Unscrupulous Builders

– in Westminster Hall at 10:58 am on 9th February 2011.

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Photo of Stephen Lloyd Stephen Lloyd Liberal Democrat, Eastbourne 10:58 am, 9th February 2011

Thank you, Mr Davies, for giving me the opportunity to speak in the debate. I welcome the Minister, and look forward to his response after we have all spoken.

As an officer of the all-party groups on ageing and older people and on consumer affairs and trading standards, I feel that the issue of unscrupulous builders is of the utmost importance and warrants the thorough consideration it will be given now. I come from a business background-I run a small company and have worked as a business development director in the corporate sector-so I am not a politician whose default position is, "Let's have more regulation." However, in the building and renovation trade, many rogue builders across the UK have been ripping people off for far too long.

In my judgment, something must be done, and the Government must take steps to protect vulnerable people from cowboy builders. There are three core issues to address: first, the routine targeting of the most vulnerable people in our society; secondly, the way that unscrupulous traders create an unfair marketplace and plague the legitimate building industry; and thirdly, how we can act to stop the proliferation of fraudulent work.

Recently, a rogue trader was convicted in my constituency. That was a good result considering how difficult it is to prosecute such criminals under current legislation. During the proceedings, it came to light that he had accepted cash and cheques from customers in Eastbourne for sums of up to £23,000. One of the victims was an elderly widower, which is not uncommon. He received redress from the television show "Cowboy Builders." The programme surprised my constituent by fixing the damage done to his property while he was in hospital recovering from a heart attack. That was a good deed and much appreciated, even if it was for the purposes of entertainment. Although we can take comfort from the happy ending to my constituent's ordeal, it is unacceptable that he felt compelled to turn to a television show rather than to the authorities. However, given the lack of adequate, robust legislation to protect citizens from such criminals, his decision is easily understood and was, frankly, wholly rational.

We have a duty to those whom we serve to do something about the weakness of the current legislation, and I hope that colleagues will join me in calling for a formal consultation into the merits of a compulsory licensing system for the construction industry. Gangs such as the group of Gloucestershire scam builders convicted and jailed in January for defrauding householders of nearly £1 million cannot be allowed to continue unabated. The three men involved conned more than 50 people in 14 counties, and I extend my sincere appreciation to Gloucestershire police, who worked tirelessly and diligently throughout the three-year investigation to bring the fraudsters to justice. I echo the sentiments of the detective chief inspector who led the investigation. He characterised the perpetrators as, "Criminals, pure and simple."

Such unlawful behaviour must be taken seriously. Consumer rights experts report an average of 100,000 complaints about rogue builders each year, and trading standards organisations reveal that £170 million is stolen from UK home owners by cowboy builders every year. We are told that 2.4 million people have had problems with cold-calling property repairers; it is imperative that we take action.

Photo of Mark Williams Mark Williams Liberal Democrat, Ceredigion

I congratulate my hon. Friend on securing the debate, and support the clarity that he seeks through a licensing regime. Does he agree that one of the strongest arguments in favour of that is the frustration shared by many of our constituents? One of my constituents, in pursuit of justice after an experience with a cowboy builder, has written to the Royal Institution of Chartered Surveyors, the Insolvency Service, the Property Ombudsman, the Legal Complaints Service and the Trading Standards Institute, but so far to no avail. I welcome my hon. Friend's attempts to bring some clarity to this area of concern.

Photo of Stephen Lloyd Stephen Lloyd Liberal Democrat, Eastbourne

I thank my hon. Friend for his extremely well-made intervention. I have heard about such cases again and again both in my constituency and as an officer of the all-party group for consumer affairs and trading standards. We are in a ludicrous position where criminals are ripping off people, often elderly people, up and down the country. However, because they are clever at using-or abusing-the law, it is almost impossible to pin them down and seek redress. That is an absurdity, and times need to change.

The issue is not simply about providing adequate protection to the public; the trouble caused by such activities is far-reaching and widespread. I know some tremendous local builders in Eastbourne, but the actions of the cowboy builders impede legitimate businesses and create an unfair marketplace for the many-the vast majority of builders, renovation companies and tradespeople who are wholly legitimate. The problem causes particular difficulty for the small firms that we are counting on to help bring us out of recession. Because the unscrupulous individuals who prey on the public operate outside the law, they often do not pay VAT. That gives cowboy builders an illegitimate financial advantage by enabling them to charge much lower prices-20% lower-than responsible legitimate companies, thereby distorting the marketplace and creating unfair competition.

That practice results in a significant loss of tax revenue, because much of the work that would be invoiced is currently paid cash in hand and is off the books, resulting in an enormous revenue loss to the Exchequer. Given the current economic situation, it would be foolish to pass up the opportunity to clamp down on such behaviour. It is deeply unfair to law-abiding citizens who pay their taxes to continue allowing fraudsters and charlatan building companies not to contribute their fair share. Beyond that, a further worry must be addressed. Around 80% of the informal economy-sometimes known as the black economy-is work undertaken by companies that are completely outside the tax system. I have already mentioned VAT, but such evaders are much more likely to avoid other key legal obligations, such as health and safety legislation. That puts their customers not only at a financial, pecuniary risk, but at physical risk.

Photo of Jim Shannon Jim Shannon Shadow DUP Spokesperson (Health), Shadow DUP Spokesperson (Transport)

Everyone has seen the programme, "Cowboy Builders", that the hon. Gentleman referred to. It illustrates that a small number of people will take advantage of vulnerable people. Does the hon. Gentleman feel that one way of monitoring and keeping an eye on things and regulating the system would be to use local government to oversee work and say whether it should be passed? Perhaps that would be one way of resolving the situation.

Photo of Stephen Lloyd Stephen Lloyd Liberal Democrat, Eastbourne

That is a good point. It is not the conclusion that I have reached, but it is a strong point. The challenge with local government oversight is that it varies a lot around the country. Some local authorities would make it a high priority, while others would not. It is an option, but the conclusion I have drawn is that the Government must start taking steps to look at a licensing proposal.

I am aware that there are already programmes to help regulate the construction industry and mitigate fears, and I do not wish to undermine the valuable work of organisations such as TrustMark and the National House-Building Council. However, those schemes are taken up mainly by large companies that operate at national or regional level, and they are not the problem. The administration and cost involved in registering with such schemes is a natural deterrent to the individuals and small firms that I, and many of my colleagues, want to help. Because the vast majority of substandard work is carried out by individuals or small gangs of rogue builders, the current measures are inadequate.

According to Local Authority Building Control, TrustMark has insufficient funding to deal with the problem. Therefore, we need serious consideration about how to proceed with more effective methods of regulation. The seriousness of the matter is heightened by the well-known target of the illegitimate traders-older people, who are often the most vulnerable in our society. An ageing population coupled with increased home ownership necessitates a Government response.

Between 1981 and 2001, the proportion of the population over 75 years old increased by more than 30%. The number of pensioners living alone increased by 150,000 between 1991 and 2002, and now accounts for 14.4% of all households. That means that there are now more than 5 million pensioner-only households. Let me be clear: MPs in the House know that unscrupulous builders target vulnerable, often elderly, people. That is a growing market, and unless something is done, those builders will have ever more opportunities to rip people off.

Numerous investigations have shown that unscrupulous builders are taking full advantage of the gaps in our legislation and our rising pensioner population. Crooked salespeople are commonly overbearing, persistent and totally unscrupulous. That is a particular problem for older people, as they often live alone and are trapped by such intrusive door-to-door sales techniques. Once a salesperson is in their home, a vulnerable individual has limited means by which to end the transaction. The option of asking someone to leave is not always available to them because many home owners feel too intimidated in that situation to broach things so directly. That may sound absurd, but our experience as Members of Parliament, dealing with a large amount of casework and listening to constituents, who are often elderly, means that we know that they will be too frightened to ask the cowboy builder to leave.

When hard-sell tactics are used, many individuals feel trapped in their homes and have nowhere to retreat, leading to increased pressure and a desire to rid their home of the unwanted guests as quickly as possible, often-crucially-by accepting the service being offered. In fact, there are even reports of people being driven to their bank immediately to draw out large sums of money when faced with threatening demands.

Photo of Stephen Gilbert Stephen Gilbert Liberal Democrat, St Austell and Newquay

I am grateful to my hon. Friend for securing a debate that is important to constituents from throughout the country and represented by hon. Members on both sides of the Chamber. Does he agree that one way in which we could consider regulating the sector is by extending what we have done with the gas industry to the building industry? The Gas Safe register gives older people confidence that the engineers coming into their home are qualified and professional.

Photo of Stephen Lloyd Stephen Lloyd Liberal Democrat, Eastbourne

I thank my hon. Friend for his intervention. That is a good idea as long as it is managed properly. My concern is that it might end up a bit like TrustMark. Many people do not know about that scheme and even among those who do know about it, there is some concern that it is not robustly policed. I like the idea, but we have come to the point when we need to introduce licensing. I will explain how I propose that we fund it.

In my judgment and that of many others, none of the current legislation is able sufficiently to protect the public from such threats. I hope that hon. Members will forgive me because I am going to give them a bit of a history lesson. The Pedlars Act 1871-that is a wonderful phrase; "the Pedlars Act"-excludes virtually all callers involving property maintenance and repairs. The cancellation of contract concluded away from business premises section of the consumer protection regulations is an important statutory consumer measure, but it will generally offer little or no protection from criminal practices when the traders' names and addresses are not known. Large amounts of cash change hands, yet there is no intention of operating in a fair manner. That is absolutely appalling. It is systemic and we simply cannot let it continue. Section 16 of the Theft Act 1968 has left a loophole in legislation, as its definition of theft covers only actions when a person, by deception, dishonestly obtains property belonging to another with the intention of permanently depriving the other of it.

Cowboy builders are fully aware of the flaw in consumer protection and know that as long as they carry out at least some activity, the incident will be classified as a contractual disagreement and therefore not a criminal offence. Prosecution of those perpetrators is very tough, as the necessary evidence is often very difficult to obtain; I could go on and on. That is why the market has been expanding and the actions of those deplorable individuals have got bigger every year. They know the law is an ass.

There is a logistical problem for any witnesses asked to stand up in court and face those who wronged them. That is a particular concern when the victims are already among the most vulnerable. It is another reason why action must be taken to halt the spread of these fraudulent criminals.

I am coming to the end of my speech because I want to give the Minister plenty of time to reply. In raising these issues, I make it absolutely clear that I do not want to cast aspersions on the legitimate business men and women who provide an important and welcome buildings and renovation service to many people up and down the country. In my constituency, a noted builder, Ellis Builders, has given me advice on how I can present and pitch a proposal in a way that will work for legitimate builders. I appreciate the support that its managing director, Derek Godfrey, gave me.

We must consider the possible courses of action open to us and the ways in which we can aid genuine tradesmen and end the scourge of rogue builders. Naturally, a central aspect of any reform would have to be an increase in public awareness. The public must know how to confirm whether the workers being hired are legitimate. One reason why the current voluntary schemes are ineffectual is the lack of public knowledge surrounding programmes such as TrustMark. I believe that to make any significant advance in protecting the well-being of individuals, it is critical that we provide one clear method for assessing the competence of a building tradesman. On that point, I agree with the National Federation of Roofing Contractors and join it in advocating a means of appraisal that will provide confidence that the tradesman or woman in someone's home is competent, trustworthy and reliable.

There are many ways in which that may be achieved. Successful licensing schemes already operating in Australia and the US could provide a useful starting point for the consultation that surely must follow this debate. However, at such a difficult time for our economy, I appreciate that we must be extremely careful not to overburden a crucial sector of that economy-construction. It is necessary to strike a careful balance. We need to provide regulation and protection for the consumer on the one hand without disproportionately increasing costs or deterring compliance on the other.

It is time to consider seriously a national licensing scheme. The fee need not be too expensive. It could be £500 per annum and tiered, with smaller companies paying less and larger ones more. Any legitimate builder would see that as a worthwhile investment in their business. It would give the public the security of knowing that a builder was licensed. They could say to someone, "Do you have a licence?" If the answer was no, they could say, "You won't be doing any work in my home." If the answer was yes, they could open the door. In my judgment, that sum, if it was tiered as well, would be sufficient to fund a licensing body.

We cannot keep sweeping this issue under the carpet. The legitimate building trade-companies of all sizes-deserves more. The public deserve more. We can do more. To misquote the great and one and only Gary Cooper, "It is time to run the cowboys out of town."

Photo of Edward Davey Edward Davey The Parliamentary Under-Secretary of State for Business, Innovation and Skills 11:17 am, 9th February 2011

I congratulate my hon. Friend Stephen Lloyd on securing the debate. I thank all hon. Members for contributing. Listening to my hon. Friends the Members for Ceredigion (Mr Williams) and for St Austell and Newquay (Stephen Gilbert) in particular, it was clear that this issue affects many of our constituents. I can confirm that it has affected my constituents. I represented one of my own members of staff on this issue. She ended up having to use the TV programme dealing with cowboy builders to sort out the problem. Through dealing with that, I understood how difficult these problems can be. My hon. Friend the Member for Eastbourne was therefore right to bring the issue to the House. Although I do not agree with his proposal for a compulsory licensing scheme, let me say up front that I hope that when he hears some of my other remarks, he will know that the Government take the issue seriously, along with many other consumer affairs where there is consumer detriment. Some of the general reforms that we want to make and the general research that we are undertaking will help to ensure that this issue and others like it can be better dealt with in future.

Let me say for the record, and so that my hon. Friend understands why I am less attracted by his proposal, that there are issues of practicality and proportionality, which I know that he, as a small business person, will be very mindful of. Many people are employed in the construction industry. The UK construction industry is one of the largest in Europe, with more than 2 million people employed and 200,000 businesses. That gives a sense of what a compulsory licensing scheme would have to do and the sheer scale and size of it. That would bring with it costs and complexity.

As my hon. Friend rightly said, some rogue, cowboy builders behave appallingly, but we must balance a number of issues as we put together our measures, and I hope to reassure him about those measures in the course of my speech. I am sure that he will agree that the vast majority of people operating in the construction industry do good jobs, work hard and perform well. We are talking about a relatively small number of rogue traders, and the question, therefore, is whether we put huge cost and complexity on 2 million people and 200,000 businesses to target that tiny minority. I say that not least because it is unclear whether a compulsory licence scheme would deal with the rogues who tend to work outside the system. One would have to be sure, even under my hon. Friend's proposals, that the enforcement measures were such that one could catch these people. I have some concerns about such issues, not least when they are married to the costs and complexities that would come about under such a scheme.

Let me reassure my hon. Friend about one or two points that came up in the debate. We want a proportionate scheme. Through licensing and regulation, we want to target those trades where there is a high risk to public safety, and my hon. Friend's points about health and safety were extremely well made. That is why the gas safe register scheme, which used to be known as the CORGI scheme, is important. It deals with the technical competence of people who ply their trade. There is also the competent persons scheme for electrical work. Clearly, gas and electricity raise other issues, and we need to ensure that they are properly regulated. However, it would be disproportionate to have similar schemes for the work done by painters, decorators and others.

I hope my hon. Friend realises that we are trying to take a proportionate approach that ensures that while legitimate businesses doing a fantastic job are not penalised with costs, measures are targeted on the real cowboys. If my hon. Friend looks at the legislative framework, he will see that it is designed to clamp down on underhand practices. The Supply of Goods and Services Act 1982 requires traders to provide a service with reasonable care and skill, in a timely manner and at a reasonable cost. The Government are examining how the Act might be modernised and simplified so that consumers have a clearer understanding of their rights, including their rights to redress when they have experienced shoddy workmanship or paid for goods that turn out to be defective. I hope that that work will lead to ideas that improve the situation.

The general consumer rights set out in the Act are accompanied by specific legislation to protect consumers from unfair selling in their own home. Builders, of course, fall within the scope of those provisions. The Cancellation of Contracts made in a Consumer's Home or Place of Work etc. Regulations 2008-I am sure my hon. Friend is familiar with them-give consumers the right to cancel a contract they have signed without penalty within seven days. That cooling-off period is a valuable protection, especially for those who may have felt pressurised into agreeing to have work done as a result of the tactics of an unscrupulous builder. My hon. Friend will note that those regulations came in in 2008, and they are still being rolled out, so an understanding of them is still developing among many trading standards officers and the wider public. Those measures are in place, however, and I think that they will be increasingly effective.

As regards other protections given to consumers, it is important to ensure that the enforcers-at national level, it is the Office of Fair Trading, but there are also local authority trading standards officers-have the right tools at their disposal to deal with dodgy builders. The Consumer Protection from Unfair Trading Regulations 2008-again, they are relatively recent-give the enforcement bodies more effective means of tackling unscrupulous practices and rogue traders. Indeed, they ban traders in all sectors from unfair commercial practices against consumers, particularly in relation to the sale and marketing of services. They set out broad rules, which enforcers can use to determine whether a practice is unfair. As I said about the other set of regulations from 2008, these regulations are still relatively new. Trading standards officers are beginning to use them and beginning to understand their use. The regulations are spreading best practice. These tools have come into the toolkit relatively recently, and they will help. They also ban any commercial practices that use harassment, coercion or undue influence that is likely significantly to impair the average consumer's freedom of choice in relation to goods or services.

If we take those various measures together, it is clear that the legislative framework is quite robust, but I would not claim that it is perfect, and we always need to think about how it could be improved. That is why the Government support a project being undertaken jointly by the Law Commission and the Scottish Law Commission to examine how private law might be reformed to provide consumers with a clear, simple right of redress when they are victims of misleading or aggressive selling. My hon. Friend may be aware of that because it comes from a Liberal Democrat consumer document called "Are you being served?", which he may have read before the election.

In addition to providing effective remedies for people who have suffered at the hands of rip-off builders, it is important that we put resources into preventing problems from occurring in the first place. At the end of last year, we announced £3.2 million of funding for scambuster teams so that they can continue the fight against rogue traders and builders who deliberately set out to defraud consumers. The fact that we have been able to continue this important work, despite the tough choices that we have had to make elsewhere, is a clear sign of how important we think this issue is. Rogue builders and others who prey on vulnerable and elderly people will not be tolerated, and scambuster teams will lead the fight against them. My hon. Friend valiantly champions the needs of elderly people in all areas of public policy, and I hope that he will talk to scambuster teams in his area to ensure that constituents who are occasionally preyed on by rogue builders are aware of the teams' work.

I appreciate that it can be difficult for consumers to judge whether a builder is genuine. For extra peace of mind, therefore, they can look for tradespeople who belong to approved traders schemes. This is where the TrustMark scheme, which has been mentioned, comes in. TrustMark is an easy way for consumers to identify a builder who has agreed to abide by industry standards of competence and fair trading and to be independently inspected to ensure that they are meeting those standards-the point my hon. Friend made about enforcement. Those in the industry who are approved by one of the operators of the TrustMark scheme are independently inspected, which can give people reassurance. This is a free service to the consumer. Last year, there were 3.5 million inquiries, with people checking out builders and other tradespeople. My hon. Friend is right that we need to raise awareness of the scheme, but the 3.5 million inquiries last year suggest that an awful lot of people are aware of it. That awareness is growing, and we need to continue to help it grow. In addition to the TrustMark scheme, many local authorities run assured trader schemes in their areas to help residents find trustworthy local builders. Again, I would encourage consumers to use those schemes wherever they exist.

The debate is timely because we need to ensure that colleagues across the House and others who are interested in this issue know that the Government take it seriously. As we look at general consumer legislation and do a lot of detailed work on it and the consumer landscape, we will be thinking about the difficult cases that have been mentioned. In the back of our minds, we will be thinking about how provisions will apply to cases in which constituents have been very badly done by. I give my hon. Friend my assurance as consumer affairs Minister that the Government will bear such cases in mind as we review the legislation- indeed, we are doing that very actively.

I reassure my hon. Friend that regulations are now in force-I admit that they are very recent-and that they will assist our work. I assure him that TrustMark is a very good scheme, and I would encourage hon. Members to promulgate it, and local authority trader schemes, when they talk to constituents.

I thank my hon. Friend once again for bringing this matter to the House. Although I have not been tempted by the compulsory license scheme that he so eloquently proposed, I hope that I have reassured him that many other measures that are in place, or which we are considering, will have a good effect on the problems that he raised.

Sitting suspended.