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Construction Industry Contracts Bill

Part of the debate – in the House of Commons at 12:00 am on 27th April 1970.

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Photo of Mr Robin Chichester-Clark Mr Robin Chichester-Clark , County Londonderry 12:00 am, 27th April 1970

The hon. Gentleman is right in saying that I did not mention his organisation by name. He often protests about this and that, but he certainly did not protest on this issue. Having made that point, which I think has largely disposed of the issue in a non-partisan spirit, I shall deal with the Bill as a whole before pinpointing a few of its weaknesses.

My first comment on the Bill is that it does nothing—I am not disparaging it —to help the industry directly. There is no pretence that it will do so, and I do not think that the Minister presented it in that way. It is a Bill designed to stop tax evasion, and none the worse for that, since we all accept that tax evasion is wrong and unfair to taxpayers. None the less, it should be realised that we have the Bill before us because the Revenue has been unable to collect taxes from an unknown number of building workers.

I say " an unknown number " advisedly, for, although we have a rough total for self-employment of about 245,000, and we know that the number has grown sharply in recent years, we do not know how many of those persons pay their taxes under Schedule D and how many do not. But, be that as it may, because the collector of taxes was unable to fulfil his statutory duty to collect taxes, we now have a Bill which imposes the tax on someone else.

In effect, the Bill says that because lump worker A—I use the Minister's own terminology—has not paid up and cannot be taxed, employer B must pay A's taxes instead. I am not resisting that proposal since there is a loophole here which must be stopped. but it is as well to make clear here and now that that is the intention of the Bill, and, to put it mildly, it is a somewhat novel and rather bizarre proposal. The Bill is a tax evasion Measure, as will be the parallel proposal for a 32 per cent. tax deduction outlined by the Chancellor, which, presumably, we shall see in the Finance Bill.

The accusations and criticisms against self-employment in this industry in the past—as the Minister did, I draw from the Phelps Brown definition a distinction between the bona fide labour-only subcontractor covered by National Working Rule 8 and the gangs of self-employed men—have related also to bad workmanship, to safety problems—this is uppermost in most of our minds—to the decline in numbers as it affects the trade unions, and also to the lack of discipline on sites. For the life of me, I cannot see how the Bill will make a great difference to any of those problems.

Perhaps I may give a specific example. I shall do it rather carefully because, like the Minister, I do not want to put ideas for further tax evasion into anyone's mind. Let us suppose, as the case is now on about 60 per cent. of speculative housing sites in the South of England, that a developer is accustomed to using self-employed labour for, say, his bricklaying work. The men come in on a lump-sum basis, they do the job, and then off they go to the next site.

Under the Bill, it seems to me, the developer will have to take on the responsibility of paying their taxes and contributions by means of the 20 per cent. construction contract levy and the 32 per cent. Finance Bill levy, or not employ them at all; or he can demand that they join a registered sub-contracting firm or form one of their own and get on the register. I think that that is a fair summary of the situation.

The first choice, to shell out, as it were, would obviously be bad economically for the developer, but in an area of desperate labour shortage like the South-East, and because of the declining number of craftsmen, I fear that he may be unable to resist it. The second choice, that of not taking them on at all, may not be open to the developer concerned if he has a job which must be done quickly, and if there is no one else in the area to do it for him. I shall come back to the third choice in a moment. The fourth would take a good deal of time. It may be followed by many old-established gangs, but, although it is possible that they may do it, if they had not been inclined to join unions or if they had not been inclined to work competently as self-employed persons, I find it hard to see why they should do so as a registered firm or partnership working on their own account. Therefore I do not think that the Bill makes much difference there.

Presumably, what the Government hope for is the third choice, that is, that all lumpers will join recognised sub-contracting firms as direct employees. Perhaps they will. Perhaps they will not. But even those who do will still be responsible to site managers and so on just as they were before, although the foreman's authority will, naturally, be somewhat increased, though, perhaps, only marginally. Therefore, safety and good workmanship will not necessarily be improved. It rather depends on the foreman.

As regards unionisation, most established firms are already well known to the district organisers of the unions, and a large number of their direct employees are not unionised now. I doubt that the unions will be much more successful under the Bill than they are numerically now. Men join unions for economic reasons and to defend their interests. Whether these reasons will seem any more compelling after the passing of the Bill, I am not sure. That remains to be seen.

I come now to certain other facets of the Bill which are not wholly satisfactory. First, the question of the register. Obviously, this is a point to which we shall return in Committee, but it is worth starting to consider it now. Phelps Brown sug gested a register, and I support it, but it would be beneficial if we began to think about another name for it. I say that because, as the Minister knows, the Forbes Committee on quality registration is now sitting and is to report, I believe, early next year.

It is proposed that the register under the Bill will be set up in October. I fear that there may well be some confusion in the public mind between the two, and clients may tend quite naturally to think that this register will be a list of good builders, whereas it will be nothing of the kind. This cannot be too strongly emphasised. It will be a list of builders and sub-contractors who have satisfied minimum qualifications in regard to insurance and tax payments. It will say nothing about quality of work. I hope that this will be made clear, if it is not clear already to the general public, when the Parliamentary Secretary winds up.

Now, the proposed fee for the register. The rumour was, certainly until today—I am not sure that the Minister did not say something about it at his Press conference —that it would cost £5 per firm, and registration would have to be renewed annually at a further cost of £5. I suspect that the Minister is open-minded about this, but we should like to hear more about it.

The cost of establishing the register is stated in the Explanatory and Financial Memorandum to be £80,000. If there are about 60,000 organisations on the C.I.T.B. register at present, and assuming that they all join the Minister's register, about £350,000 or more will be raised in fees. Clause 10(3) provides that any surplus may be paid over by the Minister to the C.I.T.B. or " to other specified purposes "—those are the words in the Bill, though at present they are unspecified—and we want to hear a little more about that.

As the register is, in effect, a statutory licence to trade, I see no reason why a firm should have to pay to join it. I hope that the Minister will consider that. If a fee is to be Paid, it should be sufficient to pay for the administration of the thing and, perhaps, no more. Employers already pay large sums to the C.I.T.B. by way of levy, and I imagine that they will not thank the Minister for a second indirect levy of this kind, particularly in the present atmosphere when there has been a certain crisis of confidence in the C.I.T.B. itself. I hope, therefore, that the Minister will look at that point again.

One difficulty in framing legislation of this kind is how to deal with the genuine self-employed tradesman, the local jobbing carpenter, for example, who is in business on his own account. He has, after all, an absolutely essential part to play in society. He is vital in domestic maintenance, and he is already in over-short supply.

The proposal in Clause 2 is that he can get on to the register provisionally, provided that he has a reference supported by an " authorised person ". This may be a Committee point, but it is again a matter where thought should be given now to what an " authorised person " is. Will it be another contractor? Will it be a J.P. or local councillor or anyone who knows the man?