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Mr. Aitken : My hon. Friend the Minister of State for the Armed Forces has considered the matter carefully, but, to date, we have concluded that there is no single cause of the difficulties to which the hon. Gentleman referred. The hon. Gentleman's point is inappropriate to this debate.

My hon. Friends the Members for Rutland and Melton (Mr. Duncan) and for Worcester got to the kernel of the debate--whether the creation of a new sub-Department of Government is a good idea. My hon. Friend the Member for Rutland and Melton asked about the risks of such a proposal leading to bad government. He was scathing, as I have been, saying that action rather than jargon was required. We are getting action and I enjoyed the best phrase of the debate--that any such designated Minister would be a postman with a red box but without a red van. I enjoyed that very much.

My hon. Friend the Member for Worcester raised the philosophical question that lies at the heart of the issue : should we treat ex-service men differently from other members of society ? As he said, they are in a unique category, but should their special status demand a change in the machinery of government ? My answer to the thrust of the argument of the hon. Member for Thurrock is that, at first glance, it sounds attractive and interesting, but the attraction of establishing a single focal point with responsibility for all the needs of ex-service personnel is superficial. Like my hon. Friends the Members for

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Worcester, for Rutland and Melton and for Hertfordshire, North, I am not sure that that is a practical option or that it would result in better service for those personnel.

A new Department, sub-Department or special unit devoted exclusively to ex- service affairs could not resolve all the problems experienced by ex- service personnel. It would have no executive responsibility or power. As my hon. Friend the Member for Bromsgrove asked, what authority would a Minister have who was just designated and who did not have proper departmental powers ? He would have a nice title and a nice red box, but he would have no clout and no authority.

Ex-service men and women would still have their various health, housing and pension concerns dealt with by the specialist organisations, such as the local authorities or the War Pensions Agency, as at present. The co- ordinating body or sub-Department envisaged by the hon. Member for Thurrock could only, as has been said many times, act as a post office between ex- service personnel and the appropriate executive authority. That approach would simply add another small tier of administration and bureaucracy to the present system.

I am sure that, on reflection, few if any veterans would really want that. In parliamentary terms, the Minister concerned would find it extremely difficult to answer to the House for areas falling within the responsibility of other Departments, and the initiatives and services that I have already outlined and to which we attach considerable importance could be undermined.

The hon. Member for Thurrock began his speech with some references to Belloc. I commend to him another set of lines by Hilaire Belloc :

"And always keep a hold of Nurse For fear of finding something worse."

That may be the answer to the hon. Gentleman.

One central fallacy ran through many speeches--the curious reference to the 17 Government Departments. That phrase crept into the circular sent out by the Royal British Legion. The word processor has whirred and the phrase has entered into the folklore of the debate. It presents a picture of the confused and oppressed veteran, lost in the Whitehall jungle wrestling with 17 different Departments. That is not merely an exaggeration, but a complete caricature. Almost nobody in the country wrestles with 17 Government Departments unless he is a Member of Parliament or the Cabinet Secretary

Mr. William Ross : Or the Prime Minister.

Mr. Aitken : Or the Prime Minister.

The man on the Clapham omnibus--or the man in the Thurrock Royal British Legion club--would rarely have direct dealings with more than one or two Government Departments at the most. The notion that a veteran with a welfare problem has to bear in mind the Foreign Office, the Scottish Office, the Department of Trade and Industry, the Duchy of Lancaster, the Department of National Heritage and the Welsh Office is a glorious fantasy, built up by the word processor and recycled phrase after phrase. Even the hon. Member for Swansea, East (Mr. Anderson) used it with carefree irresponsibility. It is actually a reckless fantasy.

Unless something extraordinary is involved, the confused veteran will not find himself dealing with 17 Government Departments. However, it seems to be the

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basis of the case that we need a co- ordinating Minister to help the poor, lost veteran wrestle with 17 Government Departments. That idea does not stand up to serious examination and that is one reason for being less than sympathetic to the call so persuasively made today. I now take up the theme of the speech by my hon. Friend the Member for Worcester--the philosophical point about how much separation there should be of ex-service men from other members of society, especially those who have also served in dangerous situations. The number of people who have served in the armed forces is diminishing as a proportion of the total population and will continue to do so as the size of the services is reduced. It is therefore all the more important to ensure that the services remain integrated with the rest of the community.

The results of cultural isolation, administrative isolation or special status would be bad for society and bad for the services themselves. For the Government to set up machinery to deal with veterans' matters quite separately could run the risk that none of us wants--that of helping to create a division between people with military connections and the remainder of society.

For that reason and for the practical reasons on which I have dwelt, I firmly believe that welfare provision for the ex-service community should continue to be integrated with that for the nation as a whole. That is not to say that we should not look for improvements. We should always wish to improve our administration, but not necessarily by creating a new tier of administration for service men and women--improvement and expansion are not the same thing.

Our door is open to the Royal British Legion and other service organisations for further discussions. We would welcome a dialogue with them about administrative improvements and how best to make them. Certainly, we would always want such improvements. We are all in favour of greater co-ordination and co-operation on service men's affairs within government. However, for the reasons that I have tried to outline I cannot share the touching faith of the hon. Member for Thurrock in the efficacy of appointing a special Minister. We would be in danger of entering Jim Hacker territory--we want more administration, therefore we want a special administration unit to administer what is already being administered. I do not think that a sub-Department of state or even only a designated Minister would add up to any meaningful progress or improvement.

In a rather charming phrase, the hon. Gentleman suddenly said, "The nature of this debate is bouncing ideas off one another, is it not ?" We have had a morning and afternoon doing just that. It has been a good House of Commons occasion and some good ideas have been floated. I do not wish to sound wholly negative. We have listened carefully to several of the points that have been made from both sides of the House. We will think about what has been said. I am afraid that I cannot go as far as the motion or the hon. Gentleman suggest, but I am grateful for the debate and for the opportunity to reiterate our commitment to good administration and good government for our ex-service men and women.

Question put and agreed to .


That this House, mindful of the increasing needs of the United Kingdom's ageing ex-service population and the many problems of younger members of the ex-service community in direct consequence of Options for Change, considers that there is now

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a pressing need for a sub-Department of Ex- Service Affairs within an existing Ministry and with a designated Minister to be responsible, as the only fundamental and long-term solution for the care and welfare of ex-service people and their dependants ; and calls upon Her Majesty's Government now to respond positively to the Royal British Legion's urgent call for a sub-department to be established.

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Property Markets

1.41 pm

Mr. Peter Thurnham (Bolton, North-East) : I beg to move, That this House recognises that confidence within property markets and the construction industry is important to ensure sustained economic growth ; considers that reforms of both the commercial and domestic property markets, and contractual arrangements within the construction industry, are essential to stimulate urban vitality and redevelopment ; acknowledges the decision by the Lord Chancellor that reform of privity of contract is necessary ; and calls upon Her Majesty's Government to introduce early legislation to enact its policy on these matters.

I congratulate the hon. Member for Thurrock (Mr. Mackinlay) both on his good fortune in coming first in the ballot and on having had such an excellent debate at this important time when we commemorate the heroic deeds of 50 years ago. I am grateful to him for leaving sufficient time for me to introduce my motion. I am not sure whether there will be time for my hon. Friend the Member for Stamford and Spalding (Mr. Davies) to speak, but I shall be as brief as possible. The motion originated from my interest in the issue of privity of contract, but it is drawn much wider than that. It embraces the importance of property markets and the construction industry. I am delighted to see the Parliamentary Under-Secretary of State for the Environment--my hon. Friend the Member for Banbury (Mr. Baldry)--in his place. His work for the construction industry should be highly commended. Indeed, he has been described to me as the best Minister that the construction industry has ever had. I am not sure what will happen in the forthcoming reshuffle, but I hope that his very good work will be amply noted and that the importance of the construction industry within the Department of the Environment will continue to be given every priority.

In stressing the importance of markets, I was delighted this week to read a pamphlet by my hon. Friend the Member for Havant (Mr. Willetts) entitled "Civic Conservatism". In it, he stresses the importance of the markets, and I shall quote briefly from his brilliant exposition. He lucidly articulates the points that I had in mind in tabling my motion. The pamphlet states :

"The tragedy of 20th Century Britain has been the way in which the state has taken over and then drained the life blood from a series of institutions which stood between the individual and the government." It also says :

"But equally we seem not to understand our own history and perpetually to fall a prey to the belief that we need our government to intervene to protect us from these dark, hostile, outside forces. As a result we are always on the lookout for the threat from market forces and are remarkably slow to see the greater danger posed for our civil society from the encroachment of the state."

It gives the following example :

"If we move on to look at the 1950s we can see the national mood was extraordinarily sensitive to fears about the damage done by free markets and remarkably relaxed about the damage done by big government. The pundits feared that commercial television was going to threaten our national culture. Looking back we can see that it was the destruction of the old communities by the enormous new public sector housing estates, a bipartisan policy trusting to big government, which did far more damage."

The report refers to the work of Professor Alice Coleman, saying : "the desolation and alienation of an inner city estate is a direct consequence of the lack of clear property rights . . . The most powerful force for breaking down the barriers of discrimination

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by sex or race or background is the market itself which will not want talents to go to waste."

It also describes how a ghetto can develop when

"people with drive, exceptional ability, self-confidence take their chance and move out".

My hon. Friend has brilliantly expressed the feelings that I have about the importance of markets. It is the need always to refer to the working of the market and to make the market work as well as possible that I shall stress today.

Before going any further, I draw attention to and declare an interest not only in the construction industry, and the electrical contracting industry in particular, but in the fact that I introduced a Landlord and Tenant Bill in 1987. That 10-minute rule Bill was successful in achieving its twin objectives, which were to improve the workings of the right-to-buy scheme and to provide proper market compensation for landlords whose properties were compulsorily purchased. The late Nicholas Ridley, who was Secretary of State for the Environment at the time, was able to incorporate the measures in my Bill into later legislation.

The British Property Federation has described the commercial property markets as being 60 per cent. rented, and the need for reform has been highlighted by numerous people. From my own experience of business, I know that privity of contract can suddenly rear its head years later when no one is aware of the liability. Recently, it was described in a Library reference note as "the sting in the tail". Mr. Steven Fogel, a solicitor who has done considerable work in this area, says that it is a law which gets up and bites people :

"The trouble with this law is that most people don't know about it or don't think about it until they get bitten. When it bites it usually bites hard."

Mr. Roy Thomason (Bromsgrove) : I am obliged to my hon. Friend for giving way on that specific point. Does he agree that if the privity of contract rules were abolished it would be much more difficult for the assignment of leases to take place ? Landlords would scrutinise more carefully potential new tenants who will be the only covenant on which they have to rely. Indeed, abolition of the rules might make it more difficult for people to come into leasehold businesses by virtue of having to climb a higher doorstep, as it were, in proving their creditworthiness to their landlords.

Mr. Thurnham : I am grateful to my hon. Friend for making that point and I shall come to that later.

It is the job of property developers to produce properties that people need, rather than ones that have to be forced down the throats of people who might not need them later. The proper working of the market will be improved if landlords look more to what future market needs will be.

Of course, only England and Wales have privity of contract. It does not apply in Scotland or in other countries in Europe and elsewhere, which seem to have well-developed and efficient property markets. Undoubtedly, it means that the courts will want to examine more carefully the strength of covenant for a following tenant. The Bill that I put forward would require the following tenant to be guaranteed by the first tenant if that is what the landlord requires, so there would be that degree of guarantee, but we would not have these nasty liabilities,

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which cannot be estimated, popping up much later. The chairman of the Property Market Reform Group, Mr. K. Manns, described it as "a medieval law which has brought misery to thousands of families and small businesses, and its reform is long overdue."

There are other aspects of the property markets which also need reform and are the subject of a consultation exercise. Undoubtedly, my hon. Friend the Minister will be able to refer to the progress of that review. They include upwards-only rent reviews, which hardly seem to be what we want at a time when we are fighting inflation. They also include confidentiality clauses, which seem to go completely against the need for proper open markets, and there is a need for much better dispute resolution clauses.

I have had a considerable number of representations from many people about the need to reform the law of privity of contract. The Lord Chancellor has said that he wishes to see it reformed. The Law Reform Committee in 1988 made the first clear proposals, which included a retrospective element. The Lord Chancellor has not felt able to support that, but he has suggested a limit of nine months on the period during which a landlord can go back if he has delayed tracing a tenant on whom he intends to make demands. There have been dreadful cases in which demands have been made for long years before.

I draw the attention of my hon. Friend the Member for Bromsgrove (Mr. Thomason) to some of the dreadful abuses. An appalling scam came to light in May 1991. A tenant who was about to go bankrupt was induced by his landlord to sign a rent which was way above the true market rent. As he knew that he was about to go bankrupt, the tenant did not mind signing. He went bankrupt and was unable to pay. The landlord was then able to go back to all the previous tenants and force them to pay the rent way above the market value. When the case came to court, the judge was forced to find in favour of the landlord because of the state of the law. That was a clear abuse. It demonstrates as clearly as possible the need for reform.

The only people I know to have made representations in favour of keeping the law as it is are the representatives of the British Property Federation, and the Prudential Insurance Company. I believe that the British Property Federation accepts that there must be some reform. One hopes that it is looking properly to the competitiveness of Britain. The recent White Paper on competitiveness did not have a great deal to say about the construction industry, but the industry is obviously important, as it employs 1 million or more people. We need the property markets and the construction industry to work efficiently. At times I wonder whether the British Property Federation wants an inefficient construction industry to boost the value of its existing buildings, rather than one which might be able to produce buildings at a lower price.

Rather surprisingly, the Prudential Insurance Company said that it thought that reform of the law might put foreign investors off investing in Britain. As most foreign investors do not have such a law in their country, that would be surprising. The newspapers today show that the Prudential is a participant in a bid of more than £600 million for National Car Parks. It is putting in the equity. So it does not seem too worried about 25-year covenants when it comes to making its own investments.

I believe that the opposition from those elements of the industry is misplaced. If they look ahead, try to decide what property will be needed in future years and construct

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properties in which they feel confident, they should not have to look to legal arrangements to ensure the value of their properties in the future.

The traders who occupy properties are in no position to judge what will be needed in 25 years. By the very nature of their businesses, they follow short-term trends in the market. They may be able to foresee their needs for relatively short periods ahead, but they will have no precise idea what their needs will be in 25 years. Traders are forced to take on a gamble. They take on a lease, gambling that they will be able to pass it on without anything bouncing back against them.

I have received letters from Sir Geoffrey Mulcahy, the chairman of Kingfisher, from the directors of Iceland Frozen Foods, from the Association of British Chambers of Commerce and from representatives of the Confederation of British Industry. Those organisations said that they would support reform. I have been amazed to read some of the comments of the chief executive of Boots, Sir James Blyth, who said at a property seminar reported on 27 May :

"At present, the property industry bears analogy to the old, discredited economies of east Europe, where customers were provided with what the factories found most convenient to produce.

The property industry may have escaped scrutiny in the UK Department of Trade and Industry's white paper on competitiveness, but . . . it has no grounds for complacency.

At a time when the rest of the commercial world is becoming more flexible and responsive to customer needs, the property industry has become more rigid and uniform,.. The industry has allowed itself to be dominated by the needs of its finances, leading to a lack of flexibility and innovation in the leases it offers tenants." He went on to say :

"The possibility that the workings of the commercial property market damage the wider economy has been raised repeatedly over the past couple of years, by academics, businesses, lobby groups, the Bank of England and the government."

There seems to be ample evidence of the inadequacy of the existing law and the need to reform it. I have been much heartened by the support from both sides of the House. Early-day motion 1292, which I am sure that the Minister has seen, referring to the Landlord and Tenant (Covenants) Bill, has now been signed by 96 hon. Members, and I hope that there will be more than 100 names on it shortly. It is significant that there has been no attempt to amend that early-day motion. I do not see any other hon. Members in the House today intending to speak against the measures in that Bill. So although the Bill has been blocked in earlier attempts to secure its Second Reading, those attempts represented a minority interest from the British Property Federation, which has been holding it up. I think that many members of the British Property Federation recognise the need to change the archaic law and it must be just a few diehards in that organisation who are holding up the matter.

A ten-minute Bill introduced by my hon. Friend the Member for Hertfordshire, South-West (Mr. Page) also touched on the subject earlier in the year. He too drew attention to the need for reforms. Obviously I shall be disappointed if my Bill does not manage to get through. Clearly it has become difficult to find time for it, but I hope that, if it is not successful, the Government will bring in a Bill in the next parliamentary Session and that that Bill will be as tough as the Government feel that it should be. The opponents of the Bill have had their moment to try to amend it. If they had wished to incorporate amendments in the Bill, I am sure that that would have been possible, but

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they have lost that chance. I hope that the Government will bring in a strong Bill in the coming year, along the lines already indicated by the Lord Chancellor.

I have already mentioned the good work of my hon. Friend the Minister in relation to the construction industry and also the work done by the Electrical Contractors Association. I have had the honour to represent that excellent association in the House for some 10 years. It has 2,200 employer members and 50,000 employees, representing 80 per cent. of an industry which has a total output of £3.4 billion. The ECA has played a leading role in bringing together groups of specialist subcontractors--the specialist engineering contractors group and the constructors liaison group --bringing specialist interests together overall. My hon. Friend once described it as an alphabet soup, but we have been able to get through that stage to the point at which valuable work is being done.

I also praise the Minister for the work that he did in enabling the review of construction industry contractual arrangements to take place, under Sir Michael Latham. We are all very pleased with the progress made to date, including the interim report, and we expect the final report to come out in the next few days. I hope that there will be an opportunity for the House to debate the report before the recess. In any event, we look forward to an early Government response to the recommendations in Sir Michael Latham's report.

In preparing that report, I do not think that Sir Michael Latham has had time to see an interesting proposal which came to light the other day from Professor Colin New of the Cranfield school of management on the question of payment of late debts. That has always been a particular problem for specialist contractors in the construction industry.

I hope that the Minister may have had a chance to see the article that I sent through to his office earlier today, showing that the proposal suggests that any bill not paid within 30 days of the due date on the invoice would not count as a VAT input. That would have a remarkable effect on people's behaviour because no one would want to pay, in effect, a 17.5 per cent. tax for late payment. At the same time, the charge would not affect small firms which are below the VAT threshold. The proposal would therefore help many small firms and not hinder them in the way that other proposals to legislate against late payment run the risk of doing.

I ask the Minister to look at that new proposal, which I commend Professor New for making. I hope that it may suggest a way forward for resolving a long-standing source of discontent not only in the construction industry, but industry and commerce throughout the country, particu-larly small businesses.

Without taking up too much of the remaining time, I should like to comment briefly on one or two other points in the motion. On housing, my hon. Friend the Minister will be aware that a pamphlet by me entitled "Choose your landlord" was published last year by the Conservative Political Centre. It pressed the case for private landlords to play a much larger role in the provision of housing, particularly in moving housing from local authority control into the private sector.

On 5 May 1993, my right hon. Friend the Prime Minister said in the Harry Simpson memorial lecture :

"There's clearly a need for a larger private rented sector in Britain."

We all look forward to that. The latest figures, just released

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by the Department of the Environment, show that an extra 250,000 homes have been privately let in the past five years, which suggests that the decades-long decline in the private rented sector is at last being reversed. That has been achieved by, in particular, the successful legislation that the Government introduced in 1988 to improve the workings of the domestic rental market.

If we can bring private landlords into the council estates, that will introduce an element of entrepreneurship and alter the way in which people think on those estates. I accept, however, that on 17 June my right hon. Friend the Minister for Housing, Inner Cities and Construction said in a speech to the Chartered Institute of Housing :

"Finding landlords to take on responsibility for a good proportion of the 4 million council stock would be a tall order."

We could make a lot of progress and set about changing some of the attitudes that my hon. Friend the Member for Havant described so well in his pamphlet by bringing market forces to bear properly in the council estates. We should not be afraid of doing that. We should look at it as a positive way in which to alter attitudes so that people on council estates can develop their own job opportunities and establish a wider range of contacts to help them to develop their own lives.

I do not know whether my hon. Friend will have time to comment further on the development of the housing market, but many people look to housing investment trusts as one way in which to attract new capital.

We cannot expect to make much progress in improving the private rented sector without giving some thought to how housing benefit should develop. My hon. Friend may know that I am working on a further pamphlet with Professor David Marsland to look at housing benefit more as an area entitlement rather than a personal entitlement.

I commend the motion to the House and I hope that there will be further opportunities to debate the points that I have put forward. I look forward to hearing my hon. Friend the Minister's response. Perhaps there will also be sufficient time for my hon. Friend the Member for Stamford and Spalding to contribute to the debate, should he catch your eye, Madam Deputy Speaker.

2.3 pm

The Parliamentary Under-Secretary of State for the Environment (Mr. Tony Baldry) : I welcome the fact that my hon. Friend the Member forBolton, North-East (Mr. Thurnham) has introduced a timely debate on the property and construction industries. I thank him for his kind personal comments, which were much appreciated.

The provision of high-quality business and industrial premises is an essential prerequisite of a competitive economy. The property industry makes a substantial contribution to the general economy in terms of jobs and wealth creation. Property investments started to show recovery and improved performance in 1993. That has continued so far this year, with a considerable weight of funds competing for prime propositions in all sectors of the market--retail, office and industrial.

Demand is increasing, with a corresponding fall in vacancy rates. That fall reflects the strengthening and continuing recovery of the economy, with low inflation and low interest rates. I am told that, in some areas, levels of prime stock have fallen so far that developers are now dusting off their plans. A few property companies have

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made encouraging starts in speculative development, including office developments in London and elsewhere and some retail and industrial warehouse projects.

As I go around the country from city to city--I was in Birmingham this week, Newcastle last week and shall be in Sheffield next week--I discover that the story is much the same : increasing confidence, strengthening recovery and continuing property investment are starting to take hold firmly. Bank loans outstanding to property companies have fallen significantly since their peak in May 1991. Confidence is improving and a number of banks are again looking carefully at property ventures--albeit, quite properly, selectively and on sensible loan-to-value ratios. The property industry can therefore regard the future with much greater optimism. Building on the substantial recent progress, there is every prospect of a sound, non-inflationary recovery in the commercial property sector. My hon. Friend the Member for Bolton, North-East has made an interesting contribution on privity, a subject in which he has taken a considerable interest. As he made clear, that aspect of our law has concerned many people throughout the country, particularly those with small businesses.

Last year, my right hon. and noble Friend the Lord Chancellor set out the Government's policy, which is that the Law Commission's recommendations contained in its report on privity should be implemented with two important changes : first, implementation should be limited to new rather than existing leases. I hope that that will go a considerable way towards reassuring those who are concerned that any reform that we make to the privity law may destabilise the market. We are considering only new contracts, so anyone entering a new contract would do so in the knowledge of the changes to the privity law.

The second new requirement applies to existing as well as new leases. A notice of arrears would be served on any former tenant from whom it is intended to recover funds within nine months of the sum in question becoming due. As my hon. Friend quite fairly made clear, one of the difficulties of the privity law is that people often do not know about its impact until they are served with a writ. Sometimes they do not know about it until long after they have signed the lease in question.

I hope that the two changes that we have announced to the Law Commission's recommendations are sensible. They have been taken in the light of what people had to say and should meet general agreement. It remains our intention to introduce further legislation in those terms as soon as a suitable legislative opportunity arises. Should any hon. Member seek to create an opportunity by means of a private Member's Bill, we would consider carefully how far we could extend support for such a Bill, depending on the extent to which the Bill accorded with settled policy. As my hon. Friend said, he attempted to pilot such a Bill to give effect to the policy that I have outlined. The number of hon. Members' signatures on the early-day motion shows the widespread support from both sides of the House for his Bill.

Despite expressions of support for the principles of the Bill, however, it has been unable to make progress. I know that there are those who remain nervous about the possible effects on the property market of any change, despite our decision to limit the reforms to new leases. We are willing to consider and to listen to ideas on how the reforms might be improved, and I hope that a consensus can be achieved.

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My hon. Friend the Member for Bolton, North -East can be assured that, in due course, when legislative proposals are brought before Parliament, we will want to ensure that they meet the necessary requirements so that there is stability within the property market and a fair balance between landlords' needs and tenants' rights. That is what we are seeking to achieve.

I know that there has been much concern about issues relating to commercial leasing--notably, upward-only rent reviews, confidentiality clauses and dispute resolution procedures. That was why we issued a consultation paper last year. The subjects are complex, so it was not surprising that we received a considerable number of submissions and comments on our proposals. We in government have been giving careful consideration to the complex and difficult issues, and we want and hope to announce the outcome as soon as possible. We understand that the commercial property world is keen to hear of the outcome of the review.

The construction industry is vital to our economy, with which its health is inextricably entwined. The British construction industry's output is £45 billion to £50 billion a year. When taken together with the construction materials and products sectors, the construction industry is equivalent to about one tenth of the national gross domestic product, one third of the manufacturing output and 50 per cent. of fixed investment. The industry is very important, which is why every official and Minister in the Department of the Environment, which sponsors the construction industry, is determined to do everything possible to help it prosper and to influence events to ensure the greatest prosperity for the United Kingdom construction industry here and abroad.

For the past few months the construction industry has been enjoying a period of sustained growth, which is expected to settle at a rate of some 2 to 3 per cent. a year. In the past six months, there has been an increase in construction output. The value of new orders in the 12 months to April this year was 10 per cent. higher than a year earlier. We do not want a return to the sort of boom conditions of the late 1980s, because they often led to a subsequent bust. We want a pattern of steady and sustained growth. That has clearly begun to emerge to the benefit of the construction industry as a whole. Following heavy cost cutting during the recession, the construction market remains highly competitive. British firms are well placed to compete abroad and are performing well abroad. Exports of building materials and components rose 13 per cent. at the end of last year, cutting the trade gap by 7 per cent. Trade in manufactured products and components is in the black for the first time in years, which is good news. With inflation at historically low levels, interest rates at a 22- year low, and GDP, manufacturing output and consumer spending showing sustained improvements, the general climate for United Kingdom construction continues to look excellent.

We in government will continue to do everything in our power and influence to assist the United Kingdom construction industry to take full advantage of the opportunities available here and overseas. Last year, together with the construction industry, we carried out a review of the Department of the Environment's sponsorship functions in the light of the challenges facing the industry as a result of the recession. We took account

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of the widely held view that the construction industry needed to do more to try to improve its efficiency, quality and competitiveness. One of the problems that we have had in the past has been liaising with the large number of representational organisations in the industry. My hon. Friend aptly described them as alphabet soup, which is how they often appear to Ministers and officials. There must be well over 100 trade associations and professional institutions, some of which represent quite small numbers of companies or people. We have had to cope with large numbers of ad hoc requests for meetings and visits that often overlap. I am pleased to be able to tell the House that, over the past couple of years, much progress has been made.

We now have three umbrella bodies which between them represent almost all the associations and institutions--the Construction Industry Council, the Construction Industry Employers Council, and the construction liaison group. I know that my hon. Friend the Member for Bolton, North-East had a positive hand in helping to set up the CLG. These umbrella bodies were a major help to us during our review of sponsorship. They are helping us to set up regular consultation arrangements, which represent a big improvement on the former ad hoc demands for meetings. I very much thank everyone involved for the constructive way in which they have worked together with the construction sponsorship directorate in the DOE.

The review concluded that we needed to improve information exchange with the industry and to put increased effort into promoting innovation and competitiveness. So our sponsorship functions were relaunched as the construction sponsorship directorate last September, with a determination to listen to the industry's concerns and views, to explain Government policies so that the industry is clear about our objectives, to act as the industry's advocate in Whitehall, in government and wherever else we may be needed at home and abroad, and to promote exports, innovation and productivity.

A large number of officials in the construction sponsorship directorate will spend time on attachment to the construction industry, so that they can understand as closely as possible the challenges facing the industry. I am also glad to say that the industry itself is starting to send an increasing number of secondees to work with us in the directorate. That will also enable us to understand the needs of industry better--and enable them to have a better appreciation of the machinery of government.

It is clear that a great deal of progress has been made since the launch of the construction sponsorship directorate. Ministers and officials are grateful for the plaudits for the directorate's work that have come from every quarter of the industry, as my hon. Friend noted. We find it both challenging and stimulating to work in close partnership with the industry, and Ministers and all the directorate's officials are determined to have the best possible working relationship with all parts of the construction industry. We have set up arrangements for regular consultations. These include a twice-yearly state of the industry report, produced jointly by the Department and the industry. It forms the basis for discussions between my right hon. Friend the Secretary of State, Ministers and senior construction industry representatives. We were getting frustrated with the continuous debate about the exact state of the industry, often based on one or two statistics produced by one or two trade groups. Now we have an

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agreed state of the industry report. There are also regular fortnightly briefing meetings on specific topics between the industry and me, enabling me to hear the industry's views at first hand. We have also established a new consultative group for Government and industry, which meets regularly to discuss issues and concerns at official level. Finally, we are publishing a new monthly newsletter, entitled "Construction Monitor", which contains the latest European, United Kingdom and statistical information. It is distributed through Building magazine so as to reach the largest possible readership. We have been working closely with the industry to ensure that we achieve what the United Kingdom wants on the European Union construction products directive. We have taken a number of other steps to improve our sponsorship activities. Last week I launched a new construction benchmarking challenge, which aims to promote innovation and best practice by encouraging construction industry trade associations and companies to co-operate in benchmarking schemes. An improved range of statistics is being produced to help industry decision makers, and a joint group has been established to advise my Department, so that the statistics we produce offer the industry the best possible advice.

We are promoting research and innovation in a number of ways. A whole industry strategy group has been set up to develop a joint strategy with the industry and to help ensure that resources are used as effectively as possible. The Department of the Environment is spending £25 million a year on construction research, of which £5 million is allocated to collaborative projects funded jointly with the industry. In every aspect, we are seeking to ensure that the industry is as competitive as possible.

My hon. Friend mentioned the industry's important concern that its competitiveness has been undermined by conflict within the industry. That is one reason why we established the Latham review, ably chaired by our former colleague, Sir Michael Latham, which is due to report later this month. As my hon. Friend said, the interim report is extremely encouraging. I have no doubt that the Latham

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