Construction Industry

Lord Jackson of Peterborough Excerpts

Tuesday 28th June 2011 Westminster Hall

[Chris Williamson]

My hon. Friend makes a central and pertinent point. The confusion that has been brought about as a consequence of the Localism Bill has created a real problem. I do not particularly want to make a partisan point here, but I was disappointed in the debate on the Bill that Government Members were queuing up to say how the measures would enable them to stop housing developments from taking place in their local areas.

[Mr Stewart Jackson (Peterborough) (Con)]

I apologise for my late arrival to this debate, Mr Caton. Circumstances beyond my control meant that I could not get here on time, so I sincerely apologise.

Let me take the hon. Gentleman back to regional spatial strategies. He will no doubt be aware that in August 2009 the then shadow spokesman for Communities and Local Government, my right hon. Friend Member for Meriden (Mrs Spelman), wrote to council leaders and developers indicating that an incoming Government would probably scrap the regional spatial strategy and that they should continue with plans to build, but based within a context of working with local authorities in developing local development frameworks. There was never a moratorium on building. That was just a different way in which to pursue the same ends—to build more homes for people who need them.

[Chris Williamson]

The real problem is that the housing targets offered some cover for local authority planning departments and planning committees. With those targets gone, they are much more exposed. As we have seen up and down the country, they have come under pressure from people who do not want to have their view spoiled or who do not want to see new housing developments. None the less, we all know that new housing is desperately required. But now local authorities will be much more exposed, because they cannot refer back to the regional targets set by Government. I know that the RSS was not perfect, but I genuinely believe that local authorities and in particular locally elected representatives need some additional support to help them to drive through the new housing that is needed throughout our country.

I want to say a little about the contribution that the construction sector makes to the wider economy. A thriving and vibrant construction sector has a significant and beneficial knock-on impact on the wider economy, not least because 80% of the materials that are procured by the construction industry are procured from within the UK, which creates an additional stimulus outside of the construction sector itself.

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[Mr Stewart Jackson (Peterborough) (Con)]

It is a pleasure to serve under your chairmanship for the first time, Mr Caton, and to be able to contribute to this very important debate.

I pay tribute to the hon. Member for Liverpool, Walton (Steve Rotheram). We perhaps do not have much in common politically, but we both represent cities that have a district called Walton at their heart, so there is some agreement across the Chamber. I spoke on regeneration for Her Majesty’s Opposition in the previous Parliament, and during a visit to Liverpool—to north Liverpool, Rock Ferry and Bootle—in 2009 I was struck by the positive and good work undertaken by the Liverpool NewHeartlands pathfinder scheme. From what I heard of his speech, the hon. Gentleman put his case this morning confidently and reasonably, and I will try to pick up on some of the issues that he has talked about.

I particularly want to look at the wider context of construction, because it strikes me that Opposition Members are not giving due credit to some of the things that the Government have done in the 15 months of this coalition Administration. They do not concede that in 12 or 13 benign economic years, with incremental growth, there was still failure to deliver the appropriate results in the construction sector. An average of 145,000 new homes were built between 2000 and 2010, but in 2009— the last year for which figures are available—only 103,000 housing completions were delivered, which is the lowest number since 1923, and that was, coming back to the point that the hon. Member for Derby North (Chris Williamson) raised, with the regional spatial strategy.

The regional spatial strategy was not a panacea or an answer to the conundrum. It did not deliver what it was meant to. There might have been elements of localism, and some stasis in planning departments, in the competence of councillors and in the willingness of people to use the existing legal system to block such development, but the bigger question is: “Were we building the right homes in the right places?” Between 1997 and 2005 we built 117,000 homes in the east and south-east, on the flood plain, and we need to look at that. Were we building the appropriate quantity of homes, and on what demographic basis?

[Chris Williamson]

Will the hon. Gentleman at least concede that before the unprecedented worldwide economic downturn the regional spatial strategy was making a positive contribution? The number of new housing starts in the past year has fallen again to a new record low, so the policies being pursued by the Government are not working. Will he concede that the economic downturn is the biggest reason for the reduction in the housing stock, and not the regional spatial strategy?

[Mr Jackson]

The hon. Gentleman is persistent, not least in his aspirations for Derby to host the green investment bank. I have to tell him, regretfully from his point of view, that Peterborough got in first, and we have a good chance because we are an environment city with excellent transport links—we are a sustainable bus city. However, I must not stray too far from the locus of the debate.

What the hon. Gentleman says is not necessarily true. If we look at the first quarterly figures on private sector housing starts, yes, they are patchy but we are looking at an upward trajectory, certainly in the eastern region and also possibly in the east midlands and other parts of the country. I accept that there will be a difficult time, because historically this is the worst period that the construction industry has suffered in the past 60 years.

[Gordon Banks]

I have worked in the private housing industry for a significant time, and I think that it would be an experience for the hon. Gentleman to make a journey up to Scotland to see the absolute decimation of the private housing sector there. Major developers are releasing four or five plots for development at a time, where 10 or 15 years ago there were four or five completions per week. The housing industry in the UK, and in Scotland in particular, is as far down on its knees as it can get.

[Mr Jackson]

The hon. Gentleman will therefore support the views of the Government, and particularly those expressed in the ministerial statement issued by the Secretary of State for Communities and Local Government on 23 March, which focused on a presumption in favour of sustainable development, encouraging developers to question local planning authorities vis-à-vis section 106 and the financial viability of each development.

[Gordon Banks]

I do not think that the hon. Gentleman has been listening to the debate. The driver behind the private housing sector is bank finance and mortgages.

[Mr Jackson]

If the hon. Gentleman will allow me to proceed, he will hear my comments on that in due course.

I agree with the premise of the financial importance of the construction sector. It is certainly the case that there is a multiplier of £2.84 to every £1 invested in the construction industry. I also agree that we have a social and economic responsibility, and the Government see it as such, to tackle the historically high levels of people on social housing waiting lists—currently 1.75 million. That concentrates our minds, whichever constituency of the country we represent. We must not be too churlish, however, about what the Government have done. The new homes bonus, which we developed while in opposition, is a fiscal incentive, to encourage local authorities to build appropriate housing, and because it is based on council tax bands rather than on capital values, it builds in a predisposition for quality homes at the same time as paying due regard to the need for social housing.

[Chris Williamson]

Is the hon. Gentleman aware that when this matter was considered by the Communities and Local Government Committee, all the expert opinion was that the new homes bonus simply would not work and that it needed an overlaid target? The hon. Gentleman throws his eyes into the back of his head but that was what they said. They were unanimous. All the expert opinion was that the bonus would not work without an overlaying of a national target system.

[Mr Jackson]

We all know that there were limits to the concept of localism. It would be foolish for any Secretary of State or any Minister in the Department for Communities and Local Government or the Department for Business, Innovation and Skills to say that they could second-guess the development control—to use the old term—or the planning policy of each of the 400-odd local authorities. In densely populated areas of the south-east of England local authorities might feel that they have reached an equilibrium in quality of life and do not want more house building. There are large parts of the north of England, however, for example County Durham, Northumberland and the north-west, where better quality housing perhaps is needed.

[Susan Elan Jones]

Will the hon. Gentleman give way?

[Mr Jackson]

If the hon. Lady will forgive me, I will not give way for the time being because I have quite a few points to make and others might wish to speak. I will let her in later.

It is not possible to design a system that delivers the same result in every part of the country, and the experts the hon. Gentleman mentioned will be disproved, I believe, by the impact. Six years’ matched funding for infrastructure, giving genuine fiscal power to local authorities, will deliver, using the market mechanism, the right kind of quality housing in the right place. None of us can prejudge that until we have seen it in action. The new homes bonus will work, based on a council tax band D of £1,414, and the Home Builders Federation projects that that will bring £1.2 billion into local authorities each year. That is income to the local economy of each authority that builds new homes, which can only be good, and it is 215,000 jobs.

The wider context of the Government’s construction policies is about rebalancing an over-reliance, in some parts of the country in particular, on the public sector, and trying to encourage, with tax policies and a regulatory regime, more private sector growth in jobs. We have already begun to see that. We are not steaming ahead with the creation of private sector jobs, but the trend is in the right direction, and I expect more jobs to be created in the construction industry.

[Mr Charles Walker in the Chair]

The Government’s plan for growth, published in March at the same time as the Budget, introduced significant changes that will help the construction industry. Of course, it makes a presumption in favour of sustainable development, and the wording was criticised for being opaque, but it is now in place and subject to consultation and discussion. The national planning policy framework is coming forward. I have some concerns about it. I am particularly mindful of the possibility of a watering down of the primacy of town centres over out-of-town shopping centres, and the Treasury needs to be mindful of it too. It is all very well creating Asdas and Tescos on the fringes of towns, but that effectively destroys the viability of niche retailers in town centres.

Generally, however, the national planning policy framework will de-clutter the governance of planning, which can only be good. The hon. Member for Liverpool, Walton is right that certainty and the ability to plan properly are absolutely integral to a successful construction industry. That is why this Government’s remit includes simplifying generic planning policy.

To my mind, we are not going fast enough in piloting local land auction models, but we are going in the right direction. Public land will be the first to be auctioned. There is a myth about the availability of land, and a lack of available land clearly contributed to the overheating of the housing market between 2006 and 2009. However, even in the south-east of England, only 12% of land is used for housing, and 10% is used across England as a whole.

The conversion of commercial premises to residential premises and a duty to co-operate would meet some of the objections made by the hon. Member for Derby North about regional spatial strategies. The Local Government Association and others, including KPMG in its report on regional governance, found that regional development agencies did not alleviate differences between regions, or even within regions. He will know that there is a world of difference between Rutland and Melton and inner-city Nottingham or Derby. We as a Government believe—I cannot speak for the Minister—that there are sub-regional economies that were not reflected in regional development agency boundaries. We believe that it is much more practical and flexible to consider a duty to co-operate, particularly in the development of infrastructure.

We are proceeding with a major infrastructure planning system overhaul and consulting on the liberalisation of use classes as a way forward, but the hon. Member for Ochil and South Perthshire (Gordon Banks) is absolutely right that the principal issue is mortgage finance and the capital available for the development of housing. None of us can deny that—it is absolutely the case—but he must concede that the Minister for Housing and Local Government, my right hon. Friend the Member for Welwyn Hatfield (Grant Shapps), did an extremely good job in raising with the Treasury the importance of not throwing the baby out with the bathwater in terms of the Financial Services Authority’s mortgage market review. Both the Chancellor and the Secretary of State for Business, Innovation and Skills are mindful that the FSA review must get the balance right. Without reckless spending, they must make available the mortgage moneys that young people need to buy their first property.

To give my own local authority a plug and pay tribute to it, Peterborough city council voted just last week to put £10 million aside for a local authority mortgage scheme. Without wanting to be too partisan, I must say that I am slightly disappointed that the Labour group on Peterborough city council has seen fit to call in that decision, which will delay the process of getting young people the finance that they need to buy property. Not everything that the previous Government did was wrong. The HomeBuy Direct scheme was good, and we have built on it pragmatically and practically with the Firstbuy scheme, which will put about £1 billion into the system and help 10,000 first-time buyers.

The other issue is the planning system. We cannot get away from the fact that the planning system in this country can be construed as dysfunctional. One hears anecdotes all the time. Developers bring an expensive, costed plan for the development of a few hundred houses to a planning department and an officer says, “Yes, that’s a good plan. We can run with that.” He leaves, and another officer comes in and says, “Hmm, I don’t really like the aesthetics. Will you do it again?” Time is money, and that takes an enormous amount of time. It is extremely frustrating, and it is not fair on shareholders or on the people who want to buy the new houses.

We must develop a way to break through the shroud of mystery around town planners, as we used to call them in the old days. They are a bit like hospital consultants: “Don’t question my professionalism on this.” However, it matters to economic growth and people’s jobs and livelihoods that planners expedite decisions. We must develop a way to incentivise them to get inherently viable projects off the ground. They must work much more closely with developers on things such as section 106 and focus on the affordability of individual projects. The evidence that has been presented shows that it is complex. Some supplementary planning documents for large-scale developments can take 18 months to two years. With core strategies, site allocation plans and consultation on local development frameworks, the process can be frustrating for developers. We must find a way to simplify the system.

A report by Michael Ball of Reading university, “The labour needs of extra housing output”, suggests that the costs associated with development control could be up to £3 billion a year. That is not acceptable if we are committed to a pro-growth agenda. Since January 2005, 3,250 pages of national planning policy guidance have been issued. The complexity and cost of development are significant. The hon. Member for Derby North made the point that the gross cost of regulation, the cost of construction and the market price of floor space are significantly greater in London and other UK cities than elsewhere.

I am being admonished by you, Mr Walker, to conclude my remarks, but I will say that we need to see construction policy holistically. We need to consider residential real estate investment trusts and what the Treasury can do to simplify them. We need to consider how EU procurement rules affect large-scale regeneration. We need to consider brownfield remediation to make it simpler for construction companies to build. We need to encourage special purpose vehicles through the tax system so that local authorities can work with developers. We need to push forward tax increment financing so that there is a fiscal incentive to regenerate town centres and other areas. We also need to concentrate on empty properties.

We must find a way to deal with land banking by people who hold land but will not release it—

[Mr Charles Walker (in the Chair)]

Order. We must find a way of concluding this speech as well, Mr Jackson.

[Mr Jackson]

I am happy to conclude my speech, Mr Walker, with three brief points. Developers must engage properly with local authorities and local planning authorities, and with politicians here in Westminster, to lobby hard for changes in the Budget next year. Mortgage providers must provide more flexible mortgage products. We must also concentrate on developing the right houses in the right places at the right price. There is a wider issue, which is not just a local issue of building.

My final point concerns apprenticeships. This Government have a good record on apprenticeships and announced 50,000 new apprenticeships in the Budget. That will be an integral part of growing and enhancing the construction sector.

[Mr Charles Walker (in the Chair)]

The Front-Bench spokesmen have about 10.5 minutes each.