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The lump that wont go away

WHO said this and when? We do not object to a man if he is a bona fide contractor finding his own materials, taking the work direct, but this system of these men doing labour only is what we object to.

Most people would assume this comment was made some time in the past 30 years, a reference to the issue which has dominated the labour relations agenda since the 1960s: labour-only subcontracting (LOSC), the lump and self-employment.

In fact it came from a plasterer giving evidence to the Royal Commission on Labour in 1892. And early readers of Labour News, the greatgrandparent of Construction News, would have been equally familiar with the seemingly contemporary themes of fragmentation of the industry, calls for registration and apocalyptic warnings about training and skills shortages.

There are fundamental economic reasons why the same themes, the same problems and the same solutions have been played out over the past 125 years. They are bound up with the development of the contracting system, which was reaching maturity in the 1870s.

Contractors operate in inherently unstable conditions. The level of demand in the economy, decision-making by clients and professional groups, the prices charged by materials suppliers, even the weather, are outside their control. But once they reach a certain size they either have to find ways of maintaining enough workers across a range of sites to cope with new contracts, or have enough flexibility in hiring and firing them to cope with swings in demand.

The logic for contractors was to minimise risk and maximise liquidity rather than, as with industrial firms, concentrate capital investment to achieve economies of scale. And they turned their attention to the one cost area they could control: labour.

But workers too could exploit the instability of the market by well-timed work hold-ups and wage demands. The result in the years before the first world war was a series of disputes involving employers trying to introduce devices such as piecework and payment by the hour, and workers trying to enforce the guaranteed week and union membership.

The conflict between the two produced two apparently contradictory tendencies: moves by contractors to tie the unions into joint control of working conditions by formal working rules; and the development of LOSC as the most flexible way of engaging labour.

This conflict has played itself out again and again in the years since because the logic behind it remains the same. From the point of view of an individual contractor it will make perfect sense to maximise flexibility and pass on as much risk as possible to its subcontractors and workforce. But the results of this cause problems for contractors collectively. For if the industry is so fragmented and dominated by market forces, who trains the workforce of the future? And if circumstances are such that workers are powerful enough to make escalating demands for more money, who ensures that the free-for-all does not turn into industrial anarchy?

Just before the first world war it seemed the employers were winning. LOSC may have been even more widespread than it is today. But the war and its aftermath strengthened the unions. Labour shortages, new Labour local authorities determined to regulate working conditions and an upsurge in union membership meant LOSC would not return to its pre-war levels until the 1980s.

The post-war years also saw attempts to regulate employment. The builders parliament of 1919 proposed decasualising labour by registering workers. In 1926 the unions and employers set up the National Joint Council for the Building Industry to provide joint regulation of pay and conditions.

But the industry was never entirely decasualised, and LOSC forms of employment continued. In the North-West they called it the tape, in Scotland the grip and in the South the lump: it meant you were paid for what you produced as an individual rather than as part of a team.

In the 1950s and 1960s LOSC grew once more, encouraged by the potential for tax evasion in switching to self-employment. By the 1960s concern about LOSC was such that the government set up the Phelps Brown committee to investigate. It rejected a ban on LOSC, but called for tough action against nominal self-employment. The Labour government agreed, but introduced and then increased Selective Employment Tax, a payroll tax that gave firms and workers incentive to switch to self employment.

Some sectors of the industry took stronger action. In the electrical contracting sector, concern about the industrial anarchy caused by subcontracting and bonus rates led employers and unions to set up the Joint Industry Board to regulate them. This example would be followed 12 years later by the engineering construction sector, and the result was fewer self- employed workers.

The building unions turned back to industrial methods of fighting the lump and 1971 saw the formation of UCATT, after the amalgamation of the woodworking, building trade and painting unions. A year later a national strike picked off employers one by one in a campaign for a 30 guaranteed week, and the NJCBI agreed a new voluntary register of firms which would use all appropriate steps to hire directly employed labour. Two pickets were jailed after the strike on charges of intimidation.

Action by the 1974 Labour government against tax evasion cut self-employment for a while, but the re-election of the Conservatives in 1979 reversed the trend. Self-employment was to double in the decade of the enterprise culture as employment laws weakened the unions and local authorities were prevented from inserting no lump clauses in their contracts.

The building unions and the national joint machinery became more irrelevant to conditions on site. Self-employment reached 60 per cent of the private sector workforce, and the battle between flexibility and control seemed over.

But statutory training boards survived in construction against the odds because employers wanted a collective organisation to underpin the development of the workforce of the future.

Steel erectors on London office sites showed the vulnerability of contractors in an unofficial strike in 1989 which halted work on projects worth billions of pounds. An unofficial joint sites committee briefly threatened disruption in London in the early 1990s.

Clients and contractors worried about the effect of unrestricted subcontracting on work quality backed plans for voluntary registration of firms and skills certification for workers.

And the Inland Revenue and Contributions Agency signalled it would reclaim tax and national insurance from contractors using bogus self-employment.

The tension between flexibility and control was working in the 1990s just as as it had in the 1890s.

Julian Birch worked on Construction News from 1984 until 1992, latterly as news editor. He is the author of Employed or Self employed? Contract Labour in the British Construction Industry, published by the International Labour Organisation. He now works as a freelance journalist and writer.