Local Democracy, Economic Development and Construction Bill [HL]

My Lords, I also pay tribute to the Minister’s excellent tour d’horizon in introducing this legislation, although I have to say that when I listened to the speeches from the Front Benches opposite, my mind went back to the days when I worked in the Augean stables of Scottish local government legislation in the other place. The late Donald Dewar and I probably had recurrent nightmares of the annual treadmill that was the yearly local government (miscellaneous provisions) Bill. It was perhaps not quite as elegantly named as this Bill but it is quite clear that the arguments being deployed by the opposition Front Bench are almost identical to the ones that we brought forward regardless of the content of the local government reforms. I have said enough about local government and I do not wish to say anything more about that today. I declare an interest as president of the Specialist Engineering Contractors Group and I wish to concentrate on Part 8. Obviously we will get down to the fine print in Committee but it is worth flagging up some of the concerns. The noble Baroness, Lady Warsi, made an impressive speech in which she referred to Part 8. She said that, basically, she was not unhappy about it because it says what is in the tin and that is what you are going to get. Part 8 deals with construction contracts and the feeling I have about it, at least in part, is that it is rather like going to a supermarket and bringing back what you think is a tin of thick vegetable soup but instead you get a wishy-washy gruel. This is a vexed area. The Specialist Engineering Contractors Group is an umbrella body for six trade associations of varying sizes, including heating and ventilating contractors, electrical contractors, and people engaged in steelwork, lifts and plumbing, as well as the electrical contractors in Scotland, who have their own organisation, SELECT. These are the people in the construction industry who do the business, deal with the highly skilled aspects of the work, and are very often engaged in complicated contracts and work which requires addressing high engineering specifications. They are therefore at the mercy—I use the word advisedly—of major contractors who dither and find excuses for not paying. A few weeks ago, the noble Lord, Lord Mandelson, was proud to make the point that the Government, as a major customer of the construction industry, are determined to pay their bills within 10 days, but, of course, the people who will be paid are not the men and women I am talking about. The major contractors will get their payments but there is no obligation on them to trickle it down through the system, yet this legislation has the important objective of facilitating what Keynes would have called the countercyclical economic activity which we hope will diminish the worst effects of the oncoming recession. In the 21 October edition of the Independent, information was provided that the construction industry accounted for 21 per cent of all insolvencies, compared with 8 per cent in financial services and 5 per cent in the retail sector. We are all worried about the situation at Woolworths and a number of other such stores, and we are concerned about the unemployment that is flowing out of the City of London and out of financial services centres across the UK, but a sizeable number of businesses in the construction industry were going bust quite some time before the flood that is now coming out of the City. The trade association of which I speak has some 60,000 members that employ 300,000 people. You do not have to be a mathematical genius to divide 300 by 60 to see how many people work for these very small businesses, some of which are one-person businesses. They do not have the resources to enter into expensive adjudication processes if people quibble or deny them the right to payment timeously. Equally, if they become awkward and do that, the chances of them getting follow-up contracts are limited. I am not carping here about the intention of the legislation—we agree that it is desirable and worth while—but when we get to Committee it will be useful for us to look rather more closely than I feel that officials have done at the drafting of this legislation. We want to look at the whole issue of a payment notice, which is rather strange. We would expect that if you submitted a bid to get some building work, once you had completed the work you would send in a bill and say, ““That’s the work done, and this is what we want paid””. But in the construction industry what happens is that the person who has had the work done then sends out a notice of how much they are going to pay the contractor. There is a period within which that has to be done but, if that is in the 59th minute of the 23rd hour, that is rather uncomfortable for the business that has people and suppliers to pay. Businesses naturally get distressed about that. The major contractors, in the main, are not the villains of the piece. A cynical minority use their position of power and their wealth—and that wealth tends not actually to be theirs but to be money that they have been paid from the final client. That money should be going on to the subcontractors but in a number of cases that does not happen. When it does not, we get the kind of insolvencies we are talking about here. We need to look at this more closely when we get to Committee and Third Reading. We need to look again at questions regarding the time of notice and whether there should be a more specific period there. We need a single mandatory statutory procedure for adjudication, reflecting the adjudication procedure that is already in the scheme for construction contracts. In some respects we are talking about matters of detail, and I do not want to go down that road in what is, after all, a Second Reading debate. This is a small part of the Bill but a significant one. If we are going to see the construction industry meeting its responsibilities and delivering on the Government’s ambitions for reducing the impact of the recession that is coming upon us, we have to ensure that the parties engaged in the industry have a degree of fairness about the payment system. Given the nature of perhaps only 50 companies responsible for the major contracts, that group does not take a lot of policing. Almost inevitably, though, as a consequence of the force majeure that their economic power affords them, they are at an advantage over the small plumber, the small glazier or the small heating contractor whose work is just as valuable and essential for the turnkey at the end of the process. We therefore have to make that balance a bit better. The Government have had a first stab at that but I do not think it is quite good enough. There will be ways in which we might be able to look at amendments to it, and I look forward to having discussions with my noble friend on this issue. There is a special hell for those people who enjoy local government legislation procedures in this place. I have tried to avoid it now for the past 25 years. I may not be present for any of the Bill except Part 8, but I wish the rest of those assembled here well—from my bitter experience, it is one thing they probably want to get out of as quickly as possible. Apart from that, I welcome the Bill.