Off-site Manufacture for Construction (Science and Technology Committee Report)

Lord Borwick Excerpts

Wednesday 12th December 2018 Lords Chamber

[Lord Borwick (Con)]

My Lords, I first declare an interest, as noted in the register: I am a property developer with several ongoing housebuilding projects.

I welcome the report from the Science and Technology Committee. Off-site manufacturing is likely to be more economic, efficient, safe and automatable than traditional ways of building houses. Indeed, it ought to be the obvious thing to do. So I compliment the noble Lord, Lord Patel, the chairman of the committee, and the noble Lord, Lord Mair, for guiding us to choose this as a subject for our committee.

I used to manufacture London black taxis and was once told that each taxi off the production line was different from the last. That was not a compliment. It is important to communicate clearly that factory-made construction does not mean identical houses. On a car production line, you can change the colour of the paint and a whole lot more. Cars built to thousands of different specifications can come off the same production line. It is the same with houses. The major differences are often in the finishes rather than the underlying structure.

Noble Lords may remember the 1962 song “Little Boxes” by Malvina Reynolds and may be extremely grateful that I choose not to sing it for them—unlike David Templeman, a Member of the Western Australia Parliament, who can be seen on YouTube singing a Christmas song to his colleagues in Parliament. I remind them that the song satirises the growth of suburbia, with houses, or little boxes, of different colours,

“all made out of ticky tacky”,

which all looked the same. Noble Lords remember it.

There is a similar perception—only exacerbated by the move to off-site construction—of new-build housing in the UK now. We know this to be false and must make a more positive case for the wide range of products, styles, finishes, colours and results of modern housebuilding. Many Japanese houses are now built in this way. In fact, they are built on the foundations of the houses they replace. The buyers can pick a house from a catalogue, to the specification they want, and the whole process does not take too long to complete.

While it is important to stress that off-site does not mean uniform, we should also recognise that buyers of new houses are often different from buyers of houses generally. Those buying new houses are usually younger, often couples, and a lot of the time are buying because they are starting a family. They are often moving from a rented flat to a new house—a typical and lovely story. The demand of different buyers is similar: they are looking for their first home, something affordable, suitable for starting a family and a little more pleasing than the flat from which they are moving. If the demand is similar, it is unsurprising that the supply is similar.

Some of the concerns and worries about this, as mentioned by my right honourable friend in the other place, Oliver Letwin, are a little confusing. It is like grumbling about all the products across Marks & Spencer shops being similar. Of course they are: they are directed at a target market. It is the same at Lidl or Aldi. Their product ranges are similar because they are trying to sell products to similar markets.

The government response to this report maps out how they are already working to achieve many of the recommendations in it. But while a lot of it is welcome, there are also some areas that I would no doubt find laudable were I able to fully understand them. The trouble with the Government’s response is that, while the English may be elegant, hidden in the language is the possibility that they will achieve absolutely nothing. No doubt we should be pleased that this form of construction is included in the industrial strategy and the sector deal, but if we come back in future and nothing has happened, my noble friend and his department can still claim that as a triumph.

In the meantime, some practical steps can be taken to help drive the use of and improvement in off-site manufacturing. Specifically, the Government themselves could actually start buying these materials for their own projects. For instance, we were given evidence that prison building projects, though they may be the leader here, could make even more use of off-site manufacturing, as could nurses’ accommodation. The Department for International Development could use the methods for building projects overseas, ensuring that the manufacturing process is done here, with a “Made in the UK” stamp. Committing to that would certainly mean we could benchmark success. Does the Minister agree that the Government themselves using off-site manufacturing much more widely by the end of this Parliament would mean we could judge his department as a success or a failure?

Financing is an important issue that the committee examined in some detail. Of course, cash-flow patterns for a factory are different from those for a housing site. Off-site construction parts from a factory are paid for when they leave the factory, just like a car— except that in the car industry, stocking finance is a well-established financial services product.

Such finance is not so easy to obtain in the housebuilding industry. No doubt it will be available in 20 years’ time, when off-site manufacturing is more routine. That point was made in the report. The issue at present with this process is that we are probably in the dip of the so-called valley of death of innovation, and we are waiting to move back up the curve to the point where it works as a successful business model. Other countries, such as Japan and Germany, have already come up past that dip. While we negotiate helpful sector deals, we should also caution against too much intervention, too much bureaucracy and too many complex funding streams and quangos to administer it all. We should instead keep government action as practical as possible, and look to examples overseas of how best to let the industry thrive.

As I have said throughout, I welcome the developments in and potential uses of off-site manufacturing, the committee’s report mapping out a path to adopting it, and the Government’s willingness to adopt the proposals of that report. But there is something that we have not addressed, which unfortunately renders a lot of the good intentions, and even the good actions, somewhat futile. That is our restrictive planning system—one of the main reasons why we do not build enough houses. That is the reason why off-site manufacturing is not allowed to take off as we would like.

The planning system at the moment discourages any building from happening. It also discourages the use of building techniques that would make off-site manufacturing the game-changer it could be. One of the great advantages of off-site manufacturing is its flexibility. For instance, it would theoretically be easy to alter plans in order to change from a 3-bedroom building to a 4-bedroom building in the pre-construction phase. But our planning system would never allow that flexibility. Even on a planning-approved site, that kind of change would require a whole host of negotiations—on education, road traffic and more.

We have to build 300,000 homes a year. We must meet that challenge, and one of the best ways to do that is through the roaring success of off-site manufacturing. Again, I welcome the committee’s hard work in mapping out how this can happen.

Queen’s Speech

Lord Borwick Excerpts

Monday 26th June 2017 Lords Chamber

[Lord Borwick (Con)]

My Lords, when my noble friend Lord Colgrain asked me to follow his maiden speech, I had completely forgotten that he had not made one yet: quite a lot has been happening in Kensington recently.

Alastair Colgrain will make a fine Member of this House, as his maiden speech has proved, because he has that wide mixture of experience and skills that will enable him to thrive—not only experience as a financial services headhunter and farmer, but also early on as a policeman.

As a special constable, he told me that he was part of the line of coppers at the Trooping of the Colour, arm in arm holding back the crowds as they walked up the Mall to Buckingham Palace. I gather that two very young children, well trained by their parents that if they were lost they should find a policeman, toddled forward and grabbed Alastair by the knees. Holding tight to his trousers, they attempted to walk up the Mall, and were in danger of pulling down his police trousers, to the astonishment of the crowds and the amusement of his colleagues. His family motto is “Fac et Spera”—“Do and Hope”—an unusual motto for a banker, but perfect for this age of Brexit. We all welcome him.

In his Mansion House speech, the Chancellor said that,

“we must make anew the case for a market economy and for sound money”.

Unfortunately, he is right. Some young people have not yet got that point. Despite all the real-world evidence one could ever need, the results of the election and the recent campaigns on our streets show that there are still lots of people across the country who do not believe that free markets are a force for good. As well as making the case for free markets, it is also crucial that we do not react to the election result by simply turning on the taps, spending money we do not have. The budget deficit has come down from £152 billion in 2009 to £49 billion last year. That shows action was indeed taken by this Chancellor, and by his predecessor, to mend the broken public finances. However, it also shows that the job is not yet done. With more economic growth, we should be able to make further progress on this, and we should not be afraid to make the case for spending wisely. Public services need to be funded properly to ensure good quality, but we must also prioritise and save where we can.

Try as they might, no Government have taken more than 35% of GDP in tax in more than 50 years, according to the OBR. So if a Government want to massively increase taxes, we can conclude that people will take action. They can move elsewhere, or do less work. Calls for tax hikes to fund more spending are therefore misguided. We have probably hit the taxable capacity of this economy. We must remember that lower tax rates can actually bring in more revenue.

Corporation tax receipts are at record highs, tax rates having been continuously cut over the past few years. In fact, £56 billion came from corporation tax during the 2016-17 financial year. That was a 21% increase on the previous year. Let us not forget that in only 2008 the headline rate of corporation tax was 30% and it is now down to 19%. It is scheduled to be trimmed even more.

We know that much of the jobs growth has come from small firms and thriving entrepreneurs. It would be extremely damaging to hit those businesses with higher taxes. They would stop employing, stop striving and many may take their ideas and talents elsewhere. It is far easier to up sticks and relocate these days, and we should be encouraging entrepreneurship, not choking it.