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Construction Industry (South-West Region)

– in the House of Commons at 12:00 am on 28th April 1976.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pendry.]

10.17 p.m.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

I have on several occasions attempted to get this subject of the position of the construction industry in the South-West raised on the Adjournment of the House by the usual method of the Ballot, only to find myself successful on an evening when I have just returned from Select Committee business elsewhere in the country. As a result, I have not had the opportunity to prepare my argument in perhaps the detail that I should have liked.

I begin by agreeing that the depression in the building and construction industry is common to the whole country and not simply to the South-West. I also agree that it is not likely to right itself until the excess of inflation in the economy is checked and industrial profitability and productivity restored.

There is this to be said about the building and construction industry. It is an industry which follows the general level of industrial and commercial activity and normally does not precede it. However, the decline in building and construction in the South-West has perhaps been more steep than elsewhere because there was, only two or three years ago, a very high level of activity.

At that time, we had a property boom, a fair amount of speculative building, industrial building and fair council housing development, certainly in the larger cities of the South-West. Unfortunately, the reverse is now true. The property development market has collapsed and private building has declined. Although Bristol has a very good public building programme, to which I pay tribute, I doubt whether this is matched by the great majority of local authorities in the South-West. The rapid change in the situation in the past two or three years has resulted in large-scale unemployment in the building industry, bankruptcies of small and less stable firms, and a general decline in building and construction of all kinds.

The building workers' trade unions have argued forcefully that building employees are taking more than their fair share of unemployment. The whole industry has gone into reverse, nationally and regionally, in the past two years. Output is down by between 8 per cent. and 10 per cent. and if the decline in the South-West has been greater, as I say, it is probably because the peak of activity was once that much higher.

I am told by building trade unionists in my constituency that there is no real sign of the situation improving. It is sometimes thought that the South-West is an area of fair prosperity, but the unemployment figures do not bear this out. According to the Department of Employment, the general unemployment rate in the South-West is 6·2 per cent., which is above the national average and which compares most Unfortunately with the 3·9 per cent. unemployment rate in the South-East. Unemployment among South-Western building workers is three times the general rate of unemployment.

Every section of the construction industry has been affected—labourers, skilled men, large firms, small employers and the architectural profession. There are several youngish, highly-trained architectural assistants in my constituency who are unable to get work of any kind. The Minister may argue that this is a matter for the Department of Employment, but the first cause lies elsewhere

The problem with stop-go policies in the construction industry is that when an overheated boom is followed by a chilly period, such as the one we are now going through, firms contract and do not pick up again very easily. Fewer trainees are taken on and when the revival conies, the industry is in poor shape to take advantage of it. In Bristol and the South-West the strongest representations have been made to hon. Members by both sides of the industry who, in a recent joint deputation, asked us to assist with remedial measures.

The unions' position is clear enough They want more public expenditure in order to stimulate employment. The position of the employers is more ambiguous. Many of them, in other capacities, are advocates of cuts in public expenditure. Many of them would say that reductions in Government expenditure leading to taxation relief would bring about more private investment and stimulate their trade.

That appears to be the argument of some employers, but I am not so sure about its validity. I do not believe that there is any rigid dividing line which implies that all public spending is bad and all private spending is good. There is wasteful public spending and wasteful private spending. It should be common ground that in present national circumstances the country needs to spend less individually and collectively on current consumption and more on increasing the stock of productive national capital.

If we apply that rule to public spending, I argue that while expenditure on new town halls, for example, can hardly be justified at the moment, there are other forms of local authority construction that are justified. I believe, for instance, that housing is a way of building up productive national capital. Bad housing leads to ill health, social dislocation and a general loss of national efficiency. The building of schools and colleges, especially those devoted to offering a technical and technological education, is productive expenditure.

I agree that in a mixed economy there is much good productive private sector investment that should be assisted where appropriate. New units of housing accommodation are always welcome outside the public sector—for example, units provided for owner-occupation, units related to co-operatives and housing associations.

Industrial and commercial development, especially for the export trade, also needs to be encouraged in every way. I know that last September my right hon. Friend the Chancellor of the Exchequer made an allocation of about £32 million. It was supposed to assist the construction industry, but in the same month construction orders fell back by £132 million. I fear that my right hon. Friend's allocation was just a drop in the ocean for all the effect that it had on stimulating employment in the construction industry.

There are other forms of private investment which should be encouraged. For example, grants should be given at favourable interest rates for heat insulation for buildings. That would meet my test of adding to national efficiency here through energy conservation.

I do not want to be too long in developing these arguments as I recognise that they are probably fairly familiar to my hon. Friend, but I think that the Government should now be considering the possibilities of long-term capital works, especially those which are in full or in part revenue producing, where the full costs can be spread over a decade or more ahead and where the preliminary work would give stimulation and hope for the future, a kind of declaration of intent.

Water is an obvious example. Certainly there is still a great need for an improved supply. Such water works are usually spread over a long period. Many could now be started without the financial effect falling on this year's accounts, or on next year's. The effect could be spread into the future. In the South-West, my extra candidates would be the Severn tidal barrage for power production and the electrification of the railway system from London to Bristol and on to Exeter. These two large projects—one is almost fully revenue producing and the other is part revenue producing—would add materially to improving employment prospects in the construction industry in the South-West.

I should like to know what national measures the Government have in mind to bring about the revival of the construction industry, and the more that my hon. Friend can relate his remarks to the situation in the South-West, the better I shall he pleased.

10.31 p.m.

Photo of Mr Ernest Armstrong Mr Ernest Armstrong , North West Durham

My hon. Friend the Member for Bristol, North-East (Mr. Palmer) has raised a very important matter. I am glad to have this opportunity of discussing in the House the state of the construction industry in Bristol and the South-West.

Unemployment in any family or in any part of the country is a serious human problem. My hon. Friend is right that no industry has suffered more from the sudden lurches, as it were, between the trough and the peak situations which we have had in the past.

We are well aware of the problems which face the construction industry. We have a frequent and continuing dialogue with the industry both at national and regional level. Concerning the South-West, I would mention that my hon. Friend the Minister for Housing and Construction attended a meeting of the Department's South-West regional joint committee for the building and civil engineering industries in Bristol last July. I visited the region and took part in a television programme about the problems of the industry in the region in January. My hon. Friend will be receiving a deputation from the regional joint committee in a few days. We have also carefully studied the various memoranda which have been produced by the industry's emergency joint committee for the building, civil engineering and extractive industries in the South-West. If we were in danger of being complacent in any way—which we are not—I should mention that we have been subject to considerable, very proper, lobbying by Members of Parliament, as my hon. Friend said, because of their great concern.

The construction industry nationally employs over 2 million people and accounts for 14 per cent of all industrial production. Its role in the provision of houses, roads, factories and buildings and services of all kinds is vital to the national economy and to the success of the measures that we are taking to deal with our present economic difficulties. I should make it clear at the outset that the Government are deeply concerned about the problems which the industry faces.

In the South-West the rate of unemployment in the industry is 17 per cent. That represents a great deal of human tragedy. I realise that it is of little comfort to the region or to my hon. Friend to be told that this is part of a national problem, as my hon. Friend indicated, and that there are other parts of the country, including my own—the Northern Region—where there is a similarly bleak picture in the industry. Indeed, the unemployment level in the industry as a whole is 15 per cent.

This problem is not limited to one region or, indeed, to this country. I do not wish to minimise the seriousness of the situation, but it is a small consolation that there has been no increase in construction unemployment since the beginning of the year either nationally or in the South-West Region.

While the period ahead will not be easy, the position is not one of total gloom. As a result of the substantial measures that we have taken to encourage housing in both the public and private sectors, there has been a considerable improvement in house building. The number of housing starts in the South-West in 1975 was 28 per cent. higher than in 1974. In February there were over 37,000 houses under construction in the region, and this is a near record figure.

The House will recall that, in the measures which we have taken to counter unemployment, we have paid particular attention to the needs of the construction industry—though I would not claim that they can do more than make a modest contribution. I know that this is little consolation to a skilled tradesman who happens to find himself out of work, but I want to give the whole picture.

Last October we announced that arrangements were being made to commission an additional£32 million worth of new work to help provide employment where it is most needed in the industry. Nearly £2 million was provided in the South-West for improvements to publicly-owned housing, and for projects relating to the National Health Service, education, and other local authority services. In February, we allocated a further £50 million for the improvement of public sector housing, and the South-West's share was£3 million, making a total of£5 million in all.

While the constraints on public expenditure have inevitably led to reductions in public sector construction work, I should make it clear that the scale of the programme still remains very substantial. Public sector construction output in 1975 in Great Britain totalled over£6,000 million.

There are numbers of projects providing employment in the South-West. For example, since the beginning of the year, four contracts worth more than£20 million have been let for improvements to the A30 and A38, and another two contracts for road improvements are expected to begin later this year. The Property Services Agency has also let a contract for new Government offices in Swindon worth more than£1 million, and another worth nearly £400,000 for a new headquarters building at the Royal Naval Air Station at Yeovilton, and the new sorting office extension in Bristol will cost over £150,000. The regional health authority has schemes in Bristol worth just under£500,000, and other major public projects in the city include a school at Hanham costing£900,000. Some 1,000 staff from my Department are due to move to Bristol, a move which is likely to generate expenditure of over £500,000 on office conversions later this year. Also, there are other major schemes taking place elsewhere in the region.

The measures we are taking to stimulate industrial investment generally should also help the construction industry. We have made considerable sums available for the acceleration of capital projects by individual firms and last September an extra £20 million was allocated for the building of advance factories. There is a rolling programme of advance factory building in the South-West, and the construction of 12 units with a total area of 100,000 square feet is either in hand or due to begin within the next few weeks.

In addition, regional development grants continue to generate building work. These grants have assisted in the provision of over £5 million worth of building work in the South-West in 1974–75.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

My hon. Friend will agree that these regional grants apply only to part of the South-West. Is that not so?

Photo of Mr Ernest Armstrong Mr Ernest Armstrong , North West Durham

Yes.

Special measures have also been taken to maintain the training effort and the Training Services Agency and the Construction Industry Training Board have made a number of grants available for this purpose. These bodies are making special arrangements to assist redundant trainees and one means currently being considered is the provision of site training schemes to give on-site training for those who have completed their off-site training. Looking to the future, the industry strategy committee of the Economic development committees for the building and civil engineering industries has just produced a report on construction into the 1980s, and the recommendations are being studied in my hon. Friend's construction industry liaison group.

We recognise, as my hon. Friend emphasised, the importance of seeking to ensure a reasonably stable level of demand in the industry. We already have some action in hand in order to help in achieving this. We are examining very fully the idea of creating moving shelves of projects. These could provide a reserve of fully designed projects which could be brought forward more quickly when circumstances justified encouraging a growth in demand.

We are also providing much more information than before about future public sector work to help the industry with its own planning. By our giving as much notice as possible of changes in levels of public expenditure, as we have done over the last 12 months, the industry is better able to adjust. But we need to remember that public sector work accounts for only about half of total construction output. There is scope, too, for the industry to seek to help itself, and I am pleased that the building EDC is undertaking a study to demonstrate the benefits of new industrial building.

I do not wish to suggest that the action which we have been able to take provides anything like a complete answer to the problems facing the construction industry. I am sure that my hon. Friend will appreciate that in the present economic position the scope for action is limited. Nor is it possible to insulate the construction industry from the effect of the measures that we have to take to manage the economy. But we shall continue to give whatever help we can to the industry.

I assure my hon. Friend that I and my Department are concerned about the construction industry and are very much aware of the situation in the South-West. We are certainly not complacent. I shall study carefully again the position in the context of my hon. Friend's helpful speech.

Question put and agreed to.

Adjourned accordingly at nineteen minutes to Eleven o'clock.