Building and Construction Industries

Part of the debate – in the House of Commons at 12:00 am on 16th February 1970.

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Photo of Hon. John Silkin Hon. John Silkin , Deptford 12:00 am, 16th February 1970

The right hon. Member for Barnet (Mr. Maudling) took six years to think up an excuse. That is an excessively long time, even for hon. Members opposite.

I was trying to explain what the situation was. Apparently hon. Members are unaware that there was an economic crisis. I can assure them that there was. That crisis started with a deficit that we have succeeded in changing to a surplus of£500 million. If we consider that building and construction industries in that context the matter becomes rather more clear. Just as every industry except those immediately concerned with exports was to some extent hit by the economic measures that we introduced, so, inevitably, was the building industry. It is part of the whole community.

Builders are no less patriotic than other members of the community. All of them have always understood it. Of course, the builders would like priority bank-lending. Who would not? But they also understood that it was necessary, in the interests of the community and the economy as a whole, that credit should be restricted. To say—as one hon. Member opposite did—that they are at the bottom of the queue is to be somewhat extravagant. They are in the neutral zone. Bank advances to builders in 1969 were approximately the same—in fact I think they were a little up—on the year previously. The variation was very small. I was pointing out that they were not at the bottom of the queue.

Those hon. Members who have said that high interest rates played their part in the difficulties experienced in the building industry were correct. Of course they did; there was no question about that. But I have to think in terms of a wider situation. The right hon. and learned Member for Hexham (Mr. Rippon) put the situation firmly into proportion in 1962, when he was Parliamentary Secretary to the Ministry of Housing. He said: It is…a fallacy to believe that low interest rates quite unrelated to the economic situation of the country would mean lower prices.—[OFFICIAL REPORT, 2nd May, 1962; Vol. 658, c. 1041.] The principle is correct. We must relate it to the economic situation of the country. It is no part of this Government's intention to keep our rates high for any longer than is necessary to protect the reserves and maintain the right monetary conditions.

Many hon. Members opposite, including the hon. Member for Crosby (Mr. Graham Page), have mentioned the import deposit scheme. I have been informed that its effect is marginal. The industry is continually increasing its use of home-produced materials. From time to time it is suggested to me—and I totally agree—that we should increase the amount of home-produced materials and cut down our imports. That has been a large part of the whole consideration.

Many hon. Members also referred to the question of increasing costs. During the years comparisons have been made between the period when the Conservatives were in office, when it is said that costs were arising at about 3 per cent., and the period of the Labour Government, when costs are said to have risen by 4 per cent. I accept those figures. There is a difference of 1 per cent. in the increase in costs. Various reasons have been put forward for that. One is the effect of the selective employment tax. That allegation has been made very frequently by hon. Members opposite, and it was made finally and very forcefully by the hon. Member for Crosby and by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer).

It has been pointed out that S.E.T. adds nearly 4 per cent. to construction costs. Here again, we have to ask what are the alternatives. [An HON. MEMBER: "Take it away!"] That is a possible alternative. But in its place we have to put something else.

On 29th January the hon. Member for Worcester (Mr. Peter Walker) said that if the Conservatives brought in a value-added tax it would not discriminate against house-building. I am delighted to hear it. The hon. Member did not say that house-building would be exempted from the tax. That fact was forcefully made by my hon. Friend the Member for Bassetlaw (Mr. Ashton). It is true that if a value-added tax ran at the same rate as it appears to be running in other countries where it is imposed, so far from builders being better off with that tax instead of S.E.T. they might find themselves worse off. In any case, the tax applies to only one section of the industry; another section—that which is concerned with manufacturing materials—is exempt from S.E.T. at the moment but would pay under a value-added tax—[Interruption.] It is an idea being floated among the hon. Members' Friends. That section would then be forced to pay it, and we would have an idea of what the effect must be on the cost of building.

Basically, all hon. Gentlemen were saying that, apart from house-building, the industry was doing reasonably well, and I believe that it is. [HoN. MEMBERS: "Oh."] Yes, it is. It is only in house-building that the output has fallen recently. If S.E.T. were to go and a value-added tax were to come in, another factor would enter the equation—that is, that the prospective house purchaser would have to pay more for other goods. There would be a loss in demand which would affect him and his ability to pay.