Joe Carey (Clare, Fine Gael)

I welcome this Bill and commend the Minister of State at the Department of Finance, Deputy Brian Hayes, and his officials on bringing it before the House. The Bill has received bipartisan support in the Dáil and was championed in the Seanad by Senator Quinn, who was in turn informed by the businessman, Seán Gallagher. I acknowledge the work these individuals have done. In his contribution on Second Stage, the Minister of State gave his commitment to amend certain provisions on Committee Stage. I followed the Second Stage debate with interest and the contributions from other speakers suggest that we have a robust and responsive Bill which can be wholeheartedly welcomed.

At its peak, total output from the construction sector accounted for approximately 25% of GNP. Since then, however, the sector has seen its share of GNP decline to 13.8%, or €18 billion, in 2009 and an estimated 9%, or €11.7 billion, at the end of 2010. This in itself is a clear indication of the trouble that the construction industry faces. In a normal economy construction should represent between 8% and 9% of GDP but it currently stands at between 4% and 5%. The most regrettable aspect of the boom was the extent to which our public services were funded through unsustainable property related taxes. In the absence of this revenue source our public finances have suffered. The decline in the construction industry has also impacted on employment levels. The latest seasonally adjusted employment data show that the numbers employed in the construction sector have declined from 181,400 in the first quarter of 2009 to 108,100 in the first quarter of 2011.

The recession has highlighted the lack of proper contractual arrangements and bad payment practices in the construction sector. Evidence gathered over the past several years suggests that abuse of subcontractors by main contractor has become an accepted process. In many projects the probability that the full amount owed will not ultimately be paid is factored into the initial tendering process. As companies struggle to survive the economic downturn, we have seen a significant increase in contractual disputes and the inevitable court action that ensues. Neither the High Court nor the Commercial Court is the preserve of the subcontractor or the SME because the costs associated with these courts greatly exceed what is owed in most cases. The adjudication and arbitration processes proposed in this legislation can only help in this regard.

While the issue of procurement and tendering in State contracts is not dealt with by the Bill, it is an area that needs to be examined. The procurement system as it stands is poor and the thresholds required for turnover and other areas reflect a different era. Some of the more significant public projects awarded in recent years were shelved or abandoned when apparently blue chip contractors went belly up. Biggest is not always best. I ask the Minister of State review this process in addition to the work he doing on this Bill.

The Bill contributes to the development of supports for small and medium-sized Irish enterprises. We speak of creating an entrepreneurial culture and making Ireland the best small country in which to do business. However, the movement in principle with this legislation from pay when paid to argue now, pay later instead of pay now, argue later through the non-binding resolution process is open to abuse and needs further attention on Committee Stage.

I would like to speak about the value of PRSI contributions by the self-employed when times are not so good. The current system, whereby no apparent benefit accrues in the short to medium term, dissuades people from taking the risk of creating a business. I acknowledge this issue is not in the remit of the Bill or the Minister of State but I ask that it be considered.

Like other speakers, I have come across numerous cases of subcontractors who have been badly burned. In one case a contractor has not yet been paid for work he carried out on a State project. It is ironic that many of these cases of non-payment involve State funded projects. The perception of subcontractors is that payment for such contracts are guaranteed but this has not always been the case. The subcontractor is a low form of life when creditors are listed for receiverships and liquidations. In my experience the hierarchy consists of the Revenue Commissioners, banks' secured debts, unsecured suppliers and subcontractors, in that order. In many cases the amounts owed are between €20,000 and €150,000. The thresholds set out in the Bill are too high and I hope they will be lowered on Committee Stage.

Although I anticipate that the Minister of State will argue that he has to achieve value for money for the taxpayer, I cannot understand why a proportion of the money made available from a Iiquidation is not ring-fenced for suppliers and subcontractors. It is not logical to force a supplier or subcontractor out of business for the want of cash flow if this eliminates his or her future capacity to contribute to the Exchequer, not to mention the associated costs of going out of business. The Revenue may take an initial modest hit but in the medium and longer term it may be of more benefit to the taxpayer. I accept this is a complex and fraught area but I ask that it be given full consideration. It has become apparent that big developers and contractors have had much in their armoury to protect themselves. Many cases adjudicated over by Mr. Justice Kelly in the Commercial Court shine a light on some of the sharper practices. This legislation is a step towards redressing the balance and I welcome its introduction.

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