Examination of Witnesses (Questions 580-599)
BERR, OGC
22 JANUARY 2008
Q580 Mr Hoyle: What is your projection
for the next five years on migrant labour? Do you expect it to
increase or decrease?
Mr Timms: One of the contributions
that the Office of Government Commerce has made, and very helpful
contributions, I think, is the development of an econometric model
so that we can test out both the effects on the market of major
new demands for construction coming from the public sector and
also other variations. For example, the model has been used to
look at the result of a hypothetical outflow of 5,000 people per
year from the industry over a continuous 10-year period. I am
not making a projection that that is what is going to happen,
but we just tested what the effect would be if there were such
an outflow, which I think would be quite a large outflow, and
that resulted in an additional 4% in total to output prices. That
was the result of running the model over the 10-year period, so
I think we are in quite a strong position but we do need to recognise
that we may not be able to benefit from as many migrant workers
in the future as we have done in the past.
Q581 Mr Hoyle: The figures you gave
us about the numbers up to 2006, are they estimates or are those
collected figures?
Mr Timms: Let me get Clive to
comment on exactly where that data has come from.
Mr Young: It is actually quite
difficult to get precise figures in this area because a lot of
migrant workers work in the self-employed area and they do not
actually register with the Home Office under the workers' registration
scheme, so in fact it is difficult to get the numbers of the genuinely
self-employed who are working in this area and also difficult
to forecast. We do know that ConstructionSkills have recently
been undertaking some work in what they are calling a mobility
study. They tell me that the information is due to be published
in March and their current estimate of the numbers of migrant
workers is about 144,000 based on a manual workers' total of 1.8
million. I do not at this point have any information from that
report in terms of forecasts but I look forward to seeing the
information that comes from that.
Q582 Mr Hoyle: So what you are saying
is that they could be much higher, these figures that we have
been given?
Mr Timms: The figures that we
have given are the best figures we have at the moment.
Q583 Mr Hoyle: I am just thinking
that people being paid cash in hand would not show; there would
be no way of counting those. That is okay. Given the sector's
dependency on migrant labour, especially for the delivery of the
big projects, looking at the Olympics, for example, we have always
been told by the Government that the rhetoric was British jobs
for British workers, yet on the Olympics we could have over 50%
being migrant workers. How do the two stand?
Mr Timms: I have a particular
interest in this because the area where my constituency is is
where the Olympic Games are going to be held, so I think we have
a very big opportunity here to match up people in the UK looking
for jobs with new opportunities in the construction industry around
the Olympic Games, and there are lots of other important opportunities
for the industry as well. I think we need to redouble our efforts
to attract young people into the construction industry and to
make the point to them that this is an attractive career available
in construction. It is undoubtedly the case at the moment that
it is a very good industry for young people to enter. We need
to persuade them that that is the case, and we need to do more,
for example, with the introduction of a Construction GCSE. I met
some of the very successful young people in the first cohort of
students that have taken that GCSE. There is work on the 14 to
19 diploma. There is a lot of work going on with ConstructionSkills
to underline the attractiveness of the construction sector to
people based in the UK, so I hope we will be able through those
efforts to make more headway in the years ahead to attract more
UK-based people into the construction industry. I would, however,
just make the point that I made earlier on, that the involvement
of people from outside Britain working in construction is, of
course, nothing new. Indeed, it has been a hallmark of the construction
industry for a long time.
Q584 Mr Hoyle: Historically, yes,
we had the Irish working on the motorways and projects like that.
What I would say to you is that people find it very hard to get
an apprenticeship. Somebody else is going to ask that question
but I just want to make that point that we have a lot of local
construction industry companies who can no longer take people
on.
Mr Timms: Can I comment on that?
Chairman: We have jumped ahead a bit
there.
Q585 Mr Hoyle: I just wanted to clear
up that point.
Mr Timms: It is a very good point.
Q586 Mr Hoyle: What I would say to
you is that at the moment we have seen a boom in the construction
industry, all these people being employed. What happens if there
is a downturn? Who is going to lose out? The people that come
from overseas, migrant workers, are looking for the money and
are willing to take a lesser wage. Who will be the loser if there
is a downturn in the market and people do not go back to where
they came from and will work for less money? What happens to the
UK construction workers under those circumstances?
Mr Timms: It is certainly the
case, as I said earlier, that this industry has benefited hugely
from the stability over the past decade and the industry is very
vulnerable to boom and bust cycles, and in fact that has been
a huge problem with the industry in the past. The central objective
of our policy over the past decade has been to secure stability
in the economy. The consequence has been that since 1995 in every
single year bar one the industry has seen growth, and the central
objective of our economic policy going forward is to maintain
stability. It is clearly the case, and events overnight have underlined
it, that we are entering some challenging times in the world economy,
but I think we are, compared to many other countries, in a strong
position because of the decisions that have been made and the
way that the economy has been managed. Of course, if there were
to be a downturn there would be serious challenges for every part
of the economy and for this part of the economy arguably more
than others. That is why it is so important that our commitment
to stability in the economy is maintained.
Q587 Mr Hoyle: Let us push a little
bit more on that because, in the case of the impact of inflation
on the construction industry, we are well aware of the price increases.
How will that affect the Government's capital investment programme
and how do you think you can mitigate that problem?
Mr Timms: This is a central issue
for the econometric model that I mentioned, to look at the demand
on the industry, the major projects over the coming decade and
the impact on inflation, and I will ask Mark to say a little bit
more about this in a moment, but our assessment is that the position
is a manageable one.
Q588 Mr Hoyle: Okay, it is manageable,
but we know that the Prime Minister is very concerned. He is going
to turn the screw a little bit. He takes so much money out and
says, "I am sorry, but this money is not going to be available.
We are going to reduce the amount of money", at the same
time as you have seen inflation within the construction industry,
not inflation in the country. How do we mitigate those two circumstances
which look very feasible in the near future?
Mr Timms: No, I do not think they
do. We have just had the Comprehensive Spending Review. That has
set out our spending totals for the three years starting in April.
I do not expect those to change. In terms of the Olympics, the
budget has been set out up to 2012 and I am confident that the
commitments that have been made on spending will be maintained.
We do need to keep a close eye on inflation; I agree with you
about that. That is the purpose of the model that I have described,
and our conclusion is that, with what needs to be done over the
period ahead and with the resources available with which to do
it, we are in a sound position. There may well be pinch points,
there may well be some particular skills, like project management
skills, where there is an issue, and we will need to work with
the industry to address those, but I am pretty confident that
we can get through the challenges ahead in good shape.
Q589 Mr Hoyle: The only thing I would
say is that with the Olympics what it is doing is robbing Peter
to pay Paul, so yes, you are having a boom in the south but that
is at the expense of projects going ahead in the north, because
we are taking lots of money out of there where projects have been
lost.
Mr Timms: I do not agree with
you there.
Q590 Mr Hoyle: I represent my constituency.
I cannot have a sporting village, never mind the Olympics.
Mr Timms: If you look at what
is happening in Manchester, in Liverpool, it is a different culture.
If you are looking at what is happening in Sheffield, in Leeds,
there is huge regeneration going on in all of those city centres,
in Newcastle at the moment, and that is one of the reasons, of
course, that the industry has done so well over the past decade,
so I think we are in a position—and I made a speech to this
effect last week—where certainly we have seen London doing
well, and some people are now calling it the capital of the world,
but I think that is benefiting the regions of the UK, and indeed
Scotland and Wales as well.
Mr Hoyle: Thank you for your honesty.
I look forward to standing up and the Chairman saying, "We
want no more lottery money. We have got enough. We do not need
any more".
Q591 Mr Wright: Moving on to skills
and training, last year's machinery of government changes led
to your department losing the policy lead on construction skills.
How do you engage with that department now in this particular
area?
Mr Timms: This is a very important
area for us, as indeed it is for every part of the economy, but
in construction skills it is extremely important. The machinery
of government change has given the lead to the Department for
Innovation, Universities and Skills. We are working very closely
with them. From my perspective, ConstructionSkills is doing a
very good job. They are working with schools and looking to improve
the image of construction as a career. They are increasing apprenticeships,
to pick up a point that was made a moment ago. They are managing
the National Skills Academy for Construction and they are working
as well to increase diversity in the industry, increasing recruitment
of women and of young people from ethnic minorities, so I think
the arrangements we have got in place with DIUS now in the lead
are delivering well for us, but it is a very good example of an
area where, in my role as the Government's Minister for Construction,
I need to work very closely with colleagues across government.
Q592 Mr Wright: So what you will
do is have regular meetings with them to discuss some of the issues
on the question of the number of people required within the industry
and the migrant workers? How would you input into that? Would
that be a genuine partnership between the two departments?
Mr Timms: Yes. There are regular
discussions between officials about all of those matters. We are
starting to look again at the kinds of issues being considered
by the model that I referred to, the OGC model, which does look
at numbers of people of different kinds that are likely to be
available to the industry over the period ahead and that information
comes from discussions within government, across government, even
parts of government. I think, again, it is a good example of how
government has to work in dealing with an industry which has such
a wide impact.
Q593 Mr Wright: You did mention briefly
earlier the speech you made last week, and in part of that speech
you said we needed to move on from the "north-south divide"
debate. Yet in the provision of construction skills we heard from
the unions and the sector skills council that there are significant
regional variations in performance, with training provision by
employers being much more prevalent in the north and Scotland.
Are you doing anything to spread northern best practice to the
south in the provision of training?
Mr Timms: You are absolutely right
about the regional differences in the pattern of apprenticeships.
In Scotland and the north, where direct employment tends to be
the norm, there is a very strong commitment on the part of employers
and I welcome that. In the south, however, where the use of self-employed
and sub-contract labour is much more common, apprenticeship opportunities
are fewer, so with support from the Learning and Skills Council
and the CITB—ConstructionSkills is looking at addressing
exactly that challenge. It has developed programme-led apprenticeships
which is a new training route to enable the big housebuilders
and contractors to participate through their supply chains of
small businesses, so we are making some progress. We do need to
find more work placements for young people wanting to take up
apprenticeships. I think that initiative is going to help but
it is something we are going to have to continue to focus on.
Q594 Mr Wright: Would this be one
of your priorities, bearing in mind that most of the major projects
are in the south of the country and are obviously dependent on
bringing in the skills but it just does not seem to be working
correctly. Is that one of your priorities with DIUS?
Mr Timms: Increasing the number
of apprenticeships is a priority, and indeed DIUS has identified
it and put figures on the number of apprenticeships that they
want to deliver over the next three years of all kinds. Within
that construction apprenticeships are going to be very important
and they are certainly very important to the industry and therefore
for me.
Q595 Mr Wright: We are in that area
where somebody who has an apprenticeship in engineering certainly
could be guaranteed a job, but UCATT told us at a previous evidence
hearing that 50,000 young people applied to the Construction Industry
Board for apprenticeships in 2006 but there were only 7,000 places
with employers that could be found. It is a huge shortfall, and
we recognise that there is the need for these skills in the coming
years. What are we doing to rectify that situation?
Mr Timms: We certainly do need
more; there is no question in my mind about that, but the figure
I have—correct me if I am wrong—is 10,000.
Q596 Mr Wright: I think in the original
evidence we had the union gave us a figure of 9,000 but they downgraded
it to 7,000.
Mr Timms: If you look across government
as a whole what DIUS is saying is that we want to increase apprenticeship
places from a quarter of a million to date to 400,000 by 2010-11.
to achieve that and to achieve the contribution that I want from
the construction industry we are going to need more high quality
employer places than we have available today. That I think is
the key constraint, the placements in the industry. We cannot
deliver apprenticeships by ourselves. There have to be those work
places available for young people to take up in order to complete
their apprenticeships successfully and I am certainly going to
be working with the industry to encourage more employers, and
employers in larger numbers, to make those places available.
Q597 Mr Wright: Do you have any targets
for the future, bearing in mind the low take-up within industry?
Mr Timms: I have not set a target
yet specifically for construction apprenticeships. I think to
some extent this is going to depend on my discussions with the
industry and an assessment of what realistically the industry
can deliver.
Q598 Mr Bailey: Can I just switch
the line of questioning from the role of government in creating
capacity within the industry? One of the things that has emerged
is the enormous but largely unrealised potential that government
does have to improve the industry and the Construction Confederation
told us that better and earlier information about long term investment
programmes would play a role in that. What are you doing to improve
the flow of information to the sector on government investment
plans?
Mr Timms: This is another very
important area. There is huge potential, given that the public
sector accounts for such a large share of the industry's business,
for the public sector in its procurement activity to be helpful
to the industry, and indeed to promote improvement in the industry,
and I think that is an important opportunity. We are pursuing
that through the Public Sector Construction Clients' Forum, which,
in response to some work by the National Audit Office, was established
in 2005, and also through things like the integration demonstration
programme. I think the forum does give us the opportunity to improve
the flow of information to the industry as well about what is
coming up but I see it as more than that; I think it is about
helping the industry to modernise and adopt best practice at every
point in the supply chain.
Q599 Mr Bailey: What do you think
of the proposal in the Institution of Civil Engineers' document
that there should be an "independent national commission
for strategic infrastructure planning"?
Mr Timms: I am not convinced at
this stage that that would be a sensible thing to do. I must confess
I have not read the argument. Although I am aware of the recommendation
I have not read the case that the institution has made. I think
the arrangements that we have, including on big projects,—and
we have talked about the Olympics and Crossrail, the announcement
that has been made relatively recently, and other big projects—work
pretty well. I am not sure how you could take it out of the ambit
of government, given that the commitment of very large sums of
money would be needed with the projects that such an independent
body was recommending. It seems to me this is much too close to
the very heart of government decision-making for it to be realistic
to take it outside and put it in a separate institution.
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