Local Democracy, Economic Development and Construction Bill [Lords]

First, may I draw attention to my interests as declared in the Register of Members' Interests? The Housing Grants, Construction and Regeneration Act 1996, which was the basis of the provisions being amended by part 8 of the Bill, was an important measure that addressed real concerns within the construction industry about the litigious characteristics of the industry, the tendency for different parties to fight each other, and the considerable problems of payment that existed within the industry as it operated in the 1980s and 1990s. The motive for the 1996 Act was the Latham report. It was the work of Sir Michael Latham, a distinguished former Member of this House, and it commanded all-party support. I was very pleased as Opposition spokesman on construction at that time to give full support to Sir Michael's proposals and to the legislation that flowed from them. I was even more fortunate as a Minister in the early days of the current Government to be in a position to introduce in the late-1990s the provisions of the 1996 Act, together with the scheme for construction contracts which was developed under the powers in that Act. That was a further reinforcement of the bipartisan approach towards improvements in the culture of payment and the reduction in litigation in the construction industry. Those proposals were not, of course, a total panacea. There remain problems and weaknesses in procedures that have not yet been tackled. There is obvious unhappiness on the part of some parties to construction contracts that payment is not always made when it should be, and that the stronger party can often use its muscle to try to impose unreasonable conditions, but for all that there has been an advance. The amount of litigation has been reduced, and the use of the adjudication procedure is now much more widespread. There is general agreement that the provisions of the 1996 Act have been beneficial. Having said that, there is still a need for further improvement, and this Bill carries forward proposals that were the subject of intense debate within the construction industry over several years but which should add further improvements to the provisions of the 1996 Act. Inevitably, this is a compromise. There is a range of different points of view within the industry. It is highly fragmented and it is almost impossible to anticipate a situation where a package of reforms would satisfy all parties and be unanimously agreed. However, the compromise the Government have proposed is a sensible and practical one that achieves significant improvements, both in terms of the adjudication procedure and some of the elements relating to payment procedures, and I welcome its provisions. There will still be problems, and issues of cash flow affecting smaller firms—particularly small and specialist constructors—will remain very difficult. In the current economic climate cash flow for smaller firms down the supply chain remains a critical issue.