Local Democracy, Economic Development and Construction Bill [Lords]

As I have said, the case that the hon. Gentleman highlights would put other creditors in a weaker position. Other trading partners of the contractor would be able to request such security during the normal course of business, but they would not be able to demand it, which is why the new clause would not be the right approach. In addition and practically, compelling the payer to provide security would be expensive—perhaps prohibitively so. For example, a bank would charge for a guarantee, and, if the nature of any security were such that funds had to be ring-fenced so that the payer was unable to use them for day-to-day operations, the payer would be more likely to fail anyway. New clause 5 would repeal section 113 of the Housing Grants, Construction and Regeneration Act 1996. The new clause would, it appears, allow the parties to a construction contract to rely on all types of pay-when-paid clause. However, amendments 5, 6, 7 and 16 would continue to prevent the parties from relying on pay-when-paid clauses, and because of that new clause 5 would remove the insolvency exceptions. We need to be careful that we do not create a different situation for construction insolvencies from those involving other businesses, and preventing construction firms from using pay-when-paid clauses in insolvency cases would clearly do that. I thank the Opposition for their support for the Government amendments. I again emphasise that the Bill must provide a balance between the needs of all parts of the construction industry. For that reason, I ask Opposition Members to withdraw their amendments and to support the Government amendments. Question put and agreed to. New clause 12 accordingly read a Second time, and added to the Bill.