Grand Committee
(9 months, 3 weeks ago)
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Arrangement of Business
(9 months, 3 weeks ago)
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The Deputy Chairman of Committees (Baroness Pitkeathley) (Lab)
My Lords, good afternoon. I remind your Lordships that, as normal, if there is a Division in the Chamber while we are sitting, the Committee will adjourn for 10 minutes.
Local Elections (Northern Ireland) (Amendment) Order 2024
(9 months, 3 weeks ago)
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Lord Caine
That the Grand Committee do consider the Local Elections (Northern Ireland) (Amendment) Order 2024.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Caine) (Con)
This statutory instrument, and the Representation of the People (Postal Vote Handling etc.) (Northern Ireland) (Amendment) Regulations 2024, were laid before your Lordships House on 10 January. They flow from the Elections Act 2022 and deliver on the Government’s manifesto commitment to stop “postal vote harvesting”: the dubious practice of collecting large numbers of postal votes to be returned by someone other than the voter to whom the ballot paper is issued. One instrument applies these measures to parliamentary and Northern Ireland Assembly elections in Northern Ireland, and the second to local elections. The equivalent measures for Great Britain have, of course, already been passed by this Parliament.
These statutory instruments will set a limit on how many postal votes any one individual can directly “hand in” to the returning officer, and complement other Elections Act provisions protecting the integrity of the absent vote process. These include banning political campaigners handling postal votes issued to another person, and ensuring the secrecy of absent voting. One of the instruments also contains some technical amendments relating to the changes to EU voting and candidacy rights, which I will touch upon later.
I will set out the measures related to limiting handing in postal votes in more detail. Currently, there are no restrictions on who may hand in postal votes and how many may be handed in by any single person, and no record of who has done so. This is not acceptable because it creates opportunities for unscrupulous individuals to undermine the integrity of postal voting. For example, voters could be coerced into handing over their unmarked ballot paper, or completed ballots could be tampered with out of sight of the voter before being returned. Even if they are acting legitimately, where individuals are seen to be handing in significant numbers of postal votes in one go, it can easily create the perception and suspicion of impropriety, which can be damaging to confidence in the electoral system. Retaining public confidence in the democratic systems of our country is, of course, critically important.
We are therefore intent on striking the right balance between being mindful of security, keeping the electoral process accessible and ensuring that confidence in our electoral systems is reinforced. Under these regulations, a person, in addition to their own postal vote, will be able to hand in the postal votes of up to five other electors, including any for whom they are acting as proxy. We consider this a reasonable limit that will support the integrity of postal voting.
In Northern Ireland, postal votes can be handed in at the electoral office. Unlike in Great Britain, where postal votes may be returned to the polling station, in Northern Ireland handing in postal votes at polling stations has never been permitted. This prohibition will not change as a result of these measures. A person handing in postal votes will be required to complete a form setting out basic information. Where the forms are not completed, those, and those in excess of the limit, apart from the person’s own, will be rejected. Any postal votes that have been left behind in the electoral office without an accompanying form, including those posted through or pushed under the front door, will not be counted as they will not have been returned in accordance with these requirements.
The new forms make these changes clear to the voter. In addition, the rules will be published as widely as possible by both the Electoral Commission and the chief electoral officer. After the poll, the chief electoral officer will, where possible, write to the persons whose postal votes have been rejected under these requirements to notify them that their vote was rejected, and the reasons for that.
The regulations before us today also make some small changes in relation to EU voting and candidacy rights. The Representation of the People (Franchise Amendment and Eligibility Review) (Northern Ireland) Regulations 2023 implemented changes to the previously automatic right of EU citizens to vote and stand in elections. These regulations amend those 2023 regulations, so that where the eligibility of EU citizens to remain on the register has been reviewed, duplicate notices do not have to be issued.
Additionally, where an election is originally scheduled to take place before the franchise changes come into force, but following the death of a candidate the poll is rescheduled for a date after the changes, these measures will ensure that candidates and registered EU citizens remain eligible to stand and hold office at that poll.
I hope noble Lords agree that these measures are sensible safeguards against the potential abuse of absent voting and will reduce the opportunity for individuals to exploit the process. I hope that, following my setting out the details of these statutory instruments, the Committee will appreciate their careful and considered design for supporting absent voters. I beg to move.
Baroness Ritchie of Downpatrick (Lab)
My Lords, I thank the Minister for his presentation of the facts concerning both statutory instruments. I declare an interest in two respects: first, as a member of the Secondary Legislation Scrutiny Committee of your Lordships’ House; and secondly, as a participant in elections in Northern Ireland for the past 43 years, either as a candidate or as a party worker. In all those elections, I was well aware that postal votes provided the elderly, the infirm, students and those on holiday with the opportunity to vote by post or by proxy. I welcome legislative efforts to protect postal and postal proxy voting arrangements, because there was no doubt that there was actual fraud, as I saw for myself. I saw it in the last election in which I was a participant, and whenever I failed to get re-elected as the MP for South Down. There is no doubt that electoral fraud took place in the polling place and through postal votes, through a large degree of postal vote harvesting. We saw people going into the electoral office with hundreds of completed ballot papers in the prescribed envelopes, duly certified by a family member.
I have always been afraid that there might be those who seek to steal postal votes, particularly from the infirm, in order to seek electoral advantage. We have heard many examples of that, so I am pleased that legislative action is being taken. However, what legislative action will the Government take to protect the polling place itself at parliamentary, Assembly and local government elections in Northern Ireland, in order to protect voters and prevent vote stealing? People who had perhaps not voted in previous elections, and who turned up to vote in the 2017 parliamentary election and were definitely on the register, discovered at 6 or 7 o’clock that evening that their votes had already been cast by somebody else.
There needs to be some legislative means to protect the polling place, both inside and outside, because in some places voters are subject to constant haranguing by party workers; indeed, we have all been victims of that. What can be done to ensure that photographic identities are protected and cannot be copied or photoshopped, as must have been the case in the instance to which I referred?
I would also like to know from the Minister whether discussions took place with the Electoral Office of Northern Ireland and the Electoral Commission before these instruments were made. If they did, what was the view of both organisations? In addition, are the Government confident that there will be full access to the franchise through this legislative means for those who are elderly, those on holiday, and for students, and that there will not be any denial of the franchise or any means of obviating these new legislative measures? We have seen examples of that.
Whenever the ballots are open to party political workers some few days before the actual polling place is open, will those workers have an opportunity to be informed of the number of postal votes issued, the number delivered, and the number rejected because they did not have the proper accompanying identification with them?
In any event, and in conclusion, I welcome the instruments as they stand and as they relate to the protection of the franchise in council and Assembly elections.
Lord Morrow (DUP)
My Lords, I am just interested in what the Minister said in relation to postal votes. He remarked that they are sometimes pushed through the door. I am not saying that he implied anything by saying that, but by listening to the way it was said you could nearly think that maybe there was something very improper about that. There has been no alternative up to now other than to push them through the front door—and certainly not through the back door.
As regards postal voting, if I go to the polling station, I must produce ID; there is no need for that at all if I get a postal vote. It strikes me that the potential for where abuse might occur is always with postal voting. I am not saying that it is on a wide scale, but I listened to what the noble Baroness, Lady Ritchie, said, and found myself concurring with much of it.
The other thing I want to emphasise is on voting on the day. It is imperative that there is a police presence inside the polling station. That can be reassuring to the public who come to vote. Some come in trepidation and fear because very often, as the noble Baroness, Lady Ritchie, rightly said, there is quite a hostile atmosphere outside from political activists coming to the polling station who do not always have a great regard for the rule of law. Indeed, they have very little respect for those who may not vote exactly how they guess—because that is all they are doing—they will. That needs to be looked at.
However, I have to say in favour of Northern Ireland that it has led the way on this matter. We have been able to get a fairer system of voting—if that is the proper word. Take remote, isolated areas, not least border areas: a minority community there might not feel very comfortable about coming to vote, hence they resort to postal voting—perhaps “resort” is not the right word either, but they will avail themselves of the postal voting system. That must be protected too. We can turn this thing down so tight that there is no degree of flexibility, because all we are trying to do is protect the genuine voter coming to vote. It is not those who are abusing the system who will feel pushed out here, because they will not; they will still have their ways of doing things, which are often very provocative. Indeed, sometimes quite a bit of agitation is applied.
Elderly voters who apply for a postal vote are vulnerable because activists—for the sake of a better word—will call at their door and tell them, “You’ve got a postal vote; I’ll deal with it”. That is highly suspect and must be dealt with in a way where the postal voter can be assured that their postal vote will go the way they want it to go, not the way the activist who arrives on their doorstep surmising, “Oh, here’s a number of postal votes, we’d better call here”, wants it to go. I have no problem with election workers assisting people, but that is all they should be doing.
Baroness Suttie (LD)
My Lords, I shall be extremely brief because we support these SIs. Trust in elections is absolutely key to our democratic system. The review by the noble Lord, Lord Pickles, identified several areas where measures could be strengthened to reduce the risk of electoral fraud; these SIs stem from that, and are welcome.
The noble Baroness, Lady Ritchie, asked about consultation, but the instruments say that consultation took place with the Northern Ireland electoral bodies and the Chief Electoral Officer for Northern Ireland. This is not always the case but I understand that, in this case, consultation took place. That is very much to be welcomed.
My only substantial question for the Minister regards training on these changes for the electoral officers in Northern Ireland and making sure that the changes are communicated properly. Can he give us an assurance that this will be done in good time ahead of the forthcoming general election? Can he confirm that there will be provision for sufficient resources to be made available in order to implement these changes?
The Minister will know that, when these SIs were debated last week in the House of Commons, some concern was expressed about the definition of “political campaigner”. Can he confirm that these changes will also be communicated to the political parties in good time? Can he say a little about how the definition of “political campaigner” will be monitored in practice?
Lord Khan of Burnley (Lab)
My Lords, I thank the Minister for introducing these SIs, which put in place new rules on the handing in of postal votes in local, parliamentary and Assembly elections in Northern Ireland, as provided for by the Elections Act 2022. An equivalent SI for Great Britain has already gone through both Houses, with noble Lords participating in the recent debate here in January.
The Act established that it was an offence for a “political campaigner” to handle postal votes other than in very select circumstances. These instruments set out the new rules for members of the general public, which will sit alongside the other measures that the Act brought in. We on these Benches will not oppose the SIs but we want to probe the Minister on their impact. It is always worth noting that, long before the 2022 Act, the Labour Party had for years been signed up to the Electoral Commission’s code of conduct for campaigners, which bans campaigners from handling completed postal ballots.
We seek clarity on who is covered by which provisions. Colleagues in the Commons, as the noble Baroness, Lady Suttie, said, raised the issue of the need for good understanding and communication on who is covered by the definition of a political campaigner, so people have absolute clarity on which set of rules applies to them. If a person puts a party poster in their window during an election, are they a political campaigner? How will electoral officers be supported to adjudicate on whether someone is a political campaigner or not?
We would like to see more clarity for voters, so that votes are not lost by mistake. Can the Minister give more detail on how the regulations will be made clear to voters, in order to avoid any votes being lost due to people being unaware or unsure of the new requirements?
Finally, I want to pick up on support for electoral officers, which was mentioned by the noble Baroness, Lady Suttie, and other noble Lords. Without a doubt, these changes will place some administrative burdens on our electoral administrators. The pressure on local authorities is significant; electoral administrators up and down the country are stretched and are getting their heads around the changes the Government are making, as we pointed out several times during the passage of the Elections Bill. In the light of the numerous SIs that have come before us, these changes will create an unprecedented level of work for electoral administrators. Will electoral officers be further resourced in Northern Ireland? Will they be strengthened to deal with the impacts and changes outlined? My noble friend Lady Ritchie of Downpatrick spoke about the consultation, which is referred to in the Explanatory Notes, but can the Minister tell us about the nature of the feedback from the Electoral Office for Northern Ireland and the Electoral Commission? I look forward to his response.
Lord Caine (Con)
My Lords, I am most grateful to all noble Lords who have participated in this short debate. I shall try to respond to a number of the points that have been made. I particularly thank the noble Baroness, Lady Ritchie of Downpatrick, and the noble Lord, Lord Morrow, who have extensive experience of elections in Northern Ireland, in both fighting them and campaigning as candidates. I have participated directly in only one election in Northern Ireland, in 2010—without a great deal of conspicuous success, I am afraid to say.
I am grateful to noble Lords. Both the noble Baroness, Lady Ritchie, and the noble Lord, Lord Morrow, spoke about protecting polling stations. Of course, we will keep that under close review. Any question of a police presence at polling stations would be a matter not for the Government but for the Police Service of Northern Ireland, in consultation with the Chief Electoral Office. Of course, we keep the issue constantly under review and take it very seriously. That said, notwithstanding some of the comments that have been made, my understanding is that the police and the chief electoral officer are clear that organised electoral fraud at polling stations or polling places is not currently a significant issue. However, I take on board the noble Baroness’s comments and will look closely at the issue.
On engagement with the chief electoral officer and the Electoral Commission, I assure noble Lords that extensive and significant consultation took place. I refer specifically to the questions of the noble Baroness, Lady Suttie. These issues were discussed at length, and I can confirm that the Electoral Commission and the chief electoral officer were fully supportive of the changes the Government are setting out in these regulations.
Concerns were raised about the potential denial of the franchise. The Government are satisfied, through our consultations with the Electoral Office and the Electoral Commission, that these regulations are a fair and proportionate measure which will help to protect the integrity of the election system in Northern Ireland and the postal vote system.
The noble Lord, Lord Khan of Burnley, referred to the definition of a political campaigner. He will be aware that this is set out in the legislation. For the record, it is worth setting it out for the Committee. A political campaigner is a candidate, election agent or sub-agent; somebody employed or engaged by a candidate for the purpose of assisting the candidate’s activities; a member of a registered political party who conducts activity designed to promote a particular outcome at the election; someone employed or engaged by a registered political party in connection with the party’s political activities; or a person employed or engaged by a person within any of the previous categories to promote a particular outcome at the election, which further applies to anyone employed or engaged by such a person to help promote a particular outcome at the election.
Of course, with any new system, we will need to see how this beds in, and we will keep it under review. If changes are necessary, we will come back to Parliament with them.
We are clear that the changes will be communicated directly to electors via forms, including declaration of identity and polling cards. The Electoral Commission and the chief electoral officer will also use all avenues open to them to publicise the changes, including their websites. Both the Electoral Commission and the chief electoral officer are seized of the importance of this and of making sure that the changes are clearly and widely understood by voters.
In conclusion, I know that all noble Lords believe that preserving our democratic processes is paramount. I hope the Committee will agree that these instruments enable us to ensure the integrity of the electoral system and maintain confidence in it by introducing, where we can, what I regard as sensible safeguards against the potential abuse of absent voting. I am therefore pleased to be able to introduce these measures.
Lord Khan of Burnley (Lab)
Before the Minister sits down, can he tell the Committee about extra support and resources for electoral officers? Perhaps I missed what he said about that.
Lord Caine (Con)
Of course; I apologise to the noble Lord. In Northern Ireland, all electoral delivery is the responsibility of the chief electoral officer and his staff. Local authorities in Northern Ireland are not involved in that at all. I can assure the noble Lord that we are working closely with the chief electoral officer to identify the specific impact of each of these measures and that any additional resource will be kept under review in that context.
Baroness Ritchie of Downpatrick (Lab)
I asked about the reconciliation of postal votes, which happens about three days before polling day in electoral offices. One party-political worker from each party goes along to that and the postal ballots are opened. Will there be a register showing how many postal ballots were submitted, and those that were rejected and accepted?
Lord Caine (Con)
That is my understanding. As I outlined in my speech, where votes have been rejected, the electoral officer will write to the individuals concerned to let them know why, where possible.
That probably covers most of what was raised in the discussion. I commend these instruments to the Committee.
Representation of the People (Postal Vote Handling etc.) (Northern Ireland) (Amendment) Regulations 2024
(9 months, 3 weeks ago)
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Lord Caine
That the Grand Committee do consider the Representation of the People (Postal Vote Handling etc.) (Northern Ireland) (Amendment) Regulations 2024.
Reporting on Payment Practices and Performance (Amendment) Regulations 2024
(9 months, 3 weeks ago)
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Lord Johnson of Lainston
That the Grand Committee do consider the Reporting on Payment Practices and Performance (Amendment) Regulations 2024.
Relevant document: 10th Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
My Lords, as we all agree, small businesses are the backbone of our economy. They make up 99.9% of UK businesses, employ millions of people and enrich our daily lives. That is why the Government have declared 2024 to be the year of the small business. So far, we have strengthened our “Help to Grow” campaign, established the Small Business Council and are extending the payment performance reporting regulations which we are here to debate today.
However, small businesses are being let down by late and long payments, which contribute to an estimated 50,000 UK business closures each year. In addition, 56 million hours are wasted each year by businesses chasing late payments. I will outline the key elements of this statutory instrument and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) 2017.
The first objective of this instrument is to extend the reporting requirements beyond the expiry of the Reporting on Payment Practices and Performance Regulations 2017 and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) 2017 on 6 April this year until 6 April 2031—a very clear extension. Since the 2017 regulations and the Small Business Commissioner were introduced, instances of late payment by large businesses have fallen across the UK. If the 2017 regulations were to sunset without extension, we would remove payment time transparency entirely. I hope that noble Lords agree with me on that. We would also be removing the healthy dose of competition that drives large businesses to improve their payment time. Without the reporting requirements, businesses would not have to worry about being the outcasts of their peers due to poor payment practices.
My colleague Kevin Hollinrake MP, the Minister for Small Business, launched a consultation early last year which asked the public for their opinion on the regulations and our proposals for improving them. Trade associations and businesses across a wide range of sectors provided us with overwhelming support for the extension of the regulations and for the new reporting requirements which we will be introducing.
The second objective of this instrument requires large companies and limited liability partnerships in scope of the 2017 regulations to disclose additional information and report two new payment performance metrics. We will make it a requirement for businesses to provide the value of the invoices paid during the reporting period. Small businesses told us that this would provide them with even more clarity over how large businesses behave. We will also be introducing a requirement for businesses to report on the percentage of invoices that they dispute. Small businesses told us that they are concerned that some of their customers use frivolous disputes to avoid making timely payments. We listened to them and have taken action to address this.
The third objective of this instrument is to clarify the reporting requirements when supply chain finance is used by large businesses. This amendment will ensure that the impact of the use of supply chain finance is more accurately reflected in the reporting data, providing small businesses with a clearer picture of a business’s payment practices.
Like their predecessor, these regulations will require a review in April 2029, before their statutory expiration on 6 April 2031. It is critical that this legislation remains in place and is further improved to provide small businesses with the transparency that they need. By increasing the level of transparency, we will be arming small businesses with more information to help them make informed decisions about who they work with, while applying additional pressure to large businesses to improve their behaviour. We are incredibly grateful to the 137 respondents to the consultation on these regulations. They included small and large businesses as well as a range of representative trade bodies. There was overwhelming support for the extension of the regulations and for the new metrics that we will be introducing. I sincerely hope that my colleagues here with me today can see the benefits that these regulations provide and can agree with the introduction of this affirmative statutory instrument. I beg to move.
Lord Aberdare (CB)
My Lords, I welcome these regulations, although I would have liked them to go even further. Prompt payment, as the Minister said, is vital to smaller construction firms, particularly at present, when a recent report from the Begbies Traynor Group found that the construction sector had the highest number of at-risk businesses in the UK, more so than any other industry. That is 83,000 firms in significant financial distress. Late payment and retentions are key issues exacerbating these problems for small construction firms, as larger companies higher up the supply chain seek to hold cash in their accounts for as long as possible, thereby adding to the challenges for smaller firms of inflation and increased costs of materials, energy and other necessities. Borrowing is often no longer an option for many SMEs. Therefore these regulations, requiring greater transparency of payment reporting, represent a step forward in keeping larger companies accountable and reinforcing the Government’s efforts to support SMEs by establishing prompt payment as the norm, not the exception.
The requirement to report on invoices both paid and unpaid by value, not just by volume, is particularly welcome. Even if the number of invoices paid within the time specified—30 days, 60 days or more than 60 days—represents a high percentage of all invoices, the total percentage value of those invoices may be significantly lower, because lower-value invoices tend to be paid more quickly. The requirement for senior management to sign off on the figures reported is also a laudable step forward.
However, there are some disappointing omissions from the regulations. The Government’s consultation response last November promised to introduce “reporting on retention payments”—that is, the withholding of a proportion of payments due to subcontractors for work they have completed—for businesses in the construction sector. Perhaps the Minister can tell us something about when and how this will happen, even if it may be too much to hope that he might give an indication of how the Government might move towards ending the pernicious practice of retentions altogether. It is high time that happened, after so many years of government consultations and considerations but no conclusions.
The consultation response also promised more active and visible enforcement of payment practice reporting requirements, but there is no reference to this in the regulations before us today. Reporting by itself will not solve prompt payment issues, so how will it be backed up by the enforcement measures promised by the Government? What will happen if a supplier to a government construction project reports consistent lateness in paying its supply chain, especially for higher-value invoices? Can the Minister say something about how and when this enforcement commitment will be met, including the plans for implementing changes to the role of the Small Business Commissioner to broaden its powers and increase its effectiveness in supporting small businesses?
I welcome the regulations as far as they go, but I look forward to hearing from the Minister how the Government plan to finish the job by introducing further regulations, hopefully quite soon, to ensure that reporting requirements are actually monitored and enforced and, above all, to begin finally to deal with the far too long-standing bane, blight, canker, plague, scourge—or whatever other synonym one may choose—of retentions.
Lord Fox (LD)
My Lords, we, too, welcome this statutory instrument in as far as it goes. When I saw that my friend the noble Lord, Lord Aberdare, was speaking, I knew that my speech would get shorter, because he has already covered much of the ground that I wanted to talk about. Late payment is just about the number one issue facing SMEs. If you listen to the organisations that represent them, it is the issue they always come back to. It will not be solved merely by transparency; we know that is the case. We have some transparency, but we are not getting solutions.
There is a culture in certain sectors. As the noble Lord, Lord Aberdare, just set out, some sectors are worse than others. SMEs rely on a small number of large customers. The Minister said that publishing information would help SMEs to make informed decisions about whom they would work with. However, in many cases SMEs do not have the luxury of a decision about whether to sell their product or service to one company or another. That is the market and those are the businesses that operate; if there is a culture of late payment or retention in that business and, if those SMEs want to continue to trade, they have no choice about with whom they will trade. There is very little jeopardy for those companies that continue to practise late payment. That is the point the noble Lord made about enforcement.
I will make one other point about the building sector. Although it is a somewhat dated example, we can go back to 2018 and the Sandwell hospital project, which was managed and run by a company called Carillion. When that company went bust, it was very clear that its entire cash flow was managed through the late payment and retention of its contractors and subcontractors. The transparency situation has not appreciably changed since then.
A big issue that has to change is the Government’s view to their management of public procurement. The issue of late payment came up a number of times when we considered the public procurement Bill. Can the Minister ask his department what it can do, using the new Procurement Act, to help bolster enforcement on these issues? From our point of view, we would make it compulsory to sign up to a prompt payment code then seek ways to enforce it. Without that, the small improvement of this statutory instrument will continue to leave many of our small and medium-sized businesses in a position where their cash flow is used for the benefit of their customers’ cash flow.
Lord Leong (Lab)
My Lords, I thank all noble Lords who have spoken. I declare my interests, as set out in the register, as a director of several businesses and companies. I thank the Minister for setting out the regulations and welcome the Government’s campaign, declaring 2024 as the year of the SME.
I have advocated for provisions such as those provided by this instrument since long before I became a Member of your Lordships’ House. As a businessperson, I welcomed the original instrument’s introduction in 2017, and support the extended sunset clause and the expanded reporting requirements contained in this legislation.
As noble Lords have said, for too long and far too often, SMEs that have supplied goods and services to larger companies and public sector organisations have not been properly respected regarding payment terms. A relatively small amount of money for a large organisation can be, for many SMEs, a question of whether wages or rents are paid on time. It is stressful enough running a business, and late payments from large customers, whether through inefficient systems or the deliberate withholding of payments, are an all too common factor. Late payments can lead to additional borrowing costs for SMEs. Further, some SMEs may be reluctant to chase late payments for fear of jeopardising the business relationship. When payments have to be chased, good will, time and energy are unnecessarily wasted on both sides.
In tough economic times, as costs rise and margins are squeezed, SMEs are particularly vulnerable to cash-flow problems. Yet, in 2022, SMEs were owed an average of £22,000 in late payments. This has massive negative impacts on reinvestment, liquidity and market operation.
We know that we have a serious productivity problem in our economy. We can also agree that SMEs are the lifeblood of a healthy economy. So I am unsurprised that a consultation on these regulations last year strongly supported their extension and expansion. The expansion requires companies to publish additional information on both the proportion of disputed invoices resulting in payments exceeding the agreed times and the value of invoices paid late, in addition to the number of such invoices—an important improvement, in my view. It also requires companies to report on the percentage of invoices paid before 30 days, within between 31 and 60 days, and after 61 days or longer.
Lord Johnson of Lainston (Con)
I greatly thank noble Lords for their passionate inputs into this debate. This is a serious issue. I should say that, although I do not believe I have any personal conflict, I would recommend that all noble Lords inspect my register of interests because, clearly, I have interests in businesses. Indeed, the noble Lords, Lord Leong and Lord Fox, and I have all had experience of working in small businesses, and late payment is a significant issue. We have these dry statistics, but the reality is that it has an effect on people’s lives, induces stress and wastes time, with an impact on the economy. It is something that we have to take very seriously. We are all in agreement that extending these rules until 2031 makes absolute sense. I am grateful to my colleagues for supporting us in this cross-party and cross-Committee view.
Some relevant questions were asked, and I will try to cover them briefly, but I would be absolutely delighted to have a further conversation. I know that my colleague, Kevin Hollinrake, is certainly available to hear further input from noble Lords, if that would be useful.
The noble Lord, Lord Aberdare, made a point about the Small Business Commissioner. Let me say something; it may help to cover some of the other points made by noble Lords. The Payment and Cash Flow Review Report issued by Minister Hollinrake at the end of last year—I thought that it was a clear and excellent report—covers nearly all of the questions asked by noble Lords today, in particular the point about the Small Business Commissioner. The intention, to which we are absolutely committed, is to introduce broader responsibilities, which will allow said commissioner to undertake better investigations and publish reports; this will help significantly, I think.
The noble Lord, Lord Leong, asked who currently enforces the payments process. It is the Department for Business and Trade. We publish that data—it is on the Government’s website—and we also have a team tasked specifically with ensuring that we monitor late payment. That information is published.
I am sensitive to the point made by the noble Lord, Lord Fox, about the competitive case. As someone running a small business, one is—I was, and we were—obliged to take whatever business one can get. That is not irrelevant when it comes to the publishing of businesses’ competitive positions among each other; it is important. Similarly, the work that we have done on Companies House, with input from many noble Lords opposite, allows us to have better data around companies’ behaviour, which will have a significant impact. As I understand it, at least anecdotally, there is a concept in the consultation of competition between companies in terms of wanting to be a better payer is something that is not to be taken lightly.
I refer noble Lords to the report, looking at concepts such as late payments to be embedded in environmental, social and corporate governance standards, and so on. This will all have ultimately important impacts.
I have two other points, before I conclude, about the construction sector. Again, we have been very clear that we are looking to severely control the principles around retention payments, how they can be levied and how that operates in the information that we publish on that. We have been working very closely with an organisation called Build UK, which now publishes league tables on payment performance within the construction industry. This is a very clear flagged issue and something we are certainly working on. I am happy to write to noble Lords with further information if that is useful.
Lastly, the noble Lord, Lord Fox, raised a very important point about government procurement: how can we ensure that the Procurement Act is used more effectively to ensure that, through the supply chain, government procurement, which accounted for however significant a percentage of all procurement in the UK, is used to drive payment terms from its suppliers? That is a core element of this and it is worth saying that, since legislation was brought in in 2017, average payment times have reduced from 81 days to 36 days, which is a significant reduction. That is a single statistic, and I am very aware that it does not represent the value of the deals or go into a huge amount of detail, but that is the information that I have been given and I think it is very encouraging. Clearly, there are outliers and industries where there are still issues over payments. The Government take this point extremely seriously. It is a cornerstone part of our policy agenda to help small businesses, and indeed help the economy, to function properly. I am very grateful to all noble Lords for their input.
Lord Leong (Lab)
The Minister mentioned the drop in procurement payment from 81 days to 36 days. That is obviously very encouraging, but do the Government have figures for how long it takes the main contractor to pay its subcontractors?
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord, Lord Leong, for that point. We will have this data. I am looking, and average payment times between businesses peaked in December 2020 at 30 days and is now down to 35.6. I do not have the data in front of me for what it was before these regulations came in, but there is a very clear downward trend that can be seen in a chart in the report. I am happy to show noble Lords and to write with more specific information. The whole point about this exercise is to have the information to demonstrate what the trends are and who is not following the right courses of action.
Lord Aberdare (CB)
Before the noble Lord sits down, if that is the right phraseology, I have no doubt about the Government’s commitment to some of these further developments in reporting on retentions, for example. My question was very much about how and when that is going to happen, and why it does not happen. Here we have regulations which seem to me to be ideal for that quite simple reporting of retentions. It does not go nearly far enough, in my view, towards actually scrapping retentions, but it does at least produce the sort of transparency that the Minister is talking about.
Lord Johnson of Lainston (Con)
I thank the noble Lord, Lord Aberdare, for those points. The timeline is genuinely as soon as possible. We felt it was more important, given the timing of the cliff edge and the sunset around this legislation, to make sure that we extended that to 2031. I am aware, without speaking on behalf of my ministerial colleagues, that retention payments and issues around construction are absolutely on top of the priority hopper, so I hope the noble Lord will be satisfied with that.
Lord Fox (LD)
My Lords, finally—I am not to be outdone—the Minister sets a lot of store on the public embarrassment issue. I come back to the balance of jeopardy: the Minister is a businessman of the world and he knows that, if you have a publicly listed company, it can make sure it reaches its numbers by the end of the year by extending its outgoings into the following year—it happens all the time. Which is more embarrassing to the board, not meeting its financial projections to the Stock Exchange or having a rather dirty note in its annual report 12 months later?
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord for the direction of his question. I do not necessarily think that I can answer it specifically. It would be unfair to deviate away from the main thrust of what we have been discussing today: a very sound extension of the right type of legislation for gathering information and including new areas within which to gather information, such as on value, to ensure that the supply chain funding and the data from companies using that system are not distorted. This is sensible, frankly, and has the support of everyone here.
However, the Committee is absolutely right to put pressure on the Government regarding potential payments around the construction industry and, importantly, the Small Business Commissioner. The plan is that the commissioner will be given significantly more powers—and not simply to publish the league tables, which I agree with the noble Lord is soft power. As I understand it, we are looking at opportunities to give the Small Business Commissioner, or whatever office it evolves into, real teeth when it comes to ensuring that companies are fulfilling their obligations.
There is more work to be done. This is a quite a new concept for the UK economy. We are looking at legislation that is just under 10 years old whereas, previously, we did not have any such legislative structures.
Paternity Leave (Amendment) Regulations 2024
(9 months, 3 weeks ago)
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Lord Johnson of Lainston
That the Grand Committee do consider the Paternity Leave (Amendment) Regulations 2024.
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
My Lords, I am delighted to be here today for this debate on the draft regulations, which will benefit working families by providing valuable additional flexibility to paternity leave working alongside the paternity pay regulations.
Currently, eligible employed fathers and partners are entitled to one or two consecutive weeks of statutory paternity leave and pay to care for their baby or support the mother. This must be taken within eight weeks of birth or placement for adoption. These regulations recognise the importance of fathers and partners spending valuable time with their children in the first year following birth or adoption and will make it easier for parents to take their full paternity entitlement.
We know that having more flexibility in how paternity leave and pay can be taken is important to families. We consulted on this in 2019 through the Good Work Plan: Proposals to Support Families. We found that 64% of respondents wanted greater flexibility in when and how paternity leave could be taken. Allowing fathers and partners to take their leave up to a year following birth or adoption was the most commonly suggested measure to accomplish this. Our changes will provide this much-needed flexibility. These regulations will fulfil our 2019 manifesto commitment to make paternity leave easier to take. I want to set out briefly how they will do this.
Our first change will allow fathers and partners to take their leave in non-consecutive blocks. Currently, only one block of leave can be taken, which can be either one or two weeks. Our change will remove this barrier by enabling parents to take two non-consecutive weeks of leave. We hope that providing fathers and partners with the flexibility to take their two weeks of leave non-consecutively means that they will find it easier to use their full entitlement and take their second week of leave. For some parents, taking two weeks of leave in one go is challenging due to pressures of work or for other reasons. Enabling parents to take their leave non-consecutively means they can take their leave at a time that works best for them and could lead to an increase in parents taking their second week of paternity leave.
Our second change will allow fathers and partners to take their leave and pay at any point in the first year after the birth or placement for adoption of their child. This represents a big increase from the eight weeks following birth or adoption in which parents currently must take their leave. This change gives parents more flexibility to take their paternity leave at a time that works best for their family. For example, this change could enable a father or partner to take time off work to be the primary caregiver when the mother returns to work. This is important as evidence shows that fathers who spend time solo parenting are more likely to play a greater role in caring for their children in later years.
Our third change will shorten the notice period required for each period of leave. The new regulations will require an employee to give only four weeks’ notice prior to each period of leave instead of 14 weeks before the expected week of childbirth. This means that a parent can decide when to take their leave at shorter notice to accommodate the changing needs of their families. This will apply to parents in birth and surrogacy scenarios, as the notification rules are different for adopters. This will also allow fathers/partners to change the number and dates of blocks of leave they plan to take. Responses to the Good Work Plan consultation show that both employers’ and employees’ groups considered this to be a fair and practical option. These regulations will work alongside the Statutory Paternity Pay (Amendment) Regulations 2024 to make both paternity leave and paternity pay more flexible and easier for fathers and partners to take.
Lord Fox (LD)
My Lords, I thank the Minister for his presentation, which was very clear, and I welcome the movements that this statutory instrument represents. It is important to add more flexibility, to do things such as reducing notice, and to extend the period by which this leave can be used. The Minister is correct: the ability for fathers to spend time with their babies at this early stage is an extremely vital part of improving the level of parenting going forward.
However, we have to be a bit realistic, in that we have an economy that is gradually moving towards an informal employment model, whether it is gig economy or zero hours, which means that an increasing number of people are missed out by this sort of measure. Then, of course, we have straightforward self-employed people, who are not part of this, and people who have not been working for long enough for their business. That starts to leave out a large number of people. I cannot give the exact number, but at least a quarter of fathers are not eligible because of those issues; it is probably more because the gig economy is increasing. I urge the Minister and the Government to consult with all of us about ways those fathers can be brought into the system, because at the moment there is a danger that they will slip through the net.
We will be going into the election with a manifesto commitment to an increase in the amount of paternity leave that is available and in the level of flexibility. I am sure that His Majesty’s loyal Opposition will say something similar in a minute, perhaps with more specificity. However, I will make a special mention of those businesses that go beyond the law. Many businesses go way past the legal minimum, and one way of moving this forward is for the Government to recognise, praise and celebrate businesses that do far more than the current legal limit. They recognise that the fathers in their business benefit, not just as fathers but as employees. I think the Government and all of us can spend time celebrating that.
Lord McNicol of West Kilbride (Lab)
My Lords, like the noble Lord, Lord Fox, I welcome this SI, as far as it goes. As he said, it is welcome, but this is not groundbreaking; we are talking about small moves in timescale, the length of leave, when it can be taken and the number of opportunities to take it. On the previous SI, we were all declaring our interests. My interest in paternity leave finished 21 years ago, when my youngest child passed his first birthday, but I declare my interest in a number of businesses that I advise, all of which treat their employees at a better and higher level than the legal minimum that this sets—and I shall come back to that.
The SI, Explanatory Memorandum, impact assessment and the Minister’s introduction are all very clear. As I said at the start, this is welcome, but I have a few questions to raise. If the Minister cannot answer them, I am more than happy for him to write to me and place a record of that letter in the Library with answers to some of the specifics—but we support this SI going through.
To work through the regulations, one thing that I was not clear about is the territorial application, which is England and Wales and Scotland. Why does it not also cover Northern Ireland? I was interested in that.
Let us look at flexibility. When I did take paternity leave—Jeez, 23 or 24 years ago—my employer at the time, GMB trade union, offered two weeks, which could be taken within the first year, but there was no period that you had to take. These regs will cover two one-week blocks. Twenty-four years ago, I was able to take the first week, then my wife and I decided that I would take every Friday for the next five weeks, because she had help and support earlier in the week, and Fridays were the time that I could take to spend time with our child and allow her some respite. That flexibility of having one day a week for the next five weeks was a different way of taking it, but that is not covered by the regulations. So, just to take the point from the noble Lord, Lord Fox, a bit further, did the department look at widening that flexibility so that it could be taken as individual days?
I fully welcome it being within the first year, and the notice period is also more than welcome. The Minister noted that the first consultation was post the general election following a manifesto commitment in 2019. We are now in 2024, so I am wondering why it took so long to get here, because this is a positive move. The impact assessment, again, is spot on and covers all the right issues.
I am looking at flexibility for a reason. If we look at page 9 of the impact assessment, it looks at the take-up assumptions. Right now, we are on 74% for week one and 66% for week two. A large number of partners and fathers are not taking the second week, so this is about redressing that. However, the assumption is that the second week will move up to a central figure of 70%, which is an increase of only 4%. Even if we get to the high-end assumption of 74%, it is an increase of only 8%. Any increase is welcome, but is there more that the department can do to help general uptake on the first week? With these changes, there is no expectation that week one uptake would increase. Is there more that we could do on advertising and marketing to show and share the benefits of this? Looking at the finances of it, they are relatively small.
The Minister touched on the neonatal issue as well. I have a genuine question for information. Obviously, when there is a notice period, it is for four weeks. If you have a premature birth, or it is an adoption and things move quicker, that four-week period may be too much. The Minister touched on this but I did not quite get the detail of it. If there is a premature birth, what are the rules in terms of the partner or father being able to move quickly in order to take time off? I presume that many premature births end up in hospital but I am sure that support from the partner or father would be very willing. Can the Minister say anything on that?
The noble Lord, Lord Fox, touched on the gig economy so there is no need for me to repeat what he said.
With that, as the noble Lord, Lord Fox, said, we will come back to the manifesto in due course, but now is not the time to set out what our policy would be for the next election. We on these Benches support these regulations.
Lord Johnson of Lainston (Con)
I am grateful to the noble Lord, Lord McNicol, for making the point about the declaration of interests. I hope that, for once, I also have no interests to declare in a debate and no need to apologise after the event for not declaring them—but who knows? What is important is that the nation will benefit, and we may too; that is a good thing. I will answer some of the questions asked but am happy to follow up with answers to some of the more specific questions in writing.
The noble Lord, Lord Fox, made some important points about celebrating and congratulating businesses that go beyond the statutory minimum. We should bear this in mind. I do not have the statistics on how businesses function in terms of percentages and performance but, to be honest, all the businesses that I have ever worked around or been involved with have always operated a different process for paternity leave, maternity leave and so on. That is a great thing; we should not forget it. These are minimum standards. It is important that I emphasise that. This should not be “the” standard, as it were; we hope for and expect companies—indeed, all bodies—to try to go beyond it. As the noble Lord, Lord McNicol, rightly said—28 years ago, was it?
Lord Johnson of Lainston (Con)
Yes—24 years ago, the noble Lord had a greater degree of flexibility then than these minimum standards imply. I thank the noble Lord, Lord Fox, for raising that.
I also thank the noble Lord for making a point about the self-employed. Mothers are eligible for maternity leave as self-employed persons but self-employed fathers are not eligible for paternity leave. I have not covered this area in my ministerial work but I would be comfortable going back to my colleagues and asking them to scrutinise the opportunities there further. Bearing in mind that self-employed people—again, I have been self-employed to some extent—have very different working patterns and living patterns, we should not necessarily conflate the two, but it is absolutely right to review and assess how we as a society support families and carers of babies and children.
The noble Lord, Lord McNicol, made a number of important points. The first related to Northern Ireland. This area of legislation is devolved to Northern Ireland. We assume that it will follow the legislative work we are doing today—we cannot guarantee that but it is the assumption; there is some shaking of heads and nodding behind me—but, clearly, we believe that these minimum standards should be applied, certainly across Great Britain.
The noble Lord, Lord McNicol, asked whether we looked at widening flexibility. I do not have the answer to that because I was not engaged in the preparation of this legislation, but I will come back to him, if that is acceptable. All these measures are always taken in the light of balancing our desire to create the sort of society that we want with the need for economic growth and bearing in mind how businesses function. The issue with all these pieces of legislation and regulations is that they apply across the board to all businesses, and some businesses, particularly very small ones, can often find compliance difficult. They might not have the flexibility over the professional employee basis that many noble Lords here may be more used to, so I have some sympathy with the need to be quite clear about ensuring that these are minimum rather than general standards and that they can be operated by all companies across the economy.
I noted the noble Lord’s last point: 74% take-up of week 1, and 64%—or low 60s—take-up of week 2. That is precisely why we are making these changes: to encourage fathers to take that second week. We believe that additional flexibility will allow that.
The noble Lord asked about neonatal care regulations. I believe they are to come into play on 6 April, and they are also entitlements from day 1. If that is not the case, I will let him know. As far as I understand it, they operate slightly differently from paternity leave, but I am happy to clarify exactly what those new entitlements will be. Again, they will be a very important, welcome relief for many parents in an extremely difficult situation.
With that, I am grateful to noble Lords for their input in this valuable and important debate. I commend these regulations to the Committee.
Economic Crime and Corporate Transparency Act 2023 (Consequential, Supplementary and Incidental Provisions) Regulations 2024
(9 months, 3 weeks ago)
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Lord Johnson of Lainston
That the Grand Committee do consider the Economic Crime and Corporate Transparency Act 2023 (Consequential, Supplementary and Incidental Provisions) Regulations 2024.
The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)
My Lords, it is a pleasure to see the same team back again. We have covered late payments of paternity leave and now we are on economic crime; I hope that they are not linked. I believe these are to be consequential, which in plain English means inconsequential. I hope that we can cover this quite smoothly but of course, as always, I am very open to hearing noble Lords’ views on how we can improve our legislation to reduce economic crime in this country and get Companies House to work more effectively. At the risk of being slightly repetitive, I urge noble Lords to look at my interests in the register.
These regulations were laid before the House on 30 January under the Economic Crime and Corporate Transparency Act 2023, which I will refer to as the 2023 Act. This Act makes changes to the Companies Act 2006, which, among other things, reforms the role and powers of the Registrar of Companies.
Last week, I brought forward the first four affirmative statutory instruments to begin the long-awaited process of enabling the registrar to become a proactive gatekeeper of company information. Those regulations and the powers in the 2023 Act equip the registrar with the ability to compel answers about suspicious information, remove or change information on the UK company register, as well as analyse and disclose data available to her to law enforcement agents. I am pleased to say that, by next week, the registrar will be able to begin using her new powers. This will be an important step in improving the integrity of the company register for investors and businesses alike and will help in the fight against economic crime.
This statutory instrument will make minor consequential amendments to the Companies Act 2006 and the Economic Crime (Transparency and Enforcement) Act 2022. It also introduces changes to eight pieces of secondary legislation. The changes are very technical in nature but are designed to ensure that the reforms apply coherently and the registrar’s new powers are exercised effectively.
The key purpose of this statutory instrument is to ensure that the changes introduced into the Companies Act 2006 will extend, where possible, to law governing other business entities registered in the UK. It also lifts restrictions on the use and disclosure of certain data by the registrar and allows her to share it more widely, especially with public authorities for purposes connected with the exercise of these functions. The changes are necessary to ensure consistency across the statute book pertaining to business entities, as well as to provide clarity and accessibility to users of legislation.
Although this statutory instrument does not make any policy changes, these regulations are an important effort to ensure that the registrar’s objectives and powers are applied consistently to all business activities registered at Companies House. I am sure that noble Lords have read some of the background notes but these are grandfathered in European companies, called Societas, and various other types of companies; I will be happy to write to noble Lords in greater detail but we are comfortable in wanting to make sure that we have not let any peculiar formation through the net.
Looking ahead, there will be greater opportunities to consider the more substantial parts of the reforms. My department will continue to bring forward further statutory instruments to implement the reforms to Companies House fully. These instruments will strengthen the role and powers of the registrar, help tackle economic crime and make the company register one of the most trusted in the world. I beg to move.
Lord Fox (LD)
Those are laudable aim, Minister. Those of us who laboured long and hard into the night on the then Economic Crime and Corporate Transparency Bill welcome the arrival of this statutory instrument. When we considered the other ones last week, I asked when the commencement statutory instrument was due. I think that this is what I was asking for, so that is good news.
I have nothing to add. As I say, we debated long and hard on the Bill, now the Act. The proof of the pudding will be in Companies House and how it gets motoring on its new mission. I know that the Minister and the department know this; anything that we can do together to help it get there is to the benefit of all of us. We wish this statutory instrument godspeed and we wait hopefully for the other 50-something that will come hard on its heels.
Lord Leong (Lab)
My Lords, as stated earlier, I declare my interest as a director of several companies, as set out in the register. I thank the Minister for clearly setting out this set of regulations. I agree with the noble Lord, Lord Fox: we on these Benches are content to support this set of technical regulations and have nothing further to add.
Lord Johnson of Lainston (Con)
I am grateful to the noble Lords for their support of this technical point. If people are listening to these debates, they should not be under any illusion that there has not been a rigorous debate around every element of the ECCT Bill—and more will come. In this instance, these are technical points, and I would be grateful if this instrument could be passed by the Committee.