Twyford Phil: Construction Contracts Amendment Bill — Third ReadingText is incorporated into the Bound VolumeTwyford Phil: Construction Contracts Amendment Bill — Third Reading[Sitting date: 20 October 2015. Volume:709;Page:7352. Text is incorporated into the Bound Volume.]PHIL TWYFORD (Labour—Te Atatū): This bill fixes an injustice in our laws in relation to the way contractors and subcontractors are treated in the construction industry. Labour supports this bill.I want first to make a couple of comments about some of the boasting that we heard from the Minister for Building and Housing in his initial contribution. He is very fond of conjuring up in his crystal ball the vast number of buildings that are going to be built. He likes to say that we are in the midst of this incredible boom—more building than ever before. But what he omits to say actually is that his signal achievement as Minister is that he has increased the build rate in the last few years—what is it—two three four times off the lowest base in living memory. His benchmark his comparator for the increase in the build rate is the depths of the global financial crisis. That is his great achievement. When he loves to talk about this huge building boom that he is claiming credit for what he omits to say is that under his watch in Auckland we are in the middle of a housing crisis and the Productivity Commission says that we currently have a shortfall of some 32000 homes built since National has been in Government. When the Minister talks about the great building boom as he did in his remarks he fails to point out that actually we are still building 2500 fewer dwellings than we need just to keep up with population growth.Hon Dr Nick Smith: Not true.PHIL TWYFORD: That is absolutely the truth. The Minister says it is not true but it is absolutely the truth. When you look at the statistics and when you look at the work of the Productivity Commission the Auckland Council and anybody else who cares to look at this it is clear—it is very clear—that the shortage of houses in Auckland is getting worse every week and it has been getting worse every week since Nick Smith became the Minister.Mr DEPUTY SPEAKER: You have made your rebuttal. Now move on to the bill please.PHIL TWYFORD: The construction industry is very important. The Minister himself pointed out that it has something like 200000 employees. It is responsible for something like 6 to 7 percent of the country’s GDP. But the problem with the construction industry is that it is plagued by a boom-and-bust cycle that guts it regularly of its skilled workers. When the industry takes a hit as it does from time to time firms like Mainzeal go under taking with them hundreds and hundreds of contractors. This bill fixes part of the problem which is the law that puts subcontractors at risk. The bill fixes that and that is great.I am going to talk some more about how Clayton Cosgrove basically cut the lunch of the Minister in actually providing the most important feature of this bill. It came out of Clayton Cosgrove’s issues paper after the collapse of Mainzeal and it came out of his Supplementary Order Paper 439. Nick Smith salvaged some integrity and credibility for this bill by basically picking up Clayton Cosgrove’s good work. The issue of retentions was I think really well illustrated by the Mainzeal collapse. Mainzeal went into receivership owing nearly $100 million—having $95 million in assets and owing $100 million.I want to quote one small-business owner who was badly affected who is typical of hundreds of others—an electrical contractor and small-business owner Dave Burt. He was out of pocket to the tune of $25000 because the retentions that Mainzeal held for that subcontractor were not protected. They had no legal protection. Dave Burt was left $25000 out of pocket. This is not to mention the hundreds of contractors who lost their tools. In the Mainzeal collapse their tools of trade were locked behind security guards and locked gates and they could not get them. I want to pay credit to the work that Clayton Cosgrove did in addressing that.It is ironic as Clayton Cosgrove said that at the very time that Nick Smith brings a construction contracts bill to this House that sets out to reduce the vulnerability of subcontractors in the industry to losing those retentions National is displaying once again the schizophrenic view that it has about deregulation in the building industry having been responsible for this ideological burp to deregulate the building industry in the early 1990s and having put the country through a $22 billion disaster that Paula Bennett now thinks we have all moved on from—$22 billion is the dollar value of the losses faced by tens of thousands of New Zealand homeowners because of the National Government’s leaky homes disaster and now Paula Bennett thinks we have all moved on.Well we have not and as Clayton Cosgrove pointed out the Government has come a cropper in Christchurch with the appalling quality of Earthquake Commission repairs and what we see in Auckland now according to Auckland Council’s most senior building inspector is an epidemic of shoddy work. The Auckland Council has just revealed the other day that it has set up a special investigations unit to crack down on cowboy builders because there are so many of them. It has set up a special complaints and investigations unit.What people in the construction industry are saying is that there are two people who are responsible for this at the moment. One of them is Maurice Williamson who watered down the requirements of the licensed building practitioners scheme. He was so desperate to get builders registered with the licensed building practitioners scheme that the standards the quality standards for training and certification have been made so low that the licensed building practitioners or LBP scheme is almost meaningless. So that was a giant missed opportunity to actually raise the standards of quality and of training. The other Minister who is responsible for this is the Minister who has spoken in this debate the Hon Nick Smith. The most senior people in the construction industry have pointed out to me that in their official task force on this they recommended to the Government that the Government make a top priority of investing in quality and training in the construction industry. That Minister has basically parked it. He has told the construction industry that it is not a priority for him. He has put it to one side he does not care about it and the most senior and influential people in the construction industry are appalled by Nick Smith’s attitude.So he comes to this House with what is in itself a very good bill—it fixes a longstanding injustice—and that is the failure to protect retentions for subcontractors in the construction industry but at the same time this Minister does nothing to protect the quality of work in the construction industry. This alongside the boom-and-bust cycle is what puts the very same subcontractors at risk and believe me in Christchurch with the Earthquake Commission repairs and in Auckland with this epidemic of shoddy cowboy building material we are going to see more and more firms at risk of going under because of the instability caused by this Government’s failure to actually address the underlying structural causes of the boom-and-bust cycle. That is at the heart of this issue. This Government has done nothing to address it.Retentions are incredibly important and there are thousands of subcontractors at work in this industry who are reliant on having guaranteed access to those retentions. The fact is that this bill basically requires them to be held in trust not in a trust account. It was Clayton Cosgrove’s original proposal that the retentions be held in a trust account and as we have heard the Minister felt that this would create too much in the way of compliance costs. Well we will see. We will see whether or not a statutory obligation to hold these funds in trust provides sufficient protection. Maybe the Government is right; maybe it is not. But the important principle is that those retentions will be held. They will be legally protected. The companies will not be able to use them for cash flow and it is our sincere wish on this side of the House that that is going to provide a lot more financial security for subcontractors.