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Off-site Manufacture for Construction (Science and Technology Committee Report) - Motion to Take Note

Part of the debate – in the House of Lords at 4:07 pm on 12th December 2018.

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Photo of Lord Stunell Lord Stunell Liberal Democrat 4:07 pm, 12th December 2018

My Lords, it is a great pleasure to take part in this debate and to follow the excellent speeches so far. I thank the noble Lord, Lord Patel, and the committee for producing an excellent report: it is wide-ranging, has a set of very balanced and sound recommendations and is founded on sound, solid analysis of the situation. We need to reflect on the fact that the construction industry is the most important and strategic of all the industries in this country. We sometimes talk about aerospace or the car industry being strategic, but the fact of the matter is you can buy cars or aeroplanes from somewhere else. You cannot buy new factories from somewhere else—or new houses or hospitals, for that matter. If the Government want to see a booming economy and solid, well-supported social services, it always comes back to something that has to be provided by the construction industry. That is reflected, to some extent at least, in the Government’s response to the report and their action in establishing the construction sector deal and strategy. I will come to that in a moment.

However, it is not just a question of maintaining an industry and improving it marginally; it is being given a much bigger job. Getting housing up to 300,000 units a year by 2020 is a formidable task, when we are struggling to reach 200,000. That involves a huge expansion of capacity. One could say the same about the health service, major infrastructure projects and a whole range of things. The report went to the Select Committee in the other place, which received details saying the industry would need to expand its capacity by 35% over the next 10 years. That is a huge challenge and, no doubt, the Government will want to engage with the industry in delivering it.

At the same time, there are 70,000 retirements each year from the workforce, and only about 30,000 to 40,000 people are being recruited into the industry from within the United Kingdom. Until now, that gap has been filled at all levels of the industry by the recruitment of workers from overseas—from architects, engineers and other professional workers to the skilled workers on-site. At the time the referendum was held, there were 200,000 EU 27 workers in the construction industry. It is a signal of the direction of travel that there are now, according to the ONS, only 156,000—in other words, a drop of 40,000 in that migrant pool of workers in the construction industry.

With the workload increasing and the labour force availability decreasing, there are clearly some major pressures and challenges. It could well be that off-site building, modern methods of construction—there are about five different ways of expressing it—can certainly contribute a great deal towards filling that gap.

However, there are other problems. It has already been mentioned that the report identifies a skills gap as well as a personpower or manpower gap. The problem is that, in a fragmented industry with a very large number of single-person or two- or three-person small-scale subcontractors, their capacity to provide training is somewhat limited. I think the report has let the Minister off quite gently on the ineffectiveness of the levy and on the current way in which apprenticeships are supported in the construction industry. I hope we can return to it in a more considered way on another occasion.

The Government’s response says that they have now approved 50 apprenticeship modules. That is intended to deliver 25,000 new apprentices into the construction industry by 2020. So 25,000 new apprentices are going in when the workforce is shrinking at 20,000 a year from retirements and another 20,000 a year from the reduction in EU migrants. It is not nearly enough. The Minister has approved 50 modules. How many more are stuck in the in tray, with the levy unspent, because it is just not possible for firms to get apprenticeships started?

Reference has been made to the T-levels, but I notice that the figures are pretty meagre. Courses in the construction sector are planned to start in 2020, and the response boasts—I think I can use that word—that there will be 1,000 people taking them up. Well, that is an extra 1,000 apprentices added to the workforce in 2022. It is a drop in the ocean. The Select Committee report also mentions that the type of skills needed is expanding in the construction industry; the noble Baroness, Lady Young, made the point about digital skills.

There is no doubt at all that taking manufacture off-site and putting it under cover provides opportunities and possibilities which are difficult to provide in the traditional industrial model that we have in the construction industry. That is good. But the report says that, to do that, it is essential to have a consistent pipeline of investment and of building. The problem is that, although we have a National Infrastructure Commission and an infrastructure development authority, the reality is that, rather than a pipeline, we have some sort of tangled-up hosepipe. Every time somebody is ready to spray the water on the flowerbeds, someone else steps on the pipe and no water comes out. You look down the pipe to see what has happened to the water, then someone turns it back on again and you get sprayed. That is what the industry feels like as far as consistent investment goes. I hope the Government will be prepared to say something about how they will do some countercyclical investment, particularly in housing, to make sure that that consistent pipeline is there.

The report also mentions research and development. The figures are awful because the Government think the industry spends £370 billion a year. They have obviously captured more than the report, which refers to £138 billion a year. Whatever the number is, the figure the Government have produced for the amount of R&D tax credits given by HMRC is £45 million. For the smaller figure that represents 0.04% of turnover going into research and development. The Government’s comment in their response to the Select Committee is that this,

“is low compared to some other sectors”.

I have no idea which other sector could manage to get less than 0.04%, but maybe the Minister has some information. Quite clearly it should be 2% to 3%—it should be a significant number. That really will be important if we are to move to a new model off-site.

What is the machinery for delivering this and to knock down the barriers? The construction sector deal is a very good step forward. We have certainly welcomed it. We believe it is an essential way for the Government to interpose in this. The way to deliver it is through the Construction Leadership Council. That is how things are mediated between the Government and the industry. I think it is something of a phantom body. There is a lot of “will do” this and “will do” that, rather than “have done” this and “have done” that. What actual spend has there been to date on the strategy? We are a quarter of the way through the time period. How far are we through the spending period? The noble Baroness, Lady Young, talked about cycles and election cycles. The current election cycle could do with having a stabiliser fitted to it, but leaving that point aside we need to know and understand what the Government intend to be the rate at which the strategy will develop. When will that first annual report be published? As the Select Committee asked, when and what is the timeline for that?

Many other vital points appear in the report, but in my last couple of minutes I will raise important issues that could do with more emphasis. Only 9% of the construction industry workforce are women. Off-site provides a chance to reset the image of construction and the environment in which construction is carried out to be far more appealing to those who are not attracted to the industry. I hope the Government and the Construction Leadership Council will work together to change the perception and the reality.

I have to agree with the noble Baroness, Lady Young—it is not just about getting the quantity right; we have to get the quality right. Some 93% of new homes handed over to their new owners last year were reported as having defects. The fact is that existing standards are not complied with and they are too low. Sustainability and durability are not taken seriously by the current construction industry—put it up, walk away. We have to have a model that understands that it is a whole-life process, with whole-life costing and sustainability. I was pleased to see that there will be some evaluation projects for sustainable homes, paid for out of the strategy, but we should immediately move to put zero-carbon homes standards in place. I do not think that there is any excuse for putting it into the long grass any longer—just do it.

Overall, this is an excellent report. It highlights that a huge amount of work has to be done if we are to create a fit-for-purpose industry with the capacity and skills to build a long-term, sustainable environment and infrastructure to serve the whole country. I look forward to hearing that the Minister recognises that, without that, practically all the other policy aspirations the Government have, whether housing, health, education or economic growth, will not happen without a viable, strong construction industry.