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Construction Industry

Volume 481: debated on Thursday 23 October 2008

The global credit crunch is affecting all economies, including the UK. Overall, the construction industry is experiencing a significant downturn in activity, but some sectors are faring better than others. The housing and commercial sectors are being hit hardest. However, the outlook for other parts of the industry is more positive due to major programmes of work such as Crossrail, the Olympics and the Building Schools for the Future programme.

The Minister mentions the Chancellor’s solution to the problem, which is to bring forward major infrastructure and construction projects—a massive spending splurge paid for by a borrowing splurge. But does he really think that that will address the problems facing small construction companies, especially in the housing sector, that are facing problems this week and this month?

As I said, the housing and commercial sectors are among the hardest hit at the moment. We announced a package of measures on 2 September, some of which will help the housing sector. I would have thought that the Opposition would want to welcome the bringing forward of infrastructure investment, because such investment is important for the UK’s long-term future and, if we can speed up the investment process, it will create new jobs for prime contractors and down through the construction supply chain. That will be valuable at this difficult economic time and will be welcomed by those who work in the construction industry.

I am sure that the Minister is concerned about the fate of house builders across the UK. In that context, is he aware that house builders in Scotland face particular problems from rule changes introduced by the Scottish Government, which require housing associations to borrow a greater proportion of money for new affordable housing developments from the private sector? That is reducing the scope for such developments and making matters worse for the house building sector. Will he raise that with Ministers in the Scottish Government to ensure that the entire UK house building industry is given the boost that it needs?

I note what the hon. Gentleman says. As he will be aware, that is a devolved matter, but I hope that the Scottish Government would recognise, as the UK Government do, that the housing sector is an important part of the UK economy, and regulation needs to be proportionate and appropriate. We do not want regulation that gets in the way of construction projects that need to continue at this point in time.

My hon. Friend mentions the need for regulation to be proportionate and appropriate. Even in the good times, the construction industry makes use of false self-employment, which often leaves people unprotected and uninsured. Construction also suffers from high levels of health and safety risks. Now there is a downturn and competition is tight, those problems will increase, so can he make the regulatory agencies aware of the need for extra vigilance to protect people employed in that industry?

My hon. Friend makes a good point about health and safety issues in the construction sector. As he will be aware, we already have rigorous inspection regimes and it is important that we continue to be vigilant in regulating the construction sector. It is done through a risk-assessment methodology, and that is the right approach.

The broader point is that during these difficult economic times, it is right for the Government to want to invest in major construction projects that will bring long-term benefits to the UK economy, and that is what we will continue to do with programmes such as Building Schools for the Future and the new hospitals project. Only this week, we saw the 100th new hospital build implemented. Those programmes are important for the UK economy and we need to continue to make progress with them.

Many construction firms are facing a double whammy with projects being cancelled on the one hand and credit being withdrawn on the other. What they need, investment plans notwithstanding, is help with their cash flow. Given that, and given the potential appalling impact on jobs in that sector and in those sectors that rely on it, why are the Government refusing to let small firms defer their VAT payments? After all, they did it for farmers in 2001. Why will they not help builders now?

I would be very interested if the hon. Gentleman could give us the cost of his VAT deferral proposal—

I do not accept that suggestion from a sedentary position.

Obviously, we will consider all representations, but the Conservative party’s policy, as I understand it, is to say that it wants a 1 per cent. cut on national insurance and it wants a VAT payment holiday. It will pay for that by cutting tax reliefs, but those reliefs are important to businesses and to their long-term investments, so I do not think that that is a responsible strategy. The simple fact of the matter is that the Government have taken action to recapitalise banks and to ensure that banks will continue to make available competitive lending to small businesses. I would like to think that that would be widely welcomed.

May I reinforce the Minister’s point? In constituencies such as mine, many jobs are dependent on the Government’s sustaining their public sector investment. Will the Minister assure me that he will do everything within his power to press the appropriate ministries to sustain that investment in the coming years?

Yes, I can give my hon. Friend that assurance. The public sector construction market is hugely important given that it counts for about 40 per cent. of the industry’s total output. At this point in time it would be grossly irresponsible to do anything other than to continue to seek strong investment in our national infrastructure. The public sector can lead the way in continuing to ensure that there is strong demand and that there are jobs in the construction sector. That is the responsible thing to do in difficult economic times. To suggest that we should cut that investment, which is what the Opposition seem to want to do, or to reject our proposals to do more, would not be welcomed by the public, who are concerned about construction jobs and about jobs more generally in our economy.