Local Democracy, Economic Development and Construction Bill [Lords]

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The Committee consisted of the following Members:

Chairmen: † Mr. Eric Illsley, Mr. David Amess

† Cooper, Rosie (West Lancashire) (Lab)

† Curry, Mr. David (Skipton and Ripon) (Con)

Dunne, Mr. Philip (Ludlow) (Con)

† Efford, Clive (Eltham) (Lab)

† Gardiner, Barry (Brent, North) (Lab)

† Goldsworthy, Julia (Falmouth and Camborne) (LD)

† Goodman, Mr. Paul (Wycombe) (Con)

† Heppell, Mr. John (Nottingham, East) (Lab)

† Jackson, Mr. Stewart (Peterborough) (Con)

† Lilley, Mr. Peter (Hitchin and Harpenden) (Con)

† McCarthy-Fry, Sarah (Exchequer Secretary to the Treasury) (Lab/Co-op)

† Raynsford, Mr. Nick (Greenwich and Woolwich) (Lab)

† Rogerson, Dan (North Cornwall) (LD)

† Stewart, Ian (Eccles) (Lab)

† Watts, Mr. Dave (Lord Commissioner of Her Majesty's Treasury)

† Winterton, Ms Rosie (Minister for Regional Economic Development and Co-ordination)

Mick Hillyard, Committee Clerk

† attended the Committee

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Public Bill Committee

Thursday 18 June 2009

(Afternoon)

[Mr. Eric Illsley in the Chair]

Local Democracy, Economic Development and Construction Bill [Lords]

Clause 135

Requirement for construction contracts to be in writing

1 pm

Question (this day) again proposed, That the clause stand part of the Bill.

Mr. Stewart Jackson (Peterborough) (Con): We may have lift problems again, given the depleted number of Labour Members; however, we are not going to divide for the time being.

I was making mention this morning of the right hon. Member for Greenwich and Woolwich because a rather mischievous suggestion was made that he might want to make a comeback in his role as Minister of State at the then Office of the Deputy Prime Minister. I have heard of worse ideas. If I may pay him a compliment, in my role as shadow fire service Minister, rarely do I meet anyone in the fire service who has not got a good word to say about him as a former fire service Minister. If the Government Whips are taking any notice of what I say, they might consider my suggestion—but that has probably ruined his career.

Turning to clause 135, this morning I was making the case that had been put very strongly by the Construction Confederation, but it might be as well to put it into a wider context. The Opposition believe that the Housing Grants, Construction and Regeneration Act 1996 needs updating to tackle the continuing problem of late and unreasonably disputed payments in the sector. We believe in the decision to legislate, and support strengthening the adjudication system. We consistently lobbied for that with the last three construction Ministers. We support the aims of the clauses on payment, and we hope that the Minister takes on board the significant amount of lobbying that the construction industry has put in place.

I am anxious not to stray outside the remit of the clause, but I was obviously disappointed that the amendment proposed by the Federation of Master Builders was not selected. We may have been minded to support that provision, which amended the 1996 Act and dealt with the desirability of maintaining a diverse range of contractors in a local authority area. We are sorry it was not on the selection list.

The Government had an opportunity, in drafting the clause, to take cognisance of the pleas being made in the industry to roll up all the adjudication under the auspices of the scheme for construction contracts. As a

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result, there would have been no need for this strict definition—the division between written and oral contracts—which, as I said earlier, may well give rise to unnecessary bureaucracy and time-wasting and impose an indicative cost on the construction industry. However, I look forward to hearing from the Exchequer Secretary to the Treasury, the hon. Member for Portsmouth, North. I paid her a compliment this morning, Mr. Illsley, and congratulated her on her promotion. She is in fact on double time this afternoon, we gather, because she is simultaneously serving on the Finance Bill and this Bill.

Dan Rogerson (North Cornwall) (LD): Following on from the hon. Gentleman’s remarks, I suppose the Exchequer Secretary is fortunate that the rules change on 1 July, so she will not have to declare that she is doing two jobs at once. I am not sure what the salary implications are, but I am sure there are some.

I should note that this is an odd Bill, in that it puts together lots of different unrelated elements. I suppose that that is a feature of where we are in this Session—trying to get things done before we finish for the summer. It also shows that the Bill has not focused on issues of local democratic involvement, which we had hoped it might when the White Paper was introduced. Having said that, this is obviously a crucial issue for people in the construction sector. Members of the Committee have received a great deal of information from individual businesses and representative organisations about those concerns. We will not have the opportunity to talk about those as we move through this part of the Bill. However, it seems that there is concern that the proposed changes will not meet the needs of the sector in these difficult economic times. We will need to return to that as we move through the clauses in this part of the Bill.

Mr. Nick Raynsford (Greenwich and Woolwich) (Lab): On Second Reading, I drew attention to my interest in this issue. Before we discuss the clause, I should reiterate that I am currently the honorary vice-chairman of the Construction Industry Council, and have for the past four years been respectively its chairman and deputy chairman. I thank the hon. Member for Peterborough for his kind remarks about my past in relation to the fire service. I am afraid he will groan when I tell him that I have a past in relation to the construction industry—I was Construction Minister between 1997 and 2001. Before that, I was an Opposition spokesperson on such matters and spent some considerable time on what became the Housing Grants, Construction and Regeneration Act 1996.

Ian Stewart (Eccles) (Lab): Is this an application for anything?

Mr. Raynsford: No, no. I just think that hon. Members should be aware of my perspective on the issue. The 1996 Act gave effect to the recommendations that came from the Latham review, which was an important review seeking to tackle the problems of excessive conflict and litigation in the construction industry and encouraging more partnering and collaborative work. The Act has helped in many ways to deal with unnecessary disputes, reducing the amount of conflict in the industry, and to provide speedier remedies for disputes through the adjudication procedure and greater certainty about

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payment. Despite the progress, there are still difficulties in this part of the Bill. It has been seen as necessary to tidy up some of the loose ends in the existing legislation, and also to take forward the process of assisting the industry in becoming more productive, less litigious and more effective.

There has been a lengthy period of consultation on the proposed clauses we are dealing with. Not every part of the industry has been happy. We are talking about a complex industry with a large range of different interests. Inevitably, the interests of main, sub and specialist contractors, consultants, manufacturers and others are sometimes different. Unsurprisingly, there was no overall consensus on the measures necessary to tidy up the 1996 Act, but eventually, a compromise emerged from those discussions, and that is broadly reflected in the clauses.

On the clause before us, the suggestion that somehow there might be problems arising as a result of widening the definition of construction contracts to include oral ones is not a correct perception. There is a difficulty with construction contracts, which are generally in writing, but where it is necessary to vary the contract—probably on site as a result of an unforeseen circumstance—an oral instruction may be given. If that happens, the contract is no longer a purely written one, but a combination of written and oral. Given the current requirement that the contracts must be in writing, it could provide a loophole for a party trying to avoid adjudication by arguing that because there was an oral element in the contract, it would preclude the adjudication process. That loophole will be closed by the clause we are discussing.

I put it to the hon. Member for Peterborough that, although I hear the concerns raised by the Construction Confederation, it would be a retrograde step to oppose the widening of the definition to include oral elements, due to the circumstances I have explained. That is widely seen as a way of helping to ensure that adjudication is effective and cannot be frustrated by litigious parties who are simply trying to force their way through and bully other parties to a construction contract by using the law. In my view, the change is welcome. I hope that the Government will press it, and that the Opposition will not oppose it.

The Exchequer Secretary to the Treasury (Sarah McCarthy-Fry): I welcome you to the Chair, Mr. Illsley, and I thank hon. Members across the Committee for their kind words.

There are two points that I want to deal with, the first being that made by the hon. Member for Peterborough about the worry that the contracts would lengthen the adjudication process. It is worth reminding him that we are not requiring parties to use adjudication; it is available to them if they feel it is appropriate in their circumstances. It may well be that adjudicating an oral contract is the most cost-effective way of determining a dispute. It may be more expensive than adjudicating a written contract, but it would still be much cheaper than deciding the dispute through litigation. We think we should let people choose for themselves.

On the wider point about a single statutory adjudication scheme, it would introduce greater clarity and simplicity but it would also represent a much more significant intervention into freedom of contract and would prevent

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parties from agreeing the best process for resolving disputes under their particular form of agreement. It could also curtail any future innovation in the adjudication process. We have decided that the balance falls on the side of maintaining parties’ freedoms. However, the point is not an unreasonable one, and we have made the offer to industry that we will conduct a thorough review of the existing adjudication system set out in secondary legislation when we amend it as a consequence of the changes we are making to the 1996 Act.

Mr. Jackson: I thank the Minister for her answer. Will she elucidate the remarks made in the other place on 3 March by Lord Brett in Grand Committee when talking about a single scheme for adjudication?

“That would not be unreasonable. Therefore, we have made an offer to the industry that we will conduct a thorough review of the existing adjudication scheme set out in secondary legislation when we make amendments”—[Official Report, House of Lords, 3 March 2009; Vol. 708, c. GC293.]

What time scale is the Minister looking at for that review, given that this process has been dragging on, with consultation, for seven years?

Sarah McCarthy-Fry: I wish I could answer the hon. Gentleman. I will have to say, as soon as possible and practical, unless inspiration arrives at some point, in which case I may be able to elucidate further later on. I will undertake to write to the hon. Gentleman.

Question put and agreed to.

Clause 135 accordingly ordered to stand part of the Bill.

Clause 136

Adjudicator’s power to make corrections

Question proposed, That the clause stand part of the Bill.

Mr. Jackson: This clause is relatively easy and uncontentious, so we will not burden the Committee. It inserts the new subsection (3)(a) into section 108 of the Housing Grants, Construction and Regeneration Act 1996, requiring parties to a construction contract to provide in the contract the adjudicator’s power to correct a clerical or typographical error. We do not have any problems with this tidying-up exercise. It is broadly welcomed by most members of the construction community and we are happy, subject to the Minister’s comments, not to divide the Committee.

Sarah McCarthy-Fry: As the hon. Gentleman said, this clause ensures that adjudicators can, generally speaking, make corrections to their decisions, and inserts into the 1996 Act the requirement that the construction contract should provide that

“the adjudicator has the power to correct a clerical or typographical error”

in his decision

“arising by accident or omission”.

This puts on a clear statutory footing an adjudicator’s ability to amend an obvious error in their decision. The 1996 Act is currently silent as to the power of an adjudicator to correct such errors.

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Reverting to the previous clause, the review of the statutory scheme will be in 18 months.

Question put and agreed to.

Clause 136 accordingly ordered to stand part of the Bill.

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Prepared 19 June 2009