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Viscount Ullswater: My Lords, I am attracted to the proposition put forward by the noble Lord, Lord Williams, at this stage of the Bill. It is a new approach, as is that of the noble Lord, Lord Berkeley.

At Committee I said that I was persuaded by the Process Industries Latham Group--PILG--and I noticed that the noble Lord grimaced when I used that term at Committee stage. However, I am glad that he is now used to using it. The group has long experience of good relations within that sector of the industry. I do not believe that it is right just to sweep aside or impose upon it unthought-out recommendations. It is not basically concerned with speculative development; normally, it carries out a process which both sides want. At that stage, therefore, I said that I felt that the Government were taking the right tack.

The noble Lord, Lord Berkeley, mentioned the problem of the steel fabricators. I agree with much of what he said, and I should like to tackle that point in a later amendment which will cope with the problems that the steelmakers face. But the duty of the Government--the noble Lord, Lord Howie, may put it more strongly--is to try in some way to satisfy the industry. The noble Lord, Lord Williams, is trying to square a circle by not making it mandatory that every process engineering contract be excluded from the Bill but, instead, allowing it to be excluded by the words in his amendment.

Therefore, this is not a novel approach; it is a new approach, and my noble friend should consider what is being said. It may be that the industry is trying to speak to him in this way.

Lord Ezra: My Lords, the amendments we are now debating relate to a fundamental but simple issue:

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namely, that hard and fast distinction cannot be made between construction work and process work; that some trades inevitably cross the border.

We now have a number of propositions which introduce flexibility. I am attracted by the wording put forward by the noble Lord, Lord Berkeley, in Amendment No. 140. I would have thought that the Government would be pleased to see that degree of flexibility introduced into something which has proved extremely difficult and which could be made more difficult by the solution proposed in the Bill. I hope, therefore, the noble Viscount having suggested that his noble friend look at the matter sympathetically, that the Minister will do so.

3.45 p.m.

Lord Monkswell: My Lords, in rising to support my noble friend's amendment, I speak as a mere stripling in the industry compared with my noble friends Lord Berkeley and Lord Howie of Troon.

My noble friend Lord Williams is trying to resolve a problem that we see on the face of the Bill in the distinction between sections of the construction industry. Amendment No. 111 is one way of resolving the problem. It may be that if this one does not find favour with the Government, subsequent amendments may help to bail them out in different ways.

Perhaps I can say a few words about the perception of the process industries and their anxieties. We must recognise that within the construction industry contractual problems arise. To a large extent a number of unpredictable factors bear upon the construction industry which cause difficulties between contractors and subcontractors. Some may be totally outside the realms of human control--things like the weather which can affect contracts; but other factors are under human control. For example, a large contractor may seek to gain advantage over a small subcontractor.

Another factor that must be considered is the variations in demand and workload in the industry. Twenty years ago there was a large degree of unpredictability in the industry. For instance, in the building of a nuclear power station the initial contractor could not tell within half a decade when the job would be completed because he could not predict what would happen--the design parameters might change and so forth. Over the past decade it has become easier for the main contractors in an operation to say how long it will take and what the cost will be.

There have been major advances in the way that large contracts are organised and planned. But one factor that comes into the situation is the fact that there is a great dearth of work in that area of activity. It is relatively easy, therefore, for a large contractor to lay terms and conditions on the smaller subcontractors and be able to plan with a fair degree of precision the timescales and costs involved. But that situation could change. Within the next five or 10 years there could be a complete turnround.

If we look at the state of the water industry, for example, we see a desperate need for major investment. That will increase the demand on the contractors and

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subcontractors. It may be that the planning and timescales in terms of costs will go out of the window because of competition and changing circumstances. It may be that an industry which operates on a fairly secure basis and does not think it needs a fall-back position to deal with problems of contracts, payment terms and so forth may, in the foreseeable future, find itself in difficulty and needing that fall-back position. That is something else that we must recognise.

The civil engineering and construction industries operate on the basis of contracts. In the normal course of events, everyone would expect that the contracts would be honoured and everything would go ahead but, in practice, what happens is that, as we heard from the noble Lord, Lord Howie, the Latham report recognised that those contracts fell apart, there was litigation and there were all sorts of problems which added to the industry's costs. That is what we are trying to do with this Bill: to provide that when these contractual positions become difficult and everything falls into the muddy morass of disputes there should be a fall-back position enshrined in this Bill to enable prompt, satisfactory resolution of problems and to enable the business to carry on.

We have recognised on this side of the House--and I think that it has been recognised by a number of noble Lords on the other side of the House--that there is a problem there and the Government are tackling it with this Bill. However, there is a risk that quite large parts of the construction industry will effectively not be covered. While at this point in time they may feel that they do not have a problem, it is quite likely that they will have problems in the short, medium and long term, and they should have a fall-back position, which would be guaranteed by this Bill, to resolve those problems. I hope that the Government will recognise the force of the arguments that we have deployed and, if they do not accept this amendment--I believe it is probably one of the better ones--I hope they will recognise that later amendments propose what we might describe as fall-back positions to try to ensure that the aims of the Bill, which we agree with the Government, are met fully by the Bill itself.

Baroness Hamwee: My Lords, the noble Viscount, Lord Ullswater, put his finger on it. Unless these provisions satisfy the industry, or industries--I am learning that, perhaps, there is more than one industry--then they will have failed. It is something of an indictment of the Government that the matter is left to the Pandora's box of this House--and, if I may say so to the noble Lord, Lord Howie, there are not so very many of us who are experts. I am very much not an expert in matters of the construction industry, although I am learning as this Bill progresses. However, I see as a matter of common sense in relation to these industries, as well as to others, that if the Bill does not end up with a procedure and provisions which are generally acceptable then it will have failed, and failed very badly.

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It will have failed those from outside this House who have put a great deal of work into getting a better Bill than we started with.

Lord Lucas: My Lords, these are four very interesting amendments. Before I deal with them and the problems we have with them in detail, I should like to turn to the general matter which has been raised, which is really a question of whether the process engineering industry should be in or out of this Bill. The noble Lord, Lord Howie of Troon, said that he found rather too few amendments.

Lord Howie of Troon: My Lords, the Minister is not listening.

Lord Lucas: My Lords, we listen very carefully to what is said in this House. I shall consider carefully all that has been said today, but the noble Lord should be aware that it takes some while to produce amendments. As we go through today's proceedings he will discover that there are things happening beneath the surface for which he may be grateful, but which have not yet poked their heads above it in the form of amendments.

Lord Howie of Troon: My Lords, God bless you for those kind words.

Lord Lucas: My Lords, the noble Lord, Lord Howie, also quoted the Latham Report's finding that construction costs might be cut by 30 per cent. That is not a consequence of this Bill alone; there is a whole series of initiatives being pursued by the Construction Industry Board, and the Process Industries Latham Group believes that it can achieve cost reductions, principally by good practice rather than mainly by legislative means. As has been outlined by several speakers today, there is a difference between the construction industry and the process industry. The construction industry is broadly behind this Bill. There is a consensus. The process industry is not; there is a divergence of opinion, and the Process Industries Latham Group, which is a powerful element within the industry, does not want this Bill applied to it. As my noble friend Lord Ullswater and the noble Baroness, Lady Hamwee, said, it is important that this Bill operates with the agreement and consensus of the industries, because otherwise it will not work.

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