Live Debate: Lords Chamber

Private Notice Question: Abolition of the Department for Science, Innovation and Technology and the merging of its functions with other departments

and the merging of its functions with other departments, and the implications of this on the future operation of the AI Safety Institute, the sovereign AI fund, the Government Digital Service, and UK Research and Innovation.

15:20

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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Yeah. >> Science and AI are having an increasingly large impact across all areas of government policy and economic growth. We should not see economic growth. We should not see science and technology as an isolated issue. That is why the Prime Minister has announced a bold Prime Minister has announced a bold restructuring, including the elevation of AI to the office of the Prime Minister and Cabinet. This will provide a more coherent, agile and effective government framework to deliver on our national priorities.

A WMS has been tabled today. In the name of my noble friend, the Lord Privy Seal, outlining these changes.

15:21

Lord Clement-Jones (Liberal Democrat)

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I welcome the creation of DSIT and the focus that it brought to science and technology, but with a very regrettable resignation of the noble Lord Vallance, who will be noble Lord Vallance, who will be greatly missed, and the understandable concern expressed by Sir Paul Nurse, the president of the Royal Society, and many university and tech leaders. What assurance do we have that the focus will be retained, particularly in developing UK digital sovereignty? And, my Lords, which single department will own AI safety and regulation?

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The noble Lord raises a series of very important issues. I'd first of very important issues. I'd first like to put on record my absolute thanks to the work that's been done by my noble friend Lord Vallance, who's been a pleasure and privilege who's been a pleasure and privilege to work with. Noble Lords will appreciate, as there have been many comments in your Lordships' House comments in your Lordships' House today that there is still an ongoing appointment of government. So it is. I can't possibly talk So it is.

I can't possibly talk about any further roles and appointments that are being made, including my own, so we will deal with those as they emerge in terms of the substance and overall does raise an important point. But the government has made a decision that by having by having DSIT, having science and AI sit separate and away from the rest of government, it means that other departments haven't treated it in the way it should. Noble Lords would appreciate that there hasn't. There hasn't a month gone past where I haven't been asked about the impact of AI on the Cabinet Office, and so have every member of the frontbench asked about how AI is affecting government in work.

So it's right that we are putting both science and AI at the heart of government, which is why we have the new office for the Prime Minister and Cabinet to make sure it is at its most at the centre, as well as having a new Minister specialist for AI attending Cabinet.

15:23

Lord Waldegrave of North Hill (Conservative)

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Later, the Minister agree with me that there is a real danger here in exactly the wrong signal being sent to the science community. First of all, by the departure of one of the most successful science Ministers of recent years. And I say that as one of his predecessors from long ago, the noble Lord Lord Vallance. But more importantly, structurally, the abolition and fragmentation of DSIT means that the. The idea that science must permeate all departments of government. The signal is the opposite to that, and that the establishment of DSIT did that.

And that is. And it's a very regrettable development, I think, and seen by many in the science community that it's been destroyed.

15:23

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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Well. >> The noble Lord makes an interesting point, but I think it's also incredibly important that we talk about AI and AI more broadly talk about AI and AI more broadly in terms of the impact on science and what is changing as something that should be at the heart of government, and something that is central to every government department. There hasn't been a subject matter that I have discussed in your Lordships' House from this Dispatch Box, where I haven't been asked about the impact of new tech, whether that's been the Cabinet Office Civil Service pension scheme, or whether it has been how we do resilience, or even the role of ethics and integrity in the development of AI.

It affects every part of my portfolio and every one of my colleagues. So this is about making sure that AI is at the centre and that also that we can make sure that both science and technology is part of our aims and efforts to ensure that there is growth in every postcode. As the Prime Minister has made clear.

15:24

Lord Tarassenko (Crossbench)

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But any. take of the order of 12 months. 12 months is an eternity in AI. It's equivalent to three generations of frontier AI models. Can the noble, noble Baroness, the Minister, reassure the House that both the AI Safety Institute and the sovereign AI fund will be able to keep up the momentum that is so essential to their activities during this unnecessary transition period?

15:25

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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Yeah. important point. I think we have we're seeing technology move faster than at any point, never mind in my lifetime. But I think over the last 100 years, and it's incredibly important we do keep up, which is why we will now have a dedicated Minister in the attending Cabinet to make sure these issues are reflected. I think some noble Lords would not have had the opportunity to read the mess that has been placed in front of your Lordships' House, but so just to reassure, the AI Security Institute will be part of the office for the Prime Minister and Cabinet, the UK Research and Innovation Fund is moving to the new business department and their £9.22 billion for their budget for R&D will continue.

The government digital service is moving to DCMS, and the sovereign AI fund is moving also to Lord Best.

15:26

Viscount Stansgate (Labour)

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Labour. >> Labour may I. >> If the House will allow me pay my own tribute to my noble friend Lord Vallance of Balham, whose record of public service as record of public service as government Chief Scientific Adviser or as Minister of Science, has been exemplary. And the noble Lord has said he will be missed. Would my noble friend agree that this reorganisation does show that the new Prime Minister has some understanding of the transformative power of science, innovation and technology, and that this new department can in turn have a transformative effect.

And while I think the points made by the noble Lord Lord Waldegrave and Lord Tarassenko have merit, and I'm grateful to my noble friend for giving some more detail in her answer, I hope that this will achieve the aim of making science apply across all of government for the benefit of this country.

15:26

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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Yeah, yeah. >> Yeah, yeah. >> My noble friend is absolutely right. The new Department for business, innovation, Science and business, innovation, Science and Trade will focus on new and emerging sectors as part of our Reindustrialisation agenda. This is Reindustrialisation agenda. This is about building on the foundations we've already met, so we can move further and faster to deliver for the people of the United Kingdom, which is our responsibility.

15:27

Lord Ranger of Northwood (Conservative)

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Conservative Minister. >> Conservative Minister. >> There is much scratching of heads between the the dis and the heads between the the dis and the detachment between science and technology. We hear about an AI Minister that will now be in a new office at the Cabinet Office, and some are also saying at DCMS reporting into. But what we were talking about is the movement in technology, quantum computing, cyber security, and what's happening in terms of investment into all forms of technology.

So the challenge now is where will technology sit as a focus for this government?

15:28

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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Noble Lord, raises a very genuinely valid point. But this is about how we mainstream everything about how we mainstream everything and put it at its heart. Everything we're talking about is an AI enhanced reindustrialisation. I appreciate that there are many. There are many times where we probably use the words AI as short speak for whether it's tech, whether it's science, just because of how quickly the technology is moving on. But I want to reassure the noble Lord that across the eight industrial priority sectors, we will continue to make sure that AI and science and technology are at their heart.

15:28

Lord Dixon of Jericho (Liberal Democrat)

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And Lib Dems. country or a company can lead in artificial intelligence. So one is people, one is chips, one is models and one is infrastructure. And the and one is infrastructure. And the final one is deployment. The leading global companies are spending about £500 billion this year on it. Our spending as a country will be roughly 0.3% of that, given the scale of our investment compared to others, does the machinery of government changes reflect the government choosing to focus on an area where we can have stronger comparative advantage as a country, or does it does it mean that we will still continue to try and lead on all of those areas?

15:29

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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Yeah. >> The noble Lord is right that we're talking about how, how technology and how the advancements of technology are going to fuel of technology are going to fuel economic growth going forward. That is a priority for the government, as the Prime Minister has made

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clear in terms of the prioritisation of That that will come in the

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That that will come in the coming days. And in. But our key here is about making sure that the reindustrialisation, through these reindustrialisation, through these tools and using these levers can work for every single corner of the United Kingdom, making sure that there is no longer a postcode lottery in people's opportunity to. lottery in people's opportunity to. And also to make best use of these tools. crossbench.

15:30

Lord Krebs (Crossbench)

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Then I'll come to conservative crossbench next. Grateful, my Lords, crossbench next. Grateful, my Lords, for those of us in the scientific community, there is concern about the erosion of funding for basic discovery science, which of course is the bedrock of all future applications of science. So I ask the noble Baroness, the Minister, in this reorganisation, can she provide reassurance that Ukri will not reduce further the support for basic discovery science?

15:30

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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Yes. reassure the noble Lord. And can the £9.22 billion that UK re has the £9.22 billion that UK re has for 2627 is to be distributed and will continue to be distributed across three buckets basic curiosity driven research, foundational research and research targeted to addressing strategic government and societal priorities. Working with to support the growth of innovative companies. That will remain the case.

15:30

That Kanishka Narayan, who is a great Minister, has gone into the Cabinet, but it is obviously the Cabinet, but it is obviously the abolition of DSIT is a phenomenal waste of time and will take three months of civil services time when months of civil services time when they should be focussed on policies and government. Digital service should obviously be in the Cabinet Office. By the way. Could the Minister tell us where sovereign AI will sit? And also, I gather, only 100 million of the £500 million announced has actually been allocated.

Can she guarantee that the other 400 million will be allocated over the next two years?

15:31

Lord Vaizey of Didcot (Conservative)

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Yes. >> My Lords, the sovereign AI fund will sit in DBS and as as enable Lord Jay is very aware, on the 16th of April, we announced the £500 million fund. I have nothing that suggests that we will not be

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spending every penny of it. My Lords, isn't isn't the point here that this country is brilliant

15:31

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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innovation thanks to our wonderful science base, but we are hopeless at adoption and taking advantage of at adoption and taking advantage of it. And so many British inventions are being developed with investment are being developed with investment and overseas. Surely putting science and technology within the business department is the way to business department is the way to ensure that when we have these future inventions, we actually get the resources to develop them and

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the resources to develop them and country. Yeah. My noble friend is absolutely

15:32

Baroness Foster of Aghadrumsee (Non-affiliated)

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right. These changes are to make sure that we can align science and research based directly with commercial application and job creation. Noble Lords will be aware that the new Prime Minister has that the new Prime Minister has announced that number ten of the North. This is to coordinate a growth based strategy for every corner of the United Kingdom, using corner of the United Kingdom, using the tools available to us, so that we can actually use the levers of government to deliver for every

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postcode. Foster. Foster.

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Noble Baroness has said about AI and I presume that it now sits within the Department for business. within the Department for business. Given that, will. The noble Lady, the Minister, wearing another hat, a hat which I very much hope she continues to wear in Northern Ireland, meet with me because we do not have an AI growth zone. Despite the fact that all the rest of the UK has growth zones. We do not have an AI growth zone and I think she

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will want to ensure that we develop that. The noble Baroness is absolutely right. In terms of my commitment and passion about Northern Ireland, and I, of course, will take every opportunity to have a cup of coffee with her. I plan on being in with her. I plan on being in Northern Ireland in. I plan on being in Northern Ireland over being in Northern Ireland over recess, subject to events and. We will do so then.

15:33

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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The. This appointment of an AI

15:33

Viscount Camrose (Conservative)

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Minister to Cabinet does indeed give a timely prominence to AI policy making. But would the noble Lady, the Minister, accept that it also removes a good deal of clarity. Who owns AI policy between Cabinet Office and the Minister himself? Office and the Minister himself? What will the AI taskforce do that these ministries will not. And is these ministries will not. And is the purpose to develop new AI policies or to execute existing ones?

15:34

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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The noble Lord is more than aware that the role of the Cabinet Office is to coordinate policy across government. Hence, the establishment of an AI taskforce to make sure and to support the work of the new Minister. The office of the Prime Minister and the Cabinet is being overseen both directly by the Prime Minister and the new First Secretary to government, and operational matters will be overseen by the Cabinet Secretary. This is about making sure that the Minister, who will obviously be working to it, who will have responsibility for the coordination and ownership of AI policy, has the support he needs at the top levels of government.

15:34

Lord Fox (Liberal Democrat)

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The noble Lord spoke about >> The noble Lord spoke about messages sent and. And the noble Lord Krebs talked about concerns within the research community. Whatever the Minister thinks, does she accept that the response to this by the research community has been really bad and is really upset and worried about the implications of this? Does she accept that? And does she accept that the government has a big job in raising up the morale and explaining to the research community how it's going to work for them?

15:35

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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Well, I thank the Lord for his question. I just would want to cite the new Prime Minister who said, we will choose hope to build a fairer society. Hope is definitely the word of the day, my Lords. So on that basis. Absolutely. And if he heard the words of the new Business Secretary on the today programme today, he was very, very clear that he'll be reaching out to all parts of the science community to reassure them and make sure they understand that they are remain, that they will now be at the heart of government, which is why we've made these changes.

15:35

Lord Deben (Conservative)

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My Lord, my Lord, the labour. >> Is she not embarrassed that the only way we've been able to discuss this important matter is a private notice question?

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And hear, hear! And should not this be brought

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And should not this be brought discuss. These issues? And it is a disgrace that these

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And it is a disgrace that these steps are being taken. And what is happening is that the legislature

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happening is that the legislature is being overrun by those who are in charge. They. Well, my Lords, last I checked,

15:36

Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)

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>> Well, my Lords, last I checked, I thought I was a member of Parliament in the broadest sense and that this was a member of the Houses of Parliament. I am in front of Parliament. We have tabled a written ministerial statement as is normal, a PMQ which is normal, and we have done exactly as we would do at any other point in terms of addressing and updating your Lordships House. I want to be very clear, however, to the noble Lord and to your Lordships' House.

I am not embarrassed about my government. I'm very, very proud of it.

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My Lord, the time allowed for this question is now up. Members who wish to leave before the next who wish to leave before the next business may do so quietly and The The first The first reading of the private member's Bill Baroness Helic.

15:38

Business of the House

My Lords, I beg to introduce a >> My Lords, I beg to introduce a bill to establish a closed season from the start of February to the end of September, during which the end of September, during which the killing or taking of brown hairs is prohibited. Protect mountain hares, repeal the seasonal prohibition of the sale of the hares in the Hares Preservation Act, 1892, and to connected purposes, I beg to move that this Bill be now read the

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first time. Yes. The question is, is this building now read a first time. As building now read a first time. As many as are of that opinion will say content, not content. The say content, not content. The contents have it. Business of the

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House. Lord True. My Lords, I beg to move the

15:38

Business of the House motion

>> My Lords, I beg to move the motion standing in my name. It is an unusual motion. The last very

15:38

Business of the House motion Lord True (Conservative)

much more far reaching and far more prescriptive example being a motion introduced by the noble Baroness, the Leader of the House personally in 2019. Frankly, my Lords, it is in many ways an undesirable motion. It really should not be left for any other party in this House to have to ensure that time is given for a government to be held to account, a point made very vehemently by an amiable friend. Lord Deben my Lords, it's the duty of a Leader of the House who, by the way, we're all very pleased to see survived a vicious.

A vicious night of the long knives in the Labour Party. It is the leader's duty to enable scrutiny of government policies, and while the noble Baroness has survived. May I say, while I'm up, how sad we are to see so many outstanding Ministers in this House. The noble Lord Lord Timpson, the noble Lord, Lord Livermore, the noble Lord, Lord Vallance, felled with his whole department. As we've just heard, the noble Baroness, Lady Chapman, and so many others leaving the government.

My Lords, we thank them all for their service to the House and to this country. Now, my Lords, before anyone gets too excited about all this, let me tell the House that all this motion asks for is that the new government should allow a short, take note debate to answer to Parliament tomorrow on their policies. There'll be no vote. Nobody's holiday will be interfered with, whatever the captain of the gentleman's is telling people I. Afterwards. My Lords, it is an opportunity for the government to set out the policies in which the noble Baroness Baroness Anderson has just said they are so proud, and if the noble Baroness, the Leader of the House, tells the House she will give adequate time for debate and scrutiny in Parliament on the new government's strategy and all its new announcements tomorrow and indeed all this week.

Then I can withdraw my motion. My Lords, these are unprecedented circumstances. Only once before, in the whole of British history, in 1963 has a Prime Minister taken office who didn't put himself before the British people at the previous general election? And what is more so during a recess of the House of Commons, all recent Prime Ministers taking office in similar circumstances have made themselves available to Parliament. Contrast that with the new Prime Minister's convenient entry to number ten.

On the first working day, after the Commons had adjourned for the summer recess, and the unseemly finagling of changing Commons business to deprive the opposition of our scheduled opposition day debate for fear we might vote for the House of Commons to sit this week and hold the Prime Minister to account. Now, having suppressed scrutiny by the Commons last week, is this now to be followed, my Lords, by imposing a whip? I thought we had heard that Mr. Burnham didn't like whip to suppress scrutiny of the government in this place.

It looks as if the Prime Minister, my Lords, is bending over backwards to avoid telling Parliament what his plans are. But yesterday outside Parliament, while Parliament was sitting here, he declared Grandiloquently that he would be, and I quote, a circuit breaker for Britain, bringing forward the biggest changes in the last 40 years. A new political model, a new model, incidentally, a new model, incidentally, which includes putting someone who resigned on propriety ethics issue in charge of propriety and ethics, and someone who resigned over a housing issue in charge of housing.

My Lords, I've heard of thumbing their nose at the so-called establishment, but there are points when it can look a little rich now. The Cabinet met earlier today to discuss the government's new ideas. Noble Baroness was there. So can your Lordships House. Can this Parliament, sitting here in this place, not be told? The barest outline of this new political model, the new economic model and the ten year plan, for example, will tax overall go up or will it come down? Will where health welfare spending rise or will it be cut? What is the fiscal strategy already, my Lords, the government has talked or briefed outside Parliament about cutting energy bills, lifting the personal tax allowance, nationalising Thames Water, the biggest council house programme since the war, giving mayors more funding, creating a national care service, more overseas aid, cutting student loan repayments, more employment support and ending homelessness.

Yes, my Lords, but where is the money coming from? They're not so noisy. They're not so noisy now, my Lord. And can the noble Baroness shed any light on all this? Can she say which of this list are commitments, and what which just backstairs smooching of the media, and it seems some backbenchers. After all, she was there in Cabinet this morning. My Lords, the ministerial code is absolutely unequivocal. It states, and I quote, when Parliament is in session, the most important announcements of government policy should be made.

In the first instance. The first in Parliament. Why is that not been happening? My Lords, we need statements here and we need answers. I ask the noble Baroness on behalf of the whole House to ensure that happens. Where, for example, is a statement on ending rough sleeping, which has actually risen in Manchester in the last few years. And the media have been told this morning that the government will pause VAT on electricity. Ironically, by using our Brexit freedoms, I thought Mr.

I thought Mr. Burnham wanted to end those freedoms. My Lords, why was this not announced in Parliament before the media were briefed? We haven't even seen written statements on these announcements, though I gather one on VAT was issued moments ago while we were considering the PMQ. And I wonder how many members of this House have had the opportunity to see it. I echo what the noble Lord Lord Deben said, sir Ed Davey, no less, said the VAT pause was not the best way to help people, and doesn't go far enough.

Well, you can discuss that. Isn't there for this an issue for questioning in a short debate, an opportunity for noble Lords to put their point of view? Where is the explanation of how this will be paid for? The press are being told it will be paid for by scrapping digital ID. Well, good riddance to that, my Lords. But the former Chief Secretary to number ten, Mr. Darren Jones, has this morning said that the digital ID programme was unfunded.

He sat in Cabinet with the noble Baroness until last Sunday morning, running the Prime Minister's office. My Lords, he should know whether it's funded or not. So how do the numbers add up? Shouldn't your Lordships be able to question that in a short take note debate tomorrow? Which is all I suggest. We're told there'll be more policy announcements made to the media this week. Will the noble Baroness ensure full compliance with the ministerial code and see that each and every one is also made here? First in the first instance, and in the absence of that agreeing, this motion would grant your Lordships time tomorrow to question and debate what the Prime Minister says, I repeat, are planned to be the biggest political and economic changes for 40 years.

My Lords, we are a House of scrutiny, and I think it is reasonable that while we are sitting, we should be afforded a modest time to do our work and question government. Surely it would be a quite extraordinary position for government to order its backbenchers to vote this motion down on the basis that they don't yet know, or they don't want Parliament to know, what Mr. Burnham's plans are. Did hundreds, my Lords of Labour, MPs and peers really flop, waving their selfies to greet the Prime Minister without even asking what he stood for? My Lords, I say again, the ministerial code requires Ministers to come to Parliament and make a statement regarding new policy announcements.

Now, the noble Lord Lord Purvis of Tweed said on the Chagos Bill. By the way, the attorney, former Attorney General, I'm pleased to see in his place and was summarily and harshly sacked, along with many other friends of Sir Keir Starmer. Will the Chagos bill, by the way, now be buried? But on that debate, the noble Lord Lord Purvis of Tweed declared in April and I quote, scrutiny and accountability. These are issues these benches have focussed on relentlessly.

We shall soon see how relentless the Lib Dems will be today for parliamentary scrutiny and accountability. My Lords, scrutiny and accountability are the essential functions, the rights and duties of your Lordships House. So I hope the noble Lord will be true to his words today and be relentless with the government. Currently, my Lords, we have government by continuous press conference and media spin. That isn't what this great House has ever believed in or should readily accept. In this unprecedented situation, the government should answer in detail and with details to this part of Parliament that is sitting, I hope the noble Baroness leader, when she replies, will set out a reasonable programme of how she'll ensure that is done this week, including a short take note motion tomorrow.

If not, then I reserve the right to submit this motion to the opinion of the House that the executive is accountable to. Parliament is the most basic and dearly bought principle of our free democracy. It must never be bypassed and I beg to move.

15:49

Lord Purvis of Tweed (Liberal Democrat)

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16:02

to Labour MPs on the 8th of July, to Labour MPs on the 8th of July, setting out his approach to how he wanted to treat Parliament. He said

16:02

Lord Harper (Conservative)

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wanted to treat Parliament. He said that Ministers would respect the House. I presume by that he meant Ministers would respect the houses. He also said in his email that he He also said in his email that he wanted to see us do politics differently. He said he said, I don't know why they're laughing over this is your Prime Minister said he wanted to see politics done differently. He said he wanted to see more consensus, which means working together to debate the policies of the government.

And he wanted to see more of a partnership approach from the government treating Parliament properly for both policy and legislation. Now we can judge parties by their words and prime Ministers by their words or by what they do. Those were fine words, but we're going to judge the government by what it does if it chooses to. Absent itself from scrutiny. Whilst one House of Parliament is sitting, then we will know that those were just words and that the Prime Minister has no intention to do politics differently, has no intention to take Parliament seriously, doesn't respect the House of Lords, and we will draw our conclusions and behave accordingly.

There's an opportunity for the Lord Privy Seal to demonstrate that the Prime Minister's own words to Labour MPs had some meaning, and for her to make a generous response to my noble friend Lord True, enabling him to withdraw his motion and for us to debate the government's policies which appeared to be popular on the other side, to answer questions. And we can do that this week when this House is sitting, and I look forward to what she's got to say.

16:04

Baroness Smith of Basildon, Leader of the House of Lords and Lord Privy Seal (Labour)

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Thank you. True and thank those Ministers who have served in government and have now left government. Their service has been exemplary. They've all has been exemplary. They've all been dedicated and hard working, and we're grateful for their continued support and wish them well. And can I also welcome the fact that my noble friend, the Chief Whip, has been reappointed? It's not necessarily the greatest secret of the House at the moment, but we look forward to working, and I look forward to him as well, and thank him for his comments about my reappointment to the Cabinet.

I look at the start of this session in the King's Speech. As group leaders, we pledged and we spoke of a reset returning to our usual ways of working in a collegiate and a productive way that best benefits this House and the work that we are entrusted to undertake. And as a matter of clarity, I know the chief whips have spoken outside. The motion. Yesterday was tabled, I think, at around 5 p.m. I then later went down to see the noble Lord, the Leader of the Opposition.

When I first tried to speak to him, I was told he was unavailable to speak to me, though within a few minutes I think he realised that wasn't a good idea. He did come down. I'm grateful to him for that though. It wasn't, as he knows, the

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most productive conversation. For clarity, I had no knowledge that the Leader of the House had that the Leader of the House had been told that. And of course, as soon as I heard that she had been soon as I heard that she had been told that, I came largely down to the corridor. As she's just acknowledged, there was no question acknowledged, there was no question whatsoever of my refusing to see the Leader of the House on any occasion.

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occasion. I'm grateful to the Lord for that, because I was told by his office that he was unavailable to see me. At that point, I. I did say that he then came down to see me. So I'm grateful for clarification that he wasn't involved in that decision by his office, but it was tabled at around 5 p.m. and as the chief officer agreed, it wasn't actually any discussions with the usual channels until about 930 and given nine, 9:00. And I have to say, given the what was said and we all agreed how we would say this when we had the King's speech, I was a bit surprised and I was disappointed that there was no consultation, no discussion, no engagement, or even notice from the noble Lord.

There was no request for a statement. There was no discussion to say, oh, have we got any plans this week for a debate? Would we like to do that? The first we knew about it was a motion being tabled. There was no attempt at all to seek to address the concerns. Nobody was raised in any of the ways that we committed to do so. When we had the debate on the King's Speech, I have to say to noble Lords, I really thought we

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had made some progress then. Yeah. And as I said, business motions moved by the opposition is not unprecedented, but they are unprecedented, but they are extremely rare. Only twice in recent history has the opposition attempted to take control of the attempted to take control of the Order Paper in this way, and very much opposed then by the noble Lord opposite. Lord Richard did it in 1996, about 30 years ago, in response to the Scott report, I did something similar in 2019, reflecting a motion that has been tabled in the House of Commons in relation to Brexit.

My Lords, those bad tempered days of debate, I would hope that none of us would want to return to those. Fortunately, particularly. Fortunately for the party opposite and the noble Lords and his predecessors, this has never happened before. With the change of a Prime Minister. My Lords, I completely agree and have always committed to this, that the House should be given ample opportunity to scrutinise the government. But, my Lords, in politics as in life, patience is a virtue.

This is day two of a new Prime Minister. The government is still being formed. We saw an appointment just now and of course we will welcome scrutiny and Ministers will come to this House and Parliament will do its job in scrutinising the work of the new government. But, my Lords, this motion is unnecessary. It is not the way this House does business. There has not been extensive policy changes at this point, and the Prime Minister has committed to move forward on the basis of the manifesto that this party was elected on at the 2024 election.

Now, this morning, an issue raised by the noble Lord of the opposition, the Prime Minister announced a targeted intervention on VAT to help with the cost of living. Today, a written ministerial statement was laid to update the House on these matters. A topical oral question on Thursday relates these matters and in the autumn noble Lords will have to scrutinise the regulations that give effect to the policy. Might as well. That's hardly dodging scrutiny. I've also made a written statement today to inform Parliament of the machinery of government changes that have taken place, and my noble friend Lady Anderson of Stoke on Trent has answered a PMQ on the topic.

My point is, my Lords, that the scrutiny of government is continuing. We have have a number of bills before us which also deserve scrutiny. Oral questions will be asked, statements will be applied for repeated and yesterday an exceptional number. I think ten private notice questions were tabled. General debates will take place on Thursday and we will continue to lay written ministerial statements as required. If this motion were carried, we put at risk a full day of business and we put at risk continued scrutiny of legislation that considers important.

My Lords, the Prime Minister has been very clear. He takes Parliament seriously and I can tell, noble Lord, no, it's no good. The party opposite making those comments on day two of a Prime Minister. I'd like to have a considered response to my new Prime Minister and the House fully debate and properly debate when he brings proposals forward. I, as a parliamentarian myself of nearly 30 years on the frontbench in government and in opposition for over 25. I hope noble Lords will recognise my commitment to the work of this House and to scrutiny of government, and rest assured we will not seek to evade or avoid scrutiny of our government's policies because we will be proud of those policies as they are drafted and brought forward.

For further discussion. And I have to say to noble Lords, this Prime Minister did not set the timing for the change of leadership. Prime the recess dates and in fact, the noble Lord tables his motion yesterday. He's known for some time, though it's not exactly been a state secret. When the new Prime Minister was taking office. My Lords, procedures like this should only be used in rare and unprecedented times. The party opposite the party opposite has ensured that a change of a party leader between elections is certainly not unprecedented.

My Lords, I urge noble Lords not to accept this motion today. But whatever the outcome. Can we just rise above some of the rancour today, which I think was unnecessary? And I wish all noble Lords a restful summer recess, and I look forward to further scrutiny in September.

16:12

Lord True (Conservative)

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Lords, I reciprocate the noble >> Lords, I reciprocate the noble Baroness on on the last words that she used. And of course I wish that to all members of this House. I to all members of this House. I mean this House works extremely hard and certainly merits the time that it will have off. And I also agree with her. I said at the outset of my speech that these things are exceptional. The noble Baroness put forward a motion of this kind at the time of the debate over prorogation, which was pretty well unprecedented.

As I explained in my speech, it is unprecedented, apart from in 1963, for a change to take place of this kind when the House of Commons isn't sitting. And that is the case for your Lordships House being given the opportunity to debate these questions. My Lords, I do value good relations with the noble Baroness, and if by that incident or anything else, that she's been disobliged by something that I have sin or sin of commission or omission, then I apologise for that.

My Lords, if I can return to the debate. Of course we had ten minutes from the noble Lord Lord Purvis of Tweed. I don't really know what he was on about. For most of the time. He certainly wasn't relentless for accountability. My Lord, she's as relentless as a limp rag when it came to criticism of the government,

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I did think he certainly fell below the standard of the time. Yeah.

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So far as the party opposite is concerned, my Lords and I will conclude not with this. I ask, what conclude not with this. I ask, what are they so worried about? A short three hour debate tomorrow? It won't interfere with any holiday won't interfere with any holiday plans. Mr. Burnham says he wants to bring back hope. My Lord, that must bring back hope. My Lord, that must be more than admission of the hopelessness of two years of Keir Starmer, his government and its huge toll on business and jobs.

It must be an expression of confidence, as we've heard from others, that his policies are better. So why are they so afraid to debate them here in Parliament? Now, my Lords, when the the time is right. This House is a house of scrutiny, and I believe we should assert our right to be informed and to be heard, and therefore I beg to test the opinion of the.

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The question is that this motion be agreed to, as many of that opinion will say content. The contrary, not content, not content. The question will be decided by The question will be decided by Division. I will advise the House Division. I will advise the House when voting is open. Voting is now

16:15

Division: Business of the House Motion

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Is.

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Is. The question is that this motion

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The question is that this motion be agreed to as many of that opinion will say. Content contrary, not content. The contents will go not content. The contents will go to the right by the throne. The not The question is. The question is that My My Lords, there have voted contents 173 not there have voted contents 173 not contents 234 the not contents have. Lords. This may be a suitable moment for a pause while there is a reset.

Just to repeat, this may be a convenient moment for noble Lords who wish to move. To leave the Lords, we now come to an instrument previously debated in Grand Committee. Environmental Permitting waste, controlling or transporting and relevant functions of Primary authorities. Amendment England

16:27

Business of the House

Regulations 2026.

16:27

Baroness Hayman of Ullock, The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Labour)

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Baroness Hayman of Ullock Lords, I beg leave to move the motion. Standing in my name on the Order Paper. >> The question is that this motion be agreed to, as many of that opinion are content contrary, not content. The contents have it. Third Reading of the Sporting Events Bill Baroness Twycross.

16:28

Lord Kennedy of Southwark (Labour)

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My >> Lords. I have it in command from His Majesty the King and His Royal Highness the Prince of Wales, to acquaint the House that, having acquaint the House that, having been informed of the purport of the Sporting Events Bill, have consented to place His Majesty's and His Royal Highness's interests, as far as they are affected by the Bill at the disposal of Parliament for the purposes of the Bill.

16:28

Baroness Twycross, The Minister of State, Department for Culture, Media and Sport (Labour)

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My Lords, before the Bill for the formal Third Reading of the Sporting Events Bill, I'll now make Sporting Events Bill, I'll now make a short statement on the position regarding legislative consent. As noble Lords will know, this Bill affects the whole of the United Kingdom. We are seeking consent from each of the devolved legislatures and have been engaging constructively with the devolved governments throughout the bill's passage. We will continue to work alongside the devolved governments to ensure final positions are reached in relation to legislative consent before the final amending stage in the second House.

We will have more to say in the other place, and we will, of course, keep noble Lords updated on this. I beg to move that this bill now be read a third time.

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The question is that this bill be now read a third time. As many of that opinion say, content

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of that opinion say, content contrary, not content. The contents have it. I beg to move that this bill do

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I beg to move that this bill do now pass. My Lords, this bill seeks to establish a framework that enables certain sporting events to benefit from the enhanced commercial protections, need to preserve the integrity of events and, importantly, offset costs to and, importantly, offset costs to the taxpayers. These provisions will help ensure that the United Kingdom remains an attractive host for major sporting events, and continues to build on its world leading reputation in this field. At report, I committed to further engagement with noble Lords and our outstanding recurrent sporting events sector over the summer.

I do understand the views of your Lordships' House on this matter, and I am committed to properly assessing all the considerations and possible unintended consequences before determining appropriate next steps. My Lords, I also wanted to reiterate that the environment would be a clear consideration as this government develops a major event strategy to be published in the spring. I would like to thank all noble Lords who have contributed during highly constructive debates and through noble Lords time and expertise sought to strengthen the Bill.

Specifically, I would like to thank the opposition and Liberal Democrat Frontbenches, as well as the noble Ladies Baroness Evans of Bowes Park and Baroness Grey-Thompson, and the noble Lord Lord Holmes of Richmond in particular for their constructive approach and engagement. I would also like to thank my officials for their considerable support and patience during passage. I am grateful for the engagement with the Bill and its broad support across your Lordships' House. As I have said before, if we get this right, the benefits we felt far beyond the field of play.

I beg to move.

16:30

Lord Addington (Liberal Democrat)

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The question is that this bill >> The question is that this bill do now pass. Briefly say a few words. This was a bill where the only disagreement we have is we didn't think the government was didn't think the government was brave enough for its own ideas. Doesn't often happen. And we actually get down and get through to a position. And I think we did. And just to remind ourselves, we did it by those on this side of the House, working together in a constructive manner.

I do hope we can remember that in the future and make sure that when you actually do have some agreement, making sure that it is, shall we say, brought forth in a coherent manner means you get something better. I hope I hear what the the the government have said on this. I take heart from it, but I please do remember, you can be braver when you have a good idea. I'm not often going to say this, but I am in this occasion.

16:31

Lord Ashcombe (Conservative)

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Hear, hear. >> Hear, hear. >> My Lords. The more astute amongst your Lordships will have realised that this is the first time I've taken part in this bill, and I do so because, unfortunately, my noble friends Lord Markham and my noble friends Lord Markham and Lord Parkinson of Whitley Bay, who have led from these benches on this bill, cannot be here today. They both send their apologies. It therefore falls upon me to respond on behalf of His Majesty's official opposition today.

We have broadly welcomed this legislation while highlighting a few areas where we have concerns and others where we have seen room for improvement. The noble Baroness, Lady Grey Thompson, said at Second Reading that she wished the government would be more bold, as noted by the noble Lord Lord Addington just now, with the scope of the supporting frameworks events framework. Whilst the government has not yet fully taken her advice, it is your. It is welcome that your Lordships House has done so by adopting the amendments tabled by my noble friend Lady Evans, of Bowes Park, and by the noble Lord Lord Addington.

The changes we have made here last week strengthen the bill, and will. If the government follows through on its promise to continue the debates we have had about them in good faith, enable many of the most well loved sporting events in this country to benefit from this legislation. I hope when the Bill goes to another place, that the new government will agree with the amendments made here, or if it wishes to make some modest changes to them, that it will keep them in both spirit and substance.

I want to record our thanks to a number of noble Lords who have made this such a constructive process. First, to my noble friends, Baroness Evans of Bowes Park, Lord Moynihan and Lord Fuller, the noble Lord Lord Addington and the noble Baroness, Lady Grey Thompson, who have all brought their considerable experience and expertise to the Bill's proceedings. I also thank the noble Baroness, the Minister, all the officials and the Bill team who have supported her for their willingness to meet noble Lords across your Lordships House throughout the passage of the Bill.

I know that noble Lords found their discussions genuinely useful, and I am grateful that some of their concerns raised by the opposition and others were. Listen to. This is a bill which hopefully will hopefully boost the ability of the United Kingdom to host major sporting events. It leaves this house in a better state than when it was introduced, and I hope it moves through another place in the same spirit.

16:34

Baroness Twycross, The Minister of State, Department for Culture, Media and Sport (Labour)

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I thank the noble Lords and I beg to move. >> The question is that. >> This bill do now pass, as many of us will say, content contrary, not content.

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not content. The contents have it. questions on a statement made in. The House of Commons on. Thursday, 16th July.

16:34

Statement: Local government reorganisation Lord Jamieson (Conservative)

On local. Government reorganisation. My Lords, I thank the Minister for this opportunity to ask questions on this statement. On these benches, several of us have run unitary councils and we recognise the potential for improved efficiencies and better delivery for residents, but that must be done on the basis of genuine communities and geographies at a scale capable of dealing, delivering meaningful efficiencies and with the true consent of residents. The government set out clear principles at the beginning of this process, a scale of around half a million people.

Respect for existing boundaries and local consent. Yet looking at the proposals before us today, it is difficult to conclude that those principles have been applied in practice. Populations ranging from nearly 700 000 down to 170 000. The breaking up of existing district councils and a lack of local support and consent. Rather, the common thread that seems to run through the proposals is the focus on the needs of largely Labour run city councils, to the detriment of the rest of those counties.

Government has accepted the proposals of Leicester, Lincoln, Nottingham, Oxford, Plymouth and Exeter, amongst others. Despite unanimous opposition from the remaining councils in those areas. Is this just about rescuing badly run Labour councils and facilitating cities, shifting their housing house building onto the neighbouring greenfields? I highlight Devon, where the expansion of Exeter and Plymouth, necessitating the break up of several district councils and which will leave what can best be described as an orphan. Devon coast and countryside unitary.

A unitary of only 260,000 population but spread over a vast rural area stretching from Kingsbridge on the north coast to Sidmouth in the south coast, a journey of two hours or so by car and a similar journey east to west. My Lords, this is setting up a council to fail and the situation is similar in Leicestershire, Lincolnshire, Oxfordshire and Nottinghamshire. As my hon. Friend in the other place, the Shadow Secretary of State said, this appears to be gerrymandering for political benefit, not delivering for residents.

Ministers have repeatedly stated that councils should meet the standards of transparency, consultation, good governance and sound decision making. Yet many communities and councils are asking themselves has government applied those standards to itself in reaching these decisions? My Lords, having run a unitary council with a population just under 300 000, scale truly matters in key services such as adult and children's social care and services like highways, which will represent nearly 80% of the expenditure of these new unitary councils.

Now we succeeded because we were well run, but it was a struggle. And my noble friend Baroness Scott will also no doubt tell members here about the success of Wiltshire Council, which had the benefit of being substantially larger, breaking up counties into smaller units of 300,000 or less will cause significant synergies, particularly following government funding cuts for many councils. I ask the noble Baroness, the Minister, how many more councils does the Minister expect will require exceptional financial support as a result of these changes, and that's before the impact of this disruption, as councillors and officers focus on the upheaval of reorganisation, exacerbated by the break up of district councils, rather than doing the day job of focusing on delivering for their residents.

What is particularly striking is that these concerns are not confined to this side of the House. In the other place, Liberal Democrat members have complained about communities being done too. Not done with. Even Labour members themselves have objected to decisions affecting their own areas. Others have questioned why coherent communities were being split, why some selected proposals appeared not to meet the government's own criteria, and why areas with such strong local identities are being carved up to fit the new structures.

Devolution should be about empowering local communities, not imposing structures from Whitehall. Reorganisation should be a means to an end, not an end in itself. If local government reform is to be to command public confidence, at the very least it should be transparent, consistent and demonstrably fair. Therefore, can the Minister explain why did the government depart from its original principles on population size, retaining boundaries and financial sustainability? What objective criteria are applied when choosing between competing local proposals? Why were proposals that split established communities or transferred areas into expanded city authorities preferred over alternatives? Has the government truly examined the impact on the delivery and viability of those essential social care services that support some of the most vulnerable in our communities? What steps will the government now take to reassure communities that these decisions have been taken in the interests of effective local government, rather than political convenience? And can the Minister assure the House that these proposals are financially viable and will not result in the need for more exceptional financial support? And finally, what will be the impact of the almost inevitable issuance of Jlr's?

16:41

Baroness Pinnock (Liberal Democrat)

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My Lord, there are some deeply >> My Lord, there are some deeply worrying elements in this statement. worrying elements in this statement. First, it was issued on the final day before the Commons recess, a momentous decision of that purport should be the subject of detailed scrutiny, and that has been deliberately avoided. Secondly, the announcement has been made by a Minister who then resigned from government. It was his final throw of the dice. This announcement is discredited before the details are even considered.

I trust that the new Minister for Local Government will make her first task to reconsider the implications of these decisions. It is imperative that Angela Rayner does so because the decisions that have been announced fail to meet the test of enhancing devolution and democracy, as well as creating new local authorities that will be financially sustainable. The claim is that creating unitary authorities will put an end to two tier councils. Well, at the same time, the government intends to create an additional tier of local governance in the shape of mayoral authorities.

Two tiers will remain the decisions the Minister made about the boundaries is controversial. Some have described it as gerrymandering and there seems no other explanation in some instances, for example, the Devon, which has already been referenced by the the noble Lord Jamieson has been divided into four authorities, three relatively small councils in geographical terms based on Plymouth, Exeter and Torbay, and each of the population of around 300,000. And the fourth is the rest of rural Devon, a scattered rural population with no obvious centre.

Gloucester is to have one council, Gloucestershire. Maybe, I should say, is to have one council serving a population of 670,000 people. Come the noble Baroness. The Minister, explain how this huge range of population sizes is consistent with the. With the parameters that were set by the government and with creating genuine local democracy. The argument made in the Minister's statement is that there will be 3000 fewer councillors. From my perspective, it is shameful to be proud of reducing elected representatives.

Democracy has to enable electors to feel that they have access to local decision makers and are able to influence local decisions. Reducing councillors means increasing the size of wards and making councillors more remote from the people they represent. So on the test of enhancing democracy and enhancing devolution, devolution, these decisions have failed. Then there is the claim that there will be cost savings by having fewer councillors and fewer council officers, and that is a claim the government always makes, but it is not supported by facts.

For example, in Devon, the previously single social care model for the whole county will be required to divide into four units and financial benefits of of the model will drop sharply. Very large councils of over £400,000 400 000 population see cost per head rise and the financial benefits lost. And yet the government has created several councils way above the 400 000 population size. Now the noble Baroness Limb Minister may be able to explain the financial argument with details that are omitted from the statement, and I look forward to that.

If she has those details. In the statement. The government has admitted that it has failed in the task of making decisions on Cambridge and Peterborough and West Sussex. So when will these decisions be made? Meanwhile, the timetable for electing councillors for the new Unitaries is set for May next year. Well, while in some cases ward boundaries will have to be reviewed because of the way the boundaries for the new Unitaries have been drawn. Democratic representation is vital for communities in England.

Each councillor will on average represent 3000 electors. In France, that number is nearer 200. And in Germany 400. This statement represents presents a retrograde step and a lost opportunity to step and a lost opportunity to revitalise local democracy.

16:47

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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That's all right, my Lords. I am grateful to the noble Lord Jamieson grateful to the noble Lord Jamieson and the noble Baroness, Lady Pinnock, for their for their questions and for their comments on questions and for their comments on the Local Government reorganisation statement. I will begin with the timeline that has led us to the decisions announced on the 16th of July, because I do think it's important that we understand how we've arrived at the place we are now.

On the 5th of February 2025, government invited councils in 212 tier areas, together with neighbouring small unitary authorities, to develop proposals for local government reorganisation so that it is not imposing a model from Whitehall that is asking councils to come forward with their own proposals. Those proposals were received from councils on 26th September and the 28th of November 2025, and government subsequently launched statutory consultations on those proposals on the 19th of November 25 and the 5th of February 26, which closed on the 11th of January and the 26th of March 2026, respectively, and then between May and June 2026, the government undertook further consultation in East Sussex and Brighton and Hove and in West Sussex to inform the consideration of potential modifications to proposals in those areas.

And then, on the 26th of March 2026, the Secretary of State announced the first tranche of decisions on Essex, Southend on Sea and Thurrock, Hampshire, Isle of Wight, Portsmouth and Southampton and Norfolk and Suffolk. So I'm going to now set out the decisions announced by the Secretary of State on the 16th of July. These were subject to parliamentary approval. They were announced in Parliament on on the 16th of July. And there was another debate on the Monday of that week on the same subject there was a written ministerial statement was laid.

And of course, we're debating them now in this House. So the government will implement, subject to parliamentary approval, proposals for new unitary councils, including a two unitary authorities in Derbyshire and Derby put forward by Chesterfield, Derby, Erewash and High Peak, including boundary changes in Devon, Plymouth and Torbay. The four unitary proposal, put forward by Exeter and Plymouth, including boundary changes in East Sussex and Brighton and Hove. The two unitary proposal, including boundary changes requested by Brighton and Hove City Council except for the parish of Falmer, the one unitary proposal in Gloucestershire.

The four unitary proposal in Hertfordshire, including boundary changes except for the ward of Arbury in Kent and Medway. The four unitary proposal put forward by Dover and Thanet in Lancashire, Blackpool and Blackburn with Darwen. The four unitary proposal put forward by Chorley, Lancaster, Preston, Ribble Valley, South Ribble and West Lancashire in Leicestershire, Leicester and Rutland are two unitary option put forward by Leicester City Council, including boundary changes in Lincolnshire, North Lincolnshire and North East Lincolnshire. The four unitary proposal, put forward by Lincoln City Council, including boundary changes and leaving North Lincolnshire and North East Lincolnshire unchanged in Nottinghamshire and Nottingham.

A two unitary option put forward by Nottingham City Council, including boundary changes. The three unitary proposal in Oxfordshire, including boundary changes, and in Staffordshire and Stoke on Trent. The two unitary proposal, put forward by East Staffordshire, Stafford and Cannock Chase, and also by Stoke on Trent. The two unitary proposal in Warwickshire and the two unitary proposal in Worcestershire, and in Cambridge and Peterborough and West Sussex. The Secretary of State has concluded that further time is required before decisions are reached.

It is very important that we take the time to make the right decisions for those areas and to respond to Baroness Pinnock question about when they will be made as soon as possible and no later than October. So they will be worked on and decided as soon as possible. Now, I recognise that not all noble Lords are. All councils will agree with every decision we've made. These are significant changes and they matter deeply to places. Each proposal has been considered carefully against the published criteria.

Consultation responses and all other relevant information, including consultation with other government departments. The government's responsibility is to take decisions that are sustainable, coherent and in the long term interests of residents. The reason for reform is clear in too many places, two tier local government is confusing for residents divides responsibility, slows decisions, duplicates costs and blurs accountability. Boundaries drawn for a different era too often no longer reflect how people live, work, travel and access services, or how they see their own area that does not serve residents well, nor does it equip leaders for the future.

And that is why government reorganisation is necessary to create stronger councils with the scale and capacity to deliver better services, support economic growth and provide clearer accountability. Across these areas, 134 councils will be replaced by 38 new unitary authorities and across England, once all decisions are taken, we will have cut the number of councils from 317 to a maximum of 173. This will simplify and strengthen local government serving over 20 million people. And to answer the question from the noble Lord Jamieson about savings, the councils themselves have identified significant potential savings of around £1 billion by the end of 2030, savings that can be reinvested in the front line services that people rely on.

Of course, local government reorganisation is not without its challenges. Transition has to be handled carefully, particularly where vulnerable residents depend on services such as children's services, adult care and public health. And that is why we are providing over £1 million in funding for every new unitary council, including 900 000 in capacity funding and up to £150,000 of additional funding to support children's services, adult social care and public health leadership. Pace also matters, so council staff and residents need certainty, so moving forward now allows areas to prepare for elections in May 2027 and for the new councils to take on their responsibilities in 2028.

To respond to some of the other questions I see I've not got much time, but I'll be as quick as I can. The noble Lord Jamieson and Baroness Pinnock referred to gerrymandering. Well, that's absolutely not the case. I don't know if members I don't know if members listened to the debate in the other House, but if this was gerrymandering, it didn't work. According to some of our Labour members at the end of the building. But the decisions were based absolutely on the merits of the proposals against the six published criteria, consultation responses and other relevant information.

And the proposals selected have backing from a range of political parties, not just Labour. Previous decisions didn't set precedent, and I want to stress that every decision we took, we made on the basis of the information and all local areas are different, as we often say in this House, and we had to take decisions based on the local circumstances. So they were taken individually and judged on their own merits. So on the consultation, there was consultation run by the department, independent consultation to assess the proposals against the criteria set out.

And those responses were an important factor in the decision making process. The process is locally led, with councils having been invited to develop proposals for their own areas on the size of the local authorities. The 500 000 population figure has always been a guiding principle, not a fixed threshold. Ministers set this out publicly on at least five occasions our messaging has been consistent. There may need to be exceptions to ensure new structures make sense for an area, including to support devolution, and decisions will be made on a case by case basis.

So I make no apologies for the the growth focus in some of these decisions. We need to harness the growth that we know can come from every part of our country. We've made our decisions according to the criteria, and some of those are focussed on growth. And we need to continue that so that we can get this country and the potential it has out to every postcode in the land.

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My Lord. Thank you. Which is obviously 20 minutes for backbench Lords. Can I minutes for backbench Lords. Can I just say that we want the it's just the backbenchers that we want questions and not statements. And questions and not statements. And on that basis, let's start with the on that basis, let's start with the Conservatives. So we'll start with the Conservatives.

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the Conservatives. I think my interest is vice President of the LGA. My Lords, before we start, and I must say, my Lords, how good it was and how encouraging to see how keen the

16:56

Baroness Eaton (Conservative)

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Yeah, yeah, yeah. last week, can the noble Baroness, the Minister, please confirm whether officials advised Ministers that an expansion of the exceptional financial support package would be required to support some of the newly formed councils, which will come close to formation?

16:57

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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Host. We were very aware, as we took these decisions, that some of the councils involved are already the councils involved are already in a position of having exceptional financial support. We continue to work with those councils through work with those councils through the IFS process in the usual way, but LGR will save money over time and make the sector more sustainable in the long term. So where there are issues around funding and finance at the moment, the government's already tackling this with our fair funding formula, and we have supported some authorities with exceptional financial support.

We will continue to keep that under review where it's needed, but that will exist. Whether there was a two tier, confusing two tier system or authorities.

16:57

Lord Grocott (Labour)

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Can I ask my noble friend for some details from some facts which some details from some facts which you may not be able to answer now, but I'd really like her to do so in but I'd really like her to do so in writing. And it's this that the statement does tell us, or claims there will be very substantial savings from this operation. Savings of £1 billion are mentioned at one point, but it's much more opaque when it comes to the costs of the reorganisation.

And many of us with experience of these things knows well enough that it can be a very expensive business. So two specific questions to my noble friend for clarification. Number one, how much has it cost so far? We all know that local authorities almost come to a standstill when they're contemplating their abolition. And and at central government has been spending a lot of money as well. And secondly, can she tell us from these various references, which I've tried to make sense of, about £1 million for new unitary authorities, capacity building funds, etc.

etc. What is the sum total of expenditure that the government and local authorities are expected to spend to achieve this reorganisation?

16:59

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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Well, the estimate of the savings came from the work that the local authorities did themselves. Now, I accept that there will be a great deal of work to be done great deal of work to be done through the process as we transition to these unitary authorities, but quite frankly, authorities, but quite frankly, I've worked in a two tier authority in all my time in local government. I, I think that the the effort of going through the transition phase is well worth the, the end game here, which is to make sure we've got unitary authorities right across the country.

I know the noble Baroness Scott has done this exercise herself in her own council, so that we have a system of unitary authorities right across the country, and they will be the building blocks for the devolution programme when we start to or we continue to roll out devolution across the country. The figures that are being provided in terms of support for this process is £1 million in funding for every new unitary council, £900,000 in capacity funding and up to £150,000 of additional funding to support children's services, adult social care and public health leadership.

But we do we do think that this this is an investment to make sure that we've got a consistent system of local government across the country and that those savings that that councils have told us they can generate will occur.

17:00

Lord Shipley (Liberal Democrat)

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Lib Dems. >> My Lords, my Lords, the Prime Minister said yesterday, and I quote, that we will take power out of here and carry it into every postcode in the land so that they can do more. Indeed, the Minister has said the very same thing a moment ago, and yet this statement centralises power into unitary councils. It does not devolve power to town and parish councils. And I want to ask the Minister why they have been missed out of this statement.

They clearly should be a key part of the government's planned devolution to postcodes, and I hope the Minister will be able to reassure us.

17:01

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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Yes. >> Yes. >> My Lord, I think the noble Lord was part of the discussions on the Devolution and Community Devolution and Community Empowerment Bill, which set out very clearly the role of town, town very clearly the role of town, town and parish councils as we develop neighbourhood governance processes. So where and I spoke to, I went to the Nalc, the National Association of Local Councils conference just recently and spoke to them, and they will be fundamentally involved and engaged in that neighbourhood governance process, because the noble Lords quite right that we need to make sure that where funding is devolved, it doesn't stop in the in the mayoral authority that there is a devolution from that to our communities.

We're very keen to see that happen. The dialogue with town and parish councils is ongoing, and I look forward to those discussions with them as we take this process forward.

17:02

Lord Porter of Spalding (Conservative)

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But it's obvious that you cannot make an omelette without breaking eggs. But this does seem to have left rather a lot of shell in there. left rather a lot of shell in there. If we listen to the complaints that we're hearing from around the country, can the Minister confirm country, can the Minister confirm that if the new Prime Minister's focus for the department will be on mayoral devolution to mayoral combined authorities, that the department actually has the bandwidth in this Parliament to deliver this set of unitaries that have just been set out, because it's clear from some of the conversations we're having that there isn't enough bandwidth in the department to deal with all of this.

Now, if you add to that the mayoral stuff that you're going to be running that set of civil servants off of their feet, and I don't think you'll have the capacity to deliver it.

17:02

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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Well, I'm grateful to the noble Lord for mentioning a new Prime Minister, because I think he's Minister, because I think he's quite keen on devolution, and that might have something to do with the background that he's had in the last few years. I'm sure he'll want to see those building blocks of strong unitary authorities in place, so we can get on with the devolution process without further delay. Local government reorganisation is an existing policy. It was already well underway, and the £63 million of funding that places will receive to support them with transition costs had already been agreed.

So we've announced this now. I do expect to you know that my department will be having active discussions through our new Secretary of State, Angela Rayner, who I really welcome to her new role about how we do this going forward. And we have already asked those local authorities to consider the footprint they want to see for their foundation. Strategic authorities. The noble Lord asked about bandwidth in the department. The department has been outstanding so far in managing this process. In terms of providing us with the information we need to take effective decisions against the criteria that we set.

17:03

Lord Bach (Labour)

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Lord. >> Lord. >> My Lord, may I. and.

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and. The government on its decision. To extend. The boundaries of the City of

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The boundaries of the City of Leicester. Does she agree with me that its current boundaries are absurd and should have been extended years and years ago as a as half of what is really. The city is presently administered by other authorities. Does she agree to that? The City of Leicester desperately needs more land for business and housing, and does need much greater local funding in order to be able to satisfy its inhabitants. Finally, does she agree to with me that the gerrymandering accusation that is made is laughable? If anything in the city is allows other parties who haven't had a look in for many, many years away into Leicester government's and something that they should stop complaining about.

Yeah.

17:05

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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Well, I'm grateful to my noble friend, as ever, and particularly for his championing of Leicestershire, which he does admirably. The government was always clear that boundary changes could be considered where there is could be considered where there is a strong justification, and where proposals set out a credible case. We have considered these on their merits, and this reflects the aim to ensure that new councils are able to deliver effectively for their communities over the long term, including supporting future growth. And I think the point that my noble friend makes is really important in this.

Some of our some of our cities and towns are constrained by boundaries, which came from a different era. If we are going to maximise the growth from those areas, we did need to accept that there may have to be boundary changes. They're not a deviation from our stated criteria. They were absolutely part of our considerations to make sure we met. The challenge of growth going forward for our towns and cities, but also that we we enabled our local authorities to come forward with proposals that made sense to their local area.

17:06

Lord Swire (Conservative)

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So that. a record. >> Of trying to destroy what it regards as the Tory support, particularly in the shires, and we particularly in the shires, and we saw that with their approach to the candid approach to regional assemblies, which got nowhere. I don't know how well the noble Lady the Minister knows Devon, my own county, but she is delivered on the agenda which has been pushed for many, many years by Labour dominated Exeter City Council, who had its eyes on the rich plains of my old constituency of East Devon, which under these proposals it will now have.

I believe these proposals for Devon do not serve the people of Devon to have four different local unitary authorities, and I would ask the Minister simply this. The government has made a great announcement in the last 24 hours that all policies in future are going to be subject to rural proofing. What rural proofing has been done on these proposals for the fourth part of these Devon proposals, which will leave a great swathe of rural Devon under-represented in the wealth, concentrated in the three other unitary authorities.

17:07

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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I'm sorry, I'm going to sound a bit like a stuck record, but the proposals came forward from the proposals came forward from the local authorities themselves. The announcements that are being made, the announcements are being well, we we we looked at all the proposals that were submitted and we assessed them. I mean, noble, noble Lords opposite can laugh if they want. I've been through this whole exercise of assessing every single proposal that came forward against the criteria that were set for them.

We did that fairly. We did it against the criteria that were set, and we looked at every proposal to see how they best fitted the criteria. And these are the decisions we've made. Now, I absolutely accept that not everyone's going to agree with those decisions going forward, but we do. We did need to make sure that we took account of both the growth, the need to grow some of our towns and cities, the need to have sustainable and resilient public services going forward.

That was a really important consideration in this, and that was where we got some advice from other government departments and also the where we were setting the boundaries was going to make a cohesive community. So that's they were the primary considerations as we set out in the original invitation letter. And all of the proposals that we received were considered against those.

17:08

By Lords. As a. >> I always represented about 3000 electors, but they. And I always had the certainty and clarity of where responsibility lay within the where responsibility lay within the London Borough for service delivery and the GLA, and where their strategic responsibilities lay. I don't believe that that has been historically the case for residents or councillors in districts and counties, and I wonder whether my noble friend could say more about noble friend could say more about what she hopes to achieve in terms of achieving that clarity, by the changes that are coming forward.

17:09

Lord John of Southwark (Labour)

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I'm grateful to my noble friend for raising a very important issue, and those of us who have operated in two tier areas would look at London boroughs often and other

17:09

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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unitaries and the noble Lord Jamieson unitary was very close to my own local authority to see that my own local authority to see that that clarity is is much, much more easy for the public to understand easy for the public to understand in a unitary authority. My noble friend is right to point out that these problems come with these problems come with duplication and the benefits of eliminating that. For example, Buckinghamshire Council estimates Buckinghamshire Council estimates it costs around £30,000 a year just to tell people that they've got the wrong phone number.

Those sums can be taken out and that funding now available to invest in frontline services. The Secretary of State has announced an outcomes framework, so residents can then see for themselves how well their council performs, but they should be judged against the same set of services. And I very much look forward to the lack of confusion and to not having to have discussions, as I did many times in my own authority, about what a street trees and what a highways, trees and who should be looking after which set of trees.

17:10

Lord Lansley (Conservative)

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Lord Doyle draw. interest. >> As chair of the. >> Cambridgeshire Development Forum. >> The noble Lady. The Minister. >> Said that no decision has been made on Unitaries in Cambridgeshire made on Unitaries in Cambridgeshire and Peterborough. I looked at the letter that was sent to leaders of local authorities, and it did not explain why a decision had not been reached. It did not explain what further evidence needs to be gathered in order to make a decision before October, as the Minister said, and of course, tomorrow this House is to debate the establishment of a development corporation in Greater Cambridge on a territory that is aligned with where the expectation was one of the unitary authorities would be, and now we will not know what the geography of Unitaries in Cambridgeshire will be at the point at which we make that decision.

So can the Minister tell me what is what is the reason why a decision could not be made in Cambridgeshire?

17:11

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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Well, I'm very grateful that we will be debating that issue tomorrow because at one point this tomorrow because at one point this afternoon I thought we might not be, and I'm very pleased that we'll be debating the Cambridge Development Corporation tomorrow in relation to Cambridgeshire and Peterborough. Of course, local government reorganisation is a very fundamental change that will affect residents for generations to come. Given the significance of Cambridgeshire and Peterborough for national economic growth, which I know the noble Lord will understand from very close quarters, it's very important that we take the time required to get this right, and the Secretary of State has indicated that we will aim to reach a decision on which option to implement by October at the latest.

So we're still committed to the existing timetable, but we did want to take account of some of the growth issues that are still emerging as we go through the next phase of this decision making.

17:12

Baroness Bennett of Manor Castle (Green Party)

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My Lords. >> My Lords. >> My. >> Lords.

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Lords. My Lords. My Lords, thank you. I declare my position as Vice President of the Local Government President of the Local Government Association Association and the Nalc. The Green Party shares many of the concerns expressed from the front benches and indeed the backbenchers all around your House, your Lordships House, about the question of process and the imposition from Westminster of arrangements on local areas. But my question follows on from that of the noble Lord Lord Shipley, about parish and town councils.

Now the noble Lady, the Minister in responding, said that there will be support because these are obviously going to be the remaining local representatives that people can go to with very local issues. The Minister said this would be strengthened, but there are, of course, many areas of the country that don't have parish and town councils very often. These are newer developed areas and these are generally poorer areas. Is the government seriously looking at expanding the coverage of parish and town councils so that people will have a local representative that they can go to, rather than the far distant unitary councillor?

17:13

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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Well, first of all, I don't think that they will be far distant think that they will be far distant unitary councillors. My in my experience, councillors have a great connection with their local area and they will continue to do area and they will continue to do so. But to answer her question in two ways. First of all, the. There is still a process where people can apply to have a parish or town council for their area. That process remains in place if people wish to set up a town or parish council, they can do so.

But the other thing that's coming through very shortly from the from the English Devolution and Community Empowerment Bill is the neighbourhood governance process, and the details of that will be set before the House very shortly. So

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we can debate those as well. My Lord. Can my noble friend confirm, can my noble friend confirm that, my noble friend confirm that, unlike possibly some other areas, the proposals for Worcestershire for two unitary authorities geographically are divided on North and South have come from the and South have come from the councils themselves. The. The. The seven district councils who have

17:14

Lord Faulkner of Worcester (Labour)

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seven district councils who have worked together to produce the two. The. The two the. The two authority model. And that's survived changes in political leadership and has been approved by councils and very, very different political complexion. I hope there will be the possibility at some stage to explain why it is the right decision. But the Secretary of State's letter says the proposal will allow each council to shape housing and economic strategies around its own area, including local issues such as land supply, affordability, regeneration, workforce needs and business strengths.

These are the reasons why the local people in Worcestershire and the local councils in Worcestershire are supporting it, and I'm delighted that that's what the government has decided. Yes.

17:15

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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Well, I thank my noble friend for his his welcome to that for his his welcome to that decision. He's quite right, of course, that these proposals were course, that these proposals were put forward, the decisions where we. Of course, there are areas where there were different opinions. There were different opinions within political parties about how things should be done, as well as differences between political parties about how things should be done. And we that's why it was very important that we judge absolutely against the criteria that we'd set.

In response to his question about the rationale for the decisions, each of the areas that has been subject to this latest. Well, all of the areas that have had decisions on them will receive a decision letter from the government setting out the rationale behind the decision, which I hope will help local areas to understand how the process has worked. But it was, as I said, and I will keep stressing this. The proposals all came forward from local areas. We haven't designed any of these proposals in Westminster.

17:16

Lord McLoughlin (Conservative)

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Conservative sceptical like Lord Grocott as to the alleged savings Grocott as to the alleged savings that are going to be coming as a result of this, can the Minister result of this, can the Minister tell us what what mechanisms are in operation to stop councils which will be altered in their in their status unchanged, embarking on large contracts between now and the new authority dates?

17:16

Baroness Taylor of Stevenage, Parliamentary Under-Secretary (Housing, Communities and Local Government) (Labour)

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Well, that's a very important issue indeed. And we did we did pick this up early on in the pick this up early on in the process. And the Secretary of State has written to all tiers of local has written to all tiers of local government asking them to negotiate. What if they are undertaking big contracts? And sometimes that's necessary because if your contracts running out, you can't wait till you've got your new authority in place. But where that happens that they do work in partnership across the local authorities involved to make sure that everybody understands what's being committed to the same with capital disposals.

We've asked that all local authorities make sure they're working in partnership so that everybody understands what's happening, both with capital and with contracts.

17:17

Lord Holmes of Richmond (Conservative)

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Has to be in committee on the >> Has to be in committee on the Commercial Payments Bill Lord Leong. >> My Lords, I beg to move that the

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House do now resolve itself into a committee upon the bill. The question is that the House

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The question is that the House do now resolve itself into a committee upon the Bill, as many of that opinion will say, content contrary, not content. The contents

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have it. In clause one, amendment one. Lord Holmes of Richmond. My Lord.

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Lord Holmes of Richmond. My Lord. It's a pleasure to start this Committee stage of the Commercial Payments Bill. In doing so, I declare my relevant technology interests as adviser to the Crown Estate and Simmons and Simmons LLP, Estate and Simmons and Simmons LLP, and as non-executive director of Avalanche Foundation. Avalanche BVI Avalanche Foundation. Avalanche BVI incorporated. My Lords, this bill is incredibly significant, particularly if you are a small or micro business who has found themselves for far too long on the wrong end of late payments.

And in many ways, my amendments in this group and I rise to move amendment one and to speak to amendment nine, go to the very essence of the bill. There is much that significant in this bill, but largely all of it is subsequent to that fundamental point around 60 days and 30 day payment period. Everything else in the bill is largely supportive of that reality. So in this first group of amendments, I believe it's critically important that the bill is absolutely precise as to when the clock starts and indeed when it ends, because it's entirely possible, as the bill is currently drafted, and not only possible, but it is an actuality for thousands of businesses out there being told that they are receiving 60 day payment terms, and in reality, the payment may not arrive within 60, 80, 100 up to over 120 days.

And that is still possible with the bill in its current form. And there needs to be greater precision at the start point and the end point of that clock. Amendment one in my name goes to that start point and suggest that the purchaser purchaser has to give clarity to the supplier of how they are to give notice. This is critical because the situation at the moment is that time can disappear with an invoice or other notice being given by the supplier in good faith, only

17:20

Amendment:1 Lord Holmes of Richmond (Conservative)

to find themselves bounced around to find themselves bounced around that other, often larger business. Not necessarily because they're Not necessarily because they're gaming, but in. Sometimes that is certainly the case, but by the certainly the case, but by the nature of multi departments, multi point. Until that 60 day clock point. Until that 60 day clock starts. So amendment one addresses this and sharpens up how that notice period has to be begun. And indeed, if that clarity isn't provided, the amendment gives clarity of itself that that notice can be deemed to have been given by the provider of that product by means of a recognised document, which anybody in business would recognise.

The obvious being an invoice. Similarly, amendment nine goes to the issue of verification and to stop as a consequence of this bill verification being used to expand or extend terms which are other than what the Bill seeks to achieve. So together they both look at that start point of the clock to give the precision which is required to stop the sense of days going by before day one is triggered. We'll come to amendments later in later groups, which go to the effective precision around ending the clock.

But these amendments, particularly amendment one, I believe, give the precision that is required for all involved to know that day one to all involved means day one. I look forward to the debate of the Minister's response. I beg to move.

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Opposed. Clause one, page two. Line five at end. Insert the words printed on the first page of the

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printed on the first page of the Marshalled List. Amendment one. My Lords. I rise. To speak to amendment ten in

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To speak to amendment ten in this group in my name. But before that I would like to commend. The noble.

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Lord home for amendment one and nine. They seem to be eminently sensible suggestions, and I wonder sensible suggestions, and I wonder if if the Small Business Commissioner makes very clear their view on. When the clock starts ticking, that would be the. The. The process by which, should any dispute become necessary, it would be very clear. So I would say at the very least, there needs to be clarity from the Small Business Commissioner. If indeed these amendments are not accepted.

But speaking to amendment ten, and I thank the noble Lord Sharpe Hunt and Leigh for their support, I think the intention of this amendment is clear. Increasingly, economic activity is switching from familiar structures and supply chains to one where businesses market their goods and their services via third party marketplaces and intermediaries, and the subsequent payment is going back through those intermediaries. This amendment brings such marketplaces and intermediaries into the context of this bill. 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 on a supplier's behalf to pay it within seven days, regardless of how the intermediary is legally categorised.

Now, I think this is a fair change, my Lords, and I'm sure there will be resistance from the sector, and the focus may well be on the time needed by the intermediary to actually make the payment to the to the vendor. There may possibly have to be a distinction made when an intermediary actually has control of the goods in a warehouse, versus where it is purely acting as an agent. Now, I'm happy, my Lords, to have a discussion and debate about this, and there may be ways in which this can be dealt with, but I think at the end, it would be very remiss for this legislation to leave your Lordships House without any provision, either primary or secondary, for the Small Business Commissioner, to have the power or take the power to bring intermediaries into the into the remit of this Bill.

17:25

Lord Sharpe of Epsom (Conservative)

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My Lords, I thank my noble >> My Lords, I thank my noble friend Lord Holmes of Richmond for introducing this debate, and I welcome all noble Lords back for what I'm sure will be a productive Committee stage. My Lords, beginning with amendment one, I understand the principle between my noble friend's approach. This bill performs a balancing act relatively successfully between good payment practice and regulation. In achieving the former, we do think we have to be careful to not overstep into the latter.

And it is my interpretation that section two B, within clause one, already succeeds in ensuring both parties to a contract are made aware of the payment terms in the four cases accounted for, so that for that reason, I am hesitant to support requiring the purchaser to give instruction as to how a payment notice should be given. But along with the noble Lord Lord Fox, perhaps the noble Lord, the Minister could first outline what the government regards as best practice for issuing notices under the Bill, which may very well include the Small Business Commissioner, making it extremely clear what they think are the right best practice terms for issuing these notices.

My Lords are much more supportive of my noble friend's amendment, number nine, which prohibits the increasing of a verification period after the day upon which this bill is passed. This bill is about increasing payment efficiency and ensuring that the verification of a payment does not take longer than previously necessary is obviously a core part of achieving that. My Lords, alongside my noble friends Lord Hunt of Wirral and Lord Leigh of Hurley, I've also added my name to the noble Lord Lord Vaux amendment number ten.

It's eminently sensible that an intermediary should not be used to either delay or circumvent payment terms. In other words, an intermediary should be used as an intermediary, so ensuring that payments go through third party swiftly, efficiently and that the payment is not treated as complete until it reaches its final destination, is surely the key to improving payment practice. So I hope the noble Lord, the Minister will agree in his response.

17:27

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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My Lords, firstly, let me thank all lots for their contribution in all lots for their contribution in this short debate and also to thank them, especially not homes and Lord them, especially not homes and Lord Fox for amendments one and 9 to 10. And I pay tribute to the noble Lord, Lord Holmes, for all his work in the area of AI and digital technology which we. We welcome. My Lords, I recognise that these amendments are tabled in a constructive spirit, seeking to ensure that suppliers are paid promptly, which we all do not disagree, that payment processors are clear and that purchasers cannot use contractual mechanisms to delay payment unjustly.

Those are the aims which the government shares. Amendment ten would create a new legal requirements for intermediaries, including online marketplaces, to send payments to a supplier within certain time limits. I understand the concern underlying the amendment. Where a small business sells through a platform or marketplace, it is important that money due to that business is not held unnecessarily. Unnecessarily. However, that is neither the purpose nor the structure of this bill. This bill focuses on late payments under commercial contracts for the supply of goods and services.

It strengthens the consequences that arise where a qualifying commercial debt has been created and where payment is overdue. It sets clear limits on payment terms between suppliers and purchasers, purchasers and strengthens the framework for interest enforcement and accountability. Those protections already apply where there is a relevant commercial contract between a supplier and a purchaser, including where the purchaser, where the supplier is ultimately paid by an intermediary. But where a platform or marketplace is merely holding, processing or transmitting funds between others.

This bill is not intended to regulate the wider intermediary relationship. To accept this amendment would therefore move the bill into a different area of regulation. It would establish a new statutory regime for online marketplaces and payment intermediaries, rather than maintaining the bill's clear focus on commercial payment practices between suppliers and purchasers. As such, while I respect the intention behind the amendment ten, I do not believe this bill is appropriate legislative vehicle for it. Now, turning to amendment one, tabled by the noble Lord Holmes, this amendment seeks to ensure that purchasers provide suppliers with greater clarity on how notices under the new section two B are to be served.

Again, I understand the practical purpose of the amendment. Suppliers need to know when they have properly notified a purchaser of the amount due. Purchasers also need clarity to show that payment processors are efficient and disputes are avoided unnecessarily. However, I hope to reassure noble Lords that the Bill is already sufficiently clear on this point. As part of the late payments consultation, we asked businesses on whether the trigger events under the late Payment of Commercial Debts Interest Act 1998 are still appropriate.

Businesses told us that those triggers should be kept. They did not identify a material problem where, with clarity of service of notices. Clause one therefore provides that a payment period can begin on the day on which the purchaser has notice of the amount of the payment. The government's view is that this formulation is clear, familiar and practical for business. When developing this bill, our intention is not to limit all the ways in which a business can provide a notice to pay, as businesses often have their own systems and relationships suppliers.

We also do not want to impose requirements on purchasers or suppliers with regard to the specific systems or forms of notices that should be adopted, or to suggest which of the parties should have the power to determine what form that notice should take. Businesses should be open to determine the systems they have in place for themselves. For that reason, I do not consider amendment one necessary in relation to amendment nine. I fully understand the noble Lord. Lord Holmes wishes to protect suppliers from unnecessary and unwarranted contractual changes, especially where the only effect of those changes is to provide the buyer with longer verification.

The government agrees that suppliers should be paid on time for goods and services supplied properly. Verification verification must not be used as a means to postpone payment. However, acceptance and verification procedures are recognised and legitimate features of many commercial contracts. They allow a purchase to verify that the goods or services supplied meet the agreed contractual requirements before payment falls due. In many cases,

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That process will be straightforward and brief. In others, it may legitimately take others, it may legitimately take longer. There are sectors where more detailed verification is essential and required. Safety essential and required. Safety critical products complex services may require careful inspection, may require careful inspection, testing or. One can think of a shipbuilding. Aerospace components, shipbuilding. Aerospace components, jet engines, specialist machinery, infrastructure, equipment or other technically complex products. In those circumstances, a purchaser may need a longer period to confirm that the supplied goods are safe, compliant and fit for purpose.

My Lords, therefore, the Bill therefore strikes a careful balance. Unless the parties agree otherwise, the verification period is deemed to be completed by the end of 30 days from the relevant trigger point. If a purchaser wishes to agree a verification period longer than 30 days, the longer period must be fair and reasonable. That is an important safeguard. It prevents purchasers from imposing unjustified verification delays, while still allowing longer periods where they can properly justify. By the nature of the goods, services or sector involved, the difficulty with amendment nine is that it would impose a broad restriction on extending verification periods when contracts are updated or replaced.

Even where such an extension is fair, reasonable and commercially necessary, that could have an. That could have unintended consequences. It would discourage purchasers from buying new, complex or innovative products if they cannot secure an adequate verification period. It would also create difficulties in sectors where product development, safety assurance, technical testing requirements evolve over time. The government's approach is therefore to protect suppliers from unreasonable delay without impeding the legitimate verification arrangements. I believe the bill already achieves that balance.

My Lords, I therefore ask that

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amendment one is withdrawn. I thank all noble Lords who have

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I thank all noble Lords who have taken part in this debate and the Minister for his response. I think Minister for his response. I think in terms of amendment one, it is not a sense of seeking to be overly not a sense of seeking to be overly prescriptive. It's merely seeking to be clear. And while I understand the minister's point, I think

17:34

Lord Holmes of Richmond (Conservative)

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the minister's point, I think there's still somewhat of a gap in the middle, both with the provisions. If amendment one or amendment nine aren't accepted, where there's possibly too much space, where what the purpose, the purposes and provisions of the Bill are seeking to achieve may not come to pass, but for the time being, I beg to withdraw amendment one.

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Is it your Lordship's pleasure that amendment one be withdrawn? Amendment is by leave withdrawn.

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Amendment two. Lord Holmes of Richmond my Lords, there's a wonderful structure to the grouping so far. Group one, start with amendment one. Group two starts with amendment two. We're starts with amendment two. We're all following so far. I, I rise to move amendment two in my name and move amendment two in my name and speak to amendment seven. Amendment two is very simply a probing amendment and seeks to suggest 30 days as the period period. So no sense of different payment periods.

Be you a local authority or not. 30 days now. In no sense am I expecting this to be accepted into the bill. My purpose is in putting. The amendment is to test where the thinking is in terms of bringing those positions closer together over time, because ultimately, and we'll come on to this in later groups. The potential is obviously through smart contracts and fintech solutions. It's possible to have all of the terms set out. And once those terms are satisfied, atomic settlement automatically occurs by virtue of that smart contract and payment is instant.

Now we're not there. And indeed, on that journey, accessibility and inclusion, not least digital inclusion, need to be at the. For an alternative, means always needs to be in the mix, but in that. That is entirely possible. Today, 60 days seems somewhat old fashioned in the light of what is already possible. It's fair to get all to try and get to the 60 day point, because as noble Lords will know, and even more small and micro entities out there know even more painfully.

Oftentimes, never mind 60 days, they're on double that, if not more. But I'm interested in the government's plans to bring 60 through 45 to 30 and a continuing route, and what the plan is to keep reducing that, because 60 is still far too long. And in most instances, even today, not really justifiable or necessary. Amendment seven goes to the end point of stopping the clock to have some greater precision as to what is the end point of that 60 or indeed 30 days.

I've used unencumbered funds as a proxy for that. It's not suggesting that is the best measure or the only measure, but I think there's a need currently to have a more precise measure. And to put that in very practical terms, what this means for the service provider, because if 60 days is always extended at the outset and then potentially stretched at the end, so the funds only finally get telegraphed on the final day. And then there's a number of days, obviously, for those funds to be unencumbered in that businesses account.

Well, that's not 60 days. I appreciate there are difficulties in trying to then work out what is standard practice for various financial services institutions to clear their funds. But there are industry standards which perhaps could be considered, if not included in that 60 day period. I look forward to the debate. The minister's response. I beg to move.

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Amendment proposed clause one, page two. Leave out lines eight and nine and insert 30 days. I should advise the committee that if this amendment were agreed to, I will be amendment were agreed to, I will be unable to call amendments 3 to 5.

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unable to call amendments 3 to 5. The reason of pre-emption. Howard. Well. I.

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I. Arrive to follow. The indefatigable Lord Jones. And congratulate him on.

17:39

Lord Leigh of Hurley (Conservative)

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His amendments two and three, and I agree there's a real risk and I agree there's a real risk that 60 days will become default, whereas 30 days is the market norm. whereas 30 days is the market norm. I did take the trouble to check with my co-directors of my family company, which I declare an interest along with the others on my register, and he tells me that which I didn't know that we always pay the week after receipt of invoice. So one doesn't want to do anything that encourages companies to pay longer than their current.

Their current practice is the case, and the government perhaps made it clear that the maximum. It's a maximum. But people who are paying earlier. Thank you. Good luck to them and carry on. In respect of amendment four, we do need to clarify what is a public authority for these purposes. It's very important. Important. But on the meat of the group and in terms of a company are involved in a special administration. I'm grateful for advice and guidance given to us by some suppliers who have been in touch and are affected by this.

It's estimated that some £835 million will be written off by those who are term as water suppliers, and that's just the direct cost. There will be a ripple effect for subcontractors and others. And this doesn't seem right that even though a supplier will be paid after an SAR, they may have to write off all their invoices for services provided to Thames Water before an SAR, and this could be a disaster for many SMEs. And of course they have to.

They contractually have to keep supplying to make sure that, for example, the sewage isn't running in the streets and the other essential services of Thames Water. So this is very acute and needs immediate attention. On behalf of the government. I'm surprised that the noble Lord Fox hasn't signed our amendment 100, as he normally likes these sort of reviews, but I hope he and all others see the merit in having that. In respect of clause 51, it's a bit of a probing one, but could become very important, as we could see in the future.

Large purchases contractually forcing smaller companies to accept cryptocurrency. It's not specified that it's cryptocurrency in the amendment, but it's clear that's what we mean. And many people wouldn't want to be forced to accept cryptocurrency. But such is the power of a larger company, they may find themselves in a position. So to do so, it's predicting what might happen in the marketplace and asking the government to think about it now and let us know its view. It's perfectly reasonable for this to happen if both parties genuinely agreed, but not if one is frankly bullied into it.

And I'm very interested in Baroness Bowles amendment 52 and look forward to

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hearing her arguments. For it to rise. I will. Speak to my amendment.

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Speak to my amendment. 52, but first I must apologise to the Committee that I was unable to speak at Second Reading, my scrutiny. Hours having been occupied in the passage of another occupied in the passage of another Bill, which also accounts for why this was rather a last minute,

17:42

Baroness Bowles of Berkhamsted (Liberal Democrat)

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almost literally amendment. And so no discussion with with anybody. I would have liked to have given it some airing. Now, I wholeheartedly support the core intention of this bill, and I'll make no secret of the fact that I would have preferred an immediate 45 day limit rather than 60 days. But scanning through the bill and the amendments once I was released to have the time to do so, it seemed to me that there is a blind spot in that there were no rules to ensure that small businesses could receive stage payments, leaving them at risk of being forced to rely on end of contract invoicing.

Now, in some instances, way stage payments may be agreed, but many businesses feel that they cannot take the risk to bid for a contract in the first place. Others are exploited and put dangerously at risk of non-payment in contractor insolvencies, the very issues that the bill seeks to resolve. So there is a huge loophole in the government's own consultation phase. Last year, small business federations and independent suppliers explicitly warned against an invoice centric blind spot. And yet here we are with it unsolved.

And we need to look. We don't need to look far for a solution. Stage payments have been a standard procedure in construction for 30 years, so why not follow that precedent? If it works for construction, why not for the wider economy? So my amendment proposes a simple entitlement for contracts exceeding 45 days. Small undertakings, which I've defined as. That's 50 employees must have the right to invoice at intervals of no more than 45 days. And if you do the sums on this under my amendment, a small firm must fund its own cost for 45 days before invoicing.

But then it still has to wait up to 60 days for payment. That's 105 days, three and a half months before a single penny arrives, and during which all the salaries and business costs have to be paid. That's still an enormous burden. But without this amendment, that gap is effectively uncapped. If we really want to support the small businesses that are the backbone of the economy, then we must stop asking them to act as the industry bank for big business.

If large contractors employed their own staff, they would not be able to delay paying those salaries for months on end. So why should they effectively be allowed to do that to their suppliers? I don't claim my amendment is perfect. In reality, I am being generous to large undertakings. The ultimate standard should be the monthly invoicing cycle we see in section 109 of the Construction Act 1996. My proposals are modest, pragmatic bridge towards that standard. You might note my 45 days is halfway between the 60 days and the standard of the Construction Act, and it closes a loophole that would otherwise render the 60 day cap toothless in many circumstances.

17:46

Lord Sharpe of Epsom (Conservative)

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My Lords, I'm going to begin by picking up where I left off in Group one by briefly touching upon Group one by briefly touching upon amendment seven in the name of my noble friend Lord Holmes of Richmond. Just as we shouldn't define a payment as complete until define a payment as complete until it is passed through an intermediary and reached its final recipient. Nor should it be considered complete until the supplier has received all owed funds. So I therefore support my noble friend's amendment. My Lords, I completely understand the strength of the arguments that were made by just now by the noble Baroness Lady Vols of Berkhamsted on her amendment 52.

I think in particular, she raised a very interesting point about the likely deterrent effect of small businesses bidding for some of these longer duration contacts contracts, and I suspect that more work needs to be done on that very subject to find out exactly what the scale of the problem might be. For now, while we think we should, of course pay due regard to the ability of small businesses to make payments, but we don't think they should come at the expense of other businesses receiving them.

Making payments, of course, may create cash flow issues, but exactly the same can be said about not receiving them or receiving them in instalments. As this amendment suggests, we therefore prefer the blanket payment period regardless of business size, as the bill already suggests, while also acknowledging, as I've said, that we should be looking into this in more detail. My Lords, moving on to the actual length of payment periods, I suspect that the argument for shorter payment periods will continue to rear its head through the passage of this bill, so I'll begin by making His Majesty's opposition position clear.

We would like to see a move to shorter terms, but given the fact that businesses have been told that a 60 day limit will be implemented and have begun to prepare for that, that's what we plan to support. So for that reason, I cannot support my noble friend's amendment. Number two, whilst as I say, a shorter payment term is desirable, it would currently be too much of a jump to reduce this to 30 days immediately. The impact assessment suggests that the difference between SMEs using 60 day and 45 day payment terms is roughly 360,000 businesses.

I suspect this number would be significantly larger for those using 30 day terms. These businesses need time to transition, which is why I support the principle behind the noble Lord Lord Fox amendment 11, which requires the transition to a 45 day term over a five year period. My Lords, we can debate the exact number of days and the length of the transition period, but I expect that we all want this to move in the same direction. So for that reason, I hope the noble Lord, the Minister, can commit to, at a minimum, reviewing the length of private sector payment terms over a set number of years.

My Lords amendments three, five and 25 in my name all probe the same point. What is the status of a payment that is delayed past the maximum threshold, not due to a fault of the purchaser, and my amendments offer two examples. Firstly, my Lords, it is not uncommon for businesses to make their payment runs at the end of the month. These are often then processed over the next few working days, meaning that they are received several days after month end. And this is a scenario that amendments three and five account for.

We don't want to see the payment terms increased, but we also do not want businesses sacrificing efficiency and shunning payment runs because there is a chance that banks will be slow in processing them and the purchaser will be charged interest. So can the Minister confirm that interests will not apply in such cases? Amendment 25 offers another example that of delays due to public holidays. Can the Minister also assure the House that such delays pushing payments over the 30 or 60 day period will not be subject to statutory interest? My My Lords Amendments four and eight, also in my name, alongside my noble friends Lord Hunt of Wirral and Lord Leigh of Hurley, seek to probe the status of nationalised bodies.

This is simply to seek clarification as to which entity status they will fall under private or public bodies. Given the pertinence of British Steel and potentially now Thames Water and whichever other companies the new Prime Minister takes a disliking to, I hope that the Minister can provide an answer at Dispatch Box today. Speaking of Thames Water, My Lords amendments 42, 43 and 100 raise an issue regarding businesses placed under special Administration regimes and similar similar statutory moratoria, which I think which I thank very much, the Lanes Group for highlighting for us.

My Lords supply made after a special administrator's appointment is ordinarily payable as an expense, but no provision currently requires payment within any defined period. Suppliers to SA regimes cannot terminate for the insolvency and cannot make continued supply conditional on payment of arrears, so it is unclear whether the payment terms in this bill survive such a moratorium. Amendment 42 would ensure that such provisions do continue past entering administration. My Lords, Amendment 43 is based on much the same premise. Suppliers cannot make continued supply conditional upon the payment of arrears and payment protection under the Insolvency Act of 1986 only applies prospectively, so this amendment ensures that the receivable.

Excuse me that the receivable has the ability that the ability to withdraw supply is protected is once again protected. I should say sorry, the sums owed would be restricted to undisputed sums and could be subject to caps and eligibility limits set by regulations. Amendment 100. My Lords, would require a review of this process as a whole, and I think it's apt that when we have been considering the nationalisation of certain companies and will soon be considering the placing of others under special administration, that there should be a review of how associated business are impacted by these measures and how the system operates as a whole.

So I hope that the noble Lord, the Minister, will agree that now is such a good time to undertake such a review. And, my Lords, amendment 51 prevents a party to a contract forcing another party from using payment methods other than that which is contractually specified. My noble friend Lord Leigh of Hurley has done much to highlight this, but we do not want to see smaller businesses bullied into using. For example, the example my noble friend gave cryptocurrency just because it suits a larger business partner.

So I hope the Minister will agree with this and the many other points that have been raised.

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Yeah, yeah. The Lordships have shown a degree of creativity, I think, on this group. We've talked about end of month processing, about end of month processing, public holidays, the effect of on privatisation or nationalisation or privatisation or nationalisation or special administration. And we've just heard crypto payments. And I

17:52

Lord Fox (Liberal Democrat)

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think of those four, I would ask that the Minister focuses first on the special administrative point that was made by by the Lordships Lee and sharp, because I think that is one, clearly that we're going to be moving into very quickly. So I would urge some some action around that. But the the the two issues where we've had more talk is around the, the time maximum and on stage payments, I should say the, the first proper job I had, I was sent to a foreign country that was very hot to go to the National Oil Company and try to get paid.

The days receivable at that time was 645. So and I failed, I have to say so. So 60 days maximum in that context starts starts to look like a step forward. But of course, it really is a point that the noble Baroness Bowles made. If if it actually sticks to 60 days, then small companies really are subsidising the the free cash or the cash flow of their their customers. So that's why I think amendment 52 puts it on statute, a way of materially helping small businesses where cash flow really is an essential existential concern.

And I think my noble friend set that out with her usual precision. And and we look forward to the minister's response. Now, turning to the point of the 60 day limit. And I thank the noble Lord Sharpe for his encouragement with my amendment. 11 because in a sense, I think what I've tried to do is, is square the circle, as the noble Lord Sharpe set out, the businesses are set up at the moment for a 60 day limit. However, much of the consultation process proposed a 45 day limit.

So going, as we say, much further than the 6060 day limit, and we've heard various arguments in in either direction. My amendment 11, I think, is a way of pointing a direction of travel, which I think is putting down a marker. And I'm very happy to discuss different ways of doing that. But it requires the Secretary of State within five years, either to lay draft legislation, reducing the maximum period from 60 to 45 days, or to explain to Parliament why it isn't.

And I think it also then makes it very clear to business, to the boat, all sides of the supply chain, where this is headed, and then some of the technology that the noble Lord home talked very eloquently about will be in place, and rapid payments really will be available to do so. I think there's some important bones for the Minister to pick through in this group.

17:55

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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Firstly, let me thank all noble Lords for their contribution and also to thank them for their amendments in this group. The government shares the objective of government shares the objective of fair payment rules and is committed to ensuring businesses, especially SMEs, are paid promptly. The six day period was set following extensive consultation with industry, with over 850 responses, responses across all sectors and business sizes, the government considers a 60 day cap to be balanced and proportionate approach. My Lords, if I say I mentioned that Second Reading, there's no reason why businesses can't pay before 60 days, and I think most businesses do.

And I'm sure noble Lords here who have businesses who do pay a much earlier than 30 days, and the department, the Department for Business and Trade, which is now called the Department for business, science, innovation and and trade based 99% of its bill within 30 days. So that's what we're trying to do is encourage behavioural and cultural change. So 60 days is a maximum. And I'm sure most businesses do pay within within that period itself. Now this

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represents a significant strength. Just ask the Minister and he may

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Just ask the Minister and he may not have it at his fingertips. So if he could. Right. Does he have if he could. Right. Does he have the analysis from the various levels and sizes of entities that respond to the consultation, respond to the consultation, married to the to the length of time which they sought in that so time which they sought in that so effectively can does the research give an interesting picture of which size of entities were asking for which length of payment period? Thank you.

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I'm sure we do. In response to the noble Lord, I will obviously speak to officials and. And make speak to officials and. And make sure that I share that information with all noble Lords. My Lords, this represents a significant strengthening of existing law, strengthening of existing law, where payment terms of more than 60 days are often imposed upon days are often imposed upon suppliers. Some smaller businesses argue that 60 days remain too long, while some large, larger businesses while some large, larger businesses express concerns about the impact of maximum payment terms on working capital and establish commercial arrangements.

The 60 day period, therefore, represents a carefully considered balance between those competing concerns. Amendments two and 11 would reduce payment periods, either by creating a statutory expectation that the maximum period will be tightened in future, or by reducing the cap for non public authority purchasers to 30 days, reducing the maximum period to 45 or 30 days may not work effectively across all sectors, particularly those with complex supply chains. Amendments three and five would move in the opposite direction, extending the maximum period to 35 days for public authorities and 65 days for other purchasers.

The government cannot support these changes either. For public authorities, the bill's 30 day period is aligned with wider public procurement rules. Extending those periods would weaken the bill's ambition and delay payments to suppliers, including small businesses. Amendment seven is seeking to define payment more clearly by reference to funds being received could result in purchasers who have done their best to pay on time, being punished for issues that are out of their control. For example, where a payment instruction has been made on time by the purchaser but is subsequently delayed by banking processes outside the purchaser's control, the government believes that the bill provides a sufficient clarity and improvement of payment practices, taking into account the need for business flexibility on how payments are made.

Amendment seven also seeks to bring advanced payment and construction payment within the scope of section two B, which would not be workable in practice. These exclusions are deliberate features of the bill and are necessary to ensure that the different payment regimes operate effectively. Advance payments are due before the supplier has performed the relevant contractual obligation. It is right, therefore, that they are excluded from the payment terms provision. Once the supplier has performed its obligations, statutory interest may arise if payment is late.

In regards to amendments four and eight, we have not consulted upon any requirement that nationalised bodies should adopt shorter payment payment terms of 30 days, and this goes beyond the policy intention of the bill. Nationalised bodies are not public authorities and will be treated as other companies operating in commercial markets. We are cautious of unintended consequences and do not accept this amendment. Amendment 25 would create an exemption from statutory interest where a payment is delayed because of a public holiday.

Statutory interest is intended to compensate suppliers where payment is late, creating specific carve out for non-working days would weaken that protection and introduce uncertainty. Amendment 51 would prohibit purchasers from forcing suppliers to use a particular payment method different from that specified in the contract. The government does not consider this amendment necessary. Terms. Terms that are not agreed by the parties will likely be unenforceable, and if a purchaser withhold payments unless the supplier agrees to amend its terms, the Small Business Commissioner has the power to adjudicate payment disputes and investigate where a larger businesses persistently engages in poor payment practices.

Amendment 52 would create a right to instalment or staged payments for small undertakings, where the contract duration is expected to exceed 45 days. The government recognises the importance of cash flow for small businesses. The Bill addresses this by introducing a statutory maximum payment of 60 days in most commercial contracts, while allowing parties the flexibility to agree instalments or stage payments where appropriate. The government does not consider it necessary to regulate such contractual arrangements in legislation or add further complexity complexity and therefore does not support this amendment.

Construction payments are dealt with separately in clause two. The new section 2D payment terms for construction contracts. I turn finally to amendments 42, 43 and 100, which concerns special administration and insolvency moratoria. Amendment 42 is not required where goods and services are supplied after a purchaser enters special administration, the bill's late payment provisions will apply. Special administrators are independent office holders acting under court supervision and should not be treated as public authorities. Amendment 43 would cut across the Established in Insolvency framework, providing preferential treatment to one group of suppliers would disadvantage other creditors and would undermine the purpose of the existing insolvency regime.

Amendment 100 would require information that is not currently collected. Compiling it would create additional costs that would ultimately reduce whatever funds available for distribution to creditors. The government remains committed to ensuring payment is prompt and terms are as short as possible. Alongside this bill, the Fair Payment Code encourages businesses to move towards a 30 day terms and the reporting on Payment Practices and Performance Regulations 2017, which was brought in by the previous government, provides transparency over payment performance.

We will continue to monitor the impact of these measures and consider carefully other whether further action is required. My Lords, and for that reason, I respectfully ask the noble Lord to withdraw his amendment.

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Lords Minister sits down. Can I just push him a bit on a point, he said, which is that he said that said, which is that he said that amendment 43 could not be accepted because it would cut across all because it would cut across all insolvency legislation, because it would not be treating all suppliers equally or creditors as equally. equally or creditors as equally. Does he recognise that particular special situation of certain special situation of certain suppliers under the CPILPA 1998, whereby those suppliers are obliged to carry on doing business with the company SA Thames Water in this particular case? So they are not they're not the same as any other creditor, and therefore it would be

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possible and appropriate to treat them differently. Yeah. I'm grateful for the noble offer,

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I'm grateful for the noble offer, bringing that specific example. And I, I think I would really need to I, I think I would really need to be very specific about this because it's referring to a particular organisation. So I need to get my organisation. So I need to get my facts correct. And I will write to the noble Lord.

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My Lord, I thank all noble Lords who participated in this debate and for all their amendments and the Minister's response. I think it was already clear, but particularly with that final exchange, the SAR provisions are particularly

18:05

Lord Holmes of Richmond (Conservative)

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significant and could barely be more up to the minute, timely and more up to the minute, timely and in need of serious consideration to ensure that is got right. Because my noble friend Lord Lee points out, my noble friend Lord Lee points out, it is a very specific and a very different situation to most all different situation to most all creditors in those circumstances. I'd also like to thank Lord Fox for I'd also like to thank Lord Fox for his 645 day example of going to a hot country.

It's not clear whether the term was only 60 days when he went to that hot country, but he liked it so much that an additional 585 days got added to the term. And it's also fantastic to have Baroness Bowles on the bus for this bill. My Lords, I think we'll be coming back to some of these issues between committee and our report and to stress, again, particularly those pertaining to s r situations. But for now, I beg to withdraw my

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amendment to. Is it your Lordship's pleasure? This amendment is withdrawn. It is by leave withdrawn. Amendments 3 to

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5 En bloc Lord Hunt of Wirral not moved. Amendment six Lord Leong. My Lords, I now like to

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My Lords, I now like to introduce amendments in my name. Turning first to the amendments to Turning first to the amendments to the Procurement Act 2023. I hope noble Lords across the House will agree that the government and the wider public sector must set a good standard for good payment practice if we expect businesses to pay

18:06

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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18:11

Lord Fox (Liberal Democrat)

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This might seem like a lot of government amendments, but I remember when the noble Lord true brought 250 amendments on the first day of the procurement Bill Committee. This rather pales into insignificance. It does beg the question at what point did it dawn on the government that they needed to align across the legislative process? And it does to me, strike up something that should have been in the original document. And a lot of this is I'm glad that we've caught it, but it does seem to me be a problem that we didn't get it in there earlier.

But I, I, it all seems sensible to me as far as I could see. I actually had to go back over the horrors of the Procurement Act and reread bits of it, which did relive those moments all over again. But from my perspective or from our perspective, it seems to be OK. I will speak to amendment 77 and offer my support for the legislative backup for the Small Business Commissioner to actually exercise the right to recover costs. Now, I would have hoped that this was there anyway, but I think it's good to have the legislative backup.

And similarly, amendment 82 would enable the government to leverage the practical experience of the Small Business Commissioner. And I would have hoped that the government would have been leveraging the experience of of of the SBC. But again, this dots, dots and I and crosses a T. So, my Lords, from these benches, we're happy to

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accept the government's amendment. Well, my Lords, I'm also grateful to the noble Lord for his comprehensive explanation. And I'm comprehensive explanation. And I'm pleased that this sort of tidying up exercise, if you will, around existing legislation, is happening existing legislation, is happening because that actually forms the basis of the next group. We're about to debate all my amendments, which I'm now very confident the which I'm now very confident the noble Lord will accept. My Lords, I have two brief questions. Section have two brief questions.

Section 68 B of amendment 41 provides for an appropriate authority to make regulations altering the maximum

18:13

Lord Sharpe of Epsom (Conservative)

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payment term. It would be useful to know why the government believes that power to be necessary, and in which circumstances they might use which circumstances they might use that power. And one further question about amendment 102. This amendment permits the Chancellor amendment permits the Chancellor for the Duchy of Lancaster to make consequential amendments by regulations as well as the regulations as well as the Secretary of State. And so for what purpose have the government made that amendment? Why does the Cabinet Office need to be able to make such amendments, and is it not sufficient for the Secretary of State at the Department for business and whatever else it's called these days, to make sure such regulations.

And I'd be grateful to the Minister for answers to those.

18:13

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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Firstly, I thank noble Lord Fox and noble Lord Sharpe for for their contribution in this amendment in contribution in this amendment in my name. Firstly, look, in any legislation, it's better that we legislation, it's better that we sort of get it right in the first place. And I really appreciate, you know, the support given to the government in this group of amendments and all that. And look, there are a lot of tidying up. And as noble Lord Sharpe says, you know, it's best that we actually address it now here, which we are addressing.

Now, the point he makes about the Duchy of Lancaster is because procurement falls within the Cabinet Office, so I hence the responsibility lies with the Cabinet Office there. Now, in relation to his earlier question about the public authorities there, I need to get back to me on that. They therefore reinforce the principle that the public sector should lead, for example, in prompt payments provide much needed clarity on construction contracts within the scope of the Procurement Act, and make a number of minor but important improvements to the Small Business Comissioner provision.

So, taken together, enhance the effectiveness of the bill, improve consistency across related legislative frameworks, and provide greater certainty for businesses and public authorities alike. My Lords. I therefore beg to move

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amendment six and the rest of the amendments in my name. If I may, just recalling the

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If I may, just recalling the Procurement Act, that the Minister in this Bill is changing the Procurement Act. And one of the Procurement Act. And one of the changes is that the power to reduce the payment term below 30 days was the payment term below 30 days was was in the Procurement Act and is being renewed here, but of course, being renewed here, but of course, extended to construction contracts. But the Procurement Act, when it had this provision, the period was 30 days or later.

If the invoice had a due date, that was later, and I think that's been removed. I'm not entirely sure why public authorities, if they are received, if they receive an invoice that has a due date from the from from the supplier, which is later than 30 days, why they would not be able to extend it beyond 30 days.

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I mean, that would be inconsistent with this bill itself, because this bill, the maximum. Well, I mean, as far as public Well, I mean, as far as public authorities concerned, it sticks at 30 days. And what we're trying to do is to tidy this up. And any provisions that actually provide an extension of more than 30 days for public authorities will not happen. And that's why we're sticking to 30

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And that's why we're sticking to 30 days for public authorities. Before the before the. I would ask that perhaps the

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I would ask that perhaps the Minister goes back and has another look at the noble Lord Lansley point there, because I. There's vague stirrings in the back of my mind that there is a point there, and it might be worth finding out

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place. I will do that. The question is that amendment six be agreed to as many of that six be agreed to as many of that opinion say, content. The contrary not content. The contents have it. not content. The contents have it. Amendment seven Lord Holmes of Richmond not moved. Amendment eight. Lord Hunt of Wirral amendment nine. Lord Holmes of Richmond. Amendment ten Lord Fox. The question is that clause one stand part of the bill as many of that opinion say, content the contrary not content.

The contents have it. Amendment 11 Lord Fox. The. The. The question. The question. Amendment. The question is that. Amendments 12 to 17 En bloc be agreed to as many of that opinion say, content. The contrary not content. The contents have it. The question is that clause two stand part of the bill. As many of that opinion say, content. The contrary not content. The contents have it in clause three. Amendment 18.

18:17

Lord Sharpe of Epsom (Conservative)

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Lord Hunt of Wirral my Lords, it's a pleasure to introduce Group four, which primarily covers the important issue of the definitions important issue of the definitions of different sized businesses. But before I open that debate, I would like to touch upon the other like to touch upon the other amendments in this group. My amendment number 18, also signed by friends Lord Hunt of Wirral and Lord Holmes of Richmond, probes the expected impact of exempting upward payments from the new payment terms. As a preliminary question, what economic impact does the government specifically consider? Section two of clause three will have, and the government's argument is this this bill will prevent the late payments that cost the United Kingdom £11 billion and cost small businesses almost eight days a year in chasing overdue invoices.

And yet they're exempting upward payments, including those from micro and small undertakings to small businesses. So, my Lords, I understand that the smaller businesses often appear more vulnerable and will often have tighter margins and a smaller cash flow, but that does not mean that the supplier, especially if they are also a small business, can necessarily take the hit of an indefinite or delayed payment term. More broadly, my Lords, the purchaser almost always has the power in a contractual agreement. They are the ones that hold the capital, exempting upward payments merely because the purchaser is smaller will exempt contracts that really should fall under the scope of this bill.

And that brings me to the most long standing issue this group addresses, which is the definition of businesses. My Lords, there are currently at least six different definitions in law of business sizes. There's the Companies Act of 2006, the Enterprise Act of 2016, the Small Business Enterprise and Employment Act of 2015. Standard settlers use the definition less complex entities. Whilst this bill uses the Procurement Act 2023, alongside giving the Secretary of State powers to make definitions. My Lords, we're not arguing that discretion is not needed in separate areas of policy, but it is widely thought that we have reached the point of confusion.

At the very least, any new definition created under this under this bill should not differ from any pre-established definition. And that is the argument that amendment 22 is attempting to make. In a more ideal scenario. My Lords Amendments 2021 and 23 at 101 attempt to offer a new standardised definition of business sizes that we believe more accurately represents the nature of today's economy. Currently, the most used definitions in the Companies Act use a numerical number of employees as a factor in defining the size of a business.

My amendment, alongside my noble friend's Lord Hunt of Wirral and Lord Holmes of Richmond, aim to replace this nominal headcount with a full time equivalent number of employees, and I'll offer just one important example of the importance of this change. And in doing so, I thank UK hospitality for their particular campaign on this issue. Members of the hospitality industry often hire more than the threshold 50 or 250 employees at their venues or events, but do so on shorter low hours contracts.

Whilst they may therefore have an employee count well over the threshold, it often does not reflect the amount of work that is actually being done by these employees. We believe that the government should be able to offer a more nuanced system that more accurately reflects the amount of labour a business employs. Finally, finally, my Lords, exacerbating this amalgam of definitions is the lack of public information about which business falls where restricting the definitions of businesses is important. But I pre-empt that the noble Lord, the Minister, will argue that this bill is not the vehicle for that particular discussion, and in a sense, he's quite right.

The Secretary of State, under subsection seven of clause three, could define small businesses as those with £100 million turnover. It would not matter if businesses did not know which partners fell under this definition. But this is, of course, hyperbole. It illustrates the point that without some form of database by which businesses can see who falls under which payment term, in this act, definitions have little meaning, and at the very least, businesses will be forced to complete the administrative work themselves. So in speaking to industry representatives in preparation for this bill, there has been general consensus that companies House is not fulfilling this role.

So the bill aims to create more symmetry between different sized businesses. Yet that cannot be achieved if there is an obscure or asymmetrical information. So could the noble Lord. The Minister today confirm that he will look into the efficacy of companies House and, if need be, provide additional support for businesses so they don't have the burden of defining businesses themselves placed upon them. And I beg to move.

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Amendment proposed clause three,

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page seven. Leave out lines 3 to 16. My Lords, I rise briefly to support my noble friend Lord Sharpe. support my noble friend Lord Sharpe. And in doing that, having signed all of the amendments in his name, there are two key principles at there are two key principles at stake here, as he eloquently set out, firstly, to not introduce yet

18:22

Lord Holmes of Richmond (Conservative)

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out, firstly, to not introduce yet another definition, and secondly, to take the opportunity to bring some clarity and some consistency and some coherence of definition, which would not just be beneficial for this bill, but would obviously have benefits far beyond it, as he rightly set out, this bill may not be the place for that. Second objective, obviously, is I obviously the place for the first. But if it's not the place for the second objective, it would certainly seem to provide the right level of focus and spotlight to enable the department to look at this and bring forward plans to have definitions and classifications that are both clear and consistent, but also provide what anybody and whatever size of business they're involved with needs.

So those definitions are actually useful.

18:23

Lord Fox (Liberal Democrat)

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My Lords, the the noble Lord Sharpe brought up a number of of Sharpe brought up a number of of important issues. I don't think he brought up any viable solutions at this point. I think he spoke at the this point. I think he spoke at the beginning of the proliferation of definitions and then sought to add to that proliferation with some new definitions. He's right though, is that some level of consistency should be required. I think for the purposes of this bill, that consistency has to come from the Purchasing Act of 2023.

Unless that is not available. But the point that the noble Lord home made that there should in in another place, be a more concerted effort to to get meaningful definitions of, of business sizes and the point that Lord Sharpe made on the ease of determining those those definitions. And as the noble Lord Lyon will know that I'm always keen to have a look at companies House and see how they're doing because they have a very important role in a number of different areas.

And and this is just one, and I think, a progress report on companies House, when we

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get back would would not be amiss. Firstly, thank you to to all noble Lords and also for to noble noble Lords and also for to noble Lord Sharpe and for tabling these amendments. Amendment 18 concerns specific exemptions from 60 day specific exemptions from 60 day maximum payment terms. The Bill will allow contracts to be exempt where the purchaser is a smaller party. It is also the government's intention, subject to consultation,

18:25

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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to exempt contracts to import or export goods or services from maximum payment terms. This exemption support businesses in the UK. The exemption for smaller purchasers, where the largest supplier agrees, will support supply chains, where goods are slow moving or niche, and where market power sits with the supplier, such as independent booksellers. During the late payment consultation, retail businesses told us that without this exemption, small businesses would struggle to stop their stores appropriately. Where the purchaser is a smaller party, the power dynamic will not lead to unfair payment terms being imposed on suppliers.

The exemption is a proportionate mechanism to support smaller businesses. Amendments 2023 focus on the definitions of business sizes, which are important for the size based exemptions set out in the bill. The definition of business sizes will be clearly defined in secondary legislation. Following consultation, the government wants to ensure that thresholds are appropriate and avoid unintended consequences. We recognise the intention to provide consistency across the statute book and the noble Lords and I have had many conversations on this.

However, these amendments would unduly constrain the flexibility needed to ensure that this regime operates as intended. These amendments would require the Secretary of State to adopt an existing definition of size of undertaking, designed for different purposes to, or to introduce a single definition definition across different pieces of legislation. This is not the approach taken in this bill. New section two E provides the necessary delegated power to define micro, small, medium and large undertaking for the purpose of exempting certain contracts from section two B and two D.

This will be subject to consultation and parliamentary approval in relation to the Small Business Comissioner amendment 101 would amend the definition of a Small Business in the Enterprise Act 2016 by setting fixed statutory thresholds based on employee numbers and turnover or balance sheet total in primary legislation. The Enterprise Act 2016 already includes a definition of a small business, and the Secretary of State has an existing delegated power to make further provisions about the definition in regulations subject to parliamentary approval.

We believe that the regulations are the appropriate place for that detail, rather than on the face of the Bill. We do not propose changing the definitions of small or larger businesses to refer to the full time equivalent instead of hate count. These definitions have been in place since the establishment of the Small Business Commissioner, and are consistent with the definitions in the wider bill, which the Commissioner is to enforce. Changing this would result in further compliance costs for businesses and be complex to administer.

I understand the concerns of those raised by particular industries, such as hospitality, and would be happy to ensure the Commissioner works with these groups to support businesses to understand how the new measures will impact them. The government's view is that the level of detail proposed is better suited to secondary legislation. Furthermore, it would remove the government's flexibility to adjust thresholds in future. Different aspects of payment legislation were relating to exemptions from maximum payment terms or the Small Business Commissioner's power require definitions that reflect commercial realities and changing business payment behaviours.

Rigid definitions developed for other purposes risk undermining the bill's objective. The government intends to draw on existing framework and keep definitions simple and effective. However, we must retain the ability to depart from them where necessary so the regime operates fairly and definitions can evolve alongside policy objectives. A one size fits all approach risks unintended consequences. Finally, amendment 99 would require the government to establish and continually update a database of businesses affected by the act. This would create a significant administrative administrative burden and be difficult to maintain as business circumstances change.

We do not consider a statutory register to be a proportionate means of supporting compliance. The Bill strengthen the Small Business Commissioner's role in helping businesses understand their rights and obligations to advise information and training. Guidance will be made clear that any exemptions are limited, targeted and subject to regulatory conditions. This complements existing transparency measures, including the reporting on payment practices and performance regime, which promotes better payment practices. My Lords, while these amendments are well intended and I thank the Lord for that, they would introduce unnecessary rigidity and constrain our ability to deliver a regime that is properly targeted at tackling late payment or supporting small businesses.

The government will draw on existing definitions where appropriate, while retaining the flexibility needed to ensure the regime remains effective and proportionate. Before I conclude, my Lords, I think I mentioned this to the noble Lords as well. I will, after recess, convene a roundtable with companies House so that interested colleagues can actually solve, have conversations with companies House as to the various enforcement powers. So for these reasons, my Lord, I would respectfully ask that amendment is withdrawn.

18:30

Lord Sharpe of Epsom (Conservative)

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Grateful indeed to the noble Lord for his explanation and for Lord for his explanation and for some of the context around some of the amendments that he's provided. I'd like to thank all noble Lords who've spoken in this debate, especially on noble friend Lord Holmes, and I will be brief in response. I look, I totally accept that the government doesn't want to use this bill, which it rightly wants to get through the House quickly for a protracted debate about business definitions, which would obviously spill across several pieces, different pieces of legislation.

But I do hope that the government at least accepts or acknowledges that this is becoming a growing concern. It is a confusing picture, as I think all noble Lords would acknowledge. So can I urge the government and the noble Lords Minister to at least consider amendment 22, which would ensure that this problem is not made worse by this piece of otherwise very sensible legislation. I accept what the noble Lord Lord Fox said there are. We're not trying to propose solutions. We are actually trying to just probe the government's intentions.

And I think the noble Lords Minister has gone some way to setting those out. But also we're trying to highlight the fact that the nature of employment and small businesses is in itself changing, and therefore, some of the more rigid and perhaps elderly definitions are no longer necessarily fit for purpose. My Lords, I also appreciate the noble Lord the Minister's responses regarding the exemption on upward payments and a business database. The context there was very useful, but on that I would be greatly appreciated if he.

If he has any information. As regards the projected economic impact of this policy, if he would be willing to write to me about it, and I hope he will take our suggestion away before Report stage. As I outlined in my opening speech, I do think this is a good opportunity to use data that's already held by the government to help businesses be more efficient and competitive. So I hope after the recess, we can reconvene and take this issue further and continue our discussions.

Can I finally, I was remiss of me actually, not to thank the noble Lord, the Minister, for his offer of the companies House meeting, which he made the other day in private. I meant to do that, and I totally forgot. But thank you. And yes, please, I beg leave to withdraw my amendment.

18:32

Is it your pleasure? This >> Is it your pleasure? This amendment be withdrawn? It is by leave. Withdrawn. Amendment 19, Lord Thomas of. Come, grieve.

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Lord Thomas of. Come, grieve. I rise to move. Amendment 19. May I first declare my interest as chairman of the board, which advises the group, the International Centre for Digital Trade and Innovation. Can I say, first of all, how grateful I am to Lord Holmes for his support in this and for the time the Minister and

18:33

Amendment:19 Lord Thomas of Cwmgiedd (Crossbench)

his officials afforded to discuss this. I set out in the Second Reading the background to this amendment and how it fits entirely with the implementation of the Electronic Trade Documents Act and our participation and lead in the international moves to move payments out of the 13th century, or modification since then into the 21st century. And I am sure that no one needs to be reminded how conservative with a small C processes in business are.

It needs something to move them. And what I propose is something that will help move it. Now there is can be no doubt at all that using electronic documents and payment systems are entirely consistent with the purpose of the bill, in that it speeds up payment. And if the system can be made to work for international trade, then the bill should not exclude international trade. We are at heart a nation of tradesmen, and therefore we should be encouraging trade, and I spoke of the many advantages of the Bill.

But there's only two I need mention now. One is, we are also. As the change in the Minister's Department indicates, a. A nation intent on innovation. And this is where I think and would encourage people to see. We're moving. And the second is to mention that this is entirely consistent with the plans to move to invoicing on the 1st of April 2029. I mentioned that date because that date is a date in the amendment. Now, I accept we are not in a position to apply to make people pay within 30 days or 60 days for international trade today, but there is no reason why we can't do it in two years time, particularly with the new department.

And so what the amendment is designed simply to do is to leave the policy statement in the in the King's Speech and the provision of making future regulations to exclude trade. OK. For now, but set a withdrawal period. Now, the minister's bound to say, oh, you can trust us in the Department. When things are ready, we'll move there. But unfortunately it is. We all need to be prodded, and businessmen particularly, are to be prodded. It took centuries for people to move away from from using bills of lading in three sets rather than one.

There was no earthly purpose in it. And I do believe, therefore, we need something in the bill to force the move to digitalisation. Now the department's got the word innovation in its title. Let us hope it can do that. Now, the Minister may not be terribly. Fired up by his officials to do this, but I'm always welcome. Other suggestions. But what we must have is a policy for implementation. That's not my primary purpose, but I would hope that at least that could be offered as a consolation prize.

I therefore beg to move this amendment.

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Propose clause three, page seven. Line 23. At the end, insert the words as printed on the Marshalled

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List. My Lord, it's a complete pleasure to follow my friend Lord pleasure to follow my friend Lord Thomas, and the excellent and eloquent way in which he introduced his amendment, which I was delighted to sign. As he rightly pointed out, this could be seen as the absolute Premier DBC amendment. It goes to the heart of what the Department is. It has business. It has innovation at its very heart, and would make complete sense for the Department to pass this before they've even changed the stationery in their various departmental boxes.

My Lords, it was a pleasure to serve under the chairmanship of my noble friend Lord Thomas, as he chaired the Special committee on the then Electronic Trade Documents Bill, and it I. I variously describe the bill as the most important bill no one has heard of, and the blockchain Bill that rightly never mentions blockchain. It was perfect in its two page shortness. It was perfect in that it never mentioned any specific technology.

It merely set out criteria that any technology would have to meet to perfect an electronic trade document. And when we talk about electronic trade documents, we're talking about economic benefits, environmental benefits, social benefits. And for the purposes of this bill, payments, efficiency and payments benefits, because of the ability to combine everything in electronic digital format, only possible because of the criteria which blockchain and distributed ledger technology allows to have a possessory document, i.e. you hold the document, you hold the goods.

Only through those technologies is it possible to thus have those possessory documents in electronic form. This would be good for payments, but it would be good for UK trade. There's currently a huge trade finance deficit painfully suffered by many businesses already involved in trade, but perhaps even more significantly, all those tens of thousands of businesses that currently don't trade internationally and could. And the provisions in this amendment really highlight that opportunity. So clearly set out.

International trade should be within the purview of this bill. And in many ways, this gives the groundwork to many of the technology amendments, which will come later this evening, because it makes the point of what is possible today without insisting that it has to be used and come into force on the date the statute comes to force. But by being in the statute with the time period as set out in the amendment, it states the case clearly it provides the time for adoption, but it really speaks to the possibility and largely the economic opportunities for all of those businesses, particularly small and micro businesses, who could avail themselves of all the benefits involved in international trade.

18:40

Lord Fox (Liberal Democrat)

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This would seem to be the >> This would seem to be the perfect amendment for the noble Lord, the Minister, to accept, as Lord, the Minister, to accept, as pointed out, it it it signals an innovative forward direction for the for the for the new Department. It utilises complex legislation that has already happened. It doesn't cost anything and nothing will happen for two years. It seems, my Lords, to be the perfect amendment for the noble Lord to accept.

18:41

Lord Sharpe of Epsom (Conservative)

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My Lords, I'm very grateful to the noble Lord, Lord Lord Thomas of Cwmgiedd, for introducing his amendment and I can't really amendment and I can't really improve on what has already been said, except to say that this is an issue that has been raised with His issue that has been raised with His Majesty's opposition in the run up to this Committee stage. So it is right that, should technology permit it, import and export trade contracts should be treated the same as domestic documents. That may not be feasible now, but the noble Lords amendment does provide for what seems to me to be a reasonable timeline to get to that point.

18:42

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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My Lords, firstly, let me thank the noble Lord, the noble and learned Lord Darroch Thomas, for tabling amendment 19. I would also like to acknowledge the advocacy the noble Lord makes in relation to E-invoicing and electronic trade documents. However, the intention to exempt imports and exports from maximum payment terms through secondary legislation is crucial to supporting UK businesses, whether helping business, British manufacturers import materials and parts, or allowing British exporters to compete in overseas markets where longer payment terms are common.

So we do not really want to undermine the ability of UK businesses to trade uncompetitive or to trade competitively by limiting this potential exemption through amendment 19, the delegated power in section two E four allows Ministers to make exemptions where payment practices vary across sectors and to respond to changing market conditions. It will be used sparingly in a targeted and evidence based way and ensures the regime can adapt while still improving, improving payment practices and protecting smaller suppliers, removing or unduly constraining the flexibility would risk unintended consequences for businesses, particularly in sectors with more complex supply chains or commercial arrangements, where longer payment terms can mutually benefit.

Retaining this power ensures that the regime can be adapted where necessary, while still delivering the bill's core objective of improving payment practices and protecting smaller suppliers. The government wants to tackle an end scenarios where businesses unfairly use their larger size and power to impose unfair payment terms on smaller businesses in unlimited circumstances covered by the exemption. We do not consider that such imbalance leads to unfair outcomes, and an exemption from maximum payment terms could benefit from the purchaser and supplier.

My Lords, I mean, I remember the days when I used to work in my dad's import and export business, the days where you used trust receipts and bill of lading to ensure that you actually get Chernobyl lost. Remember those? And also, let's not forget telex machines as well. So I think we've come we've come a long, long way. And I do remember also the days where, you know, you used to have to write or type out your invoices and send it to your suppliers by post.

I mean, we've come a long way. I mean, these days, you know, we have also platforms that do a lot of invoicing electronically. And one has to also appreciate that, you know, this has come in all sizes and shapes and sizes. I mean, the bigger companies have got more sophisticated systems in place. Smaller businesses may not. And we need to sort of actually be respectful of some businesses that may not have the sophisticated systems in place. And my Lords, as noble Lords would know, the government is moving towards E-invoicing.

And hopefully over a period of time, more and more businesses will be conducted electronically and hopefully at that time, whereby we don't really need noble Lords amendments. So for this reason, I ask the Lord to withdraw amendment 80.

18:45

Lord Lansley (Conservative)

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Before the before the Lord Thomas of Cwmgiedd responds. Can I just ask the Minister? It seems to me that he is accepting the proposition which. With which I entirely agree that the. The nature of E-invoicing and the use of electronic trade documents will make it possible for the imposition of a limit on payment terms in relation to trade documents in the future. It is possible to do it, but what the Minister seems to be saying is that the two parts of this amendment, one is about people here selling to people for providing goods or services abroad.

The other part is people abroad selling goods and services into the United Kingdom. The first one, I kind of go with the Minister that I can understand the point he's making is that we don't want to disadvantage our companies in other markets where the payment terms may be different and longer. But for those who are selling on the second limb, those who are selling into this country, surely the whole point is that they should be operating on the same payment terms. Is there not an argument for the Minister to look at the second limb? Of what amendment 19 is proposing?

18:46

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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Well, I appreciate what the noble just said, but I think what's noble just said, but I think what's really important, I think the bill itself, the scope of the bill, is targeted at UK businesses and small businesses. I mean, international trade, obviously, it's, you know, a commercial arrangement between a company based in UK or a businesses based elsewhere. And I think it's probably outside the scope of this bill in that particular regard.

18:46

Lord Thomas of Cwmgiedd (Crossbench)

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My Lords, may I thank everyone who's spoken in this short, slightly esoteric argument and these these interests. I simply would say that I don't think this issue will go away for two reasons. First of all, the payment terms in this bill are 60 days and modern international trade. That's a long, long time when payments. So I don't buy this argument that we somehow would lose competitiveness by having this. Certainly as regards imports.

But secondly, it is important to stress we are not tradesmen who trade with each other, say, between Wales and England and Scotland, but we trade internationally and that, and we need to do everything to encourage us to trade. And thirdly, if we're to innovate and this is an era of innovation, setting a good example will be a good thing. I hear what the Minister has to say. I very much look forward to what the Department is going to do to encourage it if they won't do this, and so I might if circumstances look providential, bring it back on report to see if the Minister can come up with some alternative in innovating, because it's only fair to say it's only been a Department of Innovation for a day.

18:48

Deputy Chair of Committees. Viscount Colville of Culross (Crossbench)

Not not moved. amendment. >> Is it your Lordship's pleasure that this amendment be withdrawn? It is by leave withdrawn. It is by leave withdrawn. Amendments 20 to 23 En bloc Lord Hunt of Wirral not moved. The Hunt of Wirral not moved. The question is that clause three stand part of the bill, as many of that opinion say content. The contrary, not content. The contents have it. in clause for amendment 24. Lord Holmes of Richmond.

18:48

Amendment:24 Lord Thomas of Cwmgiedd (Crossbench)

>> Amendment 24 in my name and look forward to the debate across this group. This is an incredibly straightforward amendment. It requires that the purchaser calculates interest and makes payment in all circumstances because they have the means, they have the resources. They are in the position to do such, and in doing that, it doesn't just lead to an efficient process. Crucially, it means that the relationship between the parties is maintained and not adversely affected.

As a consequence of these provisions, I beg to move.

18:49

Lord Sharpe of Epsom (Conservative)

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Amendment proposed clause four, >> Amendment proposed clause four, page nine. Line two. At the end, insert the words as printed on the master list.

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master list. My Lords, I thank my noble friend Lord Holmes of Richmond for this amendment. I'm sorry. Noble Lords have called me eating a Lords have called me eating a toffee. Which is a terrible error. Now the ability to charge statutory interest on late payments was established by the late payment of Commercial Debts. Debt Interest Act of 1998. That act, however, only introduced that right as a right to charge, which many businesses may choose not to exercise out of fear of damaging commercial relationships or losing out on contracts.

With this bill, statutory interest becomes an implied mandatory term of a commercial contract. Therefore, the interest will accrue automatically on overdue payments and the burden will not fall on the suppliers to claim that interest. So the amendment from my noble friend seeks to ensure that late payment interest is paid to a supplier within five working days. If further provides that, where statutory interest is not paid within that time frame, the unpaid interest will itself form a part of the qualifying debt and therefore be liable to a further charge of statutory interest.

Whilst we support this policy, we must ensure that the businesses, particularly smaller businesses, are given adequate time to adapt to the new regulations and particularly the SMEs. Of course, the impact assessment recognises that small and medium sized businesses will shoulder a higher proportion of the net costs associated with this policy, and it further states, and I quote here, that policy does not create specific mitigations for SMEs. Rather, information will be provided to all businesses to support their understanding and complying with the new policy requirements, in line with previous guidance issued on statutory interest, end quote.

Those words might not be particularly comforting for many small businesses that are already struggling. So might I suggest that the government do a little more to explain precisely how they will support those businesses? What kinds of information will they provide? I've tabled an amendment to the commencement clause of the bill to be debated later, which prevents this clause from being brought into force for one year. That's the kind of measure that will give businesses the time to adapt, to understand the new guidance and to prepare prepare for the new regime.

So I hope when we when we come to debate that amendment, the noble Lord, the Minister, will give it serious consideration.

18:52

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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Let me thank noble Lord for for the amendment. I understand the the amendment. I understand the concern that statutory interest isn't always claimed or paid in practice, and I agree it's practice, and I agree it's important to find ways to make the systems work better for suppliers. However, the bill already strikes the right balance. It strengthens the existing framework by making the right to statutory interest universal, ensuring it cannot be contracted out of and underpinning it with significantly stronger enforcement and transparency.

This signifies a significant advancement transitioning from a system where the right exists but remains underutilised to one where all suppliers are explicitly entitled to it and are supported in its enforcement. This amendment goes further, introducing rigid and prescriptive requirements that risk undermine undermining the balanced approach. A fixed five day deadline for the payment of interest does not accurately reflect the practical realities of commercial and accounting practices and processes, and may pose a risk of technical breach to businesses that are otherwise compliant.

The proposed definition of payment as an unequivocal, equivocal, equivocal and unencumbered use of cleared funds could lead to legal and operational uncertainties, diverting attention from timely payment to technical disagreements over banking procedures. Additionally, classifying unpaid interest as new qualifying debt, which then accumulates more interest risk, creating disproportionately large and growing liabilities. The obligation for directors to report instances of of non-payment to the Small Business Commissioner would also introduce supplementary administrative burdens without a distinct enforcement advantage.

Beyond the provisions already established in the bill. Taken together, these provisions risk creating complexity and uncertainty rather than improving payment outcomes. In practice, the Bill aims to enhance behaviour by establishing clear rights, enforceability and robust oversight, rather than specifying detailed operational rules in primary legislation. My Lords, I therefore ask the noble Lord to withdraw his amendment.

18:54

Lord Holmes of Richmond (Conservative)

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My Lords, can I thank my friend Lord Sharpe and the Minister for Lord Sharpe and the Minister for their comments in this short debate? My Lords, I think in spite of the Minister's comments and appreciate his comments around particular the five day period, I think there's a principle at the heart of this which is worth exploring between committee and report, but for now I beg leave to withdraw the amendment.

18:55

Deputy Chair of Committees. Viscount Colville of Culross (Crossbench)

As it is if I leave. Withdrawn. >> As it is if I leave. Withdrawn. Amendment 25 Lord Hunt of Wirral not moved. The question is that clause four stand part of the bill, as many of that opinion say, content the contrary not content. The contents have it. The question is that amendment 26 to 34 be agreed to as many of that opinion say, content. The contrary not content. The contents have it. The question is that clause five stand part of the bill.

As many of that opinion say, content. The contrary not content. The contents have it. The question is that clauses six and seven En bloc stand part of the bill, as many of that opinion say, content the contrary not content, the contents have it. The question is that amendment 35 and 36, taken together, agreed, as many of that opinion say, content the contrary not content, the contents have it after clause eight. Amendment 37.

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Lord Fox. I speak to amendment 37 in my name. This amendment would confirm, name. This amendment would confirm, on the face of the bill that the act does not apply to contracts principally for the licence or assignment of copyright or rights.

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assignment of copyright or rights. Date. I apologies to the House. The question is that clause eight The question is that clause eight stand part of the bill, as many of the. Many of those that opinion say content. The contrary not content. The contents have it. My apologies.

18:56

Lord Fox (Liberal Democrat)

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Lord Fox. It's a short speech so >> Lord Fox. It's a short speech so I can lengthen it by repeating it. This. This amendment would confirm This. This amendment would confirm on the face of the bill that the act does not apply to contracts principally for the licence or assignment of copyright or rights in performance. This is so that royalties, advances and residuals under publishing, music screen and similar agreements fall outside of this late payment regime as envisioned by this bill.

Now that the noble Lords will not be surprised to learn that this. This amendment has been supported by creative UK Press Music, which is. UK music and the Publishers Association. So it inserts a new clause after clause eight, which we now have, and seeks to make a clear distinction between contractual remuneration and royalties. I know that the Minister has been in discussion with the publishing industry and given his business background, he is clear on this issue. However, I don't think the bill is as clear as the Minister is on this issue.

So I think it would be very helpful for the Minister to set out in detail these distinctions, effectively putting royalties outside the scope of this bill. Now, I would prefer an agreed amendment to come forward at report, but at the very least, some clear Pepper and Hart style assurances need to be made from the Dispatch Box. I move amendment 37.

18:58

Lord Hunt of Wirral (Conservative)

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Amendment proposed clause eight insert the following new clause. The words as printed on the Marshalled List.

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My Lords, we are all very grateful to the noble Lord Lord Fox grateful to the noble Lord Lord Fox for tabling amendment 37, which seeks clarity on this important issue. As he explained, this amendment would confirm on the face amendment would confirm on the face of the to Be act that it doesn't apply to contracts principally for apply to contracts principally for the licence or assignment of copyright or rights in performances, so that royalties, advances and residuals under publishing, music screen and similar agreements fall outside.

Outside the late payment regime. But it also opens the debate to raise some interesting questions on whether this act should be sector indiscriminate, or whether there are certain industries for which regulations regarding late payment must be more bespoke. There may be strong reasons for stipulating that publishing, music and screen agreements fall outside the late payment regime, and we look forward to hearing from the noble Lord, the Minister, outlining the government's position on that specific question.

However, if that is the case, noble Lords must ask two questions. First, whether these reasons could equally apply to other industries that should therefore also be exempted, and secondly, whether there exist other distinct but legitimate reasons for different industries to be exempted. My Lords, even if there are good reasons for exempting certain industries, we must be wary of opening the floodgates such that this late payment regulation loses its practical force again, we all look forward to hearing from the noble Lord, the Minister, to detail the government's stance on this important issue.

19:00

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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Firstly with reference to >> Firstly with reference to amendment 37, I thank the noble Lord Lord Fox for his amendment and also the meeting that I had with the Publishers Association. My Lords, I can be very clear and confirm that the Bill does not substantially alter the contracts and scope of the commercial Payment and Interest on Late Payment Act 1998, where this is the case, the protections offered by that act will apply to the contract, and where they do not, they won't.

The Bill does not alter the effect of existing case law on the scope of the late Payment of Commercial Debts Interest Act 1998, where this has found that a mere licence of copyright was not within the scope. Performers, authors, musicians and other creators are often freelancers or very small businesses. They may have limited bargaining power and may depend on timely payment for work created, delivered or licensed. During the government's consultation, we heard from authors and musicians who were waiting for many, many months to be paid.

That is precisely the kind of poor payment practice the bill is designed to address. Where relevant contracts entered into by a small businesses, freelancers or individual creators are for the supply of goods and services. The bill will ensure that payment is made within the statutory maximum period of 60 days from the agreed trigger point. However, there may be agreements involving intellectual property rights that are not properly corrected or characterised as contracts for the supply of goods or services.

Some arrangements may concern the assignment, licensing or exploitation of may concern the assignment. Licensing of exploitation of intellectual property in ways that fall outside the late payment framework. The government's position is therefore clear creators and freelancers should be paid on time when their contracts fall within the commercial payment regime. However, amendment 37 risks blurring established distinctions in contract and intellectual property law and would create uncertainty about which agreements are covered. For that reason, my Lord, while I understand and sympathise with the intention of this amendment, I do not consider it necessary or appropriate.

Consequently, my Lords are backed to ask the noble Lord to

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withdraw amendment 37. Sits down. Would he like to

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Sits down. Would he like to address the two questions I raised based on. First of all, are there based on. First of all, are there other industries which might similarly be affected? If so, how similarly be affected? If so, how does the government intend to reach this.

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this. Bill is concerned, we are not providing any particular exemptions to any particular sector. As far as the intellectual property law is concerned, there were concerns from the various trade organisations that, because this bill may also include the licensing of copyright, which is not the case, because that has been decided by case law. Under the earlier legislation I mentioned. However, if the contract is for a work says someone has been work says someone has been contracted to write a particular book novel, whatever it is that book novel, whatever it is that falls within this bill itself, but not in terms of copyright contract.

19:04

Lord Fox (Liberal Democrat)

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I should have said that my wife is a is a published author, so I do have some wee family interest in this. I'm still not quite clear following the the the last statement that the Minister said in that the classic book contract, as the Minister knows, is often an advance and then royalties. The advance is sometimes an actual payment or it is an advance against royalties. And it's not quite clear of those three conditions which fits in to this bill and which does not so.

So I don't know if it's in order for the Minister to answer

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that question now or to come back. I'll answer that. Now, if the

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I'll answer that. Now, if the contract is for a a book and as part of the contract, and I advance part of the contract, and I advance the creator, say, a sum of money. And in addition to that, there'll be a royalty arrangement. The be a royalty arrangement. The contract for that sum of money is covered within the scope of this

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covered within the scope of this bill. The payment of copyright is outside the scope of this bill. I think that's clearer. I think, a result of this and, and, and see whether or not any, any comeback is required report, but pending that I beg leave to withdraw the amendment.

19:05

Deputy Chair of Committees. Lord Beith (Liberal Democrat)

Is it your Lordship's pleasure that the amendment be withdrawn? The amendment is by leave withdrawn. The amendment is by leave withdrawn. We come now to amendment 39 in clause nine. Lord Leong that's been clause nine. Lord Leong that's been debated already. We need to move. Question is the amendment. Clause IV made many references to content. Contrary, not content. Contents have it. Amendment 1338. Sorry if I said 30. Yes, I meant 38. My apologies, but I now come to 39, which is moved.

As many people say, content contrary, not content. The contents have. It is at clause nine stand part of the bill, as amended. That's means, say content contrary, not content. The contents have it. We now come to further government amendments to amendment 40. Does everyone want to take more than one everyone want to take more than one En bloc? Yes. En bloc 42 and 43. Up to four. Everything we can go to 43 because we've got something else in the way. 40 and 41 we can take together.

En bloc these amendments be agreed to, as many of us say, content contrary, not content. The contents have it. Question. Before that, though, the questions that schedule one, as amended, be the first schedule to the bill's. May that be content, not content. The contents have it. Clause ten stand part of the bill. As many people say, content contrary, not content. The contents have it. And now 42 was not moved and 43 was not moved. Which brings us to amendment number

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44 Lord Lansley clause 11. My Lords, with clause 11 and

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My Lords, with clause 11 and this group of amendments, we move to the question of retention to the question of retention payments. I suppose I would like really first to say that we really first to say that we shouldn't elide the question of late payments and retention payments as if they were somehow part of the same argument. There part of the same argument. There are different argument. Retention payments are not a late payment. They are a payment designed to allow the purchaser of a of a new building to have an opportunity to assess the quality of the new build and to remedy any defects before the point at which a final payment is made.

That's in theory, in practice, sometimes retention payments are a a device for withholding cash and which can be

19:08

Amendment:44 Lord Lansley (Conservative)

quite prejudicial to the contractor and imperil their cash flow. And we all know that for small businesses in particular, cash flow is of the essence of business. So but the my amendments in this group are intended to probe the circumstances in which retention payments make sense, and the. And the extent to which the ban is required. And just to test some of those propositions, the noble Lords will recall at Second Reading I referred to representations that had been made by the National Housing Federation, who themselves were expressing a concern about the ability of registered providers of social housing to be able to assure themselves about the quality of the build for social housing that they had contracted for, and were looking for an exemption for social housing.

I'm not proposing that in any of these amendments. I think we should try to tackle this as a as a as a broad construction industry issue as a whole. Since Second Reading, two sets of conversations. One, I'm very grateful to the Minister and his officials for the opportunity to discuss the the retention payments. I've also had the opportunity to talk with Real Estate UK, who include, of course, what we think of as the old British Property Forum, who are themselves also very concerned about a complete ban on retention payments.

And I think, of course, where they are coming from is that it is their means of securing quality assurance and for defect remediation, this can be, as they say, especially important in high risk and indeed often high rise residential buildings insofar as they have to secure the construction industry's compliance with building safety regulations. And so the the importance of holding contractors to that is particularly emphasised in their representations. Now, if retention payments are banned, the.

The. The practical issue of how payments are then staged. If. But are. But don't fall into the category of retention payments is quite an interesting and knotty issue, and I'm particularly grateful and look forward to hearing from my noble friend in relation to his amendment 49. I think it is really important that we. We can't we don't slip into thinking that that staged payments necessarily the final stage payments are retention payments. They may be a perfectly valid agreement into which contractors, two parties enter.

But I want to focus on my three amendments. They don't seek to frustrate the intentions of the bill, but I do want to probe whether actually there is some degree of compromise that ought to be met between the concerns of the industry about the impact of an overall ban and the need to protect businesses, who contractors, particularly small housebuilders who are otherwise threatened by the lack of cash payments. So amendment 44, it focuses on the small and medium enterprises.

And we've discussed those definitions. So but on the basis that that the the threat of lack of cash and cash payments and the and the consequences for their cash flow is an issue for small and medium enterprises. The purpose of this amendment would be to ensure that they benefit from the ban on retention payments, but that the same benefit is not extended to large businesses because large businesses are better able to cope. And therefore, and of course, where large contractors are concerned, of course, it may also have the additional benefit of holding them to account.

So amendment 45 looks at the question of this this question of whether a a period can be agreed between the contractors, the contractor and the purchaser during which defects are to be remedied. And it does seem to me that if we're looking at stage payments, there is a stage at which the contractor hands over a property at the conclusion for it to be transferred into the purchaser, and the purchaser ought to have, even if it's only a matter of days, ought to have a period during which they are able to identify whether there are snags, defects or quality failings that are the basis on which the final payment should be made.

Now, if we're treating any period during which payment is being retained as a retention payment, we run the risk of simply intruding, in my view, intruding into what ought to be genuinely a contractual relationship between two parties, two parties who are agreeing to buy something, and and a purchaser who is agreeing to pay for it. And they need to be able to agree on their terms of payment, and they need to be able to agree on what it is that has been provided and when it is to be provided.

So I think we do need to understand why that period is being precluded and being referred to. Amendment 48 looks at whether the problem is the amount of the retention payment. Now, I think by and large now it tends to be 5%, but it has in the past sometimes been more. So the question is, if we were to limit retention payments to no more than 2% of a contract value, would that actually remove the problem? Would it enable the purchaser of a building to be able still to secure the remedying of defects, but not prejudice, the cash flow of the of the builder now? Those are the three amendments, the purpose of which is to essentially to say, is there a reason for maybe not going to a full ban, but stepping slightly back from that, if the Minister wishes to continue with their full ban, what I've put to him, and I hope he might be able to respond in this debate, and we can look at it perhaps again at report question of whether there is, in fact a complementary package which Ministers can bring forward alongside a ban on retentions.

If the issue is about the quality assurance and the remedying of defects, and making sure that people get the building that they've paid for, what we have already, through the terms of sections one through 6 to 140 and schedule nine of the Building Safety Act 2022, we have the powers to implement a new Homes Ombudsman scheme and a code of practice. Now, we know at the moment all but one major house builder has signed up on a voluntary basis to this code of practice, so we know that we are not far from where we need to be, but it is not mandatory, and in order to take it to the next stage, it really would would really need to be mandatory.

And the powers exist, as I say, in the Building Safety Act 2022. So what I would be would think it would make very good sense is that if at the same time as Ministers implement the ban on retention payments through this legislation, they also bring forward regulations rapidly to commence the provisions of sections one, three, 6 to 140 of the Building Safety Act and go in the next few months, I hope. I'm hoping they can do all this in the course of this year rather than as is intended.

I think well into next year. It is to implement the tender, to procure the provision of the new Homes Ombudsman Scheme and the Code of Practice, and I think that would be a very. If we are proceeding with a full ban on retention payments, that would be an extremely good complement to that, because it would provide purchasers with a scheme that is designed to ensure that the homes that are being built for them are indeed of the quality that they expect.

I beg to move amendment 44.

19:17

Lord Sharpe of Epsom (Conservative)

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Amendment proposed in clause 11, page 15 at 919. At the end, insert the words on the Marshalled List. Actually the main.

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Actually the main. My. My Lords, I thank my noble friend Lord Lansley for speaking in this debate and introducing his this debate and introducing his amendments. Banning retention payments are one of the key changes that this bill will introduce, but they're also one of the most contested. So I'll begin by outlining our general position on these benches. We don't in principal oppose this step by the government to outline the scale of this issue, which I'm quite sure the noble Lord, the Minister will reiterate.

65% of retentions are not released on time and 20% are never recovered. Estimates of retention losses due to insolvencies range from a quarter of a billion to over a billion, and one need only look at the scale of the Carillion collapse to see that this is unsustainable. But pass the losses. My Lords, retentions have been used for means other than what they were intended for. They're now widely used to retain cash flow, and in doing so, they transfer risk and reduce the margins of smaller subcontractors.

So change is evidently needed. While we therefore support the government, we still must not lose sight of the fact of what the intended use of retentions are. They are supposed to act as insurance against defective work if they're there to be scrapped. We do think there must be something that replaces them. As my noble friend Lord Lansley has argued very persuasively, they do provide qualitative assurance. So, my Lords, I appreciate the government is discussing this with industry and that they expect the market to find a suitable alternative.

But some clarity of what the government has in mind would be very helpful. The amendments 46 and 49 in my name and that of my noble friend Lord hunt, seek to probe two potential alternatives escrow and staging payments. Most importantly, the government's consultation on retention suggested a ban on some or something very similar to an escrow type arrangement. Given the fact that they went with the former noble Lord. The Minister today at the despatch box confirmed that escrow will not be banned by the back door.

Amendment 47 also in my name and that of my noble friend Lord hunt seeks to probe what the government is doing to speed up its own transition away from retention payments. Public contracts make up roughly a third of withheld retention payments, and so it's only right that the government lead from the front and demonstrate that they are driving this change. Amendment 50 exempts resident run and resident owned property companies from the ban on retention payments. My Lords, I hope the Minister can confirm that this is already the case, but it is worth reiterating that residents should not fall under this ban on specific construction contracts.

I understand the principle behind the amendments. In the name of my noble friend Lord Lord Lansley on amendment 44. I will, however, make the same argument my noble friend made earlier about exempting SMEs from payment terms. Just because a small business is more vulnerable to retention payments, it does not follow that there is no risk involved for other businesses. We are therefore not in favour of specific commercial exemptions. I am sympathetic to amendment 48. However, I would like to hear what the Minister has to say regarding alternatives before we consider watered down forms of amendment.

I hope that he will confirm that in his reply that serious alternatives are being considered and that they are sufficient.

19:20

Lord Fox (Liberal Democrat)

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My Lords, the Minister has said >> My Lords, the Minister has said that I think in the past that there may be other means to ensure the may be other means to ensure the necessary delivery of projects without retention, and I think this group is designed to probe those group is designed to probe those other means. I'm grateful to the noble Lord Sharpe who set out the reasons why we to support the need for change, but also to the noble Lord Lansley, who points out the need for ensuring quality of delivery.

So it is a difficult conundrum that that faces the Minister. The amendment. Amendment 46 by the noble Lords hunt, Sharpe and Holmes sets out the case or the possibility of escrow and whether that remains legal. I would add to that bonds and insurance solutions, which may also be solutions to a similar delivery problem or the nature of certification, which. The point that the noble Lord Lord Lansley made. Either way, I think there is an issue around staging payments, which we see in amendment 49, and we discussed in a different vein in amendment 52 with my noble friend, there comes a point when is a staging payment a retention, and when is it not? So we start to have this, this, this grey area.

So I think the Minister has a difficult job. But if it is an important part of this bill to get that right. So I think like there are other Lordships, I think we're available to have those discussions. But I think when we get to report, there needs to be a way of saying, how do we square the issue of the abuse of retention with the need for delivery? Yes. Good point.

19:22

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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Firstly, let me thank all noble Lords, the three noble Lords, for the amendments in this group and the amendments in this group and thank them for their contribution. Let me start by taking amendment 46 first. First, let me reassure the first. First, let me reassure the noble Lord Sharpe and hunt that this bill does not prevent parties in any sector, including construction, from making use of payment arrangements through third party providers. A business may use a bank, a payment agent or an escrow account or provider to facilitate facilitate the transfer of funds from one party to another.

Such arrangements can, in some circumstances, support better cash flow management and provide greater transparency, and give parties additional confidence in how funds are handled. Nothing in this bill is intended to prevent the use of those legitimate payment mechanisms. Therefore, amendment 46 is unnecessary. But I should also make a further point, if I may, as drafted, this amendment risks unintentionally undermining the policy intent behind the proposed ban on retentions. Its practical effect could be to preserve the option of still using retention clauses, provided that the retained sums are held by third party.

That would run counter to this bill's purpose. Retentions have been used in the construction sector for well over a century, but the evidence from consultation, research and engagement with businesses is clear. Retentions are neither an effective way to prevent defects or to remedy poor quality work. In practice, retentions often reduce cash flow for contractors and subcontractors. Increased financial risks across the supply chain and leave businesses exposed to late and non payment, or to the loss of retained sums through insolvency.

The government's view is that the industry must now move beyond reliance on retentions. Therefore, we are not proposing any exceptions to the ban, nor do we want to permit retention practices to continue in another form. I turn next to amendment 47 and recognise the intent behind this amendment. The public sector is a major construction client, and there is a strong case for it To lead by example. Phasing out retentions in public construction contracts will send a powerful signal, help establish new standards, and support a fairer payment environment for smaller businesses.

The government recognises that a public sector has an important leadership role, but we must also recognise the practical realities that construction clients, whether public or private, face. It reflects typical project durations, existing contractual arrangements and the time required for businesses to adjust their commercial models during the transition period. The government will work with industry through the Construction Leadership Council and with clients across the public and private sectors, the financial services sector and the supply chain. The purpose of that work will be to improve quality, reduce the level of defects and help the market to develop alternatives for fear of surety for clients and supply chain, whether it's performance bonds or other form of financial instrument.

That is the right way to achieve lasting reform. It gives the sector a clear end point and a realistic path to get there. So, my Lords, I would like to thank noble Lord Lord Lansley for amendments 44, 45, 48 and for his constructive engagement with this bill. I fully understand the concern underlying these amendments. Everyone in this House, in this Lordships House wants construction work delivered to a high standard. Everyone agrees that defects should be remedied by the party responsible for them.

The question is not whether quality matters. It clearly does. The question is whether cash retentions are the appropriate way to secure that outcome. The government's answer is clear they are not. These amendments would create a wide ranging exemptions from the bill's retention provisions. Their practical effect would be to remove or significantly reduce the protection. The Bill is intended to provide for many businesses in the construction supply chain. That would be a serious step backwards. It is designed to protect cash flow, reduce exposure to insolvency risks and end the long standing practice of withholding money already earned.

If these exemptions are accepted, many of the risks that the Bill aims to address would remain. Businesses would still experience reduced cash flow, retain sums, would still be vulnerable to late release, non-payment and loss to insolvency, and clients would still have to incentivise to preserve mechanisms that reduce payments to suppliers, rather than adopt better ways of managing quality and defects. That would undermine one of the bill's central purposes. If we create broad exemptions now, we risk we risk preserving the very practices that have held us back for so long.

It is also important to recall the evidence from the 2018 consultation conducted by the previous government. Contractors reported significant difficulties in obtaining the release of the second half of the retention at the end of the defects period. The final retention payment was often used as leverage in negotiations over the final amount. That experience demonstrates why seemingly limited retention arrangements can become a source of real commercial pressure. There is also a possibility that if exemptions are introduced, clients might try to extend defects periods beyond the usual 12 to 24 months seen in construction contracts, which could extend the framework for the time frame for withholding funds.

The government fully accepts that quality and defects must be addressed, but the answer is not to continue withholding cash from supply chains. The answer is to improve quality, reduce the incidence of defects and develop fairer and more effective alternatives to retentions. That is the work we intend to take forward with industry throughout the transition period. The government's approach therefore strikes the right balance. It offers a clear incentive for essential reforms. It protects smaller businesses from the cash flow and insolvency risks linked to retentions, and it gives industry time to adapt to a significant and necessary change in relation to amendment 49.

I would like to reassure noble Lords that no provision in the Bill will change the ability of construction clients and firms to agree, either stage or interim payments under construction contracts. Therefore, this amendment is unnecessary. Whilst we understand the intention behind amendment 50 that resident owned firms undertaking essential remediation work can ensure work is of high quality. We do not believe retentions ensures this. As Dame Judith Hackitt has noted, the practice is ineffective and undermines the effectiveness of the supply chain.

Change a change which is why alternatives are required. Let me respond to a noble Lord Lance's question on new homes Ombudsman scheme and the Code of Practice. The government has already stated its intention to bring forward a statutory home, a new Homes Ombudsman Scheme requirement. Requirements are being developed. The Ministry of Housing, Communities and Local Government may undertake market engagement to assist in further developing this. This would be done transparently

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via government portals. With that, my Lord, I ask the amendments. Be withdrawn. Before the noble.

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Before the noble. Lord sits down. I totally understand where he's coming from, of course. And I think we've indicated already that we are indicated already that we are broadly supportive of the direction of travel. But what the noble Lord is in effect saying is that the suppliers have to behave better and reduce defects and do all sorts of other good stuff, all of which is admirable and worthy. But what are admirable and worthy. But what are the incentives to ensure that they do that? If I'm sure the noble Lord is familiar with the the famous phrase that was used by Charlie Munger, who's Warren Buffett's partner, if you show me the incentives, I'll tell you the

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outcomes. At the moment, there are no incentives, so the outcomes will not be good. Yes.

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Yes. I think the incentive of they get the money earlier makes to ensure that the the the service they are quality of the work must be done to specification. Otherwise, be done to specification. Otherwise, I mean, basically, you know, the claim for compensation will come in. claim for compensation will come in. So the incentive is to get the work done properly in the first place.

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I'm most grateful to to noble Lords for this short, but I think really rather forgive the pun, really rather forgive the pun, constructive debate. I think we constructive debate. I think we were trying to probe quite how the government is thinking about the implementation of a ban on implementation of a ban on retention payments. The Minister was very clear about what it is the government is trying to achieve. So

19:31

Lord Lansley (Conservative)

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government is trying to achieve. So if we follow down that path, I hope when we come together to consider this at report, we might just, in the meantime, have looked at the question of stage payments and ensure that what the Minister has said about nothing being ruled out, where stage payments are concerned isn't. There is no inadvertent limitation on the ability to stage payments during the course of a construction contract, but I would like just to come back, and I hope in the intervening period between now and report, to just test the Minister and through him, the Ministry of Housing, Communities and Local Government, because they can be getting on with this.

It's not simply pre-market engagement, but issuing an invitation to tender and making the regulations necessary to bring those provisions in the Building Safety Act into force so that we can get on with this, because that is part, in my view of of the package that I think the Minister was alluding to of trying to ensure that we have other means than retention payments, of trying to ensure the quality of new build. And I hope we can continue to discuss those issues.

That said, I beg leave to withdraw amendment 44.

19:32

Deputy Chair of Committees. Lord Beith (Liberal Democrat)

Your Lordships pleasure that the amendment be withdrawn. The amendment be withdrawn. The amendment is by leave withdrawn. Amendment 45 Lord Lansley not moved Amendment 45 Lord Lansley not moved and 46 Lord Hannett not moved. The question is that clause 11 stand part of the bill is content contrary, not content with contents. Have it in clause 12. Lord Hannett 47 not moved questions clause 127 part of the bill. As many as are that opinion will say content contrary not content.

The contents have it. Amendment 48 Lord Lansley not moved. Amendment 49. Lord Hannett not moved. Questions. Clause 13 stand part of the bill, as many of that opinion will say content. Content contrary not content. The contents have it. Questions. Clause 14 to 17 En bloc stand part of the bill that is there. That opinion will say content contrary, not content contents had it after clause 17. Amendment 50. Lord Hunt not moved. Amendment 51. Lord Hunt not moved. Amendment 52 Baroness Bowles not moved.

Amendment 53 Lord Leong informally in schedule two, page 48. Insert the words on the Marshalled List as many that say content contrary not content. The contents have it. Government amendment number 54. Lord Leong questions. The amendment be agreed to as many that will say content, content. Content, content. The contents have it. Questions that schedule two, as amended, be the second schedule to the bill as many that will say content. Content. Contrary. Not content. The contents have it. content.

The contents have it. Amendment 55. Lord hunt. My Lords, we now move to a very important part of the bill, namely part two on the Small Business Commissioner.

19:34

Amendment:55 Lord Hunt of Wirral (Conservative)

And I praise all those involved in the build up to the Enterprise Act 2016. After a lengthy period of consultation in which I was privileged to participate, the conservative government set up the role of the Small Business Commissioner and its purpose was to tackle overdue payments and unfavourable payment practices. So it is a pleasure to open this debate in moving amendment 55 and the others in this group, in the name of by my.

In my name and of my noble friend. Because we are now seeking to expand the role of the Small Business Commissioner. And I'm pleased to start by saying that His Majesty's opposition support these changes and our many amendments to this group are simply to clarify or build on the government's already solid proposals. Now amendments 55, 56 and 57 probed the reasoning behind the limiting of scope of the Commissioner's powers to disputes between small and larger businesses.

I understand the argument that small businesses or consumers are more likely to be bankrupted by dispute proceedings, but the same cannot be said of small businesses on the receiving end of poor payment practices. So I wonder whether the noble Lord, the Minister, can outline the rationale for expanding the commissioner's powers to include these size, size, adjacent disputes. My Lords amendments 64 and 65 probe what additional grounds may be included in the reasons for declining to adjudicate disputes, and which additional disputes may be exempted from adjudication? These powers have the potential to be used both widely and arbitrarily, which is why we have tabled amendment 72, which would require both Houses of Parliament to approve any new regulations.

In general, my Lords, if the Minister could anticipate what these powers might be used for, I think we'd all find that extremely helpful. Similarly, my noble friend Lord Lee of Hurley's Amendment 62 would require a reason to be given for declining to adjudicate a dispute. I think this is a courteous, low cost measure that would do much to increase the transparency of the Commissioner's Office. My Lords, Amendment 71, in my name and amendment 59, in the name of the noble Lord Lord Fox aims to set a timeline for resolving disputes.

Now, my Lords, I'm conscious that the cases brought to the Commissioner may differ greatly, both in scope and resolution and the amount of time required. And as such, I'm aware that any timeline could create a bottleneck. That being said, I do believe that some expectation should be placed on the Commissioner's office to resolve disputes in a timely manner, and so if the noble Lord, the Minister, can't agree with either of these terms, I hope he will be able at least to suggest another solution in his response.

I also consider amendment 75 to be tabled by my noble friend to be very important. Currently, under this bill, a larger business may be investigated should they persistently engage in poor payment practices with persistently being defined as an equally vague, I quote, significant number of times, end quote. Businesses deserve to know what this means, if for nothing else, so that they can avoid it. Discretion should not be introduced where it doesn't need to be. And so I hope the noble Lord, the Minister, can put a number on just what exactly constitutes persistently.

However, my Lords, these amendments are ultimately fruitless if they're not taken in conjunction with amendment 69 and 93. The amendments in this group aim to increase the efficiency and transparency of the Small Business Commissioner's Office, which rightly is having its powers now greatly expanded. And this expansion happens. The funds and resources, the office, the office will receive to carry it out remain very vague and opaque. So we do seek more clarity from the noble Lord.

The Minister. Last year, the Small Business Commissioner had a net operating expenditure of just under £1.1 million. They were not allowed to hire permanent staff members and handled a total of inquiries, not disputes. 591 inquiries. And I don't think it's good enough for the Minister to say that extra resources will still be available, as he did at Second Reading, but he didn't give any further details. And I think the time has come when we need to have very clear steer on exactly what this budget will include and amount to.

This is a root and branch reform that will will not just completely change the nature of the Commissioner's office, but will have ramifications for businesses up and down the country. It must have a clear, laid out funding plan. That is why we support the noble Lord. Lord Fox amendment 93. It would ensure that the Commissioner's new functions would not be commenced until a funding plan has been laid before and debated by Parliament. This is the bare minimum, surely, for a reform of this kind.

My Lords, both the Commissioner's Office and the businesses that were rely upon it need to know that they will be adequately provided for. One cannot instil institutional trust in a reform. If it appears that it is being underfunded. I hope the Minister can now commit to a funding plan and that if not, the noble Lord Lord Fox, will not be satisfied, as I won't be if there is no clear plan, and we will return to the matter on report.

But the noble Lord. The Minister has a real opportunity now to answer all these questions, and let's get ahead with what is a very important reform. I beg to move. Gene. Page 21923. Leave out. But no other type of person and insert or consumer or consumer.

19:42

Deputy Chair of Committees. Lord Beith (Liberal Democrat)

19:42

Lord Fox (Liberal Democrat)

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My Lords, it's a real pleasure to follow the noble Lord hunt, given his continued involvement in given his continued involvement in the Small Business Commission. And and, and there's a lot of groups, a and, and there's a lot of groups, a lot of amendments in this group. And in order to not overstay my welcome, I'm not going to speak to his amendments, but I have to say I'm broadly in agreement with everything that he's just said. But as I said, a number of amendments here.

Now, first, I will speak to excuse me, amendment 59. 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. This bill creates a 60 day limit by which private organisations must pay back small businesses. However, although the case of a dispute that there is a time limit for the dispute to be raised, there's no time limit for the case to be resolved. This means large companies could, in effect, raise a dispute and delay resolution, putting pressure on the SMEs to settle.

As can be seen from the amendment, this calls for the adjudicator to reach a decision determining a relevant payment dispute before the end of a period of 60 days, beginning from the day on which the dispute is referred to adjudication. Under the scheme, the. To facilitate this, the adjudicator must compel parties to share relevant information with itself. If the sharing of such information is necessary for the fulfilment of the duties of the duties. Under this. However, where necessary, the Commissioner may extend the period to resolve a particular.

A particular issue. Having regard to the complexity of a dispute and the conduct of the parties, the Commissioner must set out reasons for any extension. This amendment addresses this and this is an issue I think we attach quite a lot of appointment to. As the noble Lord. Lord. Just hunt. Just, just said. Amendment 71 looks at a 28 day limit, separate but otherwise. Amendment 79 in the noble Lord Holmes looks at a 12 months for an investigation.

I think in that context, the whole thing that looks like a very long time, but I look forward to what he has to say. Now turning to amendment 63, also in my name, amendment 63 seeks to protect small businesses from blacklisting, contract termination and other retaliation for using the adjudication scheme or assisting an investigation. It voids contract terms enabling such retaliation and places the burden on the larger businesses to show any detriment. Had a legal had a legitimate cause, the system being proposed by the government to hold large companies to account is welcome, but only works if companies feel and are safe to report information to the Small Business Commissioner without fear of repercussions.

Now, the Minister will say that the Small Business Commission is equipped to investigate systematic issues, and no one needs to be the wiser as to the source of any intelligence or complaint. I would say, especially given the statistics we've just heard from the noble Lord hunt, that this is an example of haute hope over expectation. Unless there is a major change of gear within the SBC. But second, it doesn't matter what I think or with respect what the Minister says.

If the small business in question believes that it is exposed to potential retaliation from a major client and doesn't believe that it will be protected, then they will not take the steps they should take to get recompense. And for these reasons, we are convinced that it's important to set an amendment like this that clearly states that retribution is not allowed. Turning to amendments 88, 89, 1991 in my name, amendment 91 is the substantive and requires the regulations defining a company's turnover to disregard arrangements designed to shrink the penalty, preventing avoidance through profit shifting.

It would make further provision for determining the turnover of a company, including the turnover should be calculated as a turnover both within and outside the United Kingdom. Section 241 of the Digital. 2024 allows a determination of turnover both inside and outside the United Kingdom. This amendment takes the same wording for this bill, and it seems to me inexplicable as to why it would not be applied in this in this situation, when it's already being applied in other situations in law.

And finally, turning to amendment 93, and I thank the noble Lords, Hunt, Sharp and Holmes for co-signing it. My Lords, this is where the future act will sink or swim. That is because all the measures in this bill hinge on, and will rely on the effectiveness of the Small Business Commission as a quasi regulator, whether that be on how well it can investigate complaints, how it deals with its client companies, how it covers online supply chains, or whether it simply has the horsepower to take on some very difficult industries.

Amendment 93 prevents the commissioners new adjudication and investigation functions from being commenced until the government has laid before Parliament a funding plan. The statement must in particular, set out the resources the Secretary of State considers the Commissioner will require to operate the adjudication scheme and carry out its investigations. The funding the Secretary of State intends to make available for each of the first three financial years following commencement, and the basis on which the adequacy of that funding will be kept under review.

My Lords, there is a precedent of this. When we were discussing the Economic Crime Bill, the Minister in question set out the extra resources that companies House would receive in order to meet the conditions of the new bill. Therefore, it is absolutely the case. We should do the same here. I'm happy to discuss this, but I do think from my perspective, from our perspective on these issues, this is an absolutely central issue.

19:49

Lord Holmes of Richmond (Conservative)

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My Lord. It's a pleasure to >> My Lord. It's a pleasure to follow my noble friend Lord Fox, and to start with his amendment 93, and to start with his amendment 93, which I was delighted to co-sign because as he finished there, it because as he finished there, it does go to the heart of this issue. A lot is being asked of an organisation which is currently small currently and obviously not set up to perform the tasks that are being asked from this bill as currently structured.

So to not have clarity as to what provisions are going to be put in place while putting the obligations on the Commission Commissioner would seem to not be the right way to get optimal results from this. As Lord Fox rightly says, there are a number of examples where regulators and other bodies have been given packages which sit alongside the obligations which are required of them from previous bills that we've all worked upon. So there's nothing extraordinary or unusual about this. I think it's absolutely critical to have sight of that before having a sense of the likelihood of success, or indeed, what other routes we may choose to take with amendments when we come to Report stage.

My Lords, I support the principles behind all of the amendments in this group. In many ways, they can all be summed up by two words the need for clarity and precision. We heard in earlier debates that sense of phrases and sections of the bill which were in need of precision. We see again with some of the key phrases here. So I support all of these amendments. I look forward to the minister's response. My Lord.

19:51

Lord Leigh of Hurley (Conservative)

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My. We now come to, as Lord Hunt of Wirral said, the heart of the bill, as far as I'm concerned, and bill, as far as I'm concerned, and for many, the most important part, and I have put down a number of amendments, starting with 62. As Lord Hutton said, it seems only sensible that if. If the Small Business Commissioner has decided not to adjudicate, he should set out in writing the reasons why and the particular. Particular emphasis on this is to understand if that is because of a lack of resources within the Commissioner's office, and if that's the case, we want we really want to know so that we can push harder for proper funding for that office.

So I hope the noble Lords Minister regard the set of amendments in Group nine as being constructive. They do reflect feedback from the world of business in respect of amendment 75, which I've tabled. I think it's reasonable to push the government to be more specific and explain what they mean by a sufficient number of occasions. It bluntly fairly meaningless, as is an extremely woolly as I think Lord Hunt of Wirral has has indicated. But there's no point saying giving us a number.

It's got to be a number in a certain period and perhaps quantified as well. To be honest, I'm also not entirely happy with clauses two K and two L of section two of the Enterprise Act 2016, which is mentioned in this clause 18 on publication directions and enforcement directions and financial penalties for non-compliance. It really doesn't specify all that exactly might be required of a company. It does give examples. In subclause two of two L, and indeed it actually rules out a larger business being required to publish information or make payments, or comply with a decision given in legal proceedings.

But I would like to see some greater powers here. So I would ask the Lord Minister to have another look at two K and two L, and perhaps over the summer months, consider with us what might be included within enforcement directions. For example, I have in mind that a company that's in breach of late payments best practices should not be given government contracts. Has that been considered at all by the government? It seem an obvious point that if there is a serious breach, a company is in constantly paying late, why would the government want to give them any contracts at all? That will bite, that will force companies to think again.

It may be the government has this in mind but hasn't got it in legislation, wants to do it through regulation or something, but it would be helpful to hear from the noble Lords Minister now or later his views on that. In my view, a solution is that the guilty company should be given the cold shoulder by the government and indeed the wider business community. Now, to be given the cold shoulder is difficult to define, although it is used in the city as the noble Lord Minister knows, and the takeover Code with great effect very, very rarely applied, but with great effect.

So, for example, I would be extremely disappointed to see the chairman of a company which consistently practices poor late payment policies to be given any sort of honour or award. Now, it may be difficult to put that into legislation, but the noble Lord, the Minister, might indicate to us his views on that, and there might be from the Dispatch Box now or later comfort given to us, that the government will not look kindly on such companies, and will take such steps as is necessary to push them along.

So we have quite a long time until report, and indeed there will be, I understand it, a new Minister in the other House in the other place. So I hope that overall the Minister in this House, who I am very confident and hopeful, will be in his seat when we return, might invite participation in some agreed. Further amendments to this part of the Bill.

19:55

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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Firstly, may I thank all noble Lords who have contributed to this group of amendments and acknowledge group of amendments and acknowledge the work done by the previous government in establishing the Small Business Commissioner, and we are actually building on on the work done by the previous government to give the SBC more powers to actually do the work under this bill itself. Now, I've listened to noble Lord Lee's very innovative suggestions and all that, and I will definitely bear in mind when I speak to my officials about some suggestions, but I will not guarantee or promising anything.

But I'll just bring it up. Firstly, my Lords, let me turn to amendments 59, 66 to 68, 71 and 79. I recognise the shared objective behind this amendments. Payment disputes should be resolved quickly, fairly and with proper, proper safeguards. That is what the Bill is designed to achieve. My Lords, there's a huge group of amendments here and I will try to address as many of the questions within my contribution. Now, if I don't, then I promise to sort of go through Hansard and and write to noble Lords.

My Lords, the bill enable regulations to set time limits for each stage of adjudication, including the Adjudicator's decision, and to make further provisions about investigation. It allows the detailed procedural rules to be informed by consultation approved by Parliament and, where appropriate, with the consent of the devolved governments. It gives the scheme flexibility to be adjusted, including to set a shorter time frame than 60 days for an adjudicator to determine a a payment dispute, if appropriate. I understand the desire to put firm deadlines and procedural requirements on the face of the bill, but doing so would risk making the scheme less effective, in particular, requiring both parties to agree to extensions could allow one party to frustrate the process and jeopardise a fair outcome.

Similarly, removing the adjudicators ability to give directions or take steps to secure fair adjudication of a dispute would make the scheme more rigid, and could prevent adjudicators from detailing properly with complex or incomplete evidence. The Bill already contains important safeguards. Adjudicators must act fairly and impartially, give parties a reasonable opportunity to present their case and operate within a framework set out in regulations and subject to scrutiny. Turning to amendments 55 to 57, 62 and 64 to 65, the government's approach is deliberately targeted.

The scheme is intended to address the power imbalance that can arise where a larger business owes money to a small business, including sole traders and the self-employed. It is not designed to duplicate existing consumer protections or create a general commercial dispute resolution service, extending the scheme more widely risks increasing complexity and case volumes and weaken the ability to provide a swift, low cost route for small businesses. The group most affected by poor payment practices, the bill sets out exclusions and grounds on which the commissioner may decline to adjudicate the regulation.

Making powers simply allow technical and proportionate refinements informed by operational experience, so the scheme remains effective on amendment 62. I recognise the importance of transparency. Where adjudication is declined, the Commissioner will usually give reason reasons to the smaller businesses while retaining discretion where disclosure would harm commercial relationships or otherwise be inappropriate. For those reasons, the government believes the bill strikes the right balance between clarity, safeguards and the flexibility needed to keep the scheme focussed and workable.

With reference to amendments 69, 74 and 93, the government is clear that these powers must be matched by the capacity capacity to use them effectively. My department is already working closely with the Commissioner to assess the staffing and funding needed ahead of commencement. The bill also provides a practical mechanism for cost recovery in relation to adjudication, so the burden does not fall solely on taxpayers, and larger businesses have a further incentive to resolve disputes promptly and pay suppliers properly.

Those arrangements will be set out in regulations subject to consultation and parliamentary scrutiny. The Commissioner's annual report will continue to provide transparency on staffing, funding and audited accounts. I'll take amendment 63, 7075 together on amendment 63. The government agrees that small businesses must be able to use the scheme without fear or retaliation. The bill already addresses this directly contracted terms restricting access to adjudication are void, and the commissioner is under clear confidentiality duties on amendment 70.

We agree that any pre-referral steps must be clear, but the right place for that operational detail is regulations following consultation and approval by both houses, so the scheme can adapt as experience develops on amendment 75, the government does not support a fixed numerical trigger for investigations. Poor payment practices differ in seriousness, scale and impact. A rigid threshold could miss serious cases or capture the wrong ones. The bill instead gives the commissioner discretion guided by statutory criteria including extent, impact, resources and proportionality.

That is a stronger safeguard than an arbitrary number. My Lords, I've recently met with the Small Business Comissioner Emma Jones, and she has actually updated me on the current working of the SBC. And what are the additional requirements required to properly enforce the requirements under this bill, and I will more than happy to organise a meeting between local Lords and the current Small Business Comissioner so that noble Lords will hear first hand from her as to how she proposed to take this bill forward.

Turning to amendment 72, I hope to reassure noble Lords that the Bill already provides the necessary safeguards. Regulations under clause 18 are subject to the affirmative procedure and must be approved by both houses before taking effect. The amendment would therefore duplicate existing scrutiny. The government will also consult appropriate stakeholders and seek devolved consent where needed. My Lords, I thank noble Lord for tabling amendments 88 to 91 which would amend which would amend the maximum penalty for breaching payment reporting requirements, providing for it to be calculated based on the company's global turnover, as well as the turnover of any parent or subsidiary company, rather than the company's UK turnover.

I can reassure the noble Lord that our intention is for fines to be substantial, whilst also being proportionate and reasonable. Financial penalties should be linked to the UK economic activity of the qualifying company responsible for the breach, rather than that of overseas or other connected businesses that are not subject to the reporting requirements. Further details as to how turnover will be determined will be set up in regulations following consultation. And with that, my Lord, I ask that the amendment be withdrawn.

20:03

Lord Fox (Liberal Democrat)

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Before the Minister sits down. I find his answer to amendment 91 a find his answer to amendment 91 a bit disappointing, given that we went through the debate with the Digital Markets, Competition and Consumers Act and came to a different conclusion, and it's not clear to me why in this circumstance, the the, the the the government goes one way when with the DMCCA we went the other the other way. So I think a conversation on that needs to be had.

20:04

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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I'm happy to follow with further conversation with the noble Lord, but I take his point. But the point also here. We need to also be mindful that there are so many different structures that company can actually operate. I mean, can actually operate. I mean, whether it's through a subsidiary here, whether it's a domain in this for for UK purposes and so on and so forth. But nevertheless, I agree with noble Lord that we need to be very clear as to what constitutes a UK trading company and what revenue

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should be taken into account. And I welcome additional engagement with the noble Lord. Sorry to make a point, but it's

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Sorry to make a point, but it's that that use of structures. That is exactly what my amendment is seeking to avoid, because it is seeking to avoid, because it is through those structures that that that clever companies with very that clever companies with very good corporate lawyers can remove profit that has been generated in this country, but attribute it to this country, but attribute it to other subsidiaries that are not in this country and therefore would not be subject to the calculation for fines.

That is why we made the decision on the Digital Markets Bill, and that is why I'm proposing we should do the same for this one.

20:05

Lord Hunt of Wirral (Conservative)

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Well, like I said earlier, I mean, I think we need to have mean, I think we need to have further conversations on that and I will welcome that.

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will welcome that. My Lords, I thank all noble Lords for taking part in what I Lords for taking part in what I believe has been a very important debate, and I'm very grateful to the noble Lord, the Minister, for his response. I warmly applaud what the noble Lord Lord Fox has said about the need for, and the critical need for clarity and. My noble friend Lord Holmes of Richmond emphasised not just clarity, but precision, and we.

We believe these elements are essential, particularly on resources. It's all well and good to pass legislation. Groundbreaking legislation to some extent. But if there aren't the resources behind that change in legislative structures, then the ultimate objective will not be achieved. And my Lords, I believe, speaking on behalf of all those who've spoken, it's all of our intentions that the expanded Small Business Commissioner's office works as the government intends it to. The amendments in this group simply represent different views on how best to achieve this, and I warmly applaud my noble friend Lord Leigh of Hurley, who always gives us the correct feedback from the world of business.

And he did so again just a few moments ago. His remarks about giving the cold shoulder have been proved with the effectiveness of the takeover code, and we have to isolate. Perhaps we haven't had enough discussion about this. We need to isolate those companies that have poor payment practices, and we must get through to them that across all parties we condemn such action in particular when it has such a dramatic impact on small and medium sized enterprises.

I do understand the noble Lord Lord Fox amendments that include overseas turnover when calculating a company's turnover, and we need to discuss further. I we need to get UK tax law right and section 474 of the Companies Act 2006 is absolutely flat tax. Yes. Anyway, that's another debate. On another occasion, my Lords, I believe the House has made clear that we support the prohibition of new regulations without either outlining what they might be used for or without them being approved by both Houses of Parliament.

And I've also set out our position on the timeline for adjudication of disputes. It is an argument which I do believe has some merit, and we would at least benefit from some guidance from the Minister. But I, I warmly applaud the consensus across this House that the question of funding must be answered before this bill passes. As I outlined at the start of this debate, businesses must be able to trust the office for it to function as intended, and trust includes knowing that it has the means to deal with the disputes with which it has been tasked by this legislation.

Now, I understand that the Minister cannot commit today to a set amount, nor indeed to a timeline, but I hope over the summer he and his official his officials can come to a solution on this issue, perhaps with the support of a rejuvenated Treasury. I look forward to revisiting this debate, and I do accept. On behalf of all those interested, the noble Lord, the minister's offer of a meeting with the Small Business Commissioner and her team. I think that would greatly enhance our ability to understand some of the issues involved.

But in the meantime, I beg leave to withdraw my amendment.

20:09

Deputy Chair of Committees. Baroness Finlay of Llandaff (Crossbench)

Your Lordships pleasure that >> Your Lordships pleasure that this amendment be withdrawn. The amendment is by leave withdrawn. amendment is by leave withdrawn. Amendment 56 Lord Hunt of Wirral not moved. Amendment 57. Lord Hunt of Wirral not moved. Amendment 58.

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Lord Leigh of Hurley. My Lords, my amendment 58 comes

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My Lords, my amendment 58 comes out of discussions I've had with SME businesses who are supplying much larger companies. I did raise this at Second Reading, but. So I

20:10

Amendment:58 Lord Leigh of Hurley (Conservative)

this at Second Reading, but. So I now put this amendment down to reflect the discussion at Second reflect the discussion at Second Reading. It may not be the most important to some, but I feel very strongly that this issue needs to be addressed and to the extent it can in this bill through these amendments, that's great, but it's part of a wider issue which government should look at, and that is that many SME companies I talk to, and they will not put their head above the parapet and say so publicly, but they are spending significant time and resources assisting larger companies fulfil their ESG ambitions, whether or not it's obligatory, they still find themselves essentially having to do it.

So what does that mean in practice? It means they have to go on courses, they have to go on webinars, they have to fill out forms, all of which are completely manilla, bland and meaningless. But tick a box for a larger company to say, yes, it's gone through its supply chain and and have ensured that they are performing to the same standards and way of doing business as they are. And it's, it's, it's detrimental to so many small businesses.

I mean, can a company that employs only six people really be expected to have a diversity policy that's meaningful? I mean, what if all six are women? Good luck to it. But should that be should that company be punished? My opinion being be encouraged. But but if if that company has all six male, then a sharp intake of breath and a cross on the ESG form. And likewise for small businesses to analyse their travel activities and the amount of water they use in their enterprise.

I mean, we're talking about businesses who sit in an office in a building, and the only water that gets used up is, is in the facilities and the roof, but they've got to fill out the form telling someone how much water they use. And it's a complete and utter waste and abuse of their time. But nobody's standing up for SME businesses and saying, up with this, we will not put. So I hope that the government takes this siren warning, picks up this issue elsewhere.

But in the context of this bill, my concern that is, at some point, larger companies might wish to withhold or defer payments to suppliers whom they regard as being unhelpful to them in their ESG drive. So it's it's I have no evidence of this happening, but it's a to prevent it happening and to raise the issue for a wider debate within the. I think it's BIST, not BSIT the Lords Minister. Yeah. Within the BIST team. So I saw the government concede the point and I hope that they will consider it.

And whilst I, like very many of my noble friend Lord Holmes of Richmond amendments always I am. I am nervous about legislation which requires more disclosure in companies accounts. The FTSE average FTSE 100 company annual return annual report has ready for this. 97000 words. So I really hope we don't legislate to make them put more words in it, partly because nobody reads it and they are huge documents printed out. I challenge anybody to say they've read the annual report of FTSE 100 company in full, so it is expensive to reduce produce, and they are read increasingly, increasingly

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frequently. I beg to move. Amendment proposed clause 18,

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Amendment proposed clause 18, page 22. Line 26. At the end, insert the words as printed on the

20:14

Deputy Chair of Committees. Baroness Finlay of Llandaff (Crossbench)

Marshalled List. >> My Lord, it's a pleasure to follow my noble friend Lord Leigh follow my noble friend Lord Leigh of Hurley. My amendment in this of Hurley. My amendment in this group largely fit into support and assistance for the small businesses

20:14

Lord Holmes of Richmond (Conservative)

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who need to be put in a position to avail themselves of these new avail themselves of these new provisions from the SBC. And what's clear is, and we'll come on to this in the next brief, this is going to in the next brief, this is going to produce potentially, as Lord Lee somewhat alluded to, it could produce a lot of data which goes nowhere and is of no benefit and isn't used to drive any change isn't used to drive any change whatsoever.

And yet, by the nature of what the requirements currently set out in the bill, that data will be produced. So it seems helpful, I believe, to look at the various categories of small business and the equalities issues in there in that that data is going to be part of the collection in any event, to just have that angle on it, to see then what potential targeted support could come from the SBC to support those businesses, to better avail themselves of the services.

Indeed, to have a small business payments charter would seem to be a good focal point for the provisions set out in this bill to make sure that those who it is aimed at are aware of it, enabled and empowered to take make use of it as and when they need. There are also questions of digital access critically important, particularly for small and micro businesses, that. It will obviously impact their ability to interact with the SBC. And it's critical also to have non-digital pathways as well.

But digital is coming whether people don't like it or indeed do. So critical to have a sense that digital exclusion needs to be addressed. So that doesn't exclude smaller microbusinesses and being able to connect with this process. And indeed, the commissioner, and as we've talked throughout many of the groups, we've continually raised the question of clarity. Well, I think supply chain is the absolute example of opacity. If anyone tries to go back more than 2 or 3 steps in that supply chain.

So I also suggest amendments to look into the payment practices at each tier of the supply chain, particularly tier one, tier two, and also to how that impacts the various layers of businesses in those tiers of the supply chain. My final amendment on ESG isn't really about ESG at all, or seeking more reporting requirements and burdensome on small and micro businesses. Rather, it's to go to the point which has been raised in many groups that we've discussed previously about how we give at every opportunity the clarity as to who isn't currently good, who currently isn't gold when it comes to payments and in these ESG requirements exist on large businesses, I think it would make them more effective and more useful not to add to those 93000 words to potentially reduce them, but have some more meaning in those words, and have, particularly in the S and G of ESG, the sense of that company having to give detailed reporting on its payment practices.

So for the large companies to make, that's and G really have far greater meaning in those reports. And potentially as a consequence of that, they could even be shorter.

20:18

Baroness Kramer (Liberal Democrat)

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My amendment 81 in this group addresses a single issue, and I would say, my Lords, that there is no possible way that the small Business Commissioner can achieve Business Commissioner can achieve his or her purpose without a strong whistleblowing framework incorporated into the office. In this legislation, the commissioner is not even a prescribed person required to keep the disclosures of a whistleblower confidential. And I want to point out that a complainant, someone raising an issue about wrong that they believe has been done to themselves is very different from a whistleblower who is identifying information which they believe demonstrates some form of bad practice, but they themselves are not the victim of that practice.

So they're not bringing a complaint about themselves. And that's one of the weaknesses within this particular legislation. And I would point out that without those particular protections of being a prescribed person, even if the commissioner wants to keep an issue that he she has in this case, that could be he later has discussed under wraps that, again, that all of that will be subject to FOI and subject access requests. And while there can be some reduction in those. It becomes extremely difficult when there isn't a right of confidentiality.

Now, many suppliers who are played late will be afraid to complain. I mean, that's simply a reality. There'll be afraid to complain directly to the commissioner for fear of getting a reputation as troublemakers and losing future business. And that's why the investigative powers of the commissioner are so important and such a significant part of this bill. But in many cases, there is no way that the commissioner will be able to pursue an investigation without getting insider information. Insider information comes from whistleblowers, but very few will disclose the relevant information if it means the end of their careers and financial ruin.

Now, the bill presently offers no confidential route for a whistleblower and very little protection from detriment, an employee, say, of a large company that is paying late. That's a who speaks out to show that his or her employer is abusing payment rules and is then consequently fired, can go to an employment tribunal. And some would say, well, that's fine. That's the way to avoid retribution. He or she, of course, needs 40 to £50,000 to be able to get to a preliminary hearing.

The case will not start for three years because the tribunals are so backlogged. And with appeals, even winning cases can take 5 to 7 years. The word gets quickly around the industry, ensuring that the whistleblower cannot get another job. Now, some whistle whistleblowers belong to trade unions. That trade union may well have an insurance agreement to pay for legal representation at the tribunal, but the terms of the insurance mean that the insurance company can withdraw if it decides the case is unlikely to succeed, or it can press for early settlement, which has the effect, of course, of silencing the content of the issue about which the whistle blowing was raised.

And most insurance companies do one or the other, they are rarely. Very rarely do they actually ever see a case through. So for whistleblowers who are not employees, that is, suppliers, associates, directors, competitors, there is not even the protection of the employment tribunal. There is absolutely nothing they can do to stop a revenge and detriment. So the best investigators that we have in the finance and business sphere, HMRC, the SFO, the NCA, the CMA all understand that whistleblowers are vital and have been strengthening the whistleblower framework, some of them very significantly indeed, including rewards.

Most of their successful cases involve whistleblower obtained evidence. The old trope that monitoring and supervision are sufficient has long been discredited. Now, I would, of course, personally like to see an overarching office of the whistleblower sitting under the Cabinet Office able to then act as a hub with spokes going out to various people, including, say, the small business commissioner. But we are where we are. That doesn't exist. And so I hope the Minister will look very seriously at the amendment that I put down on this bill and either accept it or come up with its own version, because it provides for the small business commissioner to have an office of the whistleblower within his purview.

It provides a place for a whistleblower to make a disclosure that is protected and confidential, that unless he or she gives permission for that disclosure to be made public, which sometimes people will do, particularly when it comes to taking a case to court, that it provides for redress, where the whistleblower suffers detriment. And indeed, at the base of this, the commissioner would be a proscribed person and Parliament would receive annual reports. This, to me, is a missing element within this bill, and I hope that the Minister will address it, because, frankly, the effectiveness of the bill will depend on there being an effective whistleblower route to.

20:23

Lord Thomas of Cwmgiedd (Crossbench)

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Can I make one brief observation >> Can I make one brief observation in relation to amendment 83? When one looks back at the last group of amendments and looks at this one, what in effect is happening is the what in effect is happening is the creation of an entirely alternate system of dispute resolution, a new form of court or adjudication procedure. And one of the things that I think is also apparent from the whole focus of the debate is this is not easy legislation to follow.

And I therefore think if one is to provide access to justice and the justice being now provided by the Small Business Commissioner, we must actually put what the rights are into ordinary language, because, as experience showed in the 19th century, when the small. When the county courts were created, which had the same idea as all of this, once you let lawyers in, you this, once you let lawyers in, you destroy them. And it is imperative that lawyers do not become involved.

It will destroy the system. It destroyed the county courts. It destroyed workmen's compensation. Tribunals were created to get away from the lawyers and the. The key to it is. And I'll come back to this in one of the further amendments is to make procedure and law accessible without lawyers or.

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This system will not work. Well done.

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Lawyers.

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Lawyers. As the noble Lord. The Minister has just suggested I should declare has just suggested I should declare my interest as a practising solicitor in the City of London, and I acknowledge the words of the and I acknowledge the words of the former Lord Chief Justice, Lord Thomas of Concrete. We do need access to justice. I just happen to believe it is best achieved by using lawyers, but I recognise the validity of what he has just said and we need to reflect on

20:26

Lord Hunt of Wirral (Conservative)

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That just as we need to reflect >> That just as we need to reflect on what has been said by my noble friend Lord Holmes of Richmond on having plain English so people understand. In a way, if you try and create another dispute resolution system, as we have discovered with the Financial Ombudsman Service and the noble Baroness, Lady Cramer, will know from sitting in the debates on the Financial Services and Markets Bill that allowing the the the Financial Ombudsman to decide what is fair and reasonable in all the circumstances and not have to rely on the common law, does create a difficult adjudicatory system.

And at the end of the day, what we want is for right to succeed, and it can only do so if everyone understands what the law is and isn't left to the discretion of some intermediary. That, having now pleaded the case with the lawyers. I do want to thank my noble friend Lord Lee of Hurley for introducing what has been a very important debate, and I do acknowledge the noble Baroness, Lady Cramer, in her fight for the Cabinet Office to take a role, so far as any whistleblowing regime is concerned.

I hope she will understand that I am nervous about establishing another office within the office of the Small Business Commissioner, but we look forward to hearing what the noble Lord, the Minister, wishes to say about that. But I will begin with amendments 86 and 87 in my name and my noble friends, Lord Sharpe of Epsom and Lord Holmes of Richmond. My Lords, this bill does represent a shift in the government's policy in that it does favour small and medium sized businesses.

Payment terms and retention contracts will do much to prevent exploitative counterparts, while increasing the powers of. The Small Business Commissioner will introduce another layer of protection. However, my Lords, I call it a shift because it is antithetical to the road that the government has pursued up until now, which has placed business, both small and large, under ever more regulatory and financial burdens. I am, of course, my Lords, referring to the Employment Rights Act of last year. It seems to me unfair that businesses should be expected to comply with new payment practices that reduce cash flow flexibility, while the government is simultaneously doing the same with its policies.

The worst provisions of that act have not even been implemented yet, but are expected to cost an additional £1,000 million. At a minimum, this will undoubtedly have an impact on the ability of businesses, especially smaller businesses with tighter margins, to pay back the debt that they owe within the allotted time. So amendment 86 would therefore require a small Business Commissioner review into the relationship between the Employment Rights Act 2025 and payment practices. Whilst amendment 87 would require all future changes in employment law to be tested against the prospective impacts as judged by the Commissioner.

This would allow for reflection upon past mistakes and prevent such mistakes from ever happening again. My Lords, I've also added my name to the amendment in the name of my noble friend Lord Leigh of Hurley. Preventing the imposition of Non-contractual ESG requirements. My Lords, I believe an analogy may be drawn with retention payments. Retention payments have been used to withhold cash flow in the hands of larger business and transfer risk to smaller ones. ESG requirements do the same.

Smaller businesses are forced to take them on, thereby assuming the cost and risk. Whilst larger businesses benefit from being able to cite good practice, that is not right. I do hope the noble Lord, the Minister, will accept this amendment. My Lords, I similarly understand my noble friend Lord Holmes of Richmond's Amendment 98. Whilst amendment 58 prevents Non-contractual ESG imposition, this amendment would allow for some regulation of how they are imposed contractually, and I do look forward to hearing the noble Lord.

The minister's response. My Lords, I'm broadly supportive of the rest of my noble friend's amendments, in particular the publication of data on payment disputes and investigations as amendment 80 would require, would do much to increase transparency and thus competitiveness. Amendment 83 would impose digital accessibility standards upon all SBC services and mandates non-digital alternatives. Again, my Lords, this must be funded. But if it is done so adequately, I would support such an initiative.

Similarly, subsection D d of section two G within clause 18 allows for the restriction of onward disclosure of information in relation to an adjudication. And this seems to me to account for whistleblowing and the production of. Though the protection of those who come forward. But again, we look forward to hearing from the noble Lord the Minister, as to whether he can confirm that this is the case in his response to which we now look forward to hearing.

20:32

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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My Lord, I thank all noble Lords have contributed to this group of amendments. Let me turn to amendments. Let me turn to amendments 80, 83 and 85. The government agrees that the protections in this bill must be accessible and effective for all small businesses. We note disparities exist for businesses led by women, ethnic minority and disabled entrepreneurs. That is why the regulations for the Adjudication and Investigation Scheme will be consulted upon carefully. The regime will be designed and implemented implemented to support all small businesses, including those hardest to reach.

The Commissioner already provides a wide range of simple, small, business friendly guides to help small businesses understand and use its services, including their legal rights relating to payments. The Commissioner also works with the works with a diverse range of business groups, representative organisations and partners to promote its services and improve awareness among small firms. Furthermore, the SBC Annual Report and Commissioner were report sorry. Furthermore, through the SBC Annual Report, the Commissioner will report on these activities, including steps taken to ensure services are accessible to all groups.

More broadly, the government is already supporting underrepresented entrepreneurs through wider BBB backed work. The Commissioner will continue to reflect best practice in promoting fair access to its services. For those reasons, we believe these matters are better addressed through implementation, guidance and engagement, so the schemes remain practical, proportionate, up to date and responsive. Turning to amendments 58, 97 and 98, which would introduce additional statutory structures and requirements. The combined effect of these proposals would be to place a significant new reporting and compliance burdens on businesses, including in areas where data may not be readily available or verifiable, particularly across different supply chains.

We must be careful not to impose unnecessary burdens on businesses, especially those already demonstrating good payment practices. When our focus should be on tackling poor performers, we are already introducing new powers within the bill out to enable the Small Business Commissioner to investigate businesses with poor payment practices. I agree that transparency and data are important. Payment practice reporting data is already published and accessible on gov.uk. Organisations already use that data to analyse payment performance. The Commissioner is also looking at how improved data analytics and AI tools can support its work on ESG.

I agree that payment practices are an important aspect of responsible business behaviour. The Small Business Commissioner is already working to promote cultural change through initiatives such as the Fair Payment Code. However, ESG frameworks are already well developed and continue to evolve, often at an internationally aligned basis, mandating a specific framework in legislation risks duplication and inflexibility that is best allowed to develop dynamically, dramatically. Turning specifically to amendment 58, while I understand the intention to prevent payment being withheld because of informal or extra contractual ESG requirements, the bill already ensures that payment obligations are clear.

This amendment risks causing confusion and making the payment provisions of the bill less clear. I would like to thank noble Lord Hain and Lord Birt Lord Sharpe for raising, through amendments 86 and 87, the interaction between payment practices and the Employment Rights Act. However, I will resist the temptation to reopen debates that this House has already had in detail on that particular legislation, including on the subject of impact assessments, which has been debated at length. The purpose of this bill is clear.

It is about tackling late payments and addressing the harm they cause to small businesses, cash flow, resilience and growth. The Small Business Comissioner place a focussed role within that agenda, supporting within that agenda, supporting small businesses, small firms, resolving payment disputes and driving improvements in payment practices through adjudication, investigation and enforcement. These amendments would expand that role into reviewing wider employment policy, risking diluting the commissioner's focus and effectiveness. Effectiveness. For those reasons, while I understand the intention of the amendment, I do not consider these amendments necessary or appropriate to this bill.

Turning to amendment 81, tabled by the noble Baroness Baroness Kramer, I recognise the importance of the issue she raises. The Bill already provides a framework under which the Small Business Commissioner can receive an act on information from small businesses and third parties, including whistleblowers. Individuals can provide evidence to support the Commission's investigation and wider functions. Crucially, the bill includes strong confidentiality protections. These prohibit the commissioner from disclosing information where doing so could potentially identify the individual who has provided that information, except in limited circumstances, whereas such as where consent is given.

In that context, establishing a dedicated office of the whistleblower risk duplicating protections that already exist without clearly addressing a gap in the current framework. It is important to consider the broader whistleblowing framework already in place protections for individuals making disclosures in the public interest are set up in Employment Rights Act 1996. The government has recently updated that order, and it is actively considering whether it would be appropriate to include the Small Business Commissioner as a proscribed person, and I hope that gives some consolation to the noble Baroness.

Noble Lady, there. This is an important. This is a more proportionate and coherent route to strengthening the protections. In conclusion, my Lords, these are well-intentioned amendments, and I share their ambitions. But the Bill already provides a strong and proportionate framework. Our approach is to deliver improvements in a way that is flexible, targeted and proportionate, avoiding unnecessary burdens on businesses rather than prescribing detailed mechanisms. On the face of the bill for those reasons, I ask the noble for those reasons, I ask the noble Lord to withdraw his amendment.

20:39

Deputy Chair of Committees. Baroness Finlay of Llandaff (Crossbench)

That the amendment be withdrawn. >> That the amendment be withdrawn. The amendment is by leave withdrawn. Amendment 59 Lord Fox amendment 60 and 61 Lord Leong moved En bloc. The question is that these amendments be agreed to. As many as that opinion will say content. The contrary not content. The contents have it. Amendment 62 Lord Leigh of Hurley not moved. Amendment 63. Lord Fox. Amendment 64. Lord Hunt not moved. Amendment 65, 66, 67 and not moved.

Amendment 65, 66, 67 and 68 and 69 and 70 and 71 and 72. Other. Thank you. Not moved. En bloc. Thank you. The question is that clause 18 stand part of the bill. As many as that opinion will say content. The contrary not content. The contents have it after clause 18. Amendment 73. Lord Holmes of Richmond.

20:41

Lord Holmes of Richmond (Conservative)

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My Lord, it's a pleasure to open this group of amendments and it's time to talk technology. Before time to talk technology. Before going into the specifics of the amendments, I'd like to set out the overarching reasons for this group. Firstly, as we've heard, the SBC does extremely good work, but the resources that she currently has available are chronically insufficient for the task that's being asked of her. The Minister said in the previous response that there already discussions happening around staffing and resource.

That's good, and we wait to see the outcome of that. But I'd suggest that in those discussions, what is absolutely critical is the question of the right mix of staffing and technologies, because even if the resource is put in without the right mix of technologies and staffing, the SBC is not going to have any chance whatsoever of optimising her task when it comes to what this bill requires of her. Another reason for these amendments is the government's current posture when it comes to artificial intelligence, and this may be up for change, and I certainly hope it is.

The announcement of an AI Minister to be in Cabinet can only be a positive thing, but currently the government's stance on AI is to not bring forward cross sector AI legislation. This is not a party political point. It's the same position as the previous government took. And what's said is that the government will take a domain specific approach when it comes to artificial intelligence. So here we are. We have a domain. It seems right and appropriate and beneficial to bring forward AI amendments specific to commercial payments.

My Lords, amendment 73 introduces a digital access pathway into the services of the SBC, and it should be seen with previous amendments in the last group, that it's critically important to have digital access. But this also must be seen with accessibility. Both of the digital tools themselves, and indeed providing non-digital alternatives. But a digital access pathway equally will enable the commissioner to better perform her tasks and a greater efficiency and effectiveness for small businesses to get involved with the processes as and when they need to.

My Lords, turning to AI, it's critical that the Commissioner has AI resources at her disposal, but in that we need to look at algorithmic accountability and all of the concepts around transparency, bias, and an ethical approach. My Lords, if we could suggest a principles based, outcomes focussed and input understood approach to AI, that would put the commissioner in the right space. And certainly algorithmic accountability is a key part of that. Perhaps the most important amendment in this group when it comes to the service of the commissioner, is that around an AI assisted payment monitoring tool.

This can go much broader than any staffing cohort could possibly achieve, and it would make use of all data which is currently out there and could be put alongside the payments data that the commissioner herself has. So not only be driving greater efficiency, but it would be it would enable the commissioner to get into areas which would otherwise be unavailable to her and her staff, no matter how big that staffing team was. I've talked throughout this evening around the amount of data that the commissioner currently has and the extraordinary amount of data she will have as a consequence of the provisions in this bill.

So it seems right to have an open payment data register with the right principle set around it. Obviously, principle principles of privacy, anonymity and so forth. But that data source provides such a rich base, not just for researchers, but for anybody to see what is happening at whichever angle they want to take in terms of this payments landscape. And it needs to be made available. It needs to be put into a framework. It needs to have, as I say, not just research benefits, but that will drive economic benefits.

Potentially. It will bring forward fintech tools and products as a consequence of that all, adding economic benefit as a consequence of data, which otherwise would obviously have its primary use, but then would just largely sit there, not really being of any benefit to anybody whatsoever. The final amendment I'd like to mention is that around cyber and post-quantum cryptography now, very much like Lord Thomas's amendment, it may be that this isn't the time for the commissioner and indeed broader business to consider PQs and have to adopt approaches and postures right now on passage of the Bill.

But to put a potential date in there, and to at least have the Commissioner, and indeed, to be honest, broader government and all businesses to consider what is happening in terms of the approaching Q day, when it existing cryptography will be insufficient for the might of quantum, which it will face. It seems reasonable, sensible, and the right level of forward look to have a consideration of cyber and indeed PQs in our discussions at this stage of the Bill.

My Lords, I believe that these amendments, taken together, bring the right level of technology purposed, focussed, not technology for technology's sake, not a silver bullet in search of something where it could potentially be of some use, but really clearly focussed technologies to be put for the benefit of the Commissioner. And through that the benefits, not least of small and micro businesses. My Lords, I look forward to the debate. I beg to move.

20:48

Deputy Chair of Committees. Baroness Finlay of Llandaff (Crossbench)

Amendment proposed after clause 18. Insert the new clause. The 18. Insert the new clause. The words as printed on the Marshalled List. >> And 1 or 2 brief observations in

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And 1 or 2 brief observations in support of the amendments, particularly amendment 73 and 78, particularly amendment 73 and 78, proposed by Lord Holmes. First, it is critical that people are given an easy understanding of digital

20:48

Lord Thomas of Cwmgiedd (Crossbench)

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access to the system, but that is said in the context of really, what said in the context of really, what is the amendment, which is, I think the more important one is amendment the more important one is amendment 78. I may have been slightly tendentious in what I said about tendentious in what I said about getting lawyers out of the system, but what you are likely to see in but what you are likely to see in the system is much more being done by artificial intelligence.

At the moment. There is not a lot of public confidence in decisions on adjudication, what are likely to be relatively simple things being done by machine. But it is coming and worldwide, and I really do mean worldwide. The courts are very concerned to look at the use of AI in being able to make decisions on a lot of areas, but we do no use going down that route if there isn't the public confidence. And that's why I think amendment.

The amendment 78 is very, very important because unless you are prepared to explain to the public what you're doing, how this is reliable, you will not get there. But we are going that way. I have absolutely no doubt about it. From looking at what is happening, not a little bit in this country, but much more elsewhere, that we are into the route of of AI being used to put arguments to the adjudicator, to responding to the arguments and to distil the arguments into decision making.

And it may be this will produce the return to 1846, that is, the County Courts Act, which was meant to do what this Bill is trying to do now.

20:50

Lord Fox (Liberal Democrat)

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My Lords, very briefly, and I would say that knowing that the Lord Holmes was involved in this Lord Holmes was involved in this bill, I. These these amendments are very much of the style that I had very much of the style that I had expected. And and he certainly made his arguments. It's to some extent, I think there's a mixed thing here. I think there's a mixed thing here. Some of it is mandating tools that the SBC could or should use. And to some extent, I don't think you need primary legislation to to mandate a tool.

I think the point that the noble Lord noble and learned Lord made on amendment 78 was a slightly different point from the one that the Lord Holmes, I think made. I may have misunderstood, but it is very important to know where AI is being used for decision making and for resolution. And I think that was the point that the noble and learned Lord was, was, was making. And there I have complete agreement. I think the use of distributed ledger is probably a very good idea.

Do we need primary legislation to make the SBC or advise the SBC to use it? I'm not sure. So I think I think there's a mixed bag here, but the the important element is that technology will change how the commissioner will will approach her job, and she needs to be resourced. And that's financially resourced and technically resourced in order to be able to address those changes and hopefully to be one step ahead of them.

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We're all very grateful to my noble friend Lord Holmes of Richmond, not only for his Richmond, not only for his amendments in this group, for his amendments in this group, for his wise words just spoken. And I also commend Lord Thomas of Complete and commend Lord Thomas of Complete and the noble Lord Lord Fox for their points. Just looking for a moment points. Just looking for a moment at the amendment. The First Amendment 73, which would require the Small Business Commissioner to provide a plain language digital pathway into the SBC adjudication scheme, including eligibility checker, interest calculator and guided referral process.

I do believe, my Lords, there's a lot of common sense behind this amendment, and I suppose I declare an interest. Having been UK chair of the English Speaking Union and Global chair for a number of years in placing a statutory duty on the Commissioner to provide a digital service will ensure that access. That small businesses will more easily be able to get the essential and relevant information about the scheme. Secondly, the inclusion of a plain language eligibility checker will mean that small businesses will be able to determine whether they are entitled to refer a relevant payment dispute to the scheme.

This will not only be to the benefit of the tax benefit of the taxpayer, as time and expense will not have to be expended sifting through ineligible applications, but it will also be to the benefit of small businesses who may otherwise have to spend money on legal fees and advice. Amendment 78 will would establish an algorithmic accountability framework for any AI or automated tool used by the commissioner. It requires transparency, regular bias audits, human oversight, and a right of explanation for businesses selected for investigation.

There is clear reasoning behind this amendment. If a business is put under investigation, then they should be entitled upon request to understand the factors that led to the initial decision to investigate. Not only will this provide transparency and act as a safeguard against particular businesses being targeted, but it will also mean that businesses are able to reflect on their existing practices and amend them as necessary. Then, turning to what my noble friend described as one of the most important amendments.

Amendment 92 and also amendment 94, amendment 92, would require the Secretary of State to commission an AI assisted payment monitoring tool for the Small Business Commissioner. Amendment 94 would require the Secretary of State to establish an open, machine readable register of payment practice reports. Both of these amendments rest on the principles that technology and data, when used in a constructive way, can yield more effective and efficient outcomes. An AI assisted payment monitoring tool could be used by the Small Business Commissioner to cross-reference data.

Companies are required to publish with other government databases to identify businesses whose reported payment performance is incompatible with other available financial and legal data. It would seem that such a tool would provide the commissioner with more accurate and robust data, which could be considered before the launching of a potential investigation. Similarly, an open payment data register would enable analysis by sector, business size and payment performance over time. If this register were publicly accessible and machine readable, then third parties would also have the ability to deploy their own large language models to gain insights into the sector, as well as potential businesses that must be referred for investigation.

Crucially, by making the register public, large businesses may be further incentivised to ensure that they're complying with existing payment practices and regulations. I very much look forward to the noble Lord. The minister's response on these matters. Amendment 95 would require a pilot of distributed ledger technology for construction retention records during the transition period, and amendment 96 would require post-quantum cryptography standards for all digital infrastructure, supporting the commissioner's functions. These are technical amendments which require careful

20:58

consideration in the absence of a clear cyber strategy, which the clear cyber strategy, which the government has promised would be released and has promised again and released and has promised again and again. It remains unclear how the digital infrastructure supporting digital infrastructure supporting the commissioner's functions remain shielded from cyber threats. I do shielded from cyber threats. I do hope that the noble Lord, the Minister, will be able to inform us all of when such a strategy will be published.

20:59

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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My Lords, firstly, let me thank all noble Lords for their contribution in this group of amendments, and I thank in amendments, and I thank in particular the noble Lord, Lord Holmes, for bringing forward this group of amendments. I want to be group of amendments. I want to be clear. The government agrees that these are matters of importance. It is essential that the Commissioner's work is accessible to all users, and that appropriate safeguards are in place where technology, including digital tools or AI, is used in delivering services.

The Small Business Commissioner already operates within well established cross-government frameworks for accessibility, cyber security and data protection. For example, the commissioner's website is already fully compliant with the Web Content Accessibility Guidelines, or WCAG 2.2 level A A, ensuring that its services and publications are accessible to the widest possible audience. The Commissioner is subject to strict legal obligations in relation to data protection and cyber security. These frameworks have robust safeguards around confidentiality, access controls and the secure handling of sensitive information.

Against that backdrop, the Bill is rightly focussed on establishing the core statutory framework for tackling late payment rather than prescribing detailed technical requirements that rarely feature in primary legislation. The intention here is that the detailed design of the adjudication scheme, investigation investigations regime and wider commissioner functions will be developed through secondary legislation and implementation. This will follow consultation with stakeholders, ensuring systems are practical, proportionate and effective in real world use. And I take note the noble Lords are point of plain English.

This approach allows us to engage with businesses and experts on issues such as accessibility, the use of technology, appropriate safeguards and to ensure that the regime keeps pace with technological technological developments over time. Turning to amendments 92 and 94, the Small Business Commissioner is already exploring how AI and improved data tools can be integrated into its case management system, and how a broader range of data can be used to inform investigations. But placing a statutory obligation in primary legislation to develop a specific tool would risk being overly prescriptive.

Technology in this space is evolving rapidly. We need to retain flexibility to adopt the most appropriate tools over time. For these reasons, we believe this is best delivered operationally rather than mandated into legislation. Turning to transparency and reporting, I again agree with the objective. However, we already have an established reporting regime where payment performance data publicly available and accessible that can be downloaded and analysed. The key challenge is not the absence of data, but how it is used and enforced.

My Lords, these amendments would introduce additional statutory structures and requirements which risk duplicating what already currently exists while adding complexity. We must be careful not to impose unnecessary burdens on businesses, especially those that are already demonstrating good payment practices. When our focus should be on tackling poor performance, we are already introducing new powers within the bill to enable the Small Business Commissioner to investigate businesses with poor payment practices. Turning to amendment 95, I recognise the positive intent behind this amendment and agree that greater digital adoption and improved oversight of payments within the construction supply chain are both sound and worthwhile objectives.

However, piloting such a scheme or system across construction contracts during the transition period would impose significant cost and complexity on those firms involved, especially and particularly on small businesses who are unfamiliar with this technology. Moreover, the proposal would extend the remit of the Small Business Commissioner into areas already governed by the statutory construction adjudication regime. The risk creating duplication and potential conflict with the Construction Act framework. The mechanisms through which we foresee claims for retention debts being pursued.

It is also important to note that additional transparency on retention retention practices is already being delivered through the reporting on Payment Practices and Performance Amendment Regulations 2025, which require large companies within scope to publish information on their use of retention clauses in construction contracts. This will be strengthened further by the proposals within clause 24 for the Small Business Commissioner to be given powers to impose fines where there are breaches for reporting requirements. The government is already working closely with industry to explore digital payment solutions, and has committed to broader work to improve quality, reduce defects and expand access to alternative forms of security.

This includes and I identifying technologies that can support improved productivity and performance across the life cycle of construction projects. That said, my Lord, I would respectfully ask the noble Lord to withdraw his amendment.

21:04

Lord Holmes of Richmond (Conservative)

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My Lord, I thank all noble Lords who have taken part in this debate who have taken part in this debate in answer to Lord Fox, not just on the specifics of amendment 78, but I am always 100% in agreement with Lord Thomas of Canterbury. I think it's a good place to be just. Despite the noble Lords slight down today on lawyers. I'm. I'm very happy to think that it's good to be alongside an ex Lord Chief Justice so very much agree and was making the same point on amendment 78.

Can I thank the Minister for his response? I think there are some principles which we can return to on report, but for now I beg to withdraw the amendment.

21:05

Deputy Chair of Committees. Baroness Finlay of Llandaff (Crossbench)

21:10

Amendment:103 Lord Hunt of Wirral (Conservative)

commencement of the statutory interest provisions by one year to allow businesses time to prepare. allow businesses time to prepare. My Lords, as we are in the final group of the day. I will seek to group of the day. I will seek to keep my remarks brief, but my noble friend Lord Holmes of Richmond, made the point with amendment 24 that statutory interest should be calculated and remitted promptly within five days, which is a sentiment that we agree with.

But that amendment also highlights the fact that businesses will need to take on new administrative burdens in order to carry out this new duty. Obviously, we want to encourage people to pay on time, but businesses who have previously had payment terms of 90 or 120 days will need time to adapt. That is why amendment 103, tabled alongside my noble friend's Lord Sharpe of Epsom and Lord Holmes of Richmond, delays the commencement of statutory interest interest by a year.

It acknowledges that underpinning technology will likely be necessary, especially for large multinationals with immensely complex payment systems. And so I hope the noble Lord, the Minister, will be able to agree. I beg to move.

21:12

Lord Leong, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)

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Amendment proposed in clause 31, >> Amendment proposed in clause 31, page 41, line 34. At the end, insert the words as printed on the Marshalled List.

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Firstly, let me thank the noble Lord Hunt and noble Lord Sharpe for his amendment and for the noble his amendment and for the noble Lord hunt for his contribution. The Commercial Payments Bill will strengthen an existing right that strengthen an existing right that suppliers who are paid late to interest through clauses five and six. These clauses will simplify six. These clauses will simplify the law on when statutory interest runs, and remove the ability for contracts to use an alternative contracts to use an alternative remedy to statutory interest.

Clause four, which this amendment relates to, preserves the effect of section one to the existing commercial Payment and Interest on Late Payments Act 1998, and implies statutory interest into all contracts to which the act applies. The amendment brought forward by the noble Lord to require clause four to be commenced within 12 months, would not delay the right to statutory interest, as it is already in legislation. I can reassure the noble Lord that we have considered the impact that strengthening of interest rates will have, as set out in clause five and six of the Commercial Payments Bill, and that there will be sufficient time for businesses to adapt their processes before these provisions are commenced.

I hope I've reassured the noble Lord, and I hope that he will withdraw his amendment.

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My Lords, may I just take this opportunity of thanking the noble Lord, the Minister, for the way he has approached this bill. He has certainly given us all an opportunity not only of scrutinising it line by line, but also he has made a number of offers which we have accepted of further meetings which will take place. We meetings which will take place. We hope as soon as possible, perhaps given a little time for a short recess.

But I do commend his approach, which is an example to all his colleagues, and I thank. I thank the noble Lord, the Minister, for his reply on this amendment. This bill has to be able to balance encouraging good payment practice alongside regulatory burdens. Statutory interest achieves the former, but yet has the potential to increase the latter. I hope that when we come to Report stage, the Minister will be able to bring forward a solution that addresses this, this issue.

But until then, I

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beg leave to withdraw my amendment. Is it your Lordship's pleasure that the amendment be withdrawn? that the amendment be withdrawn? The amendment is by leave withdrawn. The question is clause 31 stamp out The question is clause 31 stamp out of the bill. As many as that opinion will say content. To the contrary, not content. The contents have it. The question is that have it. The question is that clause 32 stamp part of the bill. As many as that opinion will say content.

The contrary not content. content. The contrary not content. The contents have it. The question is that this be the title of the bill. As many as that opinion will say content. The contrary, not content. The contents have it. My Lords, that concludes the committee proceedings on the Bill. The House

21:15

Deputy Chair of Committees. Baroness Finlay of Llandaff (Crossbench)

My My Lords, My Lords, the My Lords, the Committee of the whole House, to which the Commercial Payments Bill was committed, has gone through the same, and has directed me to report

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it to your Lordships with amendments. My Lords.

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My Lords. adjourn.

This debate has concluded

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