Egan Contractors

Committee Business – in the Northern Ireland Assembly at 1:45 pm on 22 June 2009.

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Photo of William Hay William Hay Speaker 1:45, 22 June 2009

The Business Committee has agreed to allow up to one hour and 30 minutes for the debate. The proposer of the motion will have 10 minutes to propose the motion and 10 minutes to make the winding-up speech. All other Members who are called to speak will have five minutes.

Photo of David Hilditch David Hilditch DUP

I beg to move

That this Assembly calls on the Minister for Social Development, in view of the adverse economic impact suffered by the employees of Egan contractors, to increase the budget allocation for decent homes and related programmes; and to ensure that future communication with contractors complies with Egan principles.

On 11 June 2009, the Committee for Social Development agreed that this motion should be tabled for debate. After receiving evidence from a number of Egan contractors on the impact of significant reductions in the Housing Executive’s decent homes expenditure, the motion was agreed on 21 May 2009. Members of the Committee will set out the key difficulties and concerns and how those matters can be resolved. First, I will provide some background to the issue.

The Housing Executive estimated that in 2006, 23% of Housing Executive homes, unfortunately, did not yet meet the decent homes standard. To be a decent home, Housing Executive houses must, among other things, comply with the statutory fitness test that requires reasonably modern facilities, a WC that is appropriately located and a reasonable level of thermal comfort. Complying with that standard will clearly not make any Housing Executive home into a luxury home. Compliance with the decent homes standard merely represents an important basic milestone that all Members want to see achieved.

The Committee understands that the Savills report will show that significant improvements in Housing Executive stock have been achieved. However, it is understood that that report will indicate that around 11,000 Housing Executive homes still do not meet the decent homes standard, owing in some part to the inefficient heating systems.

The Committee has written to the Department to request access to the Savills report. I hope that the Minister will provide some detail on the impact of the decent homes programme today and clarify the way forward for Egan contractors and their employees.

I will now discuss the Egan contractors themselves. In 1998, the construction task force, led by Sir John Egan, produced an influential report recommending the development of longer-term relationships between the construction industry and key stakeholders such as the Government. Those longer-term arrangements were designed to deliver better quality and efficiency for the Government and provide enhanced security for contractors. The Housing Executive adopted the Egan recommendations, or principles, in 2000. At that time, the Housing Executive entered into achieving excellence contracts for all work including heating installation, external cyclical maintenance, kitchen and bathroom replacements and so on. The Department has advised the Committee that those contracts were designed to be long-term partnerships but that they included no absolute guarantee of work for contractors in any particular year.

I will move on to more recent events. Owing to difficulties in the property market, the Department experienced significant shortfalls in its housing budget in 2008-09. As the House is aware, the Department asked for additional support and for the Department of Finance and Personnel’s agreement to move money around in an effort to keep the social housing development programme on track. The Department, like other Departments in monitoring rounds, did not receive all the money that it requested, the upshot of which was a substantial reduction in spending on decent homes work, which was provided by Egan contractors. In evidence to the Committee, Egan contractors described the impact of those sudden reductions in expenditure. At one stage, firms that had undertaken several million pounds worth of work a year asked their employees to do overtime. However, they abruptly laid those workers off.

The Committee is not suggesting that the Department breached its contracts with Egan firms, and it is not implying that any illegal activity has occurred. The Committee recognises that the actions of the Department and the Housing Executive may have been motivated by a desire to protect the public purse from unsustainable expense.

The Committee asks how the state of affairs with Egan contractors arose. The difficulties in funding the housing budget were well known in autumn 2008. Consequently, the Department made substantial bids in the December monitoring round. As the outcomes of monitoring rounds depend on many factors and are, therefore, never certain, one might conclude that, prior to December, the Department must have known about the potential difficulties in funding all housing maintenance programmes. Given that, the Committee has asked why the Department or the Housing Executive did not begin to reduce Egan contractors’ work in late autumn. Furthermore, the Committee asked why the funding reductions were not communicated to the Egan contractors. That would have allowed the Egan contractors to plan for the difficulties that they encountered and, crucially, would have allowed them to warn their workforce. No one wants to hear news of redundancy. However, if the employees of Egan contractors had been given more notice, they could have better arranged their finances or even sought alternative employment.

As I said, the actions of the Department and the Housing Executive in this case did not break any laws. That said, the way in which the Egan contractors and their employees were treated was, as implied in the motion, a clear deviation from the spirit of the Egan principles. The motion, therefore, calls on the Minister to ensure that there is no repeat of this situation and that future communication between the relevant parties complies with the Egan principles.

The motion also calls on the Minister to increase the budget allocation for the decent homes programme. I have already set out why that programme is important. The Committee recognises the difficult Budget situation for the year ahead. Nonetheless, the Committee encourages the Minister to set achievable and sustainable targets for all elements of the housing programme, whether for newbuild, upgrading or refurbishment work.

The Committee, the Egan contractors and their employees await the outcome of the Savills report with great interest. The Committee believes that, dependent on that report, the Minister should seek additional support for the decent homes programme through the monitoring rounds.

I look forward to hearing Members’ contributions to the debate and the Minister’s response. I have been speaking as the Deputy Chairperson of the Committee, but, as an ordinary Member, I want to say that meeting contractors on a constituency basis and hearing about problems that they have encountered has been difficult. Members of the public have also had great difficulties with their contracts for some time now. I support the motion.

Photo of Fra McCann Fra McCann Sinn Féin 2:00, 22 June 2009

Tá mé sásta labhairt ar an rún seo inniu. I welcome the opportunity to speak in the debate about the Egan contracts. My constituency office staff can attest to the impact that the situation is having, because they are being contacted daily by people who had been expecting improvement work to be carried out on their homes, only to find that many kitchen and heating replacements and other improvement works have been frozen, while planned cyclical maintenance programmes have also been suspended.

Changes to the procurement process, which were promised to provide a fairer and more efficient system, were meant to convince many local contractors to become involved in the Egan contracts process. Sir John Egan’s report entitled ‘Rethinking Construction’ was published in 1998. In 2006, the Housing Executive initiated a system based on the Egan approach, and, after the initial process, four contractors were awarded five contracts based on different Housing Executive areas. The Housing Executive agreed a package of predetermined rates and costs for Housing Executive contractors and suppliers. That was viewed by all involved as a positive partnership approach, and the contracts were to last for up to five years.

The contracts started to roll out in July 2008, the contractors having been told that £37 million a year would be available to replace 4,500 kitchens and for 9,500 homes to receive external maintenance, which is essential if houses are to meet the decent homes standard. The new programme was problematic from the beginning, and in October 2008 the Egan contractors were informed that they should roll out a new programme to begin in early 2009.

On 15 December 2008, however, the Minister for Social Development made her “smash and grab” speech, accusing her Executive colleagues of stealing her money. Her party colleagues were predicting that cyclical maintenance programmes, kitchen replacements and grants would be the first to suffer. Three days later, the Housing Executive formally announced that it would not go ahead with the Egan contracts at that time. Also, in that period, SDLP Members were advising tenants and affected homeowners to go to the DUP and Sinn Féin to register complaints that funding had been taken from the Minister, as though the fault lay with those two parties. However, they failed to mention that the Minister had handed back tens of millions of pounds to the central pot in the December monitoring round.

Although a number of schemes were reinstated —

Photo of Fra McCann Fra McCann Sinn Féin

You accused me last week of not giving way.

Photo of Alex Attwood Alex Attwood Social Democratic and Labour Party

I know; a leopard takes time to change its spots.

If, on the Floor of the House, in the past two weeks, Sinn Féin has accepted the principle that unspent DSD moneys should be reallocated for housing need, including Egan contracts, why in December 2008 did it not accept the same principle? Why, in December 2008, when the Minister went to DFP to ask that unspent DSD moneys should be allocated to housing, did Sinn Féin not stand up straight and tall, back the Minister and get the money for the Egan contracts, rather than wait six months to change its mind?

Photo of William Hay William Hay Speaker

The Member has an extra minute in which to speak.

Photo of Fra McCann Fra McCann Sinn Féin

Two members of the SDLP who are sitting on either side of the Minister are on the Committee. They know that I fully supported the Committee’s bid to support the Minister in securing additional funding and resources. I have also said that, during monitoring rounds, any money that becomes available should be directed towards the housing programme and the housing budget. I believe and I understand that there are difficulties, but we are not — [Interruption.]

Photo of William Hay William Hay Speaker

Remarks must be addressed through the Chair.

Photo of Fra McCann Fra McCann Sinn Féin

I understand some of the difficulties. We are talking about a general budget, not one that deals purely with social newbuilds. Although some schemes were reinstated in January 2009, the problem had resurfaced by March, when contractors were informed that there was little money to complete Egan contracts. The Minister informed representatives of Egan contractors that she would rather put roofs over people’s heads than replace kitchens for others. In making that statement, however, she failed to take into account the serious condition of many kitchens that must be replaced on health and safety grounds.

Many of the schemes will be suspended, including external cyclical maintenance (ECM) contracts and grants. That will have a long-term effect and, by the end of this month, much of the money that had been available will no longer exist. The impact on housing standards will cost more in the long run, as properties inevitably continue to deteriorate. Cyclical maintenance is carried out over a 15-, 20- or 25-year period, dependent on the level of work, which ensures that houses are kept to the decent homes standard. The Minister’s approach means that years of good work undertaken by the Housing Executive in ensuring appropriate standards of property maintenance will have been lost as decline starts to set in.

We have heard the pleas of Egan contractors at our Committee, and we find the Minister’s argument that she is putting the construction industry back to work on newbuilds strange when 800 or more jobs may be lost in the construction sector. Two weeks ago in the Chamber, I quoted the British Chancellor, who in his pre-Budget speech stated that the upgrading of public housing to meet the decent homes standard should be prioritised in order to maintain employment in that sector of the construction industry. We have always supported the call for additional resources to be invested in all aspects of housing, not just social newbuilds.

The Minister is obviously ignoring large and important elements of the housing programme in instructing the Housing Executive to make those drastic cuts. She needs to revisit her budget to address the issue —

Photo of William Hay William Hay Speaker

I ask the Member to draw his remarks to a close.

Photo of Fra McCann Fra McCann Sinn Féin

I thought that I had an extra minute. She needs to revisit her budget to address the provision of maintenance and heating and kitchen replacements.

Photo of Danny Kennedy Danny Kennedy UUP

I wish to explain to the House, members of the Social Development Committee and the Minister that no formal representation will be made on the motion by the Ulster Unionist Party because our representative on the Committee, Mr William Armstrong, recently had an unfortunate accident and is incapacitated, as Members will be aware. I am sure that the House will take the opportunity to wish him a speedy recovery. As he is our sole representative on that Committee, it was not felt appropriate that anyone else should speak on this issue.

Photo of Thomas Burns Thomas Burns Social Democratic and Labour Party

I am happy to speak on the subject of social housing once again. I thank the Chairperson of the Committee for Social Development for bringing the motion before the House. I am glad to see social housing so high on the agenda. I only wish that it were being given such high priority by the Executive and the Finance Minister.

In previous weeks, we have debated the housing budget and how best to provide homes that are fit for the twenty-first century. Those were worthy debates, and many Members made very positive contributions. The Minister restated her commitment to meeting the targets set out in the Programme for Government. There is no doubt that all sides of the House are committed to providing the people of Northern Ireland with good social housing.

Everyone has a right to a roof over their heads and to a decent standard of housing. They deserve no less, and we must deliver that.

We all know, however, that the housing budget falls well short of what is required. Every Department would like more money, but the situation with the Department for Social Development is different. The projected money from housing and land sales did not appear, and there is a big hole in the budget. Some Members are happy to criticise the Minister on any and every funding issue and want to paint a picture of the Department making cuts here, there and everywhere, even though they know that the Department is not properly funded.

The global economic downturn cannot be used as an excuse. Housing stock must be maintained and improved, and repairs carried out regardless. At the same time, we are all committed to the new building targets in the Programme for Government, and we now find that the money to meet those targets is a challenge for us all.

The debate is mainly about the budget allocation for decent homes and money for Egan contractors. The standard of most Housing Executive houses is quite good. However, the Minister is best placed to outline the current state of the public housing stock.

Photo of Kieran McCarthy Kieran McCarthy Alliance 2:15, 22 June 2009

Does the Member agree that there is much public concern and anxiety that the Housing Executive will not be able to honour contracts that were allocated funding? Word is now getting out that, unfortunately, the Department will not be able to deliver, particularly for disabled people.

Photo of William Hay William Hay Speaker

The Member has an extra minute in which to speak.

Photo of Thomas Burns Thomas Burns Social Democratic and Labour Party

Thank you, Mr Speaker. Work for Housing Executive tenants with a disability will be covered. That is a statutory obligation, and there is no question that that will not be covered.

Photo of Kieran McCarthy Kieran McCarthy Alliance

Excellent; thank you.

Photo of Thomas Burns Thomas Burns Social Democratic and Labour Party

A percentage of social housing falls short of what is required, and those properties will have to be brought up to standard. The Department and the Housing Executive are committed to doing that, and Egan contractors know that. I am sure, therefore, that Egan contractors had expected more work and more money.

What can the Department do if it does not have the money? We will not stop the newbuild programme. The arguments in favour of that programme were recently debated at length in the Chamber. Building social housing makes a positive contribution to the local economy. Therefore, if we want more money to be provided for decent homes and Egan contractors, we are back to the Department’s bidding for more money at every monitoring round. If more money is forthcoming, I want it to be spent on fixing houses, new kitchens and bathrooms and so forth.

There must be new money. We must find a way to sort out the big problems with the social housing budget. It needs to be returned to a sure footing, because we cannot continue to wait for new handouts at every monitoring round. It is unreasonable to expect any Minister in any Department to manage his or her budget in that way.

Photo of Anna Lo Anna Lo Alliance

With the catastrophic drop in the receipts from housing and land sales, the Department for Social Development has been in crisis for the past year, depending on quarterly monitoring rounds to meet deficits in its programmes.

The Egan contract is a casualty of the Department’s hand-to-mouth existence, as the Department does not have the ability to plan on a long-term and consistent basis. The Department for Social Development has to make priorities, and the Minister has made social housing her top priority. That is in keeping with the Programme for Government’s PSA to build 10,000 houses by 2013.

A balance must be struck. Maintenance work is essential both to keep our stock in good order and to fulfil our obligation to the tenants of the 90,000 Housing Executive homes, who pay a total of £270 million rent a year. It has been suggested that the Housing Executive wasted an opportunity by increasing rent by only 1·95% compared with the 6·12% national average increase in 2009-2010. That is mostly covered by HM Treasury through housing benefits, and perhaps the Minister will comment on that.

The debate is quite timely in that the Savills report came out today. That report stated that we have the best stock in the UK, and the Housing Executive should be commended for keeping on top of repairs and maintenance. However, we need a full maintenance programme to enable the Housing Executive to sustain its excellent record. We must not forget that 17% of our housing stock fails the decent homes standard.

The anticipated drop from £40 million to £10 million in the Egan contract is too drastic. The Egan contractors have said that there are some 1,100 vacant Housing Executive properties that cannot be rented because minor repairs or major improvements need to be carried out. Those properties could be brought up to the required standards at a fraction of the cost of building new houses. It is obviously cheaper to renovate than to build new houses, and renovation can sustain jobs in the construction industry. Perhaps we need to consider spreading the housing budget to cover maintenance work rather than dedicating it solely to building new social housing.

Photo of Michelle McIlveen Michelle McIlveen DUP

I support the motion. It addresses a wide-ranging issue that affects contractors in every constituency in Northern Ireland. Under the decent homes programme, Housing Executive houses are brought up to modern standards of fitness, structure, energy efficiency and facilities. In many ways, those are the minimum standards that we should seek to obtain. However, current circumstances have caused delays in the decent homes programme and other related programmes.

In 2006, the period for which we have the most up-to-date figures, almost one quarter of Housing Executive homes failed to meet the decent homes standard. That standard involves houses meeting the statutory fitness standard; being in a reasonable state of repair; having reasonably modern facilities; and providing a reasonable degree of thermal comfort. That all sounds perfectly adequate until one notes that the reference to reasonably modern facilities means that kitchens must be less than 20 years old and bathrooms less than 30 years old. It is a cause for concern if one quarter of houses does not reach that standard. That concern deepens if the schemes to address the problem have been placed in abeyance.

I hope that the House will forgive me for being parochial; numerous Housing Executive schemes in my constituency of Strangford were due to be carried out in this financial year but have instead been mothballed until funds are made available. That is particularly true in the Ards district, where schemes dotted around the entire district have been removed.

Photo of Danny Kennedy Danny Kennedy UUP

I am grateful to the Member for giving way. I wish to add to the concern that the Member expressed about the non-availability of Housing Executive grants. Does she share my concern that many people are being told that their applications are being cancelled, with the added difficulty that many of them have waited in a queue for a long time and now find themselves with cancelled applications? I ask the Minister to address that issue when she responds to the debate.

Photo of William Hay William Hay Speaker

The Member has an extra minute in which to speak.

Photo of Michelle McIlveen Michelle McIlveen DUP

I agree with Mr Kennedy’s comments: the issues are the same across the Province, not just in my constituency of Strangford. However, I am concerned about schemes in the Ards district that have been removed because funds have simply dried up.

The multi-element improvement scheme in the West Winds estate in Newtownards will be delayed, which will affect 68 properties. That scheme involves the improvement of living and dining space, refurbishment of kitchens and bathrooms, and rewiring and installation of central heating. An external maintenance scheme concerning 170 properties in Greyabbey and Kircubbin has been put back indefinitely. A major improvement scheme in the Glen estate, in which 16 bungalows were to receive an additional bedroom among other improvement works, cannot proceed. In Newtownards, two kitchen schemes concerning 72 homes in the Scrabo and Bowtown estates are not proceeding. Furthermore, in my council area, 112 properties in Donaghadee, which were to benefit from replacement central heating — from coal fire to gas — will have to wait until an undefined date when the Housing Executive can afford to carry out the programme.

In addition to those matters, the first phase of environmental improvement being made to the Bowtown estate, which has been ongoing for the past year, has been suspended. I understand that that alone is a £1 million scheme.

The suspension of work affects not only the expectations of the residents in those diverse social housing areas where some of the work scheduled is required urgently; there is also the effect on the contractors and, in turn, their employees and subcontractors. At a time when fewer houses are being built given the catastrophic downturn in the housing market, the impact that the cancellation of work in the social housing sector has on tradesmen in the building industry cannot be overestimated. Contractors are facing the prospect of laying staff off due to the shortfall in funding for the Egan contracts.

Mr McIntyre, the chief executive of the Northern Ireland Housing Executive, stated that the shortfall in funds has been caused by the collapse in the housing market and that the blame does not lie at the feet of the Executive. Indeed, he specifically stated that it does not represent any lack of commitment on the part of the Government to support housing.

Sales accounted for £100 million of the Housing Executive’s income two years ago, but it is anticipated that only £6 million will be garnered from that source in the forthcoming year. The Committee has been informed that the Minister has made newbuilds her first priority, which has resulted in the projected spend on Egan contracts of £37 million being slashed to just £10 million. Instead of vital works being carried out on 9,500 homes and more than 1,000 vacant properties in order to make them habitable, the proposal is to build 250 new social homes.

Funds are limited, and it is not for me to tell the Minister how to prioritise her budget, but, as the previous speaker, Ms Lo, said, a balance must be struck. I ask the Minister to look again at the programmes for the sake of people living in houses that are in need of repair and upgrade, for the workers relying on Egan contracts, and for the people on waiting lists, while there are houses simply waiting for repair.

Photo of William Hay William Hay Speaker

As Question Time commences at 2.30 pm, I suggest that the House takes its ease until that time. The debate will continue after Question Time, when the next Member to speak will be Mr Molloy.

The debate stood suspended.

(Mr Deputy Speaker [Mr McClarty] in the Chair)