My Lords, I thank the noble Lord for this amendment and for providing the opportunity for us to look again at the important matter of retention payments. Following Committee we have been busy. We have consulted with stakeholders on payment terms, and it is clear that the practice of retentions is an issue, as we suspected, largely confined to the construction sector. As with other payment issues in construction, issues with retentions go to the
heart of the industry’s business models. These models are driven by a broad and diverse range of customers—and, of course, there is an extensive reliance on subcontracting. The work is project based and frequently short term, with no ongoing relationships. Typically, low levels of capitalisation mean that the industry is heavily reliant on cash flow.
5 pm
On the amendment, government is already able to include a new obligation to report on retention practices through the powers in the Bill. Since Committee, we have held a round table with key construction representative bodies to discuss how this might be done. We are following that up with a series of bilateral discussions to make sure that we get it right. The amendment would also require government to undertake a review of the practice of retentions. Following debate in Committee, we have held discussions with a wide range of stakeholders in the construction industry, and we found that there were a range of opinions. A proper assessment across the industry of the costs and benefits of the retention system will be vital to get the policy right—and it needs to be done in partnership with the industry.
I am pleased to inform noble Lords that the Government will therefore work with the Construction Leadership Council to undertake an analysis of retention payments under construction contracts. We are currently agreeing the project specification and it is our intention that the final report should be published early in 2016. That will provide an evidence base much more quickly than the 18 months after the coming into force of the reporting requirement envisaged by this amendment. The partnership is also important; an enduring solution to the issues rests in culture change. Legislation on its own is never likely to achieve change. The outcome of the research will inform the discussion about how the industry moves to a position of zero retentions.
Finally, the amendment would require government to take a power to introduce regulations. The Government’s work with the Construction Leadership Council will provide the evidence base for any action needed. Before that review has taken place, and given the lack of a clear consensus in the industry and among its customer base, the Government do not believe it appropriate to take such a power at this stage. We are taking a number of steps which will address the key issues at the heart of this amendment—and, on that basis, I hope that the noble Lord will feel able to withdraw his amendment.