Local Democracy, Economic Development and Construction Bill [Lords]

There are of course a number of different aspects to the issue of cash flow and the hon. Gentleman rightly identifies one of them as the availability of finance from the banks, which remains a difficulty. There is also the problem of cash flow resulting from payment by a contractor to a subcontractor down the supply chain. That exercises a lot of concern on the part of smaller and specialist contractors, and the payment and adjudication provisions in the Bill may help to improve it in some respects. I understand the concerns of those who do not believe that the Bill goes far enough, but I believe it is an important, progressive step building on what has been achieved so far, and that its introduction will be helpful. Nevertheless, when we debated these particular provisions in Committee, I expressed concern that one change in the adjudication procedure could have an unintended and malign effect. The changes proposed by the Government were designed to outlaw the imposition by the more powerful party in a contractual arrangement of unfair terms requiring the other party to meet all the costs of adjudication, thereby deterring that other party from seeking adjudication in the first place. The sensible provision was to make null any contractual term that had that effect, in which case the scheme for construction contracts, which is the default provision, would come into force, and it, of course, would not include any such restrictive provision. That provision was sensible, but when looking at how it was due to work, I was advised by a number of people in the construction industry—this was reinforced by the Royal Institution of Chartered Surveyors in its representations on the subject—that it could have the malign and unintended consequence of preventing the adjudicator from getting any payment. That would be a serious deterrent to anyone taking on an adjudication. Clearly that was a proper and reasonable concern, so I aired it in Committee and subsequently tabled amendment 1 to remedy it. The purpose of amendment 1 was simply to say that in the absence of any specific agreement the adjudicator would be entitled to the payment of""such reasonable amount as he may determine by way of fees and expenses"." That seemed a fairly straightforward way to address the matter. The Government have come back with amendments 21 and 22, which address it in a different way but have the same effect. Amendment 22 specifically says:""The contractual provision referred to…is ineffective unless—""(a) it is made in writing, is contained in the construction contract and confers power on the adjudicator to allocate…fees and expenses as between the parties"." On the surface, that seems to achieve the desired effect and I welcome it. I have heard some representations made that it could still leave a lacuna whereby a contract could be devised that included exactly such a provision for the adjudicator to be entitled to payment of reasonable expenses but that might separately seek to impose a condition about other costs, including the legal costs of the parties—if they incurred such costs—being met by one party. I am assured that that is not the case, but I would welcome reassurance from the Minister that there is no scope for such a lacuna in the provisions which would allow the good intentions of the Government's provisions to be bypassed. I hope that she will be able to give me that assurance. If she is able to do so, I will be happy not to press my amendment and to favour Government amendments 21 and 22.