Construction Contracts (Retention Money) Amendment Bill

It’s a pleasure to rise on the third Tuesday morning in this House to speak to the Construction Contracts (Retention Money) Amendment Bill at the third reading. The ACT Party will be supporting this bill at the third reading, and it’s because we want to see a system where subcontractors, who work really hard up and down New Zealand, don’t lose out because of the work they’re doing to help in New Zealand’s residential and commercial building construction work throughout our country.

Retention money is a really interesting area of our law. Currently, a lot of people are involved in building work, commercial and residential, up and down New Zealand. People might contract on a large provider, a building company, but a lot of that work will be subcontracted. Not every single company involved in building can do everything that’s required. You’ve got electrical work, painting, a lot of fitting for gas, for example, a lot of bricklaying, and people involved in the roof infrastructure work. There’s a lot that goes into a building that not every single company can be involved with. So people bring in subcontractors to help with that work.

In many cases, although it’s not a legal requirement, money held for subcontractors to do work is withheld. It’s retention money. So somebody might end up asking for a whole roof to be put on. But part of that contract says that some of that money is withheld until a few months or years after that work is completed to make sure that it’s done at such a high quality that if there are any defects, the subcontractors will come and fix it as part of their contract. Now, this law is to say that we’re reducing the likelihood that some contractors will become insolvent. And because some of that retention money, or money that’s been withheld for that end part of the contract, has been mixed with other money or working capital for other projects—and when they go insolvent, that money doesn’t exist—it’s setting aside that money in a trust, so that when a company does become insolvent, there might be money set aside to continue to pay that subcontractor for that work that they had completed.

We think, overall, that this is a good idea, because ACT wants to support our subcontractors, who do work hard and are a vital part of our construction industry up and down New Zealand. I talk to them constantly, people who have real pride in their craftsmanship and who have a real pride in knowing that they’re actively participating and helping to grow a thriving New Zealand where everybody can have a good home and everybody can be proud of the infrastructure in which some of our businesses operate.

Now you see some beautiful new buildings and developments being set up around New Zealand for our growing industries and for our growing number of families. And people do have a lot of pride, but they also put in a lot of hard work and want to know that when they are doing this hard work and some money is going to be retained for a few months or years down the track to help pay for any defects, that money will actually be paid out if there is no problem at all.

But we did want to raise one issue which came up in the committee of the whole House last night, which I think is really important for the third reading, and it was that when we questioned the Minister about how much money is currently lost to subcontractors because retention money is withheld and people do become insolvent, the Minister couldn’t answer those questions. She also couldn’t answer how much working capital is currently tied up in construction, which is also money that should be used for retention money. She could not do the breakdown on how much money is currently being used for working capital, and, under this law, how much money therefore would be withheld and taken away as working capital by construction companies. I think it is slightly concerning that we have Ministers putting through bills in Parliament here where we don’t know the true costs and benefits of these proposals and we don’t know therefore what the clear policy benefits and the policy costs will be.

We will be supporting this bill because we do want to have a regime that supports our subcontractors, who do a lot of great work up and down New Zealand and help provide jobs for New Zealanders, help provide food on the table for their families, and help get our construction businesses up and running so that we have more homes and more buildings for our industries to work and live in. But it is concerning that we are having such a low level of scrutiny from this Government about what are the clear policy benefits and costs. We do support it through the House.

Well, thank you, Madam Speaker—ahead of time, which is very good to have; thank you very much. It’s a pleasure to speak on the Construction Contracts (Retention Money) Amendment Bill.

This bill will be helpful. I think it’s really important that we do ensure that the legal processes are in place for the retention of money and ensuring that it does go back to those people that it should do, particularly in an inflationary environment that we’re in today.

In July last year, inflation was at 7.3 percent, which is high. Actually, as of today—and I recommend the Massey GDP Live website: you can track GDP and inflation on a daily basis, and it’s actually more accurate than the Stats NZ numbers when they bring out their stats for a quarter. They actually go back later on and adjust it and it’s pretty much right where GDP Live is. As of yesterday, inflation is tracking at 7.28 percent, so it’s dropped off a little bit from July and then it’s started to track up again.

So we’re in a really inflationary environment at the moment, and one of the most vulnerable sectors to that is the construction sector, which take on contracts—often with a fixed price out to the future—and then they get caught with the inflationary pressures. So now more than ever, we need this to ensure that those people working in the construction sector are not even more disadvantaged by contracts that don’t fully cover people in the way that they were intended. So with that in mind, I commend the bill to the House.

Motion agreed to.

Bill read a third time.

I declare the House in committee for further consideration of the Digital Identity Services Trust Framework Bill.