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Too soon for retentions reform says minister

28 Feb Twenty-six years after the seminal Latham Report recommended reform of retention payments in the construction industry, the new minister in charge says that it is still too soon to take action.

MPs yesterday debated the use of cash retentions in the construction industry, in a Westminster Hall debate brought by Alan Brown, the SNP member for Kilmarnock and Loudoun.

He was one of several MPs seeking to bring pressure on the government to reform industry payment practices, and specifically retentions, and set out the case for reform in some detail.

Alan Brown presented his Construction Industry (Protection of Cash Retentions) Bill in 2017. Another would-be legislator, Peter Aldous – Conservative member for Waveney – also contributed to the debate, pressing for action, having seen his own private member’s bill on the topic fall last year.

Peter Aldous said: “The problem has plagued the construction industry for a long time and should really have been addressed in the 1990s when Sir Michael Latham produced his report, commissioned by both the government and the construction industry, entitled Constructing the Team. It had a significant impact on the industry and led to part II of the Housing Grants, Construction and Regeneration Act 1996, generally known as the Construction Act. Unfortunately, one of Sir Michael’s recommendations remains outstanding and has never been implemented. That relates to cash retentions being retained in a secure trust fund. Two and a half decades on, we really should now be putting right that glaring omission. It is a scar that has blighted and held back the construction industry for many years and caused personal anguish and distress to the proprietors and staff of many businesses.”

Responding for the government, the junior minister for business, energy and industrial strategy, Nadhim Zahawi, said that any legislation at this stage would be ‘premature’.

(To be fair, he has only been in the job for two weeks but he did previously support the Aldous Bill when a backbencher.)

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The minister, whose brief includes the construction industry, said: “We do not want to intervene and create perverse incentives.”

He said: “It is important that any action we take is robust, proportionate and evidence based, which is where we are at the moment. Several policy options are under consideration, including the retention deposit scheme. It would be premature to commit to anything at this stage while several policy options are under consideration.”

He added: “Unfortunately, the lack of consensus to date means that a preferred solution has not yet emerged. We will continue to work with stakeholders and I would like to think that we can get to a place where we have that consensus.”

Listening to the debate was Trevor Hursthouse, chairman of the Specialist Engineering Contractors (SEC) Group. He said afterwards: “The abuse of the retentions system has gone on far too long but I am grateful to the Members of Parliament for raising this very important issue. We know that retention abuse exists, we know it brings financial instability to our companies and we also know that the strain for some is crippling.

“I am encouraged by the minister’s commitment to reform the system and his assurances that status quo is not an option, but we still do not know when or what the government intends to do and whether they support protection of our monies with legislation and the power of public procurement. Alternative solutions to the retentions issue may or may not be found but until they are, it’s essential that funds retained are protected from entirely unjustified and unnecessary loss through upstream insolvency.”

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