to depress the realisable rents on new space". The biggest single factor boosting the construction industry in 1993 will be the commitment which has been given by the Government to increase its capital spending, largely on construction, by up to £50m above the original plans. Much of this additional spending will help the civil engineering side of the industry. Already the cross harbour bridges and weir in Belfast are providing large contracts. The investment in the water and sewerage services is another big element. This is a significant amount, but might be partially offset by some fall in private sector contracts". I should like to continue in the same vein. I recognise that in Northern Ireland the Government have put a fair amount of capital into projects that had been neglected for many years. I support the general remarks of my noble friend Lord Bruce of Donington who said that further capital finance spending by the Government would have a multiplier effect of two and a half. However, I believe that such spending in Northern Ireland would be money well spent in terms of the good will and the economic well-being of the community.

My figures from the Department of the Environment relate to town and country services. I take the point that was made by Mr. Gordon Burnison of the Construction Employers Federation of Northern Ireland when he said that measures should be implemented immediately. I believe that such plans must be ready and in existence. I have obtained information from the planning division that some 20,000 plans are approved annually by the Northern Ireland Planning Division. Many of these already exist on shelves.

Would the noble Lord, Lord Strathclyde, kindly suggest to the Ministry in Northern Ireland that these plans be taken from the shelves in the 26 local government offices and in the agencies such as health, hospitals and the Northern Ireland Housing Executive? They could be put into operation through some financial backing. This finance could be used for existing plans for repairs, improvements, and alterations to housing, hospitals, schools, roads and other essential public amenities employing building and construction workers, and not appealing to voluntary labour to go out and do this work on a voluntary or part-time working basis. This would be real work that required expertise and would be a great return to the Northern Ireland community. I thank the noble Lord the Minister.

6.41 p.m.

Earl Attlee

My Lords, I am grateful to the noble Lord, Lord Dean of Beswick, for initiating this debate and also for drawing it to my attention last week. For some years before coming to your Lordships' House I was involved with supporting the plant hire industry, and in particular the crane hire industry. I should like to draw your Lordships' attention to the capabilities of the crane hire industry today and the effect that this Government's policies have had on the industry. I should also like to address a particular problem facing the support side of the plant hire industry.

A task that is often carried out nowadays is the replacement of a railway bridge over one weekend. It is achieved by using modern, heavy, mobile cranes that can lift the massive pre-assembled sections into place. Mobile cranes are available that can lift as much as 800 or even 1,000 tonnes. More important is that the weight can be lifted at a distance from the crane. As much as 70 tonnes, the weight of a Challenger main battle tank, can be lifted at a radius of 30 metres from the crane. To support such an operation as many as 12 38-tonne artics are needed to carry the crane's ballast and other paraphernalia. Also, there will be the two 100-tonne low loaders to carry the new beams for the bridge.

Clearly the railway will be out of action while the bridge is closed to traffic. Any breakdown with the crane or the logistics would jeopardise the opening of the railway for Monday morning. The results of a main line closed on a Monday morning do not bear thinking about. The problem is that the capital investment for these machines is enormous. A 300-tonne crane costs over £1 million. The crane industry, and indeed the construction industry generally, needs a reasonably constant demand, and not boom or bust.

Several major companies have gone the latter way, sunk by the payment for under-utilised equipment being hired out at uneconomic market rates. The market will sort out the supply and the rates, but it cannot quickly adjust to a demand change without sending many firms under. That then makes a loss for the finance industry on the money advanced for the equipment. It is the Government's duty to run a stable economy, not one where at one moment the rates for goods and services are sky high and the next you are lucky if you can obtain much more than the marginal costs of being in operation.

I should now like to draw your Lordships' attention to a problem facing the plant fitters; the mechanics who repair and maintain the construction equipment. They often have to work in extremely adverse conditions. As a rule they have to work outside in all weathers, and often far away from home. The employer frequently issues the fitter with a van for his own use to carry his tools and equipment. The fitter is allowed, and indeed encouraged, to take the van home with him so that if the fitter receives an out-of-hours call he can go directly to the job without first having to go to the depot to collect the van. To take the example of the railway bridge project, consider the effect of a simple breakdown with any of the vehicles involved. The effect of just one extra hour of unnecessary delay could be disastrous to the whole project.

The problem is that under Sections 154 and 157 of the Income and Corporation Taxes Act the plant fitter is taxed under the Inland Revenue's P11D system. This was designed to catch the directors and higher-paid employees. The rationale is that the employee has the benefit of the private use of the vehicle. After a few months as a fitter's van most vehicles are entirely unsuitable for any sort of private use. The driver's seat and controls will invariably be contaminated with oil, grease, and other unmentionables. The passenger's seat will be, to say the least, suspect. No wife or girl friend would want to travel in such a vehicle.

The rear load area will always be a little bit dirty and often filthy. There will be wrenches, jacks, crowbars and oil; not to mention the evidence of last week's catastrophic breakdown. For those reasons the fitter will often have his own family car for private use. I am well aware that some other employees in other industries have the use of a van which they can keep clean, empty, and use privately. One of my friends has one to carry television sets around. His van is always less than 12 months old, and it is right that he should be taxed on the benefit of his private use. In the construction industry there is no benefit for the employee. All the benefit goes to the employer, otherwise why would such a junior employee have his own vehicle?

The decision in Pepper v. Hart was that teachers in private education sending their children to the school where they themselves taught should be taxed only on the marginal cost to the employer and not on the cost to a new parent. In consideration of that case the Inland Revenue very kindly decided that some fixed costs—for example, road fund tax —no longer needed to be taken into account where the private use of the vehicle was incidental to its business use. The point is that the marginal cost to the plant company of having his employee keeping the vehicle at home is practically nil. The value, as I have indicated, can be great to the employer.

Lord Bruce of Donington

My Lords, I am most grateful to the noble Earl for giving way. Can the noble Earl say whether the case has been taken to the commissioners on appeal against this kind of nonsense?

Earl Attlee

My Lords, I have no idea, but I doubt it. The gain to the employee is that he can provide a better service. I am not an expert on tax law, so I am not well placed to suggest a solution. However, I believe that it is possible for the Inland Revenue to make an extra-statutory concession. The alternative is to address the problem in the Budget. What is the Government's position on this matter?

6.48 p.m.

Lord Monkswell

My Lords, I thank the noble Lord, Lord Dean of Beswick, for introducing this debate. It has been interesting to hear all the contributions. We have had a wide range of contributions from the input of the housing industry and the building industry to the input of cranes into the building industry. It has been illuminating. In my contribution this evening, I want to come somewhere midway between. Before I do that, I should like to look at the global situation.

This is the second recession that we have had in 14 years of Conservative government. During the first one, in the early 1980s, I was employed by a firm making earth-moving machinery used in the building industry. I remember saying to the managing director, "Why don't you go down to Whitehall and explain to the new Government what their policies are actually doing to our company?". We were being crucified. He said, "I have done that. I went there as part of a delegation of the CBI to see Keith Joseph and we explained the problems. The problem for us was that it was like talking to a brick wall because he did not understand what is going on". We have moved on a little but I am not sure that the brick wall has disappeared.

During the mid-1980s local government had the opportunity to raise local taxes and to borrow money. As a result of the combination of those factors, local government injected economic activity into the affairs of the nation. Then came Chancellor Lawson who also pumped money into the economy. Things took off in 1987 and 1988 and we saw unemployment go down and the building industry boom. There had not been such a boom in the building industry since the Barber boom of the early 1970s. Unfortunately, the result was the same; the collapse in the property market and in the building industry.

We are in the middle of the second and an even worse recession. If I hear any more talk of the green shoots which are appearing I shall scream, and I am sure that I shall be joined by a good number of the populace of this country. Please, let us hear no more about green shoots.

We now have an additional problem. For several years the Government have succeeded in hamstringing local government. We in local government—and I speak wearing my local council hat—no longer have the opportunity to raise revenue. We are effectively capped, whether poll tax or council tax. We cannot raise our revenue above certain limits set by the Government. We are also more rigorously restricted in borrowing capital than in the mid-1980s. Local government can no longer come to the aid of the national economy; that is solely in the hands of the Government. That may be one of the reasons why the present recession is so deep and continues for so long.

Perhaps I may explain what is happening in one element of local government and describe the education scene in the City of Manchester. More than £30 million-worth of capital expenditure projects have been identified and are ready and waiting to be put into action. The Government allow Manchester to spend less than £10 million on a capital programme in relation to education. Your Lordships will appreciate the tremendous capacity which exists for work to be done.

Lord Strathclyde

My Lords, can the noble Lord tell the House how much in capital receipts Manchester hopes to release during the next nine months?

Lord Monkswell

My Lords, given the current recession, it would be a bold man who could say how much Manchester could raise in capital receipts during the next nine months.

Lord Dean of Beswick

My Lords, I am grateful to my noble friend for giving way because I believe that the Minister deflected him in his argument. Is it not a fact that Manchester schoolchildren received two-and-a-half times less in government support than those in schools on the periphery which have opted out? It is a fact that children who attend schools which have opted out receive in government support two-and-a-half times that spent on children who attend schools in an authority such as Manchester whose needs are greater. That is the unfairness of the situation and defuncts the point that the Minister was trying to make.

Lord Monkswell

My Lords, I am glad for that intervention. It is interesting to note that not one school in Manchester has opted out of local education authority administration. However, in Tory Trafford at least two schools have opted out from a Conservative local education authority. That says something about the feelings of parents in terms of their confidence in Labour LEAs as compared with Conservative LEAs.

The direct works department of Manchester City Council has identified £26 million-worth of what it terms "programme refurbishments". That includes reroofing, rewiring, the relaying of playground surfaces, and so forth. We expect to have a government allocation of £400,000 to spend on those programme refurbishments. The situation is that £400,000 plays £26 million. I am explaining to your Lordships that there is an enormous demand for capital work and building industry work within just one section of one local authority.

The Minister in his intervention raised the subject of capital receipts. I am in something of a quandary because it is argued that local authorities are sitting on capital receipts which they have not been allowed to spend. That is the case. When in previous years local authorities sold property or land, they were allowed to spend only 25 per cent. of the capital receipts and had to bank the rest. Like most local authorities which have capital receipts, Manchester has that money in the bank.

We have a building industry which today many noble Lords have said is flat on its back and with a massive under-used ability to carry out work. The Government are effectively preventing us from using the money that we have to employ building workers who are out of work to provide a decent roof over the heads of our children in school. I must point out that only last month I visited a school. It happened to be raining and I saw water dripping through the ceilings in the classrooms. I have in mind another Manchester school where the primary schoolchildren must brave the elements outside to go from the classrooms to the toilets. The children in Britain should not have to put up with those conditions. We have the money and we have the resources but when will the Government give us the opportunity to carry out the work?

7 p.m.

Lord Howie of Troon

My Lords, I begin by thanking my noble friend Lord Dean for initiating the debate. I should like to go further and add my thanks to one other speaker; namely, my old personal friend the noble Lord, Lord Auckland. He is the lone speaker from the government Back-Benches. He may be a lone speaker but he was sympathetic and well informed. I hope that the Minister's reply to the debate will be at least as sympathetic as the speech made by the noble Lord, Lord Auckland.

I wish to speak only very briefly about the general picture of the building and construction industry. I then wish to raise a specific matter. Although my noble friend Lord Dean specified the building industry in the title of the debate, in his speech he extended the subject to include the rest of the construction and civil engineering industries. Noble Lords will be aware that civil engineering is where my own personal interests lie and have lain.

I received a letter from the director of external affairs of the FCEC, the Federation of Civil Engineering Contractors—I rather expect that he has sent a copy of the letter to other noble Lords—in which he says that civil engineering has not been as badly hit as building, which is true, and that, unusually, civil engineering will come out of the recession quicker than building. In all my past experience it has been the other way around: building has come out of the recession quicker than civil engineering. However, that is not true on this occasion.

In his letter he points out that, although civil engineering has not been as badly hit, its profitability has been. He explains the reason in his letter which states: This is a product of a combination of causes—the pace and scale of the decline in the building sector; builders crossing over to compete for civil engineering work; uncertainty e.g. over the Government's expenditure plans; unevenness in the flow of work, e.g. last year there were hiatuses at the time of the Election and again ahead of the Autumn Statement; clients looking to exploit a buyers' market by lengthening tender lists and letting work out only in small packages; and so on". He goes on to say: Our sector of construction is not going to be restored to health in all senses until such time as there is a real prospect of recovery in building". Therefore, the recovery in building is not only important for the building industry but is important for the construction industry as a whole. That goes beyond building and civil engineering and applies equally to the supply of materials and plant and a wide range of ancillary services. That is all I wish to say in general about the building and construction industry.

I wish to refer to one matter which has arisen in the past few weeks; that is, the publication and acceptance by the Government of the Warne Report entitled A Review of the Architects (Registration) Acts 1931 to 1969. That was published two weeks ago and accepted in another place by Sir George Younger on behalf of the Government.

It is important because it has significant effects on the architectural profession which is an important and integral part of the building industry. The report proposes the abolition of ARCUK—the Architectural Registration Council for the United Kingdom. It also proposes an end to the statutory protection of the title "architect".

I hesitate to defend ARCUK in its present condition, but I deplore the deregistration of the professional title. The title was protected in the early 1930s in order to protect the public from charlatans —now called cowboys. I give your Lordships one example. Had registration existed in the 1920s—that is before ARCUK was set up—the late John Poulson, who died a few weeks ago, would never have been able to set up as an architect. That in itself would have been sufficient justification for protection of the title.

I quote Sam Webb writing in last week's copy of Building Design. He said: Poulson was unqualified; he never passed any recognised examination in architecture. He got in through the back door, having left school with no qualifications and after failing his studies at Leeds School of Art and being fired by his employer". When he set up as an architect, which he could do under the then rules, his previous employer said that he could not design a brick privy. He was not quite as polite as that. However, that was his estimation of the capabilities of the man who eventually built up the biggest architectural practice in Europe with extraordinary consequences.

Webb goes on to say: As his first assistant, Bert Jones, said: 'The one profession he could set himself up in at that time with no qualifications was architecture'". Warne's analysis is extremely superficial. He has swallowed the ethos of competition, applying it to the professions just as the Government apply it to everything. He seems to have no notion of the professional ethic—tattered at the edges though it may be sometimes these days. Warne notes that architecture is the only construction profession where title is protected by registration. He wonders whether it should be extended to the other construction professions; that is, civil engineering, structural engineering, heating and ventilation engineering, or building services engineering and so on.

Unfortunately, as he says on page three of the report, that falls outside the terms of reference of the review. Having asked the question, he was unable to answer it. At that point Warne should have laid down his pen and asked for new terms of reference. He did not do that. He feebly concluded that architecture could no longer be singled out and that the title's protection should be abolished merely because it was the only construction title that was protected and because, by his terms of reference, he could not discuss the other professions. Therefore, he concluded that it should be abolished. That is an extremely feeble argument.

Does it matter? I believe that it does. I mentioned Poulson and I quote Webb again. He says later in his article: After Warne, he would probably be allowed through the front door to a fanfare of trumpets by the shortsighted guardians of our future". He got in through the back door before Warne and would get in through the front door after Warne.

I draw attention to another example. Here we have a case where a protected title is about to be abolished when legislation is introduced. In the other construction professions, the title is not protected so that anybody can describe himself as a civil engineer or construction engineer. I notice that in the magazine the New Civil Engineer—and I should say that for a considerable time I was a director of the company which publishes that excellent magazine—Brian Hughes, the chief executive of the Incorporated Association of Architects and Surveyors explains why IAAS members want to be known as engineers. Noble Lords will note that it is not that they want to be engineers; they merely wish to be known as engineers, whether or not they are qualified in engineering. The chief executive is so qualified, as are some of the members, but the great majority are not. Because the title of "engineer" is unprotected, nothing can be done, as the Secretary of State for the Environment said a few weeks ago, to stop them. That is surely the height of absurdity. No doubt the Government think that this is unimportant. Over a considerable number of years the Government have shown animus towards the professions as a whole, except possibly the profession of law. Engineers cannot be protected at the moment whereas architects can still be protected. It is important for the strength of the engineering profession that the protection of its title should remain. I apologise to the Minister for not informing him in advance that I wished to raise this matter. I do not expect him to reply to me tonight but I hope he will reply to me later on. I suggest that the Minister throws out the Warne Report.

7.10 p.m.

Lord Ross of Newport

My Lords, like others I, too, wish to thank the noble Lord, Lord Dean of Beswick, for initiating this short debate. As regards housing and the health of the building industry, he is a doughty warrior. He is right constantly to remind us of the continuing problems of those two interlocking subjects. I apologise for the fact that I am winding up the debate for my party rather than my noble friend Lord Rodgers of Quarry Bank. Many noble Lords will know that my noble friend is Director-General of the Royal Institute of British Architects. I am certain my noble friend would have loved to be present to hear the speech of the noble Lord, Lord Howie, as he would have supported every word of it.

I qualified as a chartered surveyor in land agency. I was proud that I finally passed the exams with the aid of a 10 per cent. reduction as I had been in the services. Like the noble Lord, Lord Howie, I believe our professions, particularly engineering, are not being treated with the respect that they deserve. This country will lose out if people believe this issue is of no importance and that anyone can call himself an architect whether or not he has any professional qualifications. We shall be going down a very sticky road when that happens. I hope my noble friend Lord Rodgers of Quarry Bank will be present on another occasion to defend the architectural profession.

My noble friend Lord Davies has journeyed some 200 miles to be present for this debate. I thank him for that. My noble friend is in at the sharp end of this business as he is a practical builder. I should declare an interest in that I am on the managing committee of a housing association that places some contracts with builders. We have not placed any yet with my noble friend Lord Davies but that may yet happen as he does not live far away. I also have an Irish son-in-law who is, not surprisingly, involved in the building industry. He is based in Southampton but he is working in Manchester at the moment. At least the Prime Minister recently promised some £50 million, if not £100 million, to Manchester. I realise that is not to repair schools. I hope my son-in-law is presently engaged on work in Manchester connected with schools. He has travelled a long way to find work. I am sure many others involved in the building industry have had to travel far from their homes to find employment.

I do not have much to add to what has already been said today and on many previous occasions, both by honourable Members in another place and by noble Lords on both sides of this House. The noble Lord, Lord Sefton, gave us some terrifying statistics on the building industry. I have recently resigned as chairman of the National Housing Forum. I do not suppose many noble Lords have heard of that body but it is a useful body as it has representatives from nearly all the professions and from bodies such as Shelter, SHAC, the Institute of Housing, the Housing Centre Trust and others. The National Housing Forum tries to present a common approach to housing problems. I had the honour to serve that body for, some three years. That body annually promotes National Housing Week and it represents a good cross-section of a large number of bodies that are associated with housing in one way or another. It has representatives from the professions including the RIBA.

Regrettably, however, it does not include among its membership the Building Societies Association or the Council of Mortgage Brokers—I do not know whether those bodies cover the same areas—and it has representatives from only one of the builders' organisations. That is a pity as the National Housing Forum would have a lot more to offer if it had a more comprehensive membership which included more of the building concerns. That was my wish when I was chairman.

Certainly the present housing Minister has always treated the forum's views with respect. We are indebted greatly to the Rowntree Trust for much of the research that has been carried out in this area. Sir George Young has always responded to the papers we have submitted to him. At my request he also readily attended at least two of the forum's meetings during my time in the chair. There is a great opportunity at the moment to achieve a consensus over housing policy. I believe it is the first time in many years that that has been the case. That opportunity is one that is well worth pursuing. The National Housing Forum presents just such an opportunity to achieve a consensus. That is a major advance on past history. The Government would do well to maintain that position.

Sir George Young is universally popular. I believe it is accepted that at long last we have a housing Minister who really knows his job. Whether he is able to obtain the money to do what he wants to do is, of course, another matter. However, I am sure he will do his best to maintain the present consensus on housing policy. Some of his recent initiatives, particularly in London, are greatly to be welcomed. I do not think they have had much effect on the building industry but nevertheless some useful initiatives have been instigated and I hope they will be extended to other cities.

I have some experience of conditions in rural areas. This matter may have been mentioned in the previous debate. These days small builders are almost entirely dependent on housing associations to keep them in business. I should add that incomers to rural areas such as myself also provide them with employment as we tend to renovate the houses we buy. I am an incomer to deepest Shropshire. The home I have in Shropshire is my only home; it is not a second home. Up the valley where I live there are four or five properties which have been skilfully done up in recent years and that has certainly provided work for small, local builders. However, much of that work is drying up at the moment. Certainly the housing association contracts that have been issued lately have kept going many of the smaller builders in my part of the world. I speak as a member of a management committee of a housing association which has some 550 properties. At present we have a continuing programme of new build. I hope that will be allowed to continue.

However, I am concerned that housing associations in England are now being threatened with the distinct possibility that many of them will lose their development role and will be expected to concentrate purely on management. We fought that proposal last autumn when it came from Ty Cymru which is the Housing Corporation of Wales these days. We fought it most vigorously because the original proposition was to reduce the developing housing associations, of which there were some 36 in the Principality, to about six or seven. I believe the original proposition was to have three or four in South Wales, one in North Wales and one somewhere in the centre. It was suggested—it is still being suggested in England today—that substantial savings would be made through awarding very large contracts to a single builder using standardised designs which could, if necessary, be split between different sites.

I am glad to say that in Wales saner counsels have prevailed and it has now been conceded that some 21 of the 36 housing associations should continue to both build and manage. I have raised this matter on previous occasions. Much time is devoted by people on a voluntary basis to the management of housing associations. They do not want merely to end up as managers. They want to see houses being built as, on the whole, they want to see something being done for the younger generation and for the elderly.

There is real hope as regards what is happening in housing associations because the mix of houses they are providing is quite comprehensive. We are providing accommodation for the single homeless, for the elderly, for kids who are in trouble and for families. That is a heartening scene and I believe that it is true of the country as a whole. I pay tribute to the Government for helping us to achieve that position, but I hope to goodness it will continue.

What happens in England will have a direct effect on small builders, local architects and quantity surveyors if the housing associations are to lose their development role. If that is pursued to its ultimate extent it will, I believe, lead to a repeat of the mistakes of the 1960s which have left us with badly designed estates and a huge bill arising from modifications and repairs where those repairs have been possible.

Some years ago I went to the former GLC estate in Andover. The properties were all built with flat roofs. I have never forgotten the vast amount of money that had then to be spent on lousy designs to rectify the problems by putting on pitched roofs.

Larger does not necessarily mean cheaper, as Rowntree research has proved. That research shows that some small builders can do the job more cheaply than the bigger boys. Already too many designs have cut the floor areas too rigidly. Designs are far below Parker Morris standards; perhaps those standards were over the top. But throughout the 1980s we have been cutting the space and are now putting up some very small boxes. That is proved by research from Salford University.

While more homes are desperately needed, I would rather that they were built to a good standard, even though it means having fewer starts—and there are few enough of them already. There has been a shortfall of about 60,000 a year in the social housing sector. Even the Audit Commission puts the figure at about 75,000 a year. Most people believe that the figure is nearer 100,000.

Rural social housing has been discussed recently. I got the chairman of Ty Cymru at least to accept that there is a role for housing associations in small villages in rural areas where there is room to build perhaps three or four properties; and that should be done. It would be totally wrong if the smaller housing associations in rural areas were not able to perform that role.

I lived for 18 years in a village on the Isle of Wight. If we had not built six council houses before the war and six after, we would never have had a fast bowler in the cricket team or someone to pull the bells in the church. That generation has now grown up. Those people have had to go away because no other houses have been provided; and the village has become somewhat of an old-age area.

A crisis is upon us with regard to maintenance and repair of housing stock. The noble Lord, Lord Bruce of Donington, dealt with this point in his speech. A paper prepared by Rochdale Borough Council—I read it before I came to the Chamber—is being discussed by the National Housing Forum this month. It demonstrates only too clearly that there is an enormous demand for maintenance in particular on council-owned property, which is falling into disrepair. There is great concern about that. The noble Lord, Lord Bruce of Donington, referred to about 1 million unfit houses in Britain today. That is a terrible statistic, but it is probably true. That is surely an area in which we can help to a much greater degree than at present. A number of skilled men are currently unemployed. Given the chance, they could play a major role in restoring and repairing our built environment.

I was sorry to hear my noble friend Lord Davies state that where grants have been given by local authorities to restore housing, perhaps to re-roof or some such matter, and the money is paid to the person employing the repairer, the employer sits on the money. Seven or eight years ago a small builder whom I knew nearly went bust because of such a situation. I gave him a job and prevented him from going bust. But it took him nine months to get his money. That situation ought to be rectified. If people who manage to obtain improvement grants sit on the money and then make some stupid excuse as to why they have not handed it over, it is diabolical.

Figures are bandied about which seem to contradict the present situation of the Government's urban programme. I read some of the Questions and Answers in another place recently. Some claim that the programme has been cut; Ministers strongly deny that. Perhaps we shall have a response from the Minister when he replies. However, there is no doubt that, if we do not take urgent action now, such maintenance and repairs will cost us even more in the future.

I refer to some points raised by the noble Lord, Lord Dean. A number of large contracts which were promised in the past seem to have got nowhere at present. What is happening about the extension to the Jubilee Line, for instance? We heard that it was going ahead, but nothing has happened. There must be some big contracts about to be placed. The noble Lord referred to two other railway projects, and schools. At least we have a rail link into Manchester Airport which is about to open up. What about the link between Paddington and Heathrow? It is absolute madness that with an enormous major airport at Heathrow—almost the largest in the world—this country does not have a fast and efficient transport passenger service to it. If one travels on public transport, one is thrown about on the Piccadilly Line, with nowhere to put one's cases. It is extraordinary. I understand that the British Airports Authority is prepared to meet 80 per cent. of the cost.

Office conversion into housing is yet another area worth pursuing. We shall never occupy the offices that now exist in London, and no doubt elsewhere.

I conclude by paying a tribute to the construction industry. I was lucky enough to go to the Falklands when the airport was opened. It was a magnificent achievement put together by Laing, Wimpey and other large construction companies. They even built their own port. Could they do that today? The noble Lord, Lord Auckland, referred to the loss of skilled people. Can they be got back in the future? All we can usefully ask the Minister to do is to press his department to keep pursuing the Chancellor of the Exchequer in the hope that some really worthwhile initiatives will come about in the forthcoming Budget.

7.26 p.m.

Lord Peston

My Lords, the subject of the debate is an important one and is of considerable practical significance. I much enjoyed listening to a number of noble Lords making contributions directly from their experience with some knowledge of the relevant industry. I shall not be able to emulate that. I echo a remark by the noble Lord, Lord Howie. I was delighted that the noble Lord, Lord Auckland, felt able to contribute to the debate with his normal good sense. However, I too was somewhat taken aback that none of the Minister's friends—other than the noble Lord, Lord Auckland—felt able to be present and speak either in support of the Government or for the industry with which many of them are connected. They may have reasons for that.

Perhaps we may start with the factual picture. If one considers the history of construction, say, from 1979, essentially it has mirrored the behaviour of the economy—the gross domestic product. However, it has fluctuated considerably more widely than GDP. When the economy goes wildly into recession, the construction industry goes into recession in a major way. Quite clearly when the economy somewhat boomed in the mid-1980s, the construction industry boomed away even more. But when the good times came to an end, as they did for the economy—they were not sustainable because of faulty economic policies—the position for the construction industry also came to an end but in a much bigger way. That is the position at present.

The statistical picture to which noble Lords have already referred is intriguing. Fixed investment at constant prices in dwellings peaked in 1988 and has been falling continuously since. If we consider the number of housing starts, that too peaked in 1988 at 250,000, and in 1992 was 156,000, a considerable decline. Completions, which lag somewhat behind starts by definition, peaked in 1988 at 232,000. They came down to 168,000 in 1992. Given that they lagged on starts, I assume that when we have the completion figures at the end of 1993, they will be even worse.

Above all, what I find interesting—I do not speak as an expert on housing—is that if we look at local authority housing starts, we see that they have dropped from a fairly low figure, in the middle of the period about which we speak, of about 20,000 per annum to under 3,000. I may have misunderstood the figures because I find them astonishing. I have considered the figures and wondered whether I have misunderstood the Government's published statistics because they are so low. Essentially the Government have destroyed the local authority housing sector.

Indeed, for those of our fellow citizens who are on below-average incomes, the drop in local authority housing starts will not be replaced by the private sector. It is simply not profitable for the private sector to meet the demands of those poor people.

In the extremely interesting debate that preceded this one, my noble friend Lord Carter referred to the problem of affordable housing in rural areas to which the noble Lord, Lord Strathclyde, had to apply his mind. My noble friend was right to emphasise the problem, but it exists throughout the economy in urban areas too. The problem of affordable housing for poor people is chronic and it is of concern to us all.

I did not read the evening paper so I was not aware of the Prime Minister's admonition, which my noble friend Lord Bruce mentioned, that we must not be gloomy and that we must cheer up. Noble Lords will know from my contributions to debates on other economic matters that I regard that as an absurd view. The only possible way to get the policy right is first to face the reality and not to pretend that things are better than they are. Essentially, the Chancellor of the Exchequer, having pretended for a long while now that things are better than they are, has failed to act and goes on failing to act. Therefore, the correct position is, if anything, to assume that things are worse than they are. Then one might start to get them put right.

My noble friend Lord Sefton said—and I agree with him—that there will certainly be an upturn. However the problem is twofold, and he is as much aware of that as I am. There will be an upturn because we have never known the economy eventually not to turn up, but there are two problems. When will it happen? And, more important than that—because there are the beginnings of a sign that it may happen in 1993—how strong will it be? I am yet to be convinced that there will be a strong upturn in the economy at large and, a fortiori, I find it hard to believe that there will be a strong upturn in the construction industry.

Perhaps I may again refer to a topic raised by the noble Lord, Lord Auckland. He referred to the empty offices all over London and reminded us that the problem exists in many other places. We should concentrate on the London problem because many of us have direct knowledge of it. We see it out there. It shows the nature of the difficulty with the economy. Given the enormous excess stock of offices, there is in a sense no need for more building at present. We ask: when will the stock be eliminated? Can a policy be devised whereby new uses are found for the offices, both in London and elsewhere? Unless we can find other ways of using some of the space the outlook for the construction industry is even more parlous. In other words, the point made by my noble friend Lord Bruce holds even more strongly.

Lay people often ask me: how can it be that we are short of housing in our country? Why is it that our schools, like many other buildings in the public sector, are in disrepair? How can it be that our country's infrastructure is poor and deteriorating? Yet, at the same time, there is massive spare capacity in the construction industry. How can that be? Economists —and I include myself among them—are not short of clever answers to such a question. It is to do with excessive expansion in the past, the need for restructuring, the need to control inflation, and so on. No doubt the Minister's brief contains such clever answers.

However, the ordinary person insists that there is surely something wrong with an economic system if it reflects such a contradiction between demand and need on the one hand and capacity to supply but failure to do so on the other. As noble Lords know, I certainly regard myself as a very clever person but I am bound to say that for once on this subject the apparently uninformed view, the unsophisticated view, that essentially we have failed and that the economy has failed is correct. I do not think that the public want smart alec answers.

On policy, I have a few brief points to make. A great deal follows from what I said. The capacity to meet demand for construction is there; the industry is still there. We ought to be engaged in policies that lead to the capacity being used. The point I always make is that the building and construction industry is not import intensive and therefore its expansion does not have the deteriorating effect on the balance of payments that perhaps other expansion may have.

However, there is one other aspect of policy that concerns me and which my noble friend Lord Dean and others have raised. We shall certainly need the construction industry in the future. I for one was not aware—although I could have guessed and noble Lords made the point—how much unemployment there was until I was preparing for the debate. I certainly was not aware, although on reflection I should have been, of the enormous waste of talent involved in the industry currently being so depressed. In particular, the position with respect to architects is appalling. And that must be true of engineers and almost everyone else involved in the industry.

The point is that we shall need these people one day. When we need them, where will they be? The same goes for the point made by my noble friend Lord Dean. If workers are not in work then workers are not being trained, particularly not on the job. Therefore we shall not have workers with the appropriate skills in the future. I can already see that there will suddenly be a day when we shall be back again to the normal stop bit of the stop-go. People will say that the economy is overheating, that there is a great shortage of skills and the construction industry cannot meet the demand.

All that is sad, but the sadness is exacerbated by three other matters. I add, as a matter of ideology, that those who advocate intervention that might get the construction industry back to full operation are often accused of being Keynesians. Many of them are, but noble Lords ought to be aware that the economists who in the past 50 to 100 years called themselves classical economists have always advocated the use of public works in a depression in precisely those circumstances. In other words, there is nothing particularly ideological about advocating expansionary policies.

A further main point I wish to make is that in the past recovery has been connected with construction. If we take the history of the 1930s, I agree that part of the expansion that eventually occurred then was connected with rearmament. But a great deal was connected with building up the construction industry. Supporting what my noble friend Lord Bruce said, the construction industry was being built up with cheap finance which was important in those days. It is certainly not irrelevant today.

My last point is slightly in favour of the Government. They showed signs in the Autumn Statement of moving in the right direction. There is no doubt about it. I am sure that the noble Lord, Lord Strathclyde, will remind us of what was in the Autumn Statement because it is not obvious of what else he can remind us. The Government took useful action. But what concerns me is that it showed us the main weakness. The Government do not seem to believe in what they are doing. All they do is too little and, with the present Chancellor, too late. What we really want now is a statement. I accept that perhaps the noble Lord, Lord Strathclyde, cannot give it to us and we may have to wait for the Budget, but we need a statement now that the Government are fully committed to expansion and to supporting the construction industry. Then, to put it simply, the world and the economy will be a better place.

7.38 p.m.

Lord Strathclyde

My Lords, the noble Lord, Lord Dean of Beswick, opened the debate well enough. He said that he was not interested in carping and being over-critical. He wanted to be objective and helpful. Generally speaking, I believe that he was, as was my noble friend Lord Auckland. One or two other noble Lords made helpful and interesting speeches, such as the noble Lords, Lord Davies and Lord Blease. Unfortunately, the standard of the rest was hardly memorable. We had speeches of special pleading from the noble Lord, Lord Monkswell; capital receipts from the noble Lord, Lord Bruce of Donington, who even accused me of being a pessimist. I may be many things, but pessimistic is hardly one.

We had yet another interesting speech from the noble Lord, Lord Sefton of Garston, about Merseyside and the iniquities of this Government. I listened carefully, and I must tell the House that not only do we listen carefully, but also that we listen very sympathetically to the leaders of the construction industry when they set out the industry's problems. I can assure the House that we fully appreciate the severity of those problems. We are aware of the crucial role that construction plays within the national economy.

The noble Lord asked for a strategy. That is why we have a "strategy for growth" set out in the Chancellor of the Exchequer's Autumn Statement, aimed not just at promoting recovery in the economy in general, but also specifically at providing a genuine boost to the construction industry. That was naturally enough spotted by the noble Lord, Lord Peston. It did this by a mixture of fiscal help designed to give an immediate spur to activity, and longer term projects. The Government's intention throughout was to restore confidence and so to stimulate the return to sustainable growth.

One of the areas where a return of confidence is especially important is the housing sector. We know that there is pent-up demand for housing. Equally, we know that the existence of a sizeable overhang of unsold properties is a drag on recovery. So we have taken steps to deal with it, and to give a boost to the housing market generally. As noble Lords will be aware, we have made available £750 million in the UK in the current financial year. In England about £580 million of it was allocated to the Housing Corporation, to enable housing associations to purchase new, empty and repossessed properties. The corporation estimates that this will take up some 17,500 units.

I felt during the speech of the noble Lord, Lord Peston, that perhaps he did not know of the existence of the Housing Corporation and what it was for; namely, to provide affordable housing right across the country.

Lord Peston

My Lords, perhaps I may interrupt the noble Lord. Would he care to remind us of how many houses the housing associations are currently building? I looked at those figures, but he might himself like to remind the House of what numbers we are talking about.

Lord Strathclyde

I certainly hope to have those figures for the noble Lord before the debate finishes.

Lord Ross of Newport

My Lords, we are talking about 40,000 this year.

Lord Strathclyde

The noble Lord, Lord Ross of Newport, has the answer. It is 40,000. That is not a bad figure, particularly in this year; and we shall continue to see those kinds of figures over the course of the next three years.

All of this will play a vital part in helping those in housing need. But for the housing market to recover, we need to encourage those people who are actually waiting to take the first steps into home ownership. So another £50 million has been made available to expand schemes which provide existing housing association and local authority tenants with grants towards the purchase of homes in the private sector. That will enable up to 3,500 new first-time buyers to enter the housing market and should act as a catalyst to get the market moving again. It means that, all in all, the package should take some 21,000 properties out of the pool of empty stock. That is a very significant reduction—it is certainly more than our original estimate.

Although a large number of the schemes approved so far have involved the purchase of new properties from developers, that is partly because such sales can be negotiated sooner than others. We expect more private treaty sales and purchases of repossessed property to come through later. However, the specific type of property assisted does not matter. The aim of the package is to revive the housing market generally, and we need to look at the wider spin-off effects that those measures will have.

The noble Lords, Lord Davies and Lord Ross of Newport, mentioned the situation of renovation grants. The noble Lord, Lord Davies, suggested that renovation grants made by local authorities to private householders should be paid direct to the builders responsible for the work. I understand that firms can request that grants are paid direct to them; but local authorities can only do so when they have the permission of the householder. It is important to remember that the contract will be between the householder—not the local authority—and the builder. It will be for the householder to ensure that work is carried out satisfactorily. However, in those cases where householders unreasonably withhold payment, it is important that legal processes to ensure payment are efficient and effective. Therefore I sympathise with the point made by the noble Lord.

Another very important change to provide short-term help was the temporary relaxation of the usual rules on local authority capital receipts. All the proceeds of sales of assets generated from 13th November 1992 until 31st December this year will be available for use by local authorities.

The noble Lord, Lord Bruce of Donington, always enjoys this bit of my speech. But the noble Lord has fundamentally misunderstood the essence of capital receipts—what their purpose will be, and what was the purpose of past capital receipts.

That change is expected to stimulate £1.75 billion of extra capital spending over the next three-and-a-half years, and that could mean the creation of significant employment opportunities for the construction industry. The £1.75 billion figure is not our figure. These are forecast figures from local authorities on top; we have allowed a little bit extra for growth, and that is where the £1.75 billion figure comes from.

Lord Dean of Beswick

My Lords, I am grateful to the Minister for giving way. We are almost into the period when the £1.75 billion is supposed to be raised. The Minister must be aware—indeed I think he may be unaware—that what he has just said is not borne out in reality. The local authorities say, and said at the start, that they could never realise such a figure, because most of their best assets had already been sold off. The builders now say that that is not feeding through. At the time we asked for a release of the money that was always there. Even if we were optimistic enough to think that the £1.75 billion would work its way through, the calculation meant that it would take nearly two years before it triggered off the building of one house. We are talking about urgent action now, not pipe dreams from Mr. Lamont.

Lord Strathclyde

My Lords, I do not know if the—

Lord Monkswell

My Lords, I wonder whether the Minister would give way again. I suggest that the Government's action is likely to make the situation worse. Here we have a situation where there is an overhang in the property market. There is no demand for empty office blocks. There is no demand for expensive houses, particularly in the London area. In that market situation the Government say to local government, "Sell your assets". Yet the money is just not there for people to buy them. There is no demand for those assets. But the local authorities have the money from previous asset sales sitting in the bank. Why can we not use the money that we have to stimulate the market rather than depress the market by having what is almost a fire sale at the moment?

Lord Strathclyde

My Lords, I think I was being charitable when I said earlier that noble Lords opposite had misunderstood. I think it is wilful misunderstanding of what we are putting across. I shall deal quite specifically in a moment with past capital receipts. The point is that these figures were originally forecast by local authorities. There are hundreds of millions of pounds of assets in the hands of local authorities that can be disposed of in the current property market. There are airports, houses, car parks and vacant land. There are enormous opportunities for local authorities. If the local authorities choose not to realise those assets, that is a decision entirely for themselves.

We hope that early and effective use will be made of this new freedom. It will of course be up to individual authorities to decide how they want to use the funds available, but they can be applied over the full range of spending programmes. That means that they could facilitate work on housing, school and local roads programmes; and that would mean the creation of significant employment opportunities for the construction industry. Noble Lords opposite should now ask their local authorities why they are not acting rather than talking to me.

Lord Monkswell

My Lords, I apologise but perhaps I may intervene yet again. The estimates of the capital receipts that local authorities were making at the back end of last year were surely on the basis of all the green shoots that the Chancellor was talking about which have not appeared.

Lord Strathclyde

My Lords, noble Lords should not worry. I shall get to my passage on the role of the economy shortly. But let me first deal with a point raised earlier by noble Lords opposite: that the concession is time-limited and does not apply to receipts already in hand. This is because the underlying argument in favour of using part of these receipts for debt redemption remains true. When councils sell assets, it is only right that they should use the proceeds to reduce the burden of local authority debt—debt which was incurred providing the assets in the first place. Anything else would be unfair to those authorities who have, quite rightly, repaid debt as the law requires. In any case, failure to reduce the overall level of debt only stores up problems for the longer term. There may well be an ideological barrier between noble Lords opposite and myself. But that is the reason why we believe that local authorities should use their past receipts to pay off debts.

My right honourable friend the Secretary of State for the Environment has backed up the concession on local authority receipts with a new initiative called Capital Partnerships. This will encourage authorities to use their available receipts for work of lasting benefit to communities. It offers government incentives to secure the maximum private sector topping up for that work.

The first fruits of the Capital Partnerships initiative were announced last month. They were very impressive. The first tranche of schemes agreed included 81 projects in 46 districts or towns, involving everything from bus stations to business parks, nurseries to freight distribution complexes. The total cost of the schemes was £183 million, of which local authorities contributed £33 million, and central government £20 million; while no less than £130 million, over 70 per cent. of the total, came from the private sector. There is no point in the noble Lord, Lord Bruce of Donington, shaking his head. That is what happened last month. He does not like it because he does not like success.

That illustrates very strikingly that private sector funds are available, just waiting for good investment opportunities. It is a key feature of our policy for construction to bring in those funds.

The increased involvement of the private sector—whether it is in the aftermath of privatisation, or injections of private finance into central government programmes, or indeed in the form of increased home ownership—has one very great advantage that I hope noble Lords will not fail to appreciate. It gives a stable anchor for construction demand to an extent that is never going to be possible within the constraints on purely public spending.

That said, the Government will not shy away from playing its part. Despite a difficult public spending round, many of the key capital programmes affecting the construction industry have been safeguarded. It was confirmed that, subject to the satisfactory conclusion of negotiations, the Government would go ahead with the single major project for which the construction industry had been arguing all through last summer and autumn: the Jubilee Line extension. If that project goes ahead, it will on its own represent £1.2 billion of public sector money over three years, and it has been estimated that it would add at least 3 per cent. to the total civil engineering workload over that period.

The road programme too was preserved in cash terms. That means public expenditure at record levels both in local authorities' support for expenditure on roads and in the national programme for motorways and trunk roads. Last month, my right honourable friend the Secretary of State for Transport announced in another place expenditure on new construction and maintenance of national roads of just over £2 billion, which is the highest level for over 20 years in real terms and, in fact, one of the highest ever.

In a difficult year for public expenditure this clearly demonstrates the Government's commitment to capital expenditure and to investment in infrastructure. Lower tender prices meant that we could have opted to cut back the funding to the same level of activity: but instead we have chosen to go for more work for the same money. In fact, the number of new schemes next year should be double this year's levels. I know the industry has welcomed our decision.

The new injection of funds for the Housing Corporation this year will much more than deliver the manifesto commitment to provide 153,000 homes over the three years following the election. That is the figure for which the noble Lord, Lord Peston, was looking. The funds made available for education also provide for the overall capital spending on schools to be maintained in real terms at least at this year's level. The capital programme for the health service is the largest ever, and represents a construction investment equivalent to the total cost of the Jubilee Line extension.

We have also been able to preserve, in full, the funding for both Rounds 1 and 2 of City Challenge. Round 1 will make £400 million available for inner city regeneration over a five year period, starting this year. Round 2 will entail another £750 million, again spread over five years. The projects involved should attract private sector investment, so increasing the amount of work generated by the injection of public money.

The single European market is now a reality—a harsh reality perhaps. It brings competition and it brings challenges, but it also brings genuine opportunities. Industry in this country will not be slow to seize those opportunities, both those that lie in Europe and those that lie beyond.

The construction industry's ability to compete in these wider, competitive, markets is going to depend upon its ability to provide a quality product, on time and to cost, to compare with what competitors can provide. For example, it must increase its effort on research and development. New building methods and new technology will be a vital factor in gaining work in the years ahead. The groundwork must be laid now. Later will be too late.

The industry must ensure that its workforce has the skills needed to meet not just the challenges of today, but those of the future. The recovery will create a demand for skilled labour, as the noble Lord, Lord Peston, said, in the same way that resources were in demand as we came out of the last downturn, in the early 1980s. The number of jobs in the industry rose from 1.5 million in 1983 to 1.7 million in 1989. We need to be geared up to face this challenge. To that end, my right honourable friend the Secretary of State for Employment has recently announced that the Government have agreed to the reconstitution of the Construction Industry Training Board for a further five years to spearhead training within the industry.

In addition, we are making renewed efforts to remove unnecessary regulation. One of the seven deregulation task forces to be set up by my right honourable friend the President of the Board of Trade, will cover the construction industry. My right honourable friend the Minister for Housing, Planning and Construction has just announced that statutory registration of architects will be abolished—a piece of legislation which does not benefit employers, customers or architects themselves. The noble Lord, Lord Howie, rightfully made a speech about that matter. But other construction professions are satisfactorily self-regulated. The term "chartered" is protected: chartered architects, surveyors, builders, building services, engineers, and so on.

A few moments ago I mentioned markets overseas.

Lord Howie of Troon

My Lords, before the noble Lord leaves that point, perhaps I may say that he must be aware that, although the other professional bodies in construction are self-regulating, they would have no objection to registration sectors under ARCUK being extended to them. That of course was outside the Warne terms of reference.

Lord Strathclyde

Indeed, the whole thrust of this policy is to remove unnecessary regulation. Let me return to markets overseas. Last year my right honourable friend the Minister for Housing, Planning and Construction led a trade delegation to Vietnam, and I led one to Indonesia. That experience made it very clear to me that there are wide opportunities available to UK companies in countries which are growing rapidly, like Indonesia, and where that growth is putting pressure on the existing infrastructure.

My experience also made it clear that the standards of British design, construction and component manufacture are as good as or even better than the best available elsewhere. Last year, British construction contractors reported overseas earnings of about £26 billion; our consulting engineers earned £600 million; and our building materials and component manufacturers achieved exports worth £23 billion.

Shortly after I returned from Indonesia—though I claim no credit for this—Bovis landed the management contract for the prestigious Jakarta stock exchange project. There are many other British success stories from elsewhere in Asia, such as the contract won by Robert Watson to supply the steelwork required for the major and innovative new airport terminal at Kansai Airport in Japan.

Lord Bruce of Donington

My Lords, the noble Lord has touched on the earnings of those very learned and useful professions. Perhaps he could also say how many hundreds of millions of pounds were earned by insolvency practitioners?

Lord Strathclyde

If we were having a debate about insolvency practitioners I should have that figure to give you. However we are not. The noble Lord does not like to hear successful stories about the British construction industry. The noble Lord said that the Prime Minister felt that too much about him was gloomy. I shall have to tell my right honourable friend the Prime Minister not to listen to the noble Lord, Lord Bruce of Donington.

Lord Ross of Newport

My Lords, a celebrated British architect has just acquired the contract to redesign many parts of Shanghai. Would he have obtained it had he not been classified as an "architect"? Perhaps the Chinese would not think he was fully qualified.

Lord Strathclyde

My Lords, I am sure that he won the contract because he provided the best quality building.

Many noble Lords spoke of taxation policies. Those are clearly matters for the Budget, but I shall pass the comments on to my right honourable friend the Chancellor of the Exchequer.

The conditions are now in place for faster growth within the United Kingdom. Inflation is at its lowest level for six-and-a-half years; interest rates at their lowest for 15 years and the exchange rate is highly competitive. The view of the City and elsewhere is that, following the measures announced in the Autumn Statement, growth will begin again this year and pick up thereafter. The measures contained in the Autumn Statement create a climate of opportunity. They point the way to new activity and jobs so that the sad growth in industry unemployment that we have seen over the past couple of years can be stemmed and reversed. It is up to the industry to seize the opportunities for renewed growth that that provides.

8.1 p.m.

Lord Dean of Beswick

My Lords, I am grateful to all noble Lords who took part in the debate. It has been extremely worthwhile. I do not comment on the absence of speakers from the Government Benches. I knew that the Minister would speak with his usual candour and make a useful contribution to the debate. I can only assume that the many noble Lords on the Government Benches associated with the building industry who did not speak had nothing kind to say about the situation in which they find themselves.

My noble friend Lord Peston clearly indicated what lies behind the problems of the building industry. In your Lordships' House over the past two months we have had two debates on various aspects of the economy, including the manufacturing industry. A politically honest Member from the Government Back Benches—a former senior Cabinet Minister—had the candour and principle to admit that when he was in office, "We got it wrong". I speak of the noble Lord, Lord Joseph. He said that the Government of which he was part, along with the 10 noble Lords who came here after Dissolution, got it wrong.

We would start to get things right if the Government would admit that they got it wrong again and started to introduce the measures to get it right. Honesty is always accepted. But the Government refuse to do that, and that is their business.

I thank all noble Lords who took part today in what has been a worthwhile debate. I hope that the Government consider in an objective way what has been said for the industry. The industry does not hold the view given from the Dispatch Box by the Minister. Having said that, I beg leave to withdraw my Motion for Papers.

Motion for Papers, by leave, withdrawn.

House adjourned at three minutes past eight o'clock.