House of Lords
Introduction: Lord Khan of Tooting
Introduction: Lord Neri
Home Building Target
(1 day, 7 hours ago)
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Lord Young of Cookham
To ask His Majesty’s Government what progress they have made in reaching their target of building 1.5 million homes in this Parliament.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, we are driving progress through our bold planning reforms: the £39 billion social and affordable homes programme fund, and our new £16 billion National Housing Bank, which is expected to support over 500,000 homes. Alongside programmes such as the New Homes Accelerator and Small Sites Aggregator, we are working with industry and local authorities to deliver the homes this country needs. The latest statistics, published in June, show that an estimated 392,400 net additional homes have been built this Parliament, with a 15% increase in starts and a 54% increase in outlying planning proposals.
Lord Young of Cookham (Con)
My Lords, I am grateful to the Minister for her reply, but only Ministers believe that the 1.5 million target is achievable; even the National Audit Office said that the chances are slim. The Prime Minister has recently decided to channel public money for housing away from housing associations and through local authorities. First, does the Minister agree that this means we will get fewer social homes, because housing associations can top up public money with private borrowing while the local authorities cannot? Will she urge him to change direction? Secondly, does she agree that many of those renting could afford a mortgage if they had some help with a deposit? Has she read today’s Financial Times, which indicates that the previous Secretary of State urged the Government, before he was sacked, to introduce a successor to Help to Buy? Will she urge the Prime Minister to continue with that, as this will give the market the confidence it so badly needs?
Baroness Taylor of Stevenage (Lab)
On the noble Lord’s first question, the Prime Minister was talking about support between local authorities and housing associations. It is important that we have good collaboration between the two partners in delivering social housing. I look forward to a very productive relationship between local government and our registered providers. I do not believe that it will lower the number of houses that can be delivered, particularly as we now have the National Housing Bank that this Government brought in. I will write to the noble Lord on his second question.
Lord Best (CB)
I am afraid that we are not going to make the 1.5 million new homes target, but we can pull out all the stops and get as near as possible to it. Can the Minister prevail on her ministerial colleagues to commit rather more of the £39 billion that has been set aside to social housing? We can get on with that at a time when the private market is in the doldrums. There are lots of opportunities to help the construction industry get on with the social housing programme, which is so important.
Baroness Taylor of Stevenage (Lab)
We committed to delivering a stretch target of 1.5 million homes. We know it is a stretch target, but it is better to aim high in this respect. We have already announced, in August, the first tranche of the £39 billion of funding for social housing. We will move forward with the following tranches as quickly as possible.
Baroness Warwick of Undercliffe (Lab)
My Lords, I very much welcome what the Minister said. Housing associations this year built the highest number of social rented homes in the past decade, and National Housing Federation figures suggest that that will further increase. Can she add to what she said and confirm whether her department is making representations to the Treasury to match the ambition of the housing association and council sectors and to increase investment in the social and affordable homes programme in the Autumn Budget?
Baroness Taylor of Stevenage (Lab)
I am sure that my noble friend would not expect me to comment on the Autumn Budget in advance of the Chancellor’s announcements. It is important that we remember that this £39 billion investment is the highest level of investment in social and affordable homes for generations. As I said, we have already begun implementing that programme, and further funding is available through future allocations. For the first time, three councils have been awarded strategic partnership status outside London, demonstrating how our councils are stepping up to meet these ambitions. We are also removing the barriers to council housebuilding through a 10-year rent settlement, rent convergence, Public Works Loan Board borrowing rates, right-to-buy reform and a further £46 million investment through Capacity to Build to strengthen councils’ skills, expertise and capacity.
Lord Stoneham of Droxford (LD)
My Lords, I declare my interests as listed in the register. Given the dire state of the housing market, surely the response should be, “Yes Minister”—a very brave Minister retaining the target. Can the Minister reassure the House that to get construction moving, the Government will give priority to encouraging private sector investment in social housing, rather than relying on Help to Buy schemes, which normally end up with higher prices?
Baroness Taylor of Stevenage (Lab)
I am keen to encourage as much investment in the delivery of social and affordable homes as we can. When I did a workshop on this in the City, there was a great appetite for patient capital investment in social housing. I hope we will be able to encourage that. We have reviewed the Help to Buy system, as the noble Lord, Lord Young, indicated. We are working through whether that is the right way to go. There were some issues with the previous Help to Buy scheme. We continue to explore ways to deliver more housing. Certainly, I would encourage investment in this.
The Lord Bishop of Hereford
My Lords, many villages are increasingly unable to retain young families, agricultural workers and other key members of the rural workforce because of a shortage of affordable homes. As the Government pursue their housebuilding target, how will they ensure that rural communities remain sustainable local economies, rather than becoming places local people are priced out of?
Baroness Taylor of Stevenage (Lab)
There are a number of issues that we need to address. One is the rural homes exception, which we have thought about. Local authorities need to make sure that they have enough rural housing in their local plans. We need to make sure that we have rural homes exception policies, so that local people can determine what housing is built where. There is also the issue of making sure the services are there to support rural housing. All these issues are important, and we must bring those together as we make sure there is sufficient housing in rural areas.
Lord Jamieson (Con)
The Minister frequently trumpets the Government’s £39 billion social homes programme as a means of accelerating housing delivery. Can she tell the House how many social homes will be completed and occupied by July 2029 through this grant? Would she categorise that figure as a firm commitment or a “slim chance” target, as the Secretary of State describes the commitment to 1.5 million new homes by July 2029?
Baroness Taylor of Stevenage (Lab)
I say it is a great investment, because it is an enormous investment in social and affordable housing. Significantly, the previous Government left us in a housing crisis, so I will not take any criticism from the other side about investing in social housing. The funding that Homes England is committing now will deliver 73,500 homes via strategic partnerships. The GLA intends to offer allocations of at least £8 billion and will set out shortly the number of homes it expects to achieve through the initial allocation. We will consider whether a national central government target or ambition is appropriate in this regard.
Baroness Watkins of Tavistock (CB)
My Lords, I warmly welcome the approach the Government are taking. I ask the Minister whether funds could be made available for housing associations to immediately purchase properties for social rent. There are so many on the market, some of which are under housing association shared ownership anyway.
Baroness Taylor of Stevenage (Lab)
I appreciate all the issues around shared ownership, and we have debated those extensively in your Lordships’ House. Housing associations manage their own finances—they are independent organisations. Many of them purchase houses that become available on the open market, and we would encourage them to continue to do so.
Baroness Uddin (Non-Afl)
My Lords, I welcome the Government’s absolute commitment to building 1.5 million houses. How do the Government square their decision to build a data centre in the heart of the East End of London—Brick Lane, which is occupied by communities and hundreds of families—which would take away scarce land for housing, to which the Government are committed?
Baroness Taylor of Stevenage (Lab)
It would be totally inappropriate for me to comment on individual planning applications from the Dispatch Box. We always have to get the balance right between meeting the needs of our economy—data centres are, of course, a critical factor in driving our economy forward—and making sure there is enough land for housing. That situation is the responsibility of our local authorities when they go through their planning processes, unless data centres are referred as part of our national infrastructure system. I will not comment on any individual application here and now.
Tax Burden and Economic Growth
(1 day, 7 hours ago)
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Lord Leigh of Hurley
To ask His Majesty’s Government what assessment they have made of the relationship between changes in the tax burden and the effect on economic growth.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
Our tax system is very supportive of economic growth. Our tax-to-GDP ratio is in the middle of the pack of the G7, and we have the lowest headline rate of corporation tax in the G7. The UK economy saw the fastest growth in the first half of this year, and the IMF expects the UK to remain the fastest-growing European G7 economy in 2026-27. According to the IMF, this year, for the first time since 2004, we are forecast to be borrowing less than the rest of the G7 on average. Despite the headwinds from the war in the Middle East, there is a lot to be optimistic about.
Lord Leigh of Hurley (Con)
My Lords, the tax burden is forecast to reach its highest level ever. The last two, disastrous Budgets raised taxes by £40 billion and £26 billion respectively; the results can be seen in today’s very disappointing unemployment figures. The manifesto ruled out any major tax increases, but there is still great uncertainty in the UK economy, which is damaging the economy. What evidence can the Government offer that such a historically high tax burden is consistent with promoting economic growth, which is so badly needed in this country?
Lord Wilson of Sedgefield (Lab)
I should just say to the noble Lord that we had quite a big mess to tidy up when we came into government two years ago; I do not think that the Opposition should be allowed to get away with that.
Only on Friday, the ONS estimated that GDP growth increased in July by 0.4%, which was well above expectations. In fact, UK GDP growth is the fastest in the G7. The tax level still sits in the middle of the G7 nations. For example, the effective tax rate for a single individual with no children and on average earnings is one of the lowest in the OECD. I am not pretending that everything is rosy in the garden—there is a war in the Middle East. On the unemployment figures that came out today, I do not know whether the noble Lord is aware of this, but in only two peacetime years out of the past 150 has the average annual employment rate been higher than it was in 2025.
Let us just listen to what businesses have been saying. A representative of the KPMG said that
“businesses are starting to press ahead with investment”
and that
“we are starting to see the data moving in the right direction”.
As I say, there is a lot to be optimistic about.
Baroness Kramer (LD)
My Lords, there is a strong argument that the businesses hit hardest by the tax rises—notably in employers’ NICs—are small businesses with more than seven employees and medium-sized businesses. Have the Government done work to look at the impact of growth on that specific sector? It is crucial in very disadvantaged communities, and the impact is masked by always quoting the high-level numbers.
Lord Wilson of Sedgefield (Lab)
Obviously, I do not want to pre-empt anything that might come out in the Budget, but it is fair to say that the Government have protected the smallest businesses from the NICs changes by more than doubling the employment allowance, which allows eligible employers to reduce their employer NICs bill by up to £10,500. This means that around 900,000 employers, or around 40%, will have no employer NIC liabilities. We are thinking about small companies—we know that they are the ones that grow the economy—and we are going to continue doing what is best for the British economy.
Lord Londesborough (CB)
My Lords, returning to the original Question asked by the noble Lord, Lord Leigh, does the Minister agree that what really matters is growth in GDP per capita, where we sit near the bottom of the G7—given our population growth over the past five years—and that this has happened at a time when our tax burden has risen at the fastest rate in the G7? That is not a coincidence, is it?
Lord Wilson of Sedgefield (Lab)
I think it is fair to say that, as far as GDP per capita is concerned, the other figure that is not really looked at but is prevalent in all this is payroll employee-based productivity, which has grown by 2.2%—the fastest calendar year rate outside of the pandemic for more than a decade. Productivity growth is the main way to get a sustainable increase in long-term economic growth. As I said, we are not out of the woods yet, but there is a lot going on that is positive and optimistic; that is the line we need to toe.
Lord Barber of Ainsdale (Lab)
My Lords, our new Prime Minister has talked about growth in every postcode. He is surely right to set that objective so that communities are not left behind. How will the Government ensure that the revenues raised through taxation help to deliver growth in every part of our country?
Lord Wilson of Sedgefield (Lab)
My noble friend asks a very important question which is central to this Government’s plan for growth and devolution. Closing regional productivity gaps is a major economic opportunity, with productivity in northern cities around 20% lower in than similar-sized cities in the OECD. If we are able do that, we can boost UK GVA by £82 billion. We are devolving more power to local leaders and investing in transport and housing infrastructure. The aim is not simply to redistribute existing growth but to increase the productive potential of major cities around the country. We are going to rely on regional mayors, for example, to ensure that they have a say in how that growth takes place.
Viscount Goschen (Con)
My Lords, coming to the basics of the argument, why do the Government believe that raising taxes and increasing regulation promote growth?
Lord Wilson of Sedgefield (Lab)
As I have said, we have one of the most productive tax regimes in the world. We can see that by the amount of money that is raised and the number of people who are in employment. There have been only two years in the last 150 years that have seen a higher figure. We are in a position where we have to raise taxes to help solve the problems that we were left with two years ago. We will press on to make sure that the economy is as productive as it can be.
Lord Hannan of Kingsclere (Non-Afl)
My Lords, under Tony Blair, the Minister’s predecessor in another place—
Captain of the King’s Bodyguard of the Yeomen of the Guard and Deputy Chief Whip (Baroness Anderson of Stoke-on-Trent) (Lab)
My Lords, the noble Lord is now an independent, I believe, so he will ask his question and be followed by the Cross Benches.
Lord Hannan of Kingsclere (Non-Afl)
I thank the noble Baroness. Under Tony Blair, the Minister’s predecessor in Sedgefield in another place, the state was taking 34% of GDP, spending about £1 in every £3. Now, since the pandemic, it is closer to £1 in every £2. That has coincided with an extraordinary flattening of our growth rate. Will the Minister urge his colleagues in government to look at which taxes are the most deleterious to growth while bringing in the lowest revenues? I am thinking specifically of taxes on savings, investment and inheritance.
Lord Wilson of Sedgefield (Lab)
The noble Lord raises a very important point. We always have these taxes under review. No doubt when we have the Budget at the back end of October some statements will be made by the Chancellor reflecting what we need to do to ensure that the economy grows into the future. We will continue to do what is in the best interests of the British people.
Lord Macpherson of Earl’s Court (CB)
My Lords, does the Minister agree that a bigger obstacle to growth than the tax burden is the level of public debt across the world, which is reflected in higher interest rates across the OECD countries? Therefore, can he restate the Government’s commitment to the fiscal rules and to fiscal consolidation in general?
Lord Wilson of Sedgefield (Lab)
The new Chancellor has said that we will stand by the fiscal rules that were laid out at the start of this Parliament. The noble Lord is absolutely right about the debt servicing costs that we have to meet. One of the upsides—not of the debt but of what is happening—is that while borrowing was stuck at about 5% of GDP for the previous four years, it has fallen by 1% to its lowest level for six years, at 4.2%, in 2025-26. According to the IMF, this year, for the first time since 2004, we are forecast to be borrowing less than the rest of the G7 on average. We all know about the conflict in the Middle East and the impact that is having on debt not just in this country but around the world. However, we are setting a plan to ensure that we can lower that debt burden.
Baroness Neville-Rolfe (Con)
My Lords, wealth creators and entrepreneurs are more internationally mobile than ever. What steps are the Government taking to ensure that their cumulative tax rises do not drive away young people or established wealth creators such as Chris Rokos, who until recently contributed so much to the UK’s prosperity in tax and philanthropy?
Lord Wilson of Sedgefield (Lab)
The noble Baroness has mentioned young people and the importance of them staying in the UK and working here. We all know the problems that we have with NEETs. We need to consider what some businesses around the country and internationally are saying about doing business in this country; for example,
“businesses are starting to press ahead with investment … we are starting to see the data moving in the right direction”
and
“Despite geopolitical tensions, cost-of-living pressures and fiscal uncertainty, the fundamentals for … UK businesses are strong”.
This is business that is speaking about the future of the British economy. As I said, we need to be optimistic. She asked whether the tax burden is driving people out of the country. Some figures will be released next year which we think will prove that the effect has been marginal on the number of people who are leaving.
Neighbourhood Health and Social Care
(1 day, 7 hours ago)
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Baroness Thornton
To ask His Majesty’s Government what plans they have for the integration of neighbourhood health and social care, and on what timetable.
Baroness Thornton (Lab)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and I draw the House’s attention to my register of interests.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, this Government support the integration of neighbourhood health and social care. Our approach to neighbourhood health brings services together so that people experience more joined-up and person-centred care, including from integrated neighbourhood teams. In March, we published the Neighbourhood Health Framework, promoting joined-up partnership arrangements between ICBs and local authorities and asking health and well-being boards to develop neighbourhood health plans for implementation from 2027-28 at the latest.
Baroness Thornton (Lab)
I thank my noble friend for that Answer. I felt moved to put this Question because there seems to be more hope today than for many years that local integration of social care, health and primary care might happen. With so many moving parts in the reform agenda—the Casey review, the 10-year plan and so on—there may be a danger of reform steaming ahead without the voices and views of patients, carers and those with lived experience being properly baked into the design process. I seek reassurance from my noble friend that those voices will indeed be heard and heeded.
Baroness Merron (Lab)
I certainly can give that reassurance to my noble friend. I am glad she recognises that our move towards neighbourhood health is not just a shift on paper but a real turnaround in how we see people and services. Coproduction is required for neighbourhood health plans, which would be all the poorer if we did not include the voices to which she refers.
Baroness Manzoor (Con)
My Lords, integration is harder than colocation. For instance, housing and social isolation are key detriments to health, yet they sit outside the NHS. Therefore, a social worker sitting next to a GP may be helpful, but the reality is that this social worker will not get extra money, extra access to health beds in the community or extra staff. What will the Government do to erase these difficulties, particularly when the health needs of the population are growing and the workforce has not kept pace with the complex needs of the ageing population?
Baroness Merron (Lab)
The noble Baroness is quite right to talk about people having more complex needs, and, indeed, we are also living longer. However, the current health system is organised around institutions and services that are complex, disjointed and difficult to navigate, as she said. On housing, for example, I know that the health and well-being boards, which are the key to this, can design themselves to bring in services. I can think of a number which have already done that and included people from housing in the way that she describes. It is absolutely encouraged and health and well-being boards across the country are already doing that.
Baroness Pidgeon (LD)
My Lords, a recent workforce assessment by Skills for Care found that adult social care in England still had around 96,000 vacancies and projected that a further 410,000 posts will be needed by 2040 to meet demand. What are the Government doing to address these shortages and deliver genuine integrated patient services?
Baroness Merron (Lab)
We recognise the continuing challenge that we inherited in terms of workforce, but that is why we are investing in the adult social care workforce. In 2028, the first ever fair pay agreement will come in, which will be backed by £500 million of funding. It will improve pay and conditions for the workforce, which is crucial. We are also implementing the first ever universal career structure for the adult social care workforce, as well as investing up to £10 million this year in the learning and development support scheme. This, along with all the other changes, will make a massive difference to the workforce in terms of retention, recruitment and development.
Lord John of Southwark (Lab)
My Lords, my noble friend has already mentioned health and well-being boards, in which local government is a key participant and player. Having said that, and with the Government’s commitment to devolution in mind, can she tell us more about the role that local government will play in improvements to health and social care going forward? I am delighted to declare my interest as a vice-president of the Local Government Association.
Baroness Merron (Lab)
My noble friend is right to identify that, if we are going to deliver neighbourhood healthcare and make improvements in social care, we have to join up the NHS and local government. That is key to our whole approach to neighbourhood health. That is why health and well-being boards, which are responsible for drawing up the local plans for what the locality needs, will bring together and have on them local authority representation and voice, along with the NHS and others. We will manage this only by doing so, because, in order to reduce health inequalities and deliver locally, it cannot just sit with one. I am grateful to local government for what it is doing.
Baroness Watkins of Tavistock (CB)
My Lords, will the Minister explain how health and social care will be planned to ensure intergenerational input, in particular from young carers and young people, who often have very good innovative ideas about how to provide such services?
Baroness Merron (Lab)
That is a very good point. Young carers are sometimes left out, to the detriment, as I said earlier, of services and policy. I bring us back to the requirement in the Neighbourhood Health Framework, which we published just in March of this year, and add to that our introduction of neighbourhood health centre schemes across the country. The voices of local people, particularly those in the higher-priority cohorts, which can include young carers, will be heard and be part of the coproduction of how we provide neighbourhood health and social care.
Lord Kamall (Con)
My Lords, the noble Baroness said that the health and well-being boards will be responsible for making sure that there are sufficient social care services at the neighbourhood level. Following the question of the noble Lord, Lord John, to whom will they be accountable if they do not deliver sufficient social care at the neighbourhood level?
Baroness Merron (Lab)
The Neighbourhood Health Framework published in March, which I mentioned, requires local systems to develop neighbourhood health plans. That will give a very clear basis for measuring impact, which we do not have at the moment. I certainly agree with the noble Lord that it is not about the quality of the plan but about the quality of delivery. That is why the framework empowers local leaders in five minimum national goals that include, for example, as we have discussed many times, improving access to general practice, as well as the join-up with social care.
Baroness Nargund (Lab)
My Lords, I declare an interest as a former vice-chair and trustee of the British Red Cross. I have seen at first hand how the British Red Cross delivers health and social care across communities in our country by helping people to transition from hospital to home, giving them independence at home and avoiding readmissions. Does my noble friend the Minister agree that bringing together the voluntary sector with local authorities and the NHS will help to deliver more connected, effective and compassionate social care in every postcode?
Baroness Merron (Lab)
I certainly agree with my noble friend on that point. That is why achieving neighbourhood health will rely critically on that strong partnership, which will include civil society, as she says.
Lord Evans of Rainow (Con)
My Lords, the noble Baroness did not answer the question from my noble friend the Front Bench spokesman on who will be accountable if this does not work out properly.
Baroness Merron (Lab)
All the local systems have their line of accountability, with which I know noble Lords are familiar. Currently, for example, ICBs report to NHS England. Subject to the passing of the Health Bill, that will now come within the department and there will be an accountability mechanism. Transparency will be a key part of that. If noble Lords have any particular concerns, I am always happy to hear them.
AI: Human Extinction
(1 day, 7 hours ago)
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Baroness Teather
To ask His Majesty’s Government what assessment they have made of the risk of AI causing human extinction within the next decade.
The Parliamentary Secretary, Cabinet Office, and Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Baroness Twycross) (Lab)
My Lords, AI is advancing at an extraordinary pace, creating opportunities and risks that do not stop at national borders. All new emerging technologies have had an impact on society, and it is government’s role to help mitigate potential risks. The UK is leading global efforts to test and understand AI, with one of the best-resourced AI security institutes in the world, which will help us develop the standards and safeguards necessary to keep people safe.
Baroness Teather (LD)
In recent days, we have heard urgent warnings from industry leaders, and even a Nobel Prize winner, about the arms race to superintelligence and the potential for grave harm to humanity. Whether you focus on apocalyptic risks or human rights abuses from AI happening now, experts are crying out for international collaboration, transparency and regulation to ensure that AI is used for human flourishing, not harm. Will the Government use all their influence, including as host of the G20 next year, to work for international agreement to mitigate risks, and lead the way here by bringing forward an AI Bill to give statutory teeth to the AI Security Institute, which my noble friend Lord Clement-Jones has long argued for?
Baroness Twycross (Lab)
The noble Baroness makes a range of important points. I want to reassure your Lordships’ House that the Government treat AI risks with extreme seriousness. Like others, we are pleased that some of the sector is talking about the risks, because only by talking about them are we able to work through solutions. As a responsible leader in AI security, we monitor a full range of risks that could be posed by frontier AI. I note that the noble Baroness made a number of different points and questions. I am very happy to meet her to talk through where we think we might go with this policy area.
Lord Alton of Liverpool (CB)
My Lords, in light of the existential threats referred to by the noble Baroness, Lady Teather, and having chaired the inquiry launched by the Joint Committee on Human Rights into AI and human rights, with 10 oral sessions, including important evidence from Minister Kanishka Narayan, may I ask the Minister whether she will urgently read this 94-page report, published yesterday and now available in the Printed Paper Office? Having particular regard to its 59 recommendations and conclusions on the inadequacy of existing law and regulations, will she ensure a swift response and that we will have the opportunity to debate this report fully in your Lordships’ House?
Baroness Twycross (Lab)
I commend the Joint Committee on Human Rights for its report. I read it on the way into London yesterday. It is an interesting read and very clearly written. As somebody who would not purport to be as much of an AI expert as our AI Minister, I felt that it explained how AI works in very clear terms—so, from that point alone, I commend it to noble Lords to read. The Government are taking an agile and context-based approach to AI regulation. We are trying to balance the opportunities for growth with safety. We believe this approach allows risks to be addressed in the context in which they arise, while also supporting growth and innovation. We will respond fully to the Joint Committee’s report in due course.
Lord Ranger of Northwood (Con)
My Lords, if you watched the news yesterday, you would have seen an AI actor being interviewed by a certain Ed Balls and Susanna Reid. By the evening’s “News at Ten”, we had heard about AI extinction from the big AI tech bros. In the middle of that, we had an APPG AI session on what leadership looks like for AI. The questions were about international leadership, business leadership in the UK and how to reassure the public. What are the Government doing about reassuring the public when they hear all these messages about AI?
Baroness Twycross (Lab)
The main thing we need to do is not downplay people’s concerns. Clearly, when world experts and people who have been working in this field are raising concerns about it, the worst thing we could do as a Government would be to say, “Nothing to see here”, because we are so keen to be part of the huge positive way forward for AI. That is the first step. One of the things we should do more of is talk about our successes through the AI Security Institute, AISI. I have been impressed by what I have heard about it and I think the public would be reassured by some of the big successes of AISI over recent months and years.
Lord Watts (Lab)
My Lords, does the Minister agree that this is an international issue and that the only way we can deal with it is internationally? The most important part will be to make sure that the regulator has the ability to police what is going on in China, America and the rest of the world.
Baroness Twycross (Lab)
My noble friend raises a number of interesting points. It is true that we need to address this internationally. AI clearly crosses national borders. It is not like previous forms of new technology. We need to find the way forward in getting the balance right. We have been using our opportunity to lead internationally in having those conversations across borders as one of the leaders in AI safety.
Lord Clement-Jones (LD)
My Lords, I declare an interest as a consultant to DLA Piper on AI regulation and policy. Just two weeks ago, the Government resisted a proposal from Members right across this House to introduce an AI kill switch into cyber legislation on the grounds that the Government were “technology agnostic”. How agnostic does the Minister feel today?
Baroness Twycross (Lab)
I presume that the noble Lord is referring to the amendment tabled to the Cyber Security and Resilience (Network and information Systems) Bill. One of the things that we have done is introduce the Bill and the guidance to work through that. I know that my noble friend Lady Lloyd will be happy to talk further with the noble Lord about this. One of the issues with a kill switch is that it would be impossible for Britain simply to turn AI off. Another issue is the extent of people’s concerns about whether a kill switch could or would work, but I know my noble friend Lady Lloyd would be delighted to speak further to the noble Lord.
Viscount Camrose (Con)
My Lords, I very much agree with the earlier question. When it comes to managing the existential end of AI risks, unilateral regulation is of very limited value, because the risk is of course global. Given this, what is the Government’s assessment of existing efforts to drive multilateral regulation, many of which, including the G20 that was mentioned earlier, have been trundling on for many years without a great deal of results. What more can the Government do and, in the absence of DSIT, which Ministry is in charge?
Baroness Twycross (Lab)
In the absence of DSIT, as the noble Lord said, we have embedded AI across government by having the very first AI Minister sitting at the Cabinet table. The Department for Business, Innovation, Science and Trade has responsibility for AI policy, including growth, innovation and infrastructure. The newly expanded Department for Digital, Culture, Media and Sport has responsibility for tech sector oversight, cyber security and online safety, and Minister Narayan sits across different departments. We cannot have our policy on AI sitting separately from all other policy areas; it is vital that we get this driven across all areas of government.
Baroness Butler-Sloss (CB)
Might I ask the Minister whether the Government are thinking of talking to China?
Baroness Twycross (Lab)
The Government are clear that all parties involved in the development of AI need to be in agreement about a way forward.
Captain of the King’s Bodyguard of the Yeomen of the Guard and Deputy Chief Whip (Baroness Anderson of Stoke-on-Trent) (Lab)
My Lords, we will hear from the Conservative Benches.
Baroness Harding of Winscombe (Con)
My Lords, the tech companies, particularly the social media companies, have argued for a decade that their technology is global and, therefore, that local regulation is not the way to do it. Yet Australia, and now, I believe, this House have realised that local regulation is the only way you get global regulation in the end. Why do we think AI is any different?
Baroness Twycross (Lab)
I apologise if I gave the impression that we do not think we should have any regulation relating to AI. What I was trying to get across was that we are taking an agile and context-based approach to AI regulation, which seeks to get a balance. The Government have put through a number of pieces of legislation that have AI-related elements. I will be very happy to write to the noble Baroness to outline what these are.
UK Water Companies: Chinese Financial Influence
(1 day, 7 hours ago)
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Lord Blencathra
To ask His Majesty’s Government what assessment they have made of the government of China’s financial influence over UK water companies.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, the noble Lord raises a very important issue. It is critical that those who own and invest in our water companies are good custodians of these nationally important businesses. The reforms that we are putting in place will transform our water system to ensure that it delivers for customers and the environment, but also that it attracts investors who are committed to securing the long-term performance of our water companies.
Lord Blencathra (Con)
I thank the Minister for that reply, but that is for the future. The Times has revealed that emails on financial records obtained from the London office of the Industrial and Commercial Bank of China, the world’s largest bank, show that the Chinese bank issued nearly £1.26 billion in loans and borrowing options to UK water and energy companies up to July 2024. Furthermore, there were examples of concerns raised in the London office about internal due diligence being overruled by bank staff in Beijing, as well as concerns about money laundering when the bank moved £960 million for Huawei back from the UK into China following the arrest of one of its top officials. As a result of its investment in our strategic industries, there are deep concerns that this poses a financial security risk, especially since the ICBC has continued to accept business from Russian and Belarusian clients. What will the Government do about this potential security threat?
Baroness Hayman of Ullock (Lab)
The Government take all security threats extremely seriously. I am sure the noble Lord will be pleased to hear that the water industry will be included in the National Security and Investment Act’s mandatory notification scheme. That will require water companies and certain infrastructure delivery providers to notify government of certain proposed acquisitions. These notifications from companies will ensure that government can undertake a robust assessment of any national security risks. It will operate alongside powers that allow government to call in certain acquisitions. If necessary, we can then intervene with various remedies. These could include legally binding conditions or, in rare cases, blocking or unwinding a transaction.
Lord Fox (LD)
My Lords, the National Security and Investment Act 2021 allows the Government to scrutinise and intervene on certain acquisitions made by companies, including businesses which and investors who could harm our national security. The Act covers 17 sensitive areas in the economy, but although there was much discussion when the Bill was before your Lordships’ House about including critical infrastructure, it was not included in those 17 areas. I thank the noble Lord for bringing this issue up. With what we know today, is it not time to add services such as water to the list so that the Act can be used in full to scrutinise who controls our critical water supply?
Baroness Hayman of Ullock (Lab)
As I just mentioned, the water sector is in the National Security and Investment Act. That is mainly because of the essential services that it provides for public health and the economy. There are 17 existing sectors in that mandatory notification scheme, including civil nuclear, energy and transport. We are assessing whether proposed acquisitions pose a national security risk. However, the noble Lord makes an important point, so I am happy that we consider the water industry when we review the terms of that Act.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, this PNQ refers to UK water companies. My noble friend will be aware that Scottish Water is publicly owned, so the Chinese can have no such influence. Is that not the way forward?
Baroness Hayman of Ullock (Lab)
My noble friend will be aware that we published the water White Paper earlier this year. We are looking, in that White Paper and in the legislation that we will bring forward, at what ownership looks like and at the best way to secure our water industry for the future. Clearly, who owns our water industry and who has influence over it is a key part of that decision-making.
Lord Hunt of Kings Heath (Lab)
My Lords, once upon a time we owned the water industry: local authorities used to run water services very well up to 1974. Will my noble friend look, alongside security issues and the White Paper work that has been undertaken, at how these bodies can be made more publicly accountable locally?
Baroness Hayman of Ullock (Lab)
My noble friend makes an important point. We have to ensure that not just water companies but any industry that is critical to our national infrastructure and our national security is fully accountable. We absolutely must look at that.
Lord Harris of Haringey (Lab)
My Lords, the question of ownership is not the only security question that we should consider. There are reports that Iranians carried out a cyber attack on dozens of water plants in the United States at the same time as they attacked an electricity generator in this country. I refer to my interest as chair of the National Preparedness Commission. What assurance does my noble friend the Minister have that the security of the physical arrangements is sufficient to deal with those sorts of cyber attacks? Incidentally, the Chinese are also very capable of such attacks; it is not just the Iranians.
Baroness Hayman of Ullock (Lab)
One of the issues the Government have to face is the increasing threat from cyber attacks. The previous Question was around AI. We have to understand what the potential for such attacks is, and for drone attacks. We are seeing drones being used much more, if we look at the attacks Russia is making on Ukraine. We have had meetings in COBRA about national security because, as a country, we have to look at how we get together proper, resilient plans that include cyber attacks, for example.
Baroness McIntosh of Pickering (Con)
My Lords, will the Minister look carefully at the ownership of other water companies—Thames Water is obviously very much in the spotlight? Is she mindful of the contribution, over a number of years, that privatised water companies have made to the UK’s pension funds? Were these to be nationalised, what would the impact be on pensions funds?
Baroness Hayman of Ullock (Lab)
Pension funds are an incredibly important part of how our investment works. One of the questions that the noble Lord, Lord Blencathra, raised with me is: what do we consider to be good investment in this country? Actually, good investment is from businesses that and investors who are committed to the industry they are investing in. That includes the pension funds.
Baroness Ludford (LD)
My Lords, can the Minister clarify what she said about whether the National Security and Investment Act covered the water sector? I was not an expert on it, I have to admit, but I have looked online at the 17 types of notifiable acquisitions and water does not seem to be there. There seems to be some indication that the Government are considering adding it. Could she clarify, for the benefit of the House, exactly what the status is of the water industry under the National Security and Investment Act notifiable acquisitions?
Baroness Hayman of Ullock (Lab)
My understanding is that one of the recent announcements we have made is that the water industry will be subject to the National Security and Investment Act, which was brought in in 2021.
Lord Sikka (Lab)
My Lords, 90% of England’s water industry is foreign owned, including by the Chinese state. The result has been low investment, high bills, raw sewage in rivers, over 1,200 criminal convictions, and harms to nature, health and national security. Everyone knows that public control of the water industry has failed to deliver and that the only way forward is public ownership. Why are the Government in denial?
Baroness Hayman of Ullock (Lab)
I do not think that the Government are in denial. Through the White Paper and the Bill that we will bring forward, the Government will look at the best form of ownership for water companies, but it is also really important that we get the right kind of investment. The water industry requires over £200 billion in new investment before 2050 and we have to remember that capital markets are global. If we artificially restrict the kind of investment that we want to see, we will reduce competition and increase costs for customers. It is incredibly important that we get this right, while closing doors to investment that compromises our national security.
Lord Redwood (Con)
My Lords, given the very big capital requirements that the Minister has rightly identified, and the need to pay compensation to existing shareholders if the Government wanted to buy it out, is it not the case that the country cannot afford nationalisation of the water industry?
Baroness Hayman of Ullock (Lab)
I have expressed concerns previously in your Lordships’ House about the costs of nationalisation, which is why we are looking at the best way forward when we bring forward the new water legislation. I really look forward to hearing what noble Lords have to say about how we move forward.
Lord Grantchester (Lab)
My Lords, being unaware of the specific confidential financial arrangements of the UK water companies with the Bank of China, but given the high level of public anxiety over water companies’ performance and competence, can my noble friend the Minister give a full assurance that progress on water provision, waste management and adherence to environmental health will nevertheless be upheld in that most critical part of the UK’s national infrastructure?
Baroness Hayman of Ullock (Lab)
Yes, I can give my noble friend that assurance but, to deliver all this, we need to make sure that we encourage the right kind of investment into the infrastructure. That is one reason why the water industry is going to be included in the National Security and Investment Act mandatory notification scheme: to ensure that we have that assurance, as well as having information about delivery providers and the options to intervene, where necessary, if we are not happy with the transactions that are going forward.
Lord Cromwell (CB)
I know the Minister agrees with me that one of the reasons why the water industry got into such a mess was because it was so poorly regulated. A lot of the issues, such as overlaying debt, are simply a result of the regulator not being up to the job. I underline that the new regulator that we are promised—it will be called a super-regulator, apparently —really needs financially acute people who understand this sort of financial engineering. This need not have happened. We could have had a privatised water sector that was properly regulated. We did not; it was badly regulated and it got away with murder.
Baroness Hayman of Ullock (Lab)
The noble Lord hits the nail on the head regarding regulation. We know that it is not who owns the water company—whether it is nationalised or private—that decides how effective and efficient it is, and how well it works. It is how it is actually run and the financial nous that underpins it that does not allow it to get into debt and use leverage systems in a way that is not sustainable. That is what has caused so many problems. I completely agree with the noble Lord.
Lord John of Southwark (Lab)
My Lords, it has been notable, since he took office, how clear the Prime Minister has been in his commitment to reforming the water sector, which he described as “a leaking monument” to a system that prioritises private companies over the public interest. When might we expect to see real change come forward to make this sector work for people and places again?
Baroness Hayman of Ullock (Lab)
We made some changes very quickly as soon as we came into government with the Water (Special Measures) Act, which I know this House welcomed. As I mentioned, the White Paper has been published. We are working on the Bill that we will be bringing forward, and we will want to make the changes as quickly as possible. As my noble friend points out, this is a prime ministerial and government priority.
Lord Evans of Rainow (Con)
My Lords, when we consider that China, with its long-term strategic endeavour to undermine our economy, owns critical national infrastructure such as water and our manufacturing industry—this has been evidenced in the motor manufacturing industry—could we utilise pension funds, whether homegrown or international, to invest specifically in the water industry?
Baroness Hayman of Ullock (Lab)
I suggest, given the huge challenge the water industry faces and the huge amount of investment that we need, that the Government will be open to looking at any suggestions on how we can plug that gap, as there is so much work to do.
Sovereign Grant Bill
Armed Forces (Service Complaints Miscellaneous Provisions) (Amendment) Regulations 2026
Baroness Antrobus
That the draft Regulations laid before the House on 29 June and 13 July be approved.
Considered in Grand Committee on 14 September.
Withdrawal Agreement (Windsor Framework and Governance) (Amendment) Regulations 2026
(1 day, 7 hours ago)
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Baroness Twycross
That the draft Regulations laid before the House on 14 July be approved.
Considered in Grand Committee on 14 September. Relevant document: 10th Report from the Secondary Legislation Scrutiny Committee
Voter Identification (Amendment of List of Specified Documents) (Northern Ireland) Regulations 2026
(1 day, 7 hours ago)
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Baroness Anderson of Stoke-on-Trent
That the draft Regulations and Orders laid before the House on 13 July be approved.
Considered in Grand Committee on 14 September. Relevant document: 11th Report from the Secondary Legislation Scrutiny Committee
Speciality Steel UK
(1 day, 7 hours ago)
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Lord Sharpe of Epsom (Con)
My Lords, I thank the Minister for the Statement. I should say at the outset that, above all, our thoughts are with the more than 1,300 employees of Speciality Steel UK and their families, who once again face considerable uncertainty about their future.
However, I am afraid that this announcement appears to be a sign of things to come under this Government. When Parliament was recalled last year to pass the Steel Industry (Special Measures) Act, we were told that these extraordinary powers were required to deal with the immediate crisis at British Steel. When the Government returned with their nationalisation legislation earlier this year, Ministers again presented it a targeted, last-resort response to the situation at British Steel. British Steel has since been nationalised, yet the Government have still failed to secure the private investment needed for its long-term future.
Now, only two months later, we have another steel company moving towards public ownership after the proposed sale to Blastr fell through. Why did that deal fall through? Yesterday the Guardian quoted a Blastr spokesman as saying:
“We have a fully-funded proposal—at no cost to the British taxpayer—that is ready to complete within 12 weeks”.
Surely the bigger question is: why does the private sector increasingly find it so difficult to invest in British steel companies? Surely part of the answer is that successive decisions by this Government have made Britain, and particularly energy-intensive industries such as steel, simply too expensive in which to operate. Our industrial electricity prices remain among the highest in the developed world, around four times those faced by manufacturers in the United States. Then there are the additional employment costs. The Government’s own latest assessment puts the direct annual cost to business of the Employment Rights Act at around £1 billion. During the passage of that legislation, businesses repeatedly warned Ministers about its cumulative impact on investment and recruitment.
During the passage of the Steel Industry (Nationalisation) Bill, we on these Benches gave Ministers opportunities to address some of these underlying problems. We sought greater discipline over regulation and reporting, proper scrutiny of taxpayer liabilities, and action on the cumulative burden of carbon and energy policy. Instead, from 1 January next year the Government will introduce the UK carbon border adjustment mechanism. Their own figures forecast that the CBAM will raise £140 million in 2027-28, £180 million the following year and £175 million in 2029-30. Those costs ultimately fall on imported steel, aluminium, cement and other materials used throughout British manufacturing supply chains.
At the same time, domestic steel-makers remain exposed to the UK emissions trading scheme and the Government are now negotiating to link that scheme more closely with the EU’s ETS. We also understand that the Government wish to participate in the EU internal electricity market. The negotiating framework envisages dynamic alignment with relevant EU electricity rules and an indicative UK renewable energy target comparable to that of the European Union. That will only add more costs.
The new Secretary of State for Energy Security and Net Zero has spoken of the need for greater realism in our progress to net zero. Can the Minister therefore tell the House whether that realism will translate into a material change in energy policy for energy-intensive industries? What specific action will the Government now take to bring industrial energy prices materially closer to those faced by our major international competitors?
The Business Secretary told the other place yesterday that public acquisition could require approximately £350 million, including the acquisition itself and working capital over a period of one to three years. The taxpayer is already supporting Speciality Steel UK to the tune of a reported £3.5 million a month in salaries while production remains largely dormant. Can the Minister therefore tell the House the Government’s current estimate of the total taxpayer exposure? How much has already been spent? How much working capital do the Government expect to provide? Will Ministers publish a clear timetable setting out the expected costs over the next three financial years? What is the exit strategy?
Yesterday, the Business Secretary said that his ideal remains for the company
“to be run in the private sector”—[Official Report, Commons, 14/9/26; col. 1441.]
—and that he is “keen” to see it return to private ownership. If that is the objective, will the Government commit to publishing measurable conditions for doing so, as well as to regular assessments of opportunities for private investment and a clear process for returning Speciality Steel UK to private ownership?
Public ownership does not in itself give workers long-term certainty. A competitive business, sustained investment and customers who want to buy steel domestically give workers long-term certainty. That matters particularly when the Government tell other sectors that there is no money available. Only yesterday, the Government were defending their refusal to reduce VAT for our struggling hospitality sector on the grounds of the cost to the Exchequer, yet when another nationalisation is proposed, hundreds of millions of pounds of taxpayer exposure apparently becomes possible. We cannot return to a model in which the Government continually absorb the losses of industries that their own policies have helped to make uncompetitive.
The Minister will know the history as well as anyone in this House: Britain tried widespread state ownership of major industries before. By the 1970s, taxpayers were repeatedly required to support loss-making nationalised industries, while investment, productivity and competitiveness suffered. That experiment ended at the IMF, and, looking at gilt yields today, that is again where the markets think we are headed. We do not want to see that history repeated. Will the Government recognise that nationalisation is not an industrial strategy? Will they instead set out a serious plan to slash industrial electricity prices, reduce the costs of unnecessary regulation, make Britain internationally competitive again, and create the conditions in which private investors want to invest in British Steel?
Lord Fox (LD)
My Lords, I congratulate the Minister on his new role, which is fast becoming that of a steel baron. As I said from these Benches during the passage of the nationalisation Bill—which, as the noble Lord, Lord Sharpe, pointed out, focused on British Steel—Liberal Democrats recognise that national security, energy security and food security are all intertwined, and that steel is critical to our renewable sector, defence and national infrastructure.
In one sense, yesterday’s announcement adds yet another complication to the Government’s attempts to ensure that the UK has a viable and strategic steel industry. In another, it was perhaps inevitable, and gives the Government a chance to consider two sides of the steel industry at the same time.
My first focus is on the timeline and how the Speciality Steel UK part fits with other activities. In the Commons, in answer to the question from my honourable friend Daisy Cooper MP, the Secretary of State said that he expects the process for Speciality Steel UK to take between four and six months. Can the Minister update your Lordships’ House as to the timeline for British Steel and the valuation process that is under way? Can he tell us whether there is any crossover between the two or whether they are discrete processes? The Secretary of State set out the different scale of the task to rejuvenate British Steel—in fact, he implied that any involvement of the private sector would be at some time in the future. Can the Minister confirm the Government’s thinking around private sector involvement in British Steel and how it would affect attempts to get private sector involvement in Speciality Steel UK? Can he also confirm the scale of investment that Speciality Steel UK will need to make it an attractive investment for the private sector?
Additionally, how does all this affect Tata Steel in Wales? The Secretary of State said that he hopes British Steel will follow Tata and install electric arc technology. How does Tata, which despite government support is investing a great deal of its own money into electric arc, compete with a government-funded competitor —competing for raw material at the very least, but also markets?
Moneywise, in the Commons, the Secretary of State said that the cost of nationalising Speciality Steel UK will be met from existing budgets. He went on to remind the House of the huge sums involved, but it is quite clear that this pot is emptying fast. Can the Minister undertake to bring detailed costings to this House, covering valuations of both this asset and the British Steel asset, as soon as they are available?
Daisy Cooper MP also raised in the Commons the issue of Europe. The steel sector generally, and tariffs and carbon border taxes specifically, all hinge on our relationship with the European Union. Can the Minister agree that having a much closer relationship with the EU could make many of these issues much easier to deal with and iron out? Can he tell us when the Government will be making substantive moves to achieve this closer relationship?
As the Statement observes, the Government of the noble Lord, Lord Sharpe, created the legacy that this Government inherited. Central to this legacy have been the structurally sky-high costs faced by this and other manufacturing industries. I know the Minister is new to his role, but I am sure that energy was one of the first things he was asked about when he took over. The Government have made some efforts to help some high energy users, but these bypass most manufacturers and, for those they affect, reductions are being cancelled out by other measures in the opposite direction happening at the same time. Can the Minister confirm and agree with me that, without new measures which substantially cut energy costs so that they are much closer to global competitors, it really does not matter who owns the steel industry because with costs like this the sector will always struggle to flourish?
I close by recognising the people working in the industry and their importance. They are vital; the UK needs their skills, and indeed needs many who have left the industry to come back. But these people need to know they have a future and that their industry has a future. The Government have made first steps in this, but there is a great deal to do. We on these Benches will support the Government where we can, to help pick up momentum and get this industry back on its feet.
The Minister of State, Department for Business, Innovation, Science and Trade (Lord Sarwar) (Lab)
My Lords, I am grateful for the contributions and serious consideration that the House has given to the future of Speciality Steel UK. I will come on to address some of the specific questions that both noble Lords have rightfully asked, but first I thank both noble Lords for mentioning the workforce and echo what they said. For the workforce, it is a time of particular anxiety. It is important that they know that, regardless of party politics, this House and the other place stand fully behind the fantastic workforce.
Before I get on to some of the detailed answers, it is important to clarify some of the facts on where we are and what the Secretary of State outlined yesterday. This is an important matter for the employees of the business, the communities surrounding its sites and the United Kingdom’s wider industrial capability. I therefore welcome the opportunity to clarify the Government’s position, explain the decision we have taken and set out the next steps.
Speciality Steel UK entered liquidation in August 2025. Since then, the independent court-appointed official receiver has been responsible for managing the liquidation process. A question was asked about how much that has cost to date. We have supported the official receiver with around £148 million to date, supporting staff and safety at the individual site. That funding has allowed the receiver to carry out his statutory duties. It has included maintenance of the site, as I said, and conducting a sale process for the business and its assets.
For more than 12 months, the Government have worked to facilitate a private sector solution, and the noble Lord is right to say that a private sector solution remains the first preference. As part of that process, the official receiver engaged with a number of parties interested in acquiring the business and its assets, and the party granted preferential bidder status by the official receiver subsequently sought government support in connection with its proposed acquisition of Speciality Steel. We engaged extensively with the bidder and its advisers, and considered the request in detail. To clarify, it was requesting upfront financial commitment from the Government. Following the work we did, we concluded we could not provide the support on the terms proposed.
This decision was not taken lightly. The Government carefully examined the proposal and explored whether an arrangement could be reached that would provide a sustainable basis for the future of the business, while offering appropriate protection for public money. Despite that extensive engagement, material concerns remained regarding the evidence supporting the proposed support package and the protections available for taxpayers.
I want to be really clear, because this is important: we are talking specifically about the financial support that was requested. That should not be interpreted as a wider judgment on the bidder itself or its other business activities, either here or elsewhere. Our responsibility was to assess the proposal before us, including whether it provided a suitably robust basis for intervention and the appropriate safeguards. Having considered those matters, we could not support the proposal on the terms put forward. However, that conclusion does not diminish the significance of Speciality Steel UK. The business occupies a unique place in the United Kingdom steel ecosystem. Its specialist capabilities have potential applications in advanced manufacturing, aerospace and defence. Therefore, it is of strategic importance. That is why the Government remain committed to the sites, the workforces, the local communities and the local economies that are impacted.
We believe, therefore, that the viable future options should be assessed properly before the range of possibilities is permanently narrowed. For that reason, the Government will engage with the official receiver’s sale process and develop a proposal for the public acquisition of Speciality Steel UK. Any engagement will respect the independence of the official receiver and its statutory responsibilities.
Developing a proposal does not remove the need for proper processes to be followed, nor does it prejudge the outcome of the work under way. The purpose of developing an acquisition proposal is to preserve control of the sites and maintain every option available while decisions are taken about their longer-term future.
Let me stress that public acquisition is not the endpoint and it is not the first preference. It would not in itself determine the permanent future of the business, its operations or its sites; rather, it would create the space required for detailed assessment of the available options. These include a sustainable future for Speciality Steel UK as a speciality steel-maker supporting advanced manufacturing sectors, the regeneration of the sites or a combination of the two. This Government will remain focused on engaging closely with the employees, the trade unions, the local communities, elected representatives, the mayor, industry experts and other interested parties. Again, I open that offer to noble Lords on all sides of the House too.
I recognise that noble Lords will want and expect proper safeguards for public money. They have that firm commitment from me and from the Secretary of State. All options carry significant costs—there is no point in pretending otherwise. The risks exist and significant costs exist. That includes the risk of immediate closure. We will develop our estimates as the work progresses. Again, I am happy to share those assessments as much as possible with noble Lords on all sides of the House.
I also recognise the desire for certainty, particularly among employees and their families. It would not be responsible to pre-empt the detailed assessment or suggest that decisions have already been taken where they have not, but equally it is important that potentially viable options are not lost by default. I believe the approach that the Government have set out yesterday and today strikes that right balance of giving reassurance to the workforce, of keeping every option on the table and making sure we have the back-up of a public acquisition option. That is the right and responsible course to take.
There were some specific questions that I have not addressed. I have already talked about the private sector preference being the first one. Secondly, we should accept that there is a global challenge around steel, not just a UK challenge. Thirdly, I recognise the challenge set out by both noble Lords that we have to drive down the cost of living and the cost of doing business as it relates to energy. That is of course of huge significance for us if we are going to make sure we protect our steel industry and other industries that are energy intensive. These are all considerations that are being made in advance of the Budget.
I noted that many questions from the noble Lord, Lord Sharpe, related to the Budget process. I imagine those are questions we will come back to as we get closer to, and arrive at, that Budget point. I also noted that he spoke about history and not repeating the mistakes of the past. All I would say is that he was very selective about which part of history he chose and which bits we do not want to repeat. There are other parts of our history that we do not want to repeat, and we need to learn lessons from them.
The noble Lord from the Liberal Democrats asked questions around finding longer-term private sector solutions. We will find those solutions only if we make the steel industry sustainable, if we get the energy crisis right, if we address the challenges around the broader cost of production, if we deliver the orders that are required for there to be manageable order books and a functioning business and if we back it up with the appropriate skills. The steel strategy is ambitious, but it is also deliverable, and we all have work to do to make sure that happens.
Let me repeat that I commit to work with noble Lords on all sides to make sure they are fully apprised of the situation as it develops. There is one final and slightly broader point about our relationship with the European Union, some of which will come from the UK-EU summit that we continue to work towards. There is also a wider lesson around the defensive and protection measures that the UK and the EU are grappling with in relation to their steel industries. The more the relevant Ministers and Governments across the continent work in lockstep on many of the same issues we are confronting together, the better it will be for our industry here in the UK and for steel industries across Europe.
Lord Mohammed of Tinsley (LD)
My Lords, I welcome the Minister to his position; I look forward to quizzing him as someone from Sheffield and from a steel-making heritage. I will miss my interactions with his noble friend Lord Leong; I really enjoyed them and wish him well. I will make two points. First, we need a frictionless relationship with the EU, so whatever barriers and bureaucracy the Minister can take away in the reset with the European Union will be welcomed by these Benches.
Secondly, I will pick up on the point that my noble friend Lord Fox raised about people. Due to the unstable nature of the industry over the past couple of years, it has lost some skilled, experienced workers, both through redundancy and because some have sought stability elsewhere. Therefore, following my noble friend, I press the Minister on how we can bring back that skills base and how we can grow the next generation through apprenticeships. I would welcome responses to that people question; he rightly commented on it at the beginning, but I would like to press him further.
Lord Sarwar (Lab)
I thank the noble Lord for his questions. Let me reassure him that my noble friend will continue to fact-check me on a regular basis in the absence of him answering questions directly.
The workforce is fundamental to this. We will of course make decisions based on what it means for production, GDP, growth and broader calculations, but for these communities—either those working directly at these sites or those relying on them for employment indirectly—this is their everyday life. Many of the sites, particularly Speciality Steel UK, are in some of the most deprived communities in the country. Therefore, it is important that we work right across government, including the Department for Education and the DWP, as well as with BIS colleagues, the local authority and the broader mayoral and regional authorities, to make sure that, where we can, we are protecting these jobs and provide reskilling opportunities.
To the noble Lord’s final point, we have to make sure that the next generation also feels that this is a sector in which they want to train and then work, because that too is very much a part of having a sustainable steel future for the UK.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, I congratulate my noble friend the Minister on his patience in dealing with some of the questions from opposition spokesmen—they were quite astonishing. I am old enough to go back to the Thatcher years. In 1980, she appointed Sir Ian MacGregor to run the British Steel Corporation and close down Redcar, Port Talbot, Consett, Corby, Shotton, Ebbw Vale and, in Scotland, Ravenscraig. Let us make sure that the Tories are never allowed to forget that. Would my noble friend consider arranging a little seminar, so that they can learn from history?
Lord Sarwar (Lab)
I thank my noble friend for his usually robust contribution. I gently tell him that, while he was here to witness what happened in 1980 and can therefore tell us the lessons that must be learned, I was born in 1983.
Ukraine and Russia
(1 day, 7 hours ago)
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The Earl of Minto (Con)
My Lords, I thank the Minister for giving us the opportunity to ask questions on this Statement. I first pay tribute to the British service member who tragically died in a road traffic accident in Ukraine on Saturday. It is a truly saddening affair when we lose a member of our Armed Forces, and my thoughts and those of the entire House are with the family.
It is welcome that the new Secretary of State has reaffirmed so convincingly the Government’s commitment to support Ukraine in its battle for the survival of its homeland. It was also welcome to see our new Prime Minister, as one of his very first acts in office, visit Ukraine and meet with President Zelensky and hand the President something of real value to his nation.
I put on record my deep concern at the Russian strikes on the railway in western Ukraine over the weekend. Fortunately, the train carrying the former Prime Minister, Boris Johnson, and the current National Security Adviser, among other key diplomats, was not hit. But for Russia to potentially attempt to target serving and former senior British government officials, if indeed this was its intention, is extremely concerning. My party stands resolutely behind the Government in their continued support for Ukraine.
In many ways, the Statement somehow manages to simultaneously tell us quite a lot and very little at all. It tells us a lot because we now know that the new Defence Secretary wishes to approach the job much like the last two—that is to say, he likes to talk about the nature of the threats we face as a nation but fails to realise the scale of the investment that will be required and, crucially, the pace at which that investment needs to be delivered. Indeed, the Secretary of State in his Statement said:
“The threats we face are not only evolving; they are getting closer to home. Every day, the UK and our allies encounter espionage, cyber-attacks and military posturing by hostile states”.—[Official Report, Commons, 10/9/26; col. 1234.]
I completely agree. Threats to the United Kingdom are getting closer to home. It concerns me that, even after accurately recognising those threats, the Defence Secretary went on simply to repeat the Government’s line, emphasising how much was already being spent.
That is where the Statement tells us very little. I happily concede that the Government have increased defence spending, but the scale of that increase pales in comparison to what is truly needed now; and as of yet, we are no closer to eliciting the vital detail on defence spending and the timing of the expenditure we have sought for the last two years.
The Government tell us that spending will reach 2.7% next year, up from 2.3% when they entered office, but they conveniently neglect to mention that they have changed the definition of defence expenditure to include the single intelligence account. The defence investment plan was essentially unfunded, and we now know that the Chancellor is unlikely to establish the path to 3% by 2030 until the next spending review in 2027, rather than at the upcoming Autumn Budget.
Now, we have a Prime Minister who has stated openly that national security
“cannot come at the expense of social security”.—[Official Report, Commons, 9/9/26; col. 1036.]
This is a worryingly short-sighted statement to make at such a critical juncture. As my noble friend Lady Goldie said last week, these Benches are united in our view that national security comes above all other priorities. Can the Minister confirm whether the Government’s position has indeed changed or whether they do still regard national security and defence as the paramount duty of government—over and above welfare?
More importantly, it is not necessarily a question of how much is spent, although that does matter, but what we are getting for that money. We have heard that the Army is being required to cut virtually all meaningful training exercises and that, in a bid to save money, the reserves are also suffering. We currently have no attack submarines available to go to sea, and it took us weeks to prepare HMS “Dragon” for operations to protect British bases in Cyprus. The decision on the number of Orca submarines to be procured has reportedly been delayed until 2028. When will the Government announce the locations and start building the six new energetics factories we were promised in the SDR?
The Defence Secretary said in his Statement:
“I have seen the capabilities that this country has, and they are considerable”.—[Official Report, Commons, 10/9/26; col. 1235.]
Indeed, the Secretary of State is correct, but these capabilities are not considerable enough for the growing challenge and, I might add, they are diminishing in real terms. As an example, the renewed challenge from Argentina to British sovereignty over the Falkland Islands could, heaven forbid, mutate into an overt threat. We must ensure that we have the capabilities to respond appropriately should that situation occur.
Bringing this back to Ukraine, what happens if we end up with a ceasefire, which we all hope and pray for, and British troops are committed to Ukraine? Will they be sufficiently resourced to ensure that they can fight to the best of their abilities? I know there is deep concern around the answer to that question.
Finally, the new Secretary of State said that
“there is an enormous amount of consensus and national unity when it comes to defence”.—[Official Report, Commons, 10/9/26; col. 1234.]
May I gently say to the Minister here that that is not entirely correct? There is indeed absolute consensus between us on the issue of our continuing support for Ukraine, but there is no such consensus on whether this Government are doing all they should to prepare us for any major conflict in the near future.
This Statement has bravado abound, but bravado is meaningless if it is not backed by hard power. We do not say this to embarrass the Government or to score political points; we say it because we are worried about our lack of defence readiness. I urge the Government: do not place social security above national security, as the Prime Minister suggested last week, for, when the bombs are falling and the drones are striking, as the Chancellor warned only a few weeks ago, there may be very little social security left to speak of.
Baroness Smith of Newnham (LD)
My Lords, from these Benches, I thoroughly endorse everything that the noble Earl, Lord Minto, has just said. We often say that, on matters of defence, the Official Opposition and these Benches are at one with His Majesty’s Government, but a range of issues need to be dealt with, scrutinised and reassessed.
As the noble Earl pointed out, it is excellent that the new Secretary of State for Defence has pledged his commitment and the country’s ongoing commitment to Ukraine, and that he and the new Prime Minister have been to Ukraine. That is a fundamental sign of the commitment of this United Kingdom to Ukraine and is very much to be welcomed. However, following the Statement made in the other place, there are still a range of questions that need to be reviewed and looked at in more detail.
Before I go any further, I wish to associate myself with the words of the noble Earl, Lord Minto, and pass on our condolences to the family of the serviceperson lost last week in a road traffic accident in Ukraine. That loss—indeed, the loss of any personnel—is a sign of what every member of His Majesty’s Armed Forces puts on the line in service of our country day in, day out. We all acknowledge that.
We on the Front Benches are clear that, as the Secretary of State for Defence said in his Statement last week:
“If the first duty of Government is to keep our country safe, that is now a greater and more urgent responsibility than it has been for generations”.—[Official Report, Commons, 10/9/26; col. 1234.]
That is clearly true, yet we do not seem to have a sense of urgency from the Chancellor of the Exchequer, in his current incarnation, or the Prime Minister. Suggesting that national security cannot come at the expense of social security raises some serious questions, as the noble Earl, Lord Minto, pointed out. What are His Majesty’s Government, including the Chancellor, doing to ensure that, by the time we get to the spending review next spring—we understand that we are not going to get the clarity we might want at the Autumn Budget—we will be on track for the 3.5% to which the Secretary of State for Defence has recommitted? We do not have clarity on that at the moment.
Last week, in the wee small hours of the night, as we got to the end of the Committee stage of the Armed Forces Bill, I wrapped up group 13 as expeditiously as possible, which meant that we did not discuss in great detail my amendment on the implications of the delays to the defence investment plan for small and medium-sized enterprises. We need to think about this issue, because we need to be absolutely clear that the Government are investing and ensuring that we have drones, interceptors and everything else on which we are making pledges to Ukraine for our own security and defence, too. Ukraine might be at the front line of our security, but His Majesty’s Government owe it to our country, as well as to Ukraine and our NATO allies, to make sure that we are investing here and now.
The Minister of State, Ministry of Defence (Lord Coaker) (Lab)
My Lords, I thank the noble Earl, Lord Minto, and the noble Baroness, Lady Smith, for their overall constructive remarks and rightful challenge to the Government.
As both noble Lords started by saying, the House will be aware that a member of the UK Armed Forces died in a road traffic incident in Ukraine on Saturday 12 September. I am sure that the whole House will join me in extending our deepest condolences to the individual’s family, loved ones and colleagues in the Armed Forces at this difficult and tragic time. Further details are expected to be released in due course. However, I must reiterate that this incident was not the result of hostile action.
Over the weekend and into this week, noble Lords will have seen reports of continued Russian long-range attacks, including on gas and rail infrastructure near the Ukraine-Poland border, as mentioned by the noble Earl. We saw yet another Russian drone incursion overnight into Lithuania, which prompted a swift response from allies, particularly the Italians. These reckless and dangerous strikes against civilian infrastructure underline the wider security threat that Russia poses to Europe.
The UK continues to stand firmly with Ukraine. I am proud that support for Ukraine continues to unite this House. I genuinely thank the noble Earl and the noble Baroness for their comments on that and the noble Earl for his points about the Prime Minister and the Secretary of State for Defence. In that spirit, we remember that the last Government also stood steadfast in their commitment to Ukraine and to defending it against the illegal invasion by Russia. That political unity is of such immense importance to the way that Russia sees our response. That is true of the last Government, this Government and support right across this House. It is something that we should never tire of saying, because it is repeated time and time again with our adversaries.
That is why at the Ukraine Defence Contact Group earlier this month we announced that we will contribute a further £100 million towards PURL to support the delivery of Patriot missiles and other air defence equipment. We reaffirmed our commitment to provide more than 120,000 drones to Ukraine over the year. In total, the United Kingdom has committed £25 billion to Ukraine. That includes nearly 20 million rounds of small arms ammunition, more than 1 million artillery shells, more than 100,000 drones and thousands of air defence missiles and armoured vehicles. We must remind ourselves that, if Putin has achieved anything through this war, it has been to strengthen NATO, strengthen the West and weaken Russia.
I have started with a few introductory remarks before answering specific questions because it is important to lay some of that on the table and to repeat it in your Lordships’ House. I will deal with defence spending towards the end. On small and medium-sized enterprises, they form a major part of the Government’s attempts to ensure that we have the defence industrial base that we need now and for the future. Both noble Lords and many others will know that small and medium-sized businesses provide the agility that sometimes the larger companies cannot. There is an issue around regulations, which they have no doubt continually raised. We will see what we can do to ensure that those small and medium-sized enterprises can develop as quickly as possible. The noble Earl asked about munitions factories. Feasibility studies for future energetics facilities are due to report later this month, while construction of new UK energetics facilities is planned to commence later this year. I hope that answers the specific point on munitions factories.
On the Falkland Islands, there was a very well-attended, thoughtful and united discussion and debate in your Lordships’ House last week. The Government, all noble Lords and the other place reiterated our strong commitment to the protection of the Falkland Islands and a reminder to everyone that their sovereignty is a matter for the Falkland Islands themselves. We will support them in that. I do not know whether the noble Earl, Lord Minto, has had the opportunity of going there—I am sure some Members of the House have—to see the defence base, with its Typhoon jets, air defence system, troops and other defence equipment that are there to protect the Falkland Islands. I just highlight that that is purely from a defensive posture. That remains the Government’s position, as it has been our country’s position for decades.
On the Russian threat, to try to make the point for the noble Earl, Lord Minto, and to make the issue real for us all, I will highlight some of the statistics. NATO has scrambled aircraft over 700 times in the past two years to intercept Russian aircraft that were approaching allies’ airspace. The current rate of Russian long-range aviation in the High North is the highest in six years. I think it is helpful to give some of these statistics. Russian aircraft and drones have violated airspaces across multiple NATO countries and UK aircraft have experienced GPS jamming. There has been a 30% increase in Russian vessels threatening UK waters in the past two years. The Navy escorted Russian vessels for 21 days in July and activations to monitor Russian activity are up 25% in the first eight months of 2026 compared with 2025. Just to give your Lordships’ House a flavour of the threat from Russia, there have been over 90,000 attempted cyber attacks in a year on UK defence networks, with a large proportion coming from Russian-speaking actors.
I hope that is helpful to the House, because we are not hiding that there is a very real threat. This takes us to the whole discussion about defence spending. I do not think we should dismiss the fact that the Government have increased defence spending; there is an argument about the pace and the amount, but they have significantly increased it. The £15 billion being announced in-year was a significant thing for a Government to do. As some noble Lords who have had more experience of government than I have will know, to change a budget in the middle of the budgetary year is quite difficult. Finding £15 billion from other government departments to increase the Ministry of Defence budget was quite a significant change. I have made that point to your Lordships before.
The final piece of that jigsaw is the £4.7 billion that will be provided in the Autumn Budget that is coming up. I do not know whether anybody in this House has had this, but a number of people in the other House have had experience of changes being made to budgets in local areas to fund defence causing some controversy. That shows that we need to win that debate about increased defence spending. As the noble Earl knows, the Government will lay out the trajectory to 3.5% by 2035 at the spending review next spring. At some point, clearly, 3% will be passed, but when that actually is will be laid out by the Chancellor in the Budget next year.
On national security and social security, of course we want to see a reduced social security bill because it means that more people will be back to work, be active and all those sorts of things. With the Government’s “back to work” campaign and the various measures there, hopefully we will see a reduction in that budget. National security remains the prime duty of government, but as well as winning the debate in here, we have to win the debate with people out there and show that any changes to the social security budget, and any reductions that may or may not be made, will not be done at the expense of the people who depend on those funds, but that we also have that money available to spend on defence in the way that we would want and in a way which is supported by the population of this country. I suggest that that debate still has to be won with some sectors of our population and we should not take that for granted.
Baroness in Waiting/Government Whip (Baroness Antrobus) (Lab)
My Lords, we now have 20 minutes for questions from the Back Bench. I remind noble Lords to keep their remarks brief and to ask a question, so that we can get in as many contributions as possible.
The Deputy Speaker (Lord Russell of Liverpool) (CB)
My Lords, the noble Lord, Lord Campbell-Savours, is taking part remotely. I invite the noble Lord to speak.
Lord Campbell-Savours (Lab) [V]
My Lords, why do not we put aside our immediate reservations about Trump, with all his idiosyncrasies—certainly following his disastrous miscalculations on intervention in the Middle East—join his people in any talks that might take place seeking a settlement in the Ukraine conflict, and then, if we want to be more adventurous, as a compromise, promote the idea of protectorate status in eastern Ukraine to include Donetsk and Luhansk, underpinned by guarantees from the major powers, to include the United States, Europe and Russia? There are precedents. We need to think out of the box and stem the escalation referred to by my noble friend in his Statement.
Lord Coaker (Lab)
I thank my noble friend for his question. Of course, we have to prevent escalation and be careful in the language we use, which I think by and large this House is, because it is aware that a word misplaced can have very serious consequences. I say to my noble friend, however, that we all want a ceasefire in Ukraine. As far as the Government are concerned, the obstacle to that is Russia. Russia is the problem. Let me also say that the fundamental principle for all of us is that any ceasefire should come with the acceptance and support of Ukraine itself. That is an important and fundamental principle. In terms of what comes after, that is why the UK, with France, has been leading the coalition of the willing—the possibility of a multinational force—so that any agreement that is reached has the support of that multinational force, so we can make sure that it is not just written on paper but is secure in any arrangements that it comes to.
Lord Austin of Dudley (Non-Afl)
My Lords, the Minister is completely correct to reject the appeasement put forward in the previous question. We have to do everything we can to ensure that Ukraine defeats Russia. That is the only way this conflict is going to be resolved. With that in mind, can the Minister tell me what more we can do to disrupt the flow of Russian oil, which is underpinning Putin’s economy? Russia experts tell me that this will be the best way to put pressure on Putin. What thought have the Government given to taking sanctions and measures against the refineries in places such as India and Turkey, which are refining the oil for Putin?
Lord Coaker (Lab)
First, I thank the noble Lord for his comments about standing up against Russia. The UK Government have made significant efforts to disrupt the Russian economy through sanctions and through various measures that we have taken. I think it is really important to recognise the impact on Russia. Billions of pounds have been sanctioned and many ships have been disrupted, et cetera, et cetera.
This is not often done, but let me just share with the noble Lord the economic impact on Russia so far. The idea is that nothing has worked. Russia’s GDP growth has slowed from over 4% in 2023-24 to around 1% in 2025, with Russia’s Ministry of Economic Development forecasting only 0.4% growth in 2026. That is a significant achievement, I would say, and we need to say more about its impact. Inflation expectations rose in July to 14.7%, their highest level in years. The deteriorating economic picture is directly hitting average Russians, with growth in Russians’ real incomes projected to slow to 1.6% in 2026, down from 7.7% last year. We have also seen the queues that there have been for fuel.
All I am saying is that there is a lot more to be done —I absolutely accept that—but let us also give credit to the impact on Russia of what we are doing as well. At the same time, let us remind ourselves that our dispute with Russia is with the leadership, not with the Russian people.
Baroness Meyer (Con)
My Lords, I agree with everything that my noble friend Lord Minto said and I want to come back to home. As the Minister said, the threats are real. But one has the impression that the Government are not doing enough to protect British citizens. It reminds me a little bit of my father, who is French, who said that, just before World War II, the French were so much in disbelief that Germany could invade them, as they had suffered so much during World War I, and had their heads in the sand. I have the feeling that we are not taking the threats to this country seriously enough.
Lord Coaker (Lab)
It is difficult to argue that completely. If that were the case, why would we be doing what we are doing in Ukraine, under the last Government and this Government? If we did not believe that the freedom of Ukraine was ultimately and intrinsically linked with our own freedom and the freedom of all of Europe, why would we be supporting NATO in all the ways we have, with respect to infringements of airspace and what we do with Poland? Why do we have troops in Estonia? Why are we talking about the possibility of tactical nuclear weapons on F35As? Ultimately, why is it that we spend a quarter of the defence budget on the nuclear deterrent, which is the ultimate guarantor of our freedom, the freedom of Europe and the freedom of the world? Let us remind ourselves that, although the Prime Minister retains the ultimate decision on its use or not, that nuclear guarantee, our nuclear umbrella, is explicitly given to the defence of Europe. There are challenges, but I do not think it is fair to say that this Government are weak when it comes to Russia.
Lord Peach (CB)
My Lords, the Minister has been clear, and other Statements have made clear, that the risk from Russia is rising. “Hybrid” is now in common usage, and we see it associated with sabotage attacks across Europe. We need to take that threat seriously. In the spirit of this debate and discussion, we need a stronger narrative on defence and we need to embrace all elements of our society in that narrative. We need to build on the points around readiness in defence, both for regulars and, importantly, for our Reserve Forces. I declare my interest as the president of Reserves for the UK. Our Reserve Forces have never been more important. Through that, we can build stronger resilience. It is resilience that will see us through and has seen us through before. In building resilience, does the Minister agree that it is time to have a bigger conversation and strengthen the whole narrative around defence and security?
Lord Coaker (Lab)
I do absolutely agree with that. Certainly, the Government are looking at accelerating the progress—or not—that they are making on a national conversation. The noble and gallant Lord is absolutely right when he talks about resilience and the need to have a whole-of-society approach. I could not agree more, and the Government are certainly working to deliver that. The important thing is that we need to get through to people, which is why I mentioned the 90,000 cyber attacks, is that we may not have Russian paratroopers landing in the middle of Nottingham, but cyber attacks are happening now. We have seen activity on our own soil, in Salisbury and elsewhere. We have seen the way in which global conflict impacts on domestic fuel prices. We need to explain these things much more fully.
On the reserves, I could not agree more. Their importance is essential, which is why I was so proud and pleased on Saturday morning to go to the Prince William Barracks in Grantham, which the noble and gallant Lord will know very well, to celebrate the passing out of approximately 800 reserves. They are important, and the pride that they and their families had was immense. We need to build on that.
Lord Beamish (Lab)
My Lords, the situation we face in Ukraine is nothing new. In 2014, Russia annexed Crimea, when the party opposite was slashing the defence budget by 16%. Likewise, the problem we have now with our nuclear deterrent is down to the Liberal Democrats, who could not make their mind up about whether to replace it. Having visited Lithuania earlier this year, I know that it is under constant attack, not just from sabotage, as the noble and gallant Lord, Lord Peach, just mentioned, but by drone incursions. Is it not time that NATO took the fight to Russia on Ukrainian territory to take down these drones?
Lord Coaker (Lab)
We need to be careful about talking about taking Russian drones down in Ukrainian airspace. However, my noble friend is right when he talks about the need for a robust response to the incursions that we have seen. He talked about Lithuania. He will know that the NATO response was strong and powerful and a drone was shot down there following detection shortly after midnight. That is an important indicator. I am not sure whether everybody is aware but, additionally, this morning, at approximately 11 am, an unidentified object was spotted on radar close to Vilnius Airport, leading to its closure. Fighter jets from NATO Baltic Air Policing were scrambled to respond to that. My noble friend is right that Russia needs to know that incursions into NATO airspace will be dealt with robustly and strongly in the way that they have been.
Baroness Kingsmill (Lab)
We need to acknowledge the immense efforts that the Ukrainians have made in their defence and that they have been innovative, collaborative and successful in their fight against the Russian invasion, and we also have to acknowledge the significant support that NATO has given them. However, we need to think about what comes next. We need to help the Ukrainians build their industry and their defence industries to grow beyond the innovative stage so that they do not risk them being taken over by the United States or the big western companies and they can build their defence industry for themselves, because the threat from Russia is not going to go away readily.
Lord Coaker (Lab)
The bravery and courage of the Ukrainian people cannot be overstated. They are simply immense. This is a point that I have made before, but I am going to make it again: Russia did not attack Ukraine when it did in the belief that years later it would still be fighting. It believed, as I am sure a former ambassador would say, that three or so days after the attack it was going to be in Kyiv and would install a pro-Russian Government there. It did not attack in the belief that it would be where it is now, with 1.5 million casualties. God knows how much money it has cost. It is to the immense credit of the Ukrainian people that that has remained possible, not only in the face of the initial invasion but in the way in which they have continued to stand firm, as they have done. I agree with my noble friend that we need not only to support them in their war effort but to continue to discuss and work with them on what will happen in the future. However, the immediate priority is to secure the sovereignty of their country.
Lord Berkeley of Knighton (CB)
I would like us just for a moment to concentrate on the incredible loss of human life in this conflict. The Minister mentioned the economic cost to Russia and, indeed, the human cost just now. It is worth remembering that Russia has suffered 1.5 million casualties, compared with about 125,000 to 150,000 on the Ukrainian side. Of course, all are to be lamented. It is worth noting that the cost to Russia has been astonishing. One has to think a little bit, on whichever side these people are, about the awful cost for families and people and the tragedy of all these lives that have been lost.
Lord Coaker (Lab)
We all deplore the loss of life. We are all human. We reflect on the casualties, the killed and the wounded, and the impact psychologically on many people. We do not always talk about the numbers of casualties in Ukraine but the level of suffering is clear, and all of that is important for us to remember. There is only one person responsible for the invasion of Ukraine and, as far as I can see, that person is responsible for the consequences. We all hope that, as soon as possible, we will get a ceasefire that is acceptable to Ukraine and the slaughter and killing will stop.
Lord Fuller (Con)
My Lords, last week 18 maritime nations responsible for about a fifth of global shipping tonnage warned that global shipping rules are collapsing. We are an island nation and we depend on ship-borne trade, but the dark fleet threatens a structural risk to trade under IMO rules—of course, the IMO is based here in London. How are our Armed Forces ensuring that ships can maintain free passage in pursuance of the free trade that generates wealth and supports our economy?
Lord Coaker (Lab)
In my response to the noble Earl, Lord Minto, I think I said that, for 21 days in July, ships were escorted by the Royal Navy. We see our ships deployed not only in the channel but elsewhere. We had the carrier in the north Atlantic to ensure that shipping was protected. We have relationships, alliances and agreements with countries across the whole of Europe and beyond. In that way, we ensure that we protect, as much as we can, the merchant shipping upon which we all depend and that we do something about sanctioning the Russian fleet. If the noble Lord’s question is about building more ships, we are.
Viscount Stansgate (Lab)
I welcome the Statement, which says:
“Russia is constantly probing us and testing us”.
In terms of the narrative of what is happening, is it perhaps time to use less of the euphemistic language of “malign actors”, especially with regard to the very large number of cyber attacks to which my noble friend has already referred? Let us take the recent case of an abortive drone attack on a German airfield, which, thank heavens, did not work. The German Government, as I understand it, have reached the view that they now have the evidence to openly blame the state of Russia for that attack. Is that an approach that we should take as and when the Government have evidence to that effect?
Lord Coaker (Lab)
If you have evidence that something has happened, it is quite right to talk about, for example, drone attacks such as the one in Leipzig to which my noble friend refers. Sometimes, when I am asked questions, I want to go further than I do; I want to use language that is stronger and more powerful. However, I also recognise that, when you are a Government Minister, particularly at a sensitive time, particularly in a difficult situation such as this—this is true in the other place, and it would be true under whatever Government—you have to be extraordinarily careful about the language you use, in case you generate unintended consequences. I feel a real responsibility for that because I am not the person flying the jet, I am not the person on the ship, I am not the person undertaking various activities. My noble friend is absolutely right that, where we have the evidence, we have to say what has happened and explain the threat to the British people, while at the same time being extraordinarily careful with the language that we use in case, as I said, we generate unintended consequences.
Baroness Manningham-Buller (CB)
The Minister has referred to cyber attacks, drone probing and issues raised by other Members of the House, but these are just part of the picture. There are also threats to factories doing things for Ukrainians, sabotage of them, murder in the London streets. There have been firebombs on DHL aircraft. What the shadow fleet is doing at sea is equally worrying, and, of course, we have had the threat to our undersea cables; if we lose those, it would be a disaster for us. I am very grateful for what the Minister has said so far, but the scale and range of what the Russians are doing to us is broader than has been so far said in this House, and that is beyond conventional espionage and all the other things they do. Does the Minister agree?
Lord Coaker (Lab)
I thank the noble Baroness for that question. She is absolutely right. It is a sin of omission not to mention underwater cables and some of the other points that she made. Being able to explain that to the British people is important. Part of the problem, as she will know better than me from the responsibility that she had, is that some of the work the services do, along with others, to protect the country is unreported in many respects but it deals with many of these issues. I am proud of the work the services do and of the bravery and courage they show. We often talk about our Armed Forces, and quite rightly, but day in and day out MI5, MI6 and other intelligence services protect us and the public from harm, both at home and abroad, and we should celebrate what they do as well.
Financial Services and Markets Bill [HL]
(1 day, 7 hours ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
17:11 - Division on Amendment 1 - Ayes: 258 / Noes: 109 - Amendment 1 agreed.
The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)
My Lords, I begin by making a short statement on the position regarding legislative consent on the Bill. Legislative consent from the Northern Ireland Assembly and the Scottish Parliament is required for Clauses 49 and 51, which concern crypto assets and their seizure and recovery by UK law enforcement. These relate in part to matters that are devolved matters in respect of Scotland and transferred matters in respect of Northern Ireland. The Government have written to the Northern Ireland Executive and the Scottish Government on this matter and my expectation is that these issues will be fully addressed during the Bill’s passage in the other place. We remain committed to sustained engagement with the devolved Governments for the remainder of the Bill’s passage.
Clause 16: Requirements to have regard to the regulatory principles
Amendment 1
Lord Pitt-Watson
Member’s explanatory statement
This amendment would require the FCA to have regard to the climate and environment regulatory principle (as defined in the amendment in the name of Lord Pitt-Watson to clause 16, page 21, line 39) when discharging its general functions.
Lord Pitt-Watson (Lab)
My Lords, in moving Amendment 1 I will also speak to the other government amendments tabled in my name.
At Report and in Committee we discussed the fact that climate-related and nature-related risks can have significant implications for the economy, financial markets and long-term prosperity, and for the ability of the finance industry to do its job properly. We heard a number of calls to ensure that the financial services regulators continue to prioritise this agenda at a day-to-day level. However, it is important that this is done in a way that is aligned with the Government’s wider regulatory strategy and does not result in a new set of “have regards” which would further complicate the regulatory framework rather than make it simpler and more effective, as the Bill is intended to do.
The amendments tabled in my name deliver on the commitment I made last week to require the FCA and the PRA to continue to have regard to their existing climate change and environmental targets regulatory principle at a day-to-day level and to maintain appropriate notification and reporting requirements as part of that. Amendments 1 and 3 amend Clause 16, formerly Clause 17, so that the FCA and the PRA must have regard to the climate and environmental targets principle when discharging their general functions. Amendments 5 to 8 ensure that the regulators must report appropriately on their consideration of the principle, including in annual reports and consultations. Amendments 2, 4 and 9 then ensure that certain references and definitions are correct and account for these changes. Put together, these amendments will ensure that the FCA and the PRA continue to have an appropriate focus on this vital issue. I beg to move.
Baroness Hayman (CB)
My Lords, I am extremely grateful to the Minister for the clarity with which he has introduced these amendments. I am even more grateful to him for the very great care and attention that he and his team of officials gave to the concerns that were raised across the House about not just the perception but the reality of what Clause 16, as previously drafted, would have done to the ability of regulators—and their duties and responsibilities—to take, within their day-to-day functions, proper cognisance of the risks to financial markets and industry, and to our economy, of changes in climate and in the natural environment.
What we have managed to do is find a way forward that keeps within the bounds of what the Government intended in the regulation but does not sacrifice focus, given that, if nothing else, this summer gave us real experience of the effects that can happen through these issues. I am thinking particularly of the insurance industry and the housing market, and the effects that are already being felt there.
It has been quite a struggle to get here and we have gone down some byways but, in the end, we have reached absolutely the right conclusion. I am extremely grateful to the Minister and absolutely support these amendments.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to briefly follow the noble Baroness, Lady Hayman, and to applaud the work of her and her allies that has got us to this place, as she said, after a great deal of struggle. One day, we will simply have these provisions arriving in the Bills without the need for struggle—we can but hope.
I have one simple question to put to the Minister, which was inspired by attending “The People’s Emergency Briefing” on climate and nature in Gravesend on Saturday night. It was one of some 3,500 events held all around the country after the initial event in Westminster. We have yet to hear from the Conservative Front Bench, but House rumours suggest that the Opposition are going to oppose this amendment. If that is the case, would the Minister agree that they would benefit from seeing that briefing? I therefore ask the Minister—this is the first time I have asked under the new Prime Minister —whether the Government will organise a live national televised emergency briefing on climate and nature, as all these local events are asking.
Baroness Kramer (LD)
My Lords, my colleagues and noble friends Lady Sheehan and Lady Northover spoke eloquently on these issues on Report. If this amendment is pressed and the others are moved by the Government, we will support them.
Baroness Neville-Rolfe (Con)
My Lords, as this is Third Reading, I want to start by extending my warm thanks to the Minister and his team for their work on the Bill. I welcome the movement that the Government have shown on several of the issues that we have raised during the passage of this 137-page Bill, which in general we support.
Chief among them is proportionality, which will continue to apply to the regulators in the exercise of their day-to-day functions. That change reflects concerns on all sides of the House; my hope is that it will help to reduce the burden on SMEs, so I thank the Minister for this. I also welcome the movement we have seen on the important issue of financial education and look forward to engaging on that. It is becoming ever more important, whether you are a pupil, a student applying for a loan, or an adult managing your finances or thinking about retirement.
However, there remain important issues which the Government have not yet addressed sufficiently. Among them are the Henry VIII powers in Clause 3 and Clause 50 and the first use of the extensive new powers in the Bill. I understand the Government intend to reintroduce Clause 3 at a later stage in the Bill’s passage with further detail, and that is welcome, but it does not detract from the fundamental point at issue. One of Parliament’s principal functions is to scrutinise government legislation, and we simply cannot do so properly when Bills confer broad powers without setting out clearly how they are to be used.
A digital asset strategy to support faster action to stop further loss of digital entrepreneurs and less aggressive use of Section 166 are two areas where we believe the Government should go further, because we have heard consistent concerns from industry.
Turning to the amendments, I deeply regret the amendments the Government are introducing today on climate change. This represents a serious U-turn by the Government. Their original proposal was to move these considerations into five-year strategies. The existing requirements they dispensed with are largely superfluous and burdensome. There is little evidence that today’s amendments to restore them make any meaningful contribution, either to reducing climate change or to protecting the environment. At a time when businesses are already facing considerable pressure, and when our wider economic circumstances demand an unrelenting focus on growth, competitiveness and investment, imposing further needless regulatory burdens is the wrong direction of travel.
I would also suggest that, for an economy as dependent as ours on international investment, these amendments send entirely the wrong signal. We should be demonstrating to investors overseas that the UK is a predictable and attractive market. Instead, they reinforce the perception that doing business here means ever more regulation, additional cost and greater complexity for no clear practical benefit. At Second Reading, the then-Minister, the noble Lord, Lord Stockwood, who I am glad to see in his place, said that the purpose of the Bill was to
“modernise how the sector is regulated”
and
“enable it to grow”.—[Official Report, 8/6/26; col. 1146.]
These amendments seem to run directly contrary to that objective. I am deeply disappointed that the Government have abandoned that principle so quickly and with so little resistance. We on these Benches have been consistent in our opposition to this duty, which we have made clear in the House and in discussions with the Minister. I shall seek to divide the House when the amendments are called.
Lord Pitt-Watson (Lab)
My Lords, I think there is wide agreement that finance is essential for the running of our economy and that we want the British finance industry to be as successful as possible. I think that few of us would think that climate finance was not one of the most important areas to which the industry needs to contribute. I think all of us would feel proud that our country, particularly London, is rated as the number one centre of green finance in the world.
I understand the noble Baroness, Lady Neville-Rolfe, wanting to minimise regulation and thinking that this might be superfluous, but I note that climate is everywhere in the financial world. Why? It is because you are managing other people’s money. How does a fund manager, possibly with millions of people’s savings, think about appropriate investment? If you are responsible for the stewardship of a company, what is the sensible line to take in making sure it is as profitable as it can be but without risking the sustainability of the world? If you are an investment banker and somebody is issuing a bond, is it fair for it to be a green bond? Are you thinking about the reporting on the Stock Exchange? Should you have taken into account that the carbon assets you have will need to be written off and you will need to have a fund and tell your investors about that? Are you interested in impact investment? We were talking a lot about deforestation. How is it that we manage to get private money into deforestation? The noble Baroness, Lady Hayman, talked about insurance. Even in operations, look at the sort of thing that Bloomberg has done; all its electricity is now zero carbon. There is lots of stuff, and the UK is a leader. It is a growing area, and we should be proud of that.
Does regulation make a difference to this? That is a good question. If you were to look at the UK’s regulation on this and compare it with that of the United States—London versus New York—you would be in no doubt which was the better for promoting green finance. Frankly, I do not know of many financiers who would say that the United States now has more predictable regulation than we have in the United Kingdom. You could say that the regulator is already doing enough. Although I cannot respond to the noble Baroness, Lady Bennett, by having a national conversation, I did organise the FCA to do a drop-in to talk to noble Lords about what it was doing in this area. Every noble Lord I talked to afterwards thought that it would be a mistake to withdraw the “have regard” and that therefore this amendment was the right thing to do.
Whether noble Lords believe in the importance of climate and environmental issues or whether they want to be sure that Britain maintains its USP in this critical area of finance, I urge them to vote for these amendments.
Lord Pitt-Watson
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Pitt-Watson to clause 16, page 21, line 23.
Member’s explanatory statement
This amendment would require the PRA to have regard to the climate and environment regulatory principle (as defined in the amendment in the name of Lord Pitt-Watson to clause 16, page 21, line 39) when discharging its general functions.
(b) the climate and environment regulatory principle is the regulatory principle in subsection (1)(c).”Member’s explanatory statement
This amendment would define the “climate and environment regulatory principle” for the purposes of section 1B(5)(a) and 2H(2) of FSMA 2000.
Member’s explanatory statement
This amendment would require FCA annual reports to include consideration of the climate and environment regulatory principle (as defined in the amendment in the name of Lord Pitt-Watson to clause 16, page 21, line 39).
Member’s explanatory statement
This amendment would require notifications by the FCA to chairs of relevant Parliamentary Committees to specify the parts of consultations that address the ways in which the FCA has had regard to the climate and environment regulatory principle (as defined in the amendment in the name of Lord Pitt-Watson to clause 16, page 21, line 39) when preparing proposals.
Member’s explanatory statement
This amendment would require PRA annual reports to include consideration of the climate and environment regulatory principle (as defined in the amendment in the name of Lord Pitt-Watson to clause 16, page 21, line 39).
Member’s explanatory statement
This amendment would require notifications by the PRA to chairs of relevant Parliamentary Committees to specify the parts of consultations that address the ways in which the PRA has had regard to the climate and environment regulatory principle (as defined in the amendment in the name of Lord Pitt-Watson to clause 16, page 21, line 39) when preparing proposals.
Member’s explanatory statement
This amendment is consequential on the amendment in the name of Lord Pitt-Watson to clause 16, page 22, line 22.
Lord Pitt-Watson (Lab)
My Lords, this Bill delivers important reforms to ensure that the UK’s financial services sector remains open, innovative and internationally competitive while maintaining high regulatory standards and protecting consumers. It strengthens the legislative framework for financial services, supports growth and investment, and ensures that our regulators have the appropriate powers and responsibilities to respond to a rapidly changing market.
The Bill has benefited considerably from noble Lords’ detailed scrutiny and expertise throughout its passage. I hope noble Lords feel that the Government have listened carefully to the arguments advanced in Committee and on Report, and that we have brought forward amendments which were appropriate in response. The Bill, of course, is broad. It touches on lots of areas, but it is united by one common theme, shared by the House: we want to create a clear set of rules which allow the financial industry to serve its customers better and to prosper by doing so.
I thank all noble Lords who contributed to our debates, perhaps in particular my noble friend Lord Stockwood, who led the early stages of the Bill. I also thank my officials, who supported the Bill throughout its passage. It was no mean task. I am also particularly grateful to the Opposition and Liberal Democrat Front Benches; to the noble Baroness, Lady Noakes, and other members of the Financial Services Regulation Committee; to members of Peers for the Planet; and to noble Lords across the House, including Cross-Benchers, for their constructive engagement. If I had a special thank you it would be to my Whip, my noble friend Lord Wilson, without whom I would have found this process quite impossible.
The Bill leaves this House strengthened by the scrutiny that we have given it. I beg to move.
Baroness Kramer (LD)
My Lords, I will be brief, which has been my practice—as people may have noticed —throughout much of this Bill. I open by saying thank you to the Minister and to the Box. They have been very willing to share their time with us, brief us and listen to issues that we raised. We did not always get the response that we wanted, but it was a positive engagement that gives us some hope for making progress.
I think the Minister came to this Bill having been told that it was a minor, technical Bill. That probably could not have been more wrong. I am glad we achieved what we did, working across the Opposition Benches. I give credit to Conservative Peers—the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, and others—as well as, on my side, to my noble friends Lady Bowles and Lord Sharkey in trying to deal with the issues around proportionality.
There is a great deal left in accountability that will have to be tackled in future Bills. As we see the speed-up in AI, crypto and the other rapid changes that are coming, we will have to find a new way, as a Parliament, to engage. I also thank the noble Baroness, Lady Neville-Rolfe, for putting in an amendment that began to deal with the digital issue. I really believe that not covering that within this Bill was a miss-out. The Government will have to step up to the plate again very shortly.
I am also very grateful for the fact that we got support on the child trust fund issue, again from the Tory Benches. It is something I feel very personally, as people can probably guess. It benefits 80,000 disabled youngsters who have been unable to access money that is theirs that is sitting in trust fund accounts.
I thank my noble friend Lord Sharkey in particular for fighting the battle for the FOS—that battle is not over either. I also thank my noble friends Lady Northover and Lady Sheehan; we would have gone farther on the climate change, environment and deforestation issues, but we feel that an important step was taken by the Government in the amendments moved today.
This has been a very constructive Bill, but, frankly, it was not the maximum use that could have been made of a financial services Bill and I hope that we will see another one come along shortly. There are problems to be tackled, not least the issues of mortgage prisoners and community development financial institutions, as well as the utterly significant constitutional issue of accountability and how the regulators need to be effectively accountable to Parliament. I thank the whole House for working on a very complex set of issues, particularly as it entered this phase with the understanding that it was only going to be about minor technicalities.
Baroness Neville-Rolfe (Con)
My Lords, I close by acknowledging the considerable degree of cross-party support and engagement that has underpinned most of our discussions on the Bill. I thank the Minister and his officials for their work, as well as the noble Lord, Lord Stockwood, for guiding the Bill through Second Reading and Report. I also thank the noble Lord, Lord Wilson, for his support. I agree with the Minister that the Bill has benefited from its passage through the House in major ways.
I am particularly grateful to the noble Baronesses, Lady Kramer and Lady Bowles, and the noble Lords, Lord Sharkey and Lord Vaux, for the constructive way in which they have worked with us on a number of shared priorities. Across the House, we have identified a number of targeted and largely non-partisan areas in which the Bill could be improved. Serious concerns have been raised, and serious, well-intentioned proposals have been brought forward in response; I hope that they will be progressed by the Government.
I also thank my noble friends Lady Noakes and Lord Bridges of Headley for the deeply constructive approach they have taken to the important question of accountability and oversight. I strongly urge the Government to continue working with my noble friends on this issue. As I am sure the Minister recognises, they have approached it throughout in the interests of good governance and effective parliamentary scrutiny and with the support of the excellent Financial Services Regulation Committee.
My noble friends Lord Ashcombe, Lord Ranger of Northwood, Lord Holmes of Richmond, Lord Massey of Hampstead, Lord Howard of Rising, Lord Mackinlay, Lord Hunt of Wirral and Lady Lawlor have all made important and valuable contributions to our discussions, and I am grateful for their work in raising important matters with the Minister.
This is, in many respects, a model of how your Lordships’ House can work at its best: identifying genuine concerns, drawing on expertise from across the House, and working constructively to make legislation more effective, more accountable and better. I hope the Government will take forward the amendments passed and suggestions made as the Bill progresses. Most of all, I thank my noble friends Lord Altrincham and Lord Reay and our team of officials for their support on this complex Bill. Their experience and expertise in this area have been invaluable.
Commercial Payments Bill [HL]
(1 day, 7 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Sharpe of Epsom
“(1A) The purchaser must advise the supplier how the supplier should submit notice as set out in subsection (1).(1B) Where the purchaser fails to advise the supplier on how to submit notice, the supplier may rely on the notice commencing by submitting a written document (for example, a delivery notice or invoice) to the person requesting the goods or services within the purchaser’s business.(1C) The purchaser must adopt internal systems that recognise that the serving of notice commences at the point the supplier complies with subsections (1A) and (1B).”Member's explanatory statement
This amendment seeks to require the purchaser to give instructions as to how notice should be given. Where the purchaser gives no advice on notice, the supplier may rely on notice having been given by providing a delivery notice or invoice to the person within the purchaser’s business who is requesting the goods or services.
Lord Sharpe of Epsom (Con)
My Lords, I will speak to this group on behalf of my noble friend Lord Holmes of Richmond, who sends his apologies to the House for his absence today. Before I begin, I note my gratitude to the Minister, who has been incredibly receptive in listening to and addressing our concerns with the Bill. I believe that we have ended up broadly in agreement on the final form that the Bill should take, so I commend him and his officials for the cross-party work they have put in.
My noble friend’s two amendments from Committee seek to address three technical matters. Amendment 1 aims to provide the supplier with guidance on how to submit a notice. Amendment 5 seeks to clarify that a payment is defined as such only when the supplier has clear and unequivocal use of funds. Amendment 10 would prevent the import-export exemption being extended past the implementation of the Electronic Trade Documents Act.
As in Committee, we remain broadly supportive of all three amendments. Amendment 1 reflects the fact that good payment practices can be ensured only if both parties are aware of the maximum payment terms and the supplier has submitted a notice in good time. Amendment 10 reflects a much-raised concern that imports and exports are currently exempt from the Bill. The Electronic Trade Documents Act means that this will not have to be the case, so I hope that the Minister can assure us that there are plans for incorporating import and export into the payment regime upon the full enactment of that Act.
Finally, it is a shame to see that the aim behind Amendment 5 has not been accepted by the Government. The Bill aims to improve payment practices between firms, largely because, currently, too many exchanges are delayed at the expense of the supplier. If a payment is made through an intermediary and remains there for an indefinite period—perhaps beyond the 60-day payment term—and does not fall under the provisions of the Bill, the Bill is of little use to the supplier awaiting payment. Amendment 5 would ensure that payments were considered as paid only when they reached their final recipient. That principle was the reason for the Minister rejecting my Amendments 2 and 4 in Committee: that, regardless of delays, payments should count only when received by the supplier. I hope that the Minister can today confirm that this definition will be made explicit in all cases.
I turn to my amendments. Alongside my noble friend Lord Hunt of Wirral, I have retabled several probing amendments arising out of concerns about the effects of the maximum payment terms. Amendments 2, 4 and 19 are concerned with payments that are delayed by either bank holidays or bank processing times. Amendment 9 probes the economic and opportunity costs of the exemption of upwards payments from payment term restrictions. Amendments 3 and 6 seek to add a definition of nationalised bodies to the Bill, reflecting the fact that, while they will be treated as regular commercial bodies, their business models are self-evidently different and, as such, there is a risk that their payment practices reflect this. These are all questions that we would benefit from seeing answered; however, that does not detract from the fact that we support the general aim of Part 1.
It is also true that the best way of judging the effectiveness of a policy is through analysing its effects in practice. Therefore, I welcome the compromise that the Government have made with the noble Lord, Lord Fox, giving the Secretary of State the powers to shorten payment terms alongside mandating a consultation about the decision. The proposed new clause under Amendment 15 does not commit the Government to any specific action but simply requires a review of the effects of the maximum payment terms and allows for adjustment if necessary. That is a sound, self-correcting approach and I therefore thank the Minister for agreeing to this measure. I beg to move.
Lord Fox (LD)
My Lords, I feel a great wave of consensus flowing over me. I will speak to Amendment 8 in my name. As we discussed before the Recess, much of the consultation process proposed a 45-day limit, yet the Bill offers no easy route from the 60 days it proposes to a shorter timeframe. My amendment would require the Secretary of State, within five years, either to lay draft legislation reducing the maximum payment period for private purchasers from 60 to 45 days, or to explain to Parliament why not.
The Minister’s reaction and response to this issue have been typical of the very strong consensus that we have been able to build. I echo the words of the noble Lord, Lord Sharpe, that both the Minister and his team have been extremely helpful in this. That is why I am delighted to note that government Amendment 15 and the various consequentials lock in very much what I was looking for, including—as the noble Lord, Lord Sharpe, mentioned—the need for consultation within five years, with a view to shortening the payment period. This government amendment is an excellent response to my Amendment 8, thereby making my amendment unneeded.
The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Leong) (Lab)
My Lords, prior to introducing the government amendments, I wish to express my personal thanks for the positive engagement across the House, and particularly to the noble Lords, Lord Hunt and Lord Sharpe, on the Opposition Front Bench, and the noble Lord, Lord Fox, and the Liberal Democrats for their very thoughtful scrutiny of the Bill.
The Bill builds upon the important reforms that were enacted by the previous Conservative Government. The provisions in the Bill have been drafted following extensive consultation with businesses, with more than 850 responses to our consultation, which was undertaken between 31 July and 23 October 2025. We have brought forward a Bill that reflects that consultation.
Our decision to impose stricter maximum payment terms of 60 days received support from 66% of consultation respondents. This is a significant strengthening of current law. No longer will large businesses be able to impose payment terms of over 60 days upon their suppliers. The question remains whether 60 days should be the end of that journey. We have heard loud and clear from smaller businesses that the Government should consider reducing maximum payment terms to 45 days or even 30 days. I have listened carefully to all noble Lords across the House encouraging us to go further on this. I am pleased to say that the Government have tabled amendments to provide a power that may be used in future to reduce the maximum payment terms.
These amendments allow the Government to consult on whether payment periods should be reduced, ensuring that any future decisions are informed by evidence and experience of how the new measures are operating in practice. Furthermore, the Government will not use this power to reduce maximum payment terms for at least five years. I hope noble Lords will agree that this is a sensible change and a balanced approach, maintaining the payment periods consulted on and included in the Bill, providing stability and certainty while businesses adapt to the new reality of 60-day maximum payment terms, and ensuring that there is a clear route to go further in future if the evidence supports it.
I turn to the amendments tabled by other noble Lords. In response to Amendment 2, increasing the maximum payment term for public authorities beyond 30 days would undermine the Procurement Act 2023 and delay payment to suppliers. In response to Amendment 4, increasing the maximum period for non-public authority purchasers beyond 60 days would delay payments to suppliers and move away from the position consulted upon with strong levels of support.
Regarding Amendments 3 and 6, national ownership does not by itself determine the applicable payment regime. Under the Bill, a nationalised body that meets the definition of a “public authority” will be subject to a 30-day maximum payment period. A nationalised body that does not meet that definition will be subject to the 60-day maximum payment period that applies to other purchasers. I recognise the intention and ambition of the noble Lord, Lord Fox, in Amendment 8 to reduce maximum payment terms.
On Amendment 19, the Bill takes important steps by introducing clarity and consistency around payment terms, building on the reforms introduced by the previous Conservative Administration. We are not aware of public holidays being raised as a concern by any businesses or stakeholders during last year’s extensive public consultation.
Amendment 1 is already covered by the Bill. We are setting out clearly the trigger points that can be agreed to start the clock on payment and the implied term if payment is not explicitly made.
Regarding Amendment 5, the Government believe that the Bill is clear. For the purposes of whether a payment has been made on time and when interest on late payment will start, payment will be considered made at the point that funds have been received by the supplier. On both Amendments 1 and 5, the Small Business Commissioner will provide advice and information on compliance with legal obligations on these points. On Amendment 10, I outlined in Committee how the removal of this exemption would place UK businesses at a competitive disadvantage.
Lord Sharpe of Epsom (Con)
My Lords, as ever, I am grateful to the Minister for his response and, in particular, for the last piece that he mentioned, which is very welcome news, and I appreciate the clarification. As I outlined in my opening speech, a number of questions remain regarding the implementation and operation of maximum payment terms. I accept what the Minister said about consultation. I am generally dubious about the Government’s enthusiasm for consultations, but in this case, it was a good one.
We very much agree with the principle. We still need to see how these measures will actually work in practice. That is why I am very optimistic about Amendment 15. The Government will have an opportunity to revisit these measures, and I hope in doing so that they consult stakeholders and those affected by all the potential issues that this group has raised. I say to the Minister: keep up the good consultation work on this case. I look forward to scrutinising the regulations when they appear but, in the meantime, I beg leave to withdraw my amendment.
Lord Fox
“2CA Payments collected by intermediaries(1) This section applies where, under or in connection with a contract to which section 2B applies (“the supply contract”), a person other than the supplier (“the intermediary”) receives all or part of a relevant payment from the purchaser for onward transmission to the supplier.(2) This section applies regardless of—(a) whether the intermediary acts as agent for the supplier or the purchaser or otherwise, and(b) the legal characterisation of any contract between the intermediary and the supplier or the purchaser.(3) For the purposes of this section, a relevant payment is not to be treated as made to the supplier until the amount received by the intermediary is received by the supplier.(4) It is an implied term of any contract between the intermediary and the supplier that the intermediary must pay to the supplier any amount received from the purchaser in respect of a relevant payment under the supply contract before the end of the period of 7 days beginning with the day on which the intermediary receives that amount.(5) A term of any contract is void so far as it purports to—(a) provide for payment to the supplier later than is required by subsection (4), or(b) treat a relevant payment as made to the supplier earlier than is provided by subsection (3).(6) Where the intermediary fails to comply with the implied term in subsection (4), the unpaid amount is to be treated as a qualifying debt owed by the intermediary to the supplier for the purposes of this Act (and statutory interest runs accordingly).(7) Subsection (4) does not require the intermediary to pay an amount to the supplier so far as the intermediary is entitled to deduct or withhold that amount under a term of a contract with the supplier that is fair and reasonable having regard to the matters specified in Schedule 2 to the Unfair Contract Terms Act 1977, and it is for the intermediary to show that any such term satisfies that test.”Member’s explanatory statement
This amendment closes the online marketplace loophole by providing that payment is not treated as made to a supplier until the supplier actually receives the money, and by requiring any intermediary that collects payment on a supplier’s behalf to remit it within 7 days regardless of how the intermediary is legally characterised.
Lord Fox (LD)
My Lords, as we all know, economic activity is switching from familiar structures and supply chains to a situation where businesses market their goods or services via third-party online marketplaces or virtual intermediaries. The amendment would bring such marketplaces and intermediaries into the context of the Bill. It would close a loophole by providing that payment is not treated as made to a supplier until the supplier actually receives the money, which seems reasonable, and by requiring any intermediary that collects payment on a supplier’s behalf to pay it within seven days, regardless of how the intermediary is legally characterised. The Minister is Minister for Small Business, and I am sure that very many of the businesses that are now under his purview would agree that their cash flow can be majorly impacted by how quickly these online marketplaces settle.
We have debated the role of online intermediaries in a number of Bills and contexts. For example, we have talked about their role when considering product safety. In every case, the Government—both Governments —have found arguments to eliminate these important businesses and sectors from whatever legislation we have been considering. So it is quite clear that we have to move on from where we are now. We cannot keep exempting what is becoming a major part of our economy from the legislation that we consider. An ever-increasing proportion of the UK economy is shifting in this direction, and we need to grasp the nettle.
At the very least, I am looking for some assurance from the Minister that the Small Business Commissioner, the Government and departments can actually take a look at the role of these businesses in all walks of the economy and find a way of bringing them on board and making sure that they are not a loophole in the laws that the Government are very properly introducing. With that, I beg to move Amendment 7.
Lord Hunt of Wirral (Con)
My Lords, this amendment touches on very much the same point as my noble friend Lord Holmes of Richmond’s Amendment 6 in the first group. The principle that payments should be considered as such only when received by the supplier underpins several of the amendments that we on this side of the House have brought back from Committee. As such, His Majesty’s loyal Opposition support this amendment, as we did in Committee. I do not think that a payment should fall under a different regime from direct payments simply because it is made online and happens to travel through an intermediary. Similarly, ensuring the prompt forwarding of payments by intermediaries is an integral part of promoting good payment practices. This amendment aims to do that, and I warmly commend the speech of the noble Lord, Lord Fox. I join him in hoping that the Minister can confirm that these issues have been considered and addressed.
Lord Leong (Lab)
My Lords, I am grateful to the noble Lord, Lord Fox, for Amendment 7 and thank him for it. I recognise that it was tabled in a constructive spirit, and I thank him once again for the engagement we have had on this matter, both in person and by correspondence. The Government share his aims of ensuring that suppliers are paid promptly, payment processes are clear and purchasers cannot use contractual mechanisms to delay payment unjustly. I entirely agree that, when a small business sells through a platform or marketplace, the money due to that business should not be held unnecessarily.
I want to be absolutely clear that the use of intermediaries does not affect a supplier’s right to be paid within 60 days. Chapter 1 of Part 1 ensures that, for business-to-business contracts for the supply of goods or services, the maximum payment time is 60 days. If payment is more than 60 days overdue, the purchaser is in breach of contract and liable to pay interest. The use of an intermediary does not alter this position.
I reassure all noble Lords that persistent attempts to circumvent the maximum payment terms through intermediaries constitute poor payment practice. Under Clause 19, this constitutes grounds for the Small Business Commissioner to investigate and potentially levy a financial penalty on larger businesses that persistently engage in this practice. Under Clause 18, the commissioner will also be able to adjudicate payment disputes where a larger business owes money to a small business, including where the debt arises from the use of an intermediary.
The Bill addresses late business-to-business payments. It is not intended to regulate broader business relationships such as those between retailers using agents to sell goods to consumers or between a platform or marketplace and others when the platform or marketplace is holding, processing or transmitting funds between them. Those are subject to separate regulation. The contracts through which the majority of small businesses trade on online marketplaces are either business-to-consumer or consumer-to-consumer contracts and are subject to consumer legislation. These contracts were outside the scope of our impact assessment and our public consultation.
As tabled, the amendment would therefore not address the issue raised by the noble Lord, Lord Fox. Tackling the issue of late payments outside a business-to-business context would move the Bill into a completely different area of regulation and would require the establishment of a new statutory regime for online marketplaces and payment intermediaries. This would cut across existing legislation, rather than maintaining the Bill’s core focus on commercial payment practices between suppliers and purchasers.
The amendment would also interfere with existing commercial models that operate in the interests of the relevant parties and serve legitimate purpose. For example, where most intermediaries operate a system in which payments are pooled in a small business account and are drawn down by the small business on a regular basis, the amendment would mean that each individual sale, however small, would have to be remitted directly to the small business, significantly increasing transaction numbers and costs and reducing the flexibility of the operating model. Another example is payment providers holding funds for more than seven days to allow for fraud checks or other compliance requirements. The amendment would increase small businesses’ exposure to fraud and undermine the regulatory and legal framework governing payment providers.
However, I understand and share the noble Lord’s concerns about withholding funds from small businesses. I am therefore happy to ask the Small Business Commissioner to review this issue with a view to developing guidance for small businesses so that they understand how the Bill applies to trading activity on online marketplaces. This can build on the guidance that the commissioner produced last year to help small businesses understand why their accounts may be frozen or funds withheld and how they can take action to avoid this. This included a 10-point pledge to online marketplaces and payment providers which was signed and promoted by several major companies. As the Minister for Small Business, I commit to examining how the Government can further support small businesses in addressing this issue faced by those who use online platforms, including engaging with other government departments and regulators where they have responsibility.
For those reasons, and given the commitments that I have made, I respectfully ask the noble Lord, Lord Fox, to withdraw Amendment 7.
Lord Fox (LD)
I thank the noble Lord, Lord Hunt, for his support for this amendment. One point of consternation or otherwise is that I would suggest that the supplier-marketplace relationship is a B2B relationship, not a B2C one. I am not sure where the argument that I am somehow pushing this to a different sort of relationship came from, but I will set that to one side and mull on it later.
I thank the Minister for the latter part of his speech and his undertakings to focus the SBC on this issue and to ensure that his department looks at ways of making sure that small businesses understand their rights. That is really the point. The way in which the first part of his speech was set out made it clear that there are all sorts of rights for small businesses in this, but I am not sure that small businesses are necessarily aware of those rights or how they can go about exercising them and being sure that it is not a time-consuming, overwhelming process. It would be useful to hear from the Minister—and perhaps the Small Business Commissioner, as time goes by—how small businesses will be engaged to make sure that they are fighting on an even footing with the marketplaces, many of which are, let us face it, absolutely huge and very difficult organisations to take on. It can be difficult even to find the right person to speak to in them to start with.
I thank the Minister for the work that he will do in future, and I beg leave to withdraw Amendment 7.
The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)
I should alert the House to the fact that, if Amendment 11 is agreed to, I will not be able to call Amendment 13 by reason of pre-emption.
Amendment 11
Lord Sharpe of Epsom
“(7) In subsections (2) and (3)—“a micro undertaking” means an undertaking which has no more than 10 full-time equivalent employees, and has—(a) a turnover of no more than £1 million, or(b) a balance sheet total of no more than £500,000;“a small undertaking” means an undertaking other than a micro undertaking which has no more than 50 full-time equivalent employees, and has—(a) a turnover of no more than £15 million, or(b) a balance sheet total of no more than £7.5 million;“a medium-sized undertaking” means an undertaking other than a small undertaking or micro undertaking which has no more than 250 full-time equivalent employees, and has—(a) a turnover of no more than £54 million, or(b) a balance sheet total of no more than £27 million;“a large undertaking” means any undertaking other than a medium-sized undertaking, small undertaking or micro undertaking.”Member’s explanatory statement
This amendment, and others in the name of Lord Hunt of Wirral, seek to create a standardised definition of different sized businesses on the face of the CPILPA 1998.
Lord Sharpe of Epsom (Con)
My Lords, this group of amendments revisits the issue of the definitions of different-sized businesses. I note the new amendment in the name of the noble Lord, Lord Fox, which highlights the same concerns as we raised in Committee.
Those concerns remain. There has been a proliferation of definitions for different-sized businesses to suit a multitude of aims of the Government of the day. Currently, a minimum of six statutory frameworks use materially different-sized criteria, as well as other definitions existing in sector-specific regulations and guidelines. I know that the Minister will agree when I reiterate that this is currently too complex a system. The Government should aim to place as few obstacles as possible in the path of business; that means cutting the bureaucratic paperwork and jargon that firms complete to meet their legal obligations. The proliferation of business size definitions is a case in point. They may not be entirely contradictory, but they are certainly not complementary, and I believe that everyone would benefit from a more streamlined approach.
I entirely accept the Minister’s point in Committee that such a wide reform cannot take place in a Bill with as narrow a scope as this one. However, he should at least commit to restricting the definitions within this Act to those that already exist, to the best of his ability. Such a step clearly has support from all sides of the House. Similarly, given that the Minister has indicated his support for some reform of definitions, can he commit to revisiting this issue with me at a future point? I hope that he can agree to this and I look forward to his response. I beg to move.
Lord Fox (LD)
My Lords, the noble Lords, Lord Hunt and Lord Sharpe, were right to raise the issue of definitions in Committee. Rather than simply echo them, I decided to add something to the debate through Amendment 35, which sets out something of the Tower of Babel that exists around definitions. Subsection (2) of the new clause proposed in Amendment 35 gives examples of the many phrases and words that are used in a variety of different contexts. Proposed new subsection (3) identifies seven Acts—not the six that the noble Lord, Lord Sharpe, came up with; we managed to find another one—where these phrases are prevalent but not necessarily synonymous. Proposed new subsection (4) really sets out what we are looking for the Minister to do, which is work out to what extent the definitions in proposed new subsection (2) differ from those in subsection (3).
There is a compliance cost to businesses in these differing definitions, because they have to make different decisions for different legislative frameworks. The extent to which this gives rise to uncertainty and undermines the law, and the effect it will have on the functions of the Small Business Commissioner, are just some of the things that should be taken on board by the Government to bring a state of order to what has been an organic process of legislation following legislation and definition following definition. To help the Minister’s new constituency of small businesses in particular, now is the time to bring these things under control and bring definitions into order.
Lord Leong (Lab)
My Lords, I thank the noble Lords for Amendments 11, 12, 13, 14, 35 and 46. I recognise the concerns raised by the noble Lords, Lord Sharpe and Lord Fox, in Committee regarding the number of existing definitions of company sizes on the statute book and their desire for clear and consistent definitions to avoid confusion for businesses. I would like to reassure noble Lords that our intention is to use the company size thresholds set out in the Companies Act 2006 and the Enterprise Act 2016 as the basis for defining company size in the Bill.
However, it is important that we consult with businesses and industry experts to ensure that these definitions are appropriate for the purposes of this Bill. That consultation may indicate that, for the purposes of the Bill, company-size definitions should be revised or simplified. Any modifications to existing definitions will be made only when necessary.
For example, we may choose to simplify definitions to make it easier for businesses to use exemptions, while still using existing definitions as the basis. We may find through consultation that different parts of the legislation require different definitions to ensure precision and effectiveness. For example, we might be required to simplify the size definitions for the purposes of the Small Business Commissioner’s powers, so that they are based solely on headcount. We should not constrain ourselves by introducing rigid definitions now, as this could make the powers and protections afforded by the Bill more difficult for businesses to understand and administer than is necessary.
I also do not consider it necessary to delay the Bill’s commencement pending a further statutory review of definitions used across a range of legislation. The Government are already committed to consulting on any regulations made under these powers and to taking into account relevant existing definitions when developing them. The delegated power in Section 2E will be subject to consultation and parliamentary approval under the affirmative procedure, giving your Lordships’ House the opportunity to vote on the regulations before they are introduced.
In conclusion, the definition of business sizes will be set out in secondary legislation. These regulations will be informed by consultation to ensure that they are appropriate. The Government intend to use the existing definitions as the basis for this Bill and will keep definitions as simple and effective as possible.
I also commit that, before making any regulations in this area, the Government will have regard to the definitions in the Companies Act 2006, the Small Business, Enterprise and Employment Act 2015 and the Enterprise Act 2016. I also commit to meeting up with the noble Lord, Lord Sharpe, to look into these definitions going forward. For these reasons, I respectfully ask that Amendment 11 be withdrawn and that noble Lords do not move the remaining amendments in the group.
Lord Sharpe of Epsom (Con)
My Lords, again I am grateful to the Minister for his very comprehensive response. I am also grateful to the noble Lord, Lord Fox, for explaining his Amendment 35 and for digging out yet another example of an Act that governs the definitions of small business. Might I suggest to the Minister that, during this consultation, they include a question on how the nature of small business has evolved in the last 10 years? Obviously, there has been a spectacular explosion in e-commerce and other things, which will have a material impact on the types of definition we are talking about.
As I outlined in my opening speech, the current landscape of definition is unnecessarily convoluted—expensively so, as the noble Lord, Lord Fox, pointed out. However, I recognise that this Bill is not necessarily the best vehicle for driving through that reform. I appreciate the Minister’s response on this issue. I will absolutely take him up on his offer of further talks on how we might improve a bit of a messy picture. I think I also heard him say that he is quite keen to find another legislative vehicle where we can address this in the future—if I am making that up, I am sure that he will correct the record.
I beg leave to withdraw my amendment.
Lord Leong
“Powers to shorten payment termsAfter section 2E of the CPILPA 1998 (inserted by section 3), insert—“2F Powers to shorten payment terms(1) The Secretary of State may by regulations substitute the number of days for the time being specified in sections 2B(2)(a) and 2D(3)(a).(2) Regulations under subsection (1)— (a) may not specify a number of days higher than 30;(b) must specify the same number of days in sections 2B(2)(a) and 2D(3)(a).(3) The Secretary of State may by regulations substitute the number of days for the time being specified in sections 2B(2)(b) and 2D(3)(b).(4) Regulations under subsection (3)—(a) may not specify a number of days higher than 60;(b) must specify the same number of days in sections 2B(2)(b) and 2D(3)(b).(5) The Secretary of State may by regulations substitute the number of days for the time being specified in section 2B(5), but the regulations may not specify a number of days higher than 30.(6) The Secretary of State may by regulations substitute the number of days for the time being specified in section 2C(3), but the regulations may not specify a number of days higher than 30.(7) The Secretary of State must, within the required period, consult such persons as the Secretary of State considers appropriate about whether to make regulations under subsections (1), (3), (5) and (6) and the number of days that might be specified in such regulations.(8) In subsection (7) “the required period” means the period of five years beginning with the day on which sections 2B and 2D come into force (or, if they come into force on different days, the later of those days).””Member’s explanatory statement
This new clause enables the Secretary of State to make regulations to shorten the payment periods set out in various provisions of the Bill.
Lord Leong
Member’s explanatory statement
This amendment is consequential on my proposed new clause.
Member’s explanatory statement
This amendment is consequential on my proposed new clause.
Member’s explanatory statement
This amendment is consequential on my proposed new clause.
Lord Hunt of Wirral
“Special administration: continuity of payment obligations(1) This section applies where a purchaser under a contract to which the CPILPA 1998 applies is subject to a special administration regime.(2) The provisions of the CPILPA 1998 relating to payment terms and statutory interest (including sections 2B, 2C and 2D and Part 1B of that Act) continue to apply in relation to a relevant supply notwithstanding the special administration or any moratorium having effect in connection with it. (3) Nothing in this section affects the operation of any such moratorium specified in subsection (2) in relation to the enforcement of a debt.(4) In this section “relevant supply” means a supply of goods or services made after the appointment of the special administrator—(a) at the request of, or with the agreement of, the special administrator, or(b) in circumstances in which section 233, 233A or 233B of the Insolvency Act 1986 (as applied in relation to the special administration regime concerned) restricts the supplier from terminating the contract or the supply, or from making continued supply conditional on payment of outstanding charges.(5) In determining for the purposes of the CPILPA 1998 the maximum period within which a relevant payment or relevant construction payment in respect of a relevant supply must be paid, the purchaser is to be treated as if it were a public authority.(6) Sums payable in respect of a relevant supply, including statutory interest, are payable as expenses of the special administration.(7) Nothing in this section—(a) applies in relation to sums payable for goods or services supplied before the appointment of the special administrator takes effect (see section (Special administration: sums owed to suppliers required to continue supply));(b) except as provided by subsection (5), affects the order of priority in which debts, liabilities or expenses are payable under or in connection with the special administration regime.(8) In this section—“special administration regime” means a procedure under any enactment which provides for the administration of a company by a person appointed by the court and applies provisions of the Insolvency Act 1986, with or without modifications, for purposes that include securing the continued provision of a supply or service (including special administration under sections 23 to 26 of the Water Industry Act 1991, sections 59 to 65 of the Railways Act 1993 and sections 154 to 171 of the Energy Act 2004);“special administrator” means the person appointed to manage the affairs of the company under such a procedure.”Member’s explanatory statement
This amendment seeks to provide that the maximum payment periods and statutory interest under the Bill continue to apply to supplies made to a company in special administration at the administrator's request or in circumstances where insolvency legislation restricts the supplier from ceasing supply, and would apply the 30-day period the Bill sets for public authorities to such supplies.
Lord Hunt of Wirral (Con)
My Lords, Amendments 20, 21 and 33 in my name and those of my noble friends Lord Sharpe of Epsom and Lord Leigh of Hurley have been brought back from Committee to address our concerns about special administration regimes and payment practices.
I begin by acknowledging that the Minister did reassure us that the terms of this Bill will apply to companies that are required to continue supplying SARs following their being placed into administration, as Amendment 20 probes. Similarly, I acknowledge that the report on the interaction between insolvency moratoria and payment practices that Amendment 33 seeks to mandate may be unnecessary given this fact. We have, however, retabled these amendments as they lend themselves to my arguments surrounding Amendment 21. When this amendment was discussed in Committee, the Minister stated that it would
“cut across the established insolvency framework. Providing preferential treatment to one group of suppliers would disadvantage other creditors and undermine the purpose of the existing insolvency regime”.—[Official Report, 21/7/26; col. 1070.]
We do not agree with this argument. The very acceptance of Amendment 20 that suppliers to SARs will fall under this Bill implies a recognition that there is something unique about this set of businesses. Indeed, the entire reason we are having this debate is that Section 233 of the Insolvency Act 1986 makes it illegal to withhold supplies to an SAR on the condition of the payment of arrears. It would not be preferential treatment to offer to them what the Bill offers to every other business—the ability to recoup funds owed but not paid. That would place those firms on an equal footing with other creditors, given that they currently have less ability to ensure payment of arrears.
Amendment 21 is proportional in that a cap could be set by the Secretary of State and the payment could not be of sums subject to genuine disputes. This Bill is designed to ensure fair and timely payment practices. This amendment seeks to ensure just that for a set of firms that currently have no means of recouping owed sums. I look forward to the Minister’s response and, in the meantime, I beg to move.
Lord Leong (Lab)
My Lords, I thank the noble Lords, Lord Hunt of Wirral and Lord Sharpe of Epsom, and the noble Lord, Lord Leigh of Hurley, who is not in his place today, for Amendments 20, 21 and 23. I am really grateful to both noble Lords for our recent meeting covering these points, and I hope that the follow-up information which my officials provided has been helpful. I am also grateful to the Insolvency Service for its expertise in supporting our position.
The Bill does not seek to alter the existing statutory framework on insolvency. Regarding Amendment 20, I would first like to clarify the position of suppliers providing goods or services after a company enters a special administration regime. Clause 1 inserts new Section 2B into the Commercial Payments and Interest on Late Payment Act 1998, applying maximum payment terms to relevant payments under contracts within the scope of the legislation. The Bill does not exclude supplies made to companies in special administration. There is an important distinction between pre-appointment and post-appointment debts. Post-appointment supplies remain subject to the Bill where they are otherwise within scope. Payment obligations and statutory interest may continue to apply or accrue. Recovery and enforcement remain subject to any relevant insolvency moratorium and the wider insolvency rules.
By contrast, debts relating to supplies made before the appointment are in a different position. They remain pre-insolvency claims and are dealt with under the established insolvency framework. The Bill is not intended retrospectively to alter their status or priority.
The Government do not consider that entry into a special administration regime should of itself result in a purchaser being treated as a public authority for payment term purposes. Companies in special administration remain commercial entities operating within statutory rules. Special administrators are independent court-appointed officeholders, with statutory duties to manage the businesses within those rules. Applying public authority payment requirements solely because a company has entered special administration could have operational repercussions—for example, by exacerbating cash-flow pressures. Nor do we consider that the Bill should determine whether liabilities are to be treated as expenses of a special administration. Amendment 20 would make qualifying post-appointment sums, including statutory interest, expenses of the special administration. Amendment 21 would similarly elevate certified pre-appointment sums. These would be substantive changes to the treatment and priority of liabilities, potentially affecting other creditors. Such questions are matters for the insolvency framework.
Lord Hunt of Wirral (Con)
My Lords, we will carefully consider what the Minister has said, but I think he will acknowledge that there is some doubt, some worry and some concern still in existence. I appreciate his reiteration that Amendment 20 will be covered within the Bill already and I accept that the information for a review is not currently available. On Amendment 21, while I accept that it does not fall within the scope of this Bill, I gently ask the Minister whether the Government are currently looking at insolvency moratoria and special administration regimes. There has been plenty of talk in recent months about placing certain industries into public hands, not least Thames Water. If businesses of this scale are in question, firms supplying them deserve some clarity.
These firms are worried about their futures. The very need for this Bill demonstrates that poor payment practices and withheld arrears are a threat to their existence. I hope to see some solution reached in the near future, but I acknowledge that the Minister has gone a distance to try to address these concerns and that he has committed to continue to monitor the situation carefully. Therefore, in the meantime, I beg leave to withdraw my amendment.
Lord Sharpe of Epsom
“(3) A party to a construction contract is not precluded from engaging with a third party in the transference of money to another party to the construction contract under subsection (1).”Member’s explanatory statement
This amendment seeks to probe whether escrow arrangements would still be permitted under the terms of the Bill.
Lord Sharpe of Epsom (Con)
My Lords, I begin by reiterating my support for the Government’s position on retention payments. We support the right to the free exchange of goods and services and the right of firms to enter into mutually agreed contracts, but it is also clear that retention payments have become misused and are therefore untenable. Some 65% of retention payments are paid back late, while almost 25% are never paid back at all. They have become a tool for big firms to retain cash flow to prop up other ventures while the supplier, often a smaller firm, suffers as a result.
However, we must not lose sight of retention payments’ original purpose. Retention payments as a concept are wholly justified, in that they offer an insurance against defective or untimely work and incentivise the remedying of that. As I am sure many noble Lords would agree, I would hesitate to commission construction work on a private property if I did not have a way to ensure that it was done to an acceptable standard, and we should not expect firms to be any different. Therefore, some middle ground must be reached.
As in Committee, I have tabled, along with my noble friend Lord Hunt of Wirral, two amendments that propose alternatives to retention payments; namely, escrow and staged payments. I am aware that the Minister has outlined that these would be permissible following the enactment of the Bill, but, as far as I am aware, they are currently a small part of the market share of construction insurance. The primary goal of these amendments is to seek clarity from the Minister on what steps the Government are taking to promote these, and indeed other, alternatives. They are consulting with industry; what conclusions have they reached from those discussions? Which other forms of insurance do the Government deem effective, and how are they acting to promote them? I hope the Minister is able to give some clarity from the Dispatch Box on all those questions.
Amendment 24 would exempt resident-run or resident-owned blocks of flats from falling under the retention ban. The Minister has made it clear that this ban is intended to target commercial contracts rather than those of private citizens. Resident-run properties fall into an odd medium in that they are technically commercial properties, but they are run as if they are private. There is clearly a category issue here. Does the Minister accept that these are not run as commercial properties and, if so, does he have the data in front of him on the scale of this issue and whether the incoming ban will pose a risk to the resident-run property market?
Finally, I will touch on Amendments 25 and 26 in my name and those of my noble friends Lord Hunt of Wirral and Lord Leigh of Hurley. These amendments seek to prohibit the imposition of requirements from large to small businesses. In particular, we are concerned about the forced use of specific currencies that advantage the larger supplier, or the imposition of ESG requirements that allow the larger business to meet requirements in its annual reports without having to bear any of the costs. Much of the Bill seeks to support small businesses by placing them on an equal footing. It recognises that there is often an asymmetrical relationship between the buyer and the seller when either is larger. Our amendments simply seek to extend that recognition to these two well-known practices. I hope the Minister will agree with me, and I beg to move.
Lord Fox (LD)
My Lords, there are no amendments in my name in this group, but I will speak very briefly on Amendment 24, which, as we heard, seeks to remove the ban on retention, with the very worthy aim of helping ensure that resident-owned or resident-run blocks of homes can police work done on the grounds of safety. On the face of it, that sounds like a worthy idea. I am concerned that it opens a can of worms, and my instinct is that there has to be a better way of ensuring that the work is done properly. Perhaps it is the noble Lord’s idea of escrow, which I believe could, if mutually agreed, be possible.
There is a danger of watering down the retention ban if we were to accept the noble Lord’s ideas. The definition of “safety defect remediation work” could be broad, or it could be very narrow. I have had briefings from a number of different organisations which have been contradictory to each other, so I am passing the buck to the Minister to explain how he is going to solve the very worthy issue that the noble Lord, Lord Sharpe, has identified, which is resident-run or resident-owned properties, while not prising open the lid of the can of worms.
Lord Leong (Lab)
My Lords, first, I thank the noble Lords, Lord Sharpe and Lord Hunt, for the amendments in this group.
I will take Amendment 22 first. I reassure the noble Lords that the Bill does not prevent parties in any sector, including construction firms, making use of payment arrangements through a bank or an escrow provider to facilitate the transfer of funds. The important distinction is between a third party facilitating payment of money that is due and a third party holding back that money as security for the supplier’s performance. The former remains permitted, the latter could amount to a retention and would therefore fall within the prohibition. Therefore, Amendment 22 is unnecessary.
The Government’s view, shared by many in the industry, is that construction should move away from cash retentions and towards modern, more secure and equitable forms of surety. We know that there are alternative forms of surety, including performance and retention bonds, already available in the UK which can mitigate risks for clients and firms. There are also alternatives used in other countries, such as warranty bonds, which are very common in Europe and are available in the UK. We will be working with surety providers to ensure that a range of alternatives is available when the ban comes into force.
In relation to Amendment 23, I reassure noble Lords that the Bill does not prescribe when stages or milestones must occur or prevent parties from agreeing interim valuations and payments. It regulates the period within which an amount must be paid once that payment becomes due. Genuine staged and interim payment arrangements will therefore remain entirely permissible. However, describing a withholding of money for work already completed and where payment is due as a staged payment would not prevent it falling within the prohibition on retention if, in substance, the money was being retained as security for the performance of contractual obligations.
The right for firms to be paid in staged payments on projects lasting more than 45 days is already enshrined in Section 107(2) of the Housing Grants, Construction and Regeneration Act 1996. The Bill does not amend, qualify or undermine that right. Therefore, this amendment is unnecessary. In implementing the provisions of the Bill, the Government will engage directly and closely with construction industry clients, specialist providers and representatives of smaller firms to provide guidance that legitimate payment arrangements can continue while preventing contractual devices being used to recreate cash retentions under another name.
On Amendment 24, we recognise the understandable intention that resident-led and resident-owned companies should have assurance that building work is completed properly and of high quality, and that defects are remedied without additional costs falling on leaseholders. We do not believe that retentions ensure this. To agree to this amendment would create a broad exemption for construction contracts entered into by resident management and right-to-manage companies. That would leave firms working on those buildings exposed to the risks associated with cash retentions. It could also create uncertainty where different ownership and management structures exist within the same building or development.
In addition, the process required by the Building Safety Act 2022 for delivering work on high-risk building places an emphasis on safety and quality. It includes numerous gateways, information requirements and independent reviews of the building. If clients and firms in their supply chain are meeting the requirements of the Act, there should be no need to deduct retentions. As Dame Judith Hackitt has noted, retentions are ineffective and undermine the effectiveness of the supply chain, which is why alternatives are required. For this legislation to be effective, it must incentivise the industry and its clients to end the practice of cash retentions and to adopt alternative forms of surety, together with improved quality management.
Finally, I address the request made by a number of noble Lords in Committee for further information about the work to develop alternatives to retention. The Construction Leadership Council has now appointed a new industry lead for this area, and we will be increasing our engagement with stakeholders across the industry in relation to alternative forms of surety and quality improvement from September. This will give us plenty of time to address those issues in advance of the introduction of the proposed ban.
Lord Sharpe of Epsom (Con)
My Lords, I am again grateful to the Minister for his response and, indeed, to the noble Lord, Lord Fox, for his comments. On the ESG impositions and the general risk of coercion of smaller businesses by larger ones, I accept that these are already prohibited by law but I gently raise that the risk of coming forward with complaints of this kind often outweighs the benefits of redress. Essentially, small businesses are being coerced into ESG practices. That is still a problem and one that I hope a Government will address in the future.
I thank the Minister for his outline of the Government’s approach to the retentions issues. I am genuinely optimistic from listening to him, because he has talked about a variety of different products that are available. We have had some briefings on those: performance bonds, retention bonds and, as he mentioned, the warranty bond. They tend to be more common practice in Europe; I think warranty bonds are only offered by a single firm in the United Kingdom at the moment. I hope that the market will provide solutions to this problem, because we think that some form of insurance would be effective and necessary in these circumstances. It cannot really be accepted as a retention payment alternative if it is currently so scarce, so we need to make sure that it is well understood publicly and perhaps mount a campaign with industry to make sure this is very well understood.
I accept the noble Lord’s arguments about the difficulty of creating an exemption for resident-run properties. I will have a think about that further when I have a chance to read Hansard, but he made some good points.
I hope that the Government will be able to update the House in due course on their progress in promoting these various different types of instruments. In the meantime, I beg leave to withdraw my amendment.
“(5A) The adjudicator must reach a decision determining a relevant payment dispute before the end of the period of 60 days beginning with the day on which the dispute is referred to adjudication under the scheme.(5B) The adjudicator may compel parties to share relevant information with itself, if the sharing of such information is necessary for the fulfilment of the duty under subsection (5A).(5C) The Commissioner may extend the period in subsection (5A), in relation to a particular dispute, by such further period as the Commissioner considers reasonable, having regard in particular to the complexity of the dispute and the conduct of the parties.(5D) Where the Commissioner extends the period under subsection (5C), the Commissioner must notify the parties of the extension and of the reasons for it.”Member’s explanatory statement
This amendment requires payment disputes referred to the adjudication scheme to be resolved within 60 days, unless the Small Business Commissioner considers a longer period reasonable.
Lord Fox (LD)
My Lords, in moving Amendment 27, I shall also speak to Amendment 34. They are both in my name. Amendment 27 would require payment disputes referred to the adjudication scheme to be resolved within 60 days unless the Small Business Commissioner considers a longer period reasonable. The Bill creates a 60-day limit by which large private organisations must pay back small businesses. However, although, in the case of a dispute, there is a time limit for the dispute to be raised, there is no such limit on when the case should be resolved. This means that large companies could, in effect, contest a dispute and delay resolution, putting pressure on the SMEs to settle.
The amendment calls for the adjudicator to reach a decision determining a relevant payment dispute before the end of the period of 60 days, beginning from the day on which the dispute is referred to the adjudicator under the scheme. The 60 days suggested in the amendment is itself more generous than the 28-day time limit that is currently covered for the construction sector but should, at the very least, be seen as a backstop. I look forward to hearing from the Minister what limit he thinks the adjudication figure should be and how it would be applied in practice as the Bill stands.
Amendment 34 simply looks to lock in sufficient funding and government support for the Small Business Commissioner, to reflect her vastly wider remit. I am persuaded that some moves have already been made and that some are in the offing that will boost the capacity for the commissioner, but, as we have seen with Companies House, transforming an organisation into an investigative body is a huge undertaking. It is a cultural change that requires both resources and great resolve from the leadership team in that organisation. Both Houses need to be reassured that sufficient resources and government support are being made available, because if the Small Business Commissioner fails that will undermine the whole pretext of the Bill. I beg to move.
Lord Hunt of Wirral (Con)
My Lords, we are all very grateful to the noble Lord, Lord Fox, for moving his amendment. Before I speak to this group, I once again thank the Minister for his engagement. We entered this part of the Bill with some apprehensions, not least regarding the funding of the Small Business Commissioner’s office. It is perhaps too soon to say that all those concerns have been quelled, but I appreciate the time that the Minister, the Small Business Commissioner herself and her team have taken to try to address the questions that we have all put forward.
I begin by addressing the amendments to which I and my noble friend Lord Sharpe of Epsom have added our names, namely those in the name of my noble friend Lord Leigh of Hurley. Amendments 28 and 29 aim to bring some transparency to the Office of the Small Business Commissioner by requiring written reasons for declining to adjudicate a dispute, and by requiring the definition of a sufficient number of occasions to trigger an investigation into payment practices.
On the latter point, I accept the Government’s reasoning that a numerical definition does not sufficiently account for the scale of different poor payment practices. However, I hope that the Minister can therefore confirm that there will be some framework on which these decisions to investigate will be based.
I hope that the Minister will be able to outline the Government’s position on the former point—written reasons for declining to adjudicate a dispute. I understand that discretion and disclosure are considerations, so perhaps a middle ground that requires the informing of decisions to decline, without necessarily including the reasons for doing so, would be acceptable.
My concerns remain about putting a time limit on resolving disputes, as Amendment 27 would do. Although disputes should of course be addressed in a timely manner, the fact is that different disputes will require different resources and be of vastly different scales. An arbitrary time period risks rushing the commissioner’s office or forcing it to prioritise, or perhaps even to accept trade-offs. We do not believe that the benefits of a 60-day limit off-set those risks.
Finally, I am grateful to the Minister for providing us with a briefing beforehand on some of the previous funding of the Small Business Commissioner’s office and the Government’s plans for the future. We are satisfied that these have been modelled on the best predictions possible. I am sure your Lordships’ House would be grateful if the Minister could outline some of that data when he comes to reply to this debate—certainly at the Dispatch Box at some stage. I finish by asking whether there is a way to scrutinise the commissioner’s funding in the future. As I have said, we are satisfied with the predictions, but they are still only predictions. I am sure that there will be an internal review process into the effectiveness of these reforms, but this House deserves the opportunity to have some input into that process, so I look forward to hearing the Minister’s response.
Lord Leong (Lab)
My Lords, once again, I thank the noble Lord, Lord Fox, for Amendments 27 and 34, and the noble Lord, Lord Leigh, who is not in this place, and the noble Lords, Lord Hunt and Lord Sharpe, for Amendments 28 and 29. First, I recognise the constructive spirit in which these amendments have been tabled and the shared objective of ensuring that the Small Business Commissioner’s new functions are timely, transparent and effective.
I agree that payment disputes should be resolved as quickly and efficiently as possible. In line with the construction adjudication scheme, we are considering whether a 28-day limit for the adjudicator to reach a decision, extendable where necessary, would be appropriate. I believe that noble Lords would agree that this time is sensible and reasonable. We will consult on this to ensure the final approach is informed by evidence and stakeholder views. Time limits will be set out in regulations subject to Parliament’s approval. This approach will give businesses confidence that payment disputes will be resolved quickly and efficiently, while maintaining flexibility to refine time limits in the light of feedback and operational experience.
The Government recognise the importance of transparency, and I appreciate the sentiment behind Amendment 28. As a matter of principle, a small business should understand why the commissioner has declined to adjudicate a dispute. However, there may be occasions when disclosing the details of a referral to a larger business could harm commercial relationships or be otherwise inappropriate. As such, we believe such obligation should be subject to further consultation and addressed through regulations.
Regarding Amendment 29, I understand the desire for clarity on how the commissioner will assess repeated poor payment practice, but this is precisely the kind of judgment that should be informed by real experience and evidence and guided by statutory criteria that the commissioner must consider on a case-by-case basis. If we try to prescribe an arbitrary number for vastly different practices, we risk creating an inflexible model that fails in practice and undermines the commissioner’s ability to act.
On resourcing, I hear the concerns raised by noble Lords. I wholeheartedly agree that the provisions in this Bill will be effective only if properly enforced and that the resources available to the Small Business Commissioner are crucial to this aim. I reassure all noble Lords that the Office of the Small Business Commissioner is already being resourced for implementation, that I am the Minister responsible for the Small Business Commissioner and that I will ensure that it has the proper resources. I have recently facilitated a meeting between the commissioner and noble Lords to discuss preparation for the legislation coming into force. I can confirm that the commissioner’s budget has already received an initial 30% boost this financial year and that recruitment is under way for six new members of staff, bringing the existing team to 20. This has already allowed the office to begin building its capability ahead of the new enforcement powers in the Bill.
Lord Fox (LD)
My Lords, I thank the Minister wholeheartedly for his response to both my amendments. The response to Amendment 27 was more ambitious than I was proposing, so I am very happy with that. His response to Amendment 34 on resources has been more than fulsome. On that basis, I beg leave to withdraw Amendment 27.
Member's explanatory statement
This amendment concerns regulations enabling the Small Business Commissioner to impose financial penalties for breach of payment reporting requirements. This amendment has the result that the penalties need not be linked to turnover in the United Kingdom.
Lord Fox (LD)
My Lords, I shall move Amendment 30 and speak to Amendments 31, 32, 43, 44 and 45, which sounds daunting but they are all the same amendment. These amendments are in my name, and I am happy to say that they have been countersigned by the Minister. The effect of these changes would be to remove the requirement for the Small Business Commissioner to use UK turnover alone when making an adjudication. I thank the Minister for his contribution to this.
There may well be cases where it is appropriate for UK activity only to be the basis for any fine—in fact, in most cases that will be the case—but there may be others where a broader turnover is appropriate; for example, where a company’s accounting practices effectively shrink UK turnover in order to shrink a penalty. In these cases, we need to give the Small Business Commissioner the power to prevent avoidance through profits-shifting and turnover-shifting. In Committee, I used the example of the Digital Markets, Competition and Consumers Act 2024, which makes the same point and puts in place a different solution. Removing the UK from the description of how the Small Business Commissioner calculates any sanctions or giving that option to the Small Business Commissioner would give flexibility for the commissioner to pitch the right sanction to an errant business. For that reason, I beg to move Amendment 30.
Lord Sharpe of Epsom (Con)
My Lords, as we come to the end of Report, I once again place on record my thanks to noble Lords on all sides of the House for their engagement with the passage of this Bill. Up to this point, we have had a very chummy time with a lot of cosy consensus, so noble Lords will be very pleased to know that I intend to introduce a note of disagreement on this amendment.
I begin by stating that I do not disagree with the premise of Amendment 30, in the names of the noble Lord, Lord Fox, and the Minister. Companies should ensure that they have good payment practices and that these are reported, and should be incentivised where necessary. I equally understand the reasoning behind giving the Small Business Commissioner the powers to both oversee and enforce the reporting of payment practices and performances. The office will have a closer knowledge of small business payment practices than regular departmental officials, so it makes sense that it is given this responsibility. The issue is therefore not one of principle but one of proportion.
Two other arms of the Government have the power to fine businesses based on global turnover rather than domestic turnover. They are the Competition and Markets Authority and the Information Commissioner’s Office. These bodies deal with some of the most important and wide-reaching areas of our economy: the former with the upkeep of fair and competitive markets, the latter with the protection of the public’s private information.
Those issues are far greater in scale and gravity than what Clause 24 and the new Section 3A will give the SBC—the Small Business Commissioner—powers over. These powers are not even dealing with payment practices; they are dealing with the reporting of payment practices. Yet the office will be able to fine companies 1%, without even the discretion to fine less than 1%, of global turnover. To His Majesty’s loyal Opposition, this seems disproportionate, to say the very least. We do not believe that this is the right vehicle to address the subject of the profit shifting that the noble Lord Fox mentioned.
One of the key concerns that we have heard from stakeholders during the passage of this Bill is that, while they support maximum payment terms, there will be a transition period to implement the technology and payment systems. This is particularly the case with large multinational corporations. These companies have incredibly complex systems that organise payments across borders, time zones and legal frameworks. It is not outside the realm of possibility that a business such as Amazon, for example, has some teething problems and fails to accurately report payment practices and performance within the UK.
The result would be that the commissioner, based on a failure to report practices within the United Kingdom, would have the power to fine Amazon based on its global turnover. That would equate to more than £700 million for a potential technological error or delay. I do not think that power reflects the duty that we are dealing with.
Lastly, there is the question of incentives. The Office of the Small Business Commissioner justifiably prides itself on saving more money for small businesses than it costs the taxpayer. If value for money is the justification for the office’s existence, its incentive is to use its powers to raise money in order to continue its operation. I am not accusing the SBC of this; I am simply reflecting on the perverse incentives that occur when an arm of government relies on action to justify its continued existence. I do not think, given these natural incentives exist, that we should give any arm of the state the power to tax multinational businesses based on their global turnover for actions within the United Kingdom. We should especially reflect on this when we are not even discussing payment practices; we are discussing the reporting of payment practices.
Given that this amendment has the support of the majority of the House, we will not oppose it, but I would like to place on record my, and indeed His Majesty’s loyal Opposition’s, concern about this measure. It would go some way to allaying my worries if the Minister could outline how many times a fine has been given under the existing Section 3, but I am still concerned that this is a disproportionate step that places far too much power in the hands of an ultimately unaccountable body. I look forward to the Minister’s response.
Lord Leong (Lab)
My Lords, I thank the noble Lord, Lord Fox, for his amendment regarding turnover and financial penalties. These amendments raise an important question about how turnover should be calculated for financial penalties under the payment reporting regime following an investigation by the SBC. I thank the noble Lord for the constructive discussions that we have had on this issue.
The Government agree that this issue merits proper debate. We want penalties to be meaningful and capable of driving compliance while ensuring that the approach is proportionate, relevant and workable for businesses in scope. The Government support the aim of the amendment, at this stage, to open up the debate on the appropriate basis for calculating turnover. However, I want to be clear that the Government have not reached a final view on the most appropriate approach. The Government will want to engage with businesses, business representatives and other interested parties before determining how turnover should be calculated for these purposes, including—given that the Bill addresses UK payment practices—whether it should be limited to UK turnover or extended more widely.
Further detail on how turnover is calculated will be provided in secondary legislation. That secondary legislation will be informed by a process of consultation to determine how turnover should be calculated. Additionally, that secondary legislation, which will be debated in Parliament, will allow the final position to be properly tested. This approach will ensure that the regime retains the flexibility required to operate effectively and proportionately.
On that basis, I once again thank the noble Lord, Lord Fox, for raising this important issue and for engaging positively with the Government. The Government support Amendments 30 to 32 and 43 to 45, to which I have added my name. Before I sit down, I once again thank all noble Lords, especially those from the Opposition Benches—the noble Lords, Lord Sharpe of Epsom and Lord Hunt of Wirral, as well as the noble Lord, Lord Fox—for their thoughtful and constructive engagement throughout the passage of the Bill. It just shows that we can get things done if we work collaboratively.
Member’s explanatory statement
This amendment mirrors my amendment of clause 24, page 37, line 42.
Member’s explanatory statement
This amendment mirrors my amendment of clause 24, page 37, line 42.
Lord Leong
Member’s explanatory statement
This amendment ensures that if the powers proposed by my new clause were exercised to change a payment period, the necessary consequential changes could be made to other statutory provisions.
Lord Leong
Member’s explanatory statement
This amendment is consequential on my proposed new clause.
Member’s explanatory statement
This amendment is consequential on my proposed new clause.
“(e) section 2F(1),(f) section 2F(3),(g) section 2F(5), or(h) section 2F(6),”Member’s explanatory statement
This amendment deals with ancillary matters relating to the powers proposed by my new clause, namely consultation before exercise of powers, consent of devolved authorities and Parliamentary procedure, as set out in section 15 of the Commercial Payments and Interest on Late Payment Act 1998.
“(3A) The duty in subsection (3)(e), (f), (g) or (h) may be satisfied by consultation that took place in compliance with the duty in section 2F(7).” Member’s explanatory statement
This amendment has the effect that if the Secretary of State has consulted about whether to shorten payment terms as required by my new clause, that counts as satisfying the consultation requirements set out in section 15 of the Commercial Payments and Interest on Late Payment Act 1998.
Member’s explanatory statement
This amendment is consequential on my proposed new clause.
Member’s explanatory statement
This amendment is consequential on my proposed new clause.
Member’s explanatory statement
This amendment concerns financial penalties that may be imposed by the Small Business Commissioner in relation to poor payment practices. This amendment has the result that the penalties need not be linked to turnover in the United Kingdom.
Member’s explanatory statement
This amendment mirrors my amendment of Schedule 3, page 58, line 3.
Member’s explanatory statement
This amendment mirrors my amendment of Schedule 3, page 58, line 3.
Batteries (Placing on the Market) (Northern Ireland) Regulations
(1 day, 7 hours ago)
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Baroness Hayman of Ullock
That the draft Regulations laid before the House on 4 June be approved.
Relevant document: 5th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, in 2023, the European Union replaced its 2006 batteries directive with a new batteries regulation. This updated placing on the market requirements, covering design specifications for batteries and requirements relating to information and labelling. These requirements, designed to support the environmental and safety performance of batteries, relate to carbon footprint, performance and durability, recycled content, and removability and replaceability of batteries from devices.
The new EU regulation has also introduced specific safety requirements for stationary battery energy storage systems and updates the information requirements to include state of health and expected lifetime. Finally, the EU regulation also introduces the digital battery passport and supply chain due diligence policies for larger organisations. Previous requirements relating to the restriction of certain substances in batteries are carried forward.
I welcome the collaborative approach taken in the development of this instrument, which has drawn constructively on expertise from industry and government departments. The enforcement provisions set out in this SI meaningfully strengthen the application of the EU batteries regulation in Northern Ireland, where it has been law since its publication in 2023. By improving compliance in key areas such as battery safety, hazardous substances and environmental performance, it is reasonable to expect positive environmental outcomes through reduced risk of unsafe or environmentally harmful batteries being placed on the market.
I am also reassured by the de minimis assessment undertaken in respect of this instrument. Given that the associated costs are minimal and that the instrument introduces no contentious or disproportionate impacts, this approach seems to be both reasonable and appropriate.
Of course, it is right that this House scrutinises delegated legislation carefully. I am satisfied this instrument falls within the scope of the parent Act and represents an appropriate use of powers. It is for these reasons that I beg to move.
Lord McCrea of Magherafelt and Cookstown
At the end insert “, but that this that this House regrets that the draft Regulations impose a different legal requirement for the placing on the market of batteries in Northern Ireland in order to comply with the Windsor Framework; further undermine the integrity of the UK internal market; and could lead to higher costs for companies based in Northern Ireland.”
Lord McCrea of Magherafelt and Cookstown (DUP)
My Lords, I will speak to the amendment in my name and make four main points.
First, these regulations provide a graphic demonstration of the humiliating nature of the Windsor Framework. The substantive legislation which they enforce is EU Regulation 2023/1542. This legislation took effect in Northern Ireland automatically on 17 August 2023 by means of a dynamic aligning of the UK, with respect to Northern Ireland, with the EU, effectively treating part of the United Kingdom as an EU colony. Northern Ireland legislators were not even briefed on this matter. The first we learned of it was three years later, reading the Explanatory Notes to the regulations before us today, the purpose of which is to serve the EU by providing a means for enforcing its legislation.
Secondly, the enforcement that these regulations provide is deeply problematic. Speaking when these regulations were debated in another place on 8 July, the Minister stated:
“Offences are put in one of three penalty groups: summary-only offences, such as those subject to a fine, which can be unlimited; either-way offences; or imprisonment for up to 12 months and/or an unlimited fine for the most serious indictable-only offences. Offences include failure to keep appropriate due-diligence documentation; failure of a supplier of battery cells and modules to provide documentation to manufacturers; and failure by an importer to comply with certain battery safety-related obligations. Those fall into penalty groups 1, 2 and 3, respectively”.—[Official Report, Commons, Delegated Legislation Committee, 8/7/26; col. 4.]
Let us take a step back for a moment. If the norm of the 18th century was such that there could be no taxation without representation then plainly we cannot contemplate fines and imprisonment in the 21st century further to contravention of laws unless the citizens in question were represented in the making of those laws that they have broken. The EU is expecting the United Kingdom Government not only to subject part of themselves to EU law but to introduce a legislative mechanism whereby EU law can be imposed with sanctions depriving UK citizens of money in the form of fines or potentially of their liberty through imprisonment. This is constitutionally completely absurd and unacceptable.
Thirdly, we need to confront how these regulations are implicated in destroying the United Kingdom internal market for goods. By providing enforcement, the regulations before us today bring EU Regulation 2023/1542 into full effect, creating a new legal market for batteries as a matter of practice, subject to different rules from the rest of the United Kingdom. The regulations are called the “placing on the market” regulations, where the market in question is the EU internal market, not a United Kingdom internal market, which necessarily becomes, by default, a GB internal market for goods for these purposes. This presents an economic challenge for Northern Ireland. If we manufacture our own batteries, we will not do so on a level playing field with the rest of the United Kingdom, because we will be subject to EU regulations that do not apply to Great Britain. If, as a small and until recently completely integrated part of the United Kingdom economy, we get most of our batteries from GB, we will not be able to do so going forward unless GB companies provide batteries to the requirements of EU law and also pay to get additional Northern Ireland marking. Will they do this for a tiny market? This presents a very real supply chain concern.
Fourthly, the Explanatory Memorandum attending these regulations is unlike the memoranda accompanying many other regulations forged in deference to the Windsor Framework. Often they state that the Government are planning to prevent divergence between Great Britain and Northern Ireland by bringing GB into line with Northern Ireland, and thus with the EU. However, the Explanatory Memorandum accompanying these regulations does no such thing. This prompted real concern that, on this matter, London was ready to cut Northern Ireland off, which resulted in concerns being expressed to the Secondary Legislation Scrutiny Committee of your Lordships’ House.
In the other place, the Minister said:
“Let me be clear that we will take any steps necessary to continue to meet the Government’s commitment to protect the UK’s internal market. That is why we will consult in the autumn on an aligned regime in Great Britain that is consistent with the EU’s 2023 batteries regulation”.—[Official Report, Commons, Seventh Delegated Legislation Committee, 8/7/26; col. 5.]
Thus, along with the tumble dryers regulations and the machinery regulations, the battery regulations now become an early expression of the Government’s reset policy with the EU.
In closing, I want to anticipate and respond to the counterargument deployed by the Minister in another place when proposing this legislation in July. She said:
“Implementing the measures helps Northern Ireland to maintain its dual market access”.—[Official Report, Commons, Seventh Delegated Legislation Committee, 8/7/26; col. 4.]
The sense was that all the problems that I have outlined were worth while because of the great prize of dual market access. But let me be quite clear: dual market access is a myth. If Northern Ireland enjoyed dual market access, there would be no Irish Sea customs border or UK/Republic of Ireland customs border. Northern Ireland would enjoy unfettered input access, unfettered sales access to the rest of the United Kingdom, and unfettered input and sales access to the Republic. What has actually taken place is that Northern Ireland has been forced to exchange unfettered access to its home economy of nearly 70 million for unfettered access to another proximate economy of about 5 million.
Rather than becoming less problematic over time, the Irish Sea border is becoming more problematic with every new piece of legislation that is published to try to accommodate it. This position is completely unsustainable. The Irish Sea customs and international SPS border must go. I beg to move.
Lord Redwood (Con)
My Lords, I thank the noble Lord, Lord McCrea, for moving this amendment so that we can again debate this crucial constitutional matter. I have every sympathy with the points he made, because what we face again here is legislation by sleight of hand. We are in fact approving comprehensive regulations for the battery sector, but we are told they are none of our business as a United Kingdom Parliament because it was determined in Brussels, without any of our representatives present, and formed into a directive which is directly acting in Northern Ireland, an important part of our country.
We are asked to debate today the much lesser issue of the impact of the enforcement mechanism, which we are allowed to discuss and approve, not the wider impact of the battery regulation on a growing and complex sector, with many businesses at stake. So the Minister is able to tell us—reasonably accurately, perhaps —that the impact assessment says that it is not going to cost very much because that impact assessment assesses only the administrative costs connected with creating these new offences. It does not go into the detail of what might happen if people actually had to pay the fines, of course, and it leaves out the question of the huge compliance costs with the underlying directive.
The case being made is that it already applies, so businesses have already had to impose it. It is rather odd that the Government have not got round to putting in the enforcement mechanism until now. We have been told that it is much delayed compared with the EU’s requirement upon us, but, none the less, they got there in the end. The noble Lord, Lord McCrea, made the powerful point that in a democracy, if you are imposing potential large fines or imprisonment on people, that is surely something which your country and elected Parliament should control, not something which you are told you have to do because of an EU imposition on part of your country.
My second great worry about this is that it illustrates not only that laws are imposed on Northern Ireland without proper debate, democratic consideration or economic assessment, but that we end up with them in Great Britain as well. We are now told by the Government that the only way they think they can guarantee the very important integrity of our internal market—with a far bigger economic impact on both sides of the Irish Sea than the issues the EU is imposing, and with far less trade at risk—is that it all has to be taken for granted and that we have to adopt the measures that the EU is imposing on Northern Ireland, otherwise our internal market will be disrupted. Not only does the Windsor Framework now mean that Northern Ireland has to accept undemocratic law on itself, but we will probably end up with it in GB as well.
These are mighty issues arising out of what look like rather technical and small directives and statutory instruments to handle them. I again urge the Minister to take back to the wider Government that they cannot go on like this. They cannot go on pretending that we live in a sovereign democracy if, by the back door, these laws can be imposed on part of our country, and then perhaps on the whole country, without proper consideration. This must be the number one issue in the reset and the Government should not take no for an answer. There are easy solutions in a reset. Please get on with them.
Lord Browne of Belmont (DUP)
My Lords, I support the amendment in the name of my noble friend Lord McCrea. The Government present the regulations as a technical measure concerned with the placing of batteries on the market. However, like so many regulations flowing from the post-Brexit arrangements for Northern Ireland, they raise issues that extend far beyond their immediate subject matter. They concern the principle of equal treatment within our United Kingdom, the burden placed upon Northern Ireland businesses and the continuing erosion of democratic accountability.
At the practical level, these regulations impose obligations on traders, manufacturers and distributors operating in Northern Ireland that are not faced by many of their counterparts elsewhere in the United Kingdom. Businesses will have to familiarise themselves with new requirements, maintain compliance procedures, keep appropriate documents and ensure that products satisfy the latest relevant regulatory standards. The Government may regard these obligations as modest but, for many small businesses and medium-sized enterprises, they are anything but.
A family-run wholesaler or retailer in Northern Ireland does not have a dedicated compliance department or a team of lawyers on hand to interpret evolving rules. Every new requirement means additional paper, additional administrative time, additional record keeping and, of course, additional cost. Businesses supplying both GB and Northern Ireland may find themselves having to operate under distinct regulatory arrangements. That can mean separate packaging, documentation, compliance checks and reporting requirements. These costs are very real for small traders working on very tight margins.
We must also consider the enforcement regime that accompanies these obligations. Businesses are not merely being asked to comply with another set of rules; they are being asked to do so under the threat of investigation, enforcement and sanctions if they fail. A trader who inadvertently breaks these technical requirements may face compliance notices, restrictions on the sale of products or further legal proceedings. The real concern is not simply the penalty but the risk that accompanies it.
This debate is therefore about far more than batteries. It is about democracy, accountability and equal citizenship. The issue is not simply an environmental policy; it is a question of equal treatment under the law. Businesses in Northern Ireland deserve legal certainty. They deserve democratic accountability and the same regulatory framework as their counterparts in the rest of the United Kingdom, unless there is a compelling justification otherwise. Increasingly, however, we see Northern Ireland subject to distinct requirements which create barriers within the internal market of our own nation.
My noble friend Lord McCrea’s amendment rightly highlights these concerns. It recognises that every new layer of regulatory divergence carries practical consequences for traders and constitutional consequences for Northern Ireland’s place within the United Kingdom. I support my noble friend Lord McCrea’s amendment.
Baroness Chapman of Darlington (Lab)
My Lords, I will speak against the amendment from the noble Lord, Lord McCrea, although I understand the tenacity with which this point is being put on a very regular basis and how sincerely he feels about these issues. I also understand, having listened repeatedly to these points being raised, that it is not a case of persuading my good friends and colleagues in this House that this is just about batteries, that there is a pragmatic need to get on with this and that these are probably good regulations anyway, so what is the harm? Those arguments get nowhere in this debate: I recognise that. So I am going to seek to put this in a bit of context around how we have got to where we are.
The Windsor Framework is better than the Northern Ireland Protocol it replaced, but it is still unfortunately imperfect. It creates friction in the Irish Sea and additional burdens on businesses. It is probably wise to just be honest, open and upfront about this and not pretend otherwise. It is a fudge; it was necessary. I heard the noble Lord, Lord McCrae, say that he was not aware that these regulations would be coming into place. I can see why he says that, but surely, when the vote to leave the European Union took place, it must have been anticipated that there would need to be some kind of arrangement for Northern Ireland that would entail a huge amount of compromise—and, ideally, flexibility and understanding on both sides and a real determination to find a solution. I do not remember that atmosphere around those discussions at the time, so we are left with this unsatisfactory way of working. But it is the operational reality in which we find ourselves and, while it is there, it is one that we must make work.
I have heard it said that dual market access is imaginary and not a thing. I understand that there are problems with GB-NI trade; that is true. But it is not fair and not correct to say that there is no such thing as dual market access. There is and it is a position that businesses in Northern Ireland—small enterprises, big exporters and manufacturers—talk about wishing to take advantage of. You can see the growth that is being achieved in Northern Ireland as a consequence of dual market access and the unique economic position of Northern Ireland. Northern Ireland is succeeding, perhaps, you could argue, in spite of some of these challenges—and when was it not the case that business and enterprise were not able to overcome such things? My experience of talking to businesses in Northern Ireland is that they want clarity, they want certainty and they can deal with it. That is their intention.
It is right—if it is what you believe—to criticise the complexities of the current arrangements. But, equally, please do not ignore the concrete advantages that see Northern Ireland consistently expanding sales into the EU in advanced manufacturing, life sciences and aerospace, with local pioneers openly pointing to the Windsor Framework as a net positive, giving them access to a £6 trillion market. We should try, when we can, to have a calm, level-headed approach to all of this. The foundational agreements of the peace process stand. What is needed is flexibility, pragmatism and a real focus on making sure that we never lose the stability, prosperity and good governance that Northern Ireland will always need.
Lord Elliott of Ballinamallard (UUP)
My Lords, I welcome the opportunity to speak in this debate and to follow the noble Baroness, Lady Chapman, who made some very interesting points—some of which I do not agree with, but that is politics.
It is quite clear that there is a UK conformity assessment in this legislation. It is not going to be as simple as some people try to make out; that is the difficulty that we have. I agree with the noble Baroness, Lady Chapman, that some people may see the Windsor Framework as positive in the business sense. Many others do not, and that is the difficulty. If you are running a small or medium-sized business, the extra burden of administration and bureaucracy put on to you sometimes makes it hugely difficult to find your way around it.
The second issue, which has been mentioned by a number of speakers, is the control that there will be on those who break the law. There will very severe penalties that, as has been highlighted, the UK will have no control over. I note that the instrument did not require a full consultation and that the de minimis amount has been put on it regarding costs. I am not sure what all that covers. Maybe the Minister can help us out and say what the best estimates are. I see the estimates in the legislation, but I am not sure whether they are the full amount.
My final point goes back to the management of the entire Windsor Framework process. The noble Lord, Lord Murphy, who is in the Chamber, had a report out last year. He stated:
“The UK Government should work to make Windsor Framework related guidance accessible in a single ‘all-in-one service’ and do more to signpost businesses, especially small to medium-sized businesses, towards this support”.
I am not sure that has taken place yet. I am not sure whether there has been any progress on it. I would like to hear from the Minister about this. It will not resolve the issue of divergence between the UK and Northern Ireland, but it would, at least in the meantime, help small and medium-sized businesses in Northern Ireland by signposting to them so that they get the proper help and security they may need. I would like to hear whether there has been some progress on that.
Lord Jackson of Peterborough (Con)
My Lords, I am pleased to have the opportunity to support the noble Lord, Lord McCrea of Magherafelt and Cookstown. Surprisingly, I find myself in agreement with the noble Baroness, Lady Chapman of Darlington, who made a number of very fair points. Incidentally, it would be good to see her back on the Front Bench eventually; she is much missed on the Front Bench.
However, I think the noble Baroness has slightly rose-tinted spectacles in respect of the negotiations, of which I was a small part during the early part of the Northern Ireland protocol. It was never a binary choice between a hard border and nothing else. There were always the options, which were ignored by the May, Sunak and Johnson Governments, of technical solutions that Lars Karlsson, among others, pioneered in the Middle East, Norway and Sweden. I will perhaps pre-empt the perennial comments of the noble Lord, Lord Davies of Brixton, about how terrible Brexit is; in respect of Northern Ireland, there were always choices which were not pursued. However, we are where we are.
In applying EU law, the Windsor Framework relegates Northern Ireland’s citizens to second-class, violates territorial integrity and erodes UK sovereignty. Notwithstanding that this is a technical enforcement instrument, brought about because of the need to avoid legal jeopardy and litigation risk, I believe we are failing in our duty because we are not even fulfilling the traditional parliamentary role of scrutiny and oversight; incidentally, and ironically, nor are the European Parliament or the Northern Ireland Assembly, because this is generated from the European Commission. The European Parliament is not a parliament we would necessarily recognise in the traditional sense; it is in fact a body subject to huge amounts of lobbying by business in the interests of the countries of the European Union.
In effect, we are an appointment body for the market surveillance authority, which is the Office for Product Safety and Standards. That is our role in this sovereign Parliament and it is quite shameful, in my opinion. We are not even looking at the efficacy of the policy—the technical details on carbon footprint, standards, recycling, labelling, the battery passport and CE marking. We are of course diverging from the 2008 regulations affecting Great Britain.
This point was made in the committee in the other place: we may have warm words—as they say, warm words butter no parsnips—that Section 46 of the United Kingdom Internal Market Act 2020 has not been offended, but it has. We are clearly not abiding by that and by the territorial integrity and importance of the UK-wide, United Kingdom of Great Britain and Northern Ireland single market.
This goes to the point made earlier by one of the noble Lords from the DUP. We are talking here about criminal liabilities, not an overdue library book. We are talking about people potentially being the subject of criminal sanction and going to prison. That is not being debated in our sovereign Parliament, or indeed in the devolved Assembly in Northern Ireland, and I think that is a serious issue that should concern everyone, irrespective of their party. I challenge the Minister to talk about that issue, because these regulations are rules set by a body that no one voted for and cannot be removed.
I have three quick questions for the Minister. Will she give us more details on the GB-wide consultation? What are the likely producer responsibility requirements that will arise following that? Will she perhaps undertake to review the operation of the regulations, as between Great Britain and Northern Ireland, in respect of competitive advantage? Finally, if the noble Lord chooses to test the opinion of the House, he will have my strong support.
Lord Hay of Ballyore (DUP)
My Lords, I welcome the amendment from the noble Lord, Lord McCrea. Although a casual observer might think we are simply debating technical standards for consumer electronics or even industrial machinery, anyone with an eye for the integrity of our United Kingdom knows that we are doing something far more insidious and very dangerous. We are watching the further decoupling of Northern Ireland from the rest of the United Kingdom.
Let us be completely clear about what this statutory instrument does. It does not create laws designed by British lawmakers to serve British citizens. Instead, it seeks to establish an enforcement and criminal penalties regime within our borders to police an EU batteries regulation that applies directly under the Windsor Framework. It is an absolute travesty of our democracy that laws are being imposed on a part of the United Kingdom without a single vote being cast or a single shred of scrutiny being offered to any parliamentarian elected by the people of Northern Ireland. We are instructing our own domestic courts and enforcement bodies to punish British citizens for failing to comply with rules manufactured in Brussels.
How can we honestly stand in this Chamber and claim that the union is secure when a consumer or business owner in Belfast is legally barred from placing on the market a product that is perfectly lawful in the rest of the United Kingdom? These regulations divide our internal market and create a regulatory border down the Irish Sea for everyday goods. We were promised that the Windsor Framework would protect the internal market, yet here we are in 2026 rubber-stamping an instrument that proves the exact opposite.
This is a classic and deeply troubling case of democratic default. Not a single Member of this House or any elected representative in Northern Ireland had the opportunity to scrutinise, debate or vote on the underlying EU regulations. We must not simply roll over and accept the rubber-stamping of foreign laws wrapped in criminal penalties while the economic foundations of the union are being eroded away. I urge Members to oppose these regulations.
Lord Davies of Brixton (Lab)
Before the Recess we had tumble dryers, last week we had seed potatoes and this week we have batteries. I support the process. I think it is right that every Member of this House should have the right to seek a proper debate on all the statutory instruments that come before us, whether they affect Northern Ireland or are more general. It is important and, to an extent, we are making up for the problems faced by the Commons in giving adequate consideration to all the matters that come before them. So I support the process and welcome the opportunity to debate these issues.
As the noble Lord, Lord Jackson of Peterborough, said, there are always choices. The point we need to emphasise is that in the UK we have made a choice. Some people do not like the choice we have made and they have every right to protest about it, but it is the choice that has been made. There is a certain irony in the fact that those who are most vociferous in calling for Northern Ireland’s place within the United Kingdom are objecting to a decision made by the United Kingdom. You have to take the obligations that come with your objectives, and this is what we have.
I remind noble Lords of the point I made last week: the people of Northern Ireland voted against Brexit. So, when people come forward to complain about the outcome, those who promoted Brexit should accept responsibility for where we have ended up. Given the land border, there were bound to be problems. Clearly, whoever negotiated the arrangements did not do a good job. That is why the framework was being discussed yesterday in Grand Committee. As my noble friend Lady Ritchie of Downpatrick said,
“it is important that the challenges and impediments presented by the Windsor Framework are ironed out”.—[Official Report, 14/9/26; col. GC 347.]
So there is an acceptance, even by those who support the Windsor Framework—as my noble friend declared she does—that it should be sorted out, following up the work of my noble friend Lord Murphy of Torfaen.
In my last few seconds, I turn to batteries. Batteries are made in China and some are made in Belgium. The idea that we as a country can determine the nature of the batteries that are used in this country is an illustration of the falsity of the claim of taking back control. We are part of an international system, and the reason why we do not have control over the form of batteries sold in this country is that we left the European Union, where the decisions are being made. We have no power over the batteries in this country because they are not made in this country; they are made elsewhere. The wish to ignore the reality of an interconnected world is, at heart, the cause of the problems here.
Lord Frost (Non-Afl)
My Lords, I support the regret amendment tabled by the noble Lord, Lord McCrea. One must acknowledge that there is a slight Groundhog Day feel to this debate—the third in three weeks—and that the points we have made this evening have already been made many times on the previous two occasions. However, they are justified and no less important for their repetition. Indeed, the tone of these debates has changed a little, week on week, as we have reflected on the situation we are facing. It is right that we keep these great matters of principle at the forefront of our minds; they bear repetition. The great Lady Thatcher, when she was accused of saying the same old thing, said, “Of course I am. The truth always is the same old thing”. That is true of this debate as well.
In some ways, the Minister made it easier for us tonight. I do not know whether, on the previous two occasions, she grew weary of trying to say that there was nothing to see here and that we should not worry about it, because, in her opening statement, she was quite open about the fact that there is no discretion on this and that the regulations have already been in force for two years. We are talking about supplementary enforcement arrangements for regulations that are already being enforced. There is no choice around the legal requirement to impose these new laws, because they are already in place. As has already been noted, there is a legal requirement to enforce laws on criminal offences that have been made elsewhere and on which nobody in this country has had any say.
As I said last week, there is an element of performative lawmaking and discussion in this, where there is no discretion. If that is not a lack of autonomy, I do not know what is. I use that word because, as the Minister may remember, last week I quoted her as saying in our first debate:
“We retain complete autonomy to make our own regulatory decisions”.—[Official Report, 2/9/26; col. 201.]
She was referring to Northern Ireland. I questioned whether, in the light of the regulations we were discussing, that statement could stand up. I do not think she responded to that last week; perhaps she could take the time tonight to explain how she justifies that statement when we are discussing regulations over which we have had no choice.
The Minister was also honest about her intention to replicate in Great Britain this legislation that is already in place in Northern Ireland. It would be better if, at some point, the Government admitted that it is their policy to replicate in Great Britian, where they can, laws that are already in place in Northern Ireland as part of a bridge, no doubt, eventually to the single market for goods.
I thank the noble Baroness, Lady Chapman, for her comments. They may not have been entirely fair, and I would not agree with everything she said, but the tone was good. We should be able to have pragmatic and calm discussions on this, while not forgetting the important points of principle involved: democracy, discussion and proper lawmaking.
In my final few seconds, I will pick up the point of dual market access. That is not a good term. Northern Ireland is a member of another market for goods—that is the situation. It is a market in which Northern Ireland has no say. It has attenuated access to GB, but the real problem is that Great Britain has very limited access to Northern Ireland. That is the real underlying problem of the Windsor Framework, and until we deal with that problem we are going to be coming back to discuss this for years to come.
Lord Blencathra (Con)
My Lords, I thank the Minister for bringing forward these regulations and being present to hear the concerns of noble Lords; I look forward to her response. Once again, I found the arguments of the noble Lords from Northern Ireland and my noble friends on the constitutional difficulties of these regulations to be compelling. I will begin by addressing the amendment in the name of the noble Lord, Lord McCrea of Magherafelt and Cookstown. I repeat the sentiments of what I said last week: the Windsor Framework was an improvement on the Northern Ireland protocol, but that is not to say it has no flaws or that my party is not willing to improve it further, as we all must. The noble Lord, and other noble Lords and my noble friends, are right: we cannot let the integrity of the union, and Northern Ireland’s place in it, be quietly undermined through secondary legislation—secondary legislation that seems quite straightforward, innocuous and trivial, and appears not to change much, but collectively begins to lever Northern Ireland out of the United Kingdom.
I welcome the wise words of the noble Baroness, Lady Chapman of Darlington, whom I also miss on the Front Bench. I think she is the first Labour person opposite who I have heard say that the Windsor Framework needs a bit of tweaking. I think she suggested that it needed quite a bit of tweaking. I and my noble friends would probably like it to be tweaked a lot more than she would, but she has taken a very good stance, and I agree that it can be done quietly and by speaking quite softly.
These regulations fully implement the EU’s regulations on batteries and replace the previous 2006 batteries directive to improve battery safety and environmental performance. We understand that the Government received a limited number of responses to their engagement and so concluded that stakeholders are content with these regulations. That may be the case, but can the Minister say what assessment they have made of the impact on the UK’s internal market more widely, as well as on the competitiveness of Northern Ireland businesses specifically within our internal market? The Minister in the other place—and the Minister here—said that the Government
“will consult on an aligned regime across the whole UK that is consistent and will provide a unified regulatory framework across the UK and the EU”.—[Official Report, Commons, Delegated Legislation Committee, 8/7/26; col. 12.]
Does that form part of the Government’s wider aims for dynamic alignment, and what is the basis for alignment in this specific regulatory area?
I agree with my noble friend Lord Frost: when the Government consult on this, I think we all know what the outcome will be—that the UK must adopt similar legislation to that in Northern Ireland and adopt the EU regulation. In that case, let us cut out the comedy of doing a long consultation and get on with it. If we are going to align UK battery policy with Northern Ireland battery policy and EU battery policy, let us do it quickly so that we do not have any lacuna and the industry can crack on with it. I say that not because I want to be aligned with EU policy but because, if the Government are going to do it, then, whatever they do, they should do it quickly.
Important points have been raised by all the noble Lords from Northern Ireland, as well as by my noble friends and the noble Baroness, Lady Chapman. I look forward to the Minister’s response.
Baroness Hayman of Ullock (Lab)
My Lords, I thank noble Lords for their contributions to this debate. It is important to clarify what the instrument does and does not do. It does not introduce new policy nor impose any significant new regulatory burdens on businesses. It ensures the obligations that are already in force in Northern Ireland can be properly enforced. Without these regulations, we would have rules on the statute book but no effective means to uphold them; that is not a position that the Government consider acceptable.
I will try to answer as many questions as I can—unfortunately, I do not have very long. The noble Lord, Lord McCrea, talked about internal UK divergence as a result of this SI. As I said, different requirements now apply for batteries placed on the Northern Ireland market compared with those placed on the GB market as a result of the direct application of the EU Batteries Regulation in Northern Ireland. However, the majority of batteries will be manufactured to meet the Northern Ireland and EU requirements, whether they are physically placed on the market in mainland Europe, Northern Ireland or Great Britain. This SI will provide clarity, certainty and enforceability, and equip enforcement authorities with the powers they need to ensure that batteries placed on the Northern Ireland market meet the required standards.
There have been a number of questions around divergence, impacts on business and enforcement. On divergence, I reassure the House that, in practice, the impact will be minimal because the reality is that most manufacturers already design their products to meet EU standards wherever they are sold. The noble Lord, Lord Elliott, asked about enforcement and costs in the de minimis assessment covering the enforcement regime. They were extremely low, with an equivalent annual direct cost to businesses of under £8,000. That is across all Northern Ireland businesses that were affected, not each—so that £8,000 is right across the piece.
The noble Lords, Lord Elliott and Lord Redwood, also asked about impact assessments and costs. The related calculated costs from the SI are minimal. A small, one-off familiarisation cost—around two hours per business—totalling £35,017 across all the affected businesses is estimated as they become aware of the SI and its enforcement provisions. Some 776 businesses that place batteries on to the Northern Ireland market are estimated to be in scope.
There will also be some small additional costs for monitoring and enforcement activities for compliant businesses that are placing batteries on the Northern Ireland market, to enable regulator activity, such as audits or inquiries. They have been calculated to total £33,822 over the 10-year appraisal period. Ongoing costs of approximately £330,000 per annum are also expected to be incurred by Defra to fund market surveillance and enforcement activity undertaken by the OPSS. These include inspections, investigations and audit, which do not fall on businesses as costs and are not included in the equivalent annual net direct costs to businesses. There is no direct impact on households, so the equivalent annual net direct cost to households is therefore assessed as £0.
The noble Lord, Lord Redwood, also asked about offences. Some 182 batteries industry stakeholders and other stakeholders were sent the proposed offences and penalties and invited to provide feedback in January this year. Out of the 182 stakeholders, only one responded: a trade body operating in Northern Ireland. It agreed with the rationale behind the penalty group and did not comment on other aspects of the SI. The very low response rate to those communications indicated that stakeholders are content with the approach taken and that concerns related to this SI are low.
On enforcement, the Office for Product Safety and Standards, which enforced the previous placing on the market regulations, will be appointed by the Secretary of the State to enforce the new placing on the market requirements of the EU’s 2023 batteries regulation in Northern Ireland. To facilitate it, this SI amends the Market Surveillance (Northern Ireland) Regulations 2021 to provide for the powers of enforcement under those regulations to apply to the enforcement of these regulations and to the EU batteries regulation requirements.
The noble Lord, Lord Blencathra, asked some specific questions about the competitiveness of Northern Ireland businesses and the impact on the internal market, and about whether the proposed alignment in the consultation will form part of the Government’s wider aims for dynamic alignment. I thank him for those questions. We think that the practical effect will be limited. As I mentioned, the majority of batteries were manufactured to meet the Northern Ireland and EU requirements, whether they are physically placed on the market in Europe, Northern Ireland or Great Britain. Batteries meeting the Northern Ireland and EU requirements can also be placed on the market in Great Britain. As I noted earlier, the instrument does not introduce any new requirements or amend any existing ones; it is just to ensure that placing on the market requirements that are already in force or due to come into force are enforceable in Northern Ireland. We are satisfied the SI goes no further than is necessary to implement those provisions reflecting that position.
On the question on alignment, we intend to consult later this autumn on the aligned regime across the whole of the UK that is consistent with the EU batteries regulation. We think that is the right thing to do. As I mentioned, it has to be for the whole of the UK and to protect the whole of the UK’s internal market. We have engaged extensively with businesses and others over a long period on the approach to batteries; for placing on the market matters, the industry has been clear that it wants to see this common set of standards.
For waste and producer responsibility matters, the pace of battery technology development and change means that market and waste burden is very different now to when the current UK regulations were made, and there are a number of acknowledged difficulties with the operation of the existing approach. We hope that the consultation, with that UK-wide approach, will go a long way to address those issues, but it is important that the consultation should not be seen as a general approach to regulatory alignment. Rather, it reflects the specific circumstances of the batteries sector.
The noble Lord, Lord Redwood, asked about the penalties regime and why the instrument has taken over three years since the batteries regulation was published in July 2023. The EU batteries regulation introduces significant new and evolving requirements, and it is important that any regime respects Northern Ireland’s dual market position. We feel that we have moved as quickly as we were able to bring forward this instrument on the placing on the market elements. As I previously set out, the UK-wide consultation we are going to do this autumn on waste and producer responsibility provisions will propose consistency, which we know is what business wants.
On conformity—I am terribly sorry, I cannot remember who asked me this—the UKNI marking is a common requirement for regulatory regimes included in the Windsor Framework that require conformity assessment if assessment is conducted by a UK assessment body. If a product has been conformity assessed by a UK conformity assessment body, as opposed to an EU conformity assessment body, then it must be accompanied with the CE plus UKNI marking and can be placed only on the Northern Ireland market.
I am going to wrap up because I want to give the noble Lord, Lord McCrea, time to respond. It is important to note that all this has been done with close engagement across government and industry, and we have not had concerns raised by stakeholders. The instrument is practical, proportionate and necessary. I thank all noble Lords again; anything I have not covered, I will pick up from Hansard.
Lord McCrea of Magherafelt and Cookstown (DUP)
My Lords, I express my thanks to all noble Lords who have taken part in this debate. I thank the noble Lords, Lord Redwood, Lord Elliott, Lord Jackson, Lord Frost and Lord Blencathra, and also my noble friends Lord Browne and Lord Hay for their support.
There have, however, been two dissenting voices. I deeply appreciate where the noble Baroness, Lady Chapman, is coming from, but she acknowledged that there are additional burdens on industry through this. How many more additional burdens can industry in Northern Ireland take and be told that it must accept? There is a one-way traffic in concessions; whenever Europe asks for something, the Government surrender to its demands. I also remind her that there are many disadvantages to so-called dual-market access. For example, businesses importing steel into Northern Ireland are now paying up to 50% tariffs on categories 4 and 7 steel, because the EU tariff quotas have already been exhausted. There are problems there.
I gently remind the noble Lord, Lord Davies of Brixton, that the decision on leaving the European Union was not on what part was going to leave. It was a question for the United Kingdom as a whole. We were asked whether the United Kingdom should leave, not whether Northern Ireland or Scotland should. While there is different treatment for Northern Ireland, it is interesting that there is no different treatment for Scotland. It is demanding special treatment, but there is no such thing coming its way.
I listened very carefully to what the Minister has said. I thank her for the gracious manner in which she has dealt with this regret amendment, but I have to say to her and to the Government that that response will not do. On one level, introducing the same laws that the EU has imposed on one part of the United Kingdom in the other would remove the problem of divergence, but it would allow the EU to shame the whole United Kingdom through its strategy of divide and rule.
The Deputy Speaker (Baroness Finlay of Llandaff) (CB)
My Lords, the time allotted for this debate has now elapsed and the noble Lord must either press his amendment or seek leave to withdraw it.
Lord McCrea of Magherafelt and Cookstown (DUP)
I do not wish to press this regret amendment.