Local Democracy, Economic Development and Construction Bill [HL]

I shall also speak to the other amendments in this group, which are all concerned with payment procedures. It is commonly understood in the construction industry that many small firms suffer through poor payment practices. SMEs are mainly, of course, the subcontractors in the supply chain; they are the heating and electrical contractors, the plumbers, glaziers and others. One hardly needs a crystal ball to assert that, at a time of recession like this, SMEs are at greater risk than ever, whether in this industry or otherwise. My amendments to Clauses 137 and 138 would simplify the whole procedure. That in itself would be a great boon to small enterprises which do not have ranks of advisers to support them. It would make the procedure fairer to all parties, and there would be less bureaucracy by enabling the payee—the person who has been doing the work and supplying the goods—and only the payee to issue the initial payment notice. This is, after all, what other industries do. The payer does not give the initial payment request. As I understand it, and I hope that this conforms with the advice given to the Minister, well known organisations such as the Chartered Institute of Building and the Royal Institution of Chartered Surveyors also take this view that the payee and only the payee should issue the initial payment requirement. If the payer, as the Government propose as an alternative, is the most likely person to give the initial notice, a challenge to that payment request could be made only by going to adjudication. Of course, under the scheme proposed by my amendments, when the payee issues the initial invoice, as it were, on the payment due, the payer may wish to challenge that. He may wish to say, "This is not what was agreed", "The work has not been done properly" or, "The goods delivered are defective". The payer, as the Bill allows, may also wish to issue a notice to pay less than the notified sum. However, we say in these amendments that it is sensible to impose some kind of limit and that the payer’s notice that the payment should be less than the amount notified must be issued not later than 14 days after the payment due date. Without such a limit, which Clause 138 does not require, SMEs would find it difficult to manage their cash flow effectively, because the payer could issue a notice of reduced payment at the last moment before the final date for payment. I beg to move.