HL Deb 22 April 1996 vol 571 cc901-54

3.8 p.m.

Lord Lucas

My Lords, on behalf of my noble friend Lord Ferrers I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.—(Lord Lucas.)

On Question, Motion agreed to.

Clause 102 [Construction contracts]:

Lord Williams of Elvel moved Amendment No. 111: Page 58, line 14, at end insert ("the extent and nature of which shall be specified in the agreement.").

The noble Lord said: My Lords, this amendment stands in my name and that of my noble friend Lord Dubs. It may be for the convenience of the House if I also speak to Amendments Nos. 122, 123, 124 and 140. The words on the Marshalled List are designed to provide an escape clause—if I may say so—for the Government, who are in some disarray about the process engineering industry.

Ministers have placed much reliance on statements made by a group known as the Process Industries Latham Group (PILG). If I use the acronym PILG, noble Lords will understand what I am talking about. PILG has argued that process industries do not suffer the same problems as the construction industry. It states that statistics concerning the number of requests for appointment of arbitrators is evidence of that. PILG speaks for a small number of clients but appears to miss the point as to who carries out the construction and installation work. As with the construction industry, the majority of work is sublet and carried out by specialist contractors. The principal contractors carry out a management role but the installation work is carried out by the same specialists who work in the construction industry, often on the same commercial and contractual terms which, the Government and we accept after the Latham Report, are unsatisfactory.

The functions carried out by those specialist contractors are the same as those carried out within construction. They include electrical work, pipework, ventilation, structural steelwork and provision of basic building and civil engineering infrastructure.

PILG argues that its industry does not suffer from litigation and claims attitudes. However, members of PILG come from what I call the demand rather than the producing side of the industry. The procurement systems and contract documents used do not ensure that the same standards exist in contractual relationships downstream where subcontractors and specialist contractors are appointed.

The question of whether the provisions of the Bill apply to the process industries should be assessed against whether the requisite protection is provided to all parties operating in those industries. The criterion is not that one part of that sector, the demand side represented by PILG, should see itself excluded, but whether those within the sector have the basic protections described in the Bill. If so, the Bill need not apply; if not, clearly the Bill must apply.

An examination of the conditions of contract and subcontract normally used in process plant work will provide a demonstration of that point. The most commonly used conditions are the Institution of Chemical Engineers' Model Forms of Conditions of Contract for Process Plant, often known as the Red Book.

At main contract level, the Institution of Chemical Engineers' conditions provide a form of adjudication on a limited number of issues, although the parties may agree to refer other matters to the experts. At subcontract level, a totally different picture exists. There is no requirement at subcontract level to use the Institution of Chemical Engineers' subcontract conditions. That creates exactly the same free-for-all as bedevils the construction industry—the point that your Lordships address today. Without a mandatory subcontract, there is nothing to prevent any ad hoc conditions being used where pay-when-paid conditions abound, payment terms are frequently vague, and other rights such as adjudication or suspension are in most instances non-existent.

The conclusion is that the case for the whole of the process industries being excluded from the Bill has not been made by the Government. The PILG solution, which the Government have adopted, denies access to the safeguards of the Bill from the supply side of industry and restricts the ability of parties to contract freely within the safeguarded provisions of the Bill.

The Government can take their pick of the amendments moved by myself and by my noble friend Lord Dubs; they will be spoken to by my noble friend Lord Berkeley. We offer a possible solution to the problem. The parties to a contract may agree to contract out of the provisions of Part II of the Bill when the type of work falls under the definition of "process industries". If one contracting party does not wish to contract out of the provisions of Part II of the Bill, the parties will no doubt wish to agree contract terms which comply with the provisions of Part II of the Bill, notwithstanding that the whole process may be within the context of process industries. Furthermore, if the parties fail to agree on acceptable terms which comply, with the provisions of Part II of the Bill, then the relevant sections of this scheme of construction contracts, which we shall discuss later, will apply.

We believe that this is an honourable compromise between the construction industry and PILG: that those who wish to contract out can do so by contract; and those who wish to contract in can do so by contract; but every point in any agreement should be limited by the definition that is either within or without Part II of the Bill.

Having explained the purpose of Amendment No. 111—Amendment No. 122 is consequential—I do not wish to talk about the amendment which will be spoken to by my noble friend Lord Berkeley. It has the same thrust as my amendment. I believe that my noble friend has drafted it rather more expertly. Nevertheless, the principle is there. Process industries, in particular subcontractors, have a large component of matters relating to Part II of the Bill. It seems to us only right that those who wish by contract to participate in or participate out (if I may use that rather inelegant expression) should be allowed the choice. The important point is that anyone engaged in this business, in particular subcontractors to process engineers, should be protected by Part II of the Bill.

It is an important matter. We discussed the issue in Committee but I do not believe that we focused on the proper terms of subcontractors to the process engineering industry. I hope that the Government have recognised the problem and are prepared to accept the amendment. I beg to move.

Lord Berkeley

My Lords, I wish to speak to Amendments Nos. 122 to 124 and 140. My noble friend Lord Williams has lucidly explained some of the background to my drafting of the amendments which initially came from the Constructors Liaison Group. The amendments reflect something which we discussed at previous stages: the serious concern from subcontractors, sub-subcontractors and the many suppliers involved in the industry. It confirms my long-held view that it does not matter whether you are building a block of flats, a process plant or a bridge, when it gets down to the subcontractor or supplier level, the problems and challenges are the same. Therefore, the protection required for the smaller people▀×if we may lump them in that inelegant phrase℄is extremely important.

I started by looking at the problems of the process industry. Then I received further information from the people who make steelwork. I was convinced that the answer was to have a much more general amendment to subsection (2) of Clause 103 which at present allows everyone who wants to be part of the scheme to be part of it unless both parties to the contract have agreed to contract out.

I wish to give one or two examples because it is important to understand the problems and concerns of the small suppliers. I suspect that nowadays things are different from when the noble Lord, Lord Howie, and I were young engineers and most of the work seemed to be done by the main contractor employing thousands of people. Now most of it is done by subcontract. The Constructors Liaison Group said that the supply side of the industry, the little people, confirm that the Utopia described by PILG does not exist in the relationship between the principal contractor and the specialist subcontractors. All the specialist subcontractors are fighting hard in competition with others to obtain a small or large part of the order.

We are in danger of splitting the Bill's provisions into the haves and the have-nots. Whatever the type of contract, I believe that the activity remains the same. Therefore, it is important that the same contractual protection on a building project, process plant or whatever should exist. Sadly for the industry generally, at subcontract level it is normal—and there is no prohibition on it—to have the rather frightening "pay-when-paid" clause, no defined payment terms, discharge period or adequate mechanism and, of course, no adjudication. Suspension can happen just like that, for no apparent reason. There was the comment that the form G90 was frequently used in the water industry, which I believe is still part of the definition of the process industry. It contains no adjudication provisions, payment terms are defined and a suspension right exists for non-certification and payment. There is no compatible subcontract.

To round the point off, the subcontract documents are frequently one-off documents on the contractor's own terms. They were probably written five or 10 years ago with little typed or handwritten changes. It is that kind of problem that the building industry seeks to redress. We must consider carefully the comments from smaller suppliers and manufacturers in this instance.

I turn to a comment from the steelwork manufacturers, fabricators or whatever we like to call them. It is reasonable to point out that, unlike the suppliers of brick or cement who are obviously not covered in the provisions anyway, steel is specifically cut, burned, drilled, welded or whatever it is for a specific construction task. It is usually the first thing to be ordered. The shape of the building is known, one orders the steelwork and, as we have seen in many construction projects around the country, it comes first and is put up pretty quickly. Perhaps we should say that it is the first substantial expense on a project. It is usually subject to onerous terms and conditions—perhaps lateness in payment—but it is off-site until 90 per cent. of the value has been spent, which means that it is less easy to get paid. Therefore, that kind of steelwork needs the full protection of the construction Bill, in whatever form.

I have spoken about process plants. We discussed them at length in previous stages of the Bill and I do not intend to speak about blinds, signwriting, security systems or anything else because the amendments that I have drafted will enable, or, I hope, require, anyone who is a party to a construction contract anywhere in the industry either to agree with the other party that they do not need the provisions of this Bill because the terms are already included or, if they are not, that the Bill's provisions should apply.

As my noble friend Lord Williams mentioned, this is a satisfactory and fairly open way of sorting out some difficult definitions with which many noble Lords have been struggling in subsection (2). I hope that other noble Lords will find them acceptable.

3.30 p.m.

Lord Howie of Troon

My Lords, I support my noble friends Lord Williams and Lord Berkeley. Unusually for me, I start by complaining. We went through a lengthy, detailed and extremely constructive debate at Committee stage. It was enlivened by a number of contributions, from this side of the House as well as from the other side, from people who knew about the construction industry. Encouraged by the general tenor of the debate and the kindliness with which the Government listened, I wrote a lengthy letter to the noble Earl, Lord Ferrers, in which I drew attention to the comments which he and his colleagues had made on matters which were raised during the debate. I received a Spartan reply.

Looking at the Marshalled List, noble Lords will see that the Government's response has been to produce a trivial number of marginal amendments. In other words, they have paid virtually no attention to the serious points which were raised during the debate. That may have been because they did not understand them or that they ignored them. It is not a happy way to deal with a measure which is not partisan but technical. It is not as complex as the Government make out; it is quite simple. The Government's response was to say: "Here we are and here we stand". That is not the correct way to treat what is thought in the textbooks and in the minds of many of the more naïve among us to be a revising Chamber. A revising Chamber revises; it does not put up proposals which the Government ignore.

That is my ill-tempered beginning. I wish it to remain on the record because I believe it to be correct. But I am not an ill-tempered fellow—though I could and might yet be, who can tell? But I want to support my noble friends.

What is the purpose of the Bill? That question underlines the amendment that my noble friends have tabled. The Bill's objective, as I understand it, was to produce cheaper and more reliable construction. One of the ways in which that was to be done—the route adopted by the Government and included in the Bill—was to regularise the body of dispute that arises between contractors, clients, subcontractors and everybody else involved. The process is very time-consuming and expensive. It keeps the lawyers happy but does not produce the kind of inexpensive building that we want.

That was the whole aim of the Latham Report. Sir Michael Latham thought that the cost of construction might be reduced by as much as 30 per cent. He may be right or he may be wrong. I have my own views on that. A large part of the reduction in cost that Latham sought lay in minimising the conflict between client, contractor and subcontractor. Design may produce cheapness, but the major area where cheapness could be produced is that area of conflict. That is what Part II of the Bill is mainly about.

My remarks are based on very lengthy experience in the construction industry—even longer experience than that of my noble friend Lord Berkeley, who is a mere youngster in these matters. I have seen this whole business of conflict, claims and counter-claims going on and on to no great effect in the end. These are fairly general remarks, and I hope to be more brief in the course of today's proceedings.

I turn to PILG, as it was termed by my noble friend Lord Williams. PILG represents the process industries' desire to be excluded from the Bill. The Government have acceded to that demand. I can see why PILG wants to be excluded; the industries would not have to bother with these matters. My noble friend Lord Berkeley put his finger on the problem. He remarked that PILG represented the "big boys" in the process business. We know perfectly well that in the process industries, as in any other area of the construction industry, there is a long chain of contractual obligations. It extends from the main contractor to the subcontractor, to the sub-subcontractor, and ends up who knows where?

It is not true that the constrictions of Institution of Chemical Engineers' contracts apply to the subcontractors and the sub-subcontractors. That is not so. In so far as PILG says that these contracts apply to the main contractors, it is correct; but they do not go on down the line. And on down the line is where construction contracts come into play—and where the construction subcontractor comes into the Bill.

In Committee, I drew attention to such matters as the foundation for a chemical plant or a power station. That foundation might well be totally, completely and utterly a piece of civil engineering construction. I shall not irritate the House, as I did in Committee, by drawing on my own experience. However, I could mention power stations that have been floated upon civil engineering rafts—constructions like boats, on which the power station sits. The power station might be a process plant—although I am prepared to argue the matter—hut the foundation is wholly a civil engineering conception. The fact that it is on the site of a process plant is totally and utterly immaterial. I find it extremely odd that people as intelligent as Ministers and the whole of Whitehall cannot grasp such a simple concept. I imagine it is not that they are unable to grasp it, but merely that they do not want to.

In another context the noble Lord, Lord Ezra, referring to coal-mines, said that such contracts would be treated as civil contracts. If they are treated as civil contracts, with all the ramifications involved in the chain (contractor, subcontractor, sub-subcontractor and so on), why should they be excluded en bloc as though they were somehow extraordinary? They are not. They are extraordinary only in the sense that the Government say they are extraordinary because they appear on a particular site. They are not extraordinary because of their engineering complexity or because of contractual arrangements. In fact, some may well be done under civil contracts, which would nullify the exclusion. We could have an extraordinary situation in which a foundation might be done under a civil engineering contract and will in some magical way be excluded from, the Bill, which would throw doubt on elements in the contract itself. I have no doubt that a lawyer would sort that matter out, but that is not my business.

Obviously, the way round this is for the parties involved to agree that this work should be done under normal civil engineering contracts. That is the natural way for it to be done, and it would be the sensible way. Under the Bill, it need not be done. The contracts for those elements of work in the process industries—however they are described (and to my mind the description is quite extraordinary)—and in so far as these sites can be described as process sites, can be wholly excluded from the Bill.

I suppose this is a revolutionary concept. The Government are not urging people to exclude their work from the normal contracts that have applied for a very long time. However, they are saying: if you do exclude your work from the normal civil engineering contract, you come under the Bill and then, hunky-dory, you can do more or less what you like. It will not do.

Frankly, the Government misconstrued the construction industry. They did so by referring back to a tax Bill for a definition. They were then got at by some big, powerful, important interests in what are called the process industries. They yielded to those pressures and in so doing lost sight of the aim of the Bill. We must not forget that the aim of the Bill is to ensure that the subcontractors and the sub-subcontractors down that enormous chain are properly paid when they complete the work on time and that they have the protection to which they are entitled.

I entirely support my noble friends and I hope that the Minister—a very nice young man—can give me a better reply than he gave me in the charming letter which he wrote to me a few weeks ago.

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: 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 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.

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.

Lord Howie of Troon

My Lords, I am grateful to the noble Lord for his earlier kind remarks, to which I look forward with eager anticipation. But does he not realize—I am sure he does—that, in this matter, when the process industry (if there is such a thing, but let us use that shorthand) objects to certain elements in the Latham approach it is dealing with the relationship between the process industry as a technical client, which-knows very much what it wants, and the main contractor. It is less interested in the relations between the main contractor and the chain of subcontractors which follows thereafter. It is this chain of subcontractors which we, or some of us at any rate, are interested in protecting, rather more than the immediate relationship between the technical client and the immediate main contractor. This is the big split that we have to consider very carefully.

Lord Lucas

My Lords, while not wishing to encourage the noble Lord, Lord Howie, to break with convention at Report stage, I will in this instance reply to the noble Lord and say that, yes, this is something which has been made very clear in the speeches today, of which we shall certainly take cognisance to the extent that we were not aware of it, although I suspect that we were very much aware of it. Nonetheless, there is discord within the process industry at the idea that this Bill should be applied to them. We want this Bill to work; we think that this Bill will work if it encompasses an industry which wants it to work and which goes at it with a will, and that industry is the construction industry.

The process industry is not happy with the Bill. To have them inside would introduce discord and, to our minds, would make it less likely that this whole process would work. However, the provisions are in the Bill to bring the process industry within it later if that consensus can be achieved. It requires only affirmative resolutions to do so, subject to the amendments which I hope will be made later today. That is our approach: to say that the process industry does not wish to be included now, we will leave it out for now, and it can come in later if it can be agreed that it wishes to come in. Indeed, when the construction industry has, as I hope it will, demonstrated how successful this process can be, I would think there will be a clamour from the process industry or, at least from its subcontractors, to come in. The process of including it will be a simple one.

Given our wish to exclude process engineering, there is a process of then drawing the line between construction and process engineering. As the noble Lord, Lord Ezra, said, that is an inexact one. We are still thinking hard as to how that should be done, and that will be reflected in much of what I say to later amendments, but there will always be boundaries; you cannot define any industry in a simple way. There are always boundaries, and I can think of boundaries between the construction and telecommunications industries which might be hard enough to draw, let alone between construction and process engineering. We will come back to the House on that issue, but I hope to give further enlightenment later. That will cover such matters as foundation and steelwork, where our view is very clearly that the process plant exclusion only covers plant, machinery and steelwork and would not cover all construction work on the site.

To turn to the amendments in particular, Amendment No. 111 from the noble Lord, Lord Williams, is very similar to one proposed in Committee. On that occasion my noble friend Lord Ferrers advised against it. He pointed out that activities either fell within the definition of construction operations, as specified in Clause 103, or they did not. Clause 103 is the test of what counts as construction, and we would not wish to muddy a situation by putting something in statute which requires parties to specify the construction elements of a particular contract.

Of course parties would be quite free, for their own guidance, to distinguish between construction and non-construction activities in a contract. Perhaps one or more of the bodies that look after standard forms of contract might even decide that it was a good practice to do so. That would be all well and good. But if a contract omitted to mention some activity which the Bill regarded as a construction operation, there should be no question of it being "exempted" by the contract. At the end of the day it would be for an adjudicator, an arbitrator or the courts to decide which operations covered by the contract were caught by these provisions, and any contractor who wishes to make sure that everything that is happening is covered by the Bill may do so. Matters can be written into the Bill; they just cannot be excluded from it in the way it is written.

There is a risk with the amendment of the noble Lord, Lord Williams. Suppose we were to accept it, and a party bent on avoiding fair contract terms then failed to identify some task as a construction operation. He could then claim that, although the activity qualified as construction under Section 103 of the Act, because it had not been designated in the contract it was disqualified under Section 102 of the Act. We would then have created an alternative test for what constituted a construction activity and thereby a recipe for confusion, litigation and avoidance. I am sure that that is not what the noble Lord, Lord Williams, is trying to achieve.

The other amendments in the group cover some of the same ground; namely, the question of whether parties should be able to opt out of fair contract provisions by agreement. Their impact would be to make all the operations covered by Clause 103(2) construction operations for the purposes of the Bill. We have already heard that many noble Lords have difficulties with some of the operations on this list. I hope they will accept that, with Amendments Nos. 120, 121 and 137, when we reach them, I shall be going some way to address their difficulties. In Committee we also took a helpful step towards the inclusion of work on warehousing associated with the process industries. When we reach Amendment No. 136 in the name of the noble Lord, Lord Williams of Elvel, I hope noble Lords will see that we are again trying to be helpful and make the list of exclusions as lean and precise as possible.

Nevertheless, there are some operations which are clearly not construction operations and where there was a good measure of agreement on that in Committee. I am thinking of examples such as drilling for oil and gas, mining, the assembly of process plant and machinery, nuclear processing, the production of bricks and blocks and works of a purely artistic nature. The effect of the amendments would be to include such operations if any party had a mind to do so. I cannot believe that that would be the right outcome. Around other items covered by Clause 103(2) we are still seeking to draw a line, and trying our hardest, with the assistance of noble Lords opposite, to make it the right line.

We do not believe, therefore, that it would be right to fudge the issue of defining the industry simply by lumping all the difficult areas together and allowing contracting parties to pick and choose whether or not they were covered by this legislation. That is something which the Bill itself must make clear. I hope therefore that noble Lords will not seek to press their amendments.

4 p.m.

Lord Williams of Elvel

My Lords, I am grateful to the Minister for his response. I am bound to say that I do not think that he has really understood the problem. The problem is that main contracts between main contractors and clients can be what they are. In the process industries these are what they are. They are governed by certain rules of the associations. The real problem is that where a main contract is concluded without any specification of how subcontractors or sub-subcontractors will operate, the subcontractors and the sub-subcontractors are left completely empty of reassurance.

We accept that the Government do not wish the process industries to be in the Bill. The noble Viscount, Lord Ullswater, expressed it quite clearly. We have come back with what I regard as being a sensible compromise. It is clear to me that the process industries have not achieved the required standards in all their contracting procedures, whatever PILG may say. At the level of employer main contractor, they may well be content. But between main contractor and subcontractor and between subcontractor and sub-subcontractor, if I may go down the chain, all is not well. It is our belief that the minimum standards in the Bill should apply down the line.

No one in your Lordships' House or in any other forum that I can imagine can define exactly where the interests of subcontractors and sub-subcontractors start and where they finish. Nevertheless, anyone taking on a subcontract from a main contract, which is what we are talking about, will be looking at the main contract and asking, "Do the provisions in the contract apply in the context of the Bill?". If they do, the subcontractors and the sub-subcontractors will be reassured. If they do not, that is a different competitive situation, with which people may or may not be happy.

This is not a party political issue. We really do believe that the Government have heard only one side of the debate and that we must find some kind of compromise to respond equally to the views of the supply side, if I may put it in that way, who are the subcontractors and the sub-subcontractors, and the demand side, who are mainly those who form the group called PILG who actually commission contracts. To do anything else would be to impose double standards on the industry.

It is perfectly honourable and honest to say that there is a grey area and that there is difficulty in defining where one thing starts and the other thing stops. I should have thought that the way to resolve that would be to put into the Bill a simple provision, in whatever terms the Government like, saying that this is an area where there is difficulty and that the way to resolve the difficulty is by allowing contracting parties to define in any contract which parts of the contract—and hence, flowing on, to the subcontract and the sub-subcontract— are in the ambit of the Bill and which are without the protection of the Bill. The noble Viscount, Lord Ullswater, made a good point in that originally we were hoping that the process industries in their entirety would be subject to the Bill. This is the compromise which I believe would meet the desire of your Lordships that the Bill should satisfy all elements in the industry, both process and construction.

Having said that, I see from the noble Lord that it probably has written on his brief "Resist" or "Do not listen". However, as we are at a late stage of the Bill, I think it is appropriate that I take the opinion of the House.

4.7 p.m.

On Question, Whether the said amendment (No. 111) shall be agreed to?

Their Lordships divided: Contents, 70; Not-Contents, 117.

Division No. 1
CONTENTS
Addington, L Howie of Troon, L
Annan, L Ilchester, E
Beaumont of Whitley, L Jay of Paddington, B
Berkeley, L Jenkins of Putney, L
Blackburn, Bp Kilbracken, L
Blease, L Longford, E
Borrie, L Lovell-Davis, L
Broadbridge, L McIntosh of Haringey, L
Bruce of Donington, L McNair, L
Carmichael of Kelvingrove, L Mason of Barnsley, L
Carter, L Monkswell, L
Chorley, L Morns of Castle Moms, L
David, B Nicol, B
Dean of Thornton-le-Fylde, B. Peston, L
Donaldson of Kingsbridge, L Redesdale, L
Dormand of Easington, L Richard, L
Dubs, L Russell. E
Ezra, L Sainsbury, L
Falkender, B Seear, B
Falkland, V Sefton of Garston, L
Fisher of Rednal, B Serota, B
Fitt, L Shaughnessy, L
Gallacher, L Simon, V
Smith of Gilmorehill, B
Gladwin of Clee, L Stallard, L
Glenamara, L Strabolgi, L
Gould of Pottermewton, B[Teller] Taylor of Blackburn, L
Thomson of Monifieth, L
Graham of Edmonton, L [Teller] Tordoff, L
Gregson, L Turner of Camden, B
Grey, E Wharton, B
Hacking, L White, B
Halsbury, E Williams of Crosby, B
Hamwee, B Williams of Elvel, L
Hams of Greenwich, L Winchilsea and Nottingham. E
Hilton of Eggardon, B Winston, L
NOT-CONTENTS
Aberdare, L Astor of Hever, L
Addison, V Belhaven and Stenton, L
Ailsa, M Blaker, L
Alexander of Tunis, E Blatch, B
Ampthill, L Boyd-Carpenter, L
Archer of Weston-Super-Mare, L Brabazon of Tara, L
Bridge of Harwich, L. McConnell, L.
Brougham and Vaux, L. Mackay of Ardbrecknish, L.
Bruntisfield, L. Mackay of Clashfern, L. [Lord Chancellor.]
Butterworth, L.
Cadman, L. Mackay of Drumadoon, L.
Campbell of Alloway, L. Merrivale, L.
Campbell of Croy, L. Mersey, V.
Carnock, L. Miller of Hendon, B.
Chalker of Wallasey, B. Milverton, L.
Charteris of Amisfield, L. Monteagle of Brandon, L.
Chelmsford, V. Mountgarret, V.
Chesham, L. [Teller.] Mowbray and Stourton, L.
Clanwilliam, E. Munster, E.
Courtown, E. Murton of Lindisfarne, L.
Craig of Radley, L. Noel-Buxton, L.
Cranborne, V. [Lord Privy Seal] Norfolk, D.
Cranbrook, E Northesk, E
Cuckney, L. O'Cathain, B.
Cullen of Ashbourne, L. Oliver of Aylmerton, L.
Cumberlege, B. Oppenheim-Bames, B.
Davidson, V. Orkney, E
De Freyne, L. Orr-Ewing, L.
Dean of Harptree, L. Pender, L.
Denton of Wakefield, B. Pilkington of Oxenford, L.
Dixon-Smith, L. Platt of Writtle, B.
Ellenborough, L. Plummer of St. Marylebone, L.
Elliott of Monpeth, L. Porter of Luddenham, L.
Elton, L. Rankeillour, L.
Flather, B. Rees, L.
Fraser of Kilmorack, L. Renton, L.
Gainford, L. Renwick, L.
Geddes, L. Saint Oswald, L.
Gisborough, L. Seccombe, B.
Goschen, V. Sharpies, B.
Gray, L. Shaw of Northstead, L.
Gray of Contin, L. Skelmersdale, L.
Hailsham of Saint Marylebone, L. Strange, B.
Harding of Petherton, L. Srathcarron, L.
Hertford, M. Strathclyde, L.
HolmPatrick, L. Sudeley, L.
Hothfield, L. Swansea, L.
Howe, E. Swinfen, L.
Johnston of Rockport, L. Terrington, L.
Kimball, L. Teynham, L.
Lane of Horsell, L. Thomas of Gwydir, L.
Lauderdale, E. Trumpington, B.
Leigh, L. Ullswater, V.
Liverpool, E. Vivian, L.
Long, V. [Teller.] Wilcox, B.
Lucas, L. Willoughby de Broke, L
Lucas of Chilworth, L. Wise, L.
Lyell, L Wyatt of Weeford, L.
McColl of Dulwich, L. Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

4.17 p.m.

Lord Williams of Elvel moved Amendment No. 112: Page 58, line 24, leave out from ("capacity") to end of line 25.

The noble Lord said: My Lords, this is a probing amendment and something which I did not pick up in Committee. It relates to certain activities of Her Majesty under Clause 102. I am sure that the noble Lord will explain to me why Her Majesty, in right of the Duchy of Lancaster or on behalf of the Duchy of Cornwall should be exempt from the particular provisions of this part of the Bill. Although in her private capacity, as a resident, Her Majesty would be exempt, the Duchy of Lancaster and the Duchy of Cornwall are substantial businesses in their own right. I wonder why those are included in the Bill. I should be grateful if the noble Lord can put on the record exactly why they are included in the Bill. I beg to move.

Lord Howie of Troon

My Lords, I support my noble friend by drawing attention to the fact that the Duke of Cornwall, I believe, in this particular context, is a substantial promoter of construction matters, especially in a housing development in south west England. That is a perfectly proper thing for a developer to proceed with and to profit from in the ordinary way of business, but it is not perhaps an area which should be excluded from the Bill. It seems to me that the Duke of Cornwall—if I have mentioned the right chap because he has several names—at Poundsbury is not acting in any way different from any other developer. And why, if he differs in no way from any other developer, should he be excluded from the Bill? I may be wrong about that. I am wrong from time to 'time. Your Lordships will have noticed that. If I am wrong, I am sure that the Minister will explain to me just where I am wrong. If I am right, I am sure that he will accede to me.

Lord Lucas

My Lords, the general rule of constitutional law is that an Act of Parliament does not bind the Crown unless, and to the extent, specified in the Act. This Government's current policy is to ensure that government departments and other public offices are not protected by this rule. We were aware that many in the industry were anxious that these provisions should apply to contracts with government departments, and we have made sure that that would be achieved.

We did not seek, however, to hind the Crown in a private capacity or by virtue of its interests in the Royal duchies. I am pleased to see that the amendment would not affect our proposals with respect to the Crown in a private capacity. We will reflect upon comments on work in the Duchy of Lancaster and the Duchy of Cornwall and I will write to the noble Lord when we have done so. I am afraid that I cannot be more helpful than that at the moment, but we welcome the amendment.

Lord Williams of Elvel

My Lords, I am grateful to the Minister for welcoming the amendment. It is, as I said, a probing amendment. I look forward to a considered response from the Government in the light of the comments that I and my noble friend Lord Howie of Troon have made. I understand the complexities of the consultation in which no doubt the Government are engaged. I should not wish to intrude on any of those complexities. In the light of what the Minister said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 103 [Meaning of "construction operations"]:

Lord Williams of Elvel moved Amendment No. 113: Page 58, line 26, leave out (", subject as follows.").

The noble Lord said: My Lords, again this is a probing amendment, possibly a probing drafting amendment. Since I have been following Bills from this Front Bench I have believed in the principle of Occam's razor and "Entia non sunt multiplisanda praeter necessitatem" if I may quote the terms of the razor. The expression "subject as follows" seems to me to be otiose in the context of the clause, but parliamentary counsel may have good reasons for including the words. I beg to move.

Lord Lucas

My Lords, as the noble Lord, Lord Williams, correctly points out, we are in the dark and mysterious world of legislative syntax here. I can confirm that parliamentary counsel like their choice of wording.

"Subject as follows" in the first line of subsection (1) of Clause 103 simply means that subsection (1) must be interpreted in the light of subsections (2), (3) and (4). Without this, the modifications suggested by the later subsections would fail to connect with subsection (1) and might even be seen to conflict with it. The phrase "subject as follows" is necessary to qualify the general definition in subsection (1) by reference to the exclusions in subsection (2), the inclusions in subsection (3) and any modifications made by order under subsection (4). With that assurance, I hope that the noble Lord will feel able to withdraw the amendment.

Lord Williams of Elvel

My Lords, I am most grateful to the Minister. As he said, parliamentary counsel have their own ways of drafting Bills. I am grateful that the Minister produced the reasons that parliamentary counsel have for the drafting. I find it rather odd; nevertheless, if that is the way it is required, that is the way it is required. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.30 p.m.

Lord Howie of Troon moved Amendment No. 114: Page 58, line 29, after ("structures") insert ("or parts of buildings or structures").

The noble Lord said: My Lords, I must offer a kind of apology to the House. It seems that I contravened the conventions by interrupting the Minister in an earlier debate. I did not, and still do not, think that I contravened the conventions, but it has been explained to me by noble Lords opposite that I did. I apologise. The problem is that I did not know what were the conventions. I rather think that noble Lords opposite made up the conventions on the hoof, which is not too bad a way of going about this kind of business. I shall try to intervene, within the conventions, on the hoof, as we go through our business. I apologise if I disturbed the Minister at what was an important part of his reply.

This group of amendments relates to the definition of "construction", about which we had lengthy and, I thought, inconclusive debates at an earlier stage. As noble Lords will remember, the definition of "construction industry" was drawn from, I think, the Income and Corporation Taxes Act 1988 to be used as a framework for the definition in what was then Clause 102.

Many of us on this side of the House, and when I say that I am merely speaking geographically and not politically, because I should be putting forward the same arguments if I sat on the other side of the House, which I once did a long time ago, and who knows, might well do again, although I do not want to anticipate such an event which has nothing to do with our discussion. It has nothing to do with "this side of the House" which is merely a conventional term when I use it, and I always like to be understood.

We tend to think that the clause as drafted left out many things which should have been in. This group of amendments hopes to cope with some at least of those matters. As it stands, the grouping falls into two parts. Amendments Nos. 114 and 115 are different from Amendment Nos. 116, 117, 118, and 119 only in the sense that Amendments Nos. 114 and 115 are general rather than particular. Amendment No. 114 is a drafting matter and may turn out to be unimportant, although it has some reference forward to later parts of the Bill and to some of the matters we discussed on an earlier amendment when I talked about parts of buildings or structures. That hints at parts of projects which are not process but construction matters. I refer to foundations, structures and things of that nature.

It may well be that to refer to parts of buildings or structures is important. It is also important, I think, when we talk about demolition, as the Bill does. Even the most ardent demolisher might not want to demolish an entire building. He might wish to demolish merely a part of it. He might wish to demolish the wrong part; he might wish to demolish the right part. So to refer to the building as a whole does not seem to me to meet that matter. If one wished to demolish a hit of a building, say, a wing of a stately home or a wing of the National Gallery, that would be part of a building and could he construed as being different from the building as a whole.

Amendment No. 115 refers to "civil or building". Here, I try to define the type of structure that is referred to in order to differentiate it from the process industry. Noble Lords with long memories and close attention spans may recall that when the Committee debated the process industries I drew a distinction between parts an oil refinery, for example, in which the process plant was closely integrated with the structure—say, a catalytic cracker or something of that nature where it was extremely difficult to distinguish between the plant and the structure (I go a long way with the Government in making that distinction)—and foundations, ordinary structures and so on. These ordinary construction elements, as opposed to those that are closely integrated into a process plant, like catalytic crackers and matters of that kind, should be distinguished. I believe that this is a serious distinction. I give the Government credit for this. It is a difficult distinction to make. Perhaps I have not chosen the right words with which to make it, but it is a distinction that ought to be made because it is real.

Amendments Nos. 116 to 119 are drawn from a rather elegant amendment that I put down at Committee stage. It was summarily rejected by the Government with contumely, instead of being accepted with grace and dignity. In the Government's list of inclusions in Clause 113 (then Clause 112) a number of matters have been omitted or at best included by inference. The inference is slight, and I do not see it myself. For example, when one talks about harbours one wishes to include structures such as jetties and breakwaters. Those are sometimes, but not always, parts of harbours. Jetties sometimes stand on their own, like the oil jetties referred to at Committee stage. Sometimes breakwaters stand on their own as distinct from harbours. A breakwater may be there for a variety of purposes but it is a construction element in its own right and ought to be included as such.

I have said that tunnels ought to be added after waterways. Some tunnels are included in the sense that there is an implication that if one builds a road or railway one includes tunnels which are inherent in that road or railway or matters of that nature. But that does not include all tunnels. The tunnel that I have in mind—I apologise to the House for reverting again to my lengthy experience in this matter and perhaps becoming the prize bore of the year—is that comprised in the hydro-electric scheme at Glen Shira. The purpose of that tunnel is to convey water from a high level dam to a low level, just outside Inveraray, where the power station is situated. It is a pressure tunnel but not a tunnel in any sense in which that term is included in the Bill. That particular tunnel was constructed under the orthodox civil engineering contracts of the day.

It may be that Amendment No. 118 is a tautology because I have suggested the insertion of "hydro-electricity supply", but I do not apologise for it. Obviously, the example that I have given would be included under hydro-electric supply, but there are a number of other matters which are totally construction in nature and are concerned with hydro-electricity supply but which are not, as far as I can see—the Minister will tell me if I am wrong—concerned with hydro-electricity. I know, or believe, that the Bill refers to dams concerned with water supply, but as far as I can see dams that are concerned with hydro-electricity supply are not included in the Bill. It may be that we will not do much in the way of big hydro-electric schemes in the future, but if we have any sense we may well be involved in a sizeable programme of small-scale hydro-electricity which will demand small-scale dams. I believe that dams in relation to hydro-electricity may well be included. The Minister will be aware that since Britain is not blessed with deep canyons and features of that nature such as can be found in the United States, where a big dam can be built behind which a large body of water is impounded, it has relatively shallow reservoirs into which water is brought from a variety of sources through a body of aqueducts and matters of that kind. These aqueducts are all construction matters. I am not quite sure that they are included in the Bill.

I turn lastly to Amendment No. 119. I do not believe that the Bill deals adequately with the civil engineering aspects of flood control. I expect that the Thames Barrier is included in the Bill. That is a big item of flood control. There are a great many other items of flood control round coasts and so on which are different from coastal protection measures. Coastal protection is not the same as flood control. Although it may be a kissing cousin, it is not the same. I believe that that should be recognised in its own right. I have also added lighthouses. A lighthouse is an important civil engineering artefact. At the top of the coat of arms of the Institution of Civil Engineers is a lighthouse. That is Eddystone Lighthouse, which was designed and built in its modern form by John Smeaton. He was the first man in Britain to describe himself as a civil engineer. Therefore, the lighthouse has an historic significance.

Not only that but, who can tell, we might still want to build lighthouses. We might decide that we need them in order to prevent ships foundering on reefs, rocks and so forth. I dare say that they will not be manned as they were, but they are important construction artefacts. They are all "construction", apart from the lamp, I suppose; the lamps are bought in and will be excluded from the Bill. However, the lighthouse itself is a civil engineering artefact, and that should be recognised in the Bill.

I am sure that the Minister will tell me where these and other artefacts that I have mentioned are covered in the Bill. But I do not believe that they are, and they ought to be. I beg to move.

Lord Williams of Elvel

My Lords, the amendment proposed by my noble friend and the subsequent amendments to which he has spoken illustrate the difficulties of trying to define what is a construction operation in the Bill. The more the Bill goes into detail the more traps are set. Indeed, my noble friend made a series of interesting points. Whether or not they are to be supported is another matter. No doubt the Minister will explain in what way, if at all, they are covered by the Bill. The argument illustrates that subsection (1)(b) is extremely detailed but leaves out some important details.

I have only one question to ask the Minister. In re-reading that subsection, I imagine that "coast protection or defence" does not refer to defence-related industries. No doubt the Minister will tell us. I imagine that "coast protection or defence" implies the defence of the coastline against, for instance, the intrusion of tidal water or whatever and not against the intrusion of a potential enemy, requiring civil engineering work. I should be interested to know whether that is part of the provision and in hearing the Minister's interpretation of that expression.

Lord Berkeley

My Lords, the noble Lord, Lord Howie, raised some interesting matters of detail. Perhaps I may begin with his comments about lighthouses. I thought that lighthouses had been abolished; manned lighthouses certainly have. To a large degree, they have been replaced by floating buoys. One or two, such as the Royal Sovereign, were concrete structures. That buoy was cast ashore somewhere near Eastbourne and floated out with some degree of problem. It did not land on the seabed the first time but it did eventually. I do not know whether that is included. It does not appear to be from the definition that we have had. As one goes down the River Thames one sees steel frames which, I believe, are anti-aircraft batteries from the Second World War. Had they ever been used for the extraction of oil they would be excluded but, if not, any demolition of them would be included—and we go on down the route.

The most interesting project to examine is a combined water supply and hydro-electric project involving a dam, some pipelines, a reservoir, some tunnels, an office block and so forth. If it is a water supply project it is excluded under subsection (2). If it is a hydro-electric project it appears to be included. The reservoir is included and the tunnel might be included if the Government accept the noble Lord's amendment. Presumably the office block is included if the whole thing is demolished but if only half is demolished it will not be included. The pipes are excluded. The same applies in respect of flood controls; if they are water supply they are excluded but if they are for flood control only they are included.

Is there a problem of precedence as well as definition between subsections (1) and (2)? We appear to be getting deeper and deeper into the mire and I certainly do not see any way out.

4.45 p.m.

Lord Lucas

My Lords, I hope that it will be possible to find a way out, although I cannot yet enlighten the noble Lord, Lord Berkeley, because, as I said, this is a matter upon which we are still cogitating. However, I hope to be in a position to show the House at least the direction of our thoughts, if not the actual wording of amendments, which would be preferable, by Third Reading.

We believe that none of these amendments is necessary. The "construction" in Clause 103(1)(b) is a generality, which is, works forming, or to form, part of the land", and then there is a selection of illustrations. I expect that there are thousands of individual items and ideas which we could include in the list. However, we have tried to include a sufficient number to give a good general idea of what is meant by the first part of the clause. The first part of the clause is the governing part, which enables us to say without fear of doubt that all the ingenious additions proposed by the noble Lord, Lord Howie, are unnecessary.

Perhaps I may tackle the amendments in order. Clause 103 (1)(a) deals with buildings and structures, which clearly includes parts of buildings and parts of structures, making Amendment No. 114 unnecessary.

As regards Amendment No. 115, we understand the noble Lord's interest in ensuring that his profession is not overlooked. However, the formidable list of examples of civil engineering works in subsection (1)(b) means that that is hardly likely to happen. Furthermore, all the suggested additions in Amendments Nos. 116, 118 and 119 fall within the meaning of, works forming?£part of the land", in subsection (1)(b). Tunnels are covered in subsection (1)(b), to which Amendment No. 117 relates.

I hope that with those assurances the noble Lord will feel able to withdraw his amendment.

Lord Howie of Troon

My Lords, I have a vague feeling that I ought to be pleased, but I am not sure about that. I ought to be pleased up to a point. I am struck by the thought that if Clause 103(1)(a) covers everything, the other subsections are not necessary. That is what the Minister said. He said that subsection (1)(a) includes all those things, so why list all this lot; or, if we list all this lot, why not list all the others, including the inoffensive items which I have asked to be added? Either the Minister is correct in saying that subsection (1)(a) includes everything or he is not—

Lord Lucas

My Lords—

Lord Howie of Troon

My Lords, do the conventions of Report stage mean that the Minister can interrupt me but I cannot interrupt him?

Lord Lucas

My Lords, we are both allowed, with the leave of the House, to interrupt each other in order to make brief clarifications. The brief clarification that I wish to make is that I said that the first part of paragraph (b) covers all the noble Lord's amendments except for Amendment No. 114, which is covered by paragraph (a), and Amendment No. 117, which is covered by paragraph (e).

Lord Howie of Troon

My Lords, I am sure that the noble Lord is right, as he is in relation to so many things. However, he referred to the first part of subsection (1)(b). It does not have a first part; there is only one part.

I should have thought that if he can include harbours, he can include jetties and breakwaters. If he can include pipelines, he can include a hydro-electricity supply. It is not too difficult and it would not do a great deal of harm. It would make matters clearer for those who are concerned about it. Therefore, I find his argument unconvincing. But I am sure that the Minister will reflect upon these comments.

Lord Williams of Elvel

My Lords, before my noble friend decides what to do with the amendment, will he ask the Minister what is the response to my question about coastal defence?

Lord Howie of Troon

My Lords, I was about to come to that. My noble friend mentioned coastal defence. There are a number of forts in the lower reaches of the Thames and probably elsewhere, so far as I can recall, which are not unlike oil rigs. In fact, they are more like gas rigs because they were designed by Posford and Pavrey, the same people who designed the first gas rigs. They are undoubtedly part of coastal defence in the sense in which my noble friend used the term, although not in the sense that I used it. I was much more specific.

Those are undoubtedly construction civil engineering matters. They were designed by consultant engineers and built by important construction contractors. They were intended for defence. They have guns and other weapons on them and are not meant for fun. Perhaps we may never have such things again. Who can tell? I sincerely hope that we do not. But, if we do have them, they should certainly be included in the province of the Bill. Therefore, my noble friend is right to raise those matters.

We talk about tunnels as being an integral part of this, that and the other. I can see the noble Lord's point but, in my opinion, that is where the clause becomes redundant and even—if I may use such a word in this House—otiose. I believe that the Minister is right to say that subsection (1) deals with everything. I agree that it does. I should be happy if we had subsection (1)(a) and left out everything else. I may have second or third thoughts about that. The Minister is taking up this point only because the clause was plagiarised from income tax legislation and he does not want it changed because of the embarrassment that that may cause. That is the simple reason; it is not a bad reason. He is being pressed by people from all quarters not to change the legislation. But, in terms of intellectual purity or even ordinary common sense, if there must be a list, it should be reasonably complete, simple and uncomplicated.

The list that we have is not complete, as I have shown, because I have proposed simple additions which a child might wish to add because they are obvious. There are then the operations that form an integral part. I believe that at an earlier stage of the Bill, an unkindly chap described this as a bit of a shambles. I hope that I did not do that, although I might have done, because it is a shambles. Of course, I shall withdraw the amendments. I believe that the Minister wishes to intervene.

Lord Lucas

My Lords, with the leave of the House, I feel that I should reply to the question asked by the noble Lord, Lord Williams. I have a helpful note in front of me which reads: "Williams: coastal defence. Yes, this is just coastal defence". I am not totally enlightened by that but I believe that the note means that that example refers to coastal defence. But, on my reading of the Bill, building a fortress from which to fire guns at the enemy would also be a construction operation. My mind then runs on to consider whether in Clause 103(1)(a), demolition of buildings or structures (whether permanent or not) would include shooting at it with a howitzer. Therefore, if I may, I shall write to the noble Lord, Lord Williams, on exactly where are the beginnings and ends of the clause in relation to warfare.

Lord Howie of Troon

My Lords, I am grateful to the noble Lord for that intervention, which seems to have nothing to do with me. However, it gave me some guidance as to the kind of intervention which can usefully be made on Report since I was rebuked earlier. I shall take that as my guide rather than the advice which I received from the noble Lord and his companions earlier. Therefore, he should look forward to lengthy interventions unless I become more kindly disposed towards him.

I believe that the clause is preposterous. Nobody to whom I have spoken in the industry—and I know a fair number of people in it—believes that there is any sense in this clause. People may have had to put up with this when dealing with their income tax but this is a totally different matter. I believe that I could have saved the time of the House by proposing to delete everything after subsection (1)(a) and to leave it at that. But, bearing in mind that that is what the Minister believes although he dare not actually say so, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 115–119 not moved.]

Lord Lucas moved Amendment No. 120: Page 58, line 37, after first ("of') insert ("fittings forming part of the land, including (without prejudice to the foregoing)").

The noble Lord said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 121 and 137, which stand in my name, and to Amendments Nos. 136, 138 and 139 in the name of the noble Lord, Lord Williams of Elvel.

I hope by now it is clear that we have taken the comments made in Committee very seriously. The exclusion of work on seating, blinds, shutters and security systems was challenged then by the noble Lord, Lord Williams of Elvel, and my noble friend Lord Ferrers undertook to consider the point.

This we have now done, and have concluded that there is a case for including the installation of the items mentioned within the definition of construction operations. This requires not only the simple deletion of subsections (2)(h) and (2)(i) of Clause 103, which we would achieve with Amendment No. 137 but also a widening of the list of systems covered by the Bill, as achieved by Amendment No. 120. We also felt it was helpful to add the examples of security and communications systems to those already present in Clause 103(c) to widen the types of system given as examples. This is the purpose of Amendment No. 121.

I hope that the noble Lord, Lord Williams, will recognise the efforts that we have made to meet his concerns and that he no longer feels the need to move Amendments Nos. 138 and 139. However, I understand that the noble Lord wishes me to address Amendment No. 136 now. Of course, I am happy to do so. We did not omit subsection (2)(g) from our scrutiny of the changes that have been suggested. I am pleased to he able to tell noble Lords that we believe that there is indeed a case for much of the work specified in paragraph (g) to be considered as construction operations. Our only hesitation is that we believe it may not be appropriate to include some signwriting activities—such as, for example, painting a pub sign—particularly where there is very high artistic content. However, we have been convinced that work on "signboards and advertisements" is a straightforward construction operation and we shall be bringing forward a suitable amendment as soon as possible. I beg to move.

5 p.m.

Lord Williams of Elvel

My Lords, I am grateful to the Minister for bringing forward Amendment No. 120. I am also grateful for Amendment No. 121. I shall speak to the same group of amendments. We did, indeed, raise such concerns in Committee. I have no difficulty in accepting the Minister's response to Amendment No. 136. No doubt we will have an amendment from the Government at a future stage which meets the concerns expressed. I am glad that the Government have accepted that paragraphs (h) and (i) are really not suitable to be excluded from the operation of the Bill.

I have one small question for the Minister. It is really a question of interpretation upon which we need, if I may put it this way, a ministerial explanation. Amendment No. 120 refers to, fittings forming part of the land". I would be most grateful if the Minister would elaborate as to what that phrase means in very simple English. I hope that the noble Lord will be able to do so without further ado. However, if he wishes to take further advice, I shall be happy to wait.

Viscount Ullswater

My Lords, I am grateful to my noble friend the Minister for bringing forward the amendments. Unlike the noble Lord, Lord Howie, I believe that it demonstrates that the Government are listening. They are sensible amendments. My noble friend also indicated that he will look at Amendment No. 136 tabled in the name of the noble Lord, Lord Williams. I expect that something could be done in subsection (2)(f) to include the artistic nature of the pub signs about which my noble friend was worried. The amendments demonstrate the care with which your Lordships have studied the issues raised in Committee. I am pleased that my noble friend has been able to bring forward such sensible amendments.

Lord Howie of Troon

My Lords, Amendment No. 120 refers to, fittings forming part of the land, including (without prejudice to the foregoing)", whatever the latter may be. I want to ask the same question posed by my noble friend Lord Williams. What does the phrase, fittings forming part of the land really mean? Does it, by any chance, include such things as jetties which I have mentioned from time to time? I am not sure that they are fittings in the strict sense of the word, and I am not sure that they form part of the land. However, they do connect to the land and therefore might be thought of as being an extension of the land. I am perhaps talking nonsense but I talk nonsense in the search for enlightenment in this case.

Lord Elton

My Lords, would not the instrument which prevents the ingress of unwelcome visitors to your Lordships' car park when it is raised and which forms part of the road when it is lowered be a fitting which is also part of the land?

Lord Ezra

My Lords, I share with other noble Lords who have spoken a slight incomprehension as to the meaning of the phrase. I believe that it is intended to generalise that part of the clause. If that is the case, I am very much in favour of it. It has already been made clear that what is stated in Clause 103(1) is not exclusive, and the more that that is referred to throughout the clause the better.

Lord Lucas

My Lords, I am delighted to confirm everything that the noble Lord, Lord Ezra, says. The amendment would indeed make the clause general whereas it was not so before. As to the meaning of the phrase, fittings forming part of the land", the general rule of law is that whatever becomes attached to the land becomes part of it. An object which was attached to the land or which was attached to something which was itself attached to the land would be covered by the provisions. It does not matter whether it is easy to remove, such as something merely screwed to the wall, or whether the attachment is more substantial. Examples of such fittings, forming part of the land would include a fireplace, panelling, a conservatory on a brick foundation or radiators bracketed to a wall. The dividing line between things which are fixed and not fixed might be the telephone on one's desk which is not fixed to the land and the socket in the wall which is. That is the sort of dividing line I would think of, but of course it is something that would be determined in each individual case.

So far as concerns jetties, if a jetty is installed inside a building then it comes under the clause. If it is not installed inside a building but is outside, it comes under subsection (1)(b).

On Question, amendment agreed to.

Lord Lucas moved Amendment No. 121: Page 58, line 39, at end insert (", or security or communications systems").

On Question, amendment agreed to.

The Deputy Speaker (Lord Broadbridge)

My Lords, I must inform your Lordships that if Amendment No. 122 is agreed to I cannot call Amendment No. 123 due to pre-emption.

[Amendments Nos. 122 to 124 not moved.]

Lord Williams of Elvel moved Amendment No. 125: Page 59, line 13, leave out (", or construction of underground works,").

The noble Lord said: My Lords, in moving the amendment I shall, for the convenience of the House, speak also to Amendment No. 126 tabled in the name of my noble friend Lord Howie. In Committee we discussed the construction of underground works. I came away from that stage with the feeling that we really had not arrived at any agreement as to what construction operations are properly excluded, perhaps by tunnelling, and construction operations which should be included in the Bill such as the activities of propping up tunnels and various civil engineering works underground.

My noble friend has formulated an amendment—Amendment No. 126—which is perhaps rather better than mine. However, I believe it would he sensible for the House to have another look at the construction of underground works. I feel that there are matters here which are still in the grey area between construction operations and those operations which are not of a construction type, which we have not yet resolved. I very much hope that we shall hear more from the Government what they can do to help the House. If I had been asked to choose between my amendment and that of my noble friend Lord Howie, I would probably have chosen my noble friend's amendment which seems to be slightly better drafted than mine. Nevertheless I believe it is time that your Lordships had a view from the Government after our discussion in Committee. I beg to move.

Lord Ezra

My Lords, I believe that this is an area which needs to be clarified. My experience of the construction of underground mines is that the civil engineering industry played a major role. I believe that the modifications proposed either in the name of the noble Lord, Lord Williams, or of the noble Lord, Lord Howie, need to be taken seriously into account.

5.15 p.m.

Lord Howie of Troon

My Lords, I am extremely grateful to my noble friend Lord Williams for preferring my amendment to his. I was a little taken aback that he should say such a thing although he and I retain relatively good relations most of the time. I think the Government should reconsider the discussion we had on this matter in Committee, in the course of which the noble Lord, Lord Ezra, spoke. He has just spoken briefly, I think rather too briefly in the light of his immense experience of underground working and indeed of placing contracts for underground working. If the Government reconsidered the Committee stage discussion they would recognise, or perhaps begin to understand, our several experiences in the construction of coal mines.

There is a problem here. The construction of a coal mine includes a certain body of surface works, some of which will be railways, roads, bridges and the supply of water for the washery, and some of which will be buildings for water supply, most of which would, I think, in the time when the noble Lord, Lord Ezra, ran the Coal Board, have been placed under civil engineering contracts and would have been happily so placed under the Bill.

However, there is a more difficult part of the problem as regards digging a shaft. The shaft for a coal mine is normally, I cannot say constructed—I suppose that excavated is the word. It is excavated and lined by a civil engineering contractor. As the noble Lord, Lord Ezra, said, when he ran the Coal Board that work would have been let under a civil engineering contract; that is, it would have been regarded as part of construction, and it certainly would have been in mining.

I do not think that the Government have really thought this matter out. They think that everything underground is the same. If one digs a tunnel before the extraction of minerals—in the case we are discussing the mineral is coal—that would be a mining operation.

But before one can begin the mining operation—that is, digging the horizontal tunnels and the horizons and all of the structures out of which coal is won and extracted from the ground—one must get into a position where one can do this. One gets into that position by excavating a shaft and lining it with concrete. That is a straightforward and orthodox, although quite difficult, construction project. There is absolutely no reason why that part of the effort of winning coal, for example, should be excluded from the Bill. That is why I drafted my amendment in the way I did.

I drafted the amendment myself without advice from anyone. It may well be imprecise and inexact; it may not quite meet the high demands of parliamentary draftsmanship. We have frequently criticised the draftsmanship throughout the Bill. Nevertheless, I make a serious point in that insofar as the work on a site—being the site of the coal mine in this case—is on a site which is directed towards the gaining of minerals and is itself operated under a civil engineering contract, it should be included in the ambit of the Bill. This would not matter where the contract was precise but it does matter where the contract relates to the scheme—which no doubt we shall discuss later—because if the work were not done under a civil engineering contract and the scheme had to come into play, that particular piece of work, in its contractual sense, would be in a kind of limbo.

I shall not insist on the wording of my amendment but I want the Government to say that they have looked carefully at the comments of the noble Lord, Lord Ezra, which he made in Committee—I do not think the Government have looked at them closely enough as yet—and the rather less important remarks I made. I hope that the Government will think again about this matter and return to us with some kind of proposal which deals with what is a serious point concerning the delineation between what is actual construction work and what is not. At the minute the Government have used a blanket, blunderbuss approach which is totally inadequate and which no one in the construction industry believes in. The Government should give this matter much more careful thought than they have done to date.

Lord Berkeley

My Lords, we discussed this matter in Committee but I am a little worried about the amendment of the noble Lord, Lord Howie of Troon. I am not sure how one recognises a civil engineering or building contract unless it happens to come within the terms of the noble Lord's special scheme. I refer to the words in the Bill, tunnelling or boring, or construction of underground works, for this purpose". It is a matter of trying to get to the site of the mineral extraction. I do not think there is much difference between tunnelling or boring. Usually it is the same thing. It might be a matter of drilling and blasting, boring with a machine drill, or building a shaft or underground caverns, or the kind of thing to which the noble Lord, Lord Howie of Troon, referred.

The real problem lies in defining whether one wishes to extract minerals, or whether one wishes to construct something else, and one uses what comes out—it I can put it crudely—as a mineral. I believe that on Second Reading or in Committee I referred to the fact that all the spoil that came out of the seaward drives of the Channel Tunnel—I declare an interest in regard to the Channel Tunnel—was strictly mineral because Eurotunnel had to pay a royalty to the Crown Estates. That is another good reason for leaving the Duchy of Cornwall out of this.

I can foresee lawyers having a wonderful time in the future defining what was the main purpose of a particular construction activity. It may be to extract coal or gravel. Who knows what will happen in the future? However, the situation is confusing at present. The amendment proposed by the noble Lord, Lord Williams of Elvel, goes some way to improving the position. I hope that the Government will look at the issue again because it is extremely unclear.

Lord Lucas

My Lords, as noble Lords clearly realise, we are dealing with one of the boundaries here and one can look at the issue either way. One can say, as we have done, that the best way to draw the boundary is for mining to be out. One then gets into the problem outlined by the noble Lord, Lord Berkeley. Alternatively, I can think of another problem: gravel was extracted in large quantities in order to make a boating lake. Was that in or was that out?

The noble Lord, Lord Ezra, and the noble Lord, Lord Howie, have quite correctly pointed out that mining operations commonly involve large contracts which we would all recognise as being construction and that in principle it would be nice to have those within the scope of the Bill. However, we have been unable to devise or to find solutions in the proposed amendments as regards exactly where those lines should be drawn.

The problem continues to rest on the difficulty of distinguishing between mining operations and civil engineering operations. We heard in Committee from the noble Lord, Lord Ezra—and we heard from him again today—that he had no difficulty distinguishing the two but no one has, as yet, suggested how this may be done satisfactorily in legislative terms.

It is true, of course, that with Amendment No. 126 the noble Lord, Lord Howie of Troon, has attempted the task for us. But I am afraid he has run straight into difficulties. It is perhaps worth pointing out that when the Department of the Environment conducted its consultation exercise on fair construction contracts last year, there was broad support for ensuring that the resulting provisions were not restricted to standard form contracts. We have therefore not sought to tie the application of Part II to the use of any particular type of contract, and it would be inconsistent of us to do so now.

It would also throw up all sorts of problems. We would need to establish what was meant by a, recognised civil engineering or building contract", as the noble Lord, Lord Berkeley, pointed out, and how that recognition could be updated from time to time. We would need to decide how to deal with contracts where provisions had been struck out, or where they had been inserted; and we would still be left with the prospect that, even with the amendment of the noble Lord, Lord Howie of Troon, in place, any party could simply avoid these provisions by insisting on using a bespoke contract. In other words, the noble Lord's amendment would have little effect.

The Government are not unsympathetic to these amendments, but we genuinely believe that in achieving their intent we would throw up too many additional complications. However, we shall look again carefully at what has been said today. If we can offer any prospect of a way forward we shall let noble Lords know by Third Reading.

Returning to the question asked by the noble Lord, Lord Berkeley, as regards the use of excavated material, I can do no better than to repeat the advice I gave to the noble Lord, Lord Williams, in our letter of 16th April. Where material such as gravel is taken from an area not otherwise involved in the construction process and used in that process, this would count as mineral extraction. In contracts for work involving borrow pits, parties may choose to extend the terms of the legislation by contract to the whole of the process, but the pit which is not otherwise involved would be outside the terms of the construction contract.

Lord Williams of Elvel

My Lords, I am grateful, as always, to the noble Lord for his response to my amendment and for the expression of sympathy from the Government on the thrust of the amendment.

I recognise that this is a difficult area. However, it is for the Government to solve difficult problems. I hope that by the time we come to Third Reading, the Government will have had further thoughts and will have been able to solve the problem with the sympathy which the noble Lord expressed this afternoon. In the light of what the Minister said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Howie of Troon had given notice of his intention to move Amendment No. 126: Page 59, line 14, at end insert ("except insofar as this work is carried out under a recognised civil engineering or building contract").

The noble Lord said: My Lords, my blood ran cold when the Minister said that he sympathised with my amendment because in my experience that is usually the nail of doom.

The noble Lord is quite right. I admitted that the wording of the amendment was my own and therefore might not have met his high standard. I recognise the difficulty of using the word "recognised" as regards a form of contract. I accept that as a real objection to my amendment. However, I remind noble Lords that in other parts of the Bill the word "adequate" was considered adequate for the Government's purposes. Using the words of the Bill, perhaps the words "an adequate civil engineering or building contract" might be the way to phrase the provision. I put that thought to the noble Lord for further consideration.

I am glad that the Minister's mind is not closed on the matter. With those brief, and I hope not unwelcome, remarks, I shall not move the amendment.

[Amendment No. 126 not moved.]

Lord Williams of Elvel moved Amendment No. 127: Page 59, line 15, after ("plant") insert ("or").

The noble Lord said: My Lords, the amendment stands in my name and in the names of my noble friends Lord Dubs and Lord Howie of Troon. It may be for the convenience of the House if I speak also to Amendment No. 128.

The purpose of the amendment is simple. It is to challenge the exclusion of steelwork from construction operations. I am advised that, unless otherwise specified, steelwork is an essential part of construction activity and construction operations. I see no reason why in the provision, construction, installation or demolition of plant, machinery", and so on, steelwork should be included where there is a primary activity of whatever it may be.

We discussed this issue in Committee. My noble friends Lord Howie and Lord Berkeley introduced several examples of steelwork being part of the construction operation, even under paragraph (c) of the provision. I see no reason why the Government cannot respond to that. I beg to move.

Viscount Ullswater

My Lords, I believe that the inclusion of the word "steelwork" in this provision is confusing. Therefore I ask my noble friend to give consideration to Amendment No. 128. I should have thought that the word "plant" would be sufficient to include the kind of steelwork to which we refer. The subsection deals with the process industry.

Perhaps I may put it another way. The difficulty has already been recognised by the Government in the amendment that they put forward at Committee stage. They included—that is, excluded from the exclusion—warehousing when they sought to make clear the meaning of bulk storage, especially when considering its application to food and drink.

I shall wish to speak later to an amendment which deals with steelwork. However, I ask my noble friend to consider carefully whether there might not be some confusion as regards the word "steelwork" in this subsection of the Bill.

Lord Elton

My Lords, perhaps I may add a request to what my noble friend has said. Perhaps he will explain to me as a layman what will happen when a high-rise block is built: all the works after the foundations are set are steelworks and the building is put on to the steelwork afterwards. Am I using the term in a sense not intended in the Bill? If not, what will be the effect of the inclusion of the words which the amendment proposes to take out of the Bill on contracts for the construction of that kind of building?

5.30 p.m.

Lord Berkeley

My Lords, perhaps I may respond to the noble Lord, Lord Elton. The amendment refers to steelwork and plant and machinery in respect of the process plant. We discussed the point earlier when I spoke to another amendment. I was pleased to hear the comments of the noble Viscount, Lord Ullswater, about the problems of the steelwork industry. Its representatives have written to us and said that the industry is beset by bad payment practices. The whole purpose of the Bill is to try to avoid bad payment practices, and they are what the Bill seeks to overcome. That is the strong message from those who put up steelwork—that is steel frames around process plants, water treatment plants and anything else that is included in the provision—and I urge the Government to reconsider the point. It may be perfectly adequate for plant or machinery, but, for the reasons which I mentioned earlier, steelwork needs to be included in the Bill. Therefore, I support my noble friend's amendment.

Lord Howie of Troon

My Lords, I too support the amendment, not surprisingly, since my name is attached to it. For once I do not think I am confused, but in so far as there is any confusion when we use the word "steelwork" in the construction industry, we mean structural steelwork. We sometimes refer to reinforcing, but when we do so it is in a context where we know what we are talking about. This reference is to structural steelwork, components of buildings. The components will be roof trusses, columns or gantries, the skeleton of a building. The noble Lord, Lord Elton, referred to the skeleton of a tower block. I do not believe that that applies here, although I may be wrong, because it is on site and relates to certain parts. If I am right, it would be odd if the structural steelwork for a tower block were included under the Bill but the structural steelwork on the sites covered in the subsection were excluded. I say that off the top of my head and I hope I am right.

Structural steel elements are wholly different from plant, whether the plant is machinery or what one brings in for heating, ventilating and similar needs. The structural steel elements are an integral part of the construction process. The fact that they are built somewhere else and brought on to the site is immaterial; they are part of the process and are usually ordered under the normal conditions of contract which apply to the construction industry. I have received a couple of letters which have no doubt also been sent to my noble friends and it is probably in order for me to quote one of them. A structural engineer who is in the business of making the structural components I am talking about writes to us in the following terms. I hope that he wrote to the Minister, although the letter does not suggest that. He states: steel is specifically cut, burned, drilled, welded to fit a specific construction task", not another task. It already suffers from being one of the first things that entails substantial expense on a project and being subject to onerous conditions making it late in payment, but being off site until 90% of the value has been spent"— that is, spentby the steelwork provider— means that it is less easy to get paid for: and therefore it needs the full protection from the construction bill The key comment in that quotation is, less easy to get paid for". One of the main aims of the Bill is that it should be easier for subcontractors to get paid for the work which they do. To exclude the steel contractors from the Bill excludes them from one of the Bill's main aims. I cannot imagine that that is the Government's aim.

I have received another letter from the British Constructional Steelwork Association, which I shall not quote, which supports that view. A distinction ought to be made, and has not yet been made in the Government's mind—I hope that the Minister is having an interesting conversation with the Whip; I am sure he will turn his attention to us fairly soon. Of course he will. I am pulling his leg. The Government have not adequately distinguished between what is understood in the construction industry, by both clients and constructors, as construction. They have probably done so under the influence of the Department of Trade and Industry, but I do not wish to go into that.

The Government should think carefully about the amendments and come back to us with a resolution which indicates that if they have not understood the points properly they have at least turned their minds to them and considered them.

Lord Lucas

My Lords, what more can I say to the noble Lord, Lord Howie, but, yes, certainly we shall return? This is very much one of the areas around the edges of the process industry that still perplexes us but not, we hope, for too long.

I am confident that at Third Reading I shall be able to say more about the point, but for the moment we are still turning it over, discussing it and trying to get the right formulation. I have little more to say other than that we recognise that we must tackle and solve the problem. It has been well discussed and eloquently advocated in the House. We paid great attention to what was said in Committee and will pay attention to what has been said today. I look forward to bringing a resolution to the House in a week's time.

Lord Williams of Elvel

My Lords, again I am grateful to the noble Lord for his assurance that on Third Reading the Government will produce a resolution to the problem. As he has heard and, I am sure, understands, it is a difficult problem. The support of the noble Viscount for the amendments will weigh with the Minister in what he has to produce on Third Reading. We look forward to that. In the light of what he said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 128 not moved.]

The Deputy Speaker (Lord Skelmersdale)

My Lords, in calling Amendment No. 129, I should say that if the amendment is agreed to then I cannot call Amendment No. 130.

Lord Howie of Troon moved Amendment No. 129: Page 59, leave out lines 17 and 18.

The noble Lord said: My Lords, the arguments in favour of my amendment to delete: nuclear processing, power generation, or water or effluent treatment, or are identical to the arguments which I raised earlier in relation to civil engineering works in mining. All those activities involve a very large element of straightforward old-fashioned construction work. You cannot build a nuclear processing plant I presume that means a power generation plant of any kind—without digging a hole in the ground. The hole you dig in the ground is a straightforward, old-fashioned civil engineering process called "muck shifting". You dig a hole, and in that hole you put the foundation. At the top of the foundation you put a shed of some kind, which encloses the nuclear plant, power station or whatever it happens to be.

Earlier, the noble Viscount, Lord Ullswater, quite properly referred to the Government's decision to exclude warehouses. Thinking about the matter rationally, a power station is just a kind of big warehouse, is it not? It is a shed. You do not pack baked beans in it or anything of that sort, but you pack certain plant in it.

That plant is excluded from the Bill; nobody argues about that at all. But there is an immense body of civil engineering (construction) activity that is involved in producing the "envelope", the shed, in which the processes are conducted. There is no possible argument for excluding the civil engineering works concerned with a nuclear power station, or any other power station or water treatment plant, from the Bill. Those are classic civil engineering operations and are to be included in the Bill.

Why on earth cannot the Government just recognise that? Why can they not quite properly exclude from the Bill those functions that are mechanical or electrical engineering or something of that sort, but leave in those that are quite obviously construction works, such as muck shifting, producing the foundation, building the envelope on top of the foundation and putting the roof on the top? I do not see any problem here.

I sincerely hope that the Government will have second thoughts about this matter. If they will not accept the amendment as it stands, I hope that they will at least accept the thought that lies behind it.

Lord Ezra

My Lords, I support the noble Lord's remarks. I have visited many power stations in my time. I supplied most of them in those halcyon days in the coal industry. Anybody who has ever visited a power station will recognise that what is visited is a vast structure which entirely dwarfs the equipment within it: the boiler plant, the turbines and the generators that produce the electricity. It is the structure that you see and the structure that you enter. A vast part of the work is civil engineering.

We are here, I suppose, to try to help the Government as much as we can through this difficult Bill. However, this is another issue which I hope the noble Lord will examine carefully in order to come back with a suggestion at Third Reading.

Lord Berkeley

My Lords, given the amendment tabled by the noble Lord, Lord Howie of Troon, in relation to paragraph (c), if the Government accept the removal of the word "steelwork", which we have just discussed, paragraph (c)(i), nuclear processing, power generation, or water or effluent treatment", could be interpreted as referring only to the pieces of plant or machinery that are brought to the site and put on those lovely foundations that we have built, having done the muck shifting. After that, you connect up a few pipes and wires—which is a very simplistic description of the enormous amount of work that has to take place—and away it goes. It is slightly different and a little more complicated for a nuclear installation. The bulk of expenditure for water and treatment plant is in civil engineering and structural steelwork.

Perhaps the Minister, in responding, can clarify the meaning. Does this subsection refer just to the plant and machinery, which basically come in a box and are plonked on a foundation; or does it include the whole contract, including all the matters to which the noble Lord, Lord Howie, referred?

5.45 p.m.

Viscount Ullswater

My Lords, the noble Lord, Lord Berkeley, has put his finger on it. This is the point that we were discussing in Committee. However, we keep being drawn back to structural steelwork and the construction of warehousing and sheds. As the noble Lord, Lord Berkeley, said, I believe that this part of the Bill is to be interpreted as referring purely to plant and machinery. That is why, in speaking to the previous amendment, I said I thought the word "steelwork" was confusing at that point. I also said that I had another remark to make later about steelwork.

I agree with the comments that have been made. I do not agree with the amendment, since I do not think it is necessary. However, if my noble friend can confirm that we are not talking about shells and structural steelwork but merely about plant and machinery, that will be very helpful.

Lord Lucas

My Lords, the noble Lord, Lord Berkeley, has got it pretty well right, as one would expect. The phrasing here is, construction, installation or demolition of plant, machinery or steelwork"— as we have just discussed— on a site where the primary activity is". The governing phrase is, construction, installation or demolition of plant, machinery". That is what we are talking about. There are grey areas enough in relation to that, if we think of building a sewerage works, for instance, as to which part is construction and which part is machinery. It is quite clear that the dividing line is there, and that in the wording of the Bill as drafted we confine the process section to that which has to do with plant and machinery.

Within that, it is quite clear to us that industries such as, nuclear processing, power generation, or water or effluent treatment", are at their heart, when it comes down to machinery, process industries and ought to be within the exclusion. But the construction operations that go with them, subject to the inevitable grey area, should be without the exclusion.

Lord Berkeley

My Lords, perhaps I may offer to the Minister a point of clarification. What has confused me, and possibly some other noble Lords, is the use of the word "construction" in this instance. I do not think that you ever "construct" plant or machinery. You fabricate it, and then you install it. It may be that we are so used to "construction" being civil engineering construction that we are becoming confused. (Perhaps it is I who am becoming confused.)

Lord Lucas

My Lords, we shall certainly take that point on board.

Lord Howie of Troon

My Lords, as always, I am indebted to my noble friend Lord Berkeley for pointing out the hole in my argument, which he did with what might be called unerring aim. I agree with him.

My purpose in tabling this amendment was to have on record, which is important, an admission by the Government that those construction elements as we understand them in the various process plants are included within the Bill. Having received that assurance—it should have been clear to me; but then I struggle with these matters—I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 130: Page 59, line 17, leave out ("or water or effluent treatment").

The noble Lord said: My Lords, this amendment reflects an amendment moved in Committee and is rather more narrowly focused than the amendment we recently discussed in the name of my noble friend Lord Howie of Troon.

It is our continuing contention—in spite of the arguments put forward by the Government—that water and effluent treatment are fundamentally construction activities; that is, they are activities which properly fall within the construction industry. We contend that such treatment involves not merely the installation or demolition of plant and machinery. Much of the work is carried out by firms which we recognise as being part of the construction industry.

The water industry frequently uses what is known as form G90, which offers a reasonable form of protection for main contractors. However, subcontracts are frequently one-off documents on the main contractor's own terms which produce problems for subcontractors in the building industry which the Bill seeks to address.

We come back to the difficulty of main contractors, subcontractors and sub-subcontractors. Main contractors may be reasonably protected, though form G90 does not contain any adjudication provisions. However, subcontractors, often smaller businesses, need the protection afforded by the Bill. Amendment No. 130 seeks to ensure that water and effluent treatment are accepted as a construction industry activity because all water and sewerage plants are produced and undertaken by construction companies. Any machinery outside their ambit is brought in in the context of a construction activity. Therefore, where the Bill reads, construction, installation or demolition of plant, machinery or steelwork on a site where the primary activity is … water or effluent treatment",

our contention is that water and effluent treatment are fundamentally construction industry activities and should not be included here. However, subcontractors should be given the protection of the Bill.

Again, I understand that this is a grey area. We discussed this matter at Committee stage but I hope the Government will look at it again. I am advised by people who know much better than I that this expression in the Bill is something that they would like reconsidered. I beg to move.

Lord Monkswell

My Lords, I rise to support my noble friend on Amendment No. 130. It may be useful to draw a distinction between water or effluent treatment and the other two elements that are contained in this section of the Bill; that is, nuclear processing and power generation. As an engineer I am concerned that nuclear processing, power generation and water or effluent treatment are lumped together. I can see a great distinction between them and perhaps I may explain my reasoning to the House.

When one looks at nuclear processing or power generation activities, one sees that a large part of the operation of the plant as a whole will be precision engineering. When one talks of nuclear processing or power generation one expects there to be complex and precise engineering and specialist scientific plant that will be part of the whole site. In that sense a large proportion of the value of the whole contract will be concerned with precision engineering, which is rather different from the normal construction site type of operation. Therefore, the pure construction side—concrete laying, steel erecting and so forth—will make up only a small proportion of the cost of the overall project.

When we consider water and effluent treatment, that element of precision engineering which will no doubt be carried out by an engineering company and be built and delivered to the site will make up a much smaller proportion of the cost of the whole project. I hesitate to argue percentages, but it will be generally understood that the construction activities in building a water or effluent treatment plant will make up a large proportion of the total project cost. In that sense it is sensible—that is why I support my noble friend's amendment—to separate the water or effluent treatment activity from nuclear processing and power generation. I hope that the Government respond sympathetically to the amendment.

Lord Lucas

My Lords, yet again we find ourselves discussing the division between process and construction. The water industry is a particularly difficult area. On the one hand, there is a great deal of construction involved in its activities and, on the other, the industry spends around £500 million a year on processed plant and therefore has a large element of process in it.

We promised to look again at the introduction of subsection (2)(c) to make sure that the right line is drawn between process engineering and other types of construction activity. Until we have done that and reached our conclusions, we do not want to look at how it will work within specific industries. For the moment we want to keep the water industry in the section. To a large extent it is a process industry and we do not want to lose that element in the generality of construction for reasons we outlined when discussing the first amendment this afternoon.

Lord Williams of Elvel

My Lords, I am glad that the Minister reaffirmed that the Government are looking at the whole question again. As I said, I received advice from somebody who knows much more about these matters than myself. I am sure that the Government will consult with those who know more about the problem.

This was a specific point which was felt to be particularly sensitive. Nuclear processing and power generation were not brought to my attention but water and effluent treatment were. I am sure that in considering their position the Government will talk to those who advised me on this matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 131: Page 59, line 20, leave out ("chemicals, pharmaceuticals,").

The noble Lord said: My Lords, in moving Amendment No. 131 I shall speak also to Amendments Nos. 132 and 133. All three amendments stand in my name and that of my noble friend Lord Dubs.

The discussion in Committee took us some way forward. The Government eliminated warehousing from this section. It may be a matter of drafting and of substance as to why chemicals, pharmaceuticals, food and drink are singled out for bulk storage or production purposes. It seems to me that if the subsection which we are now addressing simply said, the production, transmission, processing or bulk storage of any commodity, that would probably meet the case. I would like to know why chemicals and pharmaceuticals appear where other things which, after all, are stored in bulk do not appear, and why food and drink is singled out as being a specific matter which needs to be mentioned here.

Once we have admitted that warehousing may well be a construction activity and, therefore, within the ambit of the Bill, it does seem to me that almost all food and drink, other than the bulk storage of what goes into the final product, is relevant for the purposes of this section.

Again, these are purely probing amendments to find out why the drafting resulting from the discussions we had is the way it is and whether there is any justification for keeping in these elements here. I beg to move.

6 p.m.

Lord Swinfen

My Lords, I wish to raise a small point: should it not be "food or drink", rather than "food and drink"? Otherwise, I wonder whether it has to be a warehouse with both food and drink in it and, if the warehouse has either food in it or drink in it on its own, whether it falls outside the Bill.

Lord Howie of Troon

My Lords, I am not quite sure whether I should speak at this moment, because "food and drink" does not seem to be included in the amendment, but it seems to be near enough for me to have a go. I see that in line 21 not only food and drink and other things are mentioned, but steel is mentioned. In an earlier discussion we wondered whether we should delete "steelwork" from the same clause of the Bill. I am pretty sure that if we decide to delete "steelwork" it would be quite sensible to delete "steel" as the first word of line 21 as well. I throw that into the air in the hope that it will land somewhere fruitful.

Lord Lucas

My Lords, in this clause of the Bill we are trying to get as close as we feel able, at least in the days before we come to our new conclusions, whatever they may be, to the desire of the noble Lord, Lord Williams, to keep the definition of the processing industry quite close. Therefore, we have defined the major users of process engineering as being the industries which are excluded. They are, first, food and drink, which spent £1.7 billion on process plant last year; £1 billion of expenditure came from the chemicals industry, with petroleum, oil and gas production not far behind; and pharmaceuticals and steel production—not that there is a great deal of new steelwork building going on at the moment, but the building of steelworks involves heavy use of process engineering. That is, I hope your Lordships will agree, a narrow definition of the process engineering industry, but we hope that it includes the major users of process engineering. It is the best, most useful and finest—in the sense of smallest—definition of process engineering that we have been able to agree for the purposes of this Bill. I really do not believe that there is any justification in trying to take out what the noble Lord, Lord Williams, wishes to take out, which are key parts of the process engineering industry.

Lord Williams of Elvel

My Lords, I am grateful to the noble Lord. As I understand it, the Government say that there are certain selected industries which seem, according to government figures, to spend a lot of money on production, transmission, processing or bulk storage (other than warehousing)". Therefore, these are the items which are included seriatim. I understand the position of the Government. Obviously, I shall have to look at the government figures and see whether there are other industries which, in effect, spend more as a proportion of their total capital expenditure because, after all, that is what we are talking about.

I still see no reason why major industries should be singled out in this way if one is going to eliminate or exclude from the Bill the construction, installation or demolition of plant, machinery … on a site where the primary activity is … the production, transmission, processing or bulk storage (other than warehousing)". I see no reason why the Bill should not be left as such without all the rest of it, but I shall rely on the noble Lord to have another look at this, as I am sure he will. It will, no doubt, be a source of further debate as we go along or, indeed, as another place goes along. It seems to me to be incongruous as it stands. However, having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 132 and 133 not moved.]

Lord Williams of Elvel moved Amendment No. 134: Page 59, line 24, at end insert ("unless undertaken by the contractor or if not specific to the agreement").

The noble Lord said: My Lords, Amendment No. 134 stands in my name and that of my noble friend Lord Dubs. It may be for the convenience of the House if I speak also to Amendment No. 135 in the name of my noble friend Lord Howie.

This is a rather more important amendment. It does not relate to a drafting matter. It was an amendment on which we had some discussion at Committee stage, but it seemed to us that the discussion at the end of the day was somewhat less than satisfactory. I am advised, again by those who know much more about this industry than I do, that there are frequent occasions when a contractor undertakes what is essentially manufacturing work, for instance off-site, and then is responsible for bringing it on-site and constructing it. All those are part of a construction activity. It is probably well summarised by advice that I have received that, after all, a building is essentially a construction activity and everything else that goes into a building, if it is off-site and if it is brought in, specific to an agreement, by a contractor, should be covered by the Bill.

We have to have a let-out here where an agreement may specify that what is manufactured is not to he covered by the Bill. My amendment does provide for that but, apart from that, this seems to us to be essential. Any give on the part of the Government on this issue would be welcome, because it is an important point in the understanding of the contracting industry. I hope very much, therefore, that the Government will look sympathetically at what I have said. I beg to move.

Lord Berkeley

My Lords, we have been through this matter before in previous stages of the Bill. For example, I recall discussing the manufacture of a precast concrete beam for a house or a bridge. In my opinion, whether it is done by the contractor or a subcontractor does not make much difference to the problem, because the problem is the same as the problem of the steelwork contractor. The order is placed early; he is producing something, possibly, which is specific to a contract. which he cannot use anywhere else and which he cannot sell anywhere else if the person who has ordered it—the main contractor or the subcontractor, if he is a sub-subcontractor—goes bust or changes his mind or whatever. He will then have a large asset of a large piece of concrete or similar on his hands or in his yard.

I believe that the amendment proposed by the noble Lord, Lord Williams, goes a good way to improving the clause. However, as I have mentioned before, I hope that the Government might consider introducing words to the effect that the manufacture of the building or engineering components or equipment is specific to the contract being ordered rather than being off the shelf. There is nothing particularly easy about that. If it is just bricks, one can always sell bricks to someone else. But if it is something specific for a contract—a bridge beam or a floor beam—or something that is unique and which the manufacturer off site, be he the contractor himself or the subcontractor, produces and subsequently cannot use, he is in just a kind of situation which the Bill is designed to avoid.

Viscount Ullswater

My Lords, these amendments, particularly Amendment No. 135, are worthy of consideration. At Second Reading I mentioned the difficulties with off-site manufacture of components, which is very much the modern method and the modern technology of a good deal of construction. In this instance I would particularly mention structural steelwork. During the course of today's discussions we have talked a good deal about structural steelwork and I indicated that I would wish to return to this item.

The noble Lord, Lord Howie, quoted a letter from a structural engineer saying that some 90 per cent. of the value of the steelwork is created in the engineer's workshop. If that is delivered to the site and then for some reason it is not used and is returned, the scrap value is minimal compared with the amount that has been invested. There is the difference in the price between the raw steel and the amount that has been invested in cutting it, burning it, drilling it, creating trusses, columns, frames or whatever it may be. Therefore, those who have written not only to me but to other noble Lords want to be included in the Bill not only for the adjudication but probably more particularly for the payment conditions to be followed later on.

The noble Lord, Lord Berkeley, was right in saying that we do not want to go further down the chain and deal with what might be called standard components—the industry is trying to work a little more towards using standard components—because that would be going down too far into the Sale of Goods Act area. However, I am informed that most buildings are one-offs. If a 30-foot beam is required, the client usually wants a 31-foot beam. By adopting Amendment No. 135 one would not overcome the Sale of Goods Act. The components, whatever they are, still have to be fit for the purpose for which they are supplied. Bricks that were specially manufactured—in a particular shape or with a particular architectural detail of a building—might fall into this because if they were created especially for that contract they would probably be almost worthless for any other purpose. Therefore, there are other components, apart from steelwork, which is an important component, to be covered by the Act.

As I read it, the Bill would exclude most of the warehouse construction where the steelwork has been fabricated off site. If I am wrong in my interpretation, I hope that my noble friend will put me right. Yet it is intended by government amendment that warehousing should be included in the contract side. So somehow we seem in one way to be excluding it all—if it has been made off site I cannot see that it can be included—yet it is the Government's intention that warehousing, although they refer particularly to the storage of various goods, should be included. At the moment there remains confusion. I hope that my noble friend can help me out of my dilemma.

6.15 p.m.

Lord Monkswell

My Lords, perhaps my mind works differently from those of other noble Lords but it strikes me that there will be a difficulty with this exception unless it is sorted out by government action, by the amendment of my noble friend Lord Williams or by the amendment of my noble friend Lord Howie of Troon. A builder might be contracted to knock down a brick wall, clean up the bricks and rebuild the wall elsewhere on the site. If he knocked down the wall and then took away the bricks to his own yard for the purpose of cleaning them up and, in effect, re-manufacturing them and making them suitable for rebuilding the wall, the process of taking the bricks off site to his yard would mean that he was not covered by the Bill. Therefore, the fall-back positions and the requirements that the contractor could normally use to ensure that the contract was carried on in a timely manner would be lost.

One of the main purposes of the Bill is to provide a fall-back position where one party or the other to a contract does not want to carry on and may have to be required to carry on. It may be my devious mind in thinking that someone may not want to carry on in order that he can take a better job elsewhere. If he shifts the bricks off site, will he fall outside the provisions of the Bill? That is another way of looking at the problem which has been mentioned by other noble Lords.

Lord Elton

My Lords, both the noble Lord, Lord Berkeley, and my noble friend Lord Ullswater have advanced the cause of these amendments with a little more restraint than I would have done. I would ask my noble friend to have in mind that the purpose of the Bill is to secure prompt and adequate payment. It is not just to prevent unnecessary loss. Both the noble Lord, Lord Berkeley, and my noble friénd referred to non-standard items as if those were all one wanted to protect. However, the supplier of the components needs protection from late or non-payment regardless of whether they are standard items which he can sell at a lesser price elsewhere. The principle of the Bill is to secure a proper cascade of payment from the principal contractor down to the smallest subcontractor. That is valid whether or not the items supplied are standard.

Lord Berkeley

My Lords, on a point of clarification, when I was talking about the supplies of non-standard materials, I referred to either the main contractor or subcontractor. Possibly I should have said "subcontractor or supplier". It is the same thing. I certainly take on hoard the noble Lord's point because he is absolutely right.

Lord Howie of Troon

My Lords, the more often that he intervenes in these debates, the more I warm to the noble Viscount, Lord Ullswater, especially as he has just commended my Amendment No. 135. He has commended it more warmly than I would have done. I bow to the inadequacies of its wording. The amendment is meant in good heart and its intention is clear. The problem with Clause 103(2)(d) is that it lumps together, components or equipment, materials, plant or machinery", as though they were all the same thing, but they are not. I can go a good way with the Government in relation to, equipment, materials, plant or machinery", but when we come to components I part company with them. The noble Viscount referred to steelwork and I need not dwell on that. It is an obvious example of a component which is wholly constructional and should be in the Bill.

I seem to recall that during the Committee stage of the Bill, the noble Lord, Lord Swinfen—he may have something to say—drew attention to components which were produced off-site by the contractor who is on-site. I have in mind a specific example. The well-known contractors Richard Costain used to produce pre-stressed concrete sleepers for railway work in a factory somewhere near Motherwell. Those components were transported to sites where Costain's was involved. The supply of these components was part of the general contract under which the company worked. It seems wholly appropriate that components made off-site by the on-site contractor should be included in the Bill. I go a little further than that. I have in mind a specific example of components made off-site by a subcontractor.

The noble Lord, Lord Elton, was right in reminding us that in this Bill we are concerned with payment on time on delivery and that sort of thing. Let us consider, for example, a dry dock, which is a great civil engineering hole in the ground lined with concrete in a very elaborate and expensive way. At the front end of the dry dock there are the gates which lean on bearings. They are called the quoins, which merely means the corners. These quoins might very well be made of highly specialised, cast, stainless steel made in a factory in a place such as Crawley, remote from the site, but delivered to it and integral to the construction process. The manufacturer of these components delivers them and he might also erect them. He is entirely dependent on the main contractor for his payment. So he is part of the contractual chain which we have emphasised over and over again.

Under this part of the Bill, because he is producing a component which is essentially a structural matter rather than carrying out a structural act, he is excluded from the Bill. Therefore, he can whistle for his money unless he can exercise muscle of some sort. That is wholly wrong. I do not believe that it is the Government's intention that such a supplier should whistle for his money, but the effect of the Bill is that he does. I sincerely hope that the Government will consider the amendment of my noble friend, and even my own humble amendment, to see whether they can come up with a solution at Third Reading.

Lord Lucas

My Lords, I answer first the point raised by my noble friend Lord Elton. The material and component manufacturers indicated in consultation that they did not wish to be covered by the Bill, although they are covered by the supply and sale of goods Act. One presumes that someone who is just delivering a load of bricks to a construction site, and that is an end of it, feels that they are quite reasonably protected by the fact that, if they have delivered the bricks, they have completed what they were asked to do. That is something that cannot reasonably be argued about. Such a supplier presumably does not have the problems which gave rise to this Bill in the first place. We should respect that exclusion.

Amendment No. 134 addresses in particular a matter of common concern to us. There are those in the construction industry who do a great deal of work off-site and then deliver. They may not even do more than deliver, but they have completed a great deal of the construction contract off-site and, as this Bill is drafted at the moment, they are not included.

We are not happy with the exact wording of Amendment No. 134. I have a little difficulty in understanding it myself. I suspect that the words "if not" should either have commas around them or they should be excluded. If that is right, then I understand what the amendment is aiming at.

We have problems with the amendment of the noble Lord, Lord Howie, as he will know from a previous amendment, as regards the concept of a recognised civil engineering building contract. But we find ourselves in sympathy with the intention behind both these amendments. It is something which we discussed at length in Committee. My noble friend Lord Ferrers undertook to consider the matter. We are still doing so. We hope to be able to clarify the position at Third Reading. On that basis, I ask the noble Lord, Lord Williams of Elvel, to withdraw his amendment.

Lord Williams of Elvel

My Lords, I am again most grateful to the noble Lord, Lord Lucas, for considering these matters carefully. He is quite right in that the amendment, which I drafted myself, is slightly defective in its English and the words "if not" should be left out. The noble Lord is quite right in pointing that out. I hope that he recognises the strength of feeling not only in this House but in the construction industry about this matter and that at Third Reading he will be able to return with something that satisfies all concerned. As we keep on saying—and it cannot he said often enough—we are here to satisfy all in the industry. This is not a party political matter. We are doing our best to get the construction industry back on its feet. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment Nos. 135 and 136 not moved.]

The Deputy Speaker

My Lords, in calling Amendment No. 137, I advise the House that if this amendment is agreed to I cannot call either Amendment No. 138 or Amendment No. 139.

Lord Lucas moved Amendment No. 137: Page 59, leave out lines 32 to 34.

The noble Lord said: My Lords, I spoke to this with Amendment No. 120. I beg to move.

On Question, amendment agreed to.

[Amendments Nos. 138 and 139 not moved.]

Lord Berkeley had given notice of his intention to move Amendment No. 140:

Page 59, line 34, at end insert— ("(2A) When agreeing the terms of individual contracts which relate to construction operations described in subsection (2) above the contracting parties may agree to contract out of the provisions of this Part, but—

  1. (a) if one contracting party does not wish to contract out of the provisions of this Part, then the parties must agree contract terms which comply with the provisions of this Part, and
  2. (b) if the parties fail to agree on acceptable terms which comply with the provisions of this Part, then the relevant sections of the Scheme shall apply.").

The noble Lord said: My Lords, before withdrawing or not moving this amendment, perhaps I may make two points—

Lord Elton

My Lords, on a very important but small point of order, one cannot speak except to a Motion. The noble Lord can move the amendment, and having done so he can withdraw it, but he cannot speak to it until it is there to speak to.

[Amendment No. 140 not moved.]

6.30 p.m.

Lord Howie of Troon moved Amendment No. 141: Page 59, line 35, after ("shall") insert (" , subject to such consultation as the Secretary of State shall consider necessary,").

The noble Lord said: My Lords, the amendment states: subject to such consultation as the Secretary of State shall consider necessary".

I leave it at that. I beg to move.

Lord Lucas

My Lords, I am sympathetic in principle to the amendment. Consultation has been the mainspring of the exercise to produce fair contracts legislation and the Government have a considerable consultation exercise ahead of them in bringing forward the schemes for construction contracts. Clause 103(4) allows the Secretary of State by order to amend the provisions of subsections (1), (2) and (3). That would allow the definition of "construction operations" to be fine tuned if it were not quite right. It would also allow definitions to be updated in line with developments in the industry. There is no question of any such amendment taking place without consulting the appropriate representatives of any groups affected. I hope that with that assurance the noble Lord will feel able to withdraw the amendment.

Lord Howie of Troon

My Lords, I am greatly pleased by the Minister's response to my eloquent moving of the amendment. I am happy to withdraw it, as he suggests.

Amendment, by leave, withdrawn.

The Deputy Speaker

My Lords, in calling Amendment No. 142 I should advise the House that if it is agreed to I cannot call Amendments Nos. 143 or 144.

Lord Howie of Troon moved Amendment No. 142: Page 59, leave out lines 40 to 43 and insert ("architects, surveyors or consultants in building, engineering, interior or exterior decoration or in the laying-out of landscape in relation to such operations").

The noble Lord said: My Lords, as noble Lords will see, this is a piece of pedantry on my part. I am proposing to leave out certain words in the Bill as it stands and put the same words back in but in a somewhat different configuration. My reason for doing that is pedantic but simple. First, I am asking what is the difference between subsection (3)(a) which talks about the work of individuals participating and subsection (3)(b) which talks about the professional work of people.

As I see it, the professional people mentioned are likely to be the individuals participating in the carrying out of the work. So we have what might conceivably turn out to be tautology, although I am not sure. My second point is different. As we all know, in this part of the Bill the definition of "construction" was cribbed or plagiarised, virtually verbatim, from the Income and Corporation Taxes Act 1988. However, for some reason, in subsection (3)(b): the professional work ofx2014;

  1. (i) architects or surveyors, or
  2. (ii) consultants in building, engineering, interior or exterior decoration or in the laying-out of landscape,
in relation to such operations", is changed. In the original legislation, from which this part of the Bill is cribbed, the wording was, I think, as I have put it in my amendment. The draftsman of the Income and Corporation Taxes Act 1988 was, I believe, unable to make a distinction between the professional work of architects, surveyors, or consultants in building, engineering and so forth. I am asking merely what is the distinction which the Government are making which made them change this part of the Bill into, first, architects or surveyors, and, secondly, consultants in building, and the others? There must be some explanation. It is not a great matter, but if we are to use the Income and Corporation Taxes 1988 as a model, we should not leave out the one bit of it that makes sense. I beg to move.

Lord Williams of Elvel

My Lords, it may be for the convenience of the House if I speak also to Amendments Nos. 143 and 144. In introducing Amendment No. 142, my noble friend said that it is a matter of pedantry. My purpose in tabling Amendments Nos. 143 and 144 is somewhat different. I am a little concerned, not that proper interior decoration should be included as a professional job in construction operations, but that interior decorators per se should be included.

It seems odd not that someone who advises on lighting, structure or whether screens should go here or there, or whatever it might be—that is, a professional in that sense—but that someone who, as I read the Bill—I am advised that my reading is correct—comes in and says, "I think you should have a flash of green there and a splash of blue there, and a rather interesting 17th century lampshade on your desk", should be included within the Bill's ambit. I am advised that my reading of the provision is correct, but perhaps the Minister will be able to assure me that that is wrong and that interior decorators—in the way that we are used to them—are not part of the Bill and that it is only those who are professionally qualified to advise on the construction part who come within the ambit of the Bill.

Lord Berkeley

My Lords, as a civil engineer and a member of the "Civils", like my noble friend Lord Howie of Troon I feel that we have a situation of sheep and goats here. I suppose that I could call the architects and surveyors sheep as they appear in paragraph (i) as worthy of special mention while everyone else is relegated to the role of consultant. The clause could be rewritten to read, "consultants in architecture, surveying, building, engineering, interior or exterior decoration", or whatever else one might want; or one could have architects, surveyors, chartered engineers, and so forth. I feel like a second class citizen as a chartered engineer reading this provision. I hope that the Minister will look at it again.

Lord Lucas

My Lords, to deal, first, with Amendment No. 142, the noble Lord, Lord Howie of Troon, said that he thought that it might be a piece of unnecessary pedantry. I cannot but agree with him. He has rearranged the words on the page and to our mind has made them considerably more confusing. I understand some of the sentiments behind what he is saying. I understand too the sentiments behind what the noble Lord, Lord Williams, is saying, namely, that there appear to be a number of classes of consultants who might be in but who are not. We intend to have interior decorators included, and the splash of green and yellow people are intended to be in. I take the noble Lord's point that if they are in, why not others? I can perhaps say that all the others one could conceive of are included in the wording. However, as I cannot provide answers I undertake to come back to the noble Lord before Third Reading or on Third Reading. With that comfort for the noble Lord, Lord Williams, I hope that the noble Lord, Lord Howie, will feel able to withdraw the amendment.

Lord Howie of Troon

My Lords, I am always gratified when my noble friend Lord Williams is comforted, and I am now. I have only one question to ask. If the words which I have extracted carefully from the Income and Corporation Taxes Act 1988 would be confusing in this Bill, how is it that they are not confusing in that Act? There is something which might properly be called a dichotomy here, or even a straightforward old-fashioned mistake. The Minister has been reassuring. I am sure that he will go back and think about the matter. In view of his remarks, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 143 and 144 not moved.]

Lord Lucas moved Amendment No. 145: Page 59, line 46, at end insert— ("(5) No such order shall be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.").

The noble Lord said: My Lords, in moving Amendment No. 145, I should like to speak also to Amendments Nos. 148 and 176. My noble friend Lord Ferrers indicated in Committee that the Government would introduce these amendments. They reflect the concern of noble Lords that amendment of primary legislation should be a matter for affirmative resolution. The noble Lords, Lord Williams of Elvel and Lord Howie of Troon, laid amendments with the effect of Amendment No. 145 in Committee, and the noble Baroness, Lady Hamwee, put forward an amendment with the effect of Amendment No. 148. Amendment No. 176 is consequential. I beg to move.

Lord Williams of Elvel

My Lords, I am grateful to the Minister for bringing forward these amendments. They put into drafting language (if I may so put it) amendments moved in Committee. They also respond to concerns raised by the Delegated Powers Scrutiny Committee of your Lordships' House. That committee was worried about the Henry VIII provision in the original draft of the Bill to amend primary legislation by simple order. This shows that the committee set up by your Lordships to scrutinise delegated powers has again had an effect. We are grateful not only to the committee but to the Government for assenting to the important point that it raised.

Baroness Hamwee

My Lords, I, too, should like to thank the noble Lord for responding to those concerns. It occurs to me that, now there are so many provisions for affirmative resolution in the Bill, we shall have to show that we are assiduous in dealing with such resolutions when they come before the House. Of course, they may not do so.

6.45 p.m.

Lord Monkswell

My Lords, I rise to welcome what the Government have done. I believe that, when discussing earlier amendments to Clause 2, the Government gave assurances about the way in which they would use the power to amend Clause 103. Effectively, the provision says that they can amend any part of that clause: parts 1, 2 and 3. In discussions on the earlier amendments the Government spoke of amending part 2 of Clause 103 in a way that would create an inclusion within the scope of the Bill where it was deemed necessary and operations in the construction industry fell outside the Bill because of the way that the clause was written. Bearing in mind the decision in Pepper v. Hart, would the Minister be prepared to repeat those assurances so that they applied to parts 1, 2 and 3 of Clause 103 to deal with a fear that some noble Lords have that a grey area will emerge as to whether something is a construction activity not covered by the Bill? Is it the intention of the Government to seek to amend Clause 103 with this power to ensure that only construction activity is covered by the Bill rather than to cover exclusions?

Lord Elton

My Lords, I do not know whether I unnecessarily prolong matters. It seems that the anxieties of the noble Lord, Lord Monkswell, are unfounded since the amendment is to ensure that no changes can be made except if they are brought before this House, not merely by negative order, which somebody has to spot, but by affirmative order, where the matter has to be tabled and assented to by your Lordships.

Lord Lucas

My Lords, my noble friend is quite right. I believe that I have today given two assurances. First, we will consult before making any such changes. That is inevitable because it is a consensual process in which we are involved. To bounce people in and out of the Bill at the whim of the Government is not in accord with the way this part of the Bill has to work. I also drew attention to the width of the provision and the scope that it gave us to deal with large or small problems that might arise. They will all be dealt with by consultation and by the will of both Houses of Parliament and not otherwise.

On Question, amendment agreed to.

Clause 104 [Provisions not applicable to contract with residential occupier]:

Baroness Hamwee moved Amendment No. 146: Page 60, line 2, leave out ("his") and insert ("a").

The noble Baroness said: My Lords, Clause 104 deals with contracts concerning residential properties. At the last stage of the Bill an issue arose as to whether the property in question, in order to fall within the provision, was required to be a person's main residence. The noble Earl, Lord Ferrers, said on the 28th March, at col. 1872, that when the Bill referred to a residence it meant any residence. During that debate I had wondered aloud whether the wording now proposed—which refers to "a residence" rather than "his residence"—might make it clearer that reference was being made to any residence and not a main residence. Since it was a matter that I aired at the last stage, I hope that on this occasion I have not, to use his word, bounced the noble Lord, Lord Lucas. I am glad that he shakes his head. I beg to move.

Lord Lucas

My Lords, we heard in Committee that the noble Baroness, Lady Hamwee, was concerned that the reference to a residence in Clause 104(1) might be construed as a reference to a main residence. My noble friend Lord Ferrers reassured her on that occasion that when the Bill referred to a residence it meant any residence. I do not believe that there is any more that I can say or that can be added to the Bill to make that clearer. We also talked about an element of possession being included in the definition. This was a matter brought up by the noble Lord, Lord Williams of Elvel, he having considered the views of the Law Society of Scotland. The use of the possessive adjective "his" conveys that element. That would be lost if the indefinite article were substituted instead. We have considered what the noble Baroness had to say last time and looked at it again in the context of this amendment. We wish to retain the wording as it is. I hope that, with that explanation, the noble Baroness will be content to seek leave to withdraw her amendment.

Baroness Hamwee

My Lords, I moved the amendment on this occasion because I was not sure that the point had been made with any force last time. I am not entirely sure that I follow the explanation, but I certainly shall not pursue it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees

My Lords, in calling Amendment No. 147, I advise the House that, if it is agreed to, I cannot call Amendment No. 148.

[Amendment No. 147 not moved.]

Lord Lucas moved Amendment No. 148: Page 60, line 11, at end insert— ("(4) No such order shall be made unless a draft of it has been laid before and approved by a resolution of each House of Parliament.").

The noble Lord said: My Lords, I spoke to Amendment No. 148 with Amendment No. 145. I beg to move.

On Question, amendment agreed to.

Clause 105 [Provisions applicable only to agreements in writing]:

Lord Howie of Troon moved Amendment No. 149: Page 60, line 28, after first ("in") insert ("adjudication or").

The noble Lord said: My Lords, Amendment No. 149 is a very simple matter and I need not detain the House over it for any length of time. It is intended to clarify the constant confusion which the construction industry believes the Government are in throughout a large part of the Bill. I refer to the confusion between adjudication and arbitration. The effect of inserting the word "adjudication" is to suggest that certain written submissions will be appropriate in adjudication, arbitral or legal proceedings. It is hoped that the word "adjudication" will indicate that adjudication is a different matter from arbitration and should be distinguished on the face of the Bill. We will probably return to this matter later. I beg to move.

Lord Lucas

My Lords, when the noble Lord. Lord Howie of Troon, moved a similar amendment in Committee, my noble friend Lord Ferrers undertook to consider the matter. Our first thought was that the amendment was unnecessary. However, we have since been considering whether, if it is necessary, a more comprehensive formula might be better. We have not yet reached a decision and I hope that the noble Lord, Lord Howie, will allow us another week in which to complete our deliberations on this admittedly minor phraseology. I hope that with that explanation he will withdraw his amendment today.

Lord Howie of Troon

My Lords, I am pleased. I had thought that my small amendment, which adds only one word to the Bill, would have done the job. However, if the Government are to produce a more complicated formula which will take a week to devise I welcome that. With the Minister's warm words, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 150: Page 60, line 34, at end insert ("but will not include anything which relates to agreements totalling a sum below £25,000").

The noble Lord said: My Lords, this is an important amendment. It picks up a point made by the noble Viscount, Lord Ullswater, in Committee and is a matter which should concern the House. Clearly, it is not appropriate for the Bill to apply to small contracts. On the other hand, I recognise that it is difficult to prevent a larger contract being split up into smaller contracts so that the de minimis provision, which I put at £25,000, does not apply to a larger contract because it appears in several subcontracts.

Nevertheless, I believe that there is a case, if it can be properly worded, for having a de minimus provision in the Bill. I know that the Government have studied the matter and I hope that they will respond constructively. I beg to move.

Viscount Ullswater

My Lords, it would be churlish of me not to rise to say that I made the suggestion which the noble Lord, Lord Williams of Elvel, has now produced as an amendment. I made the suggestion in Committee and it prompted a considered written reply from my noble friend Lord Lucas. I hope that the noble Lord, Lord Williams, has received a copy of my noble friend's letter.

My noble friend indicated some of the anxiety expressed by the noble Lord, Lord Williams, over the splitting of contracts and the problem of non-payment which bedevils the industry even in relation to small contracts. I understand the problems that we might be putting into the Bill if we insist on the de minimis provision. However, I must stick to my last: I believe that some de minimis provision is required even in the general terms of not trying to wrap the industry in so much red tape that even the smallest contract which happened to be in writing would not be tied up in the scheme. I see the scheme as being a draconian way of dealing with a small problem. Whereas I have some concern about what my noble friend has said, I support some form of de minimis provision, whether or not the figure of £25,000 is the right one.

Lord Lucas

My Lords, this is a somewhat confusing amendment in that it attempts to graft a de minimis exemption for smaller contracts onto an inappropriate clause—that concerning agreements in writing. Nevertheless, I am happy to address the principle of an exclusion for smaller contracts without worrying too much about the precise details of how it could be achieved. This revisits the subject of a similar discussion in Committee.

There are several arguments against a de minimis exemption. First, many of those who suffer most in the construction industry are small contractors. Indeed, when one considers that about half the firms in the industry are one-man businesses and two-thirds of the rest employ no more than three staff, it is clear that we would be likely to deny fair contracts provisions to a vast amount of work if this kind of provision were in place.

However, we have done much to ensure that the provisions of Part II would be applied only to contracts where it was appropriate to do so. Clause 104, for example, would exclude a great many smaller contracts where they applied to work for householders. In addition, the right to instalments or periodic payments would apply only to contracts lasting 60 days or more, and this would also reduce the impact on smaller contracts.

Certainly we have not been convinced that fair contracts provisions would leave parties to low-value contracts any worse off. I doubt whether anyone would take a dispute about a broken window to an adjudicator, but if they did we would expect an adjudicator to be able to apportion his costs intelligently. However, I accept that when we came to detailed consideration of the scheme for construction contracts we might need to make sure that the right to adjudication did not obstruct access to the small claims court or other more efficient ways of settling tiny claims.

The main argument against a de minimis exemption is that it would bring with it the danger of unscrupulous contractors simply splitting contracts into smaller packets so that they fell below the threshold. This would be an added complication for all and do nothing to aid on-site relations. We would also need to deal with the problem of contracts whose value fluctuated above and below the threshold as the contract progressed. That is a related complication.

Even if this kind of exclusion were desirable, and we are convinced that it is not, it would by no means he easy to get right. In view of all I have said, I hope that the noble Lord, Lord Williams of Elvel, will feel able to withdraw his amendment.

Lord Williams of Elvel

My Lords, I am grateful to the Minister for his explanation of why the Government believe that de minimis provisions are not appropriate. I am bound to say that I first took the line which the noble Viscount, Lord Ullswater, took in Committee; that a de minimis provision was right. I have subsequently been advised by people who know better than I do that there should be at least a proper discussion of the de minimis provision.

I must read most carefully what the Minister has said and take advice on it because I am still unconvinced that there should not be some provision. How one formulates it I know not at the moment. It is a matter to which I may return on Third Reading or it may be taken up in another place. In the light of the Minister's explanation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 150A not moved.]

Clause 106 [Right to refer disputes to adjudication]:

Baroness Hamwee moved Amendment No. 151: Page 60, line 37, leave out ("for resolution by an adjudication procedure") and insert ("to adjudication pursuant to a procedure").

The noble Baroness said: My Lords, Clause 106 explains why construction contracts are defined and dealt with at such length by providing for an adjudication procedure. In Committee your Lordships spent some time on the language used in connection with adjudication, in particular whether it was appropriate to refer to a resolution to be achieved through adjudication since that suggested a permanent outcome.

I was teased by that and believed that there must be a way around it, laterally or perhaps diagonally. Therefore, I suggest that instead of providing for, the right to refer a dispute ‖for resolution by an adjudication procedure",

the clause might provide a right to refer the dispute, to adjudication pursuant to a procedure".

I beg to move.

7 p.m.

Lord Lucas

My Lords, this is the second time that we have seen the noble Baroness, Lady Hamwee, worried about the word "resolution". She moved another amendment to remove it in Committee. The noble Baroness continues to believe that "resolution" means something which is final; she has not accepted my assurance that this is not necessarily so.

It may be worth repeating that adjudication must have force to resolve disputes. The process is not intended to generate advice or recommendations which parties may or may not choose to accept: it is intended to produce a decision with which parties must comply. The word "resolution" is here quite appropriate.

I also pointed out in Committee that parties would be free to agree whether the decision should be final and binding, or effective for a more limited period. However, I know that noble Lords were suspicious of these assurances when they saw the description of the scheme for construction contracts. This suggested that an adjudicator's decision should have permanent effect unless parties agreed otherwise.

We have considered the views of noble Lords who sought to remonstrate with us on this point, in particular the noble Lords, Lord Howie, Lord Williams and Lord Berkeley. We have also taken into account representations which have begun to emerge from the industry on our description of the scheme. We have concluded that it would be right if disputes which are subject to scheme adjudication could normally be re-opened at practical completion of the contract, and we propose to amend scheme proposals when we consult following Royal Assent. I trust that noble Lords will now go to supper with a light heart. In particular I believe that my words should soothe the noble Baroness's fears that something dark and sinister lurks behind the word "resolution". I hope therefore that she will not press her Amendment No. 151.

Baroness Hamwee

My Lords, my concern was a good deal less than that of other noble Lords who spoke. I addressed the matter as something of an intellectual exercise and I have not lost a great deal of sleep in relation to it. I was merely hoping to be helpful to the process of what is agreed to be a non-party political matter.

I am sorry that my intellect has not shone. I am very grateful for the assurances given about the different approach to the workings of the scheme which, after all, is the substantive matter. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Courtown

My Lords, I beg to move that further consideration on Report be adjourned. In moving that Motion, I suggest that further consideration on Report begin again not before 8.5 p.m.

Moved accordingly, and, on Question, Motion agreed to.