Lords Sitting of 28 March 1996

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of St. Edmundsbury and Ipswich.): The LORD CHANCELLOR on the Woolsack.

Hormone-implanted Meat
Lord Carter Lord Carter asked Her Majesty's Government:
Whether they continue to support banning the importation of meat from countries which allow the implantation of hormones and what action they propose if such a ban is found to be in breach of the rules of the World Trade Organisation.
Lord Lucas: My Lords, the import from third countries of meat and meat products derived from animals treated with hormonal growth promoters has been banned since 1988, as has the use of these substances within the European Community. The UK has consistently opposed these bans on the grounds that there was no scientific evidence to justify their imposition. It would not be appropriate to anticipate the outcome of the World Trade Organisation dispute proceedings notified by the US authorities. Consultations started in Geneva yesterday and I hope they will lead to an acceptable negotiated settlement.
Lord Carter: My Lords, I thank the Minister for that reply. If athletes are banned from using growth promoters, why are the Government prepared to accept them for the rest of the population?
Lord Lucas: My Lords, it is quite clear, based on extensive scientific testing, and is agreed by all European countries that the growth hormones we propose should be allowed have no effect whatsoever on humans eating the resulting meat products.
Lord Stoddart of Swindon: My Lords, is the Minister aware that this is a most interesting Question, coming at this particular time? Will he tell the House under what treaty provisions the hormones are banned? At the same time will he say under what treaty provision the European Commission yesterday banned the export of all beef products to the whole world? What other products and goods may be involved? What do the Government intend to do to regain the sovereignty of this country in respect of trade overseas, and indeed our home trade?
Lord Lucas: My Lords, I probably have the information, but I cannot find the exact number of the EC regulation that bans the use of hormones. I assure the noble Lord that it is a widely used and perfectly accepted one. Nor can I answer the noble Lord on the second point that he raised about the authority for the European worldwide ban on British beef exports. It is a little wide of this Question. However, I invite him to consider the transfer of sovereignty from the European
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Commission to the World Trade Organisation which is implicit in its possible victory in the dispute on hormones. I wonder whether the noble Lord finds that a good thing, and if it is not rather inconsistent.
Lord Gisborough: My Lords, if the European Union ban is lifted, will there be a system of labelling to reassure people that these hormones are in fact harmless, as I believe them to be? If the ban is not lifted, can the noble Lord give some idea of the penalties that are likely to be imposed by the United States in tariffs against European goods?
Lord Lucas: My Lords, I think we are all in favour of labelling. It is certainly one possible outcome of the discussions between the European Community and the World Trade Organisation. So far as penalties are concerned, I am sure my noble friend is aware that there is already some element of revenge being taken by the United States which is, thankfully, not having a great effect on the British producers of any particular product. If the European Union continued with a ban which had been ruled illegal by the World Trade Organisation we should expect that to have trade consequences.
Lord Stanley of Alderley: My Lords, I declare an interest. In the past, when it was legal, I have used hexoestrol on my bullocks. Does my noble friend agree that if we, as farmers, have to rely all the time on media hype to decide what we should or should not feed our cattle, at the end of the day we shall find that we use no drugs at all, including antibiotics, and this country will surely revert to the state of health that we had, say, in the 1920s and 1930s? Is that what the Opposition wish?
Lord Lucas: My Lords, I am sure we are right in insisting that we take a great deal of care in getting the science right, taking the best possible advice and spending everything that is required to understand and prove that a particular substance is harmless to human health. I am sure that we are right then to insist, so far as we possibly can, that we abide by that scientific advice and do not allow ourselves to be swayed by pressure groups or scare stories.
Earl Baldwin of Bewdley: My Lords, does the Minister agree that it might be as wise a precaution to ban meat with implanted hormones as it is to ban feed that contains animal remains?
Lord Lucas: My Lords, I do not see the connection at all.
The Countess of Mar: My Lords, I understand that these growth hormones are based on steroids. Will the Minister explain why vets have not been allowed to use therapeutic doses of steroids on animals that have lost their appetites, when in the past they have proved extremely beneficial to the health of the animals? Why have the Government accepted that stricture when they are so against the implantation of hormones?
Lord Lucas: My Lords, we are all in favour of the therapeutic use of hormones where these have no harmful effect on humans as a result of their use and

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where they have a beneficial effect on the animal. We are at present somewhat hobbled by the European Union taking a different view, not based on science but based purely on decisions it believes it should take on behalf of consumers, rather than allowing consumers to take their own decisions.
Lord Carter: My Lords, if the Government decide on a cattle slaughter policy as a result of the BSE crisis, it will be against the advice of their scientific advisers, who have not recommended a slaughter policy. If the Government are prepared to override scientific advice where BSE is concerned, why can they not do the same for hormone-implanted beef to ensure consumer confidence?
Lord Lucas: My Lords, I fail to see the connection at all between something that is admittedly of possible potential danger to human beings and something that is provably of no potential danger to human beings.

Smoking and Health
3.8 p.m.
Lord Monson Lord Monson asked Her Majesty's Government:
Whether, in the light of the 121st birthday of Mme. Jeanne Calment last month, they will modify the health warnings on cigarette packets.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): No, my Lords. While I applaud Mme. Calment's achievement in becoming the world's oldest person, I do not accept that her longevity is in any way attributable to her liking for an occasional cigarette.
Lord Monson: My Lords, I am grateful to the Minister for that ingenious reply. Is she aware that Mme. Calment was advised at the age of 117 to give up smoking on the grounds that it was bad for her health? She was so miserable that after a year she started again, in moderation, on her 118th birthday and has not looked back since. She is now the oldest person in the world. Does the Minister agree that it seems to prove that a little of what you fancy does you good? To show that this is not a one-off, does she further agree that the Greeks are the heaviest smokers in the world yet they have the longest life expectancy in Europe?
Baroness Cumberlege: My Lords, I understand that a number of studies have been carried out on the Greek diet and that that also has an effect. I also understand that Mme. Calment drinks wine, eats chocolate cake, and is not unlike my noble friend Lady Trumpington whom we know to be indestructible.
Lord Clark of Kempston: My Lords, does the Minister agree that if the Exchequer were to lose the duty on tobacco and cigarettes it would mean the standard rate of income tax having to be increased by 4p in the pound to make up the deficit?
Baroness Cumberlege: My Lords, it is the Government's policy to increase the duty on cigarettes.
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It has a direct correlation to the numbers of people who give up smoking. The higher the price, the less people are likely to smoke.
Lord Mason of Barnsley: My Lords, is the Minister aware that on my pipe-smoking package it says, "Smoking causes cancer"? That is in accordance with the cancer directive 92/41. But that is not necessarily so. Is the Minister aware also that Lord Shinwell puffed a pipe every day until he was 100 years of age; Lord Brockway puffed a pipe every day until he was 99; and the average age of the Peers in this House who belong to the Lords and Commons Pipe and Cigar Smokers Club is over 70? Does not the Minister agree therefore that we should remove the slogan on cigarette packets and replace it with one that says, "Smoke a pipe and live longer"?
Baroness Cumberlege: My Lords, I had a distinguished father-in-law who used to say, "Moderation in all things, and not too much of that." I suspect that that is the view of the noble Lord, Lord Mason. However, perhaps I should be serious and remind your Lordships that 110,000 people in this country die prematurely every year as a result of smoking-related diseases. It is a real danger, and it is right that we should warn people on posters and on cigarette packets.
Lord Avebury: My Lords, does not the Minister agree that just because one person has been lucky enough to play Russian roulette and get away with it, others should not be encouraged to take equivalent risks? As the noble Lords, Lord Monson and Lord Mason, do not appear to understand the statistics in relation to the risk, is there not a case for expanding the warning on cigarette packets to give details of the morbidity and mortality arising from cigarette smoking so that people can make comparisons with the healthy existence of non-smokers?
Baroness Cumberlege: My Lords, the noble Lord is correct in what he says in the first part of his question. We have looked at the size of warnings on cigarette packets. At the moment the European directive specifies that the warning should cover at least 4 per cent. of each large surface of the packet; in fact, in the UK we demand 6 per cent.
Lord Gisborough: My Lords, as cigarettes kill around 100,000 people compared with BSE which has killed only 10 and all the cattle have had to be slaughtered, does not a ban on all smoking become even more necessary?
Baroness Cumberlege: My Lords, with regard to BSE, it has been proven through science that the risks of eating beef are infinitesimal. We should not perhaps enter upon that subject; a debate is tabled for quite soon.
Lord Wyatt of Weeford: My Lords, does the Minister recognise that the figures she gives are wholly bogus? They are not based on scientific fact. Will she also allow the Department of Health to state the truth? Active smokers actually live longer without senile

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dementia and Alzheimer's Disease than people who do not smoke. In fact they live around five years longer and do not occupy hospital beds as a result.
Baroness Cumberlege: No, my Lords.
Baroness Hayman: My Lords, will the Minister point out to her noble friends who do not like scientific evidence or large numbers and seem to prefer to deal with case histories that they should take the opportunity to do a ward round with any chest physician in any district general hospital? They will meet some of the real people who have suffered the terrible effects in health terms of smoking. Will she also point out that although there may be tax revenue advantages from people smoking, there is huge expenditure in the National Health Service in dealing with the effects of smoking-related diseases?
Baroness Cumberlege: My Lords, yes. It is not only chest diseases. One only needs to visit people who have had limbs amputated through the effects of smoking to see how distressing the situation can be. Of course, the cost to the NHS is enormous.
Lord Molloy: My Lords, does the noble Baroness agree that there may be hundreds of cases where people have smoked all their lives and nothing much seems to have happened to them? However, the British Medical Association says that there is no doubt whatever that a serious link exists between lung cancer and people who inhale tobacco.
Baroness Cumberlege: My Lords, the British Medical Association has fought this case long and hard. There is no doubt whatever that smoking does damage one's health. Studies have been carried out with regard to Alzheimer's Disease which show that there may be marginal benefits. However, those are far outweighed by the risks to general health.
Lord Monson: My Lords, is the noble Baroness aware that for many years the Department of Health claimed that 50,000 people a year died through the effects of smoking tobacco? Overnight that was doubled to 100,000 and then, realising that that was a suspiciously round figure, it was pushed up to 110,000. In the light of those widely varying statistics, is the Minister surprised at the suspicion of my noble friend Lord Wyatt of Weeford when he hears those figures?
Baroness Cumberlege: My Lords, I have no reason whatever to question the scientific evidence for the figures.
Baroness Jay of Paddington: My Lords, rather than concentrating on the good luck of one old lady, would it not be more helpful to think about the numbers of 15 year-old girls who unfortunately are taking up smoking? Do the Government have any proposals to try to reduce the numbers of girls aged 15 who smoke? The figure has gone up by 10 per cent. since 1988 when the new health promotion activities began.
Baroness Cumberlege: My Lords, we have been encouraged by the reduction in the numbers of people
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who smoke except for young girls. We are about to launch a £3 million campaign targeted particularly at young girls. We know that a number of factors are involved such as weight, how they look, confidence and so forth. We will be working with youth culture in order to try to combat smoking.

NHS Patients: Private Sector Treatment
3.17 p.m.
Lord Winston Lord Winston asked Her Majesty's Government:
How many of London's health authorities or hospital trusts have this year agreed contracts with private hospitals to treat patients on waiting lists because of bed shortages in the NHS; and how many patients are involved.
Baroness Cumberlege: My Lords, the Department of Health does not routinely collect that information.
Lord Winston: My Lords, it is a fact that a number of NHS patients are being treated in the private sector by NHS staff. Is the noble Baroness aware that, while the Government continue to deny that bed and nursing shortages lead to that situation, it must be cheaper, more efficient and a better use of resources to treat NHS patients on waiting lists in the NHS hospital where they were assessed?
Baroness Cumberlege: My Lords, the NHS has always used the private sector. We only have to look at the purchase of drugs that come through commercial firms, the use of builders and contractors—and in the 1980s the health authority that I used to chair used a private laundry to very good effect—to realise that there has always been a mixed economy in the NHS. It seems right that if we are to reduce the waiting times, as we have so successfully done, when it comes to the peaks it is clearly appropriate that the NHS should use all the facilities in this country and treat people, if that is what they want, in private hospitals.
Baroness Gardner of Parkes: My Lords, is my noble friend able to confirm the statement made to us this morning at a meeting of the North Thames health authority that there has been a dramatic and remarkably good improvement in the waiting list times? Does that apply in the same way in other parts of the country?
Baroness Cumberlege: My Lords, yes. Last year in the London regions we saw a reduction of 16,000 patients waiting over one year for treatment and, for the first time ever, nobody waited 18 months. Nationally, half of all admissions are emergencies; of the remaining 50 per cent., half are admitted within six weeks and nearly three-quarters within three months. We have seen the waiting time fall from an average of nine to four months.
Lord Monkswell: My Lords, given the Government's introduction of an internal market within the National Health Service—presumably to identify the costs of treatment and to promote treatment at the lowest

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cost—is it not curious that the Government do not possess figures on the use of private medical facilities compared with those of the National Health Service? Are they taking any steps to obtain that information?
Baroness Cumberlege: My Lords, it is a matter for individual health authorities and trusts to decide the best way of meeting the needs of patients within their area or patients who are waiting to go to their hospitals for treatment. On occasions, this may mean that services are purchased through private hospitals. We see nothing wrong in that.
Baroness Nicol: My Lords, are the people on the waiting list those who have seen a specialist and are now waiting for treatment, or does the waiting list include those waiting to see a specialist? Is that information collated separately?
Baroness Cumberlege: My Lords, these are people who are waiting for their operation having seen a specialist; but we recognise the point the noble Baroness makes concerning the waiting time between when the GP sees the patient and referral. That will be included in future.
Baroness Jay of Paddington: My Lords, is the Minister aware that the Fitzhugh Directory of NHS Trusts, which, perhaps unlike the Department of Health, is trying to gauge the national position and is a reputable organisation, this week published figures showing that the vast majority of trust hospitals in the country are making a profit from their use of private patients within hospitals? Surely it would be better, if there is capacity to treat private patients within NHS hospitals, that the hospitals should first of all clear their waiting lists of health service patients rather than using their facilities for private patients.
Baroness Cumberlege: My Lords, if an NHS hospital has a private wing, it is treated totally differently. We ensure that waiting lists are strictly controlled and that no NHS patient is disadvantaged because there is a private wing. I would add that the income to the NHS from providing private services is enormous and that helps NHS patients.
Baroness Jay of Paddington: My Lords, I am very sorry to come back to the Minister, but if the department does not know the position regarding the distribution of waiting lists and beds, as the Minister suggested in her reply to my noble friend Lord Winston, it is difficult to understand how there can be a nationally rational plan for distributing resources in the way she now suggests. Surely one of the problems is that individual trusts wish to make a profit from private patients on their premises and do not clear the waiting lists by using those beds. That is happening particularly in London.
Baroness Cumberlege: My Lords, if they do so they are contravening the guidance. I would want to know individual cases if the noble Baroness feels that is happening.
Baroness Gardner of Parkes: My Lords, is my noble friend aware that in the Royal Free, of which I
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am chairman, we have a private floor which contributes enormously in income to the National Health Service, but if we need beds for National Health Service patients, they are given those private beds?
Baroness Cumberlege: My Lords, I am grateful to my noble friend for that detailed advice.
Lord Winston: My Lords, I should like to come back to my original Question. In the case of one trust I know NHS patients are being treated for orthopaedic and plastic surgery. The private hospital has to pay extra for the anaesthetist who anaesthetises those patients. The problem is that one cannot have an anaesthetist being on call in an NHS hospital and at the same time operating in a private hospital. Consequently, there is some extra cost to the NHS. Is the Minister aware of that problem?
Baroness Cumberlege: My Lords, we have been determined to reduce the waiting times for patients. I suspect that the noble Lord is referring to the Hammersmith, in which he works. There are 53 patients now being treated at the Royal Masonic Hospital who were on the waiting list at the Hammersmith. I am sure that if he spoke to those patients, they would be extremely grateful to know that they are getting immediate treatment in very good surroundings.
Baroness Hooper: My Lords, does my noble friend agree that private hospitals still provide a very small percentage of healthcare treatment in this country? To my memory it is about 10 per cent. of healthcare. Does she further agree that this treatment provides an important competitive edge for the National Health Service?
Baroness Cumberlege: My Lords, my noble friend is right. This subject comes back to the philosophical point: what is the National Health Service? The National Health Service is one free at the point of delivery to those in clinical need regardless of their means to pay. We totally adhere to that principle. Whether people are treated in a National Health Service Hospital or a private hospital, as long as they get the treatment quickly, the quality is high and the service is efficient, they are very grateful, in my experience, to be treated.

Westminster City Council: Barratt Review
3.25 p.m.
Lord Williams of Elvel Lord Williams of Elvel asked Her Majesty's Government:
Whether, and if so what, sanctions are available against those members of Westminster City Council who decided that homeless families should be accommodated in dangerous premises.
The Minister of State, Department of the Environment (Earl Ferrers): My Lords, in cases of maladministration, impropriety or illegality on the part of local authority members, the action taken can cover

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investigations by the local government ombudsman, action by the independent external auditor, which could include sanctions of surcharging and disqualification from council membership, and a full range of penalties where criminal acts have been proved in the courts.
Lord Williams of Elvel: My Lords, I am grateful to the noble Earl for that response, as far as it goes. I am not sure that the Government have yet been seized of the seriousness of the scandal that is reported in the Barratt Review of Westminster City Council's activities. Is the noble Earl aware that on page 37 of his report Mr. Barratt says:
"This review will make very disturbing reading for anyone concerned about the observance of proper standards in the provision of public services"?
If the Government are as concerned as we are about the observance of proper standards, will they now institute a more detailed inquiry as recommended by Mr. Barratt to establish individual responsibilities in this matter, particularly in the light of the comment that the councillors' decisions were influenced by considerations of party advantage?
Earl Ferrers: My Lords, Mr. Barratt, a former chief executive of Cambridgeshire County Council, was appointed by Westminster City Council to look into the matter. He concluded that the council had failed to exercise proper standards of management of the asbestos but found no evidence of any intent by any person deliberately to endanger the health of tenants. I understand that both political parties on the council were completely unaware that the procedures to deal with asbestos were not properly enacted. Expert medical opinion commissioned by the council said:
"Asbestos is unlikely to have been present in sufficient quantities to have been a significant health risk".
Westminster City Council has passed the report to the district auditor and it is up to him to decide whether to take action.
Lord Bruce of Donington: My Lords, will the noble Earl give the House a formal undertaking on behalf of the Government that in the event of legal proceedings or tribunal proceedings being instituted in this matter following the reports of the District Auditor and Mr. Barratt Her Majesty's Government will not seek to protect the evidence that may be required from government departments and Ministers who may be involved by the issue of public interest immunity certificates?
Earl Ferrers: My Lords, that is a remarkable question. This is a sensitive area. It is not for the Government to intervene. It is for the auditor to take such action as he wishes to take as he thinks is appropriate. If it ever were to come—and I doubt whether it would—to a court case, the Government would act with strict propriety, as I expect would any other participant so involved.
Lord Dean of Beswick: My Lords, is the Minister aware that before the reorganisation of local government in 1974 under Mr. Heath certain council officers had
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statutory duties that transcended their responsibilities to elected members? I am referring to the former medical officers of health and the then chief public health inspectors who are now known as chief environmental officers. If they were deemed to be acting for the health of the community they could make their own decisions irrespective of the council. Can the Minister say whether those statutory duties have been removed from the successors of those officers following local government reorganisation? If they have not been removed, and these officers carried out their functions, this kind of activity could not have happened. If they have been removed, would it not be a good idea to give back the authority to those officers so that they can deal with councillors who are prepared to behave in this manner?
Earl Ferrers: My Lords, I reject the noble Lord's question, particularly the last part of it. He has assumed that councillors have acted in a way that they should not have done. A lot of things happened 20 years ago, and they may be different now. But the fact is that the relevant people, such as the executives of the council, have responsibilities. Ultimately, it is for the local councillors to accept responsibility for the actions of their council. As I understand it, the noble Lord is suggesting, and I reject, that local councillors prevented the executives from carrying out the work that they should have rightly carried out.
Lord Williams of Elvel: My Lords, is the noble Earl aware that Mr. Barratt reports at page 5 of the document,
"My unsuccessful attempts to obtain help from some of those who were senior officers involved in the affairs under review give me no confidence that this could be achieved without compulsion of witnesses"?
Information was suppressed. Will the noble Earl give the House an assurance that senior officers involved in this business will be allowed to give proper evidence?
Earl Ferrers: No, my Lords, because it is not the responsibility of government. The noble Lord need not shake his head in despair. He asked me whether the Government will do something and I say that they will not because it is not our responsibility. We do not have the power. There are independent powers to do what is necessary. The auditor has independent powers and he has the information. He has the report and if he considers it appropriate to take action, he will do so.

Police Bill [H.L.]
3.30 p.m.
Read a third time, and passed, and sent to the Commons.

Housing Grants, Construction and Regeneration Bill [H.L.]
Earl Ferrers: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

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Moved, That the House do now again resolve itself into Committee.—(Earl Ferrers.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 101 [Construction contracts]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 125:
Page 58, line 8, at end insert ("and such operations shall be specified in the agreement").
The noble Lord said: At this point we enter a new phase in the Bill which deals with the construction industry and the results of the report. Sir Michael Latham chaired the proceedings with distinction. Construction operations, which will be a matter of some contention as we move through these clauses, should be specified in any contract which is concluded under the specifications of Clause 101, which is an introductory clause. I introduce this amendment to show that there is a great deal of confusion about what a construction operation really is. I do not believe that the industry can properly function unless that confusion is cleared up.
One of the ways in which that can be done is by ensuring that each contract should specify which particular parts of it are covered by the Bill which is before the Committee. That may be a useful addition, and I put the amendment forward without prejudice to discussions which will take place at a later stage in Committee about the nature of such operations. I beg to move.
Lord Howie of Troon: I support my noble friend in this amendment for this simple reason. Clause 101 refers to a construction contract and this part of the Bill deals with such matters. Contracts relate to construction operations which are then defined in Clause 102. Those Members of the Committee who remember the Second Reading will recall that many of us felt that the definition of construction operations in Clause 102 was defective and confusing in the sense that operations which many of us thought, with our long experience in construction, were construction operations were in fact excluded from the part of the Bill included in Clause 102. I wonder whether it might be helpful, as my noble friend has suggested, for the contracts themselves to define those construction operations to which they are intended to refer, rather than for us to fall into the confusion which is apparent in Clause 102. I support my noble friend in this amendment.
Earl Ferrers: As the noble Lord, Lord Williams, said, we are moving into a different area of the Bill. I say at the outset that it is quite a complicated area. I quite see why the noble Lord wishes to make the position as clear as possible. We shall always consider his suggestions carefully.
As I see it, the amendment is designed to assist where a contract covers both construction and non-construction operations. It would require all the elements of work which fall within the construction definition to be
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specified in the contract agreement. That is what the noble Lord, Lord Howie of Troon, would like to see. He would like to see everything written down. The trouble is that when everything is written down, anything that is not written down is considered to be outside the provisions which are written down. So one has to be careful.
I believe that this amendment will be a cause for confusion for this reason. As the Bill is currently drafted, if, for example, a bricklayer was building a wall, he would know that he was entitled to the fair treatment which the Bill provides. But with the noble Lord's amendment in place, if his wall-building was not specifically mentioned as a construction activity under the contract, he would wonder where he stood. Would he still be entitled to these fair contract provisions or would he face a legal battle to establish that his work should have been specified from the outset? I believe that lawyers would have a field day over this. At worst, he could be persecuted, but incorrectly, that the contract document effectively ruled his work outside the Bill. That is something which I do not believe noble Lords would wish to do or we would wish to see happen. Small firms, the self-employed and everyone else engaged in construction work should have clear rights to the measures on adjudication and payment which we are trying to provide here.
At the moment, the activities either fall within the definition of construction operations as specified in Clause 102 or they do not. Although we have tried to draft the Bill so that there are as few grey areas as possible, one is bound to accept that some will remain. That is inevitable and in some ways it is not a bad thing. It would certainly be good practice for contractual parties to get together to make sure that they know which parts of the contract are construction operations in terms of the Act. Of course, they would be quite within their rights to apply the same sort of terms, by agreement, to any work that fell outside the definition. But I do not believe that we can require parties to specify construction activities in their contracts. I understand the reason why the noble Lord has tabled this amendment, but I believe that the context would be best without it because it allows for less doubt and would give fewer problems later on.
Lord Howie of Troon: The Minister's interesting reply does not wholly convince me. I know that the Bill is complicated and detailed but I had not thought that it went into such detail as a single brick and a single bricklayer. In my noble friend's amendment the definition of construction operations is not concerned with a wall but a building, or something of that nature, of which a brick is part. The activities of the bricklayer will be defined in the specification which will be part of the contract as a whole. I do not believe that the Minister has grasped the point.
Lord Monkswell: The Minister referred to bricklaying. There are situations in which bricklaying can be carried on and is effectively excluded from a construction contract under Clause 102. I call in aid the Ideal Home Exhibition, which I believe opened recently.

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I understand that within that exhibition a number of houses have been constructed. When one looks at Clause 102(2)(f) one sees that what is excluded is,
"the making, installation and repair of artistic works, being sculptures, murals and other works which are wholly artistic in nature".
The construction of a whole house in the Ideal Home Exhibition, which can be defined as a temporary structure of an artistic nature, may not be considered to be "construction". This highlights the difficulty we face. I ask the Minister to comment.
Lord Elton: Perhaps I may encourage my noble friend to treat the regulation of the exhibition industry as a wholly distinct issue from the regulation of the construction industry.
Earl Ferrers: The noble Lord, Lord Howie, says he is not convinced by what I said. I always regard it as a matter of regret if I cannot persuade him that what I have said is right. Either one lists everything or one leaves a certain amount to reasonable common sense. The Bill provides in Clause 101(2):
"Where an agreement relates to construction operations and other matters, this Part applies to it only so far as it relates to construction operations".
That can include a whole lot of matters. If one puts in the words suggested by the noble Lord, Lord Williams, one has to specify what those construction operations are. I know that the noble Lord, Lord Howie, would not wish to exclude the bricklayer. My fear is that if those words were put in the bricklayer would be excluded. One would have to specify what construction operations were covered.
I thought that the noble Lord, Lord Monkswell, had had a rush of blood to the head when he said that the Ideal Home Exhibition and the houses built therein could be described as,
"the making, installation and repair of artistic works, being sculptures, murals and other works which are wholly artistic in nature".
Whenever I visit the Ideal Home Exhibition my experience is that wonderful houses are put up. One says that they are exactly what one wants because they are so convenient, cheap, and so on. One does not consider them beautiful objects to be looked at in an artistic manner. I do not believe that the Ideal Home Exhibition comes into it. I hope that I have been able to satisfy the noble Lord, Lord Monkswell, on that point.
I return to the remarks of the noble Lord, Lord Howie. I believe that we must keep the Bill as simple as we can. My fear is that the proposed words would make it more complicated in the result, not the intention.
Lord Williams of Elvel: I believe that in reply to my noble friend Lord Howie, the noble Earl said that in such a contract it would be normal to specify various procedures and operations carried out under the contract. Normally, any good lawyer negotiating such a contract would wish to say what was and what was not covered by the Bill. The specification for an operation of any kind is a complicated business. I agree that we should keep it as simple as possible. Nevertheless, these are complicated matters. I do not believe that it would be
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difficult for a contract to specify, say, in an appendix, that A was covered by the Bill, B was not covered, and so on. That would be agreed between the parties and lawyers concerned. It would make the position absolutely clear. We do not want to write matters into the Bill which make it more complicated. I would have thought that my amendment makes the whole position much clearer for those people engaged in construction activity within or outwith the Act, as it will be.
Earl Ferrers: We are talking about the kinds of matters that may be in construction contracts. Clause 101 says:
"(1) In this Part a 'construction contract' means an agreement for the carrying out of construction operations.
"(2) Where an agreement relates to construction operations and other matters, this Part applies to it only so far as it relates to construction operations".
It is for any two contracting parties to draw up such contracts as they wish. Our concern is to ensure that the minimum is dealt with and that these matters come into use when there is a dispute and the parties concerned have not put anything into their agreement as to how it should be resolved. Where that arises this part of the Bill will come into operation. The noble Lord says that it tells people what to put into their contracts. It does not. The Bill says that this part will operate only if contracts do not specify the equivalent wording.
Lord Williams of Elvel: I do not quite understand the last words of the noble Earl. However, I understand that this part applies only to construction contracts which do this, that and thus. What I am trying to establish—I believe that the noble Earl has gone some way towards it—is that in any contract negotiated between two reasonable parties, as a result of the passage of the Bill there will inevitably be a discussion to decide which bits of the contract are included, given that it may contain something called a construction operation under the Act, as it then will be, and which bits are excluded. Any reasonable lawyer will establish that at the outset. All I say is that it is more helpful if it is put on the face of the Bill. However, having heard the explanation of the noble Earl that that is what the Government want to see but do not want it on the face of the Bill, I am happy to leave the matter for further discussion should that be necessary. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Howie of Troon Lord Howie of Troon moved Amendment No. 126:
Page 58, line 12, after ("Wales") insert (", Northern Ireland").
The noble Lord said: As I understand the Bill, it deals with three major and important matters; namely, adjudication, payment and the right of a contractor to cease work in certain appropriate circumstances. I well understand that those are the Bill's main objectives, but I notice that the Bill does not apply to Northern Ireland. I wonder why, because adjudication, payment and the right to stop work in appropriate circumstances in construction contracts must be as important in Northern Ireland as they are elsewhere in the UK. I am asking the

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Government to explain why Northern Ireland is excluded, because I notice that there is a reference to Northern Ireland in Clause 110(5).
If that clause applies to Northern Ireland, I cannot help but wonder why the rest of this part does not also apply to Northern Ireland. I am reinforced in that by noticing that there is a further reference to Northern Ireland in Clause 143. If my memory serves me right, that refers to Part III. I wonder why it is that those parts of the Bill which apply to the registration of architects apply to Northern Ireland whereas Part II does not.
I notice something further. The scheme which is referred to in Clause 111, to which no doubt we shall be returning from time to time later in our discussions, leans heavily on the Arbitration Bill which is now before another place. I notice that the Arbitration Bill applies to Northern Ireland. So I wonder how it comes about that arbitration applies to Northern Ireland but adjudication does not. Those are questions to which I merely seek an answer. I am not trying to provoke the Government into doing anything that they do not want to do. I hope that will enable me to understand why they want to do the things that they are trying to do. The two amendments which are associated with Amendment No. 126 are consequential upon it. I beg to move.
Viscount Ullswater: My reading of Clause 143 is that by an Order in Council the measures in Part II can be brought in for Northern Ireland. In fact it goes a little further and says that instead of an affirmative resolution, it can be brought in by negative resolution, which I should have thought was probably a good thing in this case.
Earl Ferrers: I may be able to make the noble Lord, Lord Howie of Troon, happy, anyhow on this occasion, by telling him that it is our intention that the benefits of this legislation should apply across the whole of the United Kingdom. That means of course Northern Ireland as well. The inclusion of Northern Ireland will be achieved by means of an Order in Council. That is how these arrangements for Northern Ireland are commonly made.
With reference to the amendment to give a scheme-making power to the Secretary of State for Northern Ireland, that is something which would be contained in the Order in Council. The scheme for Northern Ireland is likely to be substantially the same as that for England and Wales, taking into account the normal adjustments that one makes for Northern Ireland.
The noble Lord referred to arbitration. The Arbitration Bill is largely a Consolidation Bill. No work is needed to adapt it locally because that has already been done. I hope that the noble Lord will feel satisfied that Northern Ireland will be covered properly.
Lord Howie of Troon: I was pleased with the earlier part of the Minister's comments which were reassuring. My feeling of reassurance was somewhat modified when he said that the scheme for Northern Ireland would be similar to the proposed scheme for England
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and Wales. Since the scheme for England and Wales is terrible, as we shall discuss later on, I do not see why we should inflict it upon the Northern Irish as well.
I have just one slight note of dissent. Although it is a consolidation Bill, if the Arbitration Bill can apply directly to Northern Ireland without regulations, why on earth should not the same procedure be followed in this Bill? The confusion which I have been under, and which the Minister has largely dispelled, arises from the exclusion of Northern Ireland from the first clause. That confusion would be dispelled completely if my amendment were accepted. I hope that the Minister will think again and accept it. I know that he is that kind of man.
Earl Ferrers: I do not know what the noble Lord, Lord Howie, is asking me to accept. First, he puts down an amendment to say that Northern Ireland should be included, and then he says that he was greatly reassured by what I said but that he could not understand why on earth we should want to impose such a rotten Bill on Northern Ireland.
Lord Williams of Elvel: Scheme.
Earl Ferrers: All right, scheme. I shall modify that. This, I believe refers mostly to the scheme. The problems about which the noble Lord is concerned are covered, will be covered and will apply to Northern Ireland. As I explained to him, the arbitration matter has already been taken account of and it is not necessary therefore to alter it to apply.
Lord Howie of Troon: As the Minister, with his long experience, knows, I try to agree with what he says whenever possible. In the face of his comments, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Howie of Troon Lord Howie of Troon moved Amendment No. 127:
Page 58, line 15, after ("to") insert ("private sector construction contracts, and").
The noble Lord said: Clause 101(1) refers to:
"the carrying out of construction operations".
That might be construed as meaning all construction operations except where those are excluded under Clause 101. That is a sensible way to construe the Bill. However, Clause 101(5) refers to certain operations under the Crown but not all of them. In parenthesis, I ask why not all of them, although I do not want to press that point.
What is more important is to ask why it is necessary to distinguish between the apparent general terms of subsection (1) and the particular terms of subsection (5). That is why I ask to include the words in Amendment No. 127—to show that this part refers to private construction projects as well as the projects under the Crown. I beg to move.
Lord Williams of Elvel: I support my noble friend in this amendment. It has been represented to me that there is some confusion in Clause 101, and that the amendment proposed by my noble friend will remove that confusion altogether. I imagine that the Government

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mean Clause 101 to apply to private sector contracts as well as to those which are mentioned under subsection (5). Nevertheless, as I say, a number of representative bodies which are concerned in this industry have made approaches to me to say that they are not entirely happy about the wording and that my noble friend's amendment would clarify the matter beyond any shadow of doubt. If the Minister can clarify it beyond any shadow of doubt, then I am sure that my noble friend will be happy.
Lord Berkeley: I support the amendment, but I have one or two questions about it. It is my understanding that this whole part of the Bill is being put forward in response to pressure from the construction industry as a whole. This is the introductory clause, and we have suddenly gone to the particular. There are public sector contracts, private sector contracts, Crown contracts and probably many other types of contract. I wonder whether, in addition to supporting the amendment of the noble Lord, Lord Howie, we should ask the Minister to think again about making it even wider, starting off with all contracts and leaving the exclusions to come under Section 102(2) when we come to it.
4 p.m.
Earl Ferrers: My Lords, I shall try, as the noble Lord, Lord Williams, wishes, to clarify the matter beyond any measure of doubt. The best way for me to do that is to follow the notes that are meant to assist me in trying to explain the Government's position on this rather complicated Bill.
According to my note, the amendment of the noble Lord, Lord Howie, is simply not required. I should not have put that in quite such a rough way. I would say that I expect the noble Lord, after he has heard the considerations put forward and taken account of them, will say that on the whole he agrees with the Government and that his amendment would not be an improvement to the Bill.
The Bill of course applies to private sector contracts. That is the whole purpose of the Bill. The drafting of Clause 101(5) simply reflects the fact that, without a specific inclusion, legislation does not normally bind the Crown. We want to see the Crown so bound. Therefore we have to make sure that it is not excluded but that the Crown is included. That inclusion does not exclude any private sector contracts. I hope that that explanation will satisfy the noble Lord, Lord Berkeley, that all these provisions are to cover all contracts.
Lord Howie of Troon: I am grateful to the Minister for that reply. Like him, I am all in favour of binding the Crown wherever possible. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 101 agreed to.
Clause 102 [Meaning of "construction operations"]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 128:
Page 58, line 47, at beginning insert ("off-shore").
The noble Lord said: In moving this amendment, it may be for the convenience of the Committee if I speak also to Amendments Nos. 130, 131, 132, 133, 134 and 135. We now embark on this rather difficult clause, which is an attempt to define the meaning of "construction operations"—what are and what are not construction operations.
As I said at Second Reading, we have a number of doubts about the definition. We do not believe that the Bill as drafted covers more than about 50 per cent. of what could properly be called the construction industry. Our figure is based on the Department of the Environment's research.
Amendment No. 128 deals with off-shore drilling for, or extraction of, oil or natural gas. I am advised that on-shore drilling should not be excluded from the ambit of the Bill but off-shore drilling should be excluded. Off-shore drilling is a very specialised business. Construction companies undertake certain activities with the construction of platforms or drilling rigs, but, I believe, not nearly so much as in on-shore drilling. There is also a certain amount in off-shore drilling. I am sure that my noble friend Lord Howie will correct me if I am wrong, but it seems to me, that as a minimal inclusion in the Bill, off-shore drilling should be considered as a construction operation.
Amendment No. 130 deals with subsection (2)(c), which starts with the word "construction". I find it very odd that the word "construction" should be put into a subsection which defines something which is not construction. I should have thought that for clarity—indeed, possibly also for substantive purposes—the word "construction" in that line should be removed.
I move on to Amendment No. 131. I am advised that it is extremely difficult to define the meaning of "primary" activity. I simply offer the alternative "sole" activity in this probing amendment. I am trying to find out from the Minister what exactly "primary activity" is intended to mean in the Bill.
With Amendment No. 132 it is quite clear that water and effluent treatment are major activities of the construction industry. The view has been expressed to me that there is no reason whatever why water or effluent treatment should be excluded from the ambit of the Bill. After all, those are activities in which construction companies, in the ordinary meaning of the word, engage on a daily basis. It seems to me and my advisers that it would be proper for water and effluent treatment to come within the ambit of the Bill.
Amendment No. 133 is related to Amendment No. 134 which no doubt will be spoken to by the noble Earl when he comes to reply. As I said at Second Reading, I have great difficulty understanding why construction activities in warehousing—construction activities in the storage particularly of food and drink—should not be included within the ambit of the Bill. That is a matter that I raised at Second Reading and I do not wish to go through the arguments again. I am sure that the Committee understands my arguments.
With regard to Amendment No. 135, I simply cannot understand why construction activity inside a warehouse of food and drink should not be treated as a construction activity for the purposes of this Bill.
No doubt the noble Earl will wish to speak to his Amendment No. 134. I reserve my comments on that. In the meantime, I beg to move.
Viscount Ullswater: I support my noble friend's amendment, Amendment No. 134, in this group. I believe that it helps to clarify the position of Clause 102(2)(c). So far as I can see, in that subsection the important words are "on a site"—this argument will assist the noble Lord, Lord Williams—which identify a process engineering site as opposed to a building site or civil engineering site.
The definition of "construction operations" which appears in the Bill is drawn from the Income and Corporation Taxes Act 1988. The Latham Review Working Group 10 produced a very different draft definition of "construction operations". When that was presented to the Construction Industry Board it was accepted without comment. Amendment No. 139, tabled by the noble Lord, Lord Howie, is much closer to that definition.
However, I believe that the definition in this Bill recognises the divergent views of the process industry and the building and civil engineering industries and their history as regards dispute resolutions. I was impressed by the case put to me by the Process Industry Latham Group. Its industries do not suffer from the litigations and claims-oriented attitude which beset the building and civil engineering industries. It claims that the difference occurs for two good reasons. First, that the process plants are not speculative developments but facilities where products are made. Secondly, the number of clients and contractors are small and it is therefore important that good relations should continue for future business success.
In supporting that evidence, PILG—I notice the noble Lord, Lord Williams of Elvel, grimacing at my use of "PILG" and I understand that—can point to the number of arbitrators, for instance, between 200 and 300 appointed by the RIBA, RICS and the ICE per annum compared with two to three per annum appointed by the Institution of Chemical Engineers.
I would go along with some of the amendments put forward by the noble Lord, Lord Williams, in particular Nos. 128 and 130 because I believe that they add to the clarity of the exclusions. However, as I have indicated, I cannot go along with some of his other amendments, in particular to Clause 102(2)(c), because I believe that the whole point of "on a site" identifies a process engineering site as opposed to a building or civil engineering site. Those are the key words that I put forward for my noble friend's consideration.
Lord Williams of Elvel: The noble Viscount has been kind enough to go along with some of my
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amendments. Does he go along with my arguments about water or effluent treatment? It is an important matter.
Viscount Ullswater: I do not feel so strongly about those matters. Perhaps I may refer to the Government's amendment to the latter part of the subsection. We are talking about the bulk storage of food, probably in steel vats, in the process industry and for that reason I would allow that subsection to remain. I feel less strongly about whether water or effluent treatment is something to do with the process industry. I suspect that it is, however, and therefore I would see the provision left in as part of "on a site".
4.15 p.m.
Lord Howie of Troon: I am reassured by Amendment No. 134 tabled by the noble Earl, Lord Ferrers. It shows that the Government have accepted the fact that the definition of "construction operations" in the Bill is defective. It is much more defective than is admitted in Amendment No. 134 but I do not wish to go into that at the moment. I shall deal with it in my Amendment No. 139.
I intervene as a result of a remark made by the noble Viscount, Lord Ullswater, relating to the process engineering industry. There was much good sense in what he said. I too have had the benefit of meeting members of the Institution of Chemical Engineers to discuss their attitude towards the Bill. My amendment does not exclude the process engineering industry because I want the Minister to explain on the record why it should be excluded.
I can readily understand that certain elements of process engineering are different from the ordinary construction industry. Let us consider, for example, an oil refinery which has a catalytic cracker or something of that nature. The plant itself will be powerfully integrated into the structure and they could be considered as one item. Sometimes they are, sometimes they are not, but I see my noble friend Lord Berkeley shaking his head from side to side in a way which indicates a certain amount of disapproval. I am being as open-minded on the subject as possible.
I can understand that there would be some argument in that respect but perhaps we might consider the following. I have in mind Grangemouth oil refinery, which was specifically mentioned to me by the members of the Institution of Chemical Engineers when I met them recently. It is founded on a large cellular concrete foundation which is wholly and entirely a piece of civil engineering construction. It has nothing whatever to do with process engineering, or processes of any kind. It has a straightforward, ordinary foundation but it is a big piece of civil engineering work. I cannot see how it should be dealt with in a way different from any other civil engineering construction. So long as the foundation is in the right place and the holding-down bolts are in the right place so that the process engineers can put their plant in the right place all will be well. There is no reason at all why the foundation as a contract—it might well be a separate contract and would certainly be a sub-contract—should not be included under construction operations.

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Furthermore, I remember that 30 years ago or more I was involved with civil engineering colleagues in designing the Llandarcy gas works. It was an excellent work and won an RIBA gold medal for its architect, Alex Gordon—the prize went to the architect, not to the engineer. Obviously, that gas works was a piece of process but the building which we built was a shed. It was a lovely, prize-winning shed but it was a shed nevertheless. As a shed it was the same in the construction context as any other kind of shed. The fact that it had a gas works inside made it no different; there might have been something else inside. The fact that it has since been demolished may remove many of my arguments, but the point I am making is that the structure was a civil engineering structure and should therefore be included as a construction operation under the terms of the Bill. I can see no reason why it should be excluded as part of a process plant.
Lord Berkeley: I support the amendments proposed by the noble Lord, Lord Williams of Elvel. Following on from what was said by the noble Lord, Lord Howie, perhaps I may say that I too have worked on process plants as a civil engineer. I see little difference between putting in foundations using holding-down bolts—the noble Lord's may have been wrong and mine may have been right—or putting bridge beams or a cracker on the top or a lot of pipework.
To a large extent, the process people with their separate types of contract have got that side of it pretty well sewn up. But we should think of the civil engineers and the building people and their sub-contractors and suppliers. They need just as much protection when they are working under or around the process plant as when they are working around any other type of building or plant.
I shall speak further to the amendment tabled by the noble Lord, Lord Howie. I believe that it is important to widen the scope as much as we can in order to protect—because that is why we are here—the "small" people such as the sub-contractors and specialist suppliers in the civil engineering and building industry.
Earl Ferrers: I am grateful to the noble Lord, Lord Howie, for saying that he is reassured by Amendment No. 134. I am glad about that and perhaps I may return to it later. This part of Clause 102 covers a very complex subject. Some of the discussion that has taken place outside this Chamber may have resulted from a misunderstanding. I should like to clarify what we are trying to do. However, I accept that the drafting needs some fine-tuning and I tabled Amendment No. 134, which reassured the noble Lord, Lord Howie.
My noble friend Lord Ullswater is right to say that process engineering is totally different from construction. Process engineering is industrial work involving certain types of chemical, physical or biological processes. Examples include refining oil, generating electricity, and making chocolate. This clearly involves a great deal of heavy plant and machinery, with complicated steelwork to hold it all in place. It is only the construction of such plant,
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machinery and steelwork which the Bill excludes. The construction of buildings on the same site would be covered by the Bill.
We are excluding process plant from the legislation because it does not suffer on anything like the same scale from the problems which Sir Michael Latham identified in building and civil engineering. In the process engineering sector, clients, contractors and suppliers have proved themselves capable of finding voluntary solutions to their difficulties. The Process Industry Latham Group has warmly welcomed the intention of this part of Clause 102 and is satisfied that we have covered all the industries where process plant should be excluded from the Bill.
There is little doubt, however, that water and effluent treatment, much food and drink production, and the on-shore extraction of oil and gas are part of a well-understood process engineering sector. I re-emphasise that the exemption here would apply only to work on plant, machinery or steelwork, and not to site work or building. So much of the construction sector's interest in process engineering would be covered by the new provisions.
The noble Lord, Lord Williams, asked why on-shore drilling and off-shore drilling should be different. They are both engineering operations and not construction operations. We must remember that the whole purpose of the Bill is to deal with the construction industry. Therefore, I do not see that there is any difference between the operations, whether they are on-shore or off-shore, if they are engineering operations. If neither is a construction operation, it is right that both should be excluded.
The noble Lord then referred to Clause 102(2)(c) which includes the word "construction". He wishes to exclude the word "primary". The following operations are not construction operations within the meaning of the Bill:
"construction, installation or demolition of plant, machinery or steelwork on a site where the primary activity is nuclear processing, power generation, or water or effluent treatment",
Therefore, we return to the point that those engineering industries have shown themselves quite capable of resolving their problems. The difficulty arises within what one might call loosely the building industry. In that industry, there is a long chain of different organisations. One starts with the person who is the main contractor and the work is then passed down the chain. The chaps at the end may get left out as, indeed, may some of those in the middle. But we are trying to direct our attention to that situation. Large civil engineering projects do not have that problem which is why we have decided to exclude them.
Amendment No. 134 is designed to include in the Bill warehousing and supermarkets but not bulk storage such as oil tanks which are part of an oil refinery. Our previous clause would have excluded buildings used for storage such as food and drink warehouses. Therefore, we have tried to recognise the difficulties which may occur.
Amendment No. 134 would restrict the exemption relating to storage sites so that any bulk storage is exempted. By that I mean things which are not held in

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separate packages or bottles such as may be found in supermarkets. That will bring warehousing fully within the scope of the provisions of the Bill and will go some way towards satisfying the intention behind the amendments proposed by the noble Lord, Lord Williams, or at least I hope that that will be so.
Lord Howie of Troon: I should like to return briefly to the question of process engineering. The Minister will be aware that quite frequently, where an oil refinery is alongside the coast, the tankers come along to a jetty made of tiling and with a structural steel superstructure. On top of the jetty there is equipment that transfers the oil from the tanker into pipes and hence into the nearby refinery.
Process engineers would regard the refinery and the pipes and machinery as their business. But, from my conversations with the Institution of Chemical Engineers, I find that chemical engineers would regard the jetty itself as a part of civil engineering construction; and so it is. I designed several in the old days and as far as I know they are still standing.
The jetty which supports the plant is exactly analogous with the oil refinery foundations I mentioned earlier. If the process engineers are perfectly happy—and they tell me they are—to exclude the civil engineering component of the jetty, I cannot see why they demur when it comes to consideration of the civil engineering element in the foundation.
Earl Ferrers: I am on dodgy ground—I use common parlance—in dealing with the noble Lord, Lord Howie of Troon, who has constructed jetties. I am delighted to hear that they still exist. He has a natural understanding of the matter. As I understand the position, if the construction was taking place off-shore, that is part of a civil engineering process and would not be covered by the Bill. Of course, the construction of the jetty would be covered because I think I am right in saying that that is regarded as a construction. But, in this case, the jetty has been built and therefore you are referring to the pipework which is supported by the jetty.
I shall take note of what the noble Lord, Lord Howie, said and consider it in full. Obviously, he has a great deal of knowledge. We do not wish to impose a lot of regulation on a part of the industry which has shown over time that it can manage its affairs quite well. We wish to contain the regulation to one part of the building industry. There will inevitably be overlaps but we must try to make sure that as far as possible the overlaps are kept to a minimum. I shall certainly consider the points which the noble Lord raised.
4.30 p.m.
Lord Berkeley: I thank the Minister for agreeing to look again at these matters. Following on from the remarks of the noble Lord, Lord Howie, I believe that it may be convenient for us to consider Amendment No. 131. Steelwork can cover a multitude of sins. A jetty may be made of steel or concrete; it could have pipes on it which are also made of steel; the cables which go down to the jetty may also be made of steel;
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and there may be steel fenders. Moreover, it may or may not be in the sea. Supermarkets are quite often built with steelwork. It would be helpful if the noble Earl could look again at the definition without, as he said, going into too much detail.
Earl Ferrers: I shall be happy to look again at the matter. However, I believe that the noble Lord, Lord Berkeley, may be under a slight misapprehension. Paragraph (c) of subsection (2) of the clause refers to anything which deals with,
"nuclear processing [or] power generation".
That is where the steelwork comes in—only when referring to nuclear processing, power generation,
"or water or effluent treatment".
Of course it comes in elsewhere; for example, in building. Where it does so, it will be covered by the Bill. But where it is involved in nuclear power stations it is excluded.
Lord Monkswell: The Minister puts his finger on the nub of the problem. He says that the exclusion refers to the nuclear processing or the power generation, which I believe we would accept. The difficulty is that the wording of the Bill refers to a site where such activity is taking place. It does not refer to the nuclear generation or the power generation; it talks about a site where such work goes on. Therefore, the wording of the Bill actually widens the sphere of exclusion rather than narrowing it.
By the use of those words, the Minister has highlighted a difficulty which presents itself to us. I accept that the noble Earl recognises the strength of the argument put forward by the noble Lord, Lord Howie of Troon. Perhaps the odd remarks that I have just made will help to clarify and highlight the difficulties with which we are faced.
Viscount Ullswater: I have a point to make before my noble friend the Minister replies. I am led to believe by the conversations I have had with the Institution of Chemical Engineers that the word "steelwork" can indeed involve the bulk storage of food and drink in the food processing industry. Therefore, it is not just the steelwork which might be the frame of a building; indeed, it is actually steelwork which is used within the manufacture of those bulk vessels. We should also understand that that can be construed in the word "steelwork".
Lord Monkswell: I believe that we are entering into a most important area. We can think in terms of steelwork forming the frame of a building and that providing a support structure for the process plant within it, or one can think in terms of the steelwork which does not form the frame of a building but which is part of the process plant itself. The difficulty is where to draw the line. It is not clear from the way that the Bill is currently worded where the line that I suspect the Government and the rest of us would agree on should be drawn.
Earl Ferrers: I have tried to make it as clear as I can. If I may say so, I believe that we are talking about two totally different concepts. The noble Lord,

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Lord Monkswell, referred to construction, and so on, in paragraph (c) and the installation, demolition and steelwork on a nuclear site. That is excluded. A nuclear site, and whatever goes on there, is excluded from the legislation because it is a specialised area and those concerned have not found trouble in that respect.
I see that the noble Lord, Lord Monkswell, is frowning. However, I am trying to say that much of the process engineering activity like building reservoirs and large nuclear stations, and so on, is not supposed to be covered by the Bill. It has operated perfectly well and the participants in that industry do not want this to operate. However, the participants in the construction industry do want it because they do not get paid properly.
Therefore, with regard to the noble Lord, Lord Monkswell, and his nuclear site, as I said, that is excluded. As regards my noble friend Lord Ullswater and his vats, they are excluded by virtue of the amendment that I am now proposing to the Committee. It would exclude from the provisions of the Bill large warehouses for vats and so on—for example, vats of, say, olive oil, if one can have such things. However, it would not exclude Sainsbury's and Tesco which have what one might describe as warehouses containing bottles of olive oil. It is the large warehouses which will be excluded but the supermarkets, inasmuch as they may be considered to be warehouses, would not be excluded.
Lord Monkswell: I am sorry to press the Minister, but I believe it would be useful to try to clarify the matter. The noble Earl referred to a nuclear site and said that there were no problems. The industry was quite happy with the way things operate. However, when the Minister refers to a "nuclear site", I wonder whether he means the nuclear vessels and the process pipework that goes into such a site. Alternatively, is he including the whole site which may include the perimeter wall or fence or the gatehouse at the entrance to the site which are obviously just normal construction activities, if I may put it that way? Where is the border line? That is the difficulty.
Earl Ferrers: I believe that I now understand the noble Lord's concern rather more than I did before. I should like to consider the points that he made and write to him. My understanding is that if you are demolishing a whole nuclear site, the whole lot would be excluded and that if you are building a whole new nuclear site, including a gate and a manager's house, then that would also be excluded. However, if you had a site that was already constructed and you wanted to give the manager a jazzed up house and you built it on that site, I believe that the building would be included within the Bill. I believe that we have taken the matter as far as we can at present. I shall certainly consider the points that have been raised and, indeed, will write to the noble Lords, Lord Monkswell and Lord Howie, specifically.
Lord Howie of Troon: I have no wish to persecute the Minister or, indeed, to prolong the debate much further. However, I am intrigued by the references to nuclear power stations. I fear that I must again draw
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on my own personal experience. I was one of the designers of the pre-stressed concrete pressure vessel for Wylfa nuclear power station which was constructed by Taylor Woodrow, a very well-known civil engineering company, not a process engineering company or anything of that sort. The pressure vessel was constructed by civil engineers, not by process engineers. It was designed by them and built under the standard conditions of contract of the Institution of Civil Engineers. I forget which edition it was; it was probably the second or the third. It was quite a while ago. The exclusion of nuclear activities from construction seems to me odd at best, possibly even perverse.
Earl Ferrers: One of the advantages of such a Committee stage is that it draws out of noble Lords the most astonishing abilities. I did not know that the noble Lord, Lord Howie of Troon, had ever been able to design a pre-stressed concrete pressure vessel. If my mind wafted away while the noble Lord was speaking, it was because I tried to get that linguistic knot right; namely, that it was a pre-stressed concrete pressure vessel.
Lord Howie of Troon: I did not do it all!
Earl Ferrers: Now the noble Lord spoils it. I thought that he had done it all on his own. In any event, he is a very clever fellow to have done even a little of it, even if he just put the lid on.
I have no doubt that that work was carried out successfully, with no trouble and no hassle, as they say. I do not think the noble Lord would have liked all the fandango in this Bill to have applied to that pressure vessel which he was trying to construct. We are not trying to aim the Bill at things like that; we are trying to aim it at the construction industry, where they have had the problems which the noble Lord, Lord Howie, did not have in the case to which he referred.
Lord Williams of Elvel: This has been a long debate and no doubt there will be other long debates on this matter. As the Minister now appreciates, the drafting of Clause 102, and in particular of subsection (2), gives rise to all sorts of complexities. In particular, I am not entirely happy with the Minister's response with regard to my point about "off-shore" versus "on-shore" but we will certainly consider it.
My noble friend Lord Monkswell drew out the point about "primary activity" versus "sole activity". Indeed, that is the point that was at issue when we were discussing whether something was properly described as a nuclear power station or as what the Minister referred to as a jazzed-up house for a manager. I am advised that the word "primary" in Clause 102(2)(c) will give rise to great dispute and earn a lot of fees for lawyers.
With regard to warehousing, I am happy to accept the noble Earl's amendment, which goes a long way towards satisfying what we were aiming at and would deal with Amendment No. 135 as well.
I have no doubt that when we deal with Amendment No. 139 to be moved by my noble friend Lord Howie of Troon there will be further discussions on this matter. In the meantime, I beg leave to withdraw the Amendment.

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Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 129:
Page 59, line 2, leave out ("or construction of underground works").
The noble Lord said: This amendment covers a slightly different point but is also concerned with exclusions under subsection (2) of Clause 102. We have taken advice on this and it seems to us that construction of underground works is properly a matter for the construction industry and is performed by what would normally be called construction companies even though the works may be underground. For that reason, I would have thought that construction of underground works should be within the ambit of the Bill. I need say no more at this stage because I am sure the Minister understands what I am getting at, but I should be grateful for this amendment to be given proper consideration. I beg to move.
Lord Ezra: Perhaps I could intervene on this point, having had quite a lot of experience of underground works in my time. Something which slightly worried me when we were dealing with the previous block of amendments was that contracts let by the National Coal Board for major projects were clearly divided between civil work, electrical work, mechanical work and mining work, and it is difficult therefore to accept the concept that some of these major projects should exclude one or other of these activities. With regard to the specific amendment which the noble Lord, Lord Williams of Elvel, has moved, it is clearly in my recollection that this type of work was carried out by civil engineering contractors.
4.45 p.m.
Lord Howie of Troon: Before the noble Lord, Lord Ezra, was in charge of the National Coal Board, the board decided to build six coal-mines in Britain in the 1950s. It turned out that there was no one in Britain who had ever designed or constructed a coal-mine at that time. The board therefore appointed six civil consulting engineers to design and construct certain parts of these coal-mines. There were obviously surface works, railways works and road works. In addition, the consulting civil engineers designed the mine shafts. Mining engineers designed the horizontal works—roads and so on—which were the mine proper, but the vertical shafts, which were very deep—2,300 feet in one case, I remember—were construction works and were bored, dug, excavated and lined by civil engineering contractors. Therefore there was a strong element of underground work connected with the coal industry—in the days when we had one—which was construction work and which should be included in this Bill rather than excluded. I support this amendment.
Earl Ferrers: The noble Lord, Lord Williams of Elvel, and I share a common approach to these matters. This part of the Bill and his amendment seemed to me to be perfectly reasonable and I asked similar questions to those which the noble Lord has asked me. The noble Lord, Lord Ezra, told us of his extensive experience at the National Coal Board and what happened there. I was
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surprised that the noble Lord, Lord Howie, knew about coal-mining. I expect he will tell us before long that he designed and constructed a coal-mine, too!
Lord Howie of Troon: I was too modest to make that claim.
Earl Ferrers: Modesty has always been one of the features of the noble Lord. Clause 102(2)(b) excludes the extraction of minerals, tunnelling or boring, or construction of underground works for that purpose. That excludes from the provisions of the Bill coal-mining operations and so forth. "Underground works" would not apply to projects similar to the Jubilee Line extension, because that is not excluded, but minerals and coal are excluded.
Lord Howie of Troon: There is no point in the Minister's merely repeating what is said in the Bill. We are trying to persuade him, as elegantly as we can, that the Bill is mistaken on this point. The point made by both the noble Lord, Lord Ezra, and myself is that a coal-mine is undoubtedly for the extraction of minerals but, in order to construct a coal-mine, certain operations are required which are undoubtedly construction operations because they are carried out by civil consulting engineers and civil contracting companies. Therefore, to exclude them, whatever is said in the Bill, is merely mistaken.
Lord Berkeley: I am not sure that the fact that the works are undertaken by consulting engineers or anybody else is particularly important to the argument, but I certainly support what the noble Lord, Lord Howie, has said. I should like to refer to something I mentioned in the Second Reading debate on this Bill. In the construction of a motorway, if an area of gravel has to be removed before an embankment is put on top, because that gravel is used for a purpose such as mixing concrete, it is technically classed as a mineral. If this exclusion stands, I assume this particular operation would 'be excluded from the Bill, which seems rather odd.
I also believe—although I stand to be corrected—that much of the excavation from the Channel Tunnel was mineral by definition because it was deposited in the sea and Eurotunnel had to get a licence from the Crown Estates to deposit it. I believe it had to pay something like £1 per cubic metre for the pleasure of leaving it where it should be—in the sea. I am not suggesting that the Channel Tunnel should have been excluded from this measure but, as regards minerals and motorways, this question will arise again and again. I hope that the noble Earl will be able to look at this again.
Earl Ferrers: As I said when we first started to discuss this clause, it is complicated and there are bound to be cases that we need to consider. I am happy to consider this. What I had not realised was that both the noble Lords, Lord Howie and Lord Ezra, were—according to the noble Lord, Lord Howie—wanting to impose upon the mining industry the provisions in this Bill which relate to the building industry. I was surprised when the noble Lord said that because I thought that they did not want that. Indeed, those involved in the majority of these large engineering processes do not want this part of the Bill

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applied to them. I shall give way to the noble Lord in half a minute. If the noble Lord thinks that they do want this measure, I shall certainly consider the matter. With regard to the point made by the noble Lord, Lord Berkeley, if one is dealing with mineral extraction, that is excluded from the Bill. If one is using the products of extraction, that is not excluded from the Bill if they are used for the purposes which the Bill seeks to cover.
Lord Berkeley: Without wishing to detain the Committee too long, would that mean that if the gravel extracted from under a motorway was sold to someone else it would be excluded from the provision but if it was used for the contract itself it would be included? That is another question.
Earl Ferrers: This is a fascinating series of questions. If I may, I shall take advice on that matter because we are getting into detail here. I would say, without giving any guarantee that I am right, that I should not have thought that if one is removing a piece of gravel from a roadway, that is regarded as mineral extraction. I should have thought it was a normal building process of removing that which was there. That is rather different to digging into a gravel pit. However, I shall consider this matter.
Lord Howie of Troon: I do not wish to impose anything of any sort on the Coal Board, or on almost anyone else come to that. I would merely remind the Minister that when the six coal-mines were constructed—I do not think one builds them; they are constructed in some way—the Coal Board was perfectly happy that they should be constructed under the normal conditions of contract which prevail in the construction industry. I am sure that if it was happy then, the Coal Board would still be happy now.
Earl Ferrers: At last the noble Lord and I are at one. He says that the organisation does not want this provision. We do not want this imposed on it, or upon any organisation if it provides its own contracts. In the experience of the noble Lord, Lord Howie, and the Coal Board, it made the arrangements and its own contracts and was quite happy. That is fine; that is exactly what we want. We only want this measure to apply in certain parts of the building industry where people have not made such provisions.
Lord Williams of Elvel: I am sure that the noble Earl has understood that this is a matter of considerable controversy. The noble Lord, Lord Ezra, has made his contribution, my noble friend Lord Howie has made his contribution and my noble friend Lord Berkeley has made his contribution. The whole question of what is extraction of minerals and what is construction of underground works for that purpose needs to be looked at again. I hope very much that the noble Earl will look at it again. The noble Earl and I agree that we are at the moment probing the meaning of what the Government are putting forward. I believe that the meaning of paragraph (b) is, to put it at its best, far from clear. It seems to me that my amendment is something that
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the Government really should take fairly seriously. However, I do not wish to prolong the debate because we shall come to a further debate on this whole question of Clause 102. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 130 to 133 not moved.]
Earl Ferrers Earl Ferrers moved Amendment No. 134:
Page 59, line 8, leave out ("storage") and insert ("bulk storage (other than warehousing)").
The noble Earl said: I spoke to this amendment with an earlier grouping of amendments. I beg to move.
On Question, amendment agreed to.
[Amendment No. 135 not moved.]
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 136:
Page 59, line 12, at end insert ("unless undertaken by the contractor").
The noble Lord said: I am advised—again I have to rely on advice—that there are many occasions on which the delivery of manufactured building or engineering components is carried out by the contractor. It therefore would seem there is a difficult dividing line between what is manufacture—which clearly is not construction—and what is construction. Again we are in a grey area. As I say, I can only take the advice that I have been given that there are many occasions on which contractors get involved also in the manufacture of small components. This paragraph (d) is unsatisfactory as it stands. I beg to move.
Earl Ferrers: The noble Lord refers in this amendment to a number of quite difficult matters. I believe that one of them would include the elements of the so-called "supply and fit" contracts and whether they would be incorporated in part of this legislation. We are sympathetic to the position of contractors who supply things and who then fit them. However, there are difficult problems in this area. I am bound to tell the Committee that it has been far from straightforward to produce a definition of the construction industry for the purposes of this Bill because it involves so many facets. Many different operations go to make a finished building and not all can be regarded as construction activities. Some, such as painting or welding, for example, are just as much part of other industries. What we have to try to avoid is drawing in work in areas which have nothing to do with construction.
What we want to do is to exclude manufacturing as such. The person who makes a hopper or a conveyor belt manufacturers those products. He ought not to be included in this Bill. Contracts solely for the sale and supply of goods are already subject to very different contractual arrangements and are covered by well-established legislation. I hope that few would argue that, where 95 per cent. of the value of a contract was in the manufacture and supply of a product, with just 5 per cent. in its instalment, it

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would be right to consider this as a construction contract. But the difficulty is where one draws the line. In extending these construction provisions to supply and fit contracts, we would start to cover a great deal of manufacturing activity.
Many specialist contractors are unmoved by such considerations, but there is one point that they might well consider. At the moment they are being paid to supply and fit items such as windows, boilers and air ducts, but what if we changed tack to include manufacturing and supply? If these elements were drawn in by the work of instalment, it seems likely that unscrupulous contractors would try to split them apart. They could buy the product from one firm and then get another to come and fit it. Such avoidance would be easy. I do not believe that that would do much good to anyone.
If a contractor was not using the manufacturer to install a piece of kit on site, with all the obvious advantages which this entails, there would be little incentive for him to look locally for its manufacture. He could fax his specifications abroad and just use the man down the road to fit the final product in place. I believe that that would be a recipe for import penetration.
I would hope that we would be able to use a degree of understanding about this. These matters are inevitably grey areas. We do not want to draw into them unnecessarily those who should not be drawn in.
5 p.m.
Lord Berkeley: We covered some of this issue on the Second Reading debate. I support the amendment. I give the example of a precast concrete beam on a building or a bridge. At present, the manufacturer of that beam is included in the provisions of the Bill if it is manufactured on the site and excluded if it is manufactured off the site. It is more efficient on most occasions to make these components off the site. The contractor may well choose to do it himself; he may well choose to buy it in. To some extent even Amendment No. 136 does not quite cover this point.
Perhaps I may put forward another idea: to exclude from the terms of the Bill the manufacturer of equipment which is not specific to the contract under discussion. If it is specific to the contract, I believe that it should be included.
Lord Howie of Troon: Perhaps I may help the Minister. These are complicated matters. We seek to clarify them for the noble Earl in the hope that the Bill will eventually be understood by the remainder of us. We are not doing too well so far.
Perhaps I may refer to the Waterloo International terminal—Waterloo Railway Station, as I prefer to call it; it is not too far away. Let us for a moment call it a piece of architecture and get away from construction, and so on. The train shed is steel, made in a factory somewhere, brought on to the site and assembled. The architect was Nicholas Grimshaw and the engineer was Tony Hunt. That component seems to be excluded from the Bill. However, the undercroft to that station—it is
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very large—is mainly massed concrete designed by Alexander Gibb. I cannot remember the contractor although he is important. That part of the railway station would be included in the Bill.
On the other hand, certain elements in the undercroft are precast concrete pieces. My noble friend Lord Berkeley mentioned earlier that those would be manufactured somewhere and brought on to the site. We have a needless complication. We have reinforced concrete and prestressed concrete—elements which are brought on to the site and excluded from the Bill. We have structural steel elements, and glass, which are brought on to the site and excluded from the Bill. But a large part of that structure is included in the Bill.
I know that the Minister will reply that the client can come to any contractual arrangements that he likes. That is quite correct. But this series of exclusions complicates matters quite needlessly. It would be much more sensible if the station, or any similar construction, were to be regarded purely as a piece of architecture, and dealt with in one contractual package.
This would greatly simplify the worries that I see the Minister has. His brow has been furrowed for two hours now; and I dare say that it will be furrowed further. However, I hope that he agrees with the amendment that we put forward as mildly and patiently as we cans.
Lord Berkeley: As regards Waterloo Station, on page 59 of the Bill line 21 excludes security systems. Those are a massive part of Waterloo Station. I believe that security systems and the like are one of the biggest causes of delay in construction. I am worried to see such things excluded from such a contract.
Earl Ferrers: I am sorry if I gave the appearance to the noble Lord, Lord Howie, that my brow was furrowed. Whenever he speaks the furrows go. It is a moment of charm and happiness when I hear the noble Lord speak. He is now a great authority on Waterloo Station. Perhaps we shall find that he designed the hinges for the front door.
We seek to achieve a simple aim: to make sure that the payments of the construction industry are correctly applied. That is what the Bill is about. We then discuss these vast, grandiose schemes such as mining, nuclear constructions, Waterloo, and so forth, and those muddy what we seek to do in the Bill.
The noble Lord, Lord Berkeley, said that if you build a concrete component on the site you are covered by the Bill; and if you build it off the site, you are not covered. He is quite right. There is good reason for that. One does not want to cover people who manufacture things—air ducts, ventilators, or, for instance, bricks or concrete boxes. Those are brought on to the site. We want to cover only those who would deal on the site.
The noble Lord, Lord Howie, said that the steel work, glass and concrete lumps (if lumps were brought on) in Waterloo Station were constructed elsewhere and would not be covered by the Bill. That is perfectly true, because they were constructed perhaps 100 miles away. What matters is what occurs on the site.

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I shall look at the points made by the noble Lords. This is not a simple area. I have never conceded that it is. But we have to be careful that we do not spread the Bill far too wide. We must allow those people who manufacture to do so in the way that they can. When the item comes on to the site, if the manufacturer's job is to fix a thing down, that should be part of the manufacturing, and does not come into the construction part. It is merely the fitting in of a part manufactured elsewhere.
I doubt whether I have been able to satisfy the noble Lord, Lord Howie. I sometimes do not find him too easy to persuade when he has an idea. But I shall consider what he said to see if we can go further.
Lord Swinfen: Can my noble friend tell me whether it makes a difference if the component is manufactured by the contractor or by someone else? A reinforced concrete beam could be manufactured either on site by the contractor or in the contractor's own workshops several miles away and brought to the site. The manufacturer and contractor at that point are the same person. That may not be so as regards other components.
Earl Ferrers: I think that I am right to say—I shall need to consider it—that where a piece of material is manufactured by someone else and brought into the site, that is not covered by the Bill. But I would think that the situation where a person who is a party to the contract manufactures his own component and brings it on to the site was covered. However, that is a point of complexity. I should like to take advice on it before I give a totally reassuring reply.
Lord Williams of Elvel: With great respect to the noble Earl, I do not think that that situation is covered in the Bill as drafted. It would be covered by the amendment that I propose. If the noble Earl accepts the amendment that I propose, or some equivalent wording, I am happy to rely on the Minister to produce appropriate wording. If what the noble Earl has just announced is his intention, I hope that he will accept the amendment.
Earl Ferrers: When one is presented with a curious position at a moment's notice, as it were, it is not always easy to give the right answer. I should like to consider the matter. The noble Lord, Lord Williams, would consider it if he were in my position. If I give a wrong answer, he jumps down my throat. If I say that I wish to give a right answer he jumps down my throat for saying that too. I shall consider the matter and give a correct answer if I have given an incorrect answer. I hope that I have not done so, but I may have done.
Lord Williams of Elvel: I am sure the Committee will be very interested in the correct answer when it finally comes out. I am convinced that if the noble Earl accepted the arguments, which he seemed to be accepting, towards the end of the remarks of his noble friend Lord Swinfen and of my noble friends Lord Howie and Lord Berkeley, my amendment would stand as it is.
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Nevertheless, the noble Earl will no doubt give me and the Committee the correct answer in due course. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 137:
Page 59, leave out lines 18 to 22.
The noble Lord said: A few moments ago my noble friend Lord Berkeley raised the question of the installation of security systems, including burglar alarms. I raise the question of,
"signwriting and erecting, installing and repairing signboards and advertisements…the installation of seating, blinds and shutters…the installation of security systems, including burglar alarms, closed circuit television and public address systems",
all of which seem to us to be construction activities carried out by construction companies. I cannot for the life of me see why the Government have excluded these activities by means of paragraphs (g), (h) and (i) in the Bill. I am advised by people who know much better than I do that all are activities which should be within the ambit of the Bill. I beg to move.
Viscount Ullswater: I am attracted to the amendment moved by the noble Lord. Until I have heard what my noble friend might have to say to convince me, I cannot see that these particular operations should be excluded from "construction operations". I tried to make clear in my previous remarks the difference in respect of, as it were, the process industry in the building and civil engineering industries, which is respected in the Bill; and Clause 102(2) attempts to achieve that balance. We have had long discussions as to whether it succeeds. I am not persuaded at present that the exclusions in paragraphs (g), (h) and (i) have any connection at all to the sort of balance to which I referred.
I mentioned the definition of the Bill given by the Latham Review Working Group 10. These forms of operations fall within the definition of construction operations under that definition. I know that we are not importing that definition, although I think the noble Lord, Lord Howie of Troon, will seek to persuade the Committee that that is what we should be doing. Having said that the working group accepts these items as being part of construction operations, I hope that my noble friend will at least consider this amendment. I believe it to be quite proper.
Earl Ferrers: As I have explained on more than one occasion, this has not been an easy Bill to draft. This particular clause has not been easy, because it would either include too many people or exclude those who should be included. We have put this Bill forward as our considered thoughts as to the way ahead. Being a good, listening, caring Government, we listened to what people said to us before the Bill took shape and to what has been said during its passage. I have already proposed Amendment No. 134, which the Committee was good enough to accept, to make sure that work on warehousing is fully covered. It may well be that some of the exclusions that were appropriate when we originally drew up the list might not he appropriate when it comes to dealing with contractual relationships.

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I am still far from convinced that the work of signwriters and signboard specialists should be included in these provisions. But as to the installation of seating, blinds and shutters, and also of security systems, sufficient doubts have been raised. I was sorry that the noble Lord, Lord Williams, laughed when I said that we were a listening, caring Government. The noble Lord made a speech, I listened to it and I am prepared to consider it. I will consider these matters: they are important, and we are not convinced that we have got them right. If the noble Lord will withdraw his amendment, I will certainly see that they are considered, I hope before the next stage of the Bill.
Lord Williams of Elvel: I am most grateful to the noble Earl, who has now changed from being King Lear to being a listening, caring government Minister. We are very grateful for that. I very much hope that he will listen not only to my arguments but to those of his noble friend Lord Ullswater. Coming, as they do, from his own Benches, they may be equally persuasive as the arguments coming from this Dispatch Box. They make sense.
Earl Ferrers: The noble Lord should not try to drive the screw in too far. Of course I listened to my noble friend with deep interest.
Lord Williams of Elvel: I shall drive in any screw or knife that I have as far as I wish. However, I am grateful to the noble Earl. On that understanding, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.15 p.m.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 138:
Page 59, line 34, at end insert—
("() Any order made under subsection (4) is subject to approval by resolution of each House of Parliament.").
The noble Lord said: This amendment responds to a concern expressed by the Delegated Powers Scrutiny Committee of this House. The committee called attention to the Secretary of State's powers to amend the primary legislation under Clause 102 simply by negative procedure.
It is our belief, a belief reinforced by discussions we have had, that because these definitions lead us into all sorts of grey areas, if the Government (any government) wish to change the definitions and exclusions in Clause 102 it should be for them to come forward and make a case before both Houses of Parliament. It is not enough simply to have a negative resolution amending primary legislation in an important matter such as this.
The Committee will he aware of the report of the Delegated Powers Scrutiny Committee. I do not wish to elaborate on that. It will be aware of the large print in that report drawing attention to this point. I believe that the committee is right, and that the amendment I have tabled would satisfy those concerns. I hope it satisfies the Committee. I beg to move.
Earl Ferrers: We must make sure that contract legislation can move in step with the way industry goes. It has to take account of new developments.
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Most of the changes that we are likely to make will be very small and detailed. However, I entirely agree with the noble Lord, Lord Williams. The modification of primary legislation is something that we should take very seriously indeed. The noble Lord made a good case for suggesting that this provision should be subject to affirmative resolution. I am not sure that his wording is quite right. However, if he will withdraw his amendment at this stage, I will see that an appropriate amendment is brought forward at a later stage.
Lord Williams of Elvel: I am most grateful to the noble Earl. On that understanding I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Howie of Troon Lord Howie of Troon moved Amendment No. 139:
Leave out Clause 102 and insert the following new Clause—
MEANING OF "CONSTRUCTION OPERATIONS"
(".—(1) For this Part "construction operations" means, subject to subsection (2), operations of any of the following descriptions—

(a) construction, conversion, alterations, repair, extension, fitting out, maintenance, restoration, demolition or dismantling of buildings or structures or works above or below ground, including certain off-shore installations (whether permanent or not);

(b) preparation for intended buildings or structures, including but not limited to site clearance, earth moving, exploration, investigation and excavation, tunnelling and boring, erection of scaffolding, site restoration, dredging, landscaping provisions of roadways and other access works, and laying or installing the foundations of buildings, structures or other works, including the provision of temporary services;

(c) construction, alteration, conversion, extension, demolition or dismantling of any works forming, or to form, part of the land, including walls, roadworks, power lines, telecommunications operations, aircraft runways, docks and harbours, bridges, tunnels, railways, inland waterways, pipelines, drains and reservoirs, water mains, wells, sewers, process plant, industrial plant and installations for the purpose of land drainage, flood control, coastal protection and defence and including light houses, whether on-shore or off-shore;

(d) installation, conversion, alteration, repair, extension, restoration, demolition, dismantling or maintenance in or on any building or structure, or works of systems or components of systems, including but not limited to control systems, heating, lighting, air, hydraulics, drainage, sanitation, water supply and distribution, fire protection and alarms, security systems, intruder alarms, closed circuit television, public address systems, lifts, escalators and elevators;

(e) painting or decorating, repair, redecorating, cleaning and other maintenance or finishing including water proofing or application of internal or external finishes.

(2) The following operations are not construction operations within the meaning of this Part—

(a) off-shore drilling for, or extraction of, oil or natural gas;

(b) extraction (whether by underground or surface working) of minerals except insofar as this is borrow pit working for spoil for construction works;

(c) making and repair of artistic works being sculpture, murals and other works which are wholly artistic in nature.

(3) References in this Part to construction operations shall be taken as including—

(a) the work of individuals participating in the carrying out of such operations, and

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(b) the professional work of all consultants in relation to such operations, including but not limited to the management of such operations, and the preparation of designs, plans, drawings, specifications, reports, feasibility studies and surveys.

(4) The Secretary of State may by order made by statutory instrument add to, amend or repeal any of the provisions of subsections (1), (2) or (3) above, as to the operations and work to be treated as construction operations for the purposes of this Part and any such order shall be subject to approval by resolution of each House of parliament.").
The noble Lord said: This very large amendment seeks to leave out Clause 102 and insert a new and better clause.
I have followed the general shape of the clause as drafted in the Bill, but I have changed the contents to some extent, largely by transferring some of the present exclusions in subsection (2) of the existing clause to the inclusions subsection. I did so having taken the advice of the Institution of Civil Engineers, the Contractors Liaison Group, the Construction Industry Council, the Federation of Civil Engineering Contractors—which agreed with me, but had slight, modest reservations—and sundry other bodies that I shall not list.
None of the people to whom I have spoken in the past week or so believe that the clause is satisfactory as it stands. As I said earlier, I have not excluded the process construction engineers; I have an open mind about them and I listened carefully to the comments of the noble Viscount, Lord Ullswater, in that regard. I wanted the Minister to put on record his reasons for excluding them and he has done so, so I shall not repeat them now.
As I understand it, from my recollection of what the noble Lord, Lord Lucas, said at Second Reading, Clause 102 is based on a definition in the Income and Corporation Taxes Act 1988. I looked at the Act and found it to be enormous, but I am glad to say that the clause itself is only small. The Latham Review Working Group 10 also looked at that definition and came up with a definition broadly based on it, but rather more inclusive than the Government's definition. It is interesting that the WG10 definition is much nearer to mine than it is to the Government's—that is because I largely based it on WG10's work with modifications which were brought to me from elsewhere.
There are many projects which involve large numbers of contracts and subcontracts. It is right to legislate for payments, methods of adjudication and so forth. Where there are a large number of contracts and subcontracts it makes sense that they are all based on the same presumptions and general rules. The exclusions therefore should be kept to a minimum. The Committee will see from my amendment that I have reduced them as far as I reasonably could.
I do not intend to go through this large amendment in any detail. However, under paragraph (a) I included offshore installations, which the Government did not include. By that I mean constructions such as lighthouses, breakwaters and the kind of jetties that I mentioned earlier, none of which are mentioned in the Bill and all of which are important.
As the Committee goes through the amendment it will be apparent that I tried to identify as many obvious operations as I could. I know that there is a danger of
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including too much and causing lawyers a certain amount of joy. But the Government included a fair number and I have merely added a few more. At this stage I want to make just two points. The noble Lord, Lord Berkeley, will be pleased to note that in subsection (2)(b) I amended the part concerning extraction to say,
"except insofar as this is borrow pit working".
The noble Lord's point is a good one and I am sure that the Government will take it on board.
The last minor point I want to make is this. I notice with a little surprise that the Bill, in subsection (3)(b), speaks of,
"the professional work of—

(i) architects or surveyors, or

(ii) consultants in building, engineering, interior or exterior decoration or in the laying-out of landscape".

That was taken from the income tax Act I mentioned earlier. But, oddly enough, in that Act those groups of professionals are not split into two—there is no reason why they should he because they are all doing construction work. I covered that in a rather different way in subsection (3)(b) of my amendment.
I do not want to take up any more time on this because the major points of the new clause were discussed and debated in the amendments we have been considering for the past hour or so. It is a much simpler matter than the Government seem to think. They could have solved a lot of their problems if they had taken up the sixth edition of the Institution of Civil Engineers' standard conditions of contract or perhaps the new engineering contract on which Sir Michael Latham was quite keen and which he used as a basis.
I hope that the Minister realises that Amendment No. 139 is intended to assist him and to clarify what he must by now see is a clause in his Bill which produced a certain amount of confusion and misunderstanding, not only here, but also outside in the industry. I beg to move.
Viscount Ullswater: The amendment of the noble Lord, Lord Howie of Troon, is a comprehensive definition of construction operations which is much closer to the definition of the Latham Review Working Group 10 definition that I mentioned earlier. I recognise the problem of trying to include some contracts and exclude others from the provisions of the Bill. It is the later provisions of the Bill that are helpful to the industry and, though we are having long discussions about what contractual operations mean, it is the later provisions that are of benefit.
The noble Lord's definition will affect every construction site, as he indicated, whether it is a building site, a civil engineering site or even a process engineering site. It would make all the construction operations on that site subject to the provisions of the Bill. I know that that is what the noble Lord intends because that is what he says, in a rather provocative way, because he wants to be persuaded that the process engineering industries have a title to be excluded. As I indicated, that may lead to severe problems within the industry.

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I am content therefore to see the definition remain as it stands in the Bill, with some of the amendments that we have been discussing for the past hour or so. The noble Lord, Lord Howie, indicates that he wants the minimum of exclusions and indicated some of those in his amendment. I should like to mention one exclusion which has not been mentioned in an amendment but I feel that I should raise it at this stage. I wonder whether there should be some de minimis exclusions for relatively small contracts. I mentioned that point to my noble friend when I had a meeting with him. Are we expecting the repair to a broken window in some commercial property which has been requested in writing to be subject to all the provisions of the Bill? I believe that there should be a limit of perhaps £25,000 on any one contract so that the Bill is seen to apply more particularly to the larger contracts instead of bogging down small business in a whole series of red tape.
The reason I make that suggestion is because I believe there is a precedent for it. That comes into the construction, design and maintenance regulations of 1994 which I understand are health and safety regulations and therefore not similar to the de minimis provision I have in mind. However, it excludes small sites from those regulations where the number of workers is less than five. There is therefore a good precedent for that and perhaps my noble friend can say something about it at this stage.
Lord Monkswell: In rising to support the amendment of my noble friend Lord Howie of Troon, perhaps I can put forward a different viewpoint for consideration. The noble Viscount, Lord Ullswater, suggested that there is a need to exclude certain aspects from the operation of the Bill because they are not wanted by those specific industries—mining, the process plant industry and small contracts. I wonder whether that is because of a misconception of what the Bill is about.
I may have misconstrued it altogether but it seems to me that the Bill seeks to ensure that where we have a contractual morass within the construction industry there is a fall-back position to protect everyone in the industry from the previous regime of litigation concerning contracts that have not been fulfilled adequately and endless arbitration and disputes procedures. It is a fall-back position to protect the people operating within the industry rather than an imposition of some new series of regulations, red tape and other paraphernalia. If one looks at it in that light, the arguments from the processing industry, the mining industry and the small contractor effectively fall away.
I am concerned that, because of the way the Government seem to have drawn the exclusions so far, we could end up with the core of the construction industry being covered by the Bill and the periphery that affects the construction industry being covered by other legislation such as the Sale of Goods Act, but there could be a grey area between the core and the periphery that would not be covered either by the Bill or by the Sale of Goods Act. That could develop into a morass of its own and interested parties would no doubt feel that
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they could get an advantage by operating within that grey area. It may be that my interpretation of what the Bill sets out to do is completely erroneous, but my view may also have some merit and therefore should colour the way the Government and the noble Viscount, Lord Ullswater, consider the issue.
5.30 p.m.
Lord Berkeley: I strongly support the amendment proposed by the noble Lord, Lord Howie of Troon. Perhaps I may follow on from some of the remarks made by the noble Lord, Lord Monkswell. Since the noble Lord, Lord Howie, and I started in the industry the enormous change has been the increase in subcontracting—and not just one but several different layers. As the noble Lord, Lord Monkswell, said, it is often the small people at the end of the chain who will suffer. I therefore believe that having a lower limit would be counterproductive. This should be seen as a simplification and a benefit for them and I am sure they all welcome it, as do many of the of the organisations listed by the noble Lord, Lord Howie.
One item may be missing from the noble Lord's otherwise excellent definition. I go back to our supply of precast concrete beams and whether or not they are special. If the Minister looks with favour on the amendment, perhaps that part could be looked at again.
Baroness Hamwee: Perhaps I may take this opportunity to pursue a point made by the noble Lord, Lord Howie of Troon, and to ask for the Government's thinking on it. I refer to professionals. Normally there is a distinction between the supply of goods and the supply of services. I should be interested to know a little of the Government's thinking in revising that to the extent that they have in Clause 102.
Another question has been put to me. I do not share this concern but if others do it is a concern that should be addressed. The question is about whether certain further exclusions ought to be made. I do not read them as being included within the Bill but the contracts that have been mentioned to me are contracts such as insurance and guarantee, including the provision of bonds, the financing of construction operations and joint venture agreements. Can the Government confirm that arrangements of that type are not covered?
Earl Ferrers: The noble Lord, Lord Howie, has given us a fairly complex amendment to deal with. He was kind enough to say that he put down the amendment so that I could give my reasons for what we have put down and that as I had already done so I need not do so again. That delightfully gets me off that hook and I am grateful to him for that.
Many people complained that the clause is too long. However, the noble Lord's amendment is even longer. I can only say that if the noble Lord constructs a building like he constructs a clause it must be a very decorative and interesting building at which we would all have to look, even though it may not necessarily be one of artistic merit. I shall consider the merits, artistic or otherwise, of his amendment.

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We have had the advantage of the views of the noble Lord, Lord Monkswell. I did not realise that he is such an expert on these matters. I understand that among other great attributes that he has he is a jobbing electrician and that he has even done work in your Lordships' House. It was very brave of the works directorate to give such a desperately important job of work to the noble Lord; that probably explains why the lights in my room always go "phut"!
Lord Monkswell: Perhaps I may explain to the noble Earl that I had no involvement in making any connections with regard to the electrical work, so any faults he may find are not down to me. I would also advise him that I had a period in the construction industry some 30 years ago, and it advises me even today. I also have contacts within the construction industry even now.
Earl Ferrers: I am deeply relieved to know that the noble Lord did not have any responsibility for connecting electricity in the House. Obviously when my lights went "phut" it was only the bulb and not due to the misapplication of any sophisticated technique.
The amendment tries to provide a more comprehensive definition of the construction industry not only by adding in certain areas of work which we believe should not be there but also by going over some fairly undisputed ground in much greater detail. I think that very often less is more. In other words, it is better to have less than to have more. The amendment is designed to define the construction industry in respect of a different issue in that the noble Lord uses the working group 10 definition. That was based on a totally different issue; namely, the liability for latent defects, which was also commented upon in the Latham review. It specifically included the suppliers of components, which we have already discussed. The working group definition may serve well for the purpose the working group had in mind but I do not think it is satisfactory for our purposes.
I do not think it is necessary, for example, to add "conversion" and "restoration" to the list of activities in subsection (1)(a). Those are already covered by "alteration" and "repair". It is unnecessary to refer specifically to "water-proofing" in new subsection (1)(e). I would hope that the construction of a building, even one designed by the noble Lord, Lord Howie of Troon, would always be taken to mean that the finished product will at least be waterproof and will keep out the rain.
In its enthusiasm to ensure that no conceivable construction activity should fail to get a mention in the Bill, the amendment provides a new definition which is very extravagant in its coverage. For example, under the amendment having a car resprayed would count as a construction activity under new subsection (1)(e). That is a very remarkable thought and a quite acute misdirection of effort for this part of the Bill: any obvious error can be rectified easily. But it illustrates the point that many activities which take place in the construction industry also take place in other industries. The boundary has to be drawn with care and restraint.
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The original Clause 102 allows for the exclusion of work on plant, machinery and steel work for the process engineering industry. I hope that we may be able to discuss this fully when we reach a number of the detailed amendments later on. I point out that one of the Government's main difficulties with the noble Lord's alternative definition is that it does not deal appropriately with process plant.
There are always good things in anything which the noble Lord, Lord Howie, suggests: we have to hunt for them sometimes, but they are there. He will find that the Government are prepared to move some of the way towards him. They have done so. I forget the word which the noble Lord, Lord Howie, used, but I believe he said that he was satisfied or encouraged, and they were words of an approbatory nature as regards Amendment No. 134.
My noble friend Lord Ullswater thought that there should be a de minimis exclusion of small works of about £25,000. I understand why he said that. He was concerned that if one asked a person to put a new window in one's house, one should not have to go through all this rigmarole. In fact, I do not believe that it will be necessary to do all that. The danger of fixing a downward limit is that contractors may find it convenient to split up a large contract into a number of smaller ones so that they are below the figure of, say, £25,000. Oddly enough, if one took my noble friend's suggestion on board, one would have to realise that it is very often the small contractors who are most hit. For all that, I quite agree with my noble friend that if one has a contract for £100 one would not necessarily expect to have all the rigmarole of this part of the Bill attached to such a contract.
I wish to think about what my noble friend has suggested and find out whether there is some way of making it clear that it does not refer to the ordinary jobbing builder or electrician, if one may so put it, but that it does not also fall within the trap of enabling people to split up large contracts into a number of smaller ones, which would have a bad effect.
The noble Baroness, Lady Hamwee, asked whether the professionals were included. This measure has been put forward deliberately because there are professionals of different kinds whose work affects so much of what goes on in the construction industry. She also asked whether insurance was covered. An insurance contract as such is not in the Bill. If it is construction work it will be covered, but the insurance itself will not.
I understand the reason why the noble Lord, Lord Howie, has tabled this amendment. I know that he means the amendment to be helpful, but it is not helpful to try to define too many things, as his amendment does, because it constrains the operation of the Bill very considerably. I shall certainly take account of what has been said, but I suggest to the Committee that it would be better to accept the clause as it is in the Bill and to see whether there are any ways in which we can make it better, having considered all the views which have been expressed in Committee today.
5.45 p.m.
Lord Howie of Troon: When I seemed to speak in praise of Amendment No. 134, which I did, gladly, I was trying to intimate to the Committee that in bringing forward that very small amendment the Government had become dimly aware of the fact that their definition was unsatisfactory and that they were trying to make amends, albeit in far too modest a way. I am pleased with what little we got. I have high hopes that our debate so far will produce further amendments and improvements to the Bill.
The Minister mentioned the phrase "less means more". He will realise that that phrase was coined by Mies van der Rohe, the famous architect; therefore, it is totally appropriate for a debate about the construction industry. The noble Earl suggested that I put too much in the amendment, and he could be right. I shall leave it at that. There is one merciful thing in what he said. He did not say that in the size of the definition the Government "had got it about right". That is what they usually say on these occasions. They usually say that the precise number of words that have been put in are right. In fact, there is no doubt at all that their definition is too scanty and I have tried to make it less so and more inclusive.
The noble Viscount, Lord Ullswater, put his finger on my reason for bringing forward this amendment and it is this. I welcome Part II of the Bill in general terms and I have done on numerous occasions. It is intended to help the industry. It can only do that to the extent to which the industry is included. We know from our examination of Clause 101 as it stands at the moment that that leaves out about half of what is normally considered to be the construction industry. So one pleases half of the construction industry and the other half is left weeping into its beer. That is why I have tried to extend the element of inclusion so that the aim which the noble Viscount, Lord Ullswater, identified can be properly met and not only have half a job done, which the Government seem to be content so to do. As regards the exclusions, I speak purely from memory, but I believe I am right in saying that they were WG10 exclusions. I may be mistaken, but that is my recollection.
My last word on the subject at the moment is this. The Minister reminded us of latent defects. I can recall several unhappy hours in this Chamber debating at great length the latent defects Bill several years ago. We ended up with an Act which was totally unsatisfactory. One of the unsatisfactory parts of this Bill—and I shall not press the matter at the moment—is that it does not include latent defects. It should, because the present legislation is very poor.
However, I have high hopes that the noble Earl will be convinced, even persuaded, by the arguments which have been put forward from all sides of the Committee this evening and that he will consider what has been said and redraft Clause 102 nearer to the kind of perfection that we seek. In that hope, I beg leave to withdraw the amendment.
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Amendment, by leave, withdrawn.
Clause 102, as amended, agreed to.
Clause 103 [Provisions not applicable to contract with residential occupier]:
The Deputy Chairman of Committees (Viscount Allenby of Megiddo): Before calling Amendment No. 140, I should inform the Committee that if this amendment is agreed to I cannot call Amendment No. 141.
Lord Howie of Troon Lord Howie of Troon moved Amendment No. 140:
Page 59, line 35, leave out subsection (1) and insert—
("(1) This part does not apply to a construction contract which is exclusively for the provision of a dwelling for one of the parties (whether the dwelling is provided by the erection or the conversion or enlargement of any building or structure) or which is for work done on or in relation to such a dwelling, including the means of ingress thereto or egress therefrom.").
The noble Lord said: Nothing would induce me to prevent my noble friend Lord Williams of Elvel from moving Amendment No. 141, so I shall not be pressing this amendment and therefore it will not be passed. I await Amendment No. 141 with bated breath.
As the Bill stands, its provisions do not apply to someone who "intends to occupy" a dwelling. We all know where good intentions lead. We also know that intentions may change. An intention to occupy, which can be changed at any time, will be sufficient to avoid the provisions of the Bill. I am perfectly sure that that cannot have been the intention of the Government. The dwelling in whole or part is required to be the subject of operations to which the contract relates. These operations may include non-dwellings, for example an office block with flats above. Therefore, it is important that only contracts relating solely to work in connection with a dwelling are excluded from the legislation by this provision. The amendment is intended to tighten up a part of the Bill that needs it. I beg to move.
Lord Williams of Elvel: The amendment moved by my noble friend Lord Howie of Troon is grouped with Amendments Nos. 141 to 143. I shall refer in particular to Amendment No. 141. The Committee will be aware that the problem described by my noble friend is a serious one. The expression in the Bill as it stands is rather vague and uncertain. The clause excludes contracts with the residential occupier from Part II of the Bill. It is intended that such properties should not be affected by the construction contract regime. My amendment has the effect of deleting the concept of occupation from Clause 103 and substituting mere possession of the residence as a qualification for exemption. The amendment is suggested by the Law Society of Scotland. It has examined the drafting with great care. It has serious doubts about what "occupation" means. Does it mean actual or constructive residence? When is the intention to occupy formed? Can a person occupy one property and simultaneously intend to occupy another? Those are questions which the Law Society of Scotland is worried about and which give rise to the amendment.

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Amendment No. 142 is also proposed by the society. Its effect is to modify the definition of "flat" by removing the peed for a flat to be a self-contained property. In the view of the society, the concept of self-contained flats does not take account of Scottish law dealing with tenements or the nature of tenemental property. The ownership of Scottish tenements is qualified by the concept of common interest. That includes mutual obligations of support and maintenance, especially in terms of common property such as passages and stairs. The roof may also be common. Furthermore, the terms of Clause 103(2) take no account of the fact that many properties are not self-contained. There may be common elevators and car parking and refuse disposal facilities. In an undeveloped property there may even be a common water closet. The society believes that the amendment is necessary for clarification.
Amendment No. 143, which I endorse, stems from the same source. The amendment is consequential upon the Committee agreeing to Amendment No. 142. I hope very much that the Government will favourably consider amendments put forward on behalf of a serious body which has looked carefully at the issue. There are some problems in relation to Scottish law. I am sure that the Government are glad to be made aware of them.
Baroness Hamwee: A person may occupy one property and intend to occupy another, particularly if the other property is in the course of construction. Looking at Clause 102(1), that is not necessarily the case if the property is in the course of extension, and certainly not if it is being demolished or dismantled. The noble Lord, Lord Williams of Elvel, has made me think about the words, "as his residence". To occupy property as one's residence suggests that that may be one's main residence. I should like to know whether or not that is intended. If "any residence" is intended it may be clearer to have the words, "occupation of it as a residence".
Lord Hylton: It would he very helpful if, when the Minister replies, he explains why Clause 103 seeks to exclude residential occupiers. To my knowledge, there have been some very bad cases where individuals, who have not received professional advice, have entered into contracts, for example, for the purchase of prefabricated houses or other kinds of system built residences. In the event, it has been found to be unsuitable for the purpose. I would have thought that individual owner occupiers were exactly the kind of people who needed the protection of the Bill.
Lord Monkswell: I support the amendment moved by my noble friend Lord Howie of Troon. I, too, question why the exemption is needed at all. Perhaps the Government can explain the purpose of Clause 103.
Earl Ferrers: I am glad to say that none of the amendments in this group is at odds with the principle of having an exclusion for contracts with residential occupiers. We believe that such an exclusion is needed for two reasons. First, there is already in place considerable legislation to protect the right of the consumer. In this case, the client will be a consumer as
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it is a household contract. Secondly, there is a small but significant risk that unscrupulous contractors may try to browbeat those unfamiliar with the new law into paying for shoddy work. I hope that that satisfies the noble Lord, Lord Monkswell. It is prudent to ensure that the provision does not apply to those who carry out works on their own premises, but wanting an exclusion and getting it right are two very different matters. Even if Clause 103 is not yet quite right we must be careful that we do not make matters worse.
For example, Amendment No. 141, in the name of the noble Lord, Lord Williams of Elvel, would have the undesirable effect of removing the exclusion of contracts where the owner was not actually in residence at the time of the work. That would be likely to be the case if the house was being built or extensively repaired. I can think of an occasion when the noble Lord, Lord Williams, may buy a house and wish to do it up. He may desire to get out of the way while all the dust and filth is lying around. He may go off to somewhere like Crete and have a nice holiday and come back to find that everything is all right. Under the amendment that particular situation will not be excluded from the Bill. Similarly, although Amendment No. 140 in the name of the noble Lord, Lord Howie of Troon, has a great deal to commend it, it would not cover the situation where, for instance, one part of a house had been converted into a flat and the main householder wants to place a refurbishment contract for the whole building.
It is true that at present the residential exclusion would not apply to a contract which was related solely to work on common areas. We have to give more thought to that point. There is clearly a great deal to consider, particularly in the light of the views expressed by the noble Lord, Lord Williams of Elvel. I am concerned that it should be fair and workable.
The noble Baroness, Lady Hamwee, asked whether "residence" means main residence. When the Bill refers to "residence", it means any residence. So it would include a second home or a holiday cottage. I believe that covers her point. It would be a pity to insert any such constraining words as "main residence", because that muddles it up, and I understand that is not the noble Baroness's purpose. I hope that she will be content with the word "residence". It means her house in London, her house in the country, her house in Scotland, her house down at the seaside, or wherever she may be. If it is her residence, it is covered by the Bill.
I am not sure what the noble Lord, Lord Hylton, was aiming at, if I may be so rude as to say so. He asked a question which I find difficult to answer because I am not certain what he asked. I am not suggesting that he should necessarily ask it again, unless he wishes to do so. I should like to look at Hansard, consider what he said and to write to him to give him a proper answer.
6 p.m.
Lord Monkswell: I wonder whether I may intervene. The Minister suggested that under the terms of a contract under this Act, as it will become, a consumer might be required to pay for shoddy work. I am sure

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that he did not mean to suggest that one of the results of the Bill will be that parties to a contract have to pay for shoddy work. I am sure that he did not mean that, and I give him the opportunity to correct what he said.
The Minister explained that domestic consumers, if one can describe as a domestic consumer someone who is having work done on his house or building a new house, are covered by other legislation. But what about the contractor who may be at risk from an unscrupulous consumer?
Lord Williams of Elvel: I hope that the Minister will not brush aside the problem of "occupation" and "intention to occupy" which the Law Society of Scotland raises. It is not clear to me—we have had this before in Part I—when an intention to occupy is formed. I can intend to occupy the Minister's house in Norfolk, say, at some stage in the future. I am not sure whether I shall be able to do so, and in what circumstances, but that is my firm intention. In 20 years' time, I shall be living in the Minister's house. Is that an intention to occupy?
Earl Ferrers: In no way did I mean to disparage the words of the noble Lord, Lord Williams, and still less those of the Law Society of Scotland. What I was saying was that if his amendment were accepted there would be the difficulty that if the building was being worked on and he was not in residence because he decided to go away, that part of the construction would not be covered by the Bill. I take account of what he said, but I understand that his amendment would leave that loophole, which is something we do not want.
The noble Lord asked when an intention becomes a fact. I believe that we had this discussion the day before yesterday. He may say that he wants to live in my house, and has every intention to. I can tell him that he jolly well will not. So however well-intended his intentions may be, they might not come to fruition. On the other hand—if we are going personal—if the noble Lord were to offer me a handsome sum of money, the conditions would be separate and different. However, I do not think that is likely either.
Lord Williams of Elvel: All that I am saying is that we need some definition of the words "intention to". I hope that the Government will be able to satisfy us, either by ministerial statement of what it means so that the courts can understand, if it comes to that, or produce something on the face of the Bill.
Earl Ferrers: I shall look into the point made by the noble Lord.
Lord Howie of Troon: I sincerely hope that the Minister will pay particular attention to the comments on the Scottish question made by my noble friend Lord Williams. Matters of great importance to my fellow countrymen were raised, and dealt with eloquently by a fellow Celt. However, in view of the Minister's explanation, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 141 to 143 not moved.]
The Deputy Chairman of Committees: Before calling Amendment No. 144, I should inform the Committee that if the amendment be agreed to I cannot call Amendment No. 145. Amendment No. 144, Lord Williams of Elvel.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 144:
Page 59, line 45, leave out subsection (3).
The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendment No. 145 standing in the name of the noble Baroness, Lady Hamwee. It is odd to have a subsection which consists of seven lines and then a further subsection which provides:
"The Secretary of State may by order amend subsection (2)".
If the Government cannot get seven lines in a Bill right and have to reserve their position to amend it by order, there is something wrong with the drafting of legislation.
My preference would be my amendment, but if the Minister can explain that there is some good reason why the Government have to go back on seven lines they have put in the Bill, presumably after due consideration and study, then I should prefer the amendment tabled by the noble Baroness, which at least would preserve the principle that if primary legislation is to be amended by order, then that order should be subject to approval by resolution and debate by both Houses of Parliament. I beg to move.
Baroness Hamwee: I approach the matter slightly differently, thinking that there may be something in the pipeline. I wondered whether the proposed commonhold legislation might come up with definitions which might require the Government to review this subsection. I share the concern expressed by the noble Lord, Lord Williams of Elvel. To redefine "a dwelling" is pretty fundamental. We should be able to describe it simply enough so that it does not have to be changed. However, I am open to argument.
Earl Ferrers: That is always a good thing. The noble Lord, Lord Williams, was becoming rather pugilistic when he said that if the Government cannot even get seven lines right there must be something wrong with the drafting. He knows that is a whole load of fluff and flannel, if I may respectfully say that to him. Unusually, that happened to be so on this occasion.
The noble Lord knows well that in any Bill one has to include clauses which allow the small detail of the Bill to be changed from time to time without reverting to primary legislation. Otherwise, one has to produce huge great Bills, or sometimes small Bills, which become caught up in the pipeline. One cannot amend something that appears to be wrong once it is operating in practice. We have no reason to believe that this will not be right. But we believe that it is desirable for the Secretary of State to be able to make minor changes in technical definitions without recourse to primary legislation on each occasion.

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Definitions may require fine tuning after they have come into action. There may be a need for modifications from time to time, as new developments emerge. It is not a case of the Government not having it right the first time. The Government wish to make sure that any legislation that Parliament puts onto the statute book is flexible in the course of actions which might take place in five or 10 years' time. That is why we want to have this provision.
I accept that the amendment of primary legislation should not be a matter for negative resolution. We shall certainly consider the amendment tabled by the noble Baroness, Lady Hamwee, which would make it subject to affirmative resolution. I hope that that will satisfy the noble Baroness. I always try to be helpful and to satisfy the noble Lord, Lord Williams, but he does not look, as usual, as though he is too satisfied. He should be satisfied because I have made a great concession by accepting what the noble Baroness has suggested in principle.
Lord Williams of Elvel: So there is a little more "fluff and flannel" corning up. The noble Earl cannot get away with all that. The expression "dwelling" means a dwellinghouse or flat. All those expressions must have been defined in law already. They must have been studied and there must have been endless pieces of legislation which have defined those terms.
However, I cannot do more than express my astonishment that, after all these years, the Government cannot produce a proper definition of "dwelling" in a Bill such as this one, without having the power to amend it as they see fit in the future. Nevertheless, as the noble Earl is prepared to accept the amendment of the noble Baroness, Lady Hamwee, I shall withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendment No. 145 not moved.]
Clause 103 agreed to.
Clause 104 [Provisions applicable only to agreements in writing]:
Baroness Hamwee Baroness Hamwee moved Amendment No. 146:
Page 60, line 7, leave out ("whether or not it is").
The noble Baroness said: This amendment is grouped with Amendments Nos. 147 and 149 in my name and Amendment No. 148 tabled by the noble Lord, Lord Howie of Troon. It is obvious that they are probing amendments.
Amendment No. 146—to leave out the words "whether or not it is"—seeks to ensure that an agreement is made in writing if it fulfils paragraphs (b) or (c) or is signed by the parties. I am concerned about the evidence that would be required as to whether or not an agreement where there is a written form has been agreed if it is not signed.
Amendment No. 147 suggests a wording:
"Where parties wholly or substantially agree otherwise than in writing".
It queries how much one needs in order to reach agreement. I am aware that the law requires the main terms to be certain and such terms to be agreed as amount to an agreement. But I am bothered about the wording of the Bill as drafted.
Amendment No. 149 would amend subsection (5) where it is suggested that written submissions which are not denied constitute an agreement in writing. That is a little dangerous. There may be no denial for reasons which do not amount to accepting or admitting—"admit" is the verb that I have chosen to use—the agreement.
Those amendments are probing amendments to try to understand what some of those provisions add up to.
Clause 104(4) refers to "evidenced in writing". That makes me wonder what is the point of Clause 104(2)(a). It does not seem necessary to have the two together. That point was also in my mind. I beg to move.
Lord Howie of Troon: Amendment No. 148 in my name is almost as short as an amendment can be in that it consists of only two words. In Clause 104(5) there is reference to:
"An exchange of written submissions in arbitral or legal proceedings".
Since Clause 105, which is the heart of Part II of the Bill, refers to adjudication—the most important part of the Bill—I wonder why adjudication is not mentioned in Clause 104(5). I have suggested that the words "adjudication or" should be inserted before the word "arbitral".
There may very well be a reason for that wording and I just wondered what it might be. I hope that the noble Earl will tell me.
6.15 p.m.
Earl Ferrers: These three amendments would make it easier for parties to avoid the provisions. I hope that there is no need to consider whether the intention behind the fair contract provisions is right, or to entertain the idea that parties should be free to opt in or out at will. The three amendments, Amendments Nos. 146, 147 and 149, tabled in the name of the noble Baroness, Lady Hamwee, would seem to make it easier for parties to continue in their old ways—by making sure that an agreement was never signed, or that not too much of the detail was written down, or by simply refusing to admit the existence of an agreement.
One of the amendments, Amendment No. 147, could also cause some confusion and litigation. As currently drafted, in order to establish his rights to fair contract treatment, it is enough for a party to be able to point to a written document which was the subject of an oral agreement. But if Amendment No. 147 was in force, he would also have to prove that such a document was "wholly or substantially" instrumental to that agreement.

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We should be apprehensive for fear that unscrupulous parties might try to push contracts outside these provisions by making oral agreements where written ones are needed. We do not want a mass of litigation to arise over whether contracts can be considered written or not. I suggest that most people are wise enough to get at least something in writing before they embark on lengthy and expensive construction work. If they do, there should be no doubt that they are entitled to fair contract provisions. I believe that their interests would be better served if the noble Baroness's amendments did not form part of the Bill. However, she said that she intended them to be of a probing nature.
I am inclined rather more favourably toward Amendment No. 148 of the noble Lord, Lord Howie of Troon. This would make it possible for an exchange of communications in adjudication proceedings to provide evidence of a written agreement, if that was not denied by one of the parties. I can see much sense in that, especially since we hope that most disputes will be subjected to adjudication in the first instance. Perhaps I might suggest to the noble Lord that he withdraws his amendment, as I should like to reflect upon it and return to it perhaps at a later stage.
Baroness Hamwee: I thank the Minister for his reply. I am still confused. An agreement is in writing if it is made in writing—that is subsection (2)(a). Then subsection (4) explains that an agreement is evidenced in writing—which is the third of the alternatives in subsection (2). If the agreement is made in writing but not signed, how is that different from it being evidenced in writing? Perhaps I am worrying unnecessarily and I certainly shall not push the point now.
Earl Ferrers: I believe the answer is that construction work is often started before all the documents are signed and sealed, even though they have been agreed. The builders come in and start the work and often the documents are signed later. The document, which has been agreed orally, should be part of the contract as though it were signed, even if it were signed later.
Baroness Hamwee: Through my professional work, though not much in the construction industry, I am familiar with people failing to sign contracts. My experience is that often they do not sign them because they have not quite agreed them. I see this as an area of considerable concern but I shall not press the point tonight. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 147 not moved.]
Lord Howie of Troon Lord Howie of Troon had given notice of his intention to move Amendment No. 148:
Page 60, line 17, after first ("in") insert ("adjudication or").
The noble Lord said: I thank the Minister for his kindly attitude towards my Amendment No. 148. I hope that it is a portent of things to come, but I shall not move the amendment.
Earl Ferrers: It was also a reflection of Christmas past.
[Amendment No. 148 not moved.]
[Amendment No. 149 not moved.]
On Question, Whether Clause 104 shall stand part of the Bill?
Lord Williams of Elvel: I did not give notice of my intention to oppose the clause and I certainly do not oppose it. However, no doubt the noble Earl will be aware that Clause 104 is inappropriate for Scotland given the terms of the Requirements of Writing (Scotland) Act 1995. That is the view of the Law Society of Scotland and I am sure that that will be taken into account.
Earl Ferrers: I shall always take into account what the Law Society of Scotland says, even if it is mouthed through the words of the noble Lord, Lord Williams. I always take into account what he says and I shall see that the matter is investigated.
Clause 104 agreed to.
Clause 105 [Right to refer disputes to adjudication]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 150:
Page 60, line 25, leave out ("A") and insert ("Any").
The noble Lord said: I shall speak also to Amendment No. 151. The Committee will be aware that Clause 105 is one of the most contentious clauses in the Bill. It has given rise to a great deal of discussion and controversy. Taken together, Amendments Nos. 150 and 151 would have the effect of ensuring that any parties to the construction contract may opt for adjudication procedure to resolve a dispute.
Again, I must refer to the Law Society of Scotland. It believes that bestowing a right in Clause 105 to refer a dispute to adjudication procedure is illusory and that allowing a discretion to either party to opt for the procedure is more realistic. If there is a right on one side there must be an obligation on the other side. It is the view of the Law Society of Scotland that any party, including third parties, should be allowed to opt for the procedure. Amendment No. 151 is consequential.
I realise that the issue of rights and obligations to go to adjudication is a major issue. However, I put it forward because it comes from a source which I know the noble Earl respects. I hope that we shall have a proper debate on rights and obligations and not simply illusory rights. I beg to move.
Lord Lucas: It is our firm understanding of the words as they appear in the Bill that the amendments proposed by the noble Lord add nothing to the effect of the Bill. There should be no mistake about the access to adjudication being a right and no doubt that all parties to a construction contract should have the same right. We believe that the Bill has those effects.

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However, given the source of the noble Lord's arguments and the particular aspect of Scotland that he has introduced, we shall read the report of the debate in Hansard and consult again in order to see whether we remain firmly of our view that the two amendments are unnecessary. I hope that with that small assurance the noble Lord will feel able to withdraw his amendment at this stage.
Lord Williams of Elvel: I am grateful to the noble Lord. I believe that where a party to a construction contract has a right there must be an obligation on the other side to accept that that right can be enforced. That is the point which the Law Society of Scotland is making and I am grateful to the noble Lord for agreeing to reconsider the matter. We shall see what happens at a later stage of the Bill. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 151 not moved.]
Baroness Hamwee Baroness Hamwee moved Amendment No. 152:
Page 60, line 26, leave out ("resolution") and insert ("decision").
The noble Baroness said: The amendment is tabled in order to query the use of the word "resolution" in the second line of Clause 105(1). Resolution suggests something that is final. This is a probing amendment to enable me and perhaps other Members of the Committee to understand whether what is intended is an interim or a final outcome.
I have used the word "decision" not believing that it is necessarily the happiest of terms but because it enables me to raise the issue. It does not appear to me that a final resolution is intended, given that adjudication is a mechanism for allowing everyone to get over the hiccup and get on with the job. If it is to be final it raises issues about enforcement which I do not follow. I beg to move.
Lord Williams of Elvel: It may be for the convenience of the Committee if in speaking to Amendment No. 152 I speak also to Amendment No. 159 standing in my name. I shall reveal that it comes from the Law Society of Scotland. It takes the view that the terms of Clause 132(2)(d) are too wide and that if not limited by the concept of relevancy they result in adjudicators exercising their powers to ascertain facts in too wide a fashion. That will result in cumbersome procedures. The amendment is therefore designed to focus the attention of adjudicators who initiate fact-finding exercises on the relevant facts. The amendment gives guidance on the scope of the fact-finding exercise.
Lord Berkeley: Amendment No. 152 goes to the heart of whether it is an interim or final resolution. That is why I have tabled Amendment No. 162A. Not being a lawyer, I do not know whether the word "resolution" is correct. I wonder whether the insertion of a word such as "interim" would help to clarify the sentence.
6.30 p.m.
Lord Lucas: With these amendments, we are starting to move into the fundamentals of the adjudication process and how the adjudicator should operate. In Amendment No. 152, the noble Baroness, Lady Hamwee, is clearly worried about the word "resolution" and believes that it implies a permanent solution. I hope that I can reassure her and, indeed, the noble Lord, Lord Berkeley, about that.
It is quite clear from the wording of Clause 105 that adjudication must have force to resolve disputes. Nevertheless, parties would be free to agree whether it should be final and binding or effective for a more limited period. Parties might choose to allow the matter to be reopened by an arbitrator or in the courts at practical completion. We anticipate that in many cases they will do so.
Amendment No. 159, in the name of the noble Lord, Lord Williams of Elvel, is an attempt to restrict an adjudicator's right to ascertain the fads and the law. I cannot agree with him, and nor can my Scottish colleagues. An adjudicator should have access to legal or other expert advice and should not have to rely solely on the evidence offered to him by the parties if better evidence is available within the time available to him. There is no need to specify that the adjudicator should restrict himself to the "relevant" facts. We should leave it to the expert to decide what is relevant and what is not; to do otherwise could be a recipe for wrangling and delays. I am sorry if that is a disappointing reply for the noble Lord.
Baroness Hamwee: As the noble Lord has been speaking, I have realised that another factor which made me suggest the word "decision" is that that is the term used in Clause 105(2)(b). I shall read what the Minister said. I shall not pursue the matter. I appreciate that sometimes there are very fine differences between quite similar terms and, although fine, they may be important.
As I said in moving the amendment, I am by no means wedded to the words "decision" which in itself carries the problem to which the noble Lord, Lord Berkeley, referred. I shall read what the Minister said and in the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Howie of Troon Lord Howie of Troon moved Amendment No. 153:
Page 60, line 27, at end insert ("and the other party is under a corresponding obligation to submit to such a procedure").
The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 158 and 162 which are also in my name.
This amendment is self-explanatory and self-evident. There seems very little point in having a right to refer to a dispute if the other party to the dispute is not obliged to defer to the procedure. That is more or less the point which my noble friend Lord Williams raised a short time ago, to which he receive a somewhat encouraging reply from the noble Lord, Lord Lucas. I hope that the noble Lord will take the same view of Amendment No. 153. It is a matter of right and obligation.
Amendment No. 158 is more meaty. Clause 105 is probably—I think certainly—the most important clause in the Bill since it deals with the speedy resolution of disputes, which is the best way to achieve speedy construction and the saving of costs in the construction industry.
However, throughout the industry the clause is regarded generally as inadequate and confusing. As I said on Second Reading, the draftsman of the Bill appears to have confused—and continues to confuse in relation to the scheme with which we shall deal later—arbitration and adjudication. They are separate matters and should be kept separate. The only supporter of the clause as it stands appeared to be the Government. Even the Law Society is against it.
As I reminded the House on Second Reading, adjudication is not a new idea, although the noble Earl seemed to think that it was. Traditionally in the construction industry, the adjudicator is either the engineer or the architect. He acts in a quasi-judicial way, trying to resolve disputes so as to expedite the contract, leaving at the end, after he has made a decision in each dispute, the possibility of the parties going on to arbitration, which is a different matter. It is different because the arbitration cannot be appealed against except on points of law, whereas the decision of the adjudicator—the engineer or architect—can be appealed against. That is the whole idea of the backstop of arbitration or even the courts.
In Amendment No. 158 I have asked that the adjudicator should be an independent individual rather than a company or a partnership. I go on in paragraph (e) to require that the decision is to be implemented and:
"be final and binding upon the parties unless and until it is revised by an arbitrator".
That means that the decision must be accepted and acted upon. It is not "can be" or "may be" but "must be". I then go on to provide that where a decision includes payment, that must be discharged within a very short time limit so that the injured party is not injured further by undue delay.
I turn now to Amendment No. 162. Subsection (4) relates to the scheme to which we shall turn later and refers to an Arbitration Act which has not yet been passed. The Arbitration Act is entirely irrelevant to the adjudication process. It has nothing whatever to do with it, although in their scheme the Government are trying to impose a modified form of arbitration when it should be adjudication.
An adjudicator's decision does not involve an arbitral award and it cannot be enforced as such. I am told that there is a legal case, Cameron v Mowlem, in relation to that. Moreover, I remind the Minister that this part of the Bill is wholly unacceptable to the industry. It seems to me rather weird that a Bill which seeks to help the industry includes provisions which the industry will not accept. Perhaps the Government are trying to impose them on the industry against its will.
It is extremely important that the adjudicator should be immune from prosecution. He must be indemnified. If he is not, he will not come forward. He must be
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protected against making a decision which may be slightly mistaken. He must have that protection. That is the same protection which the arbitrator has. Why should an arbitrator be indemnified but an adjudicator not? There is no answer to that question. The two should be treated in exactly the same way.
I do not want to delay the Committee but Clause 105 is the most important part of the Bill. If the Government wish the Bill to work—as I am sure they do—it is essential that it should work in harmony with the industry and not against the grain. I beg to move.
Viscount Ullswater: The noble Lord, Lord Howie of Troon, is right to say that Clause 105 is a very important part of the Bill. I believe that what is required on the face of the Bill is an outline of what adjudication clauses in contracts should include. That would not allow parties to a contract just to strike out adjudication clauses when preparing a contract, which I understand happens at present. Indeed, Clause 105 would not allow such a practice to take place.
It must also be the intention of the clause to deal with disputes in a limited time in order to keep the work on the contract flowing. That is another reason for having a dispute resolution process by adjudication rather than necessarily referring everything to arbitration or to the courts at a later stage. I understand that adjudication takes place now and that this is to make certain that the contracts about which we are talking should provide the opportunity for an adjudicator to do his work.
If a contract has that intention and the procedures include what is set down in the Bill, then the rather more draconian measures that we have seen outlined in the draft scheme of construction contracts will not come into play. As the noble Lord, Lord Howie, indicated, they are very much more draconian; indeed, the process is very close to a form of arbitration. That seems to me completely the right approach. It will encourage the industry to act responsibly in knowing that adjudication, in the first instance, can be an interim form of settlement. At the same time, the final result can be argued at arbitration or in the courts at the end of the contract. It will not withdraw that right.
I believe that it would be in the interests of both sides to provide for a quick way of resolving disputes. I say that because the scheme, as I mentioned, is much less flexible for later alteration. Therefore, if you do not have the right form of adjudication on the face of the Bill, the scheme would provide another form which is, as I said, much less flexible.
I believe that my noble friend the Minister should look carefully at Amendment No. 153 which would at least get both sides to the table. I am also attracted to paragraphs (c), (d) and (e) of Amendment No. 158 tabled in the name of the noble Lord, Lord Howie of Troon, as I believe that there is a requirement for the adjudicator to be an independent person. Again, paragraph (e) would encourage the parties to a contract to settle the matter satisfactorily rather than leave matters unresolved. Therefore, I give a certain amount

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of encouragement to the noble Lord, Lord Howie of Troon. I hope that my noble friend the Minister will do likewise.
Lord Rodgers of Quarry Bank: I join with the noble Viscount, Lord Ullswater, in expressing my support for Amendment No. 158. I do not want to speak for long on that amendment, but I believe, as the noble Viscount rightly said, that it begins to open up the whole question of Clause 105 and why it is that a recommendation made in the report of Sir Michael Latham—a report which was so widely supported—seems to have been lost in translation. That has produced much opposition to the clause. I am sure that the Minister is aware of that fact. I hope that he will be emollient when given the chance, take the clause back and look at it again to ascertain whether it implements the decision of Latham in the way intended.
Perhaps I may give Members of the Committee an anecdote. Some years ago I had responsibility for rooms that were available for dinners and receptions. A construction firm entered into a contract for an evening reception and everything was settled. The price per head was agreed; the attendance was expected; and there was no complaint about the quality of the drinks or the service. However, when the bill for the evening was returned it was only paid to the extent of two-thirds of the total. The matter was brought to my attention and I had to decide what should be done. I was asked to write to the chairman of the firm to express deep concern. It was then that the message came to me that it was always the practice of that firm in the construction industry to withhold some part of every bill on principle and to leave it open to negotiation at a later stage. Great surprise was expressed that I had been upset by such a normal practice. However, when the firm learnt that that was not the custom in the catering business, the rest of the bill was promptly paid.
I mention that example because it is a matter upon which Sir Michael Latham put his finger and which won very general applause. I refer to the way that very substantial sums of money are regularly withheld, occasionally for a good reason but often for no reason at all. It was on that account that Sir Michael Latham put forward the proposals on adjudication which are included in the clause.
I do not want to discuss all the matters that are wrong with the provisions. Indeed, there is great confusion about the clause in the minds of those who have read the Bill concerning adjudication and arbitration. A great deal of support exists for the idea of adjudication and the consequences which follow, especially in relation to an appeal. If the Minister has not had an opportunity to take full account of the views of the industry, I hope that he will do so in the light of what has been said this evening. It is a most important part of the Bill. It must be right. There may be very good reasons why the department would like to make some changes to the Bill. I hope therefore that it will pursue that course and not be put off by others who might see advantages in leaving the clause as it is.
6.45 p.m.
Lord Berkeley: Listening to the noble Lord, Lord Rodgers of Quarry Bank, I wondered whether the work he carried out as regards the rooms would be covered under Clause 103 as being a "flat", a house, a "dwelling" of multiple occupancy, or whatever. It would be an interesting academic exercise.
I turn now to Amendment No. 153. I believe there is some confusion as regards Clause 105. I have received many representations from the industry. Is it the Government's intention that any party to a construction contract within the long definition in Clause 102 should be able to go for adjudication? If that is the case, is the other party to the contract required to join in the adjudication? Or is it optional? I believe that I know the answer. However, I hope that the Government will consider clarifying this part of the Bill so as to make the legislation simpler for those we are trying to help have an easier contractual life.
Lord Williams of Elvel: I support my noble friend Lord Howie of Troon in his amendments. My noble friend rightly said that this issue goes to the heart of Clause 105. As I said when introducing an earlier amendment, it is possibly one of the most important clauses in the Bill and has, indeed, caused a great deal of worry, confusion and debate. I hope very much that the Government will understand and take advantage of the debate in Committee this evening. I hope they appreciate that we are not happy with the way the Bill is drafted. Indeed, as the noble Lord, Lord Rodgers of Quarry Bank, said, something seems to have been lost in translation between the Latham Report and the Bill as drafted. I hope that the Government will give comfort to my noble friend by accepting his amendments or at least the thrust of them.
Lord Lucas: I am very happy to make clear to the Committee that we are discussing adjudication and not arbitration. We are discussing what is in the Bill, not what is in the scheme. As my noble friend Lord Ullswater so clearly pointed out, the two are different. The Bill is a flexible, wide ranging and simple provision whereas the scheme is a fallback which is a good deal tougher than the terms which two parties might well agree upon had they the good sense to sit down and write their own contract rather than relying upon what is a fallback and designed to be so.
Amendments Nos. 153, 158 and 162 cover a number of complex issues, and it may help if I start with the easier points. First, my noble friend Lord Ferrers has already tabled an amendment, Amendment No. 156, to increase the time-limit for adjudication and to allow an extension by the parties. We are not prepared to increase it outright to the 63 days suggested by the noble Lord, Lord Howie of Troon, in Amendment No. 158 since that would be far too lax for the vast majority of disputes, but I believe that the right to extend will allow parties to set sensible deadlines where it would be in no one's interest to insist on an inadequate period.

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Secondly, Amendment No. 162 proposed by the noble Baroness, Lady Hamwee, has picked up concerns that the adjudicator should be granted immunity lest it prove too difficult to get someone competent to act in a costly dispute. We accept the principle of this but the wording of such a provision needs careful consideration. If the noble Baroness will withdraw this amendment, we will aim to bring forward a suitable amendment as soon as possible.
Next, it is our intention that any award made by an adjudicator should be paid promptly, and we will reflect upon the need for the provision proposed by the noble Lord, Lord Howie of Troon, in Amendment No. 158 to ensure payment within seven days.
However, there is no need for Amendment No. 153 to insist in primary legislation that parties must "submit" to adjudication or that the award should be implemented or made "binding". I have already pointed out in discussing Amendment No. 152 that adjudication must have force to resolve disputes. If an adjudication procedure is not intended to resolve the disputes which are referred to it and does not require parties to submit to the process and act upon its outcome, it will be defective under the terms of that clause.
As far as the adjudicator and his powers are concerned, I do not believe it is necessary to specify that he should in all cases be independent. There may be times, for example, when parties wish to use someone connected with the project as an adjudicator. It is enough that he should act impartially—though of course he must be seen to do so.
Similarly, I do not agree with the provision in Amendment No. 158 to restrict an adjudicator's right to ascertain the facts and the law. As I have already pointed out on Amendment No. 159, he should have access to legal or other expert advice and should not have to rely solely on the evidence offered to him by the parties if better evidence is available within the time available to him.
Perhaps I may give comfort to the noble Lord, Lord Berkeley. Any party to a dispute has a right to start adjudication and that adjudication is something which other parties to the dispute must enter into.
I hope that I have said enough to convince the noble Lord, Lord Howie, and the noble Baroness, Lady Hamwee, that, to the extent to which I promised to come back with alternatives to the provisions they have suggested, we will do so and that my arguments for not doing so on the other parts of their amendments are sufficient to enable them to withdraw them.
Lord Howie of Troon: I have been called many things in my day but I think this is the first time I have ever been called a noble Baroness. I do not know what has happened in the course of this long debate, but I had not noticed and I hope it does not show. Amendment No. 162 was put down by me. I cannot remember what the noble Lord said about it, but I hope he agreed with it.
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I should like to go back to Amendment No. 153. I thought we had agreed earlier when we were discussing Amendments Nos. 150 and 151 that rights went hand in hand with obligations. Did we not take a view along those lines? I think we did. That is all I am saying in Amendment No. 153. I am merely putting into the Bill the obligation which the noble Lord, Lord Lucas, seems to find implicit in it, though I do not myself find it implicit. I would rather see it made totally explicit. I think he has misunderstood my amendment in the same way as he had some trouble with my gender.
Turning to Amendment No. 158, there is something in what the noble Lord says about the adjudicator not being required to be independent. That was in fact often the case where the adjudicator was the engineer or the architect: he would have a contractual arrangement with the employer and would therefore be thought by some not to be independent but in fact his professional obligations made him independent. I shall study what the noble Lord said about that.
I was confused, too, by what the noble Lord said about the adjudicator and the law. I think he said something about the adjudicator being able to obtain what advice he could in the course of his investigations. The noble Lord will correct me if I am mistaken. That is, in fact, what I am asking for. I am asking that the adjudicator should take the initiative in investigating matters: that is, he should ask for advice. I am not suggesting that he should become some kind of a detective. I am not using the word "investigating" in that sense.
I shall need to read very carefully in Hansard what the noble Lord said in the course of his reply to this debate. In the meantime, I beg leave to withdraw Amendment No. 153.
Amendment, by leave, withdrawn.
Lord Howie of Troon Lord Howie of Troon moved Amendment No. 153A:
Page 60, line 28, at end insert ("but excludes any dispute or difference involving allegations of a breach of professional duty").
The noble Lord said: This amendment does not intend in any way to condone professional negligence or breach of professional duty; it is merely to say that a dispute of that nature is quite different from the kind of dispute about contractual procedures which we seem to be discussing in the course of this Bill. However, the Bill uses the words "any dispute" and it might be construed that such a clause would provide or imply that a dispute or difference about professional negligence should go to adjudication. Such a dispute should obviously go to some kind of investigation, but I do not think it can be under the adjudication procedure laid down in this Bill because, by the very nature of things, an investigation into professional negligence or breach of professional duty is complicated and time-consuming and could not be done within the timescale indicated in the Bill. I beg to move.
Viscount Ullswater: If there is a concern about the jurisdiction of the adjudicator, I would prefer all disputes to be subject to adjudication procedure rather than have endless debates about whether a dispute is within the

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jurisdiction of the adjudicator or not. I think we shall be straying into that territory if we support the amendment proposed by the noble Lord, Lord Howie of Troon.
Lord Berkeley: It is difficult to disagree with my noble friend Lord Howie because we are both civil engineers, but I wonder whether the proposal to exclude engineers from breaches of professional duty is not likely to work against them as well as for them. I believe we have heard that this is an interim solution. There may be occasions when the engineers are waiting for payment until this professional negligence dispute is resolved. Is there any reason why they should not go to adjudication to obtain a quick resolution, and then be able to take it further to arbitration, if that is necessary, as for the other types of contract that we are discussing?
7 p.m.
Lord Lucas: I am grateful for the support expressed by the noble Lord, Lord Berkeley, in this civil dispute between civil engineers. I have absolutely no reason to doubt the gender of the noble Lord, Lord Howie of Troon. I am sorry that I expressed myself in a way that led him to think that I had.
Amendment No. 153A raises a specific point. It arises from the concerns of some construction professionals that disputes involving allegations of professional negligence could be handled by an adjudicator who was unqualified in the specialty involved. My first concern is that such an amendment could rule out an unacceptably large proportion of construction disputes, since a great many could involve some sort of breach of professional duty. There would also be considerable problems in defining what was meant by a "breach of professional duty". At the very least such an amendment would leave it to a variety of professional bodies to determine the application of primary legislation.
I am also concerned that this amendment could actually increase the number of allegations of professional negligence: any party who wished to avoid the process of adjudication could simply throw in some such claim to scupper it. Not only would this make it all too easy to opt out but it would also tend to increase the cost of professional indemnity insurance. In addition, the adjudicator's powers would be far from clear with such an amendment in place. Granted that he could not act in a dispute where a breach of professional duty had been alleged, how should he behave if he nonetheless uncovered evidence of such a breach—even if no allegation had been made? He could find himself in a legal minefield.
The way round these difficulties, and one that is already available under the provisions as drafted, is for parties to agree that an adjudicator's decision should have only temporary effect, so that any findings of professional negligence may be re-opened in the courts once the work is finished. I believe that is what the noble Lord, Lord Berkeley, was suggesting. In addition, the scheme for construction contracts will make it clear that an adjudicator may decline to decide a matter which is unsuited to the procedure of adjudication. Contractual agreements may
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include a similar provision. I hope with those few comments the noble Lord will feel able to withdraw his amendment.
Lord Howie of Troon: As the saying goes, I heard what the noble Lord said, and I was not terribly comforted by it. I was confused, too, by his notion that an adjudicator might uncover some element of professional negligence in the course of some other investigation. However, he would be adjudicating on a particular dispute and if he uncovered anything which was not related to that dispute, that would be none of his business until such time as that became part of a dispute. But, leaving that aside, my only objection is the fact that by its nature a professional negligence problem is likely to be a complicated one which will require substantial investigation. I think, for example, of negligence in engineering design. That would require an investigation which would take far longer than the timescale which the Bill permits. The adjudicator could come to no sensible conclusion in that time, even an interim one. He could merely blow the whistle and say that it was half-time and that the people concerned should come back again the following year, or something like that. I am not convinced by the Minister's comments. I see the drift of the Government's answer, but that is quite inadequate.
Lord Monkswell: I hope that I can offer an explanation which might resolve the problem. As I understand it, if there is a dispute between two parties to a contract, the adjudicator is called in to make an interim judgment one way or the other. The debate this evening has concerned ways of keeping contracts going, making payments and other such matters, but there may be an occasion where one party to a contract is doing some work and realises that the work may not be right and that the job ought to be stopped. Perhaps the drawings need to be checked and the engineers need to be consulted. That party calls in an adjudicator with the express purpose—and perhaps the result—of stopping the job and requiring some further action by the other party. If one thinks of the adjudication process as making an interim judgment on one side or the other rather than always one way, perhaps that will resolve the problem that the noble Lord, Lord Howie of Troon, foresees.
Lord Howie of Troon: I regard that as a piece of adjudication, and a good example of it. I repeat that I am not convinced on this matter. I shall examine the arguments that were put forward by the noble Lord at my leisure and perhaps return to this matter at a later date. In the meantime I am happy to withdraw the amendment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Earl Ferrers: In moving the Motion that the House be now resumed, I suggest that the Committee stage begin again not before five minutes past eight o'clock. The Committee will wish to he aware that the initiator of the debate which follows is a maiden speaker. I beg to move that the House do now resume.

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

British Film Industry
7.6 p.m.
The Earl of Drogheda The Earl of Drogheda rose to ask Her Majesty's Government what proposals they have for long-term tax incentives to encourage and sustain the British film industry.
The noble Earl said: My Lords, I should like to put forward a proposal for a constructive and realistic way for the Government to help and encourage the British film industry. Before doing so I should like to reassure your Lordships on one point. Although it has taken me some time to summon up courage to make my maiden speech, I promise your Lordships that I shall not make up for lost time.
Your Lordships may well ask why I feel that the British film industry deserves a helping hand at this time. There are various reasons. On one level the cinema is an industry like any other. On another level it is entertainment, education, and, at its best, an art form. It is arguably the most influential art form of the 20th century. On yet another level it can be a sort of cultural ambassador for this country all over the world.
On the face of things one might question the necessity of helping British cinema at all as it seems to be flourishing at the moment. We see films with British actors, British directors, writers and technicians being nominated for Oscars every year; indeed, several won Oscars this week. I think the answer is that it could flourish far more and should be placed on a more solid base and, most importantly, British cinema should be able to share in the rewards it generates to a far greater extent than it does at present.
I hope I might be allowed to give a couple of examples. The film "Sense and Sensibility" is a most English story and almost, incidentally, a bucolic advertisement for the British tourist industry. It was made entirely in this country with a British cast and a screenplay written by Emma Thompson but it was produced in Hollywood. It will produce handsome profits, most of which will go back to Columbia Pictures. "Four Weddings and a Funeral"—a film that everyone assumes was English—cost 4 million dollars to make, grossed 400 million dollars, and was in fact produced by a Dutch company.
We are extremely fortunate to have in this country a great theatrical tradition. At the risk of sounding complacent, it is fair to say that our theatre is the envy of other countries today. Moreover, the National Theatre and the Royal Shakespeare Company are supported by a substantial state subsidy.
One might say that the theatre here is actively fostered by the Government. But cinema is a different matter from theatre production. It is infinitely more
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expensive for one thing; and with a few rare exceptions most British films rely today for their funding largely on television companies and Hollywood.
One has the impression that the cinema is looked on by the Government as a rather disreputable and tiresome relative of the theatre, a relative who is always asking for money. There is no significant state subsidy for the production of films, nor is it realistic to expect there to be one. We should not lose sight of the fact that film making is a gamble. It is, as one film critic succinctly put it, the "funding of hope over experience".
So why should the Government help film makers at all? In the Government's eyes, after all, the film industry is an industry like any other and should be treated no differently. If the risks are higher, so are the possible profits. Is it reasonable to ask the Government to encourage what the Treasury doubtless sees as reckless gambling? I believe that it is, not only for the sake of the film industry but for other considerations as well.
Let me emphasise that the Government would not be bringing help to a dying industry or even a sick one. They would be encouraging one which is full of vitality at the moment despite the lack of government support during the past years.
The creation of every new business is a gamble, and in a way the production of each new film is like the creation of a completely new business. Unfortunately, the capital investment necessary for the making of a film is large, and because of the high risk involved, the venture capital required for making films for the cinema almost always comes from abroad, where more favourable fiscal attitudes prevail.
The supply of talent that has been fostered by our theatre is now increasingly being tapped by Hollywood, which wisely makes use of British directors, actors and technicians and frequently makes films in British studios and on British locations.
This is obviously not something to be discouraged. However, it must be remembered that most of the profits from these American-backed films go back to the United States instead of staying here to be used to build up the British film industry.
In an ideal world, it would surely be preferable for the British film industry to be established and controlled in this country. In the 1930s, 1940s and 1950s the absence of a serious rival in the form of television meant that the profits from the cinema were larger and easier to come by, and this provided the necessary capital for reinvestment in films. For this to happen today, with the overwhelming presence of television, we need a real incentive for capital investment if the film industry is to flourish. As things stand, it is only in the United States and in other countries with a favourable fiscal attitude that there is the right climate to encourage the necessary venture capital to be invested seriously in films.
In order to produce films of high quality on a consistent basis it is necessary to revive the British film tradition. A great film, or indeed any great work of art, is rarely produced in isolation. In the 1940s and 1950s, for example, for every "Kind Hearts and Coronets" (a film that may strike a chord with your Lordships), and "Whiskey Galore" (which may also do so), Britain

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produced dozens of amiable but now forgotten films which created the working soil out of which several good films and, a few great films emerged.
Two things are now needed. One is for the encouragement of investment in film by British production companies. The other is for greater encouragement for companies from other parts of the world to film in the United Kingdom. We lead the world in technology and expertise in the film industry. This is no empty boasting. Your Lordships may not be aware that there is a prize called the Cartoon d'Or which is awarded to the best animated film of the year. From the inception of this prize in 1990, it has been won by British, films every year with one exception, when it was won by a film made in France—for which the animator was British. And since we share a common language with the Americans and are regarded by them as not very different culturally, a very small incentive is needed to persuade American companies to come to film here.
Unfortunately in Great Britain, although lip service is paid to the idea of encouraging film production, in reality we have excelled at discouraging it. Let me give an example. In order to raise money, films generally need a star. Foreign film stars coming to work in this country get taxed at source and if the rate of tax here is higher than that in their home country, they are taxed at that rate. The net effect is that the producer has to indemnify the star, which costs him more and is an unnecessary discouragement for him to make his film here. Canada, France, Ireland and Germany have recognised this problem and apply a lower rate of tax in these cases. Although I realise that this offends the British sense of fairness, it seems an occasion when to act too rigidly according to one's principles may give one a momentary feeling of self-righteousness but in fact is a self-indulgent route to a hollow victory.
Much has been made, and quite rightly, of the British successes at the Oscar ceremonies this week. However, the story behind the making of one of these, "Braveheart", vividly illustrates our problem. The shooting of the film began in Scotland, where it should have been completed. It was based in Inverness, where the local economy enjoyed a boom as a result—illustrating, incidentally, the advantageous side-effects to the economy derived from film production. Half-way through filming, however, it was moved to Ireland. There were various reasons for moving to Ireland, not least the Irish fiscal incentives which, even with the considerable expense in the move, still made it financially worthwhile. Moreover, the producer was persuaded not merely by fiscal incentives but by other imaginative ones that helped the production generally. For example, 600 horses were provided free by the Irish army together with other practical assistance.
The solution that I should like to suggest for the Government to help the film industry is not unrealistic and certainly not a Utopian one. First, could we not begin immediately by creating a climate, financial and otherwise, sympathetic to film makers? Secondly, I would suggest reviving the Eady levy. By this, a proportion of tax from cinema tickets was returned to the film industry for re-investment in film production.
This levy worked well for nearly 35 years until it was discontinued in 1985. It was a highly ingenious device of the Civil Service which gave immense help to the film industry and was copied by nearly every European country. Although discontinued by us, it has been retained by the other countries, and I feel sure it could be re-introduced here without any loss of face to the Treasury, perhaps under another name.
The most realistic help the Government could give British films would be through tax concessions. I am not an economist and shall not bore your Lordships with what would certainly be confused economic arguments. However, I know that the repeal of Section 68 of the Capital Allowances Act 1990 would be an enormous help to the film industry, as would the introduction of 100 per cent. capital allowances in the first year of a qualifying investment.
Finally—and I hasten to assure your Lordships that my family connection plays no part in this suggestion—I believe that we should study the Irish example very carefully and extract all we can from it.
The Irish Government's attitude to the film industry has resulted in an enormous increase in the number of foreign films being made in Ireland, and also stimulated home grown production. Other countries are already beginning to emulate the Irish attitude since they have seen the many benefits that derive from it. Good films define a nation and establish a national identity in the eyes of the world. Film is both a tangible asset and an intangible one—like the BBC World Service or the British Council. The reputation of these two organisations as standards of excellence cannot be measured in purely financial terms. The benefits that derive from them extend far beyond what their aims are perceived to be.
It could be said that the survival abroad of the image of this country as an upholder of civilised values despite much evidence to the contrary is largely thanks to them. This in turn is of incalculable value to our trade, tourism and standing in the world. British cinema could, and should, enter this pantheon and become a symbol for excellence as well. I beg the Government to consider my suggestion.
7.20 p.m.
Viscount Mersey: My Lords, it is my privilege to congratulate the noble Earl on behalf of the whole House for such a thoughtful speech. We remember his father as a Knight of the Garter and, perhaps one should say, the King of Covent Garden, at both the Royal Opera and the Royal Ballet. It is in a way curious that the noble Earl has continued a royal association with his photography. I notice that he has photographed a royal publication on the Queen Mother's garden and, more recently, was photographer for the official brochure on Buckingham Palace. To the noble Earl I say simply: his father would be proud of him tonight. We hope to hear him often in the future.
Noble Lords: Hear, hear!
Viscount Mersey: My Lords, I last spoke on film in June 1995 in a debate which stemmed from the report

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of Sub-Committee B of the European Communities Committee on, a joint European film and television industry. However, I should like to take noble Lords back further than that, to the time when my noble friend Lord Gowrie was Minister for the Arts. He gave a very forthright reply to a question I asked about grants for film. He said that film as art deserved, and received, a grant from the British Film Institute. Meanwhile, he continued, the British film industry was highly successful and did not need any help. I remember that at that time "Chariots of Fire" had just been released. Thus, my noble friend Lord Gowrie separated film into two different types: the rather fragile art film and the far more robust industrial film.
However, I have to tell the House that I believe that my noble friend was wrong. When, 10 years later, Sub-Committee B examined film, we found that there was not a robust British film industry at all. I apologise to the noble Earl, Lord Drogheda, for disagreeing with him slightly on this matter. We found that, as he said, Hollywood is the western world's film factory, and the only one. There is not really an industry in this country. There is a craft. As he said, we are good at winning awards, but we are not so good at winning audiences.
People quote the Ealing comedies, as the noble Earl did, as the epitome of the British film industry; but, sadly, those films lost so much money for Sir Michael Balcon that he was forced to sell his studios to the BBC. Without a doubt, we make isolated brilliant films: "The Third Man", "The Elephant Man", and recently, "A Close Shave", starring Wallace and Gromit. But these do not add up to an industry. Indeed, the only facet of film activity that does add up to an industry was defined for us, a little cynically I thought, by Michael Winner. He said that the British film industry consists of the "Hammer House of Horror", the "Carry On" series and the "Doctor in the House" series. Those were "product", to use an Americanism. That is what Hollywood is so good at.
It is sobering to think that Sir Lawrence Olivier and Audrey Hepburn were not the backbone of our film industry, but that Barbara Windsor and Sid James were. So indeed were Charles Hawtrey, Hattie Jacques, Kenneth Williams and the great James Robertson Justice. So I think it important that government refer to British film as "craft" or "art" and treat it as art, and assist it as art and forget about industry, because it is not an industry. British film as an art form will certainly be my standpoint for the rest of this short speech.
The question is how to help it. Not, my noble friend will be pleased to hear, by subsidy. That merely creates lame ducks, as the noble Earl said. In his evidence to our committee, Herr Elmar Brok of Bertelsmann said:
"In Germany we have a subsidy programme for movies which is a disaster. You pay a lot of money for movies that will never see a cinema. And then you have a situation in which directors produce movies in order just to get the subsidies and have never the aim of coming to the cinemas".
We found that the same was true of French films, which did not make it to the big screen. And we found the same situation in Australia.
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So I am very pleased that the noble Earl, Lord Drogheda, excluded the word "subsidy" from his Question, but included "tax incentives". Since that was one of Sub-Committee B's principal recommendations, I am bound to agree with him. Perhaps I may quote from paragraph 131 of our report:
"We recommend the introduction of 100% first year tax write offs for investment in qualifying British films. This would represent a considerable improvement over the current write off which is straight line over three years … We further recommend that the incentives should be introduced at the earliest opportunity".
That was our recommendation just under a year ago, on 4th April 1995. Can my noble friend on the Front Bench tell us what has happened? We have not received a letter from the Government saying that they disagree with our recommendation; but nor have we had any indication that there will be 100 per cent. tax write-offs. We used the phrase "at the earliest opportunity". I do not call a 12-month delay early. I sometimes wonder whether anyone reads these reports apart from the committee members themselves.
A tax incentive would help British films. There is such an incentive in Ireland, as the noble Earl said. However, there is still a caveat. The films that go to Ireland are not Irish films. They are known as "mobile product". They generate a lot of work and a lot of income, particularly for the catering trade. But the films are not about Ireland. They do not employ Irish actors, technicians or equipment. They are not really Irish. The same would apply here, though probably not to the same extent. Mobile product arriving in Britain probably would use British technicians and equipment; and though it would not be a British film, it would generate a hive of British film activity. So certainly on balance mobile product would be welcome. I look forward to a positive response on tax from my noble friend on the Front Bench. Better late than never.
The noble Earl asked for a tax incentive on traditional cinema. I back him on that, as does my committee. But British cinema must help itself, too. I quote one more piece of evidence given to our committee by M. Cazès of Lumiere:
"Each time I meet the United Kingdom producers the only thing they ask is 'How am I going to finance my film?' This is not the question. The real question is 'How am I going to make my film have enough revenue for someone else to finance it?'".
I have said that British film is a craft, not an industry. Perhaps it should be more of an industry. Perhaps our foremost directors should think less of Oscars and more of the box office. If they do not, the lasting epitome of the British film industry will remain Hattie Jacques as matron in "Doctor in the House".
7.27 p.m.
Lord Jenkins of Putney: My Lords, some 20 years ago, when I was Minister for the Arts, I somewhat astonished myself by deciding to find a sum of money for creating what later became known as the Association for Business-Sponsorship of the Arts. I obtained the money from my noble friend Lors Barnett, who was Financial Secretary at the time, and I was accompanied in that endeavour by the noble Earl's father, Lord Drogheda. Between us we managed

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to persuade Lord Goodman to take the chair, and the Association for Business-Sponsorship of the Arts prospered.
I was therefore more than delighted to hear the noble Earl speaking tonight on a related subject. The arts should, and do, embrace film, and much else besides. I believe the noble Earl agrees with me on that. I agree with the noble Viscount, Lord Mersey, who said that he hoped we should hear more from the noble Earl particularly on this subject.
The noble Earl put his finger on the two key points. One is the possibility of tax assistance; the other is the possibility of the recreation of something like the old Eady levy. I agree with him. Any remaining remarks I make are in reinforcement of that view.
Harold Wilson was a film fan. He asked me to carry out a survey of the wider scene, including films. As a result, he set up a working party, which endorsed the Eady levy, and discussed—although I do not think much was done about it—the question of tax relief, tax support, tax gentleness one might say, so far as the industry was concerned. As a result of that, it is my view that those two actions were the foundation of the prosperity and eminence of the British film industry which obtained in the succeeding years.
The Eady levy disappeared due to the collapse of the industry. It became no longer worth while to collect at the box office—which is how the Eady levy worked—a small sum which went back into production. The sum was small and the industry was disappearing. But the British film industry has always lacked production money. It became almost impossible for distinguished directors like my noble friend Lord Attenborough—whom I am sorry we do not see here tonight; I hope that his attendance in future will be more frequent—to raise money to produce films in this country. If we are to enable British films to be made in this country with British money, we must do something about it. That is the whole point of the operation.
If we accept the two suggestions, we will be able to do that. First, we are asking in the Eady levy merely for the redistribution of money within the industry. The levy consists of a small proportion of the box office money being passed back into British productions. The charm of the scheme is this. If, as in the present case, most of the films exhibited are American, the small percentage added to the price of the ticket is exercised with American films as well as British films. In that way we take a little return to put back into the British production industry, whether the film exhibited is British or American. It therefore reverses to a small extent the situation which is operating at the moment. Furthermore, it does not cost the Treasury anything. I hope therefore that when the noble Lord, Lord Inglewood, replies he will make favourable noises about the reintroduction of something on the lines of the Eady levy.
I am not qualified to judge the tax question; I am not a tax expert. However, I have a strong feeling that it would be possible to introduce a form of tax relief which would not need to be spread elsewhere. The concern of the Treasury is that if it gives on one
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point, it will have to stretch in other directions. It is possible, in relation to the film industry, to devise a form of tax relief which will not spread elsewhere. I hope the noble Lord, Lord Inglewood, will also think favourably about that.
That is all I want to say. As I am one minute within my time, as distinct from the speakers hitherto, I shall sit down.
7.33 p.m.
Baroness Wharton: My Lords, I thank my noble friend Lord Drogheda for introducing this Unstarred Question. If we leave the British film industry entirely to market forces, I suspect that we will continue to have a diminishing film industry. Most countries, including the US, actively step in to help their own film industries and in so doing they protect their own culture and encourage employment at home.
We are all now familiar with the famous Section 35 of the Irish Finance Act which encourages film production in Ireland. Under the original Section 35 tax incentive, corporate investors were able to write off 100 per cent. of their investment against taxable profits although that has now dropped, I believe, to 80 per cent. Investment is made through shares in an Irish domestic company and held for at least three years to avoid capital gains tax except for low budget films, usually under 1 million Irish pounds, where one year is the limit.
To qualify, 75 per cent. of the work has to be done in Ireland. However, the government remain closely involved in all aspects of the feature film industry and producers have to obtain advance consent from the authorities before being able to take advantage of the tax incentives being offered. The arts ministry scrutinises everything, making sure the production industry benefits the country as a whole.
There are other areas of finance such as the Irish Film Board, though the amounts are considerably smaller. Another attraction is a favourable corporation tax of 10 per cent. as against our 40 per cent. Various other bodies in Ireland have targeted the film industry, offering financial support. The rules were modified after a thorough investigation by the Irish Treasury. In spite of that, the scheme has been extended for another three years.
What we need are tax breaks for foreign companies and private individuals investing in British production and companies wishing to establish permanent production bases in the UK. We also need a system of accelerated tax write-offs against production costs to be made available to UK corporate investors and international film companies.
Will the Treasury consider that? Will they consider relaxing the rules on withholding tax? As the Irish have shown, tax incentives are a powerful and proven method of stimulating production provided their use is constantly monitored in order to avoid abuses. Our own Secretary of State concluded that small independent production companies need to be encouraged to develop into larger, more sophisticated operations if the industry is to be viable. If that were so, we would be able to put forward package deals with maybe half a dozen films to

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potential investors rather than the usual one-off which, from an investor's point of view, is not attractive. I am sure the finance would be there if the tax advantages were in place.
Will the Government examine not only the Irish experience but also the approach of other countries to their film industries and consider something similar? We have a skilled workforce and wonderful studios. But all, or nearly all, investment is foreign with profits being exported. To survive we need to be more than just a service industry.
There is much more I could say. But as, over the years, I have taken part in many debates on film and media issues in your Lordships' House, I do not wish to detain the House any further.
7.37 p.m.
Lord Freyberg: My Lords, I too add my thanks to my noble friend Lord Drogheda for giving us the opportunity tonight to debate tax incentives to encourage and sustain the British film industry. Although buoyed by our recent successes at the Oscars, we should realise that film-making in this country is at an important crossroads. While British creative film-making skills are keenly sought the world over and our flexible labour laws are favourable to film work compared to other nations, Britain is rapidly becoming an uncompetitive place in which to make films. Thanks to our present tax system, low and medium-budget films and television programmes cost 10 per cent. more to make here than in America or almost any other European country. The governments of those nations give special treatment to their film industry. We must act to compete with them. We are not looking for subsidies but generous tax breaks and incentives without which the British film industry will decline.
In 1993 seven major American studios compiled a joint paper in response to the question, "How does the UK compare as a competitive location?" Their answer was:
"For much of the time, it compares poorly. There are insufficient fiscal incentives to produce in the UK … natural attractions—local talent base, availability of studios and technical staff—are not powerful enough magnets to overcome the sheer financial disadvantage of producing in the UK".
They went on to call for a constant factor which would enable them to use the UK's natural attractions and shift production here.
The Government must realise that foreign film companies are no different to large multinational companies such as Nissan which have been attracted to Britain by generous tax breaks and favourable deregulated working practices. If we could offer a 10 per cent. inward investment incentive to foreign film companies wanting to work here, we could increase the number of projects being made tenfold. One need only look at Ireland to appreciate the immediate effect legislation can have. After the introduction of tax incentives for film production, investment grew from £3 million in 1992 to £100 million in 1994. It is salutary to remember that the recent Oscar-winning
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film "Braveheart", which should have been shot in Scotland, was actually filmed in Ireland because it was cheaper to do so. That cost the UK some 45 million dollars. The key reason for Ireland's success is that it is an English language production base in Europe. The United Kingdom should be the first port of call for American film finance seeking a European location.
It is worth pointing out that besides introducing substantial investment incentives to encourage film production in this country there are a number of anomalies in the tax system which currently put off film makers thinking of shooting in this country; for example, "withholding tax". This means that if a singer, such as Michael Jackson, wants to record a disc here, he does not have to pay tax on his earnings, whereas for a live show he would. The film industry argues that this should apply to film. At the moment an actor is taxed both if he performs live—for example, in the theatre—but also if he comes here to make a film. To be on a par with the music industry, he should not pay tax on the latter. The fact that he does puts off many big stars from coming here.
The British film industry and the US studios which finance most film investment are also seeking an acceleration of the tax write-off which is currently available to film makers. In the 1993 Finance Act, the Government accepted the case for providing financial incentives for film production in the form of tax write-offs in order to allow the UK film production sector to compete on equal terms in international markets. At the moment only a third of film production costs can be written off. By accelerating this benefit—allowing 100 per cent. of the cost to be written off in the year of production—the film maker would benefit from a 6 per cent. saving on his budget.
The American studios have made it clear that this saving would be enough to persuade them to bring substantial new film investment to Britain. It is estimated that an acceleration of the tax write-off available to film makers would generate at least 1,200 new jobs in the first year that the regime was effective. This would be achieved with no revenue cost to the Exchequer. Acceleration of the existing tax write-off would have only a small "cash flow" effect for the Treasury.
As a revenue earner for Britain the film and video industry is potentially enormous. At present it generates an annual turnover of more than £1 billion with annual growth of some 17 per cent. It also employs 250,000 people in Britain. For every extra £1 brought in, 38 to 43 pence would go to the Government, while every job created in the film industry would create a further 1.7 in the community. Film making also provides a fantastic showcase to promote Britain's attractions.
In conclusion, 70 per cent. of films worldwide are made in the English language and yet the UK has a market share of just 4 per cent. Even this tiny percentage is more than £1 billion a year. It is clear that any increased share of the market would be a substantial boon to the British economy. I hope the Government will now take action.
7.42 p.m.
The Viscount of Falkland: My Lords, I congratulate the noble Earl on his very fine maiden speech. If I did not agree with everything he said in his speech, I certainly would not take him up on any of those points now. I agreed with much more than I disagreed with. I hope to follow that up outside the Chamber.
The British film industry has undergone quite a change—and a change for the better—over the past 10 or 11 years. The noble Viscount, Lord Mersey, and I, and possibly the noble Lord, Lord Jenkins, took part in the proceedings which led to the Films Act 1985. In those days film attendances were down to almost rock bottom. It looked like the British film industry would disappear. Admissions were down to about 50 million a year. I made a very intemperate speech one day blaming that almost exclusively on the main exhibitors in this country, which at that time were EMI and Rank, for having such disgusting cinemas which discouraged people from going into them, and for seeking to sell them, if possible, for their real estate value. Whether I was right or wrong, it was extraordinary that within three years there was an enormous investment in this country, mainly by American and Canadian companies, which resulted in a completely new way of going to the cinema. The multiplex, a multi-screen building, sometimes having as many as 14 screens, was introduced. People now go to the cinema possibly with no specific film in mind. If the film they have as their first choice is booked up or the time is not convenient, they can go to see another and they can have a meal in the same building. The pattern of cinema-going has changed.
During all this time British film production has been extremely patchy. As the noble Viscount said, to call what we have an industry would be an error. If we have anything approaching an industry we must thank Channel 4 and the BBC for it. They have held the ship together during this troubled voyage. That has led to an interesting and difficult overlap between television and film—two vastly different areas in terms of the way the product is produced and indeed the way the product is viewed. Time being limited, one cannot go into that now.
I wish to confine my remarks to exhibition in the first instance. We now have the multiplex, and there are plans to build more multiplexes all over the country. Investors, who are mostly American, although some are British, are always on the look out for sites on which to build new multiplex cinemas. One of the problems British films have is that they find it extremely difficult to get distribution and exhibition. It is not perhaps unknown to your Lordships that one of our most distinguished film makers is a name abroad but is virtually unknown here. He wins prizes all over Belgium and France. There are others in the same category. We have young film makers who are achieving extraordinary success at festival level but find it extremely difficult to get the kind of commercial exposure that they deserve. Would it not be an idea, when planning applications are made for multiplexes, that local authorities or others should look for an
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undertaking by the multiplex company to allow at least some provision for the showing of films which are not American first-run films?
One can see why the multiplex companies want predominantly to show American first-runs. That is basically what people crowd in to see. Probably one of the most foolish things that was said about the British film industry in the past 10 years was said in the vernacular of the football field by the writer of "Chariots of Fire". He said, "The Brits are coming". But the Brits never came. It was a very foolish thing to stick out his neck in such a way.
Lord Graham of Edmonton: Colin Welland.
The Viscount of Falkland: My Lords, I am reminded by the noble Lord, Lord Graham, of the name. However, I should not like to go down on record in Hansard as having blackened his name in such a way—an admirable man, I may add.
People who are enthusiastic about films do not care whether they are British. They want to be entertained by good products, in good surroundings, and in a language they can understand. English is the language which we understand. Subtitled and dubbed films do not do very well outside London. In this country we are always in the shadow of the American industry. Because films are one of their largest exports, the Americans see to it that we do not become too powerful. They always have done so. When Lord Willis (who made such useful contributions) was in the House, he always used to stress that. We have to find a niche for ourselves in this area with the kind of films that we do well.
I see from the Clock that time is running out. I remind your Lordships of films like "Sense and Sensibility". That is the kind of film we do well. It is a relatively low budget film and shows our acting skills. That is the kind of film that should be supported. Pressure should be put on exhibitors to show it as much as possible. That is the only way we can hope to compete with the American majors. I hope that that point will be taken on board.
7.49 p.m.
Lord Donoughue: My Lords, I join other noble Lords in congratulating the noble Earl, Lord Drogheda, on his excellent maiden speech in opening the debate. It was a brave way to make a maiden speech but I was not surprised, having known and respected his father greatly.
The British film industry, or art, is not big but it is not inconsequential. It is, for instance, bigger than our motor vehicle industry. It periodically employs some of the world's best directors, writers, actors and technicians. It has great potential, not least because it uses the world's prime language. We also have in the UK a booming consumer market for film, but those audiences are watching American films distributed by mainly American distributors. I agree very much that that is of crucial importance and often under-estimated. Those audiences are in fact starved of British films.
When looked at more closely, and given the enormous potential, the condition of Britain's film industry is far from satisfactory. In fact, very few British

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films are made here and many of those great directors, actors and so on, have to work abroad. The recent upward blip in US film making here, which the Minister will certainly make much of, is mainly because of weak sterling since the EMU débâcle. The reality is fundamentally unsatisfactory. We do not seem able to finance our own films, let alone secure national distribution for them. Nothing the Minister says tonight, I fear, can disguise the fact that this Government have done little to help, and some things to harm, our film industry.
In 1984 there was at least government policy activity, which subsequent experience in the industry suggests was not overwhelmingly helpful. Then we waited 11 years until last year's response to the Select Committee report, and that did not add up to much either. There was in that response welcome support for a London film commission and for a so-called West End showcase. I ask the Minister where that is. It was supposed to give a high profile to British films, but itself demonstrates a very low profile. The BBC was prompted to help save Ealing Studios, the National Lottery to give money to films, and that was puny in total and little of it was in fact given by the Government.
Above all, at the heart of the Select Committee report were proposals for self-financing fiscal incentives to promote production, which is at the centre of our debate tonight. The Government ducked all of that. Mr. Dorrell, in another place, as relaxed over film as over beef, said that the Chancellor would, in his Budget, carefully consider the Select Committee recommendations together with the logic which underpins them. We waited for the Budget and found nothing. I hope today that the Minister is not again going to say that we must wait for the Budget because the Government cannot keep ducking out that way.
The most amusing and, perhaps with hindsight, the most ominous aspect of Mr. Dorrell's announcement of 6th June 1995, was that he had in fact dramatically set up a new committee within his department to ensure that the needs of the industry, "are better understood by Government". That, I must say, was a really major initiative. It was also an interesting admission, by implication, that the film industry's needs had not been properly understood over the previous 16 years. I ask the Minister what this great new team has achieved? Are they responsible for the subsequent total silence and total absence of constructive Government proposals?
Outside government there has been no shortage of constructive proposals for tax incentives for the industry. Apart from the excellent Select Committee report, there were the recommendations of the British Screen Advisory Council last October for fiscal measures. There was also, last May, the British Film Commission paper on the economic case for stimulating investment in the UK film industry. The latter seemed to involve some loss of tax revenue, but the Select Committee's recommendations were aimed to be self-financing, as are Ireland's famous Section 35 reliefs, which have been frequently referred to tonight and which have certainly had a dramatic effect on the
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Irish film industry and employment in it. The cost to the Irish Treasury trebled to £19.9 million, but the additional revenues to the Treasury also trebled. So I ask the Minister what is the Government's approach to such self-financing, or nearly self-financing, fiscal incentives. We cannot accept that subventions from the lottery constitute a proper Government response. We cannot accept another invitation to await another Budget. We would like some precise response today, even if it is only to say "goodbye".
In 1918, the American President, Woodrow Wilson, introducing legislation specifically to benefit the US film industry said,
"when people see American movies, they buy American products".
I fear that with this Government a more relevant quote is from Bette Midler who said,
"when it's 8 p.m. in New York it's still 1938 in London".
I hope that that is not true in Whitehall and Westminster. I ask the Minister to think about 1996. After 17 years of non-incentives to the film industry, have the Government still nothing to offer?
7.56 p.m.
The Parliamentary Under-Secretary of State, Department of National Heritage (Lord Inglewood): My Lords, I must begin by saying how grateful we all are to the noble Earl for giving the House the opportunity to discuss this important topic today. It is one which my Secretary of State and I both feel matters a great deal to this country. Perhaps I may pick up the comparison made by my noble friend Lord Mersey. We believe that it is both an industry and an art. It is also important to our culture and, as has been explained, to tourism.
The noble Earl made a bold and interesting maiden speech, which no doubt owes a lot to his own profession: photography. That is an occupation for the "best" people. I can say that with confidence because it is my wife's profession as well, and I know from her how well known he is. Certain reference was made to some of the subjects of his photographs. On one occasion, which he will have forgotten, he took a photograph of me, but I do not believe that that entitles him to any great accolade!
This has been a tremendous week for the British film industry. Our actors, actresses, directors, writers, designers, animators and technicians, have mounted their annual raid on the Academy Awards, and I am delighted that they have once again come away with so many richly deserved prizes. I am sure that the whole House would want to join me in congratulating all of our winners and all of those who received nominations. I would particularly like to congratulate Nick Park, of Wallace and Gromit fame, as a distinguished graduate of the National Film and Television School, for his incredible achievement in winning a third Oscar. I believe that this means that Nick Park has now won as many Oscars as the film "Jurassic Park"!
Perhaps I may come down more to earth. Your Lordships will be aware, as has been debated through most of the contributions this evening, that the question of changing the tax system for film was most recently

1903
considered at the Committee stage of the Finance Bill in another place on 7th March. At that time my honourable friend the Financial Secretary reiterated that the Government take the needs of the film industry very seriously. He explained that the industry already enjoyed a tax régime which is more favourable than that for many other industries, and that the Government provided assistance to the industry in a number of ways.
Finally, he made clear that the Government would keep the situation under careful review, which I hope explains the Government's position that was asked for by my noble friend Lord Mersey. The Government will always consider the case for further assistance in the light of developing circumstances. While I know that my colleagues in the Treasury have made it clear that they do not see a case for any action now, they will keep the matter under careful review as they consider future budget proposals.
Much has been made by a number of contributors this evening, not least by the noble Baroness, Lady Wharton, about the tax incentives offered by the Irish Government. This is a system which rewards people and companies which invest in film production companies. It is not a relief for the cost of making a film. Furthermore, a report commissioned by the Irish Government shows that the cost to the Irish Exchequer for special reliefs to encourage investment in the film industry has far outweighed the benefits. The report estimates that the measures cost the Irish Exchequer around £19.4 million during 1994–95, while the benefits that arose totalled no more than £13.5 million, which I notice is the definition of "nearly self-financing" used by the noble Lord, Lord Donoughue.
As a result of this report, changes to the scheme have been introduced in the recent Irish Budget to improve targeting and cost effectiveness because there has been great concern that it is not actually the film industry, but the big middlemen, who have been the beneficiaries of much of what has occurred.
It has been rumoured that certain films have been shot in Ireland in preference to this country because of the reliefs available there to the investors. However, the evidence is that factors other than tax are in play, such as the availability of members of the Irish armed forces as extras at very little cost to film makers. In this context, it is as well to remember that the incidence of VAT has come as a nasty surprise to one or two people.
Reference has been made to other countries. International comparisons are notoriously difficult. Looking round the world, it is difficult to compare one country with another in this respect. It has been suggested that Canada provides a good model for this country. However, that is based on an entirely different approach to taxation from that which we have in this country. I understand that in certain circumstances it is possible to receive a tax credit that exceeds the cost of the film.
The noble Baroness, Lady Wharton, and the noble Lord, Lord Freyberg, referred to the withholding tax. The withholding tax merely exercises our taxing rights over people who earn money in this country. Before its introduction, our experience was that some foreign actors made films here, returned home and the tax was
1904
rarely paid. That led to significant loss of tax which was due from people who could well afford to pay it. Because these are difficult matters, the Government have brought together, in an advisory committee under the chairmanship of a former permanent secretary to the Treasury, Sir Peter Middleton, key figures from the film and financial sectors to discuss the obstacles to obtaining private finance for films and how they may be overcome. The committee is currently consulting the film industry and potential investors and is due to report to Ministers in July. We look forward to seeing some practical and effective proposals at that time which we hope will be of interest to the noble Lord, Lord Donoughue.
I should like to explain briefly what the Government are doing to help the British film industry. We believe that the industry is in very good shape. The number of films being produced in this country has increased in each of the past three years. That contrasts with figures for other leading film-making countries such as the United States and France where production has fallen since 1990. Part of the reason for that investment has been the changes to the tax regime introduced by the Finance Act 1992. Big budget productions like "Rob Roy" and "Judge Dredd" have been filmed in this country as a result of those changes. Our confidence in the strength of the British production sector is reinforced by the fact that currently our studios are so busy that two major new investments in studio facilities are planned. I refer to the proposed developments as Leavesden and Hillingdon. The latter is an American proposal, which hardly suggests a United States antipathy to doing film business in this country. They will add significantly to our production capacity and, along with the best technical support available in the world, will help to ensure that even more films are made here in future.
As the noble Viscount, Lord Falkland, pointed out, cinema admissions are buoyant. They have recovered from the slump in the mid-1980s. Admissions in January of this year were 29 per cent. up on January 1995. We are delighted that British film makers are rising to the challenge of producing high quality films for which there is such a strong demand. I say to the noble Lord, Lord Jenkins of Putney, that this has been achieved without the reintroduction of an Eady levy, for which we understand there is no great clamour from the industry.
Reference has been made to the National Lottery. We estimate that in the next five years about £70 million could be invested in film production in England alone by the Arts Council. If one takes the whole of the United Kingdom, the figure should amount to something like £80 million.
In addition to looking at more general problems about overcoming obstacles to attracting finance, Sir Peter Middleton's committee will look in particular at one proposal in advance of its final report. I refer to the proposal of the European Commission for an audiovisual guarantee fund to attract additional private finance by reducing the risk involved for individual investors in single film productions and the

1905
development of portfolios of film investments. The proposal is an interesting one, and we look forward to receiving Sir Peter's report next week.
The noble Lord, Lord Donoughue, asked about the showcase cinema. A feasibility study is to commence next week to look at whether or not a cinema dedicated to showing British films can be viable and what other complementary activities may be undertaken to ensure the best use of it. We expect the consultants who undertake the study to report before the end of May. In addition, the Government have announced their pump-priming support for a new London film commission which has already opened its doors and is very busy, although the formal launch will not take place until the summer.
The Government are very proud of the British film industry and the highly talented and internationally renowned people who work within it. One remarkable statistic that is often repeated, but is none the worse for that, is that over the past 20 years 30 per cent. of all Oscars have gone to British talent. We are delighted that this tally has been added to this week. We wish to ensure that the industry continues to thrive. I have explained this evening the many important initiatives that are being undertaken. I conclude by reiterating what I said at the beginning of my remarks. We in the Department of National Heritage believe that film matters. If there are things that we feel can properly be done, we shall not hesitate to do them.

Housing Grants, Construction and Regeneration Bill [H.L.]
8.6 p.m.
House again in Committee on Clause 105.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 154:
Page 60, line 32, leave out ("7") and insert ("14").
The noble Lord said: In moving Amendment No. 154 I should like to speak also to Amendments Nos. 155 to 157. Clause 105 sets certain time limits which in our view are too rigorous. Amendment No. 154 seeks to postpone the time limit on the appointment of the adjudicator. Amendment No. 157 seeks to create a longer interval for an adjudicator to arrive at a decision. The Government have put down Amendment No. 156 which may meet our concerns. I shall leave my noble friend Lord Howie of Troon to speak to Amendment No. 155, if he so requires. I beg to move.
Lord Howie of Troon: I support the noble Lord, Lord Williams of Elvel, in what he said. Amendment No. 155 is a small and self-evident amendment. Its only purpose is to add a measure of precision to a matter which at first sight appears imprecise. If there is a time limit it ought to have a starting point. My amendment is intended to provide it.
Lord Lucas: As I hope the Committee will be able to judge from Amendment No. 156, we have been listening to the industry. We are convinced that in many
1906
cases it will not be possible for an adjudicator to reach a decision within 14 days. We no longer wish to insist that every adjudication agreement includes a 14-day timetable. I hope that that will satisfy the intent of Amendment No. 157. We also believe that some adjudications will take more than 28 days. I believe it right that parties should be able to agree a suitable extension. In order to safeguard weaker parties, however, we propose that such an extension may not be agreed until adjudication proceedings have started. That means that parties could not give away their right to quick adjudication in the contract but would be able to take a separate decision on each dispute as it arose.
But time limits should still be challenging. Amendment No. 154 would double the period to appoint an adjudicator. We do not believe that that is necessary. Appointment should be a relatively simple matter, and we certainly wish to avoid the situation which has arisen in some arbitration proceedings where the appointment of a tribunal has dragged on for months. By far the easiest way to ensure rapid appointment is to name the adjudicator in the contract. Naming a reserve or two might also be good policy.
Where the appointment of an adjudicator is left to another person or an institution there is no need to build in unnecessary delay. In these days of fax machines, electronic mail, and computerised record-keeping, it should be possible to name a single adjudicator and refer a dispute to him within one week. I therefore urge the noble Lord to withdraw his amendment.
Amendment No. 155 also appears to introduce unnecessary delay. It could be interpreted as requiring a party to the dispute to notify the others before proceeding to adjudication and may have been laid in the belief that the period of an adjudicator's appointment needs some formal starting date. That is not the case. Clause 105(2) would require an adjudicator to be appointed within seven days of any party starting the process. We do not wish to slow things up by imposing steps that could be unnecessary.
If parties wish to stipulate formal notification in their contracts they are free to do so, but we do not wish to insist upon it in statute. Most parties will not embark upon adjudication lightly. While it is intended to be cheap and quick, it is neither free nor instant. If parties seriously believe they can get something put right with a couple of letters or phone calls I am sure they will do it. Where a dispute goes beyond the immediate goodwill of the parties to resolve, the adjudicator should be brought in as soon as possible. We would oppose any intermediate steps. I hope that noble Lords will reconsider the need for their amendments.
Lord Howie of Troon: I am entranced by the Minister's remarks about months. My noble friend is talking about an extra seven days. That is hardly months, hardly an unconscionable delay. I think my noble friend should pursue his amendment.
Lord Williams of Elvel: I certainly will, with that encouragement. I have taken advice, as I am sure the noble Lord will recognise. Unless it is written into the contract—I agree with the noble Lord that if it is written

1907
into the contract—that a certain person, or two or three people, will adjudicate in a dispute in the contract, there is then a question of finding an appropriate adjudicator who must be impartial, as I think we agree, although the Government did not accept the amendment tabled by my noble friend Lord Howie. Nevertheless, I think that it was understood that he should be independent.
The adjudicator, whoever he or she may be, may have many other things to do, a full diary, and so on. I and others feel that seven days is a short period of time. We are talking about calendar days rather than working days. There could be bank holidays; there could be weekends. It is a short period unless the adjudicator's identity is specified in the contract. I ask the noble Lord to reflect upon what I am saying, because it has been represented to me as being a little too short. Given that the Government rightly want to impose some timetable, seven days seem to me and to others to be too short. I hope very much that I can persuade the noble Lord to look again at the matter.
Lord Lucas: My noble friend Lord Ferrets and I are united in thinking that, having listened to the argument put by the noble Lord, Lord Williams, we should consider what he said.
Lord Williams of Elvel: I am most grateful to the noble Lord. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 155 not moved.]
Lord Lucas Lord Lucas moved Amendment No. 156:
Page 60, line 32, leave out from ("days,") to end of line 35 and insert—
("(b) require the adjudicator to reach a decision within 28 days of referral or such longer period as is agreed by the parties after the dispute has been referred;").
The noble Lord said: spoke to this amendment with the previous one. I beg to move.
On Question, amendment agreed to.
[Amendments Nos. 157 and 158 not moved.]
[Amendment No. 159 not moved.]
8.15 p.m.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 160:
Page 60, line 38, at end insert—

("(e) enable the adjudicator to have regard to Codes of Practice published by the Construction Industry Board;

(f) preclude subsequent legal proceedings against the adjudicator; and

(g) provide for the adjudicator's finding to be binding unless appealed.").

The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendment No. 162A in the name of my noble friend Lord Berkeley. Amendment No. 160 relates to the adjudicator's role. The Committee has already discussed possible legal proceedings against the adjudicator. So I do not need to go into that. I wish to expand upon the codes of practice which the Construction Industry Board is publishing and will publish in the future.
I accept that to date the Construction Industry Board has been considering codes of practice in respect of tendering rather than the performance of contracts. Nevertheless, I am advised that the board is considering codes of practice related to the performance of contracts as well as to tendering. If that is the case—one cannot deny that it is the case, because it is the case—I would have thought that the adjudicator should be allowed to have regard to those codes of practice when they are produced. It is important that the adjudicator be fully apprised of what the board, which, after all, is the overall body supervising this arrangement, believes to be right in terms of practice.
I recognise, and the Committee will recognise, that codes of practice have different functions and different legal status. There have been many debates in this place on the legal status or otherwise of codes of practice. I am not trying to put codes of practice into legal forms; in other words, I am not saying that the codes of practice should be like a highway code or anything that can be quoted in evidence in court. All I am trying to establish is that as and when the Construction Industry Board produces guidance in the form of codes of practice, the adjudicator should be enabled, including in his decision, to have reference to such a code of practice.
I leave out paragraph (f) for the time being because we have already discussed that. I come to paragraph (g) of the amendment which will:
"provide for the adjudicator's finding to be binding unless appealed".
Again, we have had some discussion of what happens when the adjudicator adjudicates. Our belief is that the proper method of going about this is to say, "All right, this is binding, so it must be implemented unless it is appealed." In our view that is the right way rather than to leave slightly in the air the matter of whether there is any binding adjudication or whether there is more in the nature of arbitration. How far an adjudicator's findings should be binding is complex. The noble Viscount, Lord Ullswater, referred to that in our earlier debates. Nevertheless, I feel it useful to propose the amendment so that the Government can put on the record how they see an adjudicator's position; how they see the finding by an adjudicator; and in what respect it can be binding or non-binding.
My noble friend Lord Berkeley will be speaking to his amendment which puts a slightly different picture, but in my view a reasonable picture. I hope that we can, first, concentrate the debate upon the codes of practice question. Secondly, I hope that we can get to the point of the status of the adjudicator's decision. I beg to move.
Lord Berkeley: I wish to speak to my Amendment No. 162A. My objective in tabling the amendment is similar to that of the noble Lord, Lord Williams of Elvel. It concerns a worry that many noble Lords expressed during the Second Reading debate as to whether the adjudication was binding or interim and, if it were the latter, at what stage could either party seek arbitration or some other means of resolving the dispute.
We must remember that we are looking at contracts which have a wide span—the largest perhaps like Waterloo Station, which has been mentioned ad nauseam

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this evening as a good example. If the steel roof of the noble Lord, Lord Howie, with its glass had been made six inches too big for the foundations and there had been some adjudication, that would have been fine, but I do not believe that anybody could have expected the contractual dispute to have been resolved in four or even eight weeks. So I personally am convinced that there has to be an option for the adjudication to be revisited, perhaps at a time that one might define as "after substantial completion of the contract", or some such wording. It is not quite so important whether it is a requirement to revisit it. With small contracts I am sure that the two parties could agree that the adjudication was final and binding.
I received my amendment from the Law Society of England and Wales (as distinct from that of Scotland). I do not believe that it has proposed this amendment as a means of increasing lawyers' fees, which is a subject about which we have had much discussion. I believe that it is a genuine attempt to draw out the problem and try to have drafted in the Bill with the utmost clarity whether the decision has to be interim or may be interim or whether there is an option for either party to seek arbitration or some other means of resolving the dispute and when that can take place.
The noble Lord, Lord Lucas, gave us some explanation earlier this evening. As I said, I tabled the amendment basically so that we could have a resolution of the problem and, I hope, clarity. On that basis, I hope that the noble Lord will agree to look again at this amendment.
Lord Lucas: As the noble Lord, Lord Williams, said, to some extent we have already covered the substance of these amendments. The Committee will be aware that we accept the principle behind the point on immunity for the adjudicator.
Amendment No. 160 also suggests that the adjudicator should be able to have regard to codes of practice published by the Construction Industry Board. We are very sympathetic to the suggestion that the adjudicator should be a best practice operator. There is nothing in this legislation which would prevent an adjudicator having regard to appropriate codes of practice. If parties wished to make doubly sure by putting a reference in the contract, that is up to them. They may even choose to insist that certain guidelines are followed. However, we do not feel that this should be a matter for primary legislation.
With regard to the amendment of the noble Lord, Lord Berkeley, and that part of the amendment of the noble Lord, Lord Williams, which refers to it, the effect would be to make an award binding and to put that system into the Bill. We are well aware that many people would like adjudication to resolve disputes only until practical completion of the contract. They would like it to be possible to re-open an adjudicator's decision once the work was out of the way. We have no problem with that. Parties would be free to make that clear in their adjudication agreement under the contract. There is nothing in the Bill which says that adjudication should
1910
be either one way or the other. We show no preference in the Bill. We do, of course, show preference in the scheme. But that is the subject of a later discussion.
However, we are not prepared to forbid agreement to the contrary; that is, to insist that adjudication could never be permanent. Some in the industry see the advantage of knowing where they stand once an adjudicator has ruled. But not everyone may be prepared to agree to submit to a process which makes temporary decisions but denies them access to the courts, sometimes for years. It would not be right to force them to do so.
I hope, therefore, that the noble Lords will feel able to withdraw their amendments.
Lord Williams of Elvel: Before we finish this discussion, with regard to the first point, I accept that it may not be right to put on the face of the Bill the matter of enabling the adjudicator to have regard to the codes of practice issued by the Construction Industry Board. Nevertheless, there is a case—I may have to return to this point at another stage—for putting the codes of practice issued by that board, which, after all, is the overseer of the whole arrangement, into a slightly special category rather than in just any other code of practice that happened to be around or any other piece of guidance that may have been issued by any other non-statutory body.
I am in some difficulty on the question of the nature of the adjudicator's finding. In practical terms, if there is a dispute between two parties to a contract and if they go to adjudication, the adjudicator will make up his mind and say, "Right, this is the answer." What then happens? Presumably, the payments are made according to whatever the adjudicator has found. Those payments are made under the adjudicator's finding, which is, therefore, to that extent, binding.
What happens when someone says, "Yes, but in the contract we did not actually say that the adjudicator's decision would be binding, but that it would be binding subject to, say, Clause 53(4)(b) of the contract", and so on? What would be the status of any such decision? I am still unclear and I believe that my noble friend Lord Berkeley is unclear, whether the Government want an adjudicator's finding to be binding and payments made accordingly subject to something else, or whether the Government are, as the noble Lord, Lord Lucas, seemed to say, rather neutral about whether or not the adjudicator's finding should be binding and that should be something left to the contract. Can the noble Lord help me on that point?
Baroness Hamwee: Before the noble Lord replies, perhaps I may add that I am increasingly unclear also. The noble Lord, Lord Williams, put the issue very sharply. Adding to my own lack of understanding is Clause 105(4)—a clause to which we shall turn in a moment—which states that:
"The scheme may apply & the provisions of the Arbitration Act".

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It seems to add to the optional nature of everything that is being done, which was indeed the point made by the noble Lord, Lord Berkeley, and my amendment earlier today.
Lord Berkeley: I do not believe that there is any situation in which the adjudication could be made binding on all contracts. If there is a serious problem, one cannot expect disputes worth tens or hundreds of millions of pounds to be resolved in four weeks. I do not know whether there is a category of dispute which could be made binding or whether the wording should perhaps be more on the lines of the amendment put forward by the noble Lord, Lord Williams, to discourage people from revisiting the adjudication. That matter does need clarification and resolution. If we in this House have trouble understanding the provision this evening, I worry about the industry applying it in the future.
8.30 p.m.
Lord Lucas: Our position is clear; we do not mind what people agree so long as what they agree is within the terms of the Bill. The Bill does not specify binding or any other particular form of the finding being unbound. We recognise that certainly with regard to major contracts it would be surprising to find arrangements which allowed a dispute involving £1 million or £100 million to be settled in 28 days by a single individual choosing his own evidence and having no form of appeal. However, whatever is provided in the contract, most contracts provide a standard clause which states that the decision is binding until practical completion. If nothing is stated in the contract, as things stand at present adjudication will be binding. Therefore, we expect that, as the provisions stand in the Bill at present, if nothing is stated in the contract, adjudication is binding. If something is stated in the contract to make it less than totally binding, that will be acceptable so long as it is within the terms of the Bill.
Baroness Hamwee: Does the Minister mean "binding" when he says that it will be binding until practical completion, or does he mean that it is an issue which will not be revisited until after practical completion, which is very different from being binding?
Lord Lucas: No. I mean binding as in, "will be settled", and that is the end of it unless you have a dispute which can be taken to the court. That is a strictly limited category connected with errors of law and misbehaviour.
Lord Howie of Troon: That is where the Minister has us worried. There is confusion between adjudication and arbitration. One cannot have a situation in which the adjudicator's decision is binding and can be sorted out only on a point of law, which is what the Minister said. The adjudicator's decision must be subject to revisitation, not only on points of law but on whether he was correct in his decision in terms of the contract and the context in which the contract was carried out.
Lord Williams of Elvel: I am sure that my noble friend is right but the problem is, what happens when
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there is an adjudication which is sort of binding subject to practically everything one can think of and when payments, perhaps large sums, must be made and the contract must continue according to adjudication? I would like the Minister to go through the practical circumstances. Where are the parties at that point? Are they bound by the adjudicator's decision until such time as the problem is revisited, to repeat that expression, in one form or another or are they not bound? What is the situation?
Lord Lucas: Adjudication is a right under the Bill. In order for the adjudication to be effective, the adjudicator must be able to issue a decision. That decision must be implemented. Therefore, if the adjudicator comes to a decision, that decision will be implemented and the payments will be made. The only point at issue is whether the adjudication can be reopened at a later date, as though it had never been made, and the whole issue rejudged, or some version of it—I believe that that is what the noble Lord, Lord Berkeley, was describing and it is a common way in which such things are done—or whether that should be an end of it; it should be an adjudication verging on arbitration and something which comes to a clean end.
The Bill does not express itself on that matter one way or another. It allows either form, or any other imaginable form, so long as it fits in with the provisions of the Bill and there is an effective arbitration. We would expect different contracts to use different forms of arbitration. The only time in which we descend into certainty is in the scheme, which provides that arbitration is binding almost as though it were arbitration, although it is not.
Viscount Ullswater: I believe that my noble friend is right. He is describing what I mentioned in an earlier intervention; that the scheme for adjudication should be this quick way of resolving disputes. I believe that the noble Lord, Lord Williams, equally understands that to be the purpose of adjudication. It is the resolution of that at a later date which a contract can agree to by arbitration or by going to the court after the contract has been completed.
It is in order for the work to flow and for the contract to continue that such arbitration is placed on the face of the Bill. If that form of adjudication is not in the contract, as my noble friend said, one must rely on the scheme for construction contracts, which is much more draconian, as I indicated. I know that it is wrong to try to muddle the words "adjudication" and "arbitration" but when I read the scheme—I found great difficulty in doing so—to my untrained mind it was almost a form of arbitration. It would be much more difficult to reopen it at a later date. The scheme is the quick resolution. If what is in the contract is what is required in the Bill, I understand that it can be reopened by arbitration after the contract has ended. However, it is not like the scheme, which would be the fall-back position.
Lord Berkeley: I do not know whether I have understood the Minister. Whether or not the adjudication is binding depends in the first instance on what is written in the contract. However, whatever is written in the contract, if it is not binding, adjudication

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or some other resolution of disputes cannot be opened until substantial completion, as the noble Viscount, Lord Ullswater, said. Am I correct in that interpretation?
Lord Lucas: I shall certainly write to the noble Lord if he is wrong. I believe that he is right and I believe that an award which could be reopened immediately would not be a conclusive adjudication and would not fall within the terms of the Bill as I understand it. I shall certainly write to the noble Lord if there is any doubt about that.
Lord Williams of Elvel: Would the Minister be good enough to copy the letter to me and to the noble Baroness, Lady Hamwee, and my noble friend Lord Howie of Troon, setting out what on earth the Government mean by the provision? I really do not understand it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Hamwee Baroness Hamwee moved Amendment No. 161:
Page 60, line 41, leave out subsection (4).
The noble Baroness said: I had not realised that the amendment would be so topical. In moving Amendment No. 161 I shall speak also to Amendments Nos. 191, 192, 193, 194 and 197.
Amendment No. 161 seeks to delete the reference to the Arbitration Act 1996 in Clause 105. Seeing it at that point I stumbled and wondered whether it might more appropriately appear in Clause 111. However, having listened to the previous debate, I am not sure whether it should be there at all or whether it should be there and strengthened. It may not be wise to take up much of the Committee's time pursuing that matter because underlying issues need to be resolved first.
Amendment No. 191 in Clause 111 seeks to change the subject matter of the clause. Clause 111(1) allows the Minister to:
"make a scheme & containing provisions about the matters referred to in the preceding provisions of this Part".
The term "matters" appears to me to include everything that has already been referred to in this part of the Bill; for instance, Clause 101, which defines a construction contract, Clause 102, which defines construction operations, and Clause 103, which deals with the exclusion of residential construction contracts. I do not believe that it is intended to allow the Minister to rewrite those provisions, among others. I have therefore sought to define the scope of the Minister's powers more strictly to what is to be the subject of the scheme for construction contracts.
Amendment No. 192 seeks to suggest that if the Minister is to have powers to make regulations regarding the scheme, we should at any rate address whether he should have similar powers to amend that scheme. I may be told that the clause contains a power to allow amendments, but I tabled the amendment in order to ask that question.
Finally—and I do not believe that this contradicts what I have just said—Amendment No. 197 seeks to provide that regulations made under the section which
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creates a scheme should be subject to approval by resolution of both Houses of Parliament. I was grateful, as I am sure were other Members of the Committee, to see a copy of the draft scheme, which according to the accompanying letter from the Minister one might call a draft draft. He refers to it very much as a first shot, which has an appealing honesty about it and recognises the difficulties that there are in creating a satisfactory scheme.
He says also that the Government intend to have both consultation and discussion before a statutory instrument is laid. The very complexity of the matter and its controversial nature seem to me to indicate that the affirmative resolution procedure will be appropriate.
I take this opportunity to ask the Minister to confirm that that consultation and discussion will be the widest reasonable consultation and discussion with all sections of the industry. Perhaps he will take this opportunity to confirm that. I beg to move.
8.45 p.m.
Lord Howie of Troon: I was rather surprised to find my Amendment No. 194 suddenly popping up. It has the effect of leaving out "Lord Advocate" and inserting "Secretary of State" for Scotland.
I raised this matter on Second Reading and my reason for doing so was quite simple. I did not believe that the Lord Advocate, estimable though he may be, was quite the man to be dabbling in construction contracts. At that time, as I recall it, the noble Lord, Lord Lucas, pointed out that the Lord Advocate was chosen because he knows about arbitration.
That did not help me very much. I know that the confusion is not as great as we thought it was, but we know that there is a confusion between arbitration and adjudication. The scheme will deal with other matters in relation to arbitration and adjudication; for example, payment and so on. I believe that the Secretary of State for Scotland, who has a department not unlike the Department of the Environment, which deals with such matters, is to be preferred to the Lord Advocate. But I leave it at that. The Government may be right. I doubt it but they may be.
I should like to say a few words about Amendment No. 161 in the name of the noble Baroness, Lady Hamwee. That seems to me a very sound, sensible and succinct amendment. I was going to speak about this issue on the debate that the clause stand part until I noticed this amendment.
This is where we get into difficulties. We must not forget that the intention of the Bill, which we applaud, is to help rather than hinder. That is the idea. Everything in it should tend towards helping rather than hindering. Sir Michael Latham wanted an arrangement whereby adjudication was followed by arbitration, for which we have argued constantly and which has been the practice followed in the construction industry since Brunel's time.
Most contracts of any size are carried out under standard conditions of contract. There are quite a variety of those established by the Institution of Civil Engineers and other groups. There are standard conditions of

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contract under which large contracts are carried out and which would almost meet the requirements of Clause 105. They could very readily be tweaked and altered in such a way that they do meet the requirements of Clause 105. Therefore, all contracts of any size in future will be carried out under standard conditions of contract which suit the requirements of Clause 105.
The noble Lord, Lord Lucas, is quite right that through the contracts, adjudication and arbitration arrangements will have been sorted out in the way that we have asked for. The problem is—and this point has been touched upon by the noble Viscount, Lord Ullswater—that smaller contracts may not be carried out under those standard conditions of contract. Under the provisions of subsection (4), the scheme will then apply to those contracts; but, as the noble Viscount, Lord Ullswater, said and as the noble Lord, Lord Lucas, admitted, the provisions of the scheme which hang over the whole of this part of our discussion like a very dark black cloud are more onerous than the conditions in standard conditions of contract.
The Government are saying that, whereas large contracts will be carried out under the standard conditions of contract, small contracts will be carried out perforce under the conditions of this scheme, which are more onerous. Why hit the small contracts when a small contractor is less able to safeguard his interests than a larger contractor? I suggest that subsection (4) should most certainly go. Later I shall suggest that the scheme should go too, but perhaps this is not the time to forecast such dire pronouncements.
Earl Ferrers: We now come to a number of detailed amendments concerning the scheme for construction contracts. That is a set of provisions which will operate when a contract fails to make proper provision for a number of matters which are the subject of this Bill. It would operate where contracts do not contain adequate arrangements for adjudication or where payment arrangements were deficient in certain respects. The scheme will be made as a statutory instrument by the Secretary of State in England and Wales and the Lord Advocate in Scotland. The draft proposals for England and Wales have already been made available to your Lordships.
Amendments Nos. 161 and 193 in the name of the noble Baroness, Lady Hamwee, would have the effect of moving the reference to arbitration law from Clause 105 to Clause 111. We know that there are some who feel that such a reference is not at all necessary, but we feel that not only is it necessary but that it also belongs rightly in the clause which deals with adjudication.
As regards the scheme-making powers to which Amendment No. 192 refers, I assure the noble Baroness that under Section 14 of the Interpretation Act 1978, the powers to make a scheme would also confer powers to amend it from time to time using the same procedures.
With Amendment No. 197, the noble Baroness raises the more important point of whether such powers should be made subject to the affirmative resolution procedure, which has been mentioned more than once today. I hope that Members of the Committee will agree that we have been quick to concede that, where we have not got it
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quite right, we are happy to make amends, and indeed amendments. I have already undertaken to return with amendments to make the powers of amendment under Clauses 102 and 103 subject to the affirmative resolution procedure.
However, the power to make the scheme for construction contracts is somewhat different. It would not be used to amend primary legislation as it currently applies; all it would be used for is to apply and, if necessary, modify certain provisions of arbitration law which would only operate within the very limited confines of scheme adjudication. It would not amend the Arbitration Bill, or the equivalent Scottish provisions—as applied to those seeking dispute resolution through arbitration—and it is not, therefore, a Henry VIII clause, which I know always frightens everyone. I can assure the noble Baroness of that. It is right, therefore, in this respect that it should not be subject to affirmative resolution.
The noble Baroness asked whether the consultation and discussion over the draft proposals would be in the widest form. I believe that I can assure her that that will be so. We have published the draft proposals because Members of the Committee were concerned to see the sort of proposals that we had in mind. They are draft proposals, and they have been sent out not only to Members of this place but also to others in the industry for consideration. They will let us have their views. It will then be up to the Government to produce draft proposals which will then be sent out for consultation before the appropriate statutory instrument is laid.
I turn now to Amendment No. 194 tabled in the name of the noble Lord, Lord Howie of Troon. It seemed to surprise the noble Lord that it was on the Marshalled List or in this group of amendments. In fact, it made him jump. Of course, I do not blame him. I understand his puzzlement as to the reason why my noble and learned friend the Lord Advocate has been nominated as the Minister responsible for making the scheme for construction contracts for Scotland. I believe that we had such a discussion on Second Reading and I thought that my noble friend Lord Lucas had dealt with it as he has dealt so excellently and clearly with all the other matters raised. However, perhaps the concentration of the noble Lord was relaxed at that moment. He needs to be convinced and I shall try to do so.
The noble Lord said that the Government may well be right. That was most generous of him. However, I happen to believe that the Government are right and the noble Lord is on the right track. Shortly put, the reason why my noble and learned friend the Lord Advocate is the appropriate Minister for the job is that he has ministerial responsibility in Scotland for dispute resolution. The Secretary of State for Scotland has no ministerial responsibility in that area. Therefore, it is entirely appropriate that my noble and learned friend should be the Minister who is to make the scheme in Scotland. I hope that that explanation is helpful and that

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the noble Lord will agree that my noble and learned friend the Locd Advocate is the correct person to undertake that particular responsibility.
Lord Howie of Troon: Yes, that explanation has helped me. In fact, it went further than I expected. It indicated the areas of responsibility upon which I was not clear. I understand that the Lord Advocate is involved in disputes, but is he also involved in payments as part of the scheme?
Earl Ferrers: If the payments are part of a dispute and disputes are the responsibility of the Lord Advocate, I presume that my noble and learned friend will be responsible for that aspect.
Lord Monkswell: In his response the Minister mentioned on at least two occasions the fact that the draft scheme—this first shot, as he described it—had been made available to Members of this Chamber. I have to advise the noble Earl that it has certainly not been made available to me. Moreover, following sight of the document by courtesy of my noble friend Lord Berkeley, I checked with the Printed Paper Office and with the Library of the House but neither department recognised the document. Therefore, could some other mechanism be found to ensure that all Members of this Chamber have sight of such documents?
I do not believe that the situation is particularly unique; indeed, we have had other Bills recently where draft schemes have been circulated. It is possible that there is a need to devise a circulation mechanism rather like that which applies to a Green Paper or a White Paper to ensure that all Members of this place have access to the relevant documentation.
Baroness Hamwee: Perhaps I may add to the questions that have been put to the Minister before he responds. Does the noble Earl have a timetable for the consultation or, at any rate, for the first stage of the process? I am not sure whether responses have been requested from the industry by a particular date. Perhaps the noble Earl can tell the Committee how he sees the process going in terms of time; and, indeed, tell us how that will fit in with the progress of the Bill. In addition, my concentration may also have been a little relaxed—to use the noble Earl's wording when replying to the noble Lord, Lord Howie of Troon—in that I am not sure whether the noble Earl responded to Amendment No. 191.
Earl Ferrers: I should like first to point out that the intervention of the noble Lord, Lord Monkswell, greatly disturbed me. It is an important document and I gave instructions that copies of it should be sent to every Member of the Committee who had spoken. I believe that my noble friend Lord Lucas signed the letters, so I do not understand what has happened. The noble Lord was either left off the mailing list, or the letter may have gone astray, which may explain why he has not received it. Instructions were also given that copies should be available in the Printed Paper Office and in the Library. I am disturbed that the noble Lord was unable to obtain a copy from those departments. As I said, I am most
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upset about the matter. The noble Lord should have received a copy of the document, but perhaps he will allow me to look into the matter to ascertain what happened. I hope that the noble Lord will accept my apologies for the fact that he has not been in receipt of the document.
The noble Baroness wanted to know about the progress of consultation and the relevant dates. I believe that the results of the consultation will probably appear after Royal Assent. Clearly one has to leave a certain amount of time to allow people to react to the documents. Therefore, the response is not likely to be available all that soon.
As regards Amendment No. 191, I should point out that this amendment would fundamentally change the nature of the Secretary of State's powers. It would mean that the provisions of the scheme could override any arrangements parties had freely entered into by contract, even where they met the statutory requirements laid down in Part II of the Bill. I believe that that would go too far. The purpose of the scheme is to supply provisions which can be used where matters are not adequately dealt with in the contract. It is not our intention to go further than is necessary to achieve the minimum statutory safeguards, as the amendments would do. That is the reason why we are not too keen on the amendment. However, I can assure the noble Baroness that her concentration was not relaxed at that moment. Indeed, I believe that my concentration was not as fine tuned as it might have been in that I failed to reply adequately to the amendment. I can only apologise for that omission.
Baroness Hamwee: I am not sure that my concentration has been entirely engaged and, indeed, perhaps not my intellect. I do not really understand the Minister's response. I was trying to limit the Secretary of State's power by the amendment. However, we have debated the issues for quite a long time and I shall not, therefore, press the matter.
9 p.m.
Lord Howie of Troon: I am very grateful for the Minister's helpful remarks with regard to the Lord Advocate. However, I think he helped me in an area where I did not need help at all. He said that the Lord Advocate had a significant role here because the question of payment would be part of a dispute. He will see that Part II relating to payments is not about disputes. I think I am right in saying that it is about ordinary payments in the course of the contract. Since it is not about disputes, it is none of the Lord Advocate's business and should happily be handed over to the department of the Secretary of State for Scotland.
Earl Ferrers: I know that the noble Lord, Lord Howie, is very keen on pushing this all over to the Secretary of State. He probably knows far more about Scottish law than I do, but it has its own peculiarities and idiosyncrasies and I am advised that this slots well into the responsibilities of the Lord Advocate and does not slot into the responsibilities of the Secretary of State. If the noble Lord says, "Well, there is a difference

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between payment and adjudication", I dare say there is, and I shall certainly look at the point, but I assumed that his argument ,was tied up with the fact that the arbitration or adjudication also depended upon payment. If it depends upon payment, or if the payment is dependent upon the result of the arbitration or adjudication, that falls within the responsibility of the Lord Advocate. I will, of course, make sure that I have not misdirected myself and have not informed the noble Lord incorrectly.
Lord Monkswell: Perhaps I could thank the Minister for his words of apology and his obviously serious intention to look into the situation of my not having received the document and its not being available to the House as he thought it should be.
Is it sensible for Parliament to complete its consideration of this Bill and for it to be passed for Royal Assent when we do not have responses from the industry on the scheme that is being drafted? I ask the Minister whether it might be useful when circulating this draft to ask the industry for at least an interim response in time for Parliament—whether it be this House or the other House—to have in front of it a report from the Government on the industry's response to the draft scheme.
Earl Ferrers: I think the noble Lord, Lord Monkswell, is slightly confused. In order to assist people, we have provided the draft proposals for their consideration. That is not necessarily an obligation upon us but we have done it. We cannot put the substantive proposals out for consideration until the Bill is passed into law because we have no statutory right to do so. It has to be after the Royal Assent that the statutory requirement to produce the proposals for discussion is undertaken. For that reason, it would be wrong to delay this matter, because it is only with the passing of the Bill that the Government will have a statutory obligation to put the proposals out for consultation.
Baroness Hamwee: I am delighted to hear that the Minister regards the power to make regulations as an obligation to consult. I do not think that is what the Bill says but I am very pleased to read it that way. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 162 and 162A not moved.]
On Question, Whether Clause 105 shall stand part of the Bill?
Lord Williams of Elvel: I put my name to a clause stand part debate on the understanding that I fully comprehended what Clause 105 was meant to say. However, after our debates in Committee, I have at the moment no idea what Clause 105 is meant to say, nor have I any idea how that clause will appear when the Bill is finally enacted. It is rather difficult to oppose the proposal that the clause should stand part when I do not understand the clause.
Lord Lucas: In order to assist the noble Lord, Lord Williams, in opposing this clause on a future occasion, I will certainly arrange for a letter to go to him and
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to others who have expressed an interest in this clause in order to put them in a better position to oppose it at Report.
Clause 105, as amended, agreed to.
Clause 106 [Entitlement to stage payments]:
Earl Ferrers Earl Ferrers moved Amendment No. 163:
Page 61, line 4, after second ("to") insert ("payment by instalments,").
The noble Earl said: Perhaps I may also speak to Amendments Nos. 165 and 169. These are grouped with Amendments Nos. 164 and 166 to 170.
Since the Bill was published, the point has been made many times that the construction industry understands the term "stage payments" in a much narrower way than was intended by its use in Clause 106. The Bill is intended to give the right on longer contracts to payment by instalments, by stage payments, or by any other kind of periodic payment. We do not wish to restrict the right to "stage payments" only in the very specific terms understood by the industry. This was an error and we apologise for the confusion caused. I therefore commend to your Lordships Amendments Nos. 163, 165 and 169.
As the noble Lord, Lord Williams of Elvel, will have perceived, again we have been a listening Government and have listened to the concerns of people.
Lord Howie of Troon: I have two amendments in this group which stand in my name, Amendments Nos. 164 and 170. I need not detain the Committee for any length of time because they are more or less in agreement with the amendments just spoken to by the noble Earl, Lord Ferrers. I welcome those amendments of his and would merely say that they would be slightly improved if my words were added to his words. Then he and I could be in greater harmony than we usually are.
On Question, amendment agreed to.
[Amendment No. 164 not moved.]
Earl Ferrers Earl Ferrers moved Amendment No. 165:
Page 61, line 4, at end insert ("or other periodic payments").
On Question, amendment agreed to.
Baroness Hamwee Baroness Hamwee moved Amendment No. 166:
Page 61, line 8, leave out second ("is") and insert ("was before the commencement of the work").
The noble Baroness said: This amendment seeks to inquire at what stage the parties should have agreed that the duration of the work is estimated to be less than 60 days. I can envisage a situation where, when the parties start off, the work is estimated to last a particular length of time, but as it goes on it is accepted that the contract is slipping—that is understood by both parties—and therefore they may be forced to agree on how long the work is likely to continue. It is a minor point but I did not understand whether that agreement as to the duration of the work should be reached before the work starts or whether it can be reached at any time. I beg to move.
Earl Ferrers: We would not particularly wish to limit the circumstances in which parties could agree that the

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work would last for less than 60 days. I do not think that there appears to be much benefit to anyone in doing so. If a party were being bullied into waiving the right to periodic payment by agreeing to an unreasonably short duration, he may simply refuse to agree. In the same way an employer may secure his position by making sure that a sensible period is specified in the contract. I do not think that the amendment of the noble Baroness would be of great assistance.
Baroness Hamwee: I might understand that reply if I read it when my intellect is less relaxed. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 167 and 168 not moved.]
Earl Ferrers Earl Ferrers moved Amendment No. 169:
Page 61, line 10, leave out ("stage").
On Question, amendment agreed to.
[Amendment No. 170 not moved.]
Clause 106, as amended, agreed to.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 171:
After Clause 106, insert the following new clause—
SCHEME FOR TRUST FUNDS: REPORT BY TI1E SECRETARY OF STATE
(". The Secretary of State shall submit a report to both Houses of Parliament within 6 months of the passing of this Act on proposals for a scheme for trust funds.").
The noble Lord said: This is a simple probing amendment to see where we are on trust funds. As the Committee will be aware, trust funds were in some respects an essential part of the Latham Report. My understanding is that agreement has not been reached between various participants in the industry, and therefore what Sir Michael Latham proposed in his report has not come to pass. The object of my amendment is simply to ask the Government where we are at the moment on trust funds and where we might be going in the future. I beg to move.
Earl Ferrers: The concept of trust funds is contentious in the construction industry. Despite repeated efforts by senior representatives of the industry over a long period, no workable scheme has emerged which can command any agreement within the industry. If no solution has come forward by now, we can be fairly confident that none will in the foreseeable future.
There are several problems. The first is that trust funds may fundamentally alter the cashflow of contractors in that sums of money will have to be set aside regularly to maintain and to replenish the fund, and they will therefore be unusable while they are in the fund. That is a prospect which is attractive neither to clients nor to most contractors simply because it is expensive to have considerable sums of money lying idle. The construction industry always has considerable cashflow difficulties and if one locks away a certain slice of cash into a trust fund that may exacerbate the difficulties with which businesses have to deal.
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The Government are not convinced that trust funds are consistent with well established practice in respect of insolvency. Parliament has agreed an order of creditors if a company is liquidated under the Insolvency Acts. Trust funds would change that order by ring-fencing payments owed on construction contracts from the main assets of the insolvent company. That may be very convenient for the unsecured creditors who are on construction contracts but it would be very much less acceptable to secured creditors who are claiming on a depleted stock of assets.
I understand the reasons that people think it would be a good idea to have a trust fund. But the fact is that it would make certain sums of money unusable by the industry which is always short of money. It may create its own forms of financial difficulties to industries, and it is not acceptable by the industry as a whole. Therefore we have decided not to proceed with it.
9.15 p.m.
Lord Williams of Elvel: I am grateful to the noble Lord for that response. Do I understand that the Government now say that not only is there no agreement within the industry and therefore at present there cannot be any trust funds, but also that the ranking of creditors would be so destroyed by such a trust fund arrangement that the Government themselves are setting their face against trust funds even if there were an agreement in the industry?
Earl Ferrers: We are saying that we do not want to legislate on this issue unless there is agreement within the industry. One of the reasons why there is no agreement is that the industry, which is much concerned with cash flow, will find that deflecting some of its funds into a trust fund will exacerbate the problems of financial viability within the industry. We would not wish to see that happen.
Conditions may change; an industry may find this a good thing to do. But to remove willingly, by legislation, certain sums which are applicable to various contractors and to put them to one side exacerbates rather than ameliorates the problems of the industry.
Lord Williams of Elvel: I understand those arguments. However, the noble Earl put forward a further argument about the ranking of creditors. I understand about the ranking of creditors. If I understood the Minister correctly, he said that if trust fund arrangements were agreed certain funds would be put aside to the disadvantage of other creditors. That means that the Government are not prepared to see a trust fund arrangement even if industry were to agree. As I understood it, that is what the noble Earl said. I may have got it wrong.
Earl Ferrers: I do not believe that the noble Lord is far wrong. There are the Insolvency Act procedures. If a firm goes bust, the Insolvency Act procedures work. If one has ring-fenced a sum of money, other people would be disadvantaged.
Lord Williams of Elvel: I know all about that. To get it absolutely clear, the Government do not want to

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disturb the procedure of insolvency legislation. We have to conclude that even if—it is unlikely—the industry on all sides were Lo agree that trust funds were necessary, the Government would say, "No, we cannot accept on the basis of the Insolvency Act". I fully understand. I am now clear on the subject, but I wished to have that completely and clearly on the record.
Earl Ferrers: The noble Lord keeps saying that he quite understands everything I say; I am so glad he does. He is correct that if all the industry were to say, "Yes, we want this", the Government would still have very grave reservations about introducing the provision.
Lord Williams of Elvel: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 107 [Dates for payment]:
Baroness Hamwee Baroness Hamwee moved Amendment No. 172:
Page 61, line 17, leave out ("an adequate") and insert ("a").
The noble Baroness said: The amendment is grouped with Amendment No. 173. Amendment No. 172 seeks to delete the description "adequate" from the mechanism for determining payment. What is the test for determining whether the mechanism is adequate? Is it an objective test? If the parties agree that the mechanism is adequate, why does it have to be described as adequate? It would merely be an agreed mechanism. Does some third party determine that the mechanism is adequate or inadequate? To the extent that that third party considers it inadequate, will he impose the provisions of the scheme? I seek to ask how the mechanism will work in practice. I beg to move.
Lord Howie of Troon: Amendment No. 173 is grouped with Amendment No. 172 and deals with the issue of adequate mechanism. The Bill gives no description of either adequacy or mechanism. My Amendment No. 173 attempts to remedy that defect in the Bill.
The mechanism relates to the amount of payment due and when it is due. Without defining the mechanism, the Bill lacks any objective standard that might be applied to it. Presumably the object of the clause is to ensure that at any time a party to a construction contract can establish a debt. Without such a debt being established, there is no prospect of legal action to recover outstanding moneys, and many of the proposed remedies set out in the Bill may prove ineffective.
It is essential that the constituent elements of an adequate mechanism should be set out in legislation and not left—perhaps to the scheme, who knows? Without these elements the avoidance of payment provisions will be a simple task for any unscrupulous contractor who seeks to delay payment. The Bill should include a description at least of the elements of an adequate mechanism. My amendment attempts to set out what those might reasonably be.
Earl Ferrers: The noble Baroness was concerned about what would be considered "adequate" in a payment mechanism. A payment mechanism will be considered
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adequate if it is successful in determining the amount of the payments and when they become due. Some idea of adequacy is important. If the mechanism failed in either of those tasks it would be considered inadequate, and the relevant procedures in the scheme for construction contracts would apply instead.
It would be unwise to be too prescriptive as to what constitutes adequacy. Compared to many of the payment arrangements about which we hear at the moment, simply clarifying the amount and the time of the payment is a big step forward. Other refinements would complicate matters and constrain contractual freedom.
Amendment No. 173 tabled by the noble Lord, Lord Howie, for example, spells the matter out in fairly good detail. However, it could be taken to read that the intervals between payment should all be the same length and that payment dates should be specified in the contract. Both of those run counter to many modern payment regimes. It would also require the payee to be notified of the amount due to him before the expiry of the payment interval, and that is far too tight for many standard contracts. Such a detailed description of adequacy would need to be perfectly right to be workable, and there is no perfect answer for all types of work and all types of contract. We want to see that payment is made, that the timing is known, and how much it will be.
Baroness Hamwee: I take the Minister's point about what the subject matter should be. But is he suggesting that under Clause 107(1), if the parties fail to agree, it means that the mechanism has been inadequate and therefore the scheme for construction contracts will kick in? That seemed to be the logic at the beginning of his reply to the amendment.
Earl Ferrers: I am not sure that I follow the noble Baroness quite as well as I should do. It may be that my intellectual mechanism has slowed up, too. Certainly, the parties are free to agree how long the period is to be between the date on which a sum becomes due and the final date of payment. That is in the Bill. As I understand it, the noble Baroness is concerned that, if the parties do not agree on that, this provision should operate. I believe that is so. The whole purpose of a contract is that it should include what payments are to be made and when they will be made—on the first of the month, every two months, or whatever it may be, and that people should be notified in advance of the sums of money they can expect. If the contract does not apply that provision, and if there were a dispute, this part of the Bill could come into operation.
Baroness Hamwee: The Minister is making my argument for me, which means that what we are talking about is a mechanism rather than an "adequate" mechanism. I am still unclear as to how one can judge whether it is "adequate". It seems to me to he almost irrelevant. Either it is a mechanism or it is not. I shall not press the matter further at the moment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Howie of Troon Lord Howie of Troon had given notice of his intention to move Amendment No. 173:
Page 61, leave out lines 21 and 22 and insert—
("(1A) The constituent elements of an adequate mechanism as set out in sub-section (1)(a) above are as follows—

(a) construction contracts shall specify the payment interval;

(b) the payment interval shall commence when any work under the contract commences;

(c) the due date for payment shall be the date of expiry of the payment interval;

(d) the final date for payment shall be stated in the construction contract; and

(e) contracting parties shall be advised in writing by the due date of the amount and the basis of the assessment of the payment to be made to them.").

The noble Lord said: The noble Earl, Lord Ferrers, may be correct in saying that Amendment No. 173 is prescriptive. So it is; that was the idea. I can see that he may not want it in the Bill. The Bill merely says an "adequate" mechanism. That is a fairly flimsy way of legislating. It refers to the scheme, and if the noble Earl remembers, we spoke a little earlier about the payment part of the scheme, which seems to have been forgotten.
The payment part of the scheme is also flimsy. It is just feasible that the payment part of the scheme may not be thought adequate by some pettifogging Scots lawyer. A little further thought must be given to this part of the Bill. I do not intend to press the amendment and I shall not move it.
[Amendment No. 173 not moved.]
Clause 107 agreed to.
Clause 108 [Notice of intention to withhold payment]:
Lord Howie of Troon Lord Howie of Troon moved Amendment No. 174:
Page 61, line 40, leave out ("award") and insert ("decision of the adjudicator").
The noble Lord said: Amendments Nos. 174 and 175 are small amendments but they are quite clear as to their meaning, and I hope that they will be acceptable.
The amendments are identical and both leave out the word "award". That is a term applied to an award by an arbitrator. Instead, the amendments insert "decision of the adjudicator". That clarifies the distinction between arbitration and adjudication which bedevils this part of the Bill and has caused some unseemly discussion in this Chamber. I hope the Minister will accept these simple and direct amendments. I beg to move.
Earl Ferrers: It is always tempting, when the noble Lord says "I hope that the Government will be able to consider this simple amendment", to do so. We always consider simple amendments, as well as difficult ones.
It is clear that the noble Lord, Lord Howie, is sensitive to the word "award" which I suspect he identifies chiefly with arbitration proceedings. It is true that the word has particular associations with arbitrators, but of course they do not enjoy a monopoly over the word. It is also frequently used in connection with other decisions, particularly where money is involved. Subsection (4) of Clause 108, where it appears, is concerned entirely with payment.
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I do not believe that the word "award" is inappropriate and the alternative suggestion does not serve so well. However, I am happy to consider the matter again to see whether we have got the right wording. If the noble Lord will be content with that, I shall ensure that that is done.
Lord Howie of Troon: I am content and I sincerely hope that the noble Lord's consideration will bear fruit in due course. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 175 not moved.]
Clause 108 agreed to.
Clause 109 [Right to suspend performance for non-payment]:
Baroness Hamwee Baroness Hamwee had given notice of her intention to move Amendment No. 176:
Page 62, line 15, at end insert—
("( ) Payment made under this Part shall be without prejudice to any right of the party making payment to claim repayment or compensation, or both, pursuant to the Scheme for Construction Contracts.").
The noble Baroness said: I do not think it would be fruitful to pursue this matter before seeing the explanation of the workings which we were promised earlier this evening. That being so, I shall not move the amendment.
[Amendment No. 176 not moved.]
9.30 p.m.
Lord Howie of Troon Lord Howie of Troon moved Amendment No. 177:
Page 62, line 16, at beginning insert ("Subject to subsection (5)").
The noble Lord said: Amendment No. 177 goes hand in hand with, and paves the way for, Amendment No. 181. As drafted, the Bill appears to assume an immediate resumption of work when work has been properly stopped following a suspension. That level of rough justice is too rough, even for the construction industry. The duration of the suspension may be easily definable but provision has to be made to cover time lost and costs incurred in demobilisation of plant and staff and then remobilisation at a later period, or perhaps, if there is an extension of time, changing from summer working to winter working, where the costs may very well be quite different. The defaulting party in this matter should be responsible for the time and for the costs. I beg to move.
Earl Ferrers: The two significant new elements here are further extensions of contractual time limits to allow for disruption and the idea that costs should be recoverable against a defaulting party. The provisions of Clause 109 permit the suspension of work but they are not intended to encourage it. Suspension should always be a last resort where one party has refused payment and has failed to give effective notice of doing so or where he has refused to comply with an adjudicator's award. If suspension happened in other circumstances, we would always expect the remaining parties to pursue their claims vigorously.

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Since legitimate suspension should only occur where conflict is serious, there are dangers in making it too easy for parties to add further elements to the dispute. Extending contractual time limits by the period of suspension might be relatively straightforward but adding further periods for consequential delays and disruption is unlikely to be a simple matter. We would not wish to stop parties pursuing extensions of time or indeed the recovery of costs if they made proper provision for that in their contract. But that is a very different matter from giving them a statutory right in those circumstances which might encourage suspension in cases where it would be by no means easy to work out the full consequences. That could lead to further litigation, the very thing which we are trying to avoid. I hope the noble Lord will realise that, although his amendment may be well intentioned, it would lead to more complications than if it were not in the Bill.
Lord Monkswell: There is a difficulty in this situation and I suggest that one should look at the matter from the other direction. The assumption is that if someone does not pay, the contractor has a right to stop work. But what would happen if one party wanted to delay the contract and cause difficulties for the other party'? Under this clause virtually the only recourse is to stop work. That stopping of work might put the contractor into difficulties, which might be exactly what the first party wants. We need to be careful about viewing from one perspective. I suspect that that is what my noble friend Lord Howie of Troon is getting at in his amendment.
Lord Howie of Troon: I did not have anything quite so Machiavellian in mind, though it is extremely interesting to have it put there by my noble friend. The noble Earl is overlooking the point that, while extensions of time are quite proper and occur frequently, they have consequential knock-on effects. It is those consequential knock-on effects with which I am hoping to deal in this amendment.
The consequential effects may be consequential on other parties. The stoppage of time of one contractor may produce adverse conditions for a sub-contractor or even a later sub-contractor, perhaps throwing him from summer working into winter working. That is easily the most obvious example of what I have in mind. I am sure that the Minister will pay close attention to my comments when he reads Hansard, as he always does. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Earl Ferrers Earl Ferrers moved Amendment No. 178:
Page 62, line 17, after ("computing") insert ("for the purposes of").
The noble Earl said: In moving this amendment I shall speak to Amendments Nos. 179 and 180. I admit at the outset that Clause 109(4) is somewhat ambiguous. Our intention was to make sure that where suspension had been properly conducted any contractual time limits, such as for the purpose of incurring penalties or winning bonuses, would be extended by the period of suspension. Several experts have pointed out to us that the clause can he react differently. The amendments
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which I have laid are designed to rectify that situation. I hope that they will meet with the approval of the Committee. I beg to move.
On Question, amendment agreed to.
Earl Ferrers Earl Ferrers moved Amendments Nos. 179 and 180:
Page 62, line 18, leave out ("for the completion") and insert ("the time taken").
Page 62, line 19, leave out first ("or) and insert ("to complete").
On Question, amendments agreed to.
[Amendment No. 181 not moved.]
On Question, Whether Clause 109, as amended, shall stand part of the Bill?
Lord Williams of Elvel: Before we leave Clause 109, I am advised by the Law Society of Scotland that it is of the view that the clause has no useful place in Scots law in view of the common law of retention and the law of unjustified enrichment which applies in Scotland. I sometimes wish that we had the law of unjustified enrichment in England and Wales.
Earl Ferrers: The noble Lord, Lord Williams of Elvel, is remarkably knowledgeable about many things. Before coming to this Committee stage I briefed myself on a number of matters but I have not done so on unjustified enrichment. I am sure that. I am rich in intellectual knowledge and that is about as far as it goes, and that does not go very far anyhow. I shall certainly look at the point and consider who is justified and who is not as regards enrichment. I shall ensure that that point is considered before the next stage of the Bill.
Clause 109, as amended, agreed to.
Clause 110 [Prohibition of conditional payment provisions]:
Lord Howie of Troon Lord Howie of Troon moved Amendment No. 182:
Page 62, line 23, leave out subsections (1) to (5) and insert—
("(1) Any provision in a contract whereby payment to a party who is required to provide construction work is dependent on payment being made by some other person is void.").
The noble Lord said: This amendment leaves out a very large part of Clause 110 and may seem somewhat severe for that reason. I shall explain why. The clause is unclear because it mixes the problems of insolvency with those of payment where no insolvency occurs. These are two separate conditions and they should be kept separate.
The main contractor can defend himself against insolvency. He should not attempt to recoup his costs from the subcontractor or from a number of them. As always, the devil is in the detail and the detail here is how the subcontractor is to know when or if the main contractor has been paid. The subcontractor is entitled to be paid for the work he has done whether or not the main contractor has been paid for the work he has done.
I know that the big contractors do not care for this amendment and they have a problem. Insolvency is a serious matter and if it is to be dealt with in the Bill, as it probably should be, this is not the place to do it. The Bill should leave payment and insolvency as separate

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matters. The clause should be split in two to indicate that it deals with two quite separate and disparate matters. I beg to move.
The Deputy Chairman of Committees (Lord Ampthill): I remind the Committee that if Amendment No. 182 is agreed to it will not be possible to move Amendments Nos. 183 to 189.
Lord Williams of Elvel: My noble friend's Amendment No. 182 is grouped with Amendments Nos. 185 to 189. Referring to Amendment No. 185, my noble friend has rightly pointed out the problems of the insolvency provisions in Clause 110. I accept that it is an extremely difficult and complicated matter. As drafted, the difficulty with the Bill is that sub-contractors and sub-sub-contractors down the line may well suffer undeservedly if the contract between the main contractor and his client cannot be fulfilled. This was the purpose of the trust funds originally proposed by Sir Michael Latham in his report. I understand what has been said about trust funds, but there is a problem about insolvency. I agree that this matter is subject to the insolvency Act, but I believe that my noble friend has a serious point in arguing that the matter should be thought through more carefully. For instance, if there is a case of insolvency it may be sensible for the insolvency practitioner—the receiver or whoever winds up the company—to be required to allocate certain funds as a matter of prior credit, rather than unsecured low-ranking credit, to the sub-sub-sub-contractors down the line. This may require an amendment to the insolvency Act. I do not believe that the Bill has yet got it right. I do not have a ready-made solution to the problem, but I believe that it has to be thought about again.
As far as concerns Amendment No. 189, I have always believed that subordinate clauses should contain verbs. This particular subordinated clause has no verb and my amendment proposes to insert one.
Lord Lucas: I should like to speak to the amendment moved by the noble Lord, Lord Howie of Troon, and the amendment spoken to by the noble Lord, Lord Williams of Elvel. In so doing, I should like to speak also to Government Amendments Nos. 186 to 188. The most substantial of the amendments are Amendments Nos. 182 and 185. They stem from a desire to abolish completely the effectiveness of pay-when-paid and pay-if-paid clauses when they appear in contracts. I have much sympathy with this. We are already going a long way to rid the industry of the wholesale application of such measures.
Nevertheless, there appear to be limited circumstances where, if parties have agreed to a pay-when-paid clause in a contract, it should be effective. Such circumstances are, fortunately, not only limited but very rare. I refer to the situation where payment at the top of the chain is withheld by reason of a party's involvency. If parties have signed up to a contract where such an event is enough to defer payments lower down the chain, we believe that the relevant provisions should he honoured. Risk-sharing is
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not uncommon in the construction industry. Parties regularly make contracts where risk is a consideration; and risk is also a factor of business life. While it is likely that many smaller contractors may be persuaded to bear some risk in order to win a contract, that is not necessarily a bad thing. At least under the arrangements that we propose here it will be impossible to enforce pay-when-paid unless it is clearly part of the contract.
At the moment we believe that many larger contractors simply use the excuse that they have not yet been paid in quite unjustified situations and without any contractual basis. Such practices must cease. Perhaps I should also add that in agreeing that a pay-when-paid clause may operate in the event of insolvency, a party would not be signing away all rights to payment. It would merely mean that the insolvency rules operate in the normal way, and the parties would have to recover their money accordingly. I hope that I have said enough to persuade both noble Lords respectively to withdraw or not move their amendments.
Amendment No. 186 in the name of my noble friend Lord Ferrers is in a similar category. Part III of the Insolvency Act 1986 refers to a "receiver or manager" and it is right that Clause 110(2)(b) follows the same wording.
Amendments Nos. 187 and 188 are intended to clarify the criteria for insolvency used here. Chapter I of Part III of the Insolvency Act 1986, which applies to England and Wales, largely supplies the wording used in subsection (2)(b). Chapter II, which applies in Scotland, refers to the appointment of a "receiver". These amendments are required to leave no doubt that such an event would qualify as insolvency under the terms of Clause 110. I hope that Amendments Nos. 186, 187 and 188 will meet with the Committee's approval.
I hope that the noble Lord, Lord Williams, will feel able to move Amendment No. 189 when we reach it, not least because my noble friend Lord Ferrers has some particular comments that he would like to make on it.
9.45 p.m.
Lord Berkeley: I should like to make a few comments in support of the suggestion made by my noble friend Lord Howie that the pay-when-paid clause should be separated from the pay-when-paid insolvency clause. Even with the amendment to line 25 which changes "void" into "ineffective", to me it reads that pay-when-paid clauses are ineffective unless the third party has gone into liquidation. The insertion of a full-stop there and a new paragraph might help. I believe that the intention is that the pay-when-paid clauses should be ineffective, "full-stop". We should then go on to talk about what happens when the third party becomes insolvent.
Lord Howie of Troon: I confess to being somewhat reassured by the comments of the noble Lord, Lord Lucas. He seems to be apprised of the dangers of pay-when-paid and all such things. I strongly welcome the remarks of my noble friend Lord Berkeley who supported my belief that the issue of payment as a whole should be considered separately from payment in conditions of insolvency. However, we have reached

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that point in the Bill when what I shall do is look carefully in Hansard at what the noble Lord, Lord Lucas, said, and see what happens when we come to the Report stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Earl Ferrers Earl Ferrers moved Amendment No. 183:
Page 62, line 25, leave out ("void") and insert ("ineffective").
The noble Earl said: I shall speak also to Amendments Nos. 184 and 190. Amendments Nos. 183 and 190, and Amendment No. 184 tabled by the noble Lord, Lord Williams—I beg the noble Lord's pardon for suggesting that I will move it, because that is for him to do—are all concerned with the word "void" as it appears in Clause 110.
I understand that the clause is a problem in Scotland. I have no doubt that the noble Lord, Lord Williams, has been told that by—who else but the Law Society of Scotland. I gather it causes a problem where a contractual clause cannot become void. It is either void from the start or it is not. The meaning that we intended to convey here is ineffective. My Amendments Nos. 183 and 190 would make that substitution and so rectify the position.
The noble Lord wishes to put in the word "unenforceable". I dare say that there is not much to choose between the two words. One might say that it was six of one and half a dozen of the other; but in this case I believe that it is seven of one and five of the other because we have our amendment down in two places and the noble Lord has his amendment down in only one place. I beg to move.
Lord Williams of Elvel: Just because the amendment is down twice does not mean to say that it is right. It is twice wrong.
The noble Earl is right. I have been advised by the Law Society of Scotland. But it is generally true, not only in Scotland but in England and Wales and probably Northern Ireland too (though I do not know about Northern Ireland), that a statutory provision cannot make a contractual provision void but at the same time impart efficacy to those conditions in certain circumstances.
A void term or condition is void ab initio and is merely an apparent condition; but in fact once it is declared void it has no legal existence or effect. Using the word "ineffective" does not seem to me to solve the problem entirely. I am advised that the word "unenforceable" is the right word, not only in Scotland but elsewhere.
I leave the matter at that. It is for the noble Earl to reconsider whether the Law Society of Scotland is right, the Scottish Office is right or I am right.
Baroness Hamwee: Is the Minister suggesting that if Members of the Committee put every amendment down three or four times, they would win the point?
Earl Ferrers: I was merely trying to point out that the noble Lord, Lord Williams, for once was lacking his normal perspicacity because he had not realised that it
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was necessary to put the amendment down twice and had put it down only once. If the argument against using the word "void" once is wrong and holds water, then the argument for putting the amendment down twice equally holds water. I believe that the noble Lord made an error in putting down his amendment once. That is why I thought that we had scored some Brownie points by putting it down twice.
Of course, I shall consider the words of the noble Lord, put forward as they were with the authority of the Law Society of Scotland. I do not suppose there is a great deal of water between the two words, if one can put such a thing between two words, but we all know what we intend. I shall certainly look again at the matter.
On Question, amendment agreed to.
[Amendments Nos. 184 and 185 nor moved.]
Lord Lucas Lord Lucas moved Amendments Nos. 186 to 188:
Page 62, line 31, leave out ("and") and insert ("or").
Page 62, line 32, after ("under") insert ("Chapter I of").
Page 62, line 32, at end insert (" or the appointment of a receiver under Chapter II of that Part,").
The noble Lord said: I spoke to these amendments with Amendment No. 182. I beg to move the three amendments en bloc.
On Question, amendments agreed to.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 189:
Page 63, line 2, after ("he") insert ("grants").
The noble Lord said: I have spoken to this amendment. I beg to move.
Earl Ferrers: When I saw this amendment, I could not think why the noble Lord had tabled it. I could not believe that it was necessary. I was not sure whether it was a frivolous amendment, a probing amendment or that he was just trying to be unusually awkward—I did not believe that that was likely because the noble Lord is not usually awkward. But I wondered whether I should come up with an unusually robust response.
I know that the noble Lord is an assiduous reader of Bills. I commend him on that. All of a sudden the light at Damascus hit me and I realised that there was a mistake and the noble Lord, Lord Williams, had found the mistake. I congratulate him on that. If I were to write a report on the noble Lord, rather like a headmaster at the end of the term I would say that he concentrated, was industrious and was sometimes right. On this occasion the noble Lord is right and I am happy to accept his amendment.
On Question, amendment agreed to.
Earl Ferrers Earl Ferrers moved Amendment No. 190:
Page 63, line 7, leave Out ("void") and insert ("ineffective").
On Question, amendment agreed to.
Clause 110, as amended, agreed to.
Clause 111 [The Scheme for Construction Contracts]:
[Amendments Nos. 191 to 195 not moved.]
Earl Ferrers Earl Ferrers moved Amendment No. 196:
Page 63, line 19, at end insert—
("( ) Where any provisions of the Scheme for Construction Contracts apply by virtue of this Part in default of contractual provision agreed by the parties, they have effect as implied terms of the contract concerned.").
The noble Earl said: The amendment aims to ensure that where the scheme for construction contracts operates, the relevant provisions will become an implied term of the contract concerned. That simply means that if the scheme's provisions are used they will have the same force as though they were written into the contract in the first place and parties may rely on them in the same way. That had been intended from the outset and we believe that an amendment is required in order to leave no doubt about the matter. I beg to move.
On Question, amendment agreed to.
[Amendment No. 197 not moved.]
On Question, Whether Clause 111, as amended, shall stand part of the Bill?
Lord Howie of Troon: When my noble friend Lord Williams and I recently visited the Minister, I said that I was tempted to place the draft scheme as an amendment to the Bill in the form of a schedule. My reason for doing so was to give the Committee an opportunity to discuss the scheme and possibly to amend it. I promptly realised that the noble Earl did not fancy that idea at all. Being the kind of person I am, I revised my opinion. Instead of tabling the scheme as an amendment, I decided with my noble friend Lord Williams to oppose the Question that Clause 111 shall stand part of the Bill.
Much of what I am about to say covers old ground over which we have trawled once or twice today. However, it is none the worse for that and it is worth repeating. We have all agreed that the draft scheme is more draconian than the ordinary contract. It is also much closer to arbitration than it is to adjudication. The reason for that is simple. So far as I can see, parts of this scheme have been lifted wholesale from the Arbitration Bill and shoved into the scheme. That is a convenient way of doing things. Just as the Government plagiarised the tax Bill for Clause 102, so they plagiarised bits of the Arbitration Bill for the scheme.
The difficulty with the scheme, which is more draconian than other arrangements, is that it will apply only to small contracts—the large contracts will operate under the standard conditions of contracts—and relatively informal contracts such as those not in writing. That is because the normal standard contracts will have been adjusted and amended to suit the requirements of Clause 102. For that reason, the weight of the scheme will hear most heavily on the small contractors and the small contracts and therefore the people least able to look after their own interests.
This is not the place to try to amend the scheme but the Bill should make clear, probably in Clause 29, that the adjudicator is not an arbitrator—and I repeat "not". I believe that the scheme is misconceived because it creates a final and binding arbitration with unreal time
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constraints instead of a quick enforceable decision which might be described, and has been described, as "pay now, argue later".
Clause 36 of the scheme seems to suspend the timetable while a court deals with the points of law. Again, that is part of an arbitration process and not an adjudication process. It also destroys entirely the idea of the quick fix which adjudication is intended to provide and which was, it will be recalled, the intention of Sir Michael Latham in his report.
The scheme is far too long. It takes several pages to appoint an adjudicator, quite apart from anything else. If one looks at the ICE sixth edition of the Standard Conditions of Contract, it can be seen that it covers the whole gamut of design, construction, contract management, payment, dispute settlements and much more in only 71 clauses with conciliation, which is much the same as adjudication, in one single subsection of 14 lines of text.
The scheme takes 66 clauses to do what the Institution of Civil Engineers does in 14 lines. And we know that many more contracts will he carried out under the sixth edition than under the scheme.
The scheme was no doubt conceived with the best intentions but it is really a monster. The Government should think again and withdraw it. I oppose the Motion that Clause 111 shall stand part of the Bill.
10 p.m.
Lord Williams of Elvel: I also oppose the Motion that Clause 111 shall stand part of the Bill for similar reasons to those given by my noble friend Lord Howie. From what we have seen so far of the scheme, it is complex, difficult to understand, confuses arbitration and adjudication, has far too many clauses, and needs serious pruning if it is to make any sense.
The idea that any scheme such as the draft that we have seen should be put into regulations is monstrous. As my noble friend said, at one point we had intended to table the scheme in draft as a new schedule to the Bill. That would have provided an opportunity to discuss it. Under the procedures of the House, it would have been possible to amend the new proposed schedule which would have enabled us to have a debate at least on some of the major points. But the more we thought about it, the more we decided that if we followed that procedure it would take up the time of this Committee not only for the whole of this evening and possibly the night but also tomorrow. We did not feel that my noble friend the Opposition Chief Whip would thank us very much if we went on through the night discussing the scheme in relation to construction contracts.
I know that the scheme is in draft but in its present form it is a bad document. In many cases it is also irrelevant because it addresses only certain points which obviously need to be addressed. But there are many matters which the scheme should cover. When we discuss the regulations—and I shall ask the Minister what he intends to do about such regulations—we shall make many suggestions. Unfortunately, when regulations come forward, they are in the form of a statutory instrument which we are not able to amend.

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My noble friend and I oppose the clause because we believe that the scheme is inefficient in what it sets out to do. It needs serious amendment. I hope that the result of the consultation process, which is taking place at present, will be serious amendment so that when the scheme comes forward in the form of regulations it is a sensible instrument of law.
Lord Berkeley: I support the remarks made by my noble friends Lord Howie of Troon and Lord Williams of Elvel and should like to make a few comments on the scheme for construction contracts. Perhaps it may be useful for Members of the Committee to imagine themselves in the position of a small or medium sized contractor who has heard about the adjudication procedure. He may decide to have a go at it, but will wonder whether he can do so without lawyers. He asks himself, "Can I go through this one or two month procedure without the benefit of lawyers?"
However, such a contractor will be faced with 10 to 12 pages of documentation. When he gets to Clause 61 of the scheme which states:
"Powers of the court in relation to an award … In such cases … the Arbitration Bill shall apply",
he will be completely lost. I share the view expressed by my noble friends that the scheme needs to be completely rewritten, bearing in mind how such a contractor would feel when faced with such wording.
Lord Monkswell: It is impossible for me to comment on the contents of the scheme because I have not as yet seen or read it; indeed, we have already discussed that point. However, as my noble friend Lord Williams of Elvel alluded to the mechanism of inserting the scheme on the Marshalled List by way of an amendment which could then in turn be amended, perhaps I may make a suggestion. It relates to the facility that exists to circulate documentation to all Members of this Chamber—that is, not only those who have taken part in the Second Reading debate and who have, therefore, identified their interest in a particular subject, but all Members who receive the regular paper distribution.
In the future, when the Government have such a draft scheme that they wish to present to Parliament, although not necessarily to be written into legislation, would they consider putting down what one might describe as a shadow government amendment? That would then be available for Members of this Chamber to study with the understanding that, at a later stage of the proceedings on the Bill, it would effectively be deleted by an amendment.
Earl Ferrers: I am most grateful to the noble Lord, Lord Howie, for giving notice of his intention to discuss clause stand part, even though he said that he did not agree with it. He is perfectly right; indeed, he did say that he was considering tabling all the draft proposals as an amendment. I told him, in the safest language, that that could be described as bumping along the bottom. Although they may not have been the words that I used when I spoke to the noble Lord, that was in fact what I had in mind.
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It is quite difficult sometimes to assuage the desires of Members of this Chamber. We have this scheme in the Bill and if such a provision is in the Bill, then it is perfectly clear that we are going to make proposals. Noble Lords may ask what the proposals will be and whether they can have sight of them before the Committee stage. We then try to send out some draft proposals, but as soon as we do so some noble Lords seek to include them in amendments. I do not know how one can have an amendment relating to draft proposals when the Bill is concerned with making something into law. Nevertheless, I am glad that the noble Lord, Lord Howie of Troon, took my advice and did not table the proposals as an amendment.
The noble Lord, Lord Monkswell, asked if we could have a shadow government amendment. Quite frankly, I do not see how one could have such an amendment which would later be removed. In fact, we have a Bill which is likely to become an Act of Parliament. One does not put into such Acts proposals and provisions which will not ultimately form part of the legislative vehicle.
Perhaps I may reassure noble Lords who are worried about that. I believe that we sometimes lose sight of the main objective. The Government's intention throughout the whole of Part II of the Bill is to enable contracting parties—and, indeed, to encourage them—to include adequate adjudication and payment arrangements in their contracts. The reason for all the trouble previously was that people had not done so. I see that the noble Lord wishes to intervene. I give way.
Lord Monkswell: I am sorry to intervene at what is perhaps an inopportune moment. However, the Bill as published has an "Explanatory and Financial Memorandum" attached to it which seeks to explain its background, but which will not form part of the Act when it receives Royal Assent. We already have a mechanism and it may simply be a question of extending it.
Earl Ferrers: There are historical reasons for having financial memoranda. I do not think one could suggest that putting this kind of provision in a Bill would equate with a financial memorandum.
Lord Williams of Elvel: The point that I and my noble friend were making was that it was well within the procedures of this House not to put the draft into the Bill as a schedule but to put it down as a probing amendment and to amend the probing amendment in order to express our views on particular clauses in the draft scheme. For various reasons, my noble friend and I have decided not to adopt that procedure. That is not trying to put it into the Bill; it is trying to find a mechanism to enable this Committee to focus discussion on particular points in what we regard as a defective scheme.
Earl Ferrers: I entirely see that. What I was endeavouring to do—obviously unsuccessfully—was to congratulate the noble Lord, Lord Howie, and the noble Lord, Lord Williams of Elvel, on having taken what I consider the right course to move that the clause should not stand part of the Bill.

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The reason we wanted the clause in the Bill in the first place was that for many years the trouble has existed in the industry that people do not pay their bills. It is in everyone's interests that people should pay their bills and that others should receive payment for what they have done. We want them to include in their own contracts sufficient details about this. When there is a dispute between two parties who have not put that provision in their contract, there will be something statutory to fall back upon. It is for that reason that we have this clause in the Bill, and I think it is right.
The noble Lord, Lord Howie, said that it is a monster. That is not a very attractive word for a nice piece of drafting. I will certainly see that the matter is considered.
I am distressed. I understand that the paper is not in the Printed Paper Office and I can understand the frustration of the noble Lord, Lord Monkswell. It will be discussed throughout the industry and comments will be made on the draft proposals. It is upon the comments on the draft proposals that we shall provide the proposals, which will themselves be available for consultation. I believe it is important to do this because, if we do not have something in law to help when there is a dispute, people will not be paid. I think the noble Lord, Lord Howie, said that these proposals were more draconian than the terms that appeared in normal contracts. If that is the case, that in itself will encourage people to put similar or appropriate provisions in their own contracts. If the scheme achieves that, it will have achieved quite a lot.
I hope your Lordships will agree that this is an important clause. Even if your Lordships do not approve of all the details of the draft proposals—and we shall have to see whether other people approve of them—the principle of having a position as a matter of law when people have not included appropriate details in their own contracts is, I believe, a good thing and will encourage people to ensure that their contracts are correct. I hope your Lordships will agree that this should remain part of the Bill.
10.15 p.m.
Lord Howie of Troon: "Draconian" was not my word, although I quoted it. It was used by the noble Lord, Lord Lucas, and also by the noble Viscount, Lord Ullswater, earlier in our discussions on the Bill. They were certainly correct in doing that. I followed their extremely good example in describing the draft, as I understood it. I am a little confused because the noble Earl congratulated me at one moment—which I enjoyed, as usual—but a little earlier he said that I was humping along the bottom. I did not quite know what that meant because it does not come within my usual vocabulary. However, I did not think it was intended to be totally complimentary.
There is no procedural reason of any kind whatsoever why the draft scheme should not have been put down as a schedule to the Bill to enable it to he fully discussed, and possibly amended. When we discussed this matter at
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the Ministry I gave the Minister examples of precedents where exactly this kind of thing had been done. There is nothing wrong with it at all. I know that he was a little alarmed about it because he did not want the scheme to be discussed or amended. I can see why that is the case because it barely existed. However, it is wrong that we should pass a Bill, an important part of which comprises a scheme which we cannot discuss and amend. That is wrong. I know that there are procedures which make it permissible, but that does not make it right. This is not the way to go about this matter.
The scheme should be included in the Bill as a schedule, preferably put down by the Government at a later stage, so that we can discuss it and amend it. As my noble friend Lord Williams said, if the scheme is introduced by means of regulation, we can discuss it right enough, and we can talk about it all night, but that is all we can do. We cannot amend it and we cannot change it, regardless of what advice we receive from the people to whom we talk. I do not think that Clause 111 should remain in the Bill. The Government have made a mistake and the clause should not stand part of the Bill.
Lord Berkeley: The noble Earl is quite right that many noble Lords said on Second Reading that we could not really discuss this Bill properly without having a copy of a draft scheme. We have been given the draft scheme, but what worries me is that—I believe it was in response to a question from the noble Baroness, Lady Hamwee—the Minister said that the consultation would be open until after the Bill receives Royal Assent. As this matter has already been discussed within the industry, I am fearful as regards what those in the industry will say to us who have been debating it, even before Report stage. I think they will crucify this scheme. We shall obtain a reaction from the industry and no doubt we shall have an opportunity to talk about that. But I wonder whether there is not a way of reconsidering this scheme, and perhaps having several rounds of consultation, if it is not possible to do what the noble Lord, Lord Howie, has suggested.
Earl Ferrers: I was glad when the noble Lord, Lord Howie, said that he enjoyed being congratulated. I enjoyed congratulating him. He was quite right to say that he had not heard the expression "bumping along the bottom". I believe it is an expression that sailors sometimes use when they think that their craft is not working as well as it should. In the days when they sailed boats and something went wrong, they humped along the bottom. I was suggesting that if the draft proposals had been included in the Bill we would have been humping along the bottom and that it was much better to discuss the matter under the Question of whether the clause should stand part of the Bill.
It was not a matter of my not wanting to discuss the proposals. The noble Lord wags his finger at me as if I am a sort of wicked old master, but I can tell him that the proposals are available to he discussed. However, what we do not want to do, as has been suggested, is to include them even in a schedule and set them in stone. What we want to do is to have in

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the Bill the format as it is in this clause and then put in draft proposals on how we think that should he interpreted. We go out to people and say, "This is the way in which we think that this part of the clause which Parliament is in the process of approving should be carried out; and do you agree?"
The statutory details are in the clause and not in the draft proposals. There is a duty to consult in the Bill. That can only become effective on Royal Assent. Therefore, however much we consult before Royal Assent, we still have to consult afterwards. Therefore the final version could not be in the Bill.
I hope that I can persuade the noble Lord, Lord Howie. I find it somewhat difficult to persuade him when he sets his mind on something. However, I assure him that we want to consult. We want to ensure that the legal process, the statutory wording, is correct. There is nothing new here. One has the statute saying one thing, and then the guidance or codes of practice putting the statute into effect—the flesh on the bones, as it were. That is what we do here. We are undertaking quite a lot of consultation on the issue.
It is not that we wish to bounce anyone. We do not wish to place draconian measures on anyone. We want some form of background so that when there is a dispute, if people have been unwise enough not to include in their contract some form of resolution of disputes, they can fall back on this part of the Bill. I hope that I have persuaded the noble Lord, Lord Howie, even if somewhat reluctantly, to accept that this is the right clause to have in the Bill.
Lord Howie of Troon: I am no more set in my ways than is the noble Earl. However, my objection to the procedure is quite simple. The way in which the Government have gone about the matter evades proper parliamentary scrutiny. That is what is wrong with it. I do not believe that it is the right way to go about parliamentary business.
10.22 p.m.
On Question, Whether Clause 111, as amended, shall stand part of the Bill?
Their Lordships divided: Contents, 13; Not-Contents, 9.

Division No. 1

CONTENTS

Annaly, L.

Mackay of Ardbrecknish, L

Blatch, B.

Mackay of Clashfern, L. [Lord Chancellor.]

Caithness, E.

Chesham, L. [Teller.]

Norton, L.

Ferrers, E.

Skelmersdale, L.

Howe, E.

Strathclyde, L. [Teller.]

Lucas, L.

Wynford, L.

NOT-CONTENTS

Berkeley, L.

Howie of Troon, L.

Cocks of Hartcliffe, L.

Monkswell, L.

Dubs, L. [Teller.]

Rodgers of Quarry Bank, L.

Graham of Edmonton, L [Teller]

Williams of Elvel, L.

Hamwee, B.

10.30 p.m.
The Deputy Chairman of Committees (Lord Cocks of Hartcliffe): As it appears that fewer than 30 Lords have voted, in accordance with Standing Order No. 55 I declare the Question not decided and, pursuant to the standing order, the House will now resume.
House resumed.
Lord Strathclyde: My Lords, I beg to move that the House do now adjourn.
Moved, That the House do now adjourn.—(Lord Strathclyde.)
Lord Monkswell: My Lords, we have an almost unprecedented situation where the Government have not achieved success in what may be described as a small part of the Bill. I am wondering how they will react. Perhaps I may make a suggestion as to how the Government might recoup the day in the eyes of the House.
It seems to me that there are two issues. One is the substantive question itself, which is that Clause 111 should stand part of the Bill. There was an extensive debate about the inadequacy of the scheme referred to in the Bill, but also about the lack of facility for Members of your Lordships' House to have sight of the scheme. A number of suggestions were made as to how the Government could ensure that the text of the draft scheme was put in front of your Lordships so that every noble Lord had access to it. The Government initially, prior to the current situation, appeared to suggest that they would not entertain any of the mechanisms to ensure that your Lordships' House was fully apprised of the scheme. We hope that the Government can give us a response at this point as to how they envisage the House having in front of it the scheme under discussion. That is the first substantive point.
The second substantive point is a situation which is almost unprecedented; at least it is very rare. The Government have effectively lost further consideration of the business in front of the House because there were insufficient Members present. It is only 10.33 p.m., which is not a late hour for the House. The House has on other occasions sat well after midnight with a goodly attendance. The question arises whether the Government have effectively either felt that the Bill was not worthy of their maintaining sufficient numbers to ensure that they could carry it through or, because of this stage in the Government's lifecycle, there is a tiredness on the Government Benches to support them.
It would be useful if the Government could give some indication of how they explain themselves in this situation, so that the House, at some later stage or even tonight, can consider that and respond accordingly.
Lord Williams of Elvel: My Lords, I am grateful to the noble Lord the Chief Whip for moving the adjournment of the House. As I understand it, our standing orders are such that, if there is no quorum in the Lobbies in a Division, the House must adjourn. However, as I understand it, the business that is unresolved at that point comes up as the first business on the next convenient day. I should he grateful if the

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noble Lord the Chief Whip could confirm my understanding of standing orders and the conventions relating to standing orders in the Companion. I very much hope that the noble Lord will be able to explain that my understanding is correct.
I also hope that the Chief Whip can confirm that it is up to the Government to keep a House and that it is up to the Government to ensure that enough people are around, in whatever part of the Palace may be appropriate, for the House to continue to operate as a House of Parliament. I hope very much that nothing we have achieved this evening, or nothing we have not achieved this evening, will derogate from that basic principle.
Lord Rodgers of Quarry Bank: My Lords, there will be 30,000 very disappointed registered architects tonight. They all believed that by the end of the day Part III of the Bill would have passed its Committee stage. As the noble Lord, Lord Williams, made clear, the responsibility lies with the Government Chief Whip. That should be fully understood.
It has crossed my mind that it might be appropriate, even at this late hour, not of course, because it would not be permitted, to move the six amendments which stand in my name, but at least to make the speeches that I intended to make. Then there would be some reassurance to all those 30,000 registered architects that whatever the shortcomings of Part III of the Bill it has many virtues too. That is what I principally intended to say.
I am delighted that the Government have included in the Bill, though it is something of a rag-bag, provisions for the future registration of architects. Indeed, Part III is the most important legislation that the registered architect in this country has experienced for 60 years. That is another reason why there will be great disappointment about what happened this evening.
I also believe that the important matters raised on Part II were worthy of greater consideration. I know that the noble Lord, Lord Howie of Troon, showed great restraint in not arguing more strongly and at greater length for the very many important points that he made.
I come back to what the noble Lord, Lord Williams, said in asking when we shall return to these matters. There is provision for further proceedings on Monday, but, as I understand it, that time was restricted to half the day. It would be helpful to know from the Government Chief Whip whether that time will now be extended to a full day and whether, because we have not completed the business before us this evening, the Report stage of the Bill might be postponed. I had in mind to ask the Government whether they would consider that because clearly there is such a mess over Part II of the Bill that it would be quite wrong to leave the House in its present state. If the Report stage were delayed until after the date that is at present fixed it would then be possible to put the Bill in good order. The Government could then bring it back to the House and I am sure that it would have a better reception than hitherto.
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I am sorry that it has been necessary to prolong the Sitting for a little while. This was a totally unanticipated event and a matter of the deepest regret, I am sure, to us all.
Lord Williams of Elvel: My Lords, perhaps I may explain to the noble Lord, Lord Rodgers, that it was certainly not my intention to disappoint the 30,000 architects who unfortunately have been deprived of the proceedings this evening. Perhaps I may also support him in his view about extra time, now that the Government have failed to keep a House and therefore we have to proceed, subject to the view of the Government Chief Whip, on the next convenient business day, which will be Monday anyway because we are due to take the Bill further in Committee on that day.
I was devoutly hoping to get to the end of Part III this evening and hear the views of representatives of architects and others. Unfortunately, we have been unable to achieve that. Therefore, I hope very much that the Government Chief Whip will be accommodating in allowing us a little extra time so that 30,000 architects, who are hanging on every word of the noble Lord, Lord Rodgers, and others in the House, will not be disappointed by a shortage of time.
Lord Howie of Troon: My Lords, I support the noble Lord, Lord Rodgers of Quarry Bank, in his appeal that the Report stage be delayed a little. My reason for saying that is that if it were delayed it would give the noble Earl the opportunity to let us have some idea of the results of the consultations which he told us he was already having on the famous scheme. I am sure that, with a little delay, he will be able to give us some guidance on how these consultations are going and what consequences they may have.
Lord Strathclyde: My Lords, it is a rarity for us to debate the Motion for the adjournment. However, we are suffering under what I might call "unusual circumstances" this evening because there were insufficient noble Lords in the House for a quorum and therefore we are rising somewhat earlier than we originally intended. Nevertheless, I am grateful to all noble Lords who have taken part in this small debate. I well understand the frustration that some may feel that we have not managed to go a little further with the Bill to meet our intended target.
I hope that the House will not be surprised if I do not go into any great detail about Clause 111. That is not because I am not deeply interested in it, but because those who were in the House will know that I was not present for the initial debate, which I know my noble friend Lord Ferrers dealt with in a most expert manner, aided by his and my noble friend Lord Lucas.
I have a sense of déjà vu. In 1988 or 1989, when I was dealing with the Companies Bill before your Lordships' House as a very junior Whip, against the noble Lord, Lord Williams of Elvel, precisely the same thing happened and the House was counted out. It became in my mind what I shall now call "The Williams Gambit". Of course, now, as Government Chief Whip, I should have been prepared for this. I sense that I owe the House

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an apology for not making sure that more of my noble friends were here, if not to hear the noble Lord, Lord Williams, and his friends debate this interesting Bill, then to be within the Palace of Westminster so that they could support the Government when the time came.
I can confirm that we shall re-start this Bill at the place we left off on the undecided Clause 111, and we shall do so on Monday, although I am reminded that the rule is not strictly that it should be on the next sitting day, hut at a subsequent sitting. However, as the House knows, we shall deal with this Bill on the next sitting day, which is next Monday.
I join with the noble Lord, Lord Williams, in saying to the noble Lord, Lord Rodgers of Quarry Bank, that no offence was intended, and I hope that none has been caused, to the 30,000 architects who are waiting to listen
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to the deliberations of this Committee. I am also extremely grateful that the noble Lord, Lord Rodgers of Quarry Bank, saved us from his six speeches.
I do not believe that any great damage has been done this evening. This Bill has been carefully thought through, planned for some time, and, in the hands of my noble friends when it returns on Monday for the Committee stage, I am sure that the Government will put their case as expertly as they have tonight. With a little extra support I hope that we shall be able to complete the Bill in good time so that we can deal with the final stages of the Education (Student Loans) Bill. I hope that we can now adjourn.

Australia and New Zealand Banking Group Bill [H.L.]
Reported from the Unopposed Bill Committee with amendments.
House adjourned at a quarter before eleven o'clock.