House of Commons - Business and Enterprise

Select Committee on Business and Enterprise Ninth Report

5 Fostering social sustainability

163. A socially sustainable construction industry should deliver the best outcomes for its people. For the sector's 2.8 million employees this includes ensuring they are able to work in a safe environment; that they receive the employment rights they are entitled to; and have the opportunity to achieve their full potential. It is also about creating an industry that provides an attractive career prospect for everyone, regardless of gender, age or ethnicity. In this chapter we consider first the issue of 'bogus' self-employment, which is a particular concern in construction. We look then at the sector's current record on the provision of training, and the issue of workforce diversity. Finally, we analyse progress in improving health and safety across the industry and the reasons why the number of deaths in construction has risen sharply in recent years.

Self-employment

164. Over 900,000 people in the construction industry are defined as self-employed—a much higher proportion of the workforce than for other industries. This is in addition to the further 600,000 workers in the informal economy. The status of self-employment defines the relationship between a person and the company they are undertaking work for as subject to commercial rather than employment law. For the individuals concerned, the main motivation is essentially about tax, whereas for contractors engaging self-employed workers, it provides greater flexibility in terms of engagement and contract termination.[253]

165. Although self employment has advantages, it also has drawbacks for both the employee and employer. A self-employed worker does not receive a number of the rights to which a direct employee is legally entitled. These include holiday pay, sickness benefit, pension provision, medical healthcare and occupational healthcare. Furthermore, the Union of Construction, Allied Trades and Technicians (UCATT) told us it is hard to organise health and safety provision for self-employed workers. Not only is the risk of an accident greater, they also do not have the employer protection to ensure their financial well-being in the event of an accident. As the union said, "the family goes on the breadline because there is no back-up".[254] Self-employed workers also have less access to training. Contractors who directly employ their workforce have a greater incentive to invest in their employees' skills so as to make them more productive to the company over time.[255] Too great a dependence on self-employed workers therefore threatens the industry-wide availability of skilled labour in the long term.[256]

166. In general, the unions supported the mandating of direct employment for all public sector construction clients.[257] However, the Minister responsible for construction told us there is "a perfectly proper place for genuine self-employment" and that "how the industry organises itself must be a matter for the industry".[258] Government can create the incentives for contractors to take on more direct employees by providing a steadier stream of work for the industry. As we discussed in Chapters 2 and 3, it can do this both through the setting up of framework arrangements and through its long-term construction programmes, such as Building Schools for the Future.[259] In addition, Constructing Excellence told us there are recent signs that firms are rediscovering the competitive advantage of direct employment, through the benefits it brings to their employees and the reflection of this in the quality of the end-product.[260] It remains to be seen whether this trend will continue through the current industry downturn.

'Bogus' self-employment

167. The level of self-employment in construction is so great that the sector has a specific Construction Industry (tax) Scheme (CIS), which sets out the rules for how contractors must handle payments to their sub-contractors—in particular whether they should be categorised as self-employed or direct employees. Sub-contractors defined as self-employed have a standard tax rate of 20% deducted from their payments, although UCATT told us the effective rate can be as low as 9% because workers are able to claim money back for expenses.[261] Directly employed workers, on the other hand, are subject to the same tax regime as all other employees in the UK, paying income tax at the basic rate of 20%. However, they and their employers must also make National Insurance Contributions. Because self-employed workers and their contractors make lower contributions than those for direct labour, there is a financial incentive on both sides for workers to be classified as self-employed. 'Bogus' self-employment is where this tax differential is exploited through the wrongful categorisation of workers as self-employed when, to all intents and purposes, they are actually direct employees. As UCATT put it: "This is a tax subsidy, a tax fiddle, nothing else other than that".[262]

THE SCALE AND COSTS

168. We received a range of opinions on the prevalence of 'bogus' self-employment. UCATT estimated up to one million of the sector's workforce were 'bogus' self-employed—a higher figure than the official estimates for all self-employment in the sector.[263] However, the Minister responsible for construction told us HMRC reckoned the total was closer to 200,000—still just under 10% of the sector's legal workforce.[264] In all likelihood, the wide difference between these figures reflects the contrasting views of the unions and the Government as to what constitutes legitimate self-employment.

169. UCATT believe the practice is rife across the construction industry, but particularly prevalent among migrant workers. Its own research on Polish workers found almost all to be self-employed, often not getting a choice in the matter as it is a condition of being hired.[265] The union's memorandum states that there have been cases of workers being signed up for 'bogus' self-employment schemes in the UK even before they have left their home country. In addition to not having the employment rights of direct employees, such workers may also experience high and unfair deductions from their wages by employment agencies to cover expenses such as accommodation. Unite argued that migrant workers are often discouraged from talking to union representatives when on site, which makes it difficult for them to access information about their employment rights in the UK.[266] The problem is particularly acute in the South and London where self-employment constitutes 89% of firms and migrants form 42% of the workforce.[267] Although a proportion of these firms represent genuine self-employment, even by the Government's conservative estimates, a sizeable number will be 'bogus' self-employed.

170. Not only does 'bogus' self-employment have implications for the workforce, it also has consequences for clients.[268] For example, in the housing repair and maintenance sector, clients have little opportunity of recourse against companies who supply 'bogus' self-employed labour when they receive poor service. As UCATT told us, "if something goes wrong then the company goes into liquidation and then sets up next week as another company".[269] The client is left high and dry.

171. 'Bogus' self-employment also costs the Exchequer income tax and national insurance contributions. Work undertaken by the University of Manchester for UCATT in 2001 estimated the cost to the Treasury at £1.5 billion a year. Given the sector's expansion in recent years, the union believes this figure could now be closer to £2.5 billion.[270] Taking account of the knock-on effects from greater dependence on the state later in life through lack of pension provision, etc, UCATT believe the overall cost of 'bogus' self-employment could be around £5 billion a year.[271] On the other hand, HMRC calculate the figure as more likely to be around £340 million a year, largely reflecting its lower estimate of the total number of 'bogus' self-employed workers.

SOLUTIONS TO THE PROBLEM

172. Despite the fact that 'bogus' self-employment is not only a tax issue, but also a worker and consumer protection concern, we were surprised to hear the Minister responsible for construction tell us that he did not have the levers to deal with the problem.[272] He argued that HMRC, as the Department responsible for the Construction Industry (tax) Scheme (CIS), had the overall lead on tackling 'bogus' self-employment. In April 2007 the Department introduced a radical overhaul of the Scheme, with the main aim of reducing the number of people abusing the system. Rather than carrying CIS cards to verify their registration with the Scheme, sub-contractors are now required to register online. Contractors must verify directly with HMRC whether a sub-contractor they have taken on is part of CIS in order to gauge how much tax they should deduct from their payments. The intention of this approach is to reduce the 'paper chase' that had characterised the previous system.[273]

173. The new CIS also emphasises consideration of sub-contractors' employment status. Contractors must now submit a monthly return detailing all their sub-contractors paid during the tax month, and certifying that none of them are in fact employees. HMRC has established an online Employment Status Indicator tool, which asks questions of the contractor to establish whether a sub-contractor should be classified as self-employed. It is based on a number of indicators of direct employment:

the contractor has the right to control what the worker has to do—where, when and how it is done—even if the contractor rarely uses that control;
the worker supplies only his or her own small tools;
the worker does not risk his or her own money and there is no possibility that he or she will suffer a financial loss;
the worker has no business organisation, for example, a yard, stock, materials, or workers; and
the worker is paid by the hour, day, week or month.

174. This contrasts with the following indicators of self-employment, defined by HMRC:

Within an overall deadline, the worker has the right to decide how and when the work will be done;
the worker supplies the materials, plant or heavy equipment needed for the job;
the worker bids for a job and will bear the additional cost if the job ends up costing more than the worker's original estimate;
the worker has a right to hire other people who answer to him or her and are paid by him or her to do the job;
the worker is paid an agreed amount for the job regardless of how long it takes.[274]

175. These criteria are broadly similar to those set out in Unite's own evidence to us.[275] HMRC's guidance also states explicitly that "employment status is not a matter of choice". We received some contrasting views as to whether the new CIS was proving a success. On the one hand, the Construction Confederation thought the new approach was working, although it cautioned that "we have all got to support it, and we have all got to make it work".[276] On the other hand, the unions were highly critical of the new Scheme. Both felt the move towards an online registration system, which has done away with the previous photo card approach would create "a recipe for fraud, confusion and lost payments".[277] They argued that it will now be difficult for employers to discover if an individual presenting themselves for work is the same person registered under the Scheme. However, the Minister responsible for construction told us: "One of the purposes of the new CIS […] is to try and get away from the cards which were often used by individuals to say "Here, I have got a card, I am self-employed"".[278] It seems to us that the success of the new Scheme will largely depend on a combination of contractors honestly assessing the employment status of their sub-contractors, and effective enforcement by HMRC. The Minister also told us that: "In terms of the effectiveness of these operational arrangements it is still quite early days".[279]

176. The unions were also keen to see an extension of the Gangmasters Licensing Regulations to cover the construction industry, citing evidence of increased gangmaster activity in the sector.[280] However, the Construction Confederation felt this would create an additional regulatory burden for employers, most of whom do not use gangmasters directly.[281] BERR told us the conduct of employment agencies and employment businesses in construction was regulated by the Employment Agency Standards Inspectorate (EASI). The Employment Bill, which is currently passing through Parliament, will increase the investigative and enforcement powers of the Inspectorate. BERR has also made changes to the regulations governing employment agencies, specifically to address some of the key abuses affecting vulnerable agency workers. In addition, the Minister told us about the Vulnerable Worker Enforcement Forum, which is an industry and government group looking at the nature and extent of abuse of workplace rights for vulnerable workers, including within the construction sector.[282] It is due to report its conclusions in summer 2008.

177. The widespread practice of wrongfully classifying directly employed workers as self-employed, otherwise known as 'bogus' self-employment, creates significant costs for construction workers, clients, the wider industry, and the Exchequer. To tackle the problem, HM Revenue and Customs' Construction Industry (tax) Scheme now places a greater onus on contractors to verify the employment status of their sub-contractors. The success of this new approach will depend on the collective 'buy-in' of contractors. Government must also ensure HMRC has the power and resources to monitor and enforce compliance.

178. We welcome the setting up of the Vulnerable Worker Enforcement Forum and look forward to its recommendations. We hope it will give particular attention to whether the Gangmasters Licensing Regulations should be extended to cover construction workers. More generally, the public sector as client has a major role to play in providing long-term security of work for construction firms, which departments should actively take advantage of. Among the benefits this would bring is a real encouragement for contractors to take on more direct employees.

Training and skills

179. The fragmented structure of the construction industry means that training is one of the areas that particularly suffers. In this section we consider why this is, and the impact this has on the skill levels of the workforce, including the fields where there are currently shortages. We go on to consider the role of the sector skills council, ConstructionSkills, in developing training routes into the construction industry, and providing training for the existing workforce.

THE CURRENT STATE OF THE INDUSTRY

180. The high level of fragmentation and reliance on sub-contracting in construction, combined with the project-based and itinerant nature of most work, and cyclical demand, create a strong disincentive for firms to invest in their people.[283] The problem is exacerbated by the high rate of self-employment. Whether 'bogusly' self-employed or not, firms are more likely to invest in their workers if they are directly employed. This is borne out by the strong geographical correlation between self-employment levels and the provision of training. Several witnesses, including the Minister, noted that firms in Scotland and the north of England continue to use predominantly direct employment and train their workers, but that there was comparatively little employer-led training taking place in London and the South East where self-employment levels were much higher.[284] Unite told us the culture has become one where companies "buy skills off the peg", relying on migrant labour from Eastern Europe to fill skills gaps, rather than train domestic workers.[285] This approach is unsustainable in the long run.

181. The Confederation of British Industry (CBI) told us a shortage of skilled labour was a key issue for almost two-thirds of firms in construction.[286] Areas of short supply include mechanical and electrical engineers, project managers, building control, specialist tradesmen and assessors, and quantity surveyors.[287] An additional challenge is that the skills needs of the sector are evolving. The development of modern construction methods and an increasing demand for environmentally sustainable buildings require workers to develop new skills.[288] The industry's slow response to these changes, in part, contributes to a lower level of labour productivity in UK construction, compared to the USA and France.[289]

CONSTRUCTIONSKILLS AND THE LEVY

182. ConstructionSkills is the sector skills council for construction. It represents all parts of the industry's workforce, from architects to bricklayers, and covers all parts of the skills agenda. It is an independent body, managed and operated by employers from the industry, which acts as the main interface between the bodies responsible for delivering training in the UK, and those that demand it. Its priorities include increasing the quality and quantity of new recruits; improving understanding of career opportunities in construction; increasing apprenticeship completions; and promoting diversity.[290]

183. The lead partner in ConstructionSkills is the Construction Industry Training Board (CITB), branded CITB-ConstructionSkills. It is one of only two remaining statutory training boards established in 1964, which gives it the power to raise a levy on employers to fund training. There is a tendency in the sector for smaller firms to train most new entrants, and for them to go on to work for the industry's larger firms later in their careers. The CITB-ConstructionSkills Levy provides a means for those larger firms to pay towards the cost of training the new entrants, which they subsequently benefit from. Employers with a total wage bill exceeding £76,000 must pay the Levy, which is set at 0.5% of the salaries for direct employees, and 1.5% of the value of payments for labour-only sub-contractors. The higher rate for sub-contractors is meant to provide an incentive for firms to employ workers directly. The £76,000 threshold also exempts smaller firms from paying, although they are still able to claim grants to fund training. In 2006, firms which did not pay any Levy employed over 10,800 new entrant trainees.

184. The Levy provides the main source of income for ConstructionSkills. In 2007 it distributed almost £137 million in grants for firms to, for example, take on new apprentices or train-up their existing workforce. The Sector Skills Council estimates that the benefit to the industry of these grants equates to £2.03 for every £1 of Levy collected.[291] CITB-ConstructionSkills requires parliamentary approval for it to continue raising Levy funds, and this is subject to it retaining the support of the majority of firms that have to pay it. ConstructionSkills told us that currently about 70% to 75% of the industry support the Levy.[292] The CBI stated that: "The sector is an example of how a training levy can work effectively where there is employer buy-in".[293]

185. The structure of the construction industry and the nature of its work create disincentives for many employers to invest in training and skills. The CITB-ConstructionSkills Levy provides an effective means of tackling this problem, which has the support of the majority of those who pay it. The Levy provides a vital means of funding for training, which contributes to the long-term skills needs of the sector. We support its continued use.

TRAINING ROUTES INTO CONSTRUCTION

186. At every entry level, there is a difficulty getting new recruits into a career in construction. At the graduate end of the workforce, young people do not perceive construction as an attractive career destination. As the Royal Institution of Chartered Surveyors puts it: "The fact remains that students, their parents and the media continue to see construction as a less appealing career option than law or medicine".[294] The Construction Industry Council voiced its frustration at this, given the general public's view of the sector's output is usually very positive—the association is not made with the quality of the people that deliver it.[295]

187. One way in which the Government has sought to engage schoolchildren in construction as a potential career choice has been to introduce the subject to the 14-19 curriculum. In 2003 the then Department for Education and Skills approved the idea of piloting a GCSE in Construction and the Built Environment (CBE). The first intake began in September 2005, and in 2007 over 1,200 students completed either a single or double award in the subject. However, in November 2007 Edexcel, the body piloting the initiative announced that that it would withdraw the GCSE in order to focus its resources instead on the Government's new CBE Diploma. The last examination for the GCSE will be in 2010. The Minister responsible for construction did not seem to be aware of this development in January 2008 when he highlighted the role of the GCSE in getting young people into the industry.[296]

188. The main reason for abandoning the GCSE was because of concerns over the potential overlap with the CBE Diploma. The Government is introducing this in certain schools from September 2008, alongside diplomas in four other fields, all of which are designed to provide an alternative vocational route for schoolchildren into employment, further training or higher education. The Diploma covers a wide range of different industries within construction, such as architecture, structural steelwork, painting and decorating, glazing, and surveying. It will be available at three levels—Foundation (equivalent to 5 GCSEs below grade C), Higher (equivalent to 5 GCSEs above grade C) and Advanced (equivalent to three A-Levels). The courses will include compulsory elements such as functional maths, English and ICT, as well as team-working and self-management skills. Students will also be required to undertake a minimum of 10 days' work experience. The CBI was supportive of the new diplomas, highlighting the fact that they seek to develop generic 'employability skills', which firms too often find lacking in school leavers.[297] However, there have been some concerns about the complexity of the diplomas and the extent to which schoolchildren will favour them over academic qualifications.[298]

189. Given that migrant labour is unlikely to provide a stable long-term solution to the skills needs of the construction industry, it is vital to attract more domestic recruits to the sector. The initial take-up for the now abandoned Construction GCSE suggests there is an appetite within schools to engage with the industry early on. We support the development of the new Construction and Built Environment Diploma and hope that it will provide a credible qualification and entry route for those considering a career in construction, as well as meeting the skills needs of employers. Given the importance of developing skills in this vital sector of the economy, its effectiveness must be rigorously and regularly reviewed.

190. Construction employees currently take a variety of training routes into the industry, perhaps the most traditional of which is through an apprenticeship. This is a structured three-year programme that combines a mix of college-based training and paid work experience with a sponsoring employer. Those completing the scheme earn a Construction Award (for craft entrants) or a National Certificate (for technical entrants) as well as a National Vocational Qualification (NVQ) at either Level 2 (equivalent to 5 GCSEs at A to C) or 3 (equivalent to 2 A-Levels), depending on the apprenticeship. In 2007 the Strategic Forum for Construction reported that 8,289 people completed apprenticeships in England, Scotland and Wales—a fraction of the level achieved during the 1970s. It currently has a target to increase the annual rate of completion to 13,500 a year by 2010, and the new industry targets extend this to 18,700 in 2012.

191. In contrast to the difficulty of attracting graduates into the industry, ConstructionSkills told us there is no shortage of young people wishing to enter the sector as an apprentice. Rather, the difficulty lies in finding an employer willing to sponsor them.[299] In the past four years there has been a gradual fall in the number of employers recruiting apprentices, and the number of apprentices taken on by each employer.[300] Both the unions expressed concern that of some 50,000 young people who applied for apprenticeships in 2006 only 9,000 secured places with employers. In 2007, the figure dropped to 7,000.[301] Unite said: "We should be talking about an 'investment shortage' not a 'skills shortage'".[302] This was also a big concern for ConstructionSkills which estimated that between 7,500 and 10,000 young people on construction further education courses do not have a sponsoring employer. Without this, they do not get any site experience, they cannot get an NVQ, and cannot complete an apprenticeship framework.[303] BERR told us "the active participation of companies is crucial to an effective apprenticeship programme" and that "we cannot deliver apprenticeships by ourselves".[304] Yet only around a quarter of construction companies are directly engaged in training apprentices. The industry will need to more than double its current level of provision if it is to meet its 2012 target.

192. In response to the problem of finding employers to sponsor full apprenticeships, ConstructionSkills have developed the concept of 'programme-led' apprenticeships (PLAs) in England. This approach essentially front-loads the college-based element of apprenticeship training, with new recruits first completing a full-time Intermediate Construction Award (ICA) before then being placed with an employer to gain on-site experience. The sector skills council has developed PLAs to allow firms who are not able to support someone through a typical apprenticeship framework to still take on trainees.[305] The approach is a key part of the drive to increase the number of completions, though, its annual report states that uptake so far has been slower than expected, despite praise for the initiative by many employers.[306] However, the scheme is still in its early days, and ConstructionSkills have a target to place 1,000 young people with PLAs by the end of 2008.

193. ConstructionSkills were also keen to see greater flexibility in the way in which government allowed it to deliver apprenticeships. One area of concern was the growing need for specialist trades throughout the supply chain and the sector skills council's inability to meet this demand because of the higher cost of training.[307] It is currently seeking to pilot Specialist Apprenticeships in response to this. Another difficulty is the absence of significant resources to support adult learners entering training because the Government's emphasis is on those in school and further education.[308] Current policy towards publicly-funded apprenticeships assumes that employers will pay a greater share of the costs for those over 19.

194. It is a disgrace that only a quarter of construction companies are training apprentices. We support ConstructionSkills' efforts to provide more flexible routes to on-site experience for trainees and their sponsors, such as through programme-led apprenticeships. Employers must now do their part by taking on more apprentices, tapping into the large number of people who want to work in the sector. The Government should also review its support for adult learners and specialist trades to provide greater flexibility of training provision to meet the needs of the construction industry.

TRAINING THE EXISTING WORKFORCE

195. BERR told us that, historically, the construction workforce has been largely unqualified, with workers building up their skills through experience on the job.[309] Approximately 55% of the workforce is below the standard of an NVQ Level 2 or equivalent, and 11.2% hold low or no qualifications.[310]However, in recent years there has been an industry drive towards creating a fully qualified workforce, both as a means of improving the quality of output, and raising health and safety standards. The Construction Skills Certification Scheme (CSCS), introduced over ten years ago, has been the primary means of achieving this. It issues different types of card to its members, depending on the experience and qualifications of the individual, ranging from a trainee working towards an NVQ Level 2 or 3, to a senior manager at NVQ Level 5. All the cards require the holder to have passed a health and safety test.

196. The industry has set itself a target to achieve a fully trained, qualified and competent workforce on all projects by 2010 as demonstrated by take-up of CSCS. All parts of the sector have bought in to the Scheme, including main contractors, specialist contractors and home builders.[311] ConstructionSkills has played an important role through its On-Site Assessment and Training programme, which helps experienced workers get the qualifications to prove their competency and gain a CSCS card. Overall, the sector skills council reports that 48,000 workers achieved a Vocational Qualification in 2007.[312]Elsewhere, it has also recently established the National Skills Academy for Construction, part of which includes the setting-up of portable training centres located on or near the site of large construction or infrastructure projects. ConstructionSkills told us it had 8 project sites already up and running, with a total of 52 in the pipeline, including the Olympic construction sites.[313]

197. To date over 1.2 million CSCS cards have been issued and coverage of the industry's workforce is estimated at about 80%.[314] Government, too, has stated its support for the Scheme. The Office of Government Commerce's Common Minimum Standards for construction procurement stipulate that contracts should contain a clause requiring all workers involved in the supply team to be registered on the CSCS, or able to prove competence in some other appropriate way. Yet the National Specialist Contractors' Council told us many public sector clients are not enforcing this requirement. Contractors who have not committed to the Scheme are still being invited to tender for projects, while workers are allowed on sites without a CSCS card or with inappropriate cards. This can frustrate those contractors and sub-contractors that have expended resources achieving a fully carded workforce.

198. There has been considerable progress in raising the skill levels of the existing construction workforce. We welcome the establishment of the National Skills Academy for Construction and support its project-based approach to delivering training. We also commend the high level of take-up of the Construction Skills Certification Scheme (CSCS) and hope the industry will be able to achieve 100% coverage by 2010. However, clients must play their part in reaching this target. Public sector clients in particular should adhere to the Common Minimum Standards, and contractually oblige their supply teams to ensure their workforces are CSCS-carded. Contractors not committed to the Scheme should not be invited to tender for work.

Workforce diversity

199. The average construction worker in the UK is white and male. Women make up only 10% of the industry's workforce and just 1% in the manual trades.[315] Similarly, ethnic minorities account for only 3% of craftspeople—significantly below the workforce average of 8%.[316] Although representation at the professional end of the sector is a little better, the proportion of women and ethnic minorities is still well below the national average.[317] Workers with disabilities constitute 13% of the construction workforce, although the fact that almost 19% of the working-age population are disabled suggests this figure could potentially be higher.[318] Overall, construction is one of the most heavily segregated sectors in the UK.

200. The 'casualisation' of the industry was seen as a primary reason why women and ethnics minorities are underrepresented in the industry. Unite told us the sector's 'hire and fire' culture, with employment opportunities being predominantly through word-of-mouth or family connections, tended to exclude ethnic minority groups.[319] The Equal Opportunities Commission stated that the industry's long hours culture and its inflexible working times often precluded women, or those with caring responsibilities, from entering construction.[320] As noted in the previous section, funding streams for training also tend to favour young people over adults, therefore excluding groups that are more likely to enter the industry later in life.[321] The Institution of Civil Engineers told us women and ethnic minorities experience "marginalisation, discrimination, disempowerment, prejudice and 'glass ceilings' to their career progression".[322] The problem is reinforced by the negative image of the industry as one that does not welcome diversity.

201. The Commission for Racial Equality estimates that in the next six years only 20% of the UK workforce will consist of the white, non-disabled men who have traditionally constituted the construction industry's workforce.[323] If the sector is to avoid capacity constraints it needs to attract those groups not engaged in construction at present. The Equal Opportunities Commission cited survey evidence that 12% of schoolgirls were interested in working in construction.[324] Though low, this is still slightly higher than the current proportion of women in the sector's workforce. The Commission stated also that eight out of ten employers thought a better gender mix would provide a wider range of skills and talents.

202. The new Construction Commitments emphasise the importance of providing equal opportunities and encouraging a diverse workforce. ConstructionSkills and CABE have both recently run campaigns aimed at changing attitudes towards the industry to help draw in atypical recruits.[325] The sector skills council also told us about a programme it had funded that placed 600 people, who were either female or of an ethnic minority, for a 13-week trial period with small and medium-sized employers in construction. In addition, it has worked with housing associations and registered social landlords, encouraging more diverse recruitment with their framework sub-contractors. Furthermore, its National Skills Academy for Construction will draw greater involvement from underrepresented groups. Elsewhere, the Prince's Trust told us its 'Get Into Construction' scheme had helped a small number of women and ethnic minority workers gain experience of the industry.[326] In the future, the introduction of the Construction and Built Environment Diploma should also help change perceptions of the sector amongst schoolchildren.

203. However, there is clearly still more to do to address the gender and racial imbalance in the construction workforce. Both the CBI and the Equal Opportunities Commission highlighted the need for better careers advice that sought to challenge traditional occupational stereotypes.[327] The introduction of more flexible working should also attract atypical recruits. As the largest client of construction work, the public sector could play a significant role in creating a more diverse workforce. We note that the Office of Government Commerce's Common Minimum Standards for construction procurement do not currently refer to diversity issues.

204. The vast majority of the construction workforce is white and male. This means there is a potentially huge pool of untapped talent which could relieve capacity constraints in the sector, and make the composition of its workforce more representative of wider society. Government as client to the sector is in a powerful position to effect change by ensuring contractors provide employment opportunities to atypical recruits. We welcome the explicit inclusion of promoting a diverse workforce in the industry's new Construction Commitments. We recommend that the Government strengthens this by making equal opportunities part of the Common Minimum Standards for public sector construction procurement.

Health and safety

205. The construction industry accounts for almost a third of workplace fatalities in the UK, even though it accounts for less than a tenth of the overall economy.[328] Improving the sector's health and safety record has accordingly formed a key part of the industry reform agenda in recent years. The Construction Confederation told us: "Any single accident is an accident too many".[329] Indeed, health and safety forms one of the six pillars of the new Construction Commitments, and the new industry-wide targets include the aim of achieving year-on-year a 10% reduction in construction fatalities and major injuries up to 2012.[330] The Construction Products Association believe this would mean a fatal injury rate of 2.3 deaths per 100,000 workers in 2010, down from 3.7 in 2006/07. The Strategic Forum has also set targets to reduce cases of work-related ill-health and to increase the availability of occupational health support. The Department for Work and Pensions' sponsored Health and Safety Executive (HSE) is responsible for monitoring the construction industry's compliance with health and safety legislation. It also conducts research, promotes training, provides an advisory service, and can submit proposals for new or revised regulations and approved codes of practice.

RECENT TRENDS

206. The UK's performance in construction health and safety compares favourably with the rest of Europe. In 2003, the latest year for which figures are available, the fatal injury rate for the UK was 3.6 per 100,000 workers, compared to an EU average of 10.6.[331] Figure 1 below shows the sector's performance over the past 15 years. 2001 marked a turning point. A large increase in fatalities in the late 1990s prompted the then Deputy Prime Minister to convene an industry-wide summit at which he called on the sector to improve its record or else face legislation. Since then, working with the HSE, the industry has made considerable efforts, with the result that there has been a gradual decline in the number of fatalities from a peak of 105 in 2000/01 to 60 in 2005/06.[332] A key initiative has been the commitment to a fully qualified workforce by requiring all employees to have registered on the Construction Skills Certification Scheme (CSCS), discussed earlier, which includes a health and safety test. ConstructionSkills report that 1.5 million workers have passed the test to date.[333]

Figure 1: Number and rate of fatal injuries to workers in construction

Source: Health and Safety Executive

207. However, 2006/07 saw an increase in the number of fatalities from 60 to 77—the highest rate since 2001/02 and a rise of 28% on the previous year.[334] More than half of those deaths were the result either of a fall from a height, or being hit by a moving or falling object. In April 2008, the HSE reported provisional figures suggesting 69 workers had died in 2007/08.[335] Although this is a 10% improvement on the previous year, it is still above the 2005/06 level. It is not clear at this stage whether these figures for the past two years mark a change in the long-term trend, or if they have been very unfortunate blips.

208. We asked witnesses what lay at the root of the rise in construction fatalities. The National House Building Council noted in its evidence that the increased use of migrant workers in the UK might present a risk if they were not able to communicate well in English and therefore understand health and safety training.[336] However, the Construction Confederation told us migrant workers operated under exactly the same regime as other operatives on major construction sites, and that they had to undergo the same induction training and wear the same personal protective equipment (PPE).[337] BERR also told us that out of the 77 deaths in 2006/07, five were migrant workers—6.5%.[338] This is slightly less than the overall percentage of migrant workers within the construction workforce as a whole.

209. BERR and several of the industry representatives we spoke to highlighted the fact that the recent rise in fatalities has occurred largely amongst smaller firms operating in housing repair and maintenance.[339] According to the HSE over half of construction deaths in 2006/07 occurred in that sector—up significantly on the previous year.[340] However, it is not yet clear why this is the case. The Federation of Master Builders (FMB) noted that the size of the sector has grown from £12.8 billion in 2002 to £15.8 billion in 2006.[341] The Government's own memorandum to the Committee argues that the level of economic activity in the construction industry will inevitably put more pressure on the workforce, which could lead to a deterioration in health and safety performance.[342] The fact that barriers to entry are lower for workers and firms in the housing repair and refurbishment sector, and over half of construction activity is in the black economy, must also be contributing factors. Yet this does not explain why in previous years the number of fatalities had been falling, and the particular jump within repair and maintenance in 2006/07.

TACKLING THE REPAIR AND MAINTENANCE SECTOR

210. In response to mounting concern over the increase in construction deaths, the Secretary of State for Work and Pensions called an industry-wide 'Forum' in September 2007 to discuss ways of addressing the problem. The forum agreed various areas of action, aimed specifically at the housing repair and maintenance sector. These included: raising levels of competence by encouraging all workers in house-building to carry a CSCS card; improving the way employers engage and consult with the people they manage; and steps to drive out the informal economy. The Strategic Forum's Health and Safety Task Group was asked to co-ordinate implementation of the proposals.[343]

211. BERR told us the size of the informal economy contributes to the challenge the Government faces in trying to improve standards in the repair and maintenance sector. The HSE's strategy for policing health and safety is to prioritise those areas that present the highest risk, therefore, deploying its resources were they can be used most effectively.[344] It has a dedicated Construction Division that looks solely at the sector, and construction accounted for 40% of its prosecutions in 2005/06. The agency also adopts a risk-based approach within industries. In February 2008 it specifically targeted construction refurbishment sites, carrying out over 1,000 spot checks across Great Britain. Inspectors immediately stopped work on 30% of the sites visited because health and safety standards were so low they put the lives of workers at risk. The Chief Executive of the HSE stated: "Our inspectors were appalled at the blatant disregard for basic health and safety precautions".[345]

212. Despite the HSE's risk-based focus, several witnesses raised concerns over the level of sanctions the agency imposes, and its overall staffing levels. On the first of these, the unions in particular wished to see much harsher penalties for contractors found to be in breach of health and safety regulations. Unite told us the average fine in construction in 2006 fell to a "disgusting" £8,400.[346] UCATT went further, stating that "deaths on construction sites will not substantially decrease until an individual director is sent to prison for their involvement in killing an employee".[347] By contrast, the Construction Products Association told us the HSE did have strong sanctions through its ability to close a site immediately.[348] The Corporate Manslaughter and Corporate Homicide Act 2007 created a new offence from April 2008 for convicting an organisation where a gross failure in the management of health and safety results in a person's death. Found guilty, an organisation is liable to an unlimited fine. They may also be required to publicise the details of their conviction and fine. Individuals cannot be prosecuted under the Act, although legislation already exists to prosecute those culpable of gross negligence manslaughter and health and safety offences.[349]

213. Given that sanctions exist to punish those in breach of health and safety regulations, a more important consideration for construction contractors is likely to be the probability of inspection in the first place. We were shocked to hear that on average an employer will receive a visit from an HSE inspector only once in every 13 years.[350] Despite more than 270,000 construction firms operating in the UK, the agency had only 124 operational construction inspectors in 2007/08, with just 18 to cover the whole of London. Furthermore, many witnesses expressed their concern to us that the number of HSE staff has been cut in recent years.[351] Since 2003, the agency's Field Operations Directorate has seen a 17% reduction in staff.[352] Within construction, there are now 10 fewer front-line inspectors than in 2005/06.[353] The Minister responsible for construction told us the HSE would "vigorously refute" the suggestion that any changes they had made might have contributed to the recent trend in construction fatalities.[354] Whilst we do not wish to suggest this is the case, it seems illogical to argue that the number of inspections has no effect on health and safety standards. Indeed, the HSE's own recent campaign on the repair and maintenance sector highlights the importance of inspections. Our colleagues on the Work and Pensions Committee recently reached the same conclusion.[355]

DRIVING CULTURE CHANGE

214. Whilst we believe inspection is important, particularly for the housing repair and maintenance sector, creating a culture of health and safety is ultimately the most effective means of reducing workplace deaths and injuries. Both government and the formal industry have in recent years worked to engender this culture change, although there is clearly further progress to be made.

215. One of the most important recent developments has been the introduction of the new Construction, Design and Management (CDM) Regulations 2007. These aim to improve health and safety in construction by placing a greater emphasis on effective planning and risk management at the outset of a project, as well as reducing paper work and encouraging team work.[356] The Specialist Engineering Contractors' (SEC) Group told us that up to 60% of fatalities on construction sites can be attributed to choices made before work on site begins.[357] The CDM Regulations place shared legal duties on virtually everyone involved in construction projects—clients, designers, contractors, sub-contractors, and workers—recognising that improved health and safety performance requires the engagement of all stakeholders. The new regulations have been generally well-received by the industry.[358] The Construction Confederation said "it is a great piece of regulation".[359] The primary reason for this is that CDM increases the role of the client in ensuring adequate consideration of health and safety, and also promotes integrated team working. Indeed, the only critic of the Regulations was the industry body that represents clients.[360] The Construction Clients' Group (CCG) had a legitimate concern that the CDM Regulations had not been drafted to enable small, infrequent clients to comply with their obligations. The CCG is currently working on a proposal to help resolve this issue. It is also disappointing that the Approved Code of Practice, which provides practical guidance on complying with the Regulations, is not free to download from the HSE website. Instead, it is available by mail order at a cost of £15. This can only hamper the dissemination of good practice on compliance.

216. Whilst the CDM Regulations provide the legal basis for much greater client involvement, there are additional ways in which procurers, particularly the public sector, can show leadership in promoting health and safety. For example, considering whole-life, by definition, requires the factoring in to the planning process of heath and safety concerns. The long-term benefit is a reduction in the costly delays that arise from accidents. The Construction Skills Certification Scheme (CSCS) is also an important driver of health and safety. As noted above, the OGC requires all workers on public sector construction sites to have registered for the Scheme. Sir Michael Latham, Chairman of ConstructionSkills, however, expressed his surprise that this is not enforced.[361] The Construction Confederation also cited survey evidence that only 52% of respondents were required to undergo a health and safety assessment during the bidding process for public sector projects. Whilst there are some examples of best practice, such as Jobcentre Plus, Defence Estates and Birmingham City Council, it described government's performance as at best "patchy".[362]

217. Yet government's purchasing power cannot foster culture change in the housing repair and maintenance sector, where homeowners are not subject to the CDM Regulations and are not likely to be aware of the Construction Skills Certification Scheme. Here, only radical steps to address the size of the informal economy are likely to improve the sector's health and safety record. The Construction Confederation noted that "domestic consumers continue to be attracted to cheap cash deals".[363] Its proposal is to reduce the rate of VAT on all repair and maintenance work to 5% so as to remove the competitive advantage of those who avoid registration for VAT. Some parts of the sector already benefit from a reduced rate, such as conversion of residential buildings to a different residential use, and for the installation of microgeneration technologies. Given that over half the sector operates in the informal economy, the Federation of Master Builders argued that such a move could actually increase the overall amount of tax revenue from the sector.[364]

218. We welcome the Strategic Forum's commitment to ambitious targets for reducing the number of workplace fatalities and major injuries over the coming years. After a period of steady decline in construction fatalities since the turn of the century, the number of deaths has increased significantly since 2005/06. Housing repair and maintenance has had the worst record, primarily because so much of the sector operates in the informal economy. To tackle this the Health and Safety Executive must devote more resources to inspection, whilst HM Treasury should look at ways of reducing the size of the informal economy, for example by conducting a full analysis of the overall consequences of cutting the rate of VAT on all repair and maintenance work.

219. More generally, government as client has a vital role to play in improving performance. The Common Minimum Standards already state that clients should ensure all contractors are assessed for health and safety when tendering for work, and all workers should be registered on the Construction Skills Certification Scheme. But this is not happening. The new Construction, Design and Management (CDM) Regulations 2007 place a much greater emphasise on the client's role in ensuring health and safety, whilst the Corporate Manslaughter and Corporate Homicide Act 2007 provides the punishment in the event of a fatality due to organisational failings. The Government should use both of these to enforce a change of approach in public sector construction procurement, and to drive culture change across the sector.

253 Ev 131, Annex D (BERR) Back

254 Q 105 (Union of Construction, Allied Trades and Technicians) Back

255 Ev 311 (Royal Institution of Chartered Surveyors) Back

256 Unite-the union, Sustainable Solutions for the Long-Term Supply of Skilled Operatives to the UK Construction Industry Back

257 Q 112 (Union of Construction, Allied Trades and Technicians) Back

258 Q 662 (BERR) Back

259 Ev 119, para 32 (BERR) Back

260 Ev 223, para 13 (Constructing Excellence) Back

261 Q 107 (Union of Construction, Allied Trades and Technicians) Back

262 Ibid. Back

263 Q 103 (Union of Construction, Allied Trades and Technicians) Back

264 Q 660 (BERR) Back