van Velden BrookeBROOKE VAN VELDEN (Deputy Leader—ACT): Thank you Mr Speaker. It is a pleasure to rise this morning on behalf of the ACT Party in support of the second reading of the Construction Contracts (Retention Money) Amendment Bill. Through the course of my speech I'm hoping to go into a little detail about why we've ended up with this bill the history behind why it's important and what's come out of the submission process a little bit about the costs and benefits and balancing those and what ACT's hope is to go forward. But firstly though I just want to start by saying thank you to all the committee staff all of the submitters and my colleague Dr James McDowall who sits on the committee that oversaw this piece of legislation. There's been an awful lot of work and it doesn't really happen without all of those people behind the scenes putting in all of that effort and importantly having submitters from the public with their industry knowledge giving us their submissions. So thank you very much for submitting on this bill.Every day up and down New Zealand people get up and they go to work on construction and ACT wants to do a bit of a shout-out to all of our subbies everybody who does work really hard to make sure that new buildings do get built in New Zealand. It's great to see hard-working Kiwis wanting to put up their tools and help create positive construction in New Zealand. We really appreciate people who want to work hard get up in the morning get their tools out and create new houses and new facilities in our communities.But construction is not easy and it's not simple and there's a lot of factors that go into it. You know you've got an awful lot of people who are involved in the construction of a new building or a new facility and that's anything from the roofers and the tilers through to plumbers electricians plasterers concrete pourers painters and bricklayers. The list is very extensive but it's very specialised. When a person or an entity or a company decides that they want a new building to be built they employ a builder or a building company and there are an awful lot of skills that are needed as I've suggested in the building of a new facility. If you go into the detail of all of those types of skills you end up needing an awful lot of training if one person needed to do all of that work themselves. So what ends up happening is people who have that contract use subcontractors—people who have specialised skills—because if you could imagine one company needing to have a person who is able to safely lay all of the cables and all the electrical work and they can earth objects or ground them and make sure that they are transferring short-circuit electricity through a grounded wire to the earth that's a very specialised skill. I know from my experience of working on a factory floor as someone who made light-fitting extrusions and did the wiring behind those you don't want to get that wrong. So there's a lot of training that's involved in electrical work. But of course if you have that skill then you compare that to making sure that you're not getting any leakage in your roof work that's another specialised skill on top of that. Building construction companies quite often subcontract to people who have worked their whole lives who have built up a wealth of knowledge and who are really awesome Kiwis getting up and donning their tools and making sure that this work is done in a good way. But the issue here of course is that what ends up happening is you have these contracts and you have people who have been brought about who might be a painter for example and they get told Yep you'll be a subcontractor for this large development. We want X number of things to happen and we'll pay you some money now but we're also going to keep a little bit of money back just to make sure that we're happy with the work that you do."—and that's quite right. That's called "retention money" which is why we're having this debate. Now that retention money sometimes is held back just to make sure that those faults are fixed before there's a final payout to make sure that the actual contract is really done and dusted. But what ends up happening in reality in some cases is that retention money isn't just kept aside; it's actually used for capital and it's used to help pay for something else that's happening in the building and construction. Usually retention money might be about 2 to 10 percent of any contract but sometimes that money is not really found when a company does go insolvent or it's being used somewhere else. So what ended up happening was that in 2014 Dr Nick Smith from the National Party tried to make it clearer what happens with retention money through a law in Parliament. There are still faults with this law and some companies have said that it's not as clear as it should be. Some of that money has been used as working capital rather than retention money and it hasn't been kept on trust. So we're now back in the House of Parliament trying to clarify this law again. One thing that this bill aims to do is to clarify that retention money is held on trust by party A—that's usually the big contractor—for the benefit of party B the subcontractor and it requires that this money is kept separate from other money or assets. That's really important because if there's a company taking on far more risk and they end up getting insolvent what ends up happening is that a smaller subcontractor quite often has no claim to any of that money. It's nowhere to be found. It also requires that party A is to give information about the retention money to party B when the money is first retained and then at least every three months. So the whole change to this trust requirement is to clarify how retention money is being held under the Act and how it can be used. There have been instances where head contractors have used retention money as working capital. The use of retention money as working capital can add additional financial risks for business for example if a head contractor becomes insolvent before paying out the retention money and it can be substantive financial loss for a subcontractor. What they're aiming to do is strengthen the trust requirements to mitigate the risks associated with the use of retention money as working capital. Throughout the submission process Parliament heard from a range of people involved in the building and construction industry who welcomed this change and clarification under the law. I point to a few entities like Concrete NZ which represents a membership of more than 700 corporates and individuals in the building and construction sector; Steel Construction New Zealand; Master Builders Association; and the New Zealand Institute of Building. There were Master Electricians who employ around 7000 electrical workers across New Zealand; the Master Plumbers Gasfitters and Drainlayers; Civil Contractors New Zealand. There are a whole range of people who made these submissions. What ACT really hopes is—sure there might be that balance between the extra cost that the business might need to take on by not having that money being available for capital funds but our hope is really that that is balanced out by the certainty that this provides to subcontractors that that money is actually held for them to be paid out right at the end when they know that all defect work has been completed to an acceptable standard. We also retain some concern just based on the fact that we have already tried to address this retention issue in previous Parliaments and yet we've come back to try and clarify the law. So the ACT Party does support this change but we also keep in the back of our minds a form of hesitancy that this will not actually be a fix all because we know that we've been in this position before and it's quite possible that we end up in a few years' time recognising that there were more changes that did need to be made to clarify this change for party A and party B. So in conclusion this law would allow subcontractors a little bit more confidence that they will have money to help them in their own cash flow when they do get paid out for the building work that they do and I hope that this law will actually provide that confidence to people up and down New Zealand who are working in our construction sector. So just on my final note we love our subbies and we hope that they do find this a good change."