ABC NT DRIVE
MONDAY, 4 MARCH 2019
SUBJECT: Labor’s Tradie Pay Guarantee.
LIZ TREVASKIS: Are you a tradie or perhaps you live with one or play sport with a tradesman. You probably know - I'm going to say you've definitely heard them complain that so-and-so was late paying them for a job that they've done and maybe that's why they can't buy the next round. But in the worst cases, you or your tradie friend may not have been paid at all because the company went bust. It's a serious problem in the construction sector and the Small Business Ombudsman says insolvencies are becoming more frequent, having a greater impact on family budgets. Federal Labor thinks it has the answer - a tradie guarantee, making companies who win Federal Government construction contracts put aside the money they owe their subcontractors in a trust. Shadow Assistant Treasurer Andrew Leigh drafted the policy. I spoke to him earlier and asked him to explain the plan for cascading statutory trusts.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: It's a complicated legal construct which delivers a very simple outcome. It means if you do to work on time, you get paid on time. It doesn’t how far down the food chain you are – whether you’re a contractor or a subcontractor or sub subcontractor - if you do the work on time, you'll get paid on time. We know, as you said, that this is a massive problem in the construction sector. We have people not only having struggling to pay the bills, but also then the cascading effect on their health, there’ll be stress on their relationships - sometimes marriages will breakdown as a result of this. Around half of the construction invoices don't get paid on time. We want to start with big federal contracts, and then work with states and territories to roll out the system of cascading trusts for state and territory projects and then onto private projects ultimately.
TREVASKIS: So how would they work? How would these big companies be forced to put money aside for subcontractors?
LEIGH: Well, effectively the cascading trust system means that for each portion of the work, the money is set aside for the people who are required to do it. So if you’re a sparkie and you’re required to do a particular part of the work, then you get paid regardless of what everyone else around you is doing. You don't have this problem of people going bust and leaving others unpaid. You don't have the problem of phoenixing, which is this awful process where people deliberately liquidate a company, strip out of valuable assets and then start a new company in the ashes of the old one.
TREVASKIS: And so at what point are the companies putting money into these trusts? Why aren't they just paying people for the work that they do for them as they do that work?
LEIGH: What a trust does it make sure the money is set aside there for you when you've done the work. At the moment, you have large project bank accounts but often when the projects get into trouble towards the top of the pyramid, then people further down don't get paid. They’ll say to the head contractor ‘I've done the work, why can’t you pay me?’ and the head contractor will come up with excuses as to how things have gone wrong. Cascading trusts cut through those excuses. Now on top of that, Liz, we’re also giving the Australian Securities and Investments Commission $7 million to run cases going after the worst phoenix offenders-
TREVASKIS: So at what point would they, would the construction companies be putting money into that trust fund? Right at the very beginning of the job?
LEIGH: Yes, exactly. So that’s how the job would be set up. We’ll look to do it first on major construction projects, which is important given that Bill Shorten has an ambitious infrastructure agenda. There'll be a lot of Commonwealth infrastructure projects rolling out if we’re fortunate enough to win government. But then also looking at moving that right through the major projects. It’s an idea that's come from John Murray, a former executive director of Master Builders Australia, endorsed by a terrific Senate report from my colleague Doug Cameron. So from right to left of the spectrum, the idea of cascading trusts has garnered broad support. We've picked up on that Murray-Cameron recommendation, putting it into action alongside the tradie litigation fund to allow ASIC to go after the worst phoenix operators, who don't just hurt the people they rip off, but also erode trust in the entire system. So when you crack down on phoenixing, you improve trust in the building industry. That's great for equity and also terrific for growth.
TREVASKIS: Sounds like a logical plan - make companies put aside the money so that they've got the money to pay their workers. I'm sure subcontractors would like the sound of this. What about the big construction companies? What is their, what have their concerns been about this?
LEIGH: Well, as I said Liz, the idea comes from a former executive director of Master Builders Australia, so John Murray knows the builders. He wouldn't have proposed this if he didn't think this was something which was eminently workable. Our state and territory governments have looked to work hard on security of payment schemes. They've been doing their best to tackle things, but we also need to approach this at the Commonwealth level. That's why we'd be working, if we won government, to harmonise and regularize the systems across states and territories.
TREVASKIS: The Master Builders in Queensland were critical of a similar scheme in place in that state. They said that in its current form, the initiative will create more red tape, restrict cash flow and make payment terms longer, increase costs to builders and subcontractors and make housing and construction more expensive. Meanwhile, the Northern Territory at the moment is experiencing a significant downturn. Can the NT really afford some of these extra costs that Master Builders are concerned about?
LEIGH: This isn’t about adding costs - this is about making things simpler. Ensuring people that do the work get paid makes sure that money flows through the economy. We want to make sure that people are paid promptly and that's exactly what cascading trusts would do. And again, people will have different views but I'm quoting from a report by John Murray, the former executive director of Master Builders Australia. Right across the expert group, the idea of cascading trusts has been strongly supported. This is something whose time has come. We just can't keep on going on with a construction sector where on big projects, plumbers, carpenters and other tradespeople won't sign up because they don't know whether or not they’ll get paid. If you're a painter and you've invested in all your equipment, you've gone and paid workers, you’ve paid for that paint and then suddenly you discover you're not getting paid, that can send you to the wall or at the very least make it challenging to do the next job. That's got to end.
TREVASKIS: That's Andrew Leigh, the Assistant Shadow Treasurer, explaining how the Labor Party want to guarantee that tradies get paid for the work that they do.
Authorised by Noah Carroll ALP Canberra.