Clause 138
Local Democracy, Economic Development and Construction Bill [Lords]
1:15 pm

Stewart Jackson (Shadow Minister, Communities and Local Government; Peterborough, Conservative)

This clause is more contentious and involves the removal of conditional payment provisions and the pay-when-certified provisions. There is concern about section 113 of the Housing Grants, Construction and Regeneration Act 1996, which has been communicated to all members of the Committee. Section 113 is a pay-when-paid provision which is used in the event of a main contractor’s client or customer going into insolvency. In other words, a subcontractor will not get paid at all in the event that a main contractor does not receive anything from his client or customer. This is a significant worry for small and medium-sized enterprises who are concerned that this clause of the 1996 Act will be used to prevent them being paid in a timely and reasonable way. The specific point raised by members of the construction community was that the former Department of Trade and Industry consulted on removing this exceptional sub-clause—or clause of the new construction act—four years ago. It gave an undertaking at the time that it was minded to remove that clause to assist small and medium-sized enterprises. The Minister’s predecessor in what was then the DTI indicated that it would be removed. However, the Department for Environment, Food and Rural Affairs decided to impose the provision nevertheless, but at the same time agreed there should be a full review of insolvency law and practice as applied to the construction industry. That review was never instigated.

Finally, to sum up what is quite a complex clause, the question asked by many in the construction industry is why should small and medium-sized enterprises act as insurers in respect of both the main contractor’s insolvency, and the client’s insolvency? We are looking to receive today undertakings from the Minister that she understands the difficulties this clause may give rise to. Is there a review specifically around this and could it be subject to secondary legislation in the future? If we do not receive sufficient undertakings and reassurance, we would certainly look to amend this clause on Report.

Dan Rogerson (North Cornwall, Liberal Democrat)

I am following the hon. Gentleman’s argument and it will not surprise him to know that we have heard similar concerns. I draw his attention and that of the Committee to new clause 21, which stands in my name. We will reach that later on in proceedings, but it seeks to address similar issues.

Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

I was getting a little confused there, I must admit. I dug out my notes for new clause 21 because I believe it addresses exactly that. Perhaps, Mr. Illsley, it would be better to wait until we get to new clause 21 before I deal with those points.