Local Democracy, Economic Development and Construction Bill
Good morning and welcome to the fourth meeting in 2009 of the Local Government and Communities Committee. I ask members and the public, as I normally do at this point in meetings, to turn off their mobile phones and BlackBerrys.
Agenda item 1 is the United Kingdom Parliament's Local Democracy, Economic Development and Construction Bill. The committee will take evidence from the Cabinet Secretary for Finance and Sustainable Growth, John Swinney, on legislative consent memorandum LCM(S3) 13.1. We welcome: the cabinet secretary; Audrey Macdonald, the bill team leader from the construction advice and policy division of the Scottish Government; and Andy Sinclair, a senior policy officer in the referendums and elections division of the Scottish Government. I thank you all for your attendance. Do you wish to make any introductory remarks, cabinet secretary?
Good morning. With the committee's permission, I would like to do so.
The UK Local Democracy, Economic Development and Construction Bill was introduced into the House of Lords on 4 December 2008. It had its second reading on 17 December 2008, and has been debated at committee on 19, 21, 26 and 28 January 2009. Its purpose is to create greater opportunities for community and individual empowerment, strengthen local democracy, reform local and regional governance arrangements to promote economic regeneration, and improve cash flow and adjudication of disputes provisions in construction contracts.
The bill runs to 144 clauses and seven schedules. It covers a wide range of issues—as we can see from its title—and most of its main provisions are relevant only to England and Wales. However, it is suggested that two specific proposals should extend to Scotland. By virtue of the Sewel convention, those proposals are subject to the consent of the Scottish Parliament. I would like to give the committee some information on them.
The first proposal is the repeal of sections 14 to 20 of the Political Parties, Elections and Referendums Act 2000. By way of background, I should explain that that legislation was enacted following a Sewel motion that endorsed the principle of providing the Scottish ministers with enabling powers that allowed for the future option of transferring any of the functions of the Local Government Boundary Commission for Scotland to the Electoral Commission. However, the Committee on Standards in Public Life has recommended that the Electoral Commission should no longer have any involvement in electoral boundary matters. Therefore, the provisions in the Political Parties, Elections and Referendums Act 2000 should be repealed.
The power that the Scottish ministers hold to transfer boundary-making powers has not been used, and the repeal of sections 14 to 20 of the 2000 act would be in line with the principles of devolution in ensuring that Scottish local government boundaries are set in legislation by the Scottish ministers and that reviews would continue to be carried out by the Local Government Boundary Commission for Scotland. Although the powers in question have never been commenced in Scotland, a legislative consent motion is still required, as the repeal of the sections will remove powers from the Scottish ministers.
The second proposal relates to the amendments to the Housing Grants, Construction and Regeneration Act 1996. Those amendments will improve the operation of construction contracts.
The 1996 act, which regulates construction contracts, has generally worked well. It was designed to provide the construction sector, which is dominated by small and medium-sized enterprises, with effective and fair payment practices to ensure prompt cash flows and, in the event of a dispute, access to a quick and relatively inexpensive adjudication process.
It is recognised that a lack of clarity about payment and any ensuing disputes can seriously impact on the successful delivery of construction projects. As I say, the 1996 act has worked well in the main, but following extensive consultation with the industry over a number of years, it is recognised that certain improvements are required. Seven clauses of the Local Democracy, Economic Development and Construction Bill are intended to address the weaknesses in the 1996 act. They will ensure fairness by providing a more level playing field for construction businesses, especially small, local businesses. That is to be done by creating greater certainty about and clarity on cash flows for everyone in the construction supply chain.
The use of a legislative consent motion to extend to Scotland the clauses in the bill that repeal sections 14 to 20 of the 2000 act and amend the 1996 act represents a practical approach. The repeal of sections 14 to 20 in the 2000 act will remove technical sections that are not required and, as far as Scotland is concerned, are unused. The construction contracts legislation amendments are relatively minor and technical. Consultation has demonstrated the industry's support for the changes.
I was interested to read in the legislative consent memorandum that the powers to transfer to the Electoral Commission responsibility for local government boundaries
"have never been used because of the obvious tension between them and the general principles of devolution".
You mentioned that in your opening remarks, cabinet secretary. Those powers were agreed to in a Sewel motion that was passed in 2000. Why was the tension with the principles of devolution not obvious in 2000? Why did we end up in the situation that we are in?
The Political Parties, Elections and Referendums Act 2000 is a relatively new piece of legislation that put in place a host of arrangements in relation to the regulation of political parties and the conduct of elections. It has become apparent—this underpins the legislative consent motion that we are discussing—that perhaps not all of those provisions were constructed effectively to be appropriate for the circumstances. Some of the powers have had to be reviewed in the light of experience. So my explanation of why the provisions need to be changed is that they were not constructed in the right fashion in the first place. We are simply rectifying an approach that was taken but which we accept was not the most appropriate one.
I am sure that it is welcome that you are amending the failures of your predecessors in that regard.
I have a question about the construction contracts legislation, which, as I understand it, relates to payment provisions. I am intrigued by the fact that the original legislation in 1996 was, to quote the memorandum,
"designed to provide the construction sector … with effective and fair payment practices".
A review was then set up, led by Sir Michael Latham, because of
"concerns that were raised by the construction industry about unreasonable delays in payment."
The review reported in September 2004. Eight years after the primary legislation was supposed to have resolved the matter, people in the construction industry were still complaining about "unreasonable delays in payment."
The amendments to the legislation that are proposed in the bill are yet another bite at the cherry—they are supposed to deal with unreasonable delays in payment and create fair payment practices. Here we are, 13 years after primary legislation was introduced that was supposed to resolve the matter, and we are still not satisfied that firms are being paid promptly and in good time for work that they have done. That must be a particular concern in these recessionary times, with many small firms facing cash flow difficulties. Can we be satisfied that we will actually get the system right 13 years later?
I am tempted to say, "If at first you don't succeed, try, try and try again," which perhaps is also relevant to the discussion that we will have in the Parliament this afternoon.
There is a consistent aspiration in all the interventions that Mr McLetchie talked about—the 1996 act, the review that took place and the proposal before the committee—to try to ensure that we do as much as is physically possible, while being consistent with legislation, to allow companies to be paid promptly. The fact that the original intervention in 1996 has not met all our expectations in that respect justifies our returning to the issue to ensure that we are able to deliver on that commitment. I accept entirely Mr McLetchie's point that, particularly in the current economic circumstances, there must be prompt and effective payment. In circumstances where credit is so difficult to acquire, that can be the difference between success or failure for an individual business. We are not talking about trivial or peripheral issues but issues that are integral to a business's survival.
The industry has been consulted consistently about these issues and the feedback from it is that the bill is welcome and will help the process in particular areas. Not all areas of payment and contract dispute resolution are causing difficulties; some areas are performing perfectly well. However, there is an aspiration to put in place all the arrangements that will ensure prompt payment. The interventions that have been made from 1996 onwards have been genuine attempts to resolve those issues. The feedback that we have received from the industry is that it is confident that the proposals in the bill will help the situation.
As someone who had the misfortune to be on the Scottish Parliamentary Corporate Body during the construction of the Parliament building, I know a wee bit about adjudication procedures, which do not always involve the company and a client; they often involve two businesses disputing what was done and under what terms. I am sure that any progress on the matter will be welcome.
There have been a couple of instances in my constituency of difficulties with making payments, so I recognise some of the problems that have arisen. If there had not been a legislative consent motion, would you have wanted to do anything else to address the problems that companies have faced?
Arriving at the bill in the United Kingdom context has been a protracted process. We looked into whether Scottish legislation could be used to address those issues and to improve the situation. It is early in my term as a minister, so I am sure that ministers in the previous Administration looked into that, too. There was a protracted discussion with the UK Government about the best legislative format for making progress—it was perfectly co-operative; the matter just took a long time to settle. Given the dialogue that we have had with the construction industry in Scotland, we believe that the bill's provisions address the industry's aspirations to improve performance in this area. I am generally satisfied with the content of the bill. The choice was between introducing a unique bill in Scotland and using the legislative consent motion to make progress, and I think that the LCM is a convenient way for us to proceed.
There are no other questions. I thank the members for their questions and the witnesses for their attendance. Given that the report on this item will be short, do members agree that it can be circulated by e-mail for agreement?
Members indicated agreement.