My Lords, I should declare an interest as my wife is a partner in a firm of solicitors and her expertise is in construction contracts. She does not talk to me about it so I do not know anything at all, but I still thought I should declare it.
This is the third time around the track on this particular topic. The quality of debate has not dipped; indeed, the interesting thing is that more people are now joining in. An emerging theme is now being drawn out, and I think it is a good one. For me, there are two points which have not been picked up, and I would like to reinforce them. First, as the noble Lord, Lord Stoneham, was saying, construction is an interesting sector and a very important one for the economy, so we must be very careful about it. The ONS produces figures on the progress of our recovery which always feature an element of construction. It is important at a local level and an everyday level but also in a macroeconomic way, and we should give regard to that.
The second thing is that there is a way that this could be sorted out by the sector itself, and it has not been. The contractual arrangements could be reformed, and the JCT, which has been mentioned, has indeed begun to think through some of these things. There are available options for people who want to make contracts that take advantage of them. But the interesting thing is that that has not happened. Something is going on here and that simple point has been made in some of the briefing we have received. There is “grand theft auto” of the working capital. The unfairness is that while this is a resource that should be of benefit to the contractors who are owed it at the end of whatever contractual period they have signed up for, it is withheld from them. The consequence of course is that it does not feature in their ability to raise finance for ongoing projects later on.
That is an important issue, which makes this practice very pernicious in the way it is applied. The original idea was that you held back the cash in case the constructor did not come back to do any remedial works that might be required. But as my noble friend Lord O’Neill said, this is a story from the past because contracting has got its act together now and is much better. Also, the contractual arrangements are better, so I do not think that it is as much of a danger as it was. My last project, which was a small one, was interesting. When you analysed the retentions money, it explained why senior members of the company kept popping up on our doorstep. The retention represented the directors’ bonus for completing a good project. They were aware of what was going on and they were very keen that we did not retain any money, and we did not. It is a fact that it is woven into the way in which these people operate, and it will be difficult to get out of.
Our amendments suggest that we already know enough about this for the Government to act. The consensus in the Room is that we should think about a review and then act promptly, but certainly set a more ambitious timetable of 2020 rather than 2025. In proposing our amendment, we simply add to the pressure that must now be felt by the department and I hope very much that when we come to hear the Minister, she will be able to respond to that.