Draft Surrey (Structural Changes) Order 2026
(1 day, 6 hours ago)
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The Chair
Good afternoon, ladies and gentlemen. The usual house rules apply: phones should be switched off, please; there should be no hot drinks in the Committee Room; and if anybody who feels that spring is arriving is bold enough to want to take their jacket off, they may do so.
The Minister for Local Government and Homelessness (Alison McGovern)
I beg to move,
That the Committee has considered the draft Surrey (Structural Changes) Order 2026.
It is a pleasure, as ever, to serve under your chairship, Sir Roger. The draft order was laid before the House on 14 January and, if approved by this House and the other place, will implement a proposal submitted by Elmbridge borough council, Mole Valley district council and Surrey county council for two new unitary councils—East Surrey council and West Surrey council—on a geography covering the entirety of the county of Surrey.
As I have said in the House before, we need to set local authorities on a clear path to financial sustainability. Local government reorganisation is a vital part of that journey. Having layers of councils is both ineffective and inefficient. Reorganisation is not a bureaucratic exercise or tinkering with lines on a map. With one council in charge in each area, we will see quicker decisions to grow our towns and cities and reconnect people to opportunity. Residents will see more preventive care and will benefit from more financially stable councils, with combined services delivering for a larger population providing efficiencies and better value. That is why reorganisation—with stronger local councils equipped to generate economic growth, improve public services and empower communities—is a vital part of our change.
I thank colleagues in this place and councils across the country for working with the Government on this process. To this end, on 5 February 2025, councils in the 21 areas of England that still have two-tier local government, including Surrey, were invited to submit proposals for unitarisation. Two proposals for reorganisation in Surrey were taken to consultation: one for two unitary councils and one for three. Following the close of the consultation, on 28 October 2025 I announced the Secretary of State’s decision to implement, subject to parliamentary approval, the two-unitaries proposal.
In reaching that decision, we considered the proposals carefully against the criteria set out in the invitation letter, alongside the responses to the consultation, all representations and all other relevant information. In our judgment, although both proposals met the criteria, the proposal for two unitaries better met the criteria in the case of Surrey. In particular, we believed that it performed better against the second criterion, as it is more likely to be financially sustainable. Putting Surrey’s local authorities on a more sustainable footing is vital to safeguarding the services residents rely on, as well as to investing in their futures.
If Parliament approves the draft order, there will be two unitary councils for Surrey from 1 April 2027. To deliver the new unitary councils, the order requires elections to be held in May 2026 for the new East Surrey and West Surrey councils, which will assume their full powers on 1 April 2027. These elections will replace the scheduled county council and some district council elections. The elections will be on the basis of East Surrey having 36 two-member wards and West Surrey having 45 two-member wards. Subsequent elections to the unitary councils will be in 2031 and every four years thereafter. We expect the Local Government Boundary Commission for England to review the wards in time for the 2031 elections. Implementing this proposal and establishing these new unitary authorities will help deliver our vision of having stronger local councils in charge of all local services and controlling local economic powers, to improve local public services and help grow economies.
Before I outline the content of the draft order, I want to bring attention to related issues in Surrey: the level of unsupported debt in Woking, and devolution for Surrey. The Government recognise that Woking borough council holds significant and exceptional unsupported debt that cannot be managed locally in its entirety. We have committed to unprecedented debt repayment support of £500 million for Woking council, reflecting historical capital practices at the council and the value for money case for acting to protect local and national taxpayers. This is a first tranche of support, and we will continue to explore what further debt support is required at a later point, including following greater certainty on the rationalisation of assets in Woking. Any support will need to consider what further action can be taken locally to reduce debt and ensure value for money for the national and local taxpayer. We are committed to providing the new unitary with interim financial support, such as capitalisation support, until this process is complete.
On devolution for Surrey, there is a plan that we are taking forward. On 12 February, we set out our intention to deliver a new wave of foundation strategic authorities across England as the next step forward in the Government’s devolution agenda. In Surrey, the Government are working with partners, which will include the new unitary authorities, to establish a foundation strategic authority for the area. This will ensure that relevant functions held at the county level, such as transport and adult skills, can continue to be delivered on that geographic footprint where possible.
We have also proposed that a spatial development strategy should be produced for the Surrey geography, which would be a function held by the foundation strategic authority. The establishment of a strategic authority will be subject to the relevant statutory tests being met, and to local consent. The Government will also ensure that fire and rescue functions continue to be governed on the same geography.
We prepared the draft order having considered the information in the proposals and the representations invited from all the councils concerned on specific matters. The order provides that, on 1 April 2027, the county of Surrey and the districts of Elmbridge, Epsom and Ewell, Guildford, Mole Valley, Reigate and Banstead, Runnymede, Spelthorne, Surrey Heath, Tandridge, Waverley and Woking will be abolished. The councils of those districts and county will be wound up and dissolved. In their place, the functions will be transferred to the two new unitary authorities, East Surrey council and West Surrey council.
The draft order also covers electoral matters, which I have set out, and provides for appropriate transitional arrangements. On transitional arrangements, it places a duty on the existing councils to co-operate with each other, the shadow authorities and the shadow executives, and to create joint committees for East Surrey and West Surrey, which will be dissolved after the first meeting of their respective shadow authorities.
Mr Andrew Snowden (Fylde) (Con)
The Minister referenced £500 million of debt repayment support off the back of Woking’s unsupported debt. That rings a bell with me; my neighbouring authority in Blackpool has £500 million of debt, while my Fylde borough council carries no debt. How much do the Government think they will pay in debt support as they look at the other councils going through this process, and have they budgeted an amount for that? Will the debt be paid off before the new authority is created, or will it be transferred to it?
Alison McGovern
I thank the hon. Gentleman for his question, which is very important. Dealing with the significant debt that local authorities have built up for a range of reasons is extremely important. He will be aware that we have dealt with the special educational needs and disabilities issue in recent days. He raises his point in the context of reorganisation, and those decisions will be taken on a case-by-case basis. It is very important that we get this issue right, and I look forward to discussing with him the details of the case he mentioned on many occasions, I am sure, as we move forward with Lancashire reorganisation.
I am pleased that Surrey leaders, members and officers have already commenced and implemented on a voluntary basis some of the transitional arrangements in the draft order to support delivery of the two new unitary councils. As such, the required joint committees have been set up and the implementation team agreed, and work is under way on the required implementation plan.
I would like to take this opportunity to thank all the Surrey councils and everyone involved in this process for their continued hard work and collaboration for local government reorganisation in Surrey. I know that this is not easy, and I reiterate my commitment to continue to support councils through the process. As part of that, we have confirmed £63 million in new funding for all 21 areas going through reorganisation, including Surrey, to help make the change.
In conclusion, through the draft order we are seeking to replace the existing local government structures in Surrey with two new unitary councils that will be financially sustainable and able to deliver high-quality public services to residents. I commend the draft order to the Committee.
David Simmonds (Ruislip, Northwood and Pinner) (Con)
It is a pleasure to serve with you in the Chair, Sir Roger.
I am sure we all recognise that when the proceedings in Committee Room 11 of the House of Commons are recorded in the annals of history, it will be noted that this was the afternoon when Surrey died, not with a bang but with a whimper, inside this very room. We are all here to abolish Surrey. There may be some in the room who felt a great enthusiasm to do that many years ago, but it is positive that we are here with what has, for a long time, been a locally led proposal for reorganisation.
I have some questions for the Minister, although I will be clear that because this is a locally led proposal that delivers benefits in the views of local leaders, the Opposition will not oppose the draft order. It is clearly disappointing that of the 31 local authorities that had their elections cancelled, we have only Surrey and its districts proceeding with local government reorganisation today. Although the draft order is very much focused on the reorganisation of the existing local authorities, there is no clarity whatsoever about the promised mayor and their responsibilities, and how they will interact with the new authorities. I have heard the frustration of many local leaders that the overall package, while acceptable, falls well short of the minimum that they were led to expect as a result of wider English local government reorganisation.
I hope the Minister will address these points in her response. She touched on the Government’s proposals to address the SEND deficit. Surrey, being a very large county with a high population of children with special educational needs and disabilities, carries a total deficit—sorry, a total debt—of around £350 million. A short time ago, the Government set out to the House that they would seek to pay off 90% of SEND deficits. Thus far, Surrey has been offered £100 million against a £350 million deficit. Clearly, that would bake in a structural problem of £250 million for the successor authorities, and it is very substantially less than the 90% that was promised before the House. It would be helpful if the Minister could set out what discussions and agreements she may have reached with her fellow Ministers in the Department for Education, given that that is one of the most critical financial challenges that will face the new authorities.
While we recognise that the draft order is specifically about Surrey, given that it sits as part of the wider devolution priority programme, it would be helpful for all of us to understand how close other local authority areas are to signing the agreements that underpin it. It would be helpful to get a sense of whether Surrey will be the only one to go through the reorganisation process. Despite the relentless pressure placed on a number of other areas, some leaders, particularly in response to what has been said about the cancellation of elections, have already withdrawn their local authorities entirely from engagement with the programme. Will this be the sole reorganisation in the programme or is it the first of many? If it is the first, when might we see some of the others?
It would be helpful for the Committee to understand what guidance the Department is providing, in the spirit of financial sustainability that the Minister spoke of, on the new higher-value property tax. Surrey is one of the areas with a higher proportion of properties that fall for consideration within that tax. We know that it is a Treasury tax that has no benefit to the local authority that collects it, but it would be helpful to understand what guidance, if any, the Department is providing to local authorities, as they engage on the very quick process of getting set up, so that they understand what they need to tell households about what the process will be and how appeals will be handled, and so that they understand their duties and responsibilities.
The Minister mentioned the additional £63 million that was announced to assist various local authorities across the country. While we know that that was very substantially less than they were promised they would receive, it would be helpful to know what guidance, if any, has been issued on the purpose of that funding. It seems very similar to the amount that those councils whose elections were to be cancelled would have spent on organising and running the elections in their areas. Clearly, many of their leaders will want to know whether this is additional funding that they can deploy towards reorganisation or simply the usual electoral grant that is provided for the running of elections that were going to be cancelled in those areas.
In summary, the Opposition will not press for a Division. We recognise that the draft order implements the will of elected leaders in Surrey, and it is very much in the spirit of our own approach to devolution. However, I must say to the Minister, as we sit here with proposals before us for only one of the authorities announced in the devolution priority programme, and with so many areas of our country feeling so let down, that this falls very far short of what was promised even to Surrey, never mind the rest of our local leaders. It would be helpful to have a clear assurance and a timeline for how the Government propose to remedy that.
Several hon. Members rose—
The Chair
Order. As is custom and practice, I shall call the Minister to respond at the end of the debate. Bear in mind that Members may intervene more than once, and on any occasion. If no Government Back Benchers wish to contribute, I will call the Liberal Democrat spokesperson.
Zöe Franklin (Guildford) (LD)
Thank you, Sir Roger; it is a pleasure to serve under your chairmanship. I thank the Minister for her introductory remarks and echo her thanks to all those across Surrey who have been involved in the transitional work, whether they are officers or elected members.
The Liberal Democrats recognise that local government reorganisation is needed to make it easier for people to interact with their councils; how many of us have listened to the understandable frustration of residents who want to complain about the bin collections and the potholes, only to find they have two separate councils to contact? It is also, more seriously, the only realistic way to address the significant financial issues that councils across the country face after years of Conservative underfunding of local government.
Nowhere is the difficult reality of council finances clearer than in Surrey, where previous Conservative administrations presided over Woking’s reaching £2.5 billion of debt and Spelthorne’s reaching £1.05 billion.
Mike Kane (Wythenshawe and Sale East) (Lab)
Forgive me, but we have to point out that the Liberal Democrats were part of the coalition that started austerity in 2010.
Zöe Franklin
I thank the hon. Member for his intervention, but I was referencing specifically the debt of Woking and Spelthorne, which were under Conservative administrations.
As I was saying, we understand why the Government decided to push Surrey to go first with reorganisation. However, we and local government colleagues in Surrey are deeply concerned by the speed at which the process has been pushed through, and the lack of meaningful consultation with residents.
The decision to push ahead with a two-council model was taken in spite of residents saying quite clearly, in response to a survey, that they would prefer a three-council model, and the district councils setting out clearly that that would not be significantly more expensive and would, in fact, better represent communities and place. Local government reorganisation and devolution should be about strengthening local communities. I know that the Government want to do that—they set it out very clearly when this was originally announced by the right hon. Member for Ashton-under-Lyne (Angela Rayner)—and yet I am afraid to say that the decision to have two councils and the double-speed process seem to be more about central cost savings than the people of Surrey.
Of course, central cost savings are not enough to rebalance Surrey’s finances. Even with an unprecedented bailout for Woking, for which we are grateful—I am sure my hon. Friend the Member for Woking will mention it—the new West Surrey council, created by the draft order, is likely to start life with somewhere between £3 billion and £4.5 billion of unresolved debt, not to mention a potentially significant structural funding gap. East Surrey may face lower unresolved debt, but it will equally have a potentially significant funding gap. Ultimately, who pays the price for that? Residents, through both council tax and, potentially, the services they receive. I want to emphasise that it is vital that the Government provide sustained and adequate funding to ensure that reorganisation strengthens councils rather than destabilising them.
Turning specifically to the draft order, although Surrey’s reorganisation is the first in the Government’s devolution programme, it is not the first county to ever go through this process, so it is interesting that the Government have diverged from the precedents set in previous examples such as Cheshire and Cumbria. I would therefore like to hear from the Minister to what extent her Department considered those previous local government reorganisation precedents when deciding on the Surrey joint committee model. What specific factors led to it diverging from those precedents, or was the decision primarily shaped by central Government’s evolving policy on reorganisation?
On the formation of the two new councils, I am sure the Minister will agree that clear, vision-led leadership that puts local people first and seeks to work collaboratively and effectively with officers and political leaders involved in the creation of those authorities is absolutely crucial to a smooth transition. Article 15 of the draft order requires the formation of an implementation team led by the county council’s chief executive. Will the Minister advise what statutory or practical considerations led to the decision that that leadership must sit with the county council’s chief executive, rather than a mutually or jointly appointed lead?
What representations did the Minister’s Department seek from councils across Surrey to shape its thinking, and can that information be shared with Surrey MPs and existing council leaders? I am also interested to understand from the Minister whether there were specific risks that the Department was seeking to mitigate by mandating county-level leadership for the implementation team, particularly given the scale of service disaggregation required.
While reorganisation in Surrey is designed to create single-tier local government through the formation of East Surrey and West Surrey councils, I am glad that the draft order allows for the retention of parish councils. As the MP for Guildford, I have seen the very clear benefit of that hyper-local tier of local councils, which provide passionate, publicly accountable community leadership and deliver high-quality services and innovative ideas alongside local people.
It has therefore been disappointing that, as far as I know, there has been very limited assistance from the Ministry of Housing, Communities and Local Government about the formation of new town and parish councils to cover the areas that do not already have them. I understand that the draft order makes provision for community boards, but I am sceptical that they would provide a similar level of community benefit or accountability that parish or town councils do, so I am very interested to hear the Minister’s views on that.
Speaking of accountability, will the Minister provide some clarity on the council vacancies that will arise after 30 September this year? My reading of the draft order is that no by-elections can take place after this date, unless the number of councillors on the district or county council they are a member of drops below a third of the total number of councillors—for example, in Guildford, that would be 16 councillors. Given that the new councils will not form formally until 1 April 2027, surely if significant numbers of vacancies arise, that will leave residents technically without full representation. Does the Minister believe that is democratically appropriate?
Before I close, I have two last queries to raise with the Minister. First, will she set out the timeline of the remaining steps for the draft order to come into place formally, including the date she expects it to come into force? Secondly—I recognise that this is something the Minister may wish to take away and write to me on—can she advise what considerations have been made to review the Surrey Act 1985 in the light of the changes taking place through the draft order and the associated reorganisation of Surrey into East Surrey and West Surrey?
In conclusion, we on the Liberal Democrat Benches recognise the need for reorganisation. We do not oppose the draft order, but we urge the Minister and the Department to work closely with colleagues and officers across all tiers of local government in Surrey to ensure that they have the necessary funding and transition support so that local people see improvements to services where they are needed and council set-ups that put the needs of residents at the centre in both culture and service delivery and that are financially resilient for the future.
Lewis Cocking (Broxbourne) (Con)
It is a pleasure to serve under your chairmanship, Sir Roger.
When creating new unitary councils, it is important that we take communities with us, and community identity is really important. I have raised concerns about this whole devolution and unitarisation process and how we take all the communities within the shire councils across the country with us.
On Surrey in particular, will the Minister, in her summing up, reflect on a comment made in the Chamber by my hon. Friend the Member for Spelthorne (Lincoln Jopp)? He called for the new proposed unitary authority covering his constituency to be named West Surrey and South Middlesex, rather than simply West Surrey, to ensure that we get that historical county representation and take communities with us.
Edward Argar (Melton and Syston) (Con)
My hon. Friend rightly highlights the campaign of my hon. and gallant Friend the Member for Spelthorne for the new council to be named West Surrey and South Middlesex. As I understand it, that name is also championed by—this shows my age—popular household name Russell Grant. Does my hon. Friend agree that alongside the questions we are debating about the financial sustainability of the new unitary authorities, their governance and the services they provide, it is absolutely vital that we ensure they have an identity that those who live in those areas can relate to?
Lewis Cocking
I completely agree. I do not think the Government have spent much time considering that fundamental flaw and how we take communities with us by getting that identity right.
The people of Spelthorne feel strongly about their historical ties to Middlesex, and I urge the Minister to listen to those concerns. Creating big new super-unitary councils by shoving multiple areas together does not make people feel included, because no one wants to end up like Birmingham. It is really important that we take communities with us.
Mr Will Forster (Woking) (LD)
It is a pleasure to serve under your chairship, Sir Roger. Surrey is the first local authority to undergo local government reorganisation under this Government’s new plan because of the catastrophic failures of local Conservative councils: Woking borough council, Surrey county council and a raft of others have significant issues. The Minister has already highlighted that the Government have agreed to an unprecedented and historic write-off of £500 million for one local authority, Woking borough council. The Government have never written off debts for one local authority on its own before, yet they are now doing so on such a large scale. The Government have said that that is the first tranche of an unprecedented debt write-off.
Moreover, the Minister has confirmed to me that the Government will provide interim financial support to the new West Surrey council, including capitalisation support and commercial support and advice to deal with the historical legacy of assets. Local authorities should keep the streets clean and maintain our parks, but they were acting like bank and property empires. Why are the Government happy for a new council, West Surrey council, to start off effectively bankrupt without the Government support that is so needed? Currently, Spelthorne borough council and Woking borough council are in intervention, with Government commissioners in post. Will those commissioners remain in situ after those councils have been abolished, or will they be transferred to West Surrey council? When will that decision be made, if the Minister cannot make it today?
My next point concerns articles 46 and 48 of the draft order and the cancelling of elections, particularly last year, for Surrey county council. The Government have decided to reschedule the elections that were previously going to be cancelled, due to their potentially unlawful nature. Can the Minister tell us what advice she and the Government have had on whether cancelling Surrey county council’s elections last year was also unlawful, before we make a decision today on formalising these provisions?
Finally, schedules 1 and 2 are about the new wards for East Surrey and West Surrey councils. I believe those wards were established for Surrey county council under the Local Government Boundary Commission for England but never implemented. Is that the case? The Minister said she assumes the Local Government Boundary Commission will review those wards before the next scheduled set of elections. Does she believe there is time for the new councils to establish themselves, to understand what council size is needed, then to undertake an 18-month review? Does she genuinely believe there is enough time for the Government to do that?
Alison McGovern
I thank all Members who have contributed to this debate, and I also thank the Members, particularly those from Surrey, who have engaged with me on this subject in recent months—I really appreciate their time and effort. I will try my best to respond to the points that have been made but, as the hon. Member for Guildford rightly expressed, I may need to write to her and others with more detail, particularly where they have requested specific guidance or advice that has been given previously; I think it is easier for members of the Committee if I provide that to her directly.
I will turn to some of the questions asked by the hon. Member for Ruislip, Northwood and Pinner. He mentioned devolution, and I answered his question in my opening speech when I said that the next step is a foundation strategic authority. Today we are dealing with reorganisation, and the Government believe that it is right to ensure the firm foundations of the unitary authorities before we proceed, but we are determined none the less to move forward with devolution for England.
The hon. Gentleman also asked about the SEND deficit; I was interested in the specific figures he mentioned, as I do not believe that any firm numbers have been confirmed yet. I am in daily contact with DFE Ministers and others, so I am sure we can correspond on that matter.
Alison McGovern
I can, if my hon. Friend really wants to intervene. [Laughter.]
Alison McGovern
I will happily correspond with any Members interested in that subject, but nothing has been confirmed yet. Let us try to make progress on that; it is very important for all local authorities.
The hon. Member for Ruislip, Northwood and Pinner asked whether this will be the sole reorganisation, and the answer is no. We are making progress on the next waves of reorganisation, and there will be more for the Government to say on that very shortly. He also asked for guidance on the new high-value council tax surcharge that we have introduced, as well as the £63 million extra in capability funding. We have been in consultation and collaboration with councils and the Local Government Association on both those matters, as we have been throughout all of reorganisation. I will happily provide the hon. Gentleman with more detail on that, if he wishes.
The hon. Member for Guildford asked about precedents from other reorganisations. Of course, we take into account what has happened previously, and the criteria against which decisions are judged are set out in the invitation letter. She asked about the county council leadership, and I can write to her with details of that process, if she would like. She also asked some detailed questions on risks and the technicalities of vacancies and by-elections, and I will again write to her with the precise details.
The hon. Member for Broxbourne asked about the name and our fellow Member’s campaign. Following oral questions, I will engage with the Member concerned, so he need have no fear—we will be listening to his points.
Finally, the hon. Member for Woking asked about the situation that he rightly described as incredibly serious—it is much more serious for any council to have got into that position than the attention that it is often given would suggest. I will write to him on the next steps with the commissioners, how it affects the whole best value process and the background of that. He also asked about the specifics of cancelling elections last year. I do not think that has any relevance, but I will write to him to confirm that, as I think he asked a specific point about advice.
I say to Surrey Members, through the Committee, that there are significant financial challenges here, and I do not underestimate how important it is to get this right to ensure that services can continue to be delivered for residents. I look forward to working together with Surrey Members to get those decisions right, so that we all get this process to the best place it can be.
The Government’s ambition is to simplify local government by ending the two-tier system and establishing new single-tier unitary councils. It is a once-in-a-generation reform to make stronger local councils that are empowered across local services and equipped to get economic growth going, improve services and empower communities. The draft order provides for two new unitary councils in Surrey, and it will help ensure that local government is financially sustainable and able to deliver for residents. These are the benefits that the draft order can bestow on the people and businesses of Surrey, and I therefore commend it to the Committee.
The Chair
Before I put the Question, I have been discussing with m’learned friend, the Clerk, the situation that arises. The Minister has, as ever, entirely courteously and properly indicated that she will respond in writing to some of the questions that have been asked, and it is not my place to interfere with the process at all. However, while the draft order relates to Surrey, it is clear that there are potentially wider implications that might be of interest. I gently suggest that, if she chose, at the very least, to copy the two Opposition Front Benchers into her letters, that would probably be hugely appreciated.
Alison McGovern
As you might expect, Sir Roger, I entirely agree with your suggestion, and I would be very happy to do so.
The Chair
As ever, courteous—thank you very much indeed.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Surrey (Structural Changes) Order 2026.
Draft Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Conferral of Functions) Regulations 2026
Draft Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Consequential Amendments) Regulations 2026
(1 day, 6 hours ago)
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The Parliamentary Under-Secretary of State for Business and Trade (Kate Dearden)
I beg to move,
That the Committee has considered the draft Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Conferral of Functions) Regulations 2026.
The Chair
With this it will be convenient to consider the draft Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Consequential Amendments) Regulations 2026.
Kate Dearden
It is a pleasure to serve under your chairship, Ms Lewell. The instruments were laid before the House on 26 January and relate to the alternative dispute resolution chapter in the Digital Markets, Competition and Consumers Act 2024, which received Royal Assent in May 2024. The Act repeals the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 and replaces them with a strengthened framework in chapter 4 of part 4 of the Act.
In most instances, disputes between businesses and consumers can be resolved without the need for any formal action, but when consumers and the trader cannot come to a solution, ADR is an effective means of securing redress for the consumer without resorting to litigation. All ADR providers are independent third parties, offering dispute resolution that is usually less confrontational for the consumers and businesses involved, but not all ADR providers have the same accreditations and standards, so consumers can experience inconsistent quality.
For ADR to be effective, it must be of high quality and meet certain standards. The Act aims to strengthen the quality of ADR available to consumers by introducing a mandatory accreditation framework for ADR providers for consumer contract disputes. That will provide a robust set of accreditation criteria to assess an ADR provider’s expertise, transparency, independence and accessibility before being accredited, and ongoing monitoring and review to ensure that accredited ADR providers continue to meet those high standards.
The Act includes the power to revoke, suspend or limit accreditation, or impose further conditions if a provider is found to be non-compliant. The intention of mandating accreditation of ADR providers is to strengthen the ADR framework in the UK. The Government believe that the changes will help to deliver a trustworthy, timely and fair service that consumers and businesses can trust to resolve consumer disputes, with improved oversight to monitor standards and ensure consistency.
Section 307 of the Act allows certain ADR functions to be conferred on another person. The regulations confer on the Chartered Trading Standards Institute responsibility for managing the provision of ADR in consumer contract disputes in non-regulated sectors, including the functions of accreditation, monitoring and reporting on the operation and effectiveness of ADR provision. That includes upholding the standards of ADR providers in the UK through powers to compel or sanction ADR providers to improve performance in the event that they do not meet their obligations.
The regulations also require the CTSI to prepare quarterly and annual reports for the Secretary of State for Business and Trade. The reports will contain information and metrics on the performance of the CTSI, ADR providers and the ADR landscape in the UK to ensure accountability and transparency, and to enable the Secretary of State to maintain oversight of the operation of the system of accreditation and the provision and quality of ADR carried out in the UK. The decision to confer these functions on the CTSI has been taken in recognition of its authority, track record and expertise in that area, including its long-standing and constructive relationships with ADR providers.
Separately, the regulations make amendments to primary and secondary legislation in consequence of chapter four of part 4 of the Act coming into force and the 2015 regulations. Those consequential changes deal with redundant references to the 2015 ADR regulations and, in some cases, replace them with a reference to chapter 4 of part 4 of the Act. They do not materially change the policy or the effect of the underlying law, but simply keep the statute book up to date in the usual way.
The intention of both sets of regulations, as I hope I have made clear, is to support and strengthen the ADR framework in the UK, putting it on a stronger footing that provides a consistent, trustworthy, timely and fair service that consumers and businesses can trust to resolve disputes amicably, with improved oversight to monitor service standards. I invite hon. Members to support the instruments, and I commend the regulations to the Committee.
Gareth Davies (Grantham and Bourne) (Con)
It is always a great pleasure to see you in the Chair, Ms Lewell. It is also a pleasure to see the Minister in her place. Alternative dispute resolution is intended to provide a low-cost, efficient alternative for resolving disputes between consumers and businesses. I thank the Minister for setting out what these regulations seek to achieve.
The regulations follow various pieces of work that were carried out by both Conservative and Labour Governments over many years, with the overall goal of securing a fair deal for consumers and a fair operating environment for businesses. Although the Opposition of course remain supportive of the goals of the Digital Markets, Competition and Consumers Act 2024, we in this place should always be mindful of the adverse impacts of introducing any kind of red tape on British businesses, no matter how well-intentioned it might be.
As the Committee would expect from the official Opposition, we have a few questions to probe some of the elements in these measures. First, will the Minister set out the current status of the ADR provider sector, and how the Government see the sector changing as a direct result of the regulations? More specifically, how many ADR providers are there in the UK, and how many of those are currently unaccredited and would therefore be impacted by these measures? Do the Government expect the number of ADR providers to reduce as a result of the requirements? If so, what impact does the Minister believe that that reduction will have on consumers and businesses that use those services?
Finally, what is the Government’s view of the impact the regulations will have on those who operate ADR businesses? The explanatory memorandum to the regulations states that the Government expect there to be no impact on businesses, and that
“the instrument does not impose regulatory obligations”.
However, that is exactly what is being done today, so that looks like an error. I would be grateful if the Minister clarified whether that is an error, and explained the language in the explanatory memorandum for the benefit of the Committee.
Kate Dearden
I thank the shadow Minister for his comments and his support for the Act and the regulations we are considering. The regulations place the CTSI on a statutory footing. I alluded in my introductory remarks to the role of the Secretary of State and the accreditation determinations, monitoring, enforcement and information sharing under the Act, as well as the mandatory and accreditation requirements.
In terms of exempt ADR providers, to avoid duplicated regulatory provision, the Act exempts ADR provision under several ombudsmen and equivalent schemes, which are already regulated under other legislation. Those are either statutory bodies performing statutory functions or redress schemes regulated by other bodies under other legislation. If a sector already has its own dispute resolution system, these new ADR rules will not apply and that avoids doubling up regulations and ensures that businesses follow only one set of rules, with no confusion about who is responsible.
There are also some statutory bodies that, to an extent, carry out ADR and it is not considered appropriate to regulate them as their remit does not cover consumer contracts as defined in chapter 4 of part 4 of the 2024 Act.
I am happy to follow up the hon. Member’s point about the specifics on the statistics afterwards if he requires any further information. On the effect of schedule 25 listing exempt ADR providers, that is quite clear, but again, if he would like further information on how we are avoiding duplication, I am happy to provide it as there is a power to add further exemptions in future, which might be used where it is more appropriate to regulate ADR elsewhere.
The important point about the legislation is that it will ensure that ADR is much easier for consumers and businesses. That is really important to reflect on. What ADR can provide in terms of support and streamlining for businesses and consumers is significant, and will offer a cheaper and faster alternative for consumers and businesses seeking to resolve disputes, compared with making a claim to the courts. This framework gives the flexibility to update those standards over time. That is important and provides a foundation for considering further reforms if required.
Gareth Davies
I totally understand that the Minister might not have the information to hand right now, so will she commit to writing to me?
Kate Dearden
Yes, I am happy to provide that follow-up information.
Question put and agreed to.
DRAFT DIGITAL MARKETS, COMPETITION AND CONSUMERS ACT 2024 (ALTERNATIVE DISPUTE RESOLUTION) (CONSEQUENTIAL AMENDMENTS) REGULATIONS 2026
Resolved,
That the Committee has considered the draft Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Consequential Amendments) Regulations 2026—(Kate Dearden.)