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Lord Mayhew: My Lords, will the Minister agree--


3.8 p.m.

Lord Strathclyde: My Lords, at a convenient moment after 3.30 p.m., my noble friend the Leader of the House will, with the leave of the House, repeat a Statement to be made in another place on the European Council in Turin.

Housing Grants, Construction and Regeneration Bill [H.L.]

The Minister of State, Department of the Environment (Earl Ferrers): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

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Moved, That the House do now again resolve itself into Committee.--(Earl Ferrers.)

On Question, Motion agreed to.

House in Committee accordingly.


On Question, Whether Clause 111, as amended, shall stand part of the Bill.

Lord Williams of Elvel: We resume the debate which this Committee had on Thursday evening on the Question of Clause 111 standing part of the Bill. At that time there were not many noble Lords opposite who were prepared to support the Government in their legislation and, regrettably, noble Lords were not available, with the enthusiasm that one would normally expect, to support the noble Earl in his honest and capable endeavours in trying to get this legislation through the Committee. It was perfectly understandable because the fact is that Clause 111 should not stand part of the Bill. It is no wonder that noble Lords opposite felt that they could not possibly support it. Indeed, even now the noble Lord the Leader of the House is demonstrating his confidence in the noble Earl's case by standing at the Bar. That is perfectly understandable for the simple reason that the scheme that has been produced in draft by the Department of the Environment is not a scheme for adjudication; it is a scheme for arbitration. Indeed, the Chief Whip is now deserting the Government.

I am certain that over the weekend the noble Earl received many representations stating that the industry, in the broadest sense of the word, simply does not agree with the thrust of the draft proposals. We debated that at some length on Thursday evening and I am sorry that noble Lords opposite were not available to hear the arguments.

I shall make just one point now. As both I and my noble friend Lord Howie said on Thursday, at one point we were proposing to table the scheme as a schedule to the Bill. Under the procedures of the House, that would have allowed us not only to discuss it substantively, but to amend those provisions if any noble Lord had chosen to table a further amendment. We could therefore have had discussions on different parts of the scheme. As my noble friend Lord Howie pointed out, after consideration we decided not to do that.

Nevertheless, I very much hope that when he comes to argue the case, the noble Earl will agree that the scheme as it stands is not acceptable either to this Committee or--this is much more important--to the industry at large. If the noble Earl can say to me today that he is producing new draft proposals for a scheme for adjudication rather than for arbitration, I should be perfectly happy, as I am sure would my noble friend, to cease our opposition to Clause 111. If, on the other hand, the scheme proceeds along the lines of the draft proposals, I am bound to advise the noble Earl that although we have decided not to table the provisions as a schedule in Committee, our view may well be different on Report.

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Lord Berkeley: I, too, have received a number of representations from the industry over the weekend about the scheme. As one who has worked in the industry for much of my life, it hurts me that although the Latham Report had the almost universal support of the industry, we now have a Bill which has been questioned by many of us and a scheme which I do not believe that anybody supports. I wonder whether the Minister received any representations over the weekend and which of the original supporters of the Latham Report are now with us even in general terms, apart from the process workers who do not want to be part of it anyway.

Perhaps I may quote from one or two comments that I have received. I refer first to the Institution of Civil Engineers and to its chief conciliation and arbitration advisory panel, which has stated:

    "It is a sad reflection upon our means of communication that the outcome has been this dismal Bill".
That is not a great compliment for the Bill.

The Building Employers Confederation has said:

    "We have given it the thumbs down and we will be looking for significant amendments".
That was referring to the scheme, not to the Bill.

The subcontractors group, the Constructors Liaison Group, describes it as "quite appalling". Lastly and perhaps most importantly, the solicitors who have to work on arbitration and adjudication for the industry and the Official Referees Solicitors Association say that they believe that the whole scheme is "misconceived" and that the Government appear to be muddling adjudication with arbitration. What has happened between the publication of the Latham Report and the introduction of the provisions of this scheme? Do those who have had to turn the report into the Bill understand what they are trying to do? Even in its early draft form, the scheme seems to muddle arbitration with adjudication.

I hope that the Minister will agree to consult urgently with the industry and that he will either come up with an alternative solution, as the noble Lord, Lord Williams, suggested, or delay the introduction of the scheme until we have a new version; otherwise the industry will continue to complain about the scheme which will remain unworkable. I believe that it will cause us much more trouble in the future, both here and in another place.

3.15 p.m.

Baroness Hamwee: During the proceedings on Thursday, my concern about the scheme's shortcomings increased almost by the minute. Noble Lords who have already spoken have referred to the lack of clarity as to whether it is an adjudication scheme. We approached the question rather crabwise on Thursday. The more questions that we asked, the more concerns noble Lords both on these Benches and the Labour Benches had about the scheme and about the final resolution to be proposed; about the Bill's relationship with the Arbitration Bill; and, returning to broader questions, about just which construction contracts would be subject to the scheme.

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I have just read a report from a newspaper which is published for the construction industry, stating that the Constructors Liaison Group believes that the scheme,

    "demonstrates a crucial misunderstanding in the mind of the DoE of the difference between adjudication and arbitration ... We regard adjudication as the key to solving a lot of the problems in the industry.

    If that is spoiled, we will be getting rid of the key part of this whole process".
The article concludes--I believe that this is very telling:

    "Indeed, if we go down the road proposed by the DoE, we could end up increasing litigation rather than reducing it".
That would go entirely against the objectives of the Latham Committee and, I believe, of the Government.

Lord Howie of Troon: Surprising as it may seem, I was greatly encouraged by the events of last Thursday evening. Because so few noble Lords stayed behind to oppose my Motion that Clause 111 should not stand part of the Bill, I took it that they agreed with me by abstention, if not by their actual presence. I must be right in that because if those noble Lords had thought that I was wrong, I am sure that they would certainly have stayed behind to support the Government and to oppose me.

I do not want to repeat the speech that I made on Thursday although many noble Lords who are present now missed it then, but I am sure that they will have studied it closely in the Official Report. Your Lordships will be glad to learn that I should like to make just two brief general points. First, the draft scheme is closer to arbitration than it is to adjudication. It is clear that parts of the draft scheme have been lifted more or less in their entirety from the Arbitration Bill, and that they have been slotted into the scheme as though arbitration were a species of adjudication which, as we all know, it is not.

My only other point, which I made on Thursday also, is that by its very nature the scheme will apply only to small contracts because most contracts in the construction industry are based on standard conditions of contract which have been laid down and agreed over many years. They are well understood on all sides of the industry. It is obvious that contracts of any substantial size will be laid under the umbrella of those standard conditions of contract. It is also true that at the moment those standard conditions do not wholly comply with the Bill, but there is no doubt that they will be amended or altered in such a way that they meet the conditions of Clause 105. That leaves out the lesser, smaller contracts which are not usually made under the standard conditions. The problem is that the scheme is more draconian than the standard conditions. The effect is that the scheme, which is more severe, will bear more heavily on small contracts than on big ones. That is unfair. The Government's strategy is that if the scheme is draconian, small contractors will be obliged to adopt the standard conditions; but, in my experience, life is not like that.

A moment or two ago my noble friend Lord Berkeley wondered whether there was an alternative to the scheme. I believe there is. If the Government are acquainted, as they must be, with the sixth edition of the standard conditions of contract published by the

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Institution of Civil Engineers, they will be aware that the conditions contain a procedure for conciliation. In this context, conciliation is almost the same as adjudication. The civil engineers' procedure for conciliation is much shorter and less complicated than the proposed scheme. Therefore, it is much more likely to be understood and used. It is also much less ambiguous than the scheme. The scheme is replete with ambiguities. I believe that many in the construction industry would prefer that the standard procedure in the sixth edition were used instead of the scheme.

My noble friend Lord Williams has already said that thought was given to putting down the scheme as a new schedule at Committee stage so that it could be debated and perhaps understood by your Lordships. In the end that was not done. I will take advice on whether it is possible to put down the civil engineers' procedure for conciliation as a schedule to the Bill at Report stage. If that can be done procedurally, I shall certainly consider doing so. It will be a great improvement on the scheme. I suggest that a much better idea would be for the Government to have a look at it--if they have not already done so--and replace this ambiguous, tortuous and too lengthy scheme with something of the kind that I have suggested.

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