Building Safety Bill

Lord Aberdare Excerpts

Committee stage
Wednesday 2nd March 2022 Grand Committee

Moved by

[Lord Aberdare]

136A: After Clause 135, insert the following new Clause—
“Review of safety impact of retention
(1) Within 12 months of the passing of this Act the Secretary of State must publish a review of the impact on building standards and safety of retention of payments due to sub-contractors by building contractors.(2) Matters which the review may consider include, but are not limited to—(a) cash flow difficulties sustained by sub-contractors as a result of retention,(b) ability of sub-contractors, as a result of retention, to afford materials of a suitable quality for future contracts,(c) ability of sub-contractors, as a result of retention, to recruit sufficiently qualified staff, and(d) other factors which may cause sub-contractors to make savings on building standards and safety because of retention.”

[Lord Aberdare (CB)]

My Lords, it has been interesting and instructive for a non-expert to listen to the debate in this rather impressive Grand Committee while waiting for my sole amendment to be reached as the very last group.

Amendment 136A is a probing amendment that seeks to encourage the Government to take some long-overdue action to tackle the pernicious practice of retentions in the construction sector. I start by thanking, in his absence, the noble Lord, Lord Blencathra. He crafted this amendment in a form deemed to be in scope and then allowed my name to appear above his. I am sorry to hear that, as I gather, he has fallen prey to Covid, but I wish him a speedy recovery and I shall certainly miss his powerful support today. I am also grateful to the Minister for sparing time last week to meet me and David Frise, representing the engineering services alliance, Actuate UK, whose members are among the firms most impacted by retentions.

I shall make just three points relating to the amendment. First, retentions are a cancer affecting the construction industry, which, as noted in the Hackitt report,

“can drive poor behaviours, by putting financial strain into the supply chain”.

These can damage both quality and safety; for example, by causing subcontractors to use cheaper, substandard or unsuitable materials or to cut corners on quality in other ways. In some cases they may withdraw from contracts or even be forced out of business altogether, causing the “golden thread” which is such an important part of the thinking behind the Bill to fray, if not snap.

Retentions poison relationships between subcontractors and contractors, creating a fundamentally adversarial relationship rather than a far more productive collaborative partnership. They deprive smaller firms of funds for investment in skills, technology, growth and productivity, while causing them to waste substantial time and effort chasing payments which are due to them, but which in some cases are never paid at all—notably when the business owing them goes bust, as in the case of Carillion. Retentions are not even a particularly effective way of preventing or remedying defects; the sector has been developing much better approaches, such as modern methods of construction and the Get It Right Initiative. I salute the Minister’s evident commitment to improving the quality and culture of the construction sector, but that aim will never be achieved while unregulated retentions persist.

My second point relates to the need for legislation. There is a high degree of consensus across the sector that something needs to be done about retentions, and there is even a target date, endorsed by the Construction Leadership Council, for there to be zero retentions by 2025. That is a laudable goal, but, as Ministers regularly point out, there is no industry consensus about how to reach it. Of course there is no consensus between firms that benefit from withholding retentions, often using them to artificially boost their own working capital, and those who are deprived of funds due to them. So we have a stalemate that can only be resolved by government through legislation, whether primary or secondary.

--- Later in debate ---

[Lord Greenhalgh (Con)]

That is a really good way to end the debate. I will have to write to the noble Lord, because I do not know a lot about the Department for Education other that it is on the street near Marsham Street. I have been there maybe two or three times when I was a council leader. I will write to the noble Lord, but I think it is probably something, as he would well know, that I am not in a position to answer at the Dispatch Box right at this minute.

At this point, I am allowed to sit down. I have avoided a Latin phrase for the whole four hours of this debate, but the noble Lord, Lord Kennedy of Southwark, has provoked me: he responded to me saying that I would not resort to Latin by saying, “Id gratum esset”. I knew enough Latin to know that that means, “It would be appreciated”. Well, I have appreciated this debate, and I look forward to moving on to Report and taking this landlord Bill through this House.

[Lord Aberdare (CB)]

My Lords, I thank the Minister for that response, which at least confirmed my prophetic abilities and had quite a bit of encouragement. I confirm that we are working on a letter to him along the lines that he described, and we will get that to him in due course—that is a bit pessimistic; we should say “shortly”. I thank him for the other comments that he has made, which I will study and act upon.

I was absolutely delighted that the noble Baroness, Lady Neville-Rolfe, was able to contribute to the debate. As she said, she was the Minister responsible when I first accidently got involved with retentions in 2015. For a glorious moment, I thought that she might prove to be the dragon-slayer, but I am delighted that she continues to support the cause. The noble Lord, Lord Stunell, made a very important point about investment in training as well as the fact that government itself is not doing all that it could to bring this practice to an end.

As always, I depend heavily on the vast expertise of my noble friend Lord Lytton, whom I thank particularly for focusing on the impact on SMEs. The noble Baroness, Lady Hayman of Ullock, also did so, again pointing out the issue of cash flow and its importance. Fortunately, my SME was never in the construction sector, so that is one problem that we did not have, although we certainly had plenty of cash-flow problems. Of course, I also thank the Minister.

Fixing this issue will be a key part of achieving the goal that the Minister is setting out to achieve: a productive, high-quality, collaborative, innovative, forward-looking and, above all, safe construction sector, providing the sorts of homes and other buildings that we can be truly proud of. I am not convinced that we should not come back to this issue on Report, but, for now, I beg leave to withdraw the amendment.

Amendment 136A withdrawn.