Lords Chamber

Tuesday 15th September 2026

(began 5 hours, 9 minutes ago)

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None Portrait Business of the House
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In In the In the Commons In the Commons that In the Commons that they In the Commons that they have

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In the Commons that they have passed the sovereign Grant Bill to which they desire the agreement of your Lordships. My Lords. Sovereign.

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Sovereign. this. Bill be now read a first time.

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Bill be now read a first time. Question is that this Bill be no. Read a first time. As many as are Read a first time. As many as are of that opinion will say. Content to the contrary, not content. The contents have it. My Lords, we now come to some instruments previously debated in Grand Committee. Armed forces. Service. Complaints. Miscellaneous provisions, Amendment Regulations 2026 and one other motion. Baroness Andrews.

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My Lords, I beg. To move the motion standing in my name on the Order Paper.

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my name on the Order Paper. En bloc two motions in the name of Baroness Antrobus be agreed to. En bloc as many as that opinion will say, content Of the contrary, not content. the contents have it. Withdrawal agreement Windsor

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Withdrawal agreement Windsor Framework and Governance Amendment Regulations 2026. Baroness Twycross my Lords, I

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Baroness Twycross my Lords, I beg leave to move the motion. Standing in my name on the Order Paper.

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Question is that the motion in the name of Baroness Twycross be agreed to? As many of you will say, content not content. The contents have it. voter identification amendment of list of Specified amendment of list of Specified Documents. Northern Ireland Regulations 2026 and two other

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motions. Baroness Anderson Stoke on Trent. My Lords, I beg to move the motion. Standing in my name on the Order Paper. En bloc.

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Order Paper. En bloc. These are the three motions in the name of Baroness Sanderson be agreed to. En bloc as many as your opinion will say content. To the contrary, not content. The contents have it. Questions on a statement made in the House of Commons

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yesterday on Speciality Steel UK. My Lords, I thank the Minister for repeating the statement and I
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None Portrait Statement: Speciality Steel UK
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should say at the outset. Above all, our thoughts are with the more than 1300 employees of Speciality Steel 1300 employees of Speciality Steel UK and their families, who once again face considerable uncertainty about their future. However, I am afraid that this announcement appears to be a sign of things to come under this government. When Parliament was recalled last year to pass the Steel Industry Special Measures Act, we were told that these extraordinary powers were required to deal with the immediate crisis at British Steel, and when the government returned with their nationalisation legislation earlier this year, this year Ministers again presented it as a targeted last resort response to the situation at British Steel.

British Steel has since been nationalised, yet the government has still failed to secure the private investment needed for its long term future. Now, only two months later, we have another steel company moving towards public ownership. After the proposed sale to blaster fell through. Now, can I start by asking the Minister why that deal fell through, given that yesterday the Guardian was quoting a blast, a spokesman as saying, and I quote, we have a fully funded proposal at no cost to the British taxpayer that is ready to complete within 12 weeks, end quote.

My Lords, surely the bigger question is why does the private sector increasingly find it so difficult to invest in British steel companies? Surely part of the answer is that successive decisions by this government have made
15:51
Lord Sharpe of Epsom Portrait Lord Sharpe of Epsom (Conservative)
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Britain, and particularly innovative, energy intensive industries such as steel simply too industries such as steel simply too expensive in which to operate. Our industrial electricity prices remain among the highest in the remain among the highest in the developed world, and they are around four times those faced by manufacturers in the United States. manufacturers in the United States. Then there are the additional employment costs. The government's own latest assessment puts the own latest assessment puts the direct annual cost to business of the Employment Rights Act at around £1 billion.

During the passage of that legislation, businesses repeatedly warned Ministers about its cumulative impact on investment and recruitment during the passage of the Steel Industry Nationalisation Bill. We on these benches, gave Ministers opportunities to address some of these underlying problems. We sought greater discipline over regulation and reporting proper scrutiny of taxpayer liabilities and action on the cumulative burden of carbon and energy policy. Instead, my Lords, from the 1st of January next year, the government will introduce the UK carbon border adjustment mechanism.

The government's own figures forecast that the Cbam will raise £140 million in 2020 728, £180 million the following year, and 175,000,000 in 20 2930. Those costs ultimately fall on imported steel, steel, aluminium, cement and other materials used throughout British manufacturing supply chains. Now, at the same time, domestic steel makers remain exposed to the UK Emissions Trading scheme and the government are now negotiating to link that scheme more closely with the EU's ETS. We also understand that the government wish to participate in the EU internal electricity market.

The negotiating framework envisages dynamic alignment with relevant EU electricity rules and an indicative UK renewable energy target comparable to that of the European Union. That my Lords will only add more costs. The new Secretary of State for Energy Security and Net Zero has spoken of the need for greater realism in our progress to net zero. So can the Minister, therefore tell the House whether that realism will translate into a material change in energy policy for energy intensive industries? What specific action will the government now take to bring industrial energy prices materially closer to those faced by our major international competitors? The Business Secretary told the Other place yesterday that public acquisition could require approximately £350 million, including the acquisition itself and working capital, over a period of 1 to 3 years.

My Lords, the taxpayer is already supporting Speciality Steel UK to the tune of a reported £3.5 million a month in salaries. While production remains largely dormant. So can the Minister, therefore tell the House what is the government's current estimate of the total taxpayer exposure? How much has already been spent? How much working capital does the government expect to provide? Will Ministers publish a clear timetable setting out the expected costs over the next three financial years? And what, my Lords, is the exit strategy.

The Business Secretary said yesterday that his ideal remains for the company to be run in the private sector, and that he is keen to see it return to private ownership. If that is the objective, will the government commit to publishing measurable conditions for doing so? Regular assessments of opportunities for private investment and a clear process for returning speciality steel. UK to private ownership. Public ownership does not in itself give workers long term certainty a competitive business, sustained investment and customers who want to buy steel domestically give workers long term certainty.

And, my Lords, that matters, particularly when the government tell other sectors that there is no money available. Only yesterday, the government were defending their refusal to reduce VAT for our struggling hospitality sector on the grounds of the cost to the Exchequer. Yet when another nationalisation is proposed, hundreds of millions of pounds of taxpayer exposure apparently becomes possible. We cannot return to a model in which government continually absorbs the losses of industries, that its own policies have helped to make uncompetitive. The Minister will know the history as well as anyone in this House.

Britain tried widespread state ownership of major industries before. By the 1970s, taxpayers were repeatedly required to support loss making nationalised industries, while investment, productivity and competitiveness suffered. My Lords, that experiment ended at the IMF and looking at gilt yields today, that is where the markets think we are headed again. We do not want to see that history repeated. So, my Lords, will the government now recognise that nationalisation is not an industrial strategy? Will they instead set out a serious plan to slash industrial electricity prices, reduce unnecessary regulation and the costs of unnecessary regulation, make Britain internationally competitive again, and create the conditions in which private investors actually want to invest in British Steel.
15:56
Lord Fox Portrait Lord Fox (Liberal Democrat)
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Yay, yay! >> Yay, yay! >> My Lords, I congratulate the Minister on his new role, which is fast becoming that of a steel Baron. As I said from these benches during the nationalisation Bill, which, as the noble Lord Sharpe pointed out, focussed on British steel, Liberal Democrats recognise the national security, energy security and food security are all intertwined and steel is critical to our renewable sector, our defence and our national infrastructure. Now, in one sense, yesterday's announcement adds yet another complication to the government's attempts to ensure that the UK has a viable and strategic steel industry.

In the other, it was perhaps inevitable, and perhaps it also gives the government a chance to consider two sides of the steel industry at the same time. So my first focus really is that on the timeline and how this fits the the speciality steel part fits with other activities. Now, in answer to my friend Daisy Cooper MP question in the Commons, the Secretary of State said that he expects to. The process for speciality steel to take between 4 and 6 months.

So can the Minister update your Lordships House as to the timeline for British Steel and the valuation process that is under is under way? There. And can he tell us whether there is any crossover between the two? Or are they discrete processes? The Secretary of State set out a different the different scale of task to rejuvenate British Steel. And in fact, he implied that any involvement of private. Of the private sector was going to be some time in the future.

So perhaps the Minister can confirm what the government's thinking is around private sector involvement in British Steel, and how does that affect the attempts to get private sector involvement into speciality steel? And can he also confirm the scale of investment that actually speciality steel itself will need in order to make it an attractive investment for the private sector? Additionally, how does all this affect Tata Steel in Wales? The Secretary of State said that he hopes British Steel will follow Tata and install electric Arc technology.

Well, how does Tata, which despite government support, is investing a great deal of its own money into electric arc, compete with the government, a government funded competitor competitor competing for raw material at the very least, but also markets money wise. In the Commons, the Secretary of State said that the cost of nationalising speciality steel will be met from existing budgets. He went on to remind the house of the huge sums involved, but it's quite clear that this pot is emptying fast.

So can the Minister undertake to bring detailed costings to this House, covering both valuations of of this asset and the British Steel asset as soon as they are available? Daisy Cooper, MP in the Commons, also raised the issue of Europe, the steel sector generally, and tariffs and carbon border taxes specifically all hinge on our relationship with the European Union. So can the Minister agree that by having a much closer relationship with the EU, it could make many of these issues much easier to deal with and indeed iron out? And can he tell us when the government will be making substantive moves to achieve this closer relationship? As the statement observes, the noble Lord Sharp's government created the legacy that this government inherited.

Central to this legacy has been the structurally sky high costs faced by this and other manufacturing industries. Now, I know the Minister is new to his role, but I'm sure that energy was one of the first things he was asked about when he took over. The government has made some efforts to help some high energy users, but these bypass most manufacturers and for those they do affect reductions are being cancelled out by other measures in the opposite direction happening at the same time.

So can the Minister confirm and agree with me that without new measures which substantially cut energy costs so that they are much closer to our global competitors, it really doesn't matter who owns the steel industry. With costs like this, the sector will always struggle to flourish. Well, I'll just close by recognising the people working in the industry and their importance. They are vital and the UK needs their skills and indeed the skills of many who've left the industry to come back.

But these people need to know they have a future. They need to know that their industry has a future. Now the government has made first steps in this, but there is a great deal to do, and we on these benches will support the government where we can, to help pick up momentum and get this industry back on its feet.
16:01
Lord Sarwar Portrait Lord Sarwar, Minister of State (Department for Business, Innovation, Science and Trade) (Labour)
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Hear, hear. >> My noble Lords, I am grateful for the contributions and the serious consideration that the House has given to the future of House has given to the future of Speciality Steel UK, and I will come on to address some of the specific questions that both my noble Lords have rightfully asked. But can I. First of all start by echoing and thanking both noble Lords for mentioning the workforce for them. It's a time of particular anxiety, and I think it's important that they know that regardless of party politics or party, that both this House and the Other place stand fully behind the fantastic workforce.

Before I get on to some of the detailed answers, I think it's important just to clarify some of the facts on on where we are and what the Secretary of State outlined yesterday. This is an important matter for the employees of the business, the communities surrounding its sites, and the United Kingdom's wider industrial capability. I therefore welcome the opportunity to clarify the government's position, explain the decision that we have taken and set out the next steps. So Speciality Steel UK entered liquidation in August 2025, and since then the Independent Court appointed official receiver has been responsible for managing the liquidation process.

A question was asked about how much that has cost to date. We have supported the official receiver with around £148 million to date, both in terms of supporting staff but also the safety at the individual site. That funding has allowed the receiver to carry out his statutory duties. It has included maintenance of the site, as I said, and conducting a sale process for the business and its assets. And for more than 12 months, the government has worked to facilitate a private sector solution.

And my noble Lord is right to say that a private sector solution remains the first preference. As part of that process, the official receiver engaged with a number of parties interested in acquiring the business and its assets, and the party granted preferential bidder status by the official receiver subsequently sought government support in connection with its proposed acquisition of speciality steel, and we engaged extensively with the bidder and its advisers and considered the detail the request in detail. To clarify, they were requesting upfront financial commitment from the government and following the work that we did, we concluded that we could not provide the support on the terms proposed and this decision was not taken lightly.

The government carefully examined the proposal and explored whether the arrangement could be reached. That would provide a sustainable basis for the future of the business, while offering appropriate protection for public money. And despite the extensive engagement, material concerns remained regarding the evidence supporting the proposed support package and the protections available for taxpayers. I want to be really, really clear because I think this is important that we are talking specifically about the the financial support that was requested that should not be interpreted as a wider judgement on the bidder itself or its other business activities, either here or elsewhere.

So our responsibility was to assess the proposal before us, including whether it provided a suitably robust basis for intervention and the appropriate safeguards, and having considered those matters, we could not support the proposal on the terms put forward. However, that conclusion does not diminish the significance of Speciality Steel UK. The business occupies a unique place in the United Kingdom steel ecosystem. IT specialist capabilities have potential applications in advanced manufacturing, aerospace and defence. Therefore, it is of strategic importance and that is why the government remains committed to the sites, to the workforces, to the local communities and the local economies that are impacted.

So we believe, therefore, that the viable future option should be assessed properly before the range of possibilities is permanently narrowed. And for that reason, the government will engage with the official receiver sale process and develop a proposal for the public acquisition of Speciality Steel UK, and any engagement will respect the independence of the official receiver and his statutory responsibilities. Developing a proposal does not remove the need for proper processes to be followed, nor does it prejudge the outcome of the work under way.

So the purpose of developing an acquisition proposal is to preserve control of the sites and maintain every option available. While decisions are taken about their longer term future, let me stress public acquisition is not the end point, and it is also not the first preference. It would not in itself determine the permanent future of the business, its operations or its sites. Rather, it would create the space required for detailed assessment of the available options, and those include a sustainable future for speciality steel UK as a speciality steel maker supporting advanced manufacturing sectors, the regeneration of the sites or the combination of the two.

And this government will remain focussed on engaging closely with the employees, with the trade unions, with the local communities, with elected representatives, with the mayor, industry experts and other interested parties. And again, I open that offer to my noble Lords on all sides of the House to. I recognise that noble Lords will want and expect proper safeguards for public money. They have that firm commitment from me and from the Secretary of State. All options carry significant costs. There is no point pretending otherwise.

The risks exist and significant costs exist. That includes the risk of immediate closure, and we will develop our estimates as the work progresses. And again, I am happy to share those assessments as much as possible with noble Lords on all sides of the House. I also recognise the desire for certainty, particularly amongst employees and their families. So it would not be responsible to pre-empt the detailed assessment or suggest that decisions have already been taken where they have not. Equally, I think it is important that potentially viable options are not lost by default, and I think the approach that the government has set out yesterday and today strikes that right balance of giving reassurance to the workforce, of keeping every option on the table and making sure we have got the back up of a public acquisition option.

I think that is the right and responsible course to take. Some specific questions that I have not addressed. I have already said about the private sector preference being the first one. Secondly, we should accept that there is a global challenge around steel, not just a UK challenge. Third, I recognise the challenge set out by both noble Lords that we have to drive down the cost of living and also the cost of doing business as it relates to energy, and that is something that is of course, of huge, huge significance and importance for us.

If we are going to make sure we are protecting our steel industry, but also industries that are very energy intensive. And these are all considerations, of course, that are being made in advance of the budget. I noted from my noble Lords questions. There were many questions that I think relate to that budget process, and I imagine those are questions will come back to as we get closer to and at that budget point. I also noted that my noble Lord spoke about history and not repeating the mistakes of the past.

All I would say he is very selective in which part of history he chose and which pits we do not want to repeat. I think there are other parts of our history that we do not want to repeat, and we need to learn lessons from. And my noble Lord from the Liberal Democrats asked questions around finding longer term private sector solutions. We are only going to find those longer term private sector solutions if we make the steel industry a sustainable industry in the country.

If we get the energy crisis right, if we address the challenges around the broader cost of production, if we deliver the orders that are required for there to be manageable order books and to be a functioning business, and also back up with the appropriate skills. The steel strategy is ambitious, but it is also deliverable, and we have all got work to do to make sure that happens. But let me just repeat again that I will commit to work with noble Lords on all sides to make sure that they are fully abbreviated of the situation as this develops.

There was one last final point, sorry, which is slightly broader, which is around the relationship with the European Union. I think if there is one lesson. Of course, some of that will come from the UK, EU summit that we continue to work towards. But I think there is also a wider lesson in terms of defensive and protection measures that we are all grappling with, that the UK is grappling with when it comes to its steel industry, but also the EU is grappling with when it comes with its steel industry.

And I think the more that the relevant Ministers and governments across Europe, the continent, work together in lockstep on many of those same issues we are confronting together, the better, I think, will be for our industry here in the UK, but also for steel industries across Europe.
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16:11
Lord Sarwar Portrait Lord Sarwar, Minister of State (Department for Business, Innovation, Science and Trade) (Labour)
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I think the noble Lord for the question, and let me reassure him question, and let me reassure him that my noble friend will continue to fact check me on a regular basis in the absence of him answering the in the absence of him answering the questions directly. Look, I think the workforce is fundamental to this. And of course, we will make decisions based upon what it means for production, what it means for GDP, what it means for growth, what it means for broader calculations.

But in actual fact, for these communities, either those that work directly in these sites or the ones who rely upon those sites in terms of employment for them, its their everyday life. And I think if you look at where many of these sites are, particularly for Speciality Steel UK, they are amongst some of the most deprived communities in the country. And therefore it's really important that the government works right across government so that the Department for education, the DWP, as well as BIS colleagues as well as the local authority as well as the broader mayor and the regional authority to make sure where we can.

We are protecting those jobs where we can. We're providing reskilling opportunities, but also to the noble Lords point, how are we making sure that the next generation also feel as if this is a sector that they want to train and then also work in as well? Because that too is very much part of having a sustainable future for the UK.
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Earl of Minto Portrait The Earl of Minto (Conservative)
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My Lords, I thank the noble Lord, >> My Lords, I thank the noble Lord, the Minister, for giving us the opportunity to ask questions on this statement. May I first pay this statement. May I first pay tribute to the British service member who tragically died in a road traffic accident in Ukraine on Saturday. It is a truly saddening affair when we lose a member of our armed forces, and my thoughts and those of the entire House are with his family. Although with the family.

My Lords, it is welcome that the new Secretary of State has reaffirmed so convincingly the government's commitment to support Ukraine in its battle for the survival of its homeland. It was also welcome to see our new Prime Minister as one of his very first acts in office, visit Ukraine and meet with President Zelensky and hand the president something of real value to his nation. May I also put on record my deep concern that the Russian strikes on the railway in western Ukraine over the weekend.

Fortunately, the train carrying the former Prime Minister Boris Johnson, and the current national security adviser, amongst other key diplomats wasn't hit. But for Russia to potentially attempt to target serving and former senior British government officials, if indeed this was their intention, is extremely concerning. My party stands resolutely behind the government in its continued support for Ukraine. My Lords, in many ways, this statement somehow manages to simultaneously tell us quite a lot, while also telling us very little at all. It tells us a lot because we now know the new Defence Secretary wishes to approach the job much like the last two.

That is to say, he likes to talk about the nature of the threats we face as a nation, but fails to realise the scale of the investment that will be required and, crucially, the pace at which that investment needs to be delivered. Indeed, the Secretary of State in his statement, said the threats we face are not only evolving, they are getting closer to home every day. The UK and our allies encounter espionage, cyber attacks and military posturing by hostile states. My Lords, I completely agree.

Threats to the United Kingdom are getting closer to home. But what concerns me, my Lord, is that even after accurately recognising those threats, the Defence Secretary went on to simply repeat the government's line, emphasising how much was already being spent. That is where the statement tells us very little. I will happily concede that the government has increased defence spending, but the scale of that increase pales in comparison to what is truly needed now. And as of yet, we are no closer to eliciting the vital detail on defence spending and the timing of that expenditure that we have sought for the last two years.

The government tells us that spending will reach 2.7% next year, up from 2.3% when they entered office, but they conveniently neglect to mention that they have changed the definition of defence expenditure to include the Single intelligence account to defence Investment Plan was essentially unfunded, and we now know that the Chancellor is unlikely to establish a path to 3% by 2030 until the next spending review in 2027, rather than at the upcoming autumn budget. And now we have a Prime Minister who has stated openly that national security cannot come at the expense of Social Security.

This is a worryingly short sighted statement to make at such a critical juncture. As my noble friend Lady Goldie said last week, these branches are united in our view that national security comes above all other priorities. Can the noble Lord, the Minister, confirm whether the government's position has indeed changed or whether they do still regard national security and defence as as the paramount duty of government over and above welfare? More importantly, my Lords, it is not necessarily how much is spent, although that really does matter, but what we are getting for that money.

We have heard that the Army is being required to cut virtually all meaningful training exercises, and in a bid to save money, the reserves are also suffering. We currently have no attack submarines available to go to sea, and it took us weeks to prepare HMS Dragon for operations to protect British bases in Cyprus. The decision on the number of the Aukus submarines to be procured has reportedly been delayed until 2028. And my Lords, when will the government announce the locations and start building the six new energetics factories? We were promised in the SDR? The Defence Secretary said in his statement.

I have seen the capabilities that this country has and they are considerable indeed, my Lords, the Secretary of State is correct, but these capabilities are not considerable enough for the growing challenge. And I might add they are diminishing in real terms. As an example, the renewed challenge from Argentina to British sovereignty over the Falkland Islands could, heaven forbid, mutate into an overt threat. We must ensure that we have the capabilities to respond appropriately should that situation occur. My Lords, to bring this back to Ukraine, what happens if we end up with a cease fire, which we all hope and pray for, and British troops are committed to Ukraine? Will they be sufficiently resourced to ensure they can fight to the best of their abilities? I know there is deep concern about the answer to that question.

And finally, my Lords, the new Secretary of State said that there is an enormous amount of consensus and national unity when it comes to defence. Might I gently say to the noble Lord, the Minister, that this is not entirely correct? There is indeed an absolute consensus between us on the issue of continuing support for Ukraine, but there is not that consensus on whether or not this government is doing all that it should to prepare us for any major conflict in the near future.

My Lords, this statement has bravado to abound, but bravado is meaningless if it is not backed by hard power. We do not say this to embarrass the government or to score political points. We say this because we are worried about our lack of defence readiness. I urge the government do not place Social Security above national security, as the Prime Minister suggested last week, for when the bombs are falling and the drones are striking, as worn by the Chancellor only a few weeks ago.

There may be very little Social Security left to speak of.
16:21
Baroness Smith of Newnham Portrait Baroness Smith of Newnham (Liberal Democrat)
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My Lords, from these benches I would like thoroughly to endorse everything the Earl of Minto has everything the Earl of Minto has just said. We often say that on matters of defence, the official opposition and these benches are at one with His Majesty's Government. But there are a range of issues that need to be dealt with, scrutinised and reassessed. And while, as the Earl of Minto pointed out, it is excellent that the new Secretary of State for defence has pledged his commitment and the country's ongoing commitment to Ukraine and that the new Secretary of State and the new Prime Minister have been to Ukraine.

That is a fundamental sign of the commitment of this United Kingdom to Ukraine and very much to be welcomed. But in the statement made in the other place, there are still a range of questions that need to be reviewed and looked at in more detail. Before I go further, I would also like to associate myself with the words of the noble Lord, the Earl of Minto, and pass on our condolences to the family of the service person lost in Ukraine last week in the road traffic accident.

That loss and the loss of any personnel is a sign of just what every member of His Majesty's Armed Forces puts on the line in the service of our country, day in and day out. And we all acknowledge that. My Lords, we seem to have a sense in which, from the front benches on defence we are really clear that, as the Secretary of State for defence said in his statement last week, if the first duty of government is to keep our country safe, then that is greater and more a greater and more urgent responsibility than it has been for generations.

That is clearly true, and yet we don't seem to have a sense of urgency from the Chancellor of the Exchequer in his current incarnation. All the Prime Minister that to suggest that national security can't come at the expense of Social Security, as the noble Lord, the Earl of Minto has already pointed out, raises some serious questions. What is His Majesty's Government doing in terms of ensuring that by the time we get to the spending review next year, so we understand that we're not going to get the clarity we might want at the budget in the autumn.

But by next spring, what will the Chancellor be doing to ensure that we are on track for the 3.5% that the Secretary of State for defence has recommitted to? Because at the moment we don't have clarity on that. In the wee small hours of the night last week, as we got to the end of Committee stage of the Armed Forces Bill. I wrapped up Group 13 with all its expediency possible, which meant we didn't discuss my amendment in great detail on the implications of the delays in the Defence Investment plan for small and medium sized enterprises.

It's an issue that we do need to think about, because we need to be absolutely clear that the government is investing and ensuring that we have the drones and the interceptors and everything else that we're making pledges to Ukraine about that we also have, for our own security and defence, because Ukraine might be at the front line of our security, but His Majesty's Government owes it to our country, as well as to Ukraine and our NATO allies, to make sure that we're investing here and now.
16:25
Lord Coaker Portrait Lord Coaker, The Minister of State, Ministry of Defence (Labour)
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My Lords, can I start by thanking Earl of Minto and Baroness thanking Earl of Minto and Baroness Miller for overall their constructive remarks and rightful challenge to the government? So can I thank them for that? Can I start with a few introductory remarks? And as both the Earl of Minto and Baroness May started, noble Lords will be aware that a member of the UK Armed Forces died in a road traffic incident in Ukraine this Saturday, the 12th of September.

I'm sure the whole House will join me in extending our deepest condolences to the individual's family and loved ones, as well as to their colleagues in the armed forces at this difficult and tragic time. Further details are expected to be released in due course. However, I must reiterate that this incident was not the result of hostile action over the weekend and into this week. Noble Lords will have seen reports of the continued Russian long range attacks, including on gas and rail infrastructure near the Ukraine Poland border, as mentioned by Earl of Minto.

And indeed we saw yet another Russian drone incursion overnight, this time into Lithuania, prompting a swift response from allies, particularly, obviously, the Italians. These reckless and dangerous strikes against civilian infrastructure underline the wider security threat that Russia poses to Europe. The UK continues to stand firmly with Ukraine, and I'm proud that support for Ukraine continues to unite this House. Can I thank genuinely thank the Earl of Minto and Baroness Miller for their comments about that. And also Earl of Minto points about the Prime Minister and the Secretary of State for defence.

Can I also say to him, in that spirit, we also remember that the last government stood steadfast as well in its commitment to Ukraine and to defend Ukraine against the illegal invasion by Russia. And I think that political unity I is is of such immense importance in the way that Russia sees our response. And that's true of both the last government, this government and indeed the support right across this House. And I think it's something that we should never, ever tire of saying, because it is repeated time and time again.

With with our with our adversaries. So that is why the latest Ukraine Defence Contact group. Earlier this month, we announced we will contribute a further £100 million towards Pearl, which will support the delivery of Patriot missiles and other air defence equipment. We also reaffirmed our commitment to provide more than 120,000 drones to Ukraine over the course of the year. In total, the United Kingdom has committed 25 billion for Ukraine, and that includes nearly 20 million rounds of small arms, ammunition, more than 1 million artillery shells, more than 100,000 drones and thousands of air defence missiles on our vehicles.

And we must remind ourselves, if there is anything Putin has achieved through this war, it has been to strengthen NATO, to strengthen the West and to weaken Russia. And I point I just said to him that I would start with a few introductory remarks before I answer the specific questions, because I think it's important to lay some of that on the on the table and to repeat that in your Lordships House specifically, I'll deal with defence spending towards the end, specifically on small and medium sized enterprises.

They do form a major part of the government's attempts to ensure that we have the defence industrial base that we need, both for now and in the future. The noble Baroness Sater Earl of Minto will know, as indeed many others will know, that there are small and medium sized businesses provide that agility, that sometimes the larger companies can't. There is an issue around regulations which they have no doubt continually raised, and we will see what we can do with that to ensure that those small and medium sized enterprises can develop as quickly as they could.

Earl of Minto asked me about the munitions factories feasibility studies for future energetics facilities are due to report later this month. While construction of new UK energetics facilities is planned to commence later this year. So I hope that answers the specific point about the munitions the munitions factories on the on the Falkland Islands, we remain as a. I think was in a very well attended and thoughtful again, united discussion and debate in your Lordships House. I think last week the.

The government, with all of the your Lordships' House and indeed the Other place, reiterated our strong commitment to the protection of the Falkland Islands and a reminder to everyone that the sovereignty of the Falkland Islands is a matter for the Falkland Islanders themselves, and we will support them in that. As the Earl of Minto. I don't know whether he's had the opportunity or. But I'm sure some members of the House have had the opportunity of going there, going there to see the defence base that is there.

The typhoon jets that are there, the air defence system, the troops that are there

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with other Defence equipment. In order to protect in protect

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In order to protect in protect the Falkland Islands. But purely. From a defensive posture. Just to highlight that. So that remains to highlight that. So that remains the government's position as it's remained the position for decades remained the position for decades for our country on the the issue of the Russian threat in order to try the Russian threat in order to try and make the Earl of Minto point for him, but also to to I think just, I think, highlight for all of us some of the some of the just to make it real, just to give some of the statistics.

NATO has scrambled aircraft over 700 times in the past two years to intercept Russian aircraft approaching my allies airspace and the current rate of Russian long range aviation in the High North is the highest in six years. If I think it's helpful just to give some of these Russian aircraft and drones have violated airspace across multiple NATO countries, and UK aircraft have experienced GPS jamming. There's been a 30% increase in Russian vessels threatening UK waters in the past two years.

And just picking out again, Navy. The Navy has escorted Russia Russian vessels for 21 days in July, and activations to monitor Russian support is up 25% in the first eight months of 2026 compared to 2025. And just one last point on a whole range of just to give your Lordships' House a flavour of the threat from Russia. Over 90,000 attempted cyber attacks in the year on UK defence networks, a large proportion coming from Russian speaking actors. So I hope that's helpful to you because it's.

It's just to make the point. Not hiding behind that. There is a very real threat, which obviously then takes us to the whole discussion about about defence spending. And just I would say I don't think we should just dismiss the fact that the government has increased defence spending. There is an argument about the pace and the amount that the government has significantly increased defence spending. And I would point out that the 15 billion that that was announced in year is a significant thing for a government, as some of you have had more experience of being in government than I have.

Will know that to actually change a budget in the middle of the budgetary year is quite a difficult thing to do, and taking 15 billion or finding 15 billion from other government departments to increase the Ministry of Defence budget was quite a significant, significant change. And I've made that point to to your Lordships before. And the final piece of that jigsaw, the 4.7 billion, will be provided in the autumn budget that's coming up. And I don't know whether anybody has had.

Certainly a number of people in the upper House have had experience of where changes have been made to budgets in local areas, which to fund defence, which have caused some controversy, which shows that we need to win that debate about increased defence spending. The noble Lord knows that the spending review next, next spring will be the time in which we get to a point where we actually the government lays out its trajectory to 3.5% by 2035. And clearly within that, at some point, clearly, obviously, 3% will be passed.

But when that actually is will be laid out by the Chancellor in the in the budget next year in terms of national national security and Social Security. Let me just say, say this where I come from for it. Of course, you want to see a reduced Social Security bill because it means more people will be back to work, more people will be active, all of those sorts of things. So I think if the government's Back to Work campaign and the various measures there, the hopefully what one will see was a reduction in in in that budget.

And of course, national security remains the prime duty of government. But we have to win as well as winning the debate in here. We have to win the debate out there with people that any changes to budget, any reductions that may or may not be able to be made in the Social Security, is not done at the expense of those people who depend on those things. But also we actually have that money available to spend on defence in the way that we would want, and in a way which is supported by the population of this country.

And I would suggest that that debate that still has to be won with some sectors of our population, and we shouldn't take that for granted.

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We have now have 20 minutes for questions from the backbench. Can I remind my noble Lords to keep remind my noble Lords to keep questions, remarks brief and to ask a question so that we can get as many contributions in as possible?

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My Lords. Lord Campbell-Savours is taking part remotely. I invite Lord

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Campbell-Savours to speak. My Lords, why don't we put aside
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Lord Campbell-Savours Portrait Lord Campbell-Savours (Labour)
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>> My Lords, why don't we put aside our immediate reservations about Trump with all his idiosyncrasies? Certainly following his disastrous miscalculations on intervention in the Middle East, and then join his people in any talks that might take place seeking a settlement in the Ukraine conflict. And if we want to be more adventurous as a compromise, promote the idea of protectorate status, protectorate status in eastern Ukraine to include Donetsk and Luhansk, underpinned by guarantees from the major powers to include the United States, Europe and Russia.

There are precedents. We need to think out of the box and stem the escalation referred to by my noble friend, the Minister in

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his statement. Thank you. Well, can I thank my noble friend for for his question? Of course, we have to prevent de-escalation and be careful in the language that we use, which I think by and large this House does, by and large this House does, because it's aware that a word. Misplaced can actually have very Misplaced can actually have very serious consequences. Let me let me just say to my noble friend, though we all want to see a ceasefire in we all want to see a ceasefire in in Ukraine, as far as the government is concerned, the obstacle to that is Russia.

And that it's they're they're the problem with it. And let me also say, the fundamental principle for all of us is that any ceasefire should be done with the acceptance and support of Ukraine itself. And that is a really important and fundamental principle for that in terms of what comes after we. That's why the UK, with France, has been leading the coalition of the willing, the. The possibility of the multi national force to. So that any agreement is reached, has the backing of that support rather of that multinational force.

So we can make sure that it's not just written on paper, but it's secure to.
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Lord Coaker Portrait Lord Coaker, The Minister of State, Ministry of Defence (Labour)
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the noble Lord for his his comments about standing up against Russia. The UK government has done has made The UK government has done has made significant effort to disrupt the Russian economy through sanctions Russian economy through sanctions and through various measures that it's that it's taken. And I just think it's really important to also recognise that the the the impact on Russia. And it gives me the so significant billions of pounds has been sanctioned, many ships have been disrupted, etcetera, etcetera.

But let me just again share because this isn't often done, let me just share with my noble friend, friend the the economic impact on Russia so far, because the, the, the idea is that nothing has worked. Russia's GDP growth has slowed from over 4% in 2324 to around 1% in 2025, with Russia's Ministry of Economic Development forecasting only 0.4% growth in 2026. That's a significant achievement. I would say that we need to actually say more about the impact that it has.

Inflation inflation expectations rose in July to the highest level, 14.7% in years. The deteriorating economic picture is directly hitting average Russians, with projected growth in Russians real incomes to slow to 1.6 in 2026, down from 7.7% last year. And we've seen the queues that have been for fuel as well. So all I all I'm saying is that there's a lot more to be done. I, I absolutely accept that, but let's also give credit to the impact that what we are doing is having an impact on Russia as well.

And at that time, let's remind our our our dispute with Russia is with the leadership, not with the Russian people.
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Lord Beamish Portrait Lord Beamish (Labour)
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And my Lords, my Lord, my Lord, my Lord, my Lord. >> The the. >> Situation in we face in Ukraine is nothing new in the Crimea in 2014, Russia annexed it when the party opposite was slashing the defence budget by 16%. Yeah. Likewise, the problem we have now with our nuclear deterrent was down to the Liberal Democrats, who were couldn't make their mind up about whether to replace the nuclear deterrent. But having visited Lithuania earlier this year, they are under constant attack, not just as Lord Peter just said about sabotage, but by drone incursions.

Is it not about time, now that NATO takes the fight to Russia on on Ukrainian territory to take down

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these drones? Yeah. I think we I think we do need to

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I think we I think we do need to be careful about talking about taking Russian drones down in taking Russian drones down in Ukrainian airspace. However, my my noble friend is absolutely right noble friend is absolutely right when he talks about the need for a robust response to the incursions that we've seen and he talks about Lithuania, he will know that the NATO response was strong and powerful, and a drone was shot down there following detection shortly after midnight.

And I think that is a really important indicator. I'm not sure whether everybody is aware. But additionally, this morning, a proximately 11:00 and an unidentified object was spotted on the radars close to Vilnius Airport, leading to its closure. Fighter jets from NATO, Baltic air policing and policing were scrambled to respond to that. So in answer to my noble friend, she's absolutely right that Russia needs to know that incursions into NATO airspace will be dealt with robustly and strongly in the way that it has been.
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Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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My Lords, I will begin by making a short statement on the position a short statement on the position regarding legislative consent on the bill, legislative consent from the Northern Ireland Assembly and the Scottish Parliament is required for clauses 49 and 51, which concern crypto assets and their seizure and recovery by UK law enforcement. These relate in part to matters that are devolved matters in respect of Scotland and transferred matters in respect of Northern Ireland. The government have written to the Northern Ireland Executive and the Scottish Government on this matter, and my expectation is that these issues will be fully addressed during the bill's passage.

In the other place, we remain committed to sustained engagement with the devolved

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governments for the remainder of the bill's passage. The question.

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The question. Is, will we now read a third time as many of that opinion say, content? The contrary not content. content? The contrary not content. The contents have it in clause 16.

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Amendment one Lord Pitt-Watson. My Lords, I beg to move this

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My Lords, I beg to move this bill be read a third time. A. Let me begin with amendment one, to which I will also speak to the other, and I'll also speak to the other government amendments tabled in my name at report and in Committee. We discussed the fact that climate related risks and nature related risks can have significant implications for the economy, for financial markets, for long term prosperity, and for the ability of the finance industry to do its job properly.

We heard a number of calls to ensure that the financial services regulator regulators continue to prioritise this agenda at a day to day level. However, it is important that this is done in a way that is aligned with the government's wider regulatory strategy and does not result in a new a new set of have regards, which would further complicate the regulatory framework rather than make it simpler and more effective, as the bill is intended to do. The amendments tabled in my name deliver on the commitment I made last week to require the FCA and PRA to continue to have regard to their existing climate change and environmental targets.

Regulatory principle at a day to day level and to maintain appropriate notification and reporting requirements as part of that. So amendments one and three amend clause 16, formerly clause 17, so that the FCA and PRA must have regard to the climate and environmental targets principle when discharging their general functions and amendments. 5 to 8 ensure that the regulators must report appropriately on their consideration of the principle, including in annual reports and consultations, amendments two, four and nine.

Then ensure that certain references and definitions are correct and account for these changes. Put together, these amendments will ensure that the FCA and PRA continue to have an appropriate focus on this vital

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issue. I beg to move. Amendment proposed clause 16,

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Amendment proposed clause 16, page 21. Line 17. After principles insert and the Climate and

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Environment regulatory principle. So I'm extremely grateful to the

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So I'm extremely grateful to the noble Lord, the Minister, for the clarity with which he has introduced these amendments. I'm
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Baroness Kramer Portrait Baroness Kramer (Liberal Democrat)
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Here, here. >> Here, here. >> My Lords. >> My colleagues spoke eloquently

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My colleagues spoke eloquently on these issues at report Baroness Northover and Baroness Sheehan. That if these. Amendments are.

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That if these. Amendments are. Moved by the government, we will

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support them. My Lords. As this is. Third Reading, I just wanted. To start by extending my warm

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To start by extending my warm thanks to the noble Lord, the Minister and his team for their work on the bill. I welcome the movement that the government have movement that the government have shown on several of the issues we've raised during the passage of we've raised during the passage of this 137 page bill that in general we support. Chief among them is proportionality, which will proportionality, which will continue to apply to the regulations, the regulators in the exercise of their day to day functions, and that change reflects concerns on all sides of the House.

And my hope is that it will help to reduce the burden on SMEs. So I thank the Minister for this. I also welcome the movement that we've seen on the important issue of financial education, and I look forward to engaging on that. It's becoming ever more important, whether you are a pupil, a student applying for a loan or an adult managing your finances or thinking about retirement. However, there remain important issues which the government has not yet addressed sufficiently. Among them are the Henry VII powers in clause three and clause 50, and the first use of the extensive new powers in the
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Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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bill. Now, I understand the government intend to reintroduce clause three at a later stage in clause three at a later stage in the Bill's passage with further detail, and that is welcome. But it does not detract from the does not detract from the fundamental point at issue. One of Parliament's principal functions is to scrutinise government to scrutinise government legislation, and we simply can't do so properly when bills confer broad so properly when bills confer broad powers without setting out how clearly they are to be used.

A digital digital asset strategy support fast action to stop further loss of digital entrepreneurs and less aggressive use of section 166 are two further areas where we believe the government should go further, because we've heard consistent concerns from industry. My Lords, turning to the amendments, I deeply regret the fact that the government is in the amendments that the government is introducing today on climate change. This represents a serious U-turn by the government. Their original proposal was to move these considerations into five year strategies.

The existing requirements they dispense with are largely superfluous and burdensome, and there is little evidence that today's amendments should restore them or make any meaningful contribution, either to reducing climate change or to protecting the environment at a time when businesses are already facing considerable pressure, and when our wider economic circumstances demand an unrelenting focus on growth, competitiveness and investment, imposing further needless regulatory burdens is the wrong direction of travel. I would also suggest that for an economy as dependent as ours on international investment, these amendments send entirely the wrong signal.

We should be demonstrating to investors overseas that the UK is a predictable and attractive market. Instead, they reinforce the perception that doing business here means ever more regulation, additional costs and greater complexity for no clear practical benefit. At Second Reading, the then Minister, Lord Stockwood, I'm glad to see in his place, said that the purpose of this Bill was to modernise how the sector is regulated and to enable it to grow. My Lords, these amendments seem to me to run directly contrary to that objective.

I am deeply disappointed that the government have abandoned that principle so quickly and with so little resistance. We on these benches have been consistent in our opposition to this duty, which we have made clear in the House and in discussions with the Minister, and I shall seek to divide the House when the amendments are called.
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Lord Pitt-Watson Portrait Lord Pitt-Watson, The Parliamentary Secretary, HM Treasury (Labour)
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My noble Lords. I think there is >> My noble Lords. I think there is a wide agreement that finance is absolutely essential for the running of our economy, and that we want the British finance industry to be as successful as possible. I think that there would be few of us that would think that climate finance was not one of the most important areas to which the industry needs to contribute, and I think all of us would feel pretty proud that our country, particularly London, is rated as the number one centre of green finance in the world and the noble Baroness Neville-Rolfe.

I understand her wanting to minimise regulation and that this might be something superfluous, but I would just note climate is everywhere in the financial world. Why? Because you're managing other people's money. The fund manager, possibly with millions of people who are saving. How do you think about appropriate investment if you're responsible for the stewardship of the company, what is the sensible line that they should be taking in making sure that there is profitable as they can be, but they're not risking the sustainability of the world.

If you're an investment banker and somebody is issuing a bond, should it be a green bond? Is that fair for it to be a green bond, or are you thinking about the reporting on the stock exchange? Should you have taken into account that the carbon assets that you have will need to be written off, and you will need to have a fund and tell your investors about that? If you're interested in impact investment in red. I know we were talking a lot about deforestation.

How is it that we manage to get private money into deforestation? Baroness Carr the Baroness Hayman talked about insurance, even your operations. Look at the sort of thing that Bloomberg has done, where now all its electricity is a zero carbon. So there's lots of stuff. And the UK is a leader and it's a growing area as well. We should be absolutely proud of that. And does regulation make a difference to this? I think that is a good question.

But look, if you were to look at the UK and our regulation on this and compare it with the United States, London versus New York, you would be in no doubt which was the better for promoting green finance. Nor, frankly, do I know of many financiers who would say that the United States now has more predictable regulation than we have in the United Kingdom. You could say the regulator is already doing enough. And whilst I can't respond to Baroness Bennett by having a national conversation, I did.

I did organise the FCA to do a drop in to talk to noble Lords about what it was that they were doing in this area. Every single one of you that I've talked to after that thought that it would be a mistake to withdraw the have regard, and that therefore, this amendment that we're putting was the right thing to do. So look, my noble Lords, whether you are someone who believes in the importance of climate and environmental issues, or whether you want to be sure that Britain maintains its USP in this critical area of finance, I would urge you to vote for these amendments.

Thank you.

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The question is that amendment one be agreed to as many of that opinion say, content. The contrary not content, not content. The question will be decided by a division. I will advise the House division. I will advise the House division. I will advise the House when voting is open. Voting is now
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None Portrait Division
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You're You're going You're going to You're going to jump You're going to jump in.

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You're going to jump in. You're going to jump in. Yes.

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The

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The question The question is The question is that The question is that amendment one be agreed to as many of that opinion say, content. The contrary not content. The contents will go to the right by the throne. The not

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I I think. You You tell You tell him You tell him what You tell him what to

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Order, Order, order Order, order the Order, order the question Order, order the question is

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Order, order the question is There There have There have voted There have voted content There have voted content 258 There have voted content 258 not contents 109 the not contents have

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it. Sorry. The contents. The contents have it. I'm so sorry. All right.

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All right. Great. The question is that amendments two 2 to 9 En bloc be amendments two 2 to 9 En bloc be agreed to as many of that opinion say content. The contrary, not say content. The contrary, not content. The contents have it. The question is that this bill do now pass.

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My Lords, this bill delivers important reforms to ensure that the UK's financial services sector the UK's financial services sector remains open, innovative and internationally competitive, while maintaining high regulatory maintaining high regulatory standards and protecting consumers. It strengthens the legislative framework for financial services, framework for financial services, supports growth and investment, and ensures that our regulators have the appropriate powers and responsibilities to respond to a rapidly changing market. The bill has benefited considerably from the detailed scrutiny and expertise of noble Lords throughout its passage, and I hope you feel that the government have listened carefully to the arguments advanced in committee and report, and that we have brought forward amendments which were an appropriate.

In response. The Bill, of course, is
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Baroness Kramer Portrait Baroness Kramer (Liberal Democrat)
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Lord Stern so I'm going to be brief, which has been my practice. I think, as people may have noticed I think, as people may have noticed throughout much of this bill. But first, I want to open that by saying thank you to the Minister saying thank you to the Minister and to the box. They've been very willing to share their time with us, to brief us and to listen to issues that we raised. We didn't always get the response that we wanted, but I think it was a positive engagement that gives us some hope for really making progress in the future.

That's a I think the Minister came to this bill having been told it was a minor technical bill, and that probably couldn't have been more wrong, but I'm glad we achieved what we did, working across the opposition benches. That, and I give credit to conservative. Peers Baroness Noakes that Baroness Neville-Rolfe and others, as well as on my own side to Baroness Bowles that and Lord Sharkey. But in trying to deal with the issues around proportionality. But there is a great deal left in accountability that is going to be have to have to be tackled in future bills.

And as we see the speed up with AI and crypto and the other rapid changes that are coming, we are going to have to find a new way, I think, as Parliament to engage. And I also want to thank Baroness Neville-Rolfe for putting in an amendment that did begin to deal with the digital issue, and I really think not covering that within this bill was a miss out, and the government will have to step up to the plate again very shortly.

I am very grateful also for the fact that we got support on the child trust fund issue. Again, from the Tory benches. It's something I feel very personally, as people can probably guess that and benefits 80,000 disabled youngsters who've been unable to access money that is theirs, that's sitting in trust fund accounts. My Lords, I want to also thank that Lord Sharkey particularly for fighting the battle for the FOS. That battle, I think, is not over either, sir. And Baroness Northover in Sheehan, we would have gone farther, I think, on the climate change environment, deforestation issues.

But we do feel that an important step was taken by government in the amendments that were moved today. So this, I think, has been a very constructive bill, but it frankly was not the maximum use that could have been made, that of a financial services bill, and I hope we will see another one come along shortly, because there are problems to be tackled. That's not least that the mortgage prisoners issues, the issues of community development, financial institutions, as well as that utterly significant constitutional issue of accountability and how the regulators need to be effectively accountable to Parliament.

So I do thank the whole House for working on a very complex set of issues, particularly when it entered this phase with the understanding that it was only going to be minor technicalities.
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Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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But. acknowledging the considerable degree of cross-party support and engagement that has underpinned most of our discussions on the Bill, and I want to thank the noble Lord, the Minister Lord Pitt-Watson and his officials for their work, and also the noble Lord Lord Stockwood, for guiding through the Bill, through Second Reading and Report. And indeed, I'd like to thank Lord Wilson for his support. I agree with the Minister that the Bill has benefited from its passage through the House in major ways.

I am particularly grateful to the noble Baroness, Lady Cramer and Lady Bowles, and the noble Lord Sharkey, and the noble Lord Lord Vaux, for the constructive way in which they've worked with us on a number of shared priorities across the House. We've identified targeted and largely non-partisan areas in which this bill could be improved. Sarah's concerns have been raised, and serious, well intentioned proposals have been brought forward in response, and I hope they will be progressed by the government.

My Lords, I also want to thank my noble friend Lady Noakes and my noble friend Lord Bridges of Headley for the deeply constructive approach they've taken to the important question of accountability and oversight. I strongly urge the government to continue working with my noble friends on this issue, as I am sure the Minister recognises they have approached it throughout in the interest of good governance and effective parliamentary scrutiny, with the support of the excellent Financial Services Regulation Committee. My noble friend Lord Ashcroft.

Lord Ranger of Northwood Lord Holmes of Richmond Lord Massey of Hampstead Lord Howard of Rising, Lord Mackinlay, Lord Hunt of Wirral and Baroness Lawlor have all made important and valuable contributions to our discussions

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and I am Grateful for their work in raising important matters with the Minister. My Lords, this is in many Minister. My Lords, this is in many respects a model of how your Lordships House can work at its best. Identifying genuine concerns, drawing on expertise across the House and working constructively to House and working constructively to make legislation more effective and more accountable and better. I hope the government will take the the government will take the amendments passed and suggestions made forward as the bill progresses.

But most of all, I would like to thank my noble friend Lord Altrincham and my noble friend Lord Reay, and our team of officials for their support on this complex bill. Their experience and expertise in

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this area have been invaluable. Hey, here.

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Hey, here. The question is this Bill, do now pass as many of that opinion will say, content. The contrary, will say, content. The contrary, not content. The contents have it. I'll leave a small pause before we

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Bill Bill Lord Leong. I beg to move that this report

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be now received. The question is this report be now received as many of that now received as many of that opinion will say, content. The contrary not content. The contents have it in clause one. Amendment

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have it in clause one. Amendment one. Lord Holmes of Richmond. My Lords, I move this group on behalf of my noble friend Lord
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Lord Sharpe of Epsom Portrait Lord Sharpe of Epsom (Conservative)
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behalf of my noble friend Lord Holmes of Richmond, who sends his apologies to the House for his absence today. But, my Lords, before I begin, can I start by noting my gratitude to the noble Lord, the Minister who has been incredibly receptive and listening to and addressing our concerns with this bill? I believe we broadly ended up in agreement on the final form this bill should take, and so I commend him and his officials for the cross-party work they've put in. My Lords, my noble friends, two amendments from the committee seek to address three technical matters.

Amendment one aims to provide the supplier with guidance as to how to submit a notice. Amendment five seeks to clarify that a payment is only defined as such when the supplier has clear and unequivocal use of funds, and amendment ten would prevent the import export exemption from being extended past the implementation of the Electronic Trade Documents Act. As a committee, we remain broadly supportive of all three amendments. Amendment one reflects the fact that good payment practices can only be ensured if both parties are aware of maximum payment terms, and the supplier has submitted a notice in good time.

Amendment ten reflects a much raised concern that imports and exports are exempt from the bill. Currently, the Electronic Trade Document Act means that this will not have to be the case, and so I hope that the Minister can assure us that there are plans for import and export incorporation into the payment regime upon the full enactment of that act. And lastly, my Lords, it is a shame to see that the aim behind amendment five has not been accepted by the government.

This bill aims to improve payment practices between firms, largely because currently too many exchanges are delayed at the expense of the supplier. So if a payment is made through an intermediary and remains there for an indefinite period of time, perhaps beyond the 60 day payment term and does not fall under the
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Lord Sharpe of Epsom Portrait Lord Sharpe of Epsom (Conservative)
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of Wirral, I have retabled several amendments arising out of the concerns for the effects of the concerns for the effects of the maximum payment terms. Amendments two, four and 19 are concerned with payments that are delayed by either payments that are delayed by either bank holidays or bank processing times. Amendment nine probes the times. Amendment nine probes the economic and opportunity costs of the exemption of upwards payments from payment term restrictions. from payment term restrictions. Amendments three and six add a definition of nationalised bodies to the Bill, reflecting the fact that whilst they will be treated as regular commercial bodies, their business models are self-evidently different and as such, there is a risk that their payment practices reflect this.

My Lords, these are all questions that we would benefit one of this Bill, and it is also true that the best way of judging the effectiveness of a policy is through analysing its effects in practice. Therefore, my Lords, I welcome the compromise that the government has made with the noble Lord Lord Fox giving the Secretary of State the powers to shorten payment terms, alongside mandating a consultation about the decision. The new clause under amendment 15 does not commit the government to any specific action, but simply requires a review of the effects of the maximum payment terms and allows for adjustment if necessary.

I think that is a sound, self-correcting approach, and I therefore thank the noble Lord, the Minister, for agreeing to this

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moment. Proposed clause one, page two. Line five. At the end, insert the Line five. At the end, insert the words printed on the Marshalled List.

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I feel a great wave of. Consensus flowing. Over me. I rise to speak to amendment

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I rise to speak to amendment eight in this group, which is in my name. And as we discussed before
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Lord Fox Portrait Lord Fox (Liberal Democrat)
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the recess, much of the consultation process proposed a 45 day limit. Yet this bill, as it stands, offered no easy route from the 60 days it proposes to a shorter time frame. My amendment requires the Secretary of State within five years, either to delay draft legislation reducing the maximum payment for private purchasers from 60 to 45 days, or explain to Parliament why not. And I would say that the Minister's reaction and response to this particular issue has been typical of the very strong consensus that we've been able to build, and I echo the words of the noble Lord Sharpe, I think both the Minister and and and his team have been extremely helpful in this.

And that's why I'm. Excuse me. And that's why I'm delighted to note that government amendment 15 and the various consequentials which essentially lock in very much. What, what what I was looking for. And as the noble Lord Sharpe, the need for consultation over five years with a view to shortening the payment period. And this amendment is an excellent response to my amendment

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needed. My Lords, prior to introducing this government amendments, I would this government amendments, I would like firstly to express my personal thanks to the positive engagement thanks to the positive engagement across the House and particularly the frontbenchers from the opposite benches Lord Hart and and Lord benches Lord Hart and and Lord Sharpe and also Lord Faulks from the Liberal Democrats for the very thoughtful scrutiny of this bill. This bill builds upon the important reforms that were enacted by the previous conservative government.

The provisions in the bill have been drafted following extensive
17:40
Lord Leong Portrait Lord Leong (Labour)
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consultation with businesses, with over 850 responses to our over 850 responses to our consultation undertaken between 31st July and 23rd of October 2025, 31st July and 23rd of October 2025, we have brought forward this Bill reflecting that consultation, our decision to impose stricter maximum payment terms of 60 days received support from 66% of consultation respondents. This is a significant strengthening of current law. No longer will large businesses be able to impose payment terms of over 60 days upon their suppliers.

The question remains whether 60 days should be the end of that journey. We have heard loud and clear from smaller businesses that government should consider reducing maximum payment terms to 45 days or even 30 days. I have listened carefully to all noble Lords across the House, encouraging us to go further on this. I'm very pleased to say that the government has tabled amendments to provide a power that may be used in future to reduce the maximum payment terms. These amendments allow the government to consult on whether payment periods should be reduced, and ensuring any future decisions is informed by evidence and experience of how the new measures are operating in practice.

Furthermore, the government will not use its power to reduce maximum payment terms for at least five years. I hope noble Lords will agree that this is a sensible change and a balanced approach. Maintaining the payment periods consulted on and included in the Bill. Providing stability and certainty while businesses adapt to the new reality of 60 day maximum payment terms and ensuring there is a clear route to further in future if the evidence supports it. Turning to the amendments tabled by the other noble Lords in response to amendment two, increasing the maximum payment term for public authorities beyond 30 days would undermine the Procurement Act 2023 and delay payment to suppliers in response to amendment four, increasing the maximum period for a non-public authority purchase beyond 60 days would delay payments to suppliers and move away from the position, consult upon strong levels of support regarding amendments three and six.

National ownership does not by itself determine the applicable payment regime. Under the Bill, a nationalised body that meets the definition of a public authority will be subject to a 30 day maximum payment period. A nationalised body that does not meet that definition will be subject to the 60 day maximum payment period that applies to other purchasers. My Lords, I recognise Lord Fox intention and ambition in amendment eight to reduce maximum payment terms. Turning to amendment 19, the Bill takes important steps by introducing clarity and consistency around payment terms.

Building on the reforms introduced by the previous conservative administration, we are not aware of public holidays being raised as a concern by any business or stakeholder. During last year's extensive public consultation. Turning to amendment one, this is already covered by the bill. We are setting out clearly the trigger points that can be agreed to start the clock on payment, and the implied term is payment is not explicitly, explicitly made. Regarding amendment five, the government believes that the bill is clear for the purposes of whether a payment has been made on time and when interest on late payment will start, payment will be considered made at the point that funds have been received by the supplier on both amendments one and five, the Small Business Commissioner will provide advice and information on compliance with legal obligations on these points.

Amendment ten I outlined the Committee how removal of this exemption would place UK businesses at a competitive disadvantage. I recognise the groundwork laid by the noble and learned Lord Thomas and noble Lord Lord Jones in relation to the Electronic Trade Documentation Act, and intend for government to take this into consideration when consulting and developing regulations regarding payments and imports or exports. I can assure all noble Lords that government is actively supporting businesses to utilise digital trade documents, including an SME capability Programme, a dedicated gov.uk web page and business awareness campaign.

I just want to bring attention to a Lord Soames question about why is the government not defining when a payment is considered made in a commercial. In this bill itself, the bill is clear on the payment terms that commercial contracts can contain and the consequences for not making a payment within those terms. So where a payment has not been active, they have not been received by a supplier under the terms of a contract. That payment will be a late payment and interest will accrue.

My Lords, with those assurances, I hope noble Lords, the noble Lord will feel able to withdraw amendment one and support the amendments in my name to move.
17:46
Lord Sharpe of Epsom Portrait Lord Sharpe of Epsom (Conservative)
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Well, as ever, I'm very grateful to the noble Lord, the Minister, for his response and in particular about. Well, the last piece that he mentioned, which is very welcome news, and I appreciate the clarification. As I outlined in my opening speech, my Lords, a number opening speech, my Lords, a number of questions still do remain regarding the implementation and operation of maximum payment terms. I accept what the noble Lord said about consultation. I'm generally dubious of the government's enthusiasm for consultations, but in this case it was a good one.

But we do. We very much agree with the principle. My Lords, we need to see how these measures will actually work in practice. Still, that's why I'm very optimistic about amendment 15. The government will have an opportunity to revisit these measures, and I hope in doing so, that they consult stakeholders and those affected by all the potential issues that this group has raised. Keep up the good consultation work on this case. My Lords, I look forward to scrutinising the

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regulations when they appear, but in the meantime I beg leave to withdraw my amendments. Mr. Lordships pleasure. This

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Mr. Lordships pleasure. This amendment be withdrawn. It is by leave withdrawn. Amendments 2 to 4. Taken together. Lord Hunt of Wirral not moved. Amendment five. Lord Holmes of Richmond not moved. Amendment six. Lord Hunt of Wirral

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amendment seven. Lord Fox I rise to move amendment seven, which is in my name. As we all know, economic activity is switching from familiar structures and supply chains to one where businesses market their goods or their services via third party
17:47
Lord Fox Portrait Lord Fox (Liberal Democrat)
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online marketplaces or virtual intermediaries. This amendment intermediaries. This amendment brings such marketplaces and intermediaries intermediaries into the context of this bill. It closes the context of this bill. It closes the loophole by providing that payment is not treated as made to a supplier until the supplier actually receives the money, which seems reasonable, and by requiring seems reasonable, and by requiring any intermediary that collects payment on a supplier's behalf to pay it within seven days, regardless of how the intermediary is legally characterised.

The noble Lord. The Minister is Minister for small businesses, and I'm sure that very many of the businesses that are now under his purview would agree that their cash flow can be majorly impacted by how quickly these online marketplaces settle. Now, we've debated the role of online intermediaries in a number of bills and in a number of contexts. For example, we've talked about their role when considering product safety. And in every case, the government. I think both governments, if we can put it that way, have found arguments to eliminate these important business businesses, this important sector from whatever legislation we've been putting forward.

So it's quite clear that we have to move on from where we are now. We can't keep exempting what is becoming a major part of our economy from the legislation that we're putting forward. So, so an ever increasing proportion of the UK economy is shifting in this direction. And we need to grasp the nettle. So at the very least, I'm looking for some assurance from the Minister that the Small Business Commissioner, the government and across departments can actually take a look at the role of these businesses in all walks of the economy and find a way of bringing them on board and making sure that they are not a loophole to the laws that the government is very properly putting forward.

So with

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that, I beg leave to move. Amendment seven. One, page three, line 37. At the

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One, page three, line 37. At the end, insert the words as printed on the Marshalled List.

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My Lords. This amendment touches on very much the same point as my noble much the same point as my noble friend Lord Holmes of Richmond's Amendment six in the first group.
17:50
Lord Hunt of Wirral Portrait Lord Hunt of Wirral (Conservative)
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Amendment six in the first group. Indeed, the principle that payment should be considered as such only when received by the supplier underpins several of the amendments that we brought back from committee on this side of the House. So as such, my Lords, His Majesty's loyal opposition support this amendment as we did at Committee stage. I do not think, simply because a payment is made online and happens to travel through an intermediary, that it should fall under a different regime to direct payments.

Similarly, my Lords, ensuring the prompt forwarding of payment by intermediaries is an integral part of promoting good payment practices. This amendment aims to do so, and I warmly commend the speech of the noble Lord Lord Fox. So I join with him in hoping that the noble Lord. The Minister, can confirm that these issues have been considered

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and addressed. I am indeed grateful and thank the noble Lord Lord Fox for amendment seven. I recognise that this amendment is stable in a this amendment is stable in a constructive spirit, and I would like like to thank the noble Lord Faulks again for the engagement that we've had on this matter, both in person and also by correspondence. The government shares the noble Lords aims of ensuring that suppliers are paid promptly, payment processes are clear and purchasers cannot use contractual mechanisms to unjustly delay payment.

I entirely agree that when a small business sells through a platform or marketplace, the money due to that business should not be held unnecessarily. I want to be absolutely clear that the use of intermediaries does not affect a supplier's right to be paid within 60 days. Chapter one, part one of the Bill ensures that for businesses, for business to business contracts, for the supply of goods or services, the maximum payment is 60 days. If payment is more than 60 days overdue, the purchaser is in breach of contract and liable to pay interest.

The use of an intermediary does not alter this position. I would also like to reassure all noble Lords that persistent attempts to circumvent the maximum payment terms through intermediaries constitute poor payment practice under clause 19. This constitutes grounds for the Small Business Commissioner to investigate and potentially to levy a financial penalty on larger businesses that persistently engage in that practice. Under clause 18, the Commissioner will also be able to adjudicate payment disputes, where a larger business owes money to a small business, including where the debt arises from the use
17:53
Lord Leong Portrait Lord Leong (Labour)
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of an intermediary. This bill addresses late business to business payments. It is not intended to regulate broader business relationships, such as those between retailers using agents to between retailers using agents to sell goods to consumers, or between a platform or marketplace and others. When the platform or marketplace is holding, processing or transmitting funds between them, or transmitting funds between them, which are subject to separate regulation. The contracts through which the majority of small businesses trade on online marketplaces are either business to consumer or consumer to consumer contracts, and are subject to consumer legislation.

These contracts were outside the scope of our impact assessment and our public consultation. The amendments tabled would therefore not address the issue that the noble Lord has raised. Tackling the issue of late payments outside a business to business context would move the bill into a completely different area of regulation and would require the establishment of a new statutory regime for online marketplaces and payment intermediaries, intermediaries. This would cut across existing legislation rather than maintaining the bill's core focus on commercial payment practices between suppliers and purchasers.

This amendment would also interfere with existing commercial models that operate in the interests of the relevant parties and serve legitimate purposes. For example, where most intermediaries operate a system in which payments are pooled in a small business account and draw down by the small business on a regular basis. This amendment would mean that cash that each individual sale, however small, would have to be remitted directly to the small business, significantly increasing transaction numbers and costs and reducing the flexibility of the operating model.

Another example is payment providers holding funds for more than seven days to allow for fraud checks or other compliance requirements. This amendment would increase small businesses exposure to fraud and undermine the regulatory and legal framework governing payment providers. However, I do understand and share the noble Lords concerns about withholding funds from small businesses. I am therefore happy to ask the Small Business Commissioner to review this issue with a view to developing guidance to small businesses. Understand how this bill applies to trading activity on online marketplaces.

This can build on the guidance that Commissioner produced last year to help small businesses understand why their accounts may be frozen or funds withheld, and how they can take action to avoid this. This includes. This included a ten point pledge to online marketplaces and payment providers signed and promoted by several major companies. As small Business Minister, I will also commit to examining how government can further support small businesses in addressing this issue faced by those who use online platforms, including engaging other departments, other government departments and regulators where they have responsibility.

For those reasons, and given the commitments I've made, I respectfully ask the noble Lord Lord Faulks to withdraw amendment seven.
17:56
Lord Fox Portrait Lord Fox (Liberal Democrat)
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Lord Darroch first of all, I thank the noble Lord hunt for his support on this amendment. One one support on this amendment. One one one point of sort of consternation or otherwise is I would suggest that the supplier marketplace that the supplier marketplace relationship is a B2B relationship. It isn't a, B, a B2C relationships. I'm not sure where the argument I'm not sure where the argument that somehow I'm pushing this to a different, a different sort of relationship came from. But I will set that to one side and, and, and mull on it later.

But I do thank the Minister for the latter part of, of, of his speech and, and undertakings to, to focus the SBC on this issue and also for his Department to look at ways of making sure that small businesses understand their rights. And I think that's the point really. I think the the way in which the first part of the minister's speech was, was set out made it clear that there are all sorts of rights for small businesses within within this, but I'm not sure the small businesses necessarily are aware of that and how they go about exercising those rights and making sure that the exercise of those rights is not a time consuming and overwhelming process.

So I think it'd be useful to hear from the Minister going forward, and perhaps from the Small business commissioner in, as time goes by, how small businesses are going to be engaged to make sure that they are actually fighting on an even footing with the marketplaces, who let's face it, many of them are absolutely huge and very, very difficult organisations to take on and actually very difficult organisation to even find the right person to speak to, to start with. So with those I thank the Minister for, for the work he's going to do in future, and I beg leave to

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withdraw amendment seven. This amendment be withdrawn. The amendment is by leave withdrawn. amendment is by leave withdrawn. Amendment eight Lord Fox not moved, not moved. Amendment nine Lord Hutton not moved and amendment ten Hutton not moved and amendment ten Lord Jones not moved. Amendment 11 Lord Hunt of Wirral I should, I Lord Hunt of Wirral I should, I should perhaps alert the House the fact that if this amendment were to be agreed to, I would not be able

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to call amendment 13 by reason of pre-emption. My Lords, this group of

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My Lords, this group of amendments revisits the issue of definitions of different sized businesses, and I note the new amendment in the name of the noble amendment in the name of the noble Lord Lord Fox, which highlights the same concerns that we raised at Committee stage. Those concerns Committee stage. Those concerns remain. My Lords. There has been a proliferation of definitions for different sized businesses to suit different sized businesses to suit a multitude of aims of the government of the day. There are currently a minimum of six statutory frameworks using materially different sized criteria, as well as other definitions existing in sector specific regulations and guidelines.

I know that the noble or the Minister will agree with me when I reiterate that this is currently too complex a system. My Lords, the government should aim to place as few obstacles as possible in the path
17:59
Lord Sharpe of Epsom Portrait Lord Sharpe of Epsom (Conservative)
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of business, and that means cutting the bureaucratic paperwork and jargon that firms Jergens that. I'll say that again. Jargon firms complete to meet their legal complete to meet their legal obligations. And the proliferation of business sized definitions is a case in point. They may not be entirely contradictory, but they are certainly not complementary. And I believe that everyone would benefit from a more streamlined approach. Now, I entirely accept the minister's point at committee that such a wide reform cannot take place in a bill with as narrow a scope as this one, but I think that the Minister should at least commit to restricting the definitions within this act to those that already exist, and to the best of his ability.

And such a step clearly has the support from all sides of the House. And similarly, my Lords, given the fact that the noble Lord, the Minister has indicated his support for some reform of definitions, I would appreciate it if he could commit to revisiting this issue with me at a future point, and I hope that he can agree to this, and I look forward to his response, and I beg to.

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Expecting somebody else to speak. And it was me. I beg pardon. And it was me. I beg pardon. Amendment proposed clause three, page eight. Leave outlines 17 to 24 and insert the words printed on the

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Marshalled List. But, my Lords, the noble Lords, hunt and sharp were right to raise hunt and sharp were right to raise the issue of of definitions in in committee, and rather than simply echo them, I decided to to add echo them, I decided to to add something to the to the the the debate through amendment 35, which sets out something of the Babel, the Tower of Babel that exists around definitions. Subsection two of amendment 35 gives examples of the many phrases and words which are used in a variety of different contexts.

Subsection three identifies seven acts, not the six that Lord Sharpe came up with. So we managed to find another one
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Lord Fox Portrait Lord Fox (Liberal Democrat)
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where these phrases are prevalent, but not necessarily synonymous. And but not necessarily synonymous. And subsection four really sets out what we're looking for the, the, the Minister to do. And it's really to, to, to work out to what extent the definitions differ within subsection of the definition set out in subsection two differ in subsection three. There's a compliance cost to these differing definitions. How is that different definition, those different definitions actually costing business because they have to make different decisions for different legislative frameworks.

The extent to which this rises gives rise to uncertainty and actually undermines the law and the effect that it will have on the functions of the small business commissioner themselves. Those are just some of the things that we think should be taken on board by the government in order to bring a state of order to what has been an organic process of legislation following legislation, definition, following definition. Now, in order to help the the the minister's new constituency of particularly small businesses is the time to bring these things under control and and bring

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definitions into order. My Lords, firstly, let me thank noble Lords for the amendments 11, noble Lords for the amendments 11, 12, 13, 14, 35 and 46. My Lords, I recognise the concerns raised by recognise the concerns raised by the noble Lord Lord Sharpe and Lord Fox at committee regarding the number of existing definitions of company sizes on the statute book and the desire to for clear and consistent definitions to avoid confusion for businesses. I would like to reassure noble Lords that our intention is to use the company size thresholds set out in the Companies Act 2006 and the Enterprise Act 2016 as the basis for defining company size in the Bill.

However, it is important that we consult with businesses and industry experts to ensure that these definitions are appropriate for the purposes of this bill. That consultation may indicate that for the purposes of the Bill, company size definition should be revised or simplified. Any modifications to existing definitions will be made only when necessary. For example, we may choose to simplify definitions to make it easier for businesses to use exemptions, whilst still using existing definitions as the basis. We may find through consultation that different parts of the legislation require different definitions to ensure precision and effectiveness.

For example, we might be required to simplify the definitions for the purposes of the Small Business Commission's power powers so that they are based solely on headcount. For simplicity, we should not constrain ourselves by introducing rigid definitions now, as this would make or could make, the
18:04
Lord Leong Portrait Lord Leong (Labour)
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powers and protection afforded by this bill more difficult for businesses to understand and businesses to understand and administer than is necessary. I also do not consider it necessary to delay the bill's commencement, to delay the bill's commencement, pending a further statutory review of definitions used across a range of legislation. The government is of legislation. The government is already committed to consulting on any regulations made under these powers and to take, and to taking into account relevant existing definitions when developing them.

The delegated powers in section two E will be subject to consultation and to parliamentary approval under the affirmative procedure, giving your Lordships House the opportunity to vote on the regulations before they are introduced. In conclusion, my Lords, the definition of business sizes will be set out in secondary legislation. These regulations will be informed by consultation to ensure that they are appropriate. The government intends to use the existing definitions as the basis for this bill, and we will keep definitions as simple and effective as possible.

I can also commit that. But before making any regulations in this area, the government will have regard to the definitions in the Companies Act 2006 and the Small Business, Enterprise and Employment Employment Act 2015 and the Enterprise Act 2016, and I can also commit to to meet up with the noble Lord Lord Sharpe to look into these definitions going forward. So for these reasons, my Lords, I respectfully ask that amendment 11 be withdrawn and not move the remaining remaining amendments in the group.
18:06
Lord Sharpe of Epsom Portrait Lord Sharpe of Epsom (Conservative)
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Well, my Lords, again, I'm grateful to the noble Lord, the Minister, for his very comprehensive response. I'm also grateful to the noble Lord Lord Fox for explaining his amendment 35, for explaining his amendment 35, and indeed for digging out yet another example of an act that governs the definitions of small governs the definitions of small business. Could I suggest that the noble Lord, the Minister, that during this consultation they also include perhaps a question about how the nature of small business has evolved in the last ten years.

Obviously, there is a spectacular explosion in e-commerce and other things, which I think will have a material impact on the types of definition we're talking about. My Lords, as I outlined in my opening speech, the current landscape of definitions is unnecessarily and expensively, as noble Lord Lord Fox pointed out, convoluted. But I also recognise that this bill is not necessarily the best vehicle for driving through that reform. So I do appreciate the Minister's response to this, to this issue. I will absolutely take him up on his offer of further talks about how we might improve what is a bit of a messy situation, messy picture.

And I think I also heard him and I might be making this up, that he's quite keen to find another perhaps legislative vehicle where we can address this in the future. And if I am making up, I'm sure he'll

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correct me. Correct the record. I beg leave to withdraw my amendment. OK. Mr. Lord Trees, treasure this

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Mr. Lord Trees, treasure this amendment. Be withdrawn. The amendment is withdrawn. Amendment amendment is withdrawn. Amendment 12 Lord Turnbull not moved. And 13 12 Lord Turnbull not moved. And 13 and 14 not moved. Amendments 15, 16, 17 and 18 already debated, moved formally. Lord Leong. The question is that these amendments be agreed to. En bloc as many of you have that opinion will say content. To the contrary, not content. The contents have it. Amendment 19 Lord Hunt not moved after clause ten.

Amendment 20. Amendment 20.
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Lord Hunt of Wirral Portrait Lord Hunt of Wirral (Conservative)
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Lord Hampton my Lords Amendments 2021 and 33. In my name and that of my noble friends, Lord Sharpe of Epsom and Lord Leigh of Hurley have been brought back from committee in order to address the concerns that we have with special Administration regimes and payment practices. My Lords, may I begin by acknowledging that the Minister did reassure us that the terms of this bill will apply to companies required to continue supplying SAA's following their being placed into administration as amendment 20 probes.

Similarly, my Lords, I acknowledge that the report on the interaction between insolvency moratoria and payment practices that amend amendment 33 mandates may be unnecessary. Given this fact, we have, however, retabled these amendments as they lend themselves to my arguments surrounding amendment 21. My Lords, when this amendment was raised at Committee stage, the noble Lord. The Minister stated, and I quote, that it would cut across the established insolvency framework that providing preferential treatment to one group of suppliers would disadvantage other creditors and undermine the purpose of the existing insolvency regime.

My Lords, we don't agree with this argument. The very acceptance of amendment 20 that suppliers to SAA's will fall under this bill implies a recognition that there is something unique about this set of businesses. Indeed, the entire reason we are having this debate is that in section 233 of the Insolvency Act of 1986 makes it illegal to withhold supplies to an SAA on the condition of the payment of arrears. It would not be preferential treatment to offer to them what this Bill offers to every other business the ability to recoup funds owed but not paid.

Indeed, my Lords, that would place those firms on an equal footing with other creditors, given that they currently have less ability to ensure payment of arrears. My Lords, amendment 21 is proportional in that a cap can be set by the Secretary of State, and the payment cannot be of some subject to genuine disputes. This Bill is designed to ensure fair and timely payment practices. This amendment seeks to ensure just that for a set of firms who currently have no means of recouping owed sums.

Of course, I look forward to the noble Lord the minister's response, and

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in the meantime I beg to move. Then the. Proposed after clause ten insert

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Proposed after clause ten insert the new clause printed on the Marshalled List. My Lords, firstly, let me thank

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My Lords, firstly, let me thank the noble Lord Lord Hunt of Wirral and Lord Sharpe of Epsom, and Lord and Lord Sharpe of Epsom, and Lord Leigh of Hurley is not in this place today for amendments 2021 and 23. I'm really grateful to both 23. I'm really grateful to both noble Lords for our recent meeting covering these points, and I hope that the follow up information which my officials provided has been helpful. I'm also grateful to the Insolvency Service for its
18:12
Lord Leong Portrait Lord Leong (Labour)
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expertise in supporting our position. The Bill does not seek to alter the existing statutory alter the existing statutory framework regarding insolvency. Regarding amendment 20, I would first like to clarify the position first like to clarify the position of suppliers providing goods or services after a company enters a services after a company enters a special administration regime. Clause one inserts a new section Clause one inserts a new section 282 B into the Commercial Payments and Interest on Late Payments Act 1998, applying maximum payment terms to relevant payments under contracts within the scope of the legislation.

The Bill does not exclude supplies made to companies in special administration. There is an important distinction between pre appointment and post appointment debts. Post appointment supplies remain subject to the Bill where they are otherwise within scope, payment obligations and statutory interest may continue to apply or accrue recovery and enforcement remains subject to any relevant insolvency moratorium and the wider insolvency rules. By contrast, debts relating to suppliers made before the appointment are in a different position. They remain pre insolvency claims are dealt and are dealt with under the established Insolvency Framework.

The Bill is not intended retrospectively to alter their status or priority. The government does not consider that entry into a special administration regime should of itself result in a purchaser being treated as a public authority for payment term purposes. Companies in special administration remain commercial entities operating within statutory rules. Special administrators are independently or independent court appointed office holders with statutory duties to manage the businesses within those rules. Applying public authority payment requirements solely because a company has entered special administration could have operational repercussions, for example by exacerbating cash flow pressures.

Nor do we consider that this bill should determine whether liabilities are to be treated as expenses of a special administration. Amendment 20 would make qualifying post appointment stumps, including statutory interest expenses of the Special Administration. Amendment 21 would similarly elevate certified pre appointment sums. This would be substantive changes to the treatment and priority of liabilities potentially affecting other creditors. Such questions are matters for the Insolvency framework regarding amendment 21. I recognise the concern raised by the noble Lords.

Suppliers may be carrying unpaid debts when a company enters special administration. That can be difficult, particularly for smaller businesses supporting essential service. I appreciate the particular concern where insolvency legislation restricts a suppliers ability to terminate a contract or make continued supply conditional of on payment of pre appointment debts. However, the relevant insolvency provisions contain certain contained their own protections and mechanisms, including provisions relating to payment for post insolvency supplies and safeguards where continued supply would cause hardship.

So we do not consider that those carefully calibrated arrangements could be recast through this bill. Given one group of creditors, preferential treatment could disadvantage others, including employees at HMRC, and would cut across established statutory priority rules. The Bill is focussed on tackling late payment through clearly statutory payment periods and related measures, not on amending insolvency law, creditor priorities or special administration regimes. Regarding amendment 33, the government does not consider the proposed statutory review necessary. The amendment specifically asks about the interaction between an insolvency moratorium and the Small Business Commissioner adjudication scheme.

That scheme does not displace any insolvency moratorium or determine the status or priority of claims. Its operations must remain subject to applicable insolvency restrictions, including restrictions on recovery and enforcement. So, my Lords, we therefore do not consider a separate statutory review of this is required. The interaction between the Bill and Insolvency Framework is already governed by established legal principles. A report within six months of Royal Assent will be unlikely to provide meaningful evidence about provisions that may not yet have commenced or had sufficient time to take effect.

The government will nevertheless monitor implementation of the new payment framework, including its operation, where a purchaser enters an insolvency procedure and will engage with Insolvency Service and relevant sector departments should evidence of practical problems arise. My Lords, for those reasons, I would ask the noble Lord to withdraw the amendment.
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Lord Hunt of Wirral Portrait Lord Hunt of Wirral (Conservative)
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My Lords, we will carefully >> My Lords, we will carefully consider what the noble Lord, the Minister has said, but I think he will acknowledge that there is some will acknowledge that there is some doubt, some worry, some concern doubt, some worry, some concern still in existence. I appreciate his reiteration. That amendment 20 will be covered within the bill already, and I accept that the information for review is not currently available on amendment 21. My Lords, whilst I accept that it does not fall into the scope of this Bill, I would gently ask the Minister whether the government are currently looking at insolvency moratoria and special administration regimes.

There has been plenty of talk in recent months about placing certain industries into public hands, not least Thames Water. I think if businesses of this scale are in question, firms supplying them deserve some clarity. My Lords, these firms are worried about their futures. The very need for this bill demonstrates that poor payment practices and withheld arrears are a threat to their existence. I hope to see some solution reached in the near future, but I acknowledge that the Minister has gone a distance to try and address these concerns, and that he has committed to continue to monitor the situation carefully and therefore, in the meantime, I

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beg leave to withdraw my amendments. Treasure this amendment. Be withdrawn. The amendment is finally withdrawn. The amendment is finally withdrawn. Amendment 21 Lord Hunt not moved, not moved in clause 11. Amendment 22 Lord hunt.

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My Lords, firstly, I'll begin by reiterating my support for the government's position on retention government's position on retention payments. We do support the right to the free exchange of goods and services and the right of firms to enter into mutually agreed upon contracts, but it is also clear that retention payments have become misused and are therefore untenable.
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Lord Sharpe of Epsom Portrait Lord Sharpe of Epsom (Conservative)
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My Lords, 65% of retention payments are paid back late, whilst almost are paid back late, whilst almost 25% are never paid back at all. They have become a tool for big firms to retain cash flow to prop firms to retain cash flow to prop up other ventures, whilst the supplier, often a smaller firm, suffers as a result. However, we must not lose sight of their original purpose. My Lords, retention payments as a concept are retention payments as a concept are wholly justified in that they offer an insurance against defective or untimely work and incentivise the remedying of that.

I, as I'm sure many noble Lords would agree, would hesitate to commission construction work on a private property if I did not have a way to ensure it was done to an acceptable standard, and we should not accept firms to be any different. Therefore, my Lord, some middle ground must be reached as at Committee stage. I've tabled, along with my noble friend Lord Lord Hunt of Wirral, two amendments that propose alternatives to retention payments, namely escrow and staged payments. Now, I'm aware that the noble Lord, the Minister, has outlined that these would be permissible following the enactment of this bill.

But as far as I'm aware, they are currently a small part of the market share of construction insurance. So the primary goal of these amendments is to seek clarity from the noble Lord, the Minister, on what steps the government is taking to promote these and indeed other alternatives. They're consulting with industry. What conclusions have they reached from those discussions? Which other forms of insurance does the government deem effective, and how are they acting to promote them? So I hope the Minister is able to give some clarity from the despatch box on all of those questions.

My Lords, amendment 24 would exempt resident run or resident owned blocks of flats from falling under the retention ban. The Minister has made it clear that this ban is intended to target commercial contracts, rather than those of private citizens. Resident run properties fall into an odd medium in that they are technically commercial properties, but they are run as if they are private. There is clearly a category issue here. So does the Minister accept that these not run as commercial properties, and if so, does he have the data in front of him? As to the scale of this issue and whether the incoming ban will pose a risk to the resident run property market? Finally, my Lords, I will touch on amendments 25 and 26 in my name and the names of my noble friends, Lord Hunt of Wirral and Lord Leigh of Hurley.

My Lords, these amendments seek to prohibit the imposition of requirements from large onto small business. In particular, we are concerned about the forced use of specific currencies that advantage the largest supplier, or the imposition of ESG requirements that allow the larger business to meet requirements in their annual reports, without having to bear any of the costs. My Lords, much of this bill seeks to support small business by placing them on an equal footing. It recognises there is often an asymmetrical relationship between the buyer and the seller when either is larger.

Our amendment simply seek to extend that recognition to these two well-known practices. So I hope the noble Lord Wood noble Lord, the

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Minister will agree with me, and I beg to move. Amendment proposed clause 11,

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Amendment proposed clause 11, page 1534. To end, insert the words printed on the Marshalled List.

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There are no amendments in my name in this in this group, but I would like to speak very briefly on would like to speak very briefly on on on the noble Lords Amendment 24, which, as we heard, seeks to remove the ban on retention with the very the ban on retention with the very worthy aim of helping ensure resident owned or resident run
18:23
Lord Fox Portrait Lord Fox (Liberal Democrat)
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blocks of homes can police work done on the grounds of safety. And on the face of it, that sounds like a very worthy idea. I am concerned a very worthy idea. I am concerned that it opens a can of worms and that is my. My instinct is there has to be a better way of ensuring that the work is done properly. Perhaps it's the noble Lords idea Perhaps it's the noble Lords idea of SEO, which I believe could, if mutually agreed, would be would would be possible.

There is a danger in watering down the retention ban if we were to accept retention ban if we were to accept the noble Lords. Ideas and also the definition of safety, remedial work could be broad or it could be very narrow. So so I I'm I'm I'm and I've had briefings from a number of different organisations which have all been contradictory to each other. So I, I'm, I'm, I'm passing the buck to the Minister to explain how he is going to, to solve the very worthy issue that the noble Lord Sharpe has identified, which is resident run properties or resident owned properties, whilst at the same time not prising open

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the lid to the can of worms. My Lords, firstly, let me thank

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My Lords, firstly, let me thank noble Lords Lord Sharpe and Lord Hain for the amendments in this group. Let me take amendment 22 first. Firstly, let me reassure the noble Lord Sharpe and hunt that noble Lord Sharpe and hunt that this bill. This bill does not prevent parties in any sector, including construction firms, from including construction firms, from making use of payment arrangements through a bank or an escrow provider to facilitate the transfer of funds. The important distinction is between a third party facilitating that payment of that payment of money that is due, and a third party holding back of that money as security for the supplier's performance.

The former remains permitted. The latter could amount to a retention and would therefore fall within the prohibition. Therefore, amendment 22 is unnecessary. The government's view shared by many in the industry, is that construction should move away from cash retentions and towards a modern, more secure and equitable forms of surety. We know that there are alternative forms of surety, including performance and retention bonds already available in the UK, which can mitigate risks for clients and firms.

There are also alternatives used in other countries, such as warranty bonds, which are very common in Europe and available in the UK. We will be working with surety providers to ensure that a range of alternatives are available when the ban comes into force. In relation to amendment 23, I would like to reassure noble Lords that the Bill does not prescribe when stages or milestones must occur, or prevent parties from agreeing interim valuations and payments. It regulates the period within which an amount must be paid once that payment becomes due.

Genuine stage and interim payment arrangements will therefore remain entirely permissible. However, describing a withholding of money for work already completed and where payment is due as a stage payment would not prevent it from falling within the prohibition on retention. If in substance, the money was being retained as security for the performance of contractual obligations. The right for firms to be paid in stage payments on projects lasting more than 45 days is already enshrined in section 107, part two of the Housing Grants Construction and Regeneration Act 1996.

This bill does not amend, qualify or undermine that right. Therefore, this amendment is unnecessary in implementing the provisions of this bill. The government will engage directly and closely with construction industry clients, specialist providers and representatives of smaller firms to provide guidance that legitimate payment arrangements can continue while preventing contractual devices from being used to create to recreate cash retentions under another name. To turn to amendment 24, we recognise the understandable intention that there are means of ensuring that the resident led and resident owned companies were one assurance that building work is completed properly and of high quality, and that defects are remedied without additional costs falling on leaseholders.

We do not believe retentions ensure this. Do you agree to this amendment? Do you agree to. This amendment would create a broad exemption for construction contracts entered into by resident management and right to manage companies. That would leave firms working on those buildings exposed to the risks associated with cash retentions. It could also create uncertainty where different ownership and management structures exist within the same building or development. In addition, the process required by the Building Safety Act 2022 for delivering work on high risk building places and emphasis on safety and quality.

It includes numerous gateways, information requirements and independent reviews of the building. If clients and firms in their supply chain are meeting the requirements of the act, then there should be no need to deduct retentions. As Dame Judith Hackitt has noted, retentions are ineffective and undermine the effectiveness of the supply chain, which is why alternatives are required. For this legislation to be effective, it must incentivise the industry and its clients to end the practice of cash retentions and to adopt alternative forms of surety, together with improved quality management.

Finally, I wish to address the request made by a number of noble Lords Committee stage for further information about the work to develop alternatives to retentions. The Construction Leadership Council has now appointed a new industry lead for this area and we will be. We will be increasing our engagement with stakeholders across industry in relation to alternative forms of surety and quality improvement from September. This will give us plenty of time to address those issues. In advance of the introduction of the proposed ban.

Turning to amendment 25, I acknowledge concerns around the risk of small businesses being pressured into accepting payment methods they have not agreed, including cryptocurrency. However, this amendment is not necessary. The terms governing payment between parties are a matter for contractual arrangements, and a purchaser or supplier should not be able to impose new payment terms unilaterally in adjudicating disputes. The Small Business Comissioner will determine whether larger businesses or smaller businesses. Money under a contract a breach may include a failure to pay, paying late or partial payment because of a larger business attempting to unilaterally change existing contractual terms.

Regarding amendment 27. I agree that payments under the Bill should not be withheld. Where there has been no breach of contract by the supplier. This amendment is therefore not necessary to achieve this and the same principle. My Lords are outlined in response to amendment 25, applies and includes ESG. The Commissioner can determine what is owed under the contract through adjudication, and has the power to investigate persistent poor payment practices. For those reasons, my Lords, I respectfully ask the noble Lord to withdraw amendment 22 and not move amendments 23 to 26.



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My. Again, grateful to the Minister for his response, and indeed to Lord Lord Fox for his indeed to Lord Lord Fox for his comments. Firstly, on ESG impositions and the general risk of coercion of smaller businesses by larger ones, I accept that these larger ones, I accept that these are already prohibited by law, but I would, however, gently raise that the risk of coming forward with the risk of coming forward with complaints of this kind often outweighs the benefits of redress. Essentially, small businesses are Essentially, small businesses are being coerced into ESG practices.

That is still a problem, and it's one that I hope a government will address in the future. My Lords, I thank the noble Lord, the Minister, for his outline of the government's approach to the retentions issues, and I am genuinely optimistic listening to him, because he has talked about a variety of different products that are available, and we've had some briefings on those performance bonds, retention bonds. And as I mentioned, the warranty bond. My Lords, these are tend to be common practice, more common practice in Europe that is current.

And I think warranty bonds are only offered by a single firm in the United Kingdom at the moment. I do and would hope that the market will provide solutions to this problem, because we do think there is some form of, of, of insurances. In fact, it would be effective and necessary in these circumstances. But it can't really be accepted as a retention payment alternative if it's currently so scarce. So we do need to make sure that it is well understood publicly and perhaps mount a campaign with industry to make sure this is very well understood.

I also accept the noble Lords arguments about the difficulty of creating an exemption for residents run properties. I'll have a think about that further when I have a chance to read Hansard, but I do think he made some good points. So I do hope the government will be able to update the House in due course on their progress in promoting these various different types of instrument, but in the meantime, I beg leave to withdraw my amendment. Yeah.
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18:34
Lord Fox Portrait Lord Fox (Liberal Democrat)
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time limit for the dispute to be raised. There is no such limit on when the case should be resolved. when the case should be resolved. This means that large companies could, in effect, contest a dispute could, in effect, contest 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 relevant payment dispute before the end of the period of 60 days, beginning from the day on which the dispute is referred to the adjudicator.

Under the scheme. The 60 day suggested in this amendment is itself more generous than the 28 day time limit that is currently covered for the construction sector, but should at the very least be seen as a backstop. And I look forward to hearing from the Minister what limits it sees to the a due adjudication figure should be, and how they would be applied in practice as the. The act currently stands. Turning to amendment 34, this simply looks to lock in sufficient funding and government support for the Small Business Commission to reflect its vastly wider remit.

Now, I'm persuaded that there are some moves that have already been made, and some that are in the offing, that will boost the capacity for the Commission. But as we have seen with companies House transforming an organisation into an investigative body is a huge undertaking and it's a cultural change. It requires both resources and great resolve from the leadership team in that organisation. And I think both houses need to be reassured that sufficient resources and sufficient government support is being made available, because if the Small Business Commission fails, it undermines the whole pretext of

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this bill. So I beg to move amendment 27. Amendment proposed clause 18,

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Amendment proposed clause 18, page 22. Line 35 at end. Insert the words printed on the Marshalled List.

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List. My Lords, we're all very grateful to the noble Lord Lord Fox grateful to the noble Lord Lord Fox for moving this group of amendments, and ahead of this group, I would and ahead of this group, I would once again like to thank the noble Lord, the Minister, for his engagement. We entered this part of the bill with some apprehensions, not least regarding the funding of this small Business Commissioner's office. It would perhaps be too soon to say all of those concerns have been quelled.

But I appreciate the time that the Minister, the small business Commissioner herself and her team have taken to try and address the questions that we have all put forward. My Lords, I will begin by addressing the amendments to which I've added my name and the name of my noble friend, Lord chapel. We're all, namely, those in the name of my noble friend Lord Leigh of Hurley. Amendments 28 and 29 aim to bring some transparency to the office of the Small Business Commissioner through requiring written reasons for declining to adjudicate a dispute and through requiring the definition of a sufficient number of occasions to trigger an investment.

An investigation into payment practices. My Lords, on the latter point, I accept the government's reasoning that a numerical definition does not sufficiently account for the scale of different poor payment practices. I hope, therefore, that the noble Lord, the Minister, can confirm that there will, however, be some framework upon which these decisions to investigate will be based on the former point. Written reasons for declining to adjudicate a dispute. I do hope the noble Lord, the
18:38
Lord Hunt of Wirral Portrait Lord Hunt of Wirral (Conservative)
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Minister, will be able to outline the government's position. I the government's position. I understand that discretion and disclosure are considerations, and disclosure are considerations, and so perhaps a middle ground that so perhaps a middle ground that requires the informing of decisions to decline without necessarily including the reasons for doing so, including the reasons for doing so, would be acceptable. My Lords, my concerns remain with putting a time limit on resolving disputes, as amendment 27 would do.

Whilst disputes should of course be addressed in a timely manner, the fact is that different disputes will require different resources and be of vastly different scales. An arbitrary time period risks rushing the commissioner's office or forcing them to prioritise, or perhaps even to accept trade offs. We don't believe that the benefits of a 60 day limit offset those risks. Finally, my Lords, I am grateful to the noble Lord, the Minister, for providing us with a briefing beforehand on some of the previous funding of the Small Business Commissioner's Office and their plans for the future.

We are satisfied that these have been modelled on the best predictions possible, and I'm sure your Lordships House would be grateful if the noble Lord. The Minister could outline some of that data when he comes to reply to this debate, certainly at the despatch box at some stage. I would like to finish by asking whether there is a way to scrutinise the Commissioner's funding in the future. As I have said, we are satisfied with the predictions, but they are still only predictions.

I'm sure there will be an internal review process into the effectiveness of these these reforms, but this House does deserve the opportunity to have some input into that process. So I look forward to hearing the noble Lord. The minister's response.
18:41
Lord Leong Portrait Lord Leong, Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Labour)
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My Lords, once again let me thank the noble Lord Lord Fox, for thank the noble Lord Lord Fox, for amendment 27 and 34 and the noble Lords, who is not in this place. Lord Hannett and Lord Sharpe for Lord Hannett and Lord Sharpe for amendments 28 and 29. Firstly, let me recognise the constructive spirit in which these amendments have been tabled and the shared objective of ensuring that Small Business Commissioner's new functions are timely, transparent and effective. I agree that payment disputes should be resolved as quickly and efficiently as possible, in line with the construction adjudication scheme.

We are considering whether a 20 day a 28 day time limit for the adjudicator to reach a decision extendable where necessary, would be appropriate. I believe that noble Lords would agree that this time it's sensible and reasonable. We will consult on this to ensure the final approach is informed by evidence and by stakeholder views. Time limits will be set out in regulations subject to Parliament's approval. This approach will give businesses confidence that payment disputes will be resolved quickly and efficiently, while maintaining flexibility to refine time limits in light of feedback and operational experience.

The government recognises the importance of transparency, and I appreciate the sentiment behind amendment 28. As a matter of principle, a small business should understand why the adjudicator has declined to adjudicate a dispute and why the commissioner has declined to adjudicate. However, there may be occasions when disclosing the details of a referral to a larger business could harm commercial relationships or be otherwise inappropriate. As such, we believe such obligation should be subject to further consultation and addressed through regulations regarding amendment 29.

I understand the desire for clarity on how the Commissioner will assess repeated poor payment practice, but this is precisely the kind of judgement that should be informed by real experience and evidence, and guided by statutory criteria, which the Commissioner must consider on a case by case basis. If we try to prescribe an arbitrary number for vastly different practices, we risk creating an inflexible model that fails in practice and undermines the commissioner's ability to act on resourcing.

I do hear the concerns raised by noble Lords. I wholeheartedly agree that the provisions in this Bill will only be effective if properly enforced, and that the resources available to the Small Business Commissioner are crucial to this aim. I want to reassure all noble Lords that the Office of Small Business Commissioner is already being resourced to implement, and that I am the Minister responsible for the Small Business Commissioner, and I will ensure that they have the proper resources and. I've recently also facilitated a meeting between the Commissioner and noble Lords to discuss preparation for the legislation coming into force.

I can confirm that the Commissioner's budget has already received an initial 30% boost this financial year, with recruitment underway for six new members of staff bringing the existing team to 20. This has already allowed the office to begin building its capability ahead of the new enforcement powers from the bill. In addition, we will undertake. We have undertaken a rigorous assessment and benchmarking exercise to assess future demand for adjudication, enforcement and investigation, and I can assure the noble Lord that I will ensure that he gets the data regarding the assessments that we have done.

The Department will provide further resources doubling the Commissioner's resource base in 2020 526 to ensure that the office delivery capability is ready on day one. They are also considering options for appointing third party adjudicators to provide further flexibility and capability. These will provide the Commissioner with a strong operating base and, together with ability to recover the cost of adjudications and investigations, ensure we have a funding model that is sustainable and flexible enough to manage demand.

I'm also happy to go further to provide noble Lords assurance on this. I'm willing to commit that before the new adjudication and investigation functions commence, the government will provide Parliament with a clear statement of implementation implementation readiness, including staffing systems, operational capability and arrangements for keeping resources under review. Resources will not be treated as a one off issue. We will keep the Commissioner's capable capacity under review as the regime settles, case loads become clearer and evidence emerges on the use of adjudication, investigations and enforcement powers.

The Commission's annual report will continue to provide transparency on activities, performance, staffing, funding and audited accounts. In addition, the government is prepared to provide further assurance to Parliament on implementation before the relevant new functions are brought into force. These are concrete evidence. Sorry. These are concrete commitments that show the government is already taking the necessary steps, so there is no need to include a separate budget publication requirement in the bill. I'll be happy to provide further updates ahead of commencement.

For these reasons, I respectfully ask the noble Lord to withdraw amendment 27 and not move the other amendments in the group.
18:47
Lord Fox Portrait Lord Fox (Liberal Democrat)
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I would like to thank the Minister wholeheartedly for for for Minister wholeheartedly for for for his response to both my amendments. The response to amendment 27 was probably more ambitious than than than I was proposing. So I'm very happy with that. And I think his response to amendment 34 and resources has been more than fulsome on that basis. I'm pleased to withdraw beg leave to withdraw amendment 27.

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Mr. Amendment be withdrawn. The amendment is by leave. Withdrawn. Amendment 28. Lord Lee of Hurley, Amendment 28. Lord Lee of Hurley, Lord Deighton not moved. And Lord Deighton not moved. And amendment 29 not moved. In clause 24, amendment 30.

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24, amendment 30. Lord Fox Lords, I rise to move amendment 30 and speak to amendment 30 and speak to amendments 31, 32, 43, 44 and 45. Which sounds daunting, but they're all the same amendment, and these amendments are in my name, and I'm happy to say that they've been countersigned by the noble Lord, the Minister as well. And in effect of these changes is to remove the requirement for the Small Business Commissioner to use UK turnover alone when making an adjudication.

And I thank very much the Minister for, for for his contribution to this. There may well be cases where indeed it's appropriate for only UK activity to be the basis for any fine. In fact, most cases that will be the case. But there may be others where a broader turnover is actually appropriate. For example, where a company's accounting practices effectively shrink the UK turnover in order to shrink a penalty. In these cases, we need to give the Small business Commissioner the power to prevent the avoidance through profit shifting and turnover shifting.

Now, in in committee, I use the example of the Digital Markets and Competition and Consumer Act 2024, which makes the same point and puts in place a similar, a different but otherwise solution. Now, by removing the UK from the description of how the UK, the Small Business Commissioner calculates any sanctions or giving that option to the Small Business Commissioner gives flexibility for the Commissioner to pitch the right sanction to an errant business and for that reason I beg leave to.

I beg to move. Amendment 30.
18:49
Lord Sharpe of Epsom Portrait Lord Sharpe of Epsom (Conservative)
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Amendment proposed clause 24. >> Amendment proposed clause 24. Page 37. Line 42. Leave out in the United Kingdom.

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Well, my Lords, as we come to the end of this Report stage, I once again like to place on record my thanks to noble Lords on all my thanks to noble Lords on all sides of the House for their engagement with the passage of this Bill. Now, up until this point, we've had a very chummy time and a lot of cosy consensus, so you'll be very pleased to know I intend to introduce a note of disagreement on this particular amendment. My Lords, I'll begin by stating that I don't disagree with the premise of amendment 30.

In the name of the noble Lord Lord Fox and the noble Lord, the Minister. Companies should ensure that they have good payment practices and that these are reported, and these should be incentivised where necessary. My Lords, I equally understand the reasoning behind giving the Small Business Commissioner the powers to both oversee and enforce the reporting of payment practices and performances. The office will have a closer knowledge of small business payment practices than regular departmental officials, and so it makes sense that they are given this responsibility.

So the issue, my Lords, is therefore not one of principle, one of proportion. Two other arms of the government have the power to find businesses based on global turnover rather than domestic turnover. They are the Competition and Markets Authority and the Information Commissioner's Office. My Lords, these bodies deal with some of the most important, wide reaching areas of our economy. The form with the upkeep of fair and competitive markets, and the latter with the protection of the public's private information. My Lords, these issues are far greater in scale and gravity than what clause 24 and the new section three A will give the SBC, the Small Business Commissioner powers over.

These powers are not even dealing with payment practices, but the reporting of payment practices. And yet the office will be able to find companies 1% without even the discretion to find less than 1% of global turnover. This, my Lords, to His Majesty's loyal opposition, seems disproportionate, to say the very least. We do not believe this is the right vehicle to address the subject of the profit shifting that the noble Lord Lord Fox mentioned. One of the key concerns that we've heard from stakeholders during the passage of this bill is that while they support maximum payment terms, there will be a transition period to implement to technology and payment systems, and this is particularly the case with large multinational corporations.

These companies have incredibly complex systems that organise payments across borders, time zones and legal frameworks. It is not outside the realm of possibility that a business such as, for example, Amazon has some teething problems and fails to accurately report payment practices and performance within the UK. The result would be that the Commissioner, based on a failure to report practices within the United Kingdom, would have the power to find Amazon based on their global turnover. That would equate to more than £700 million for a potential technological error or delay.

I don't think that power reflects the duty that we are dealing with. Lastly, my Lords, there is the question of incentives. The Small Business Commissioner unjustifiably prides itself on saving more money for the small businesses than it costs the taxpayer. But if value for money is a justification for the office's existence, then its incentive is to use its powers to raise money in order to continue its operation. My Lords, I'm not accusing the SBC of this. I'm simply reflecting upon the perverse incentives that occur when an arm of government relies on action to justify its continued existence.

Now, I don't think that given these natural incentives exist, that we should give any arm of the state the power to tax multinational businesses based on their global turnover for actions within the United Kingdom. We should especially reflect on this when we are not even discussing payment practices, but the reporting of payment practices. My Lords, we won't oppose this amendment, given that it is the support of the majority of the House, but I would like to place on record my and indeed our the.

His Majesty's loyal opposition concern about this measure. It would go some way to allaying my worries if the Minister could outline how many times a fine has been given under the existing section three, but I'm still concerned that this is a disproportionate step that places far too much power in the hands of,

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and ultimately unaccountable body. And I look forward to the name of the Lord. The minister's response. Hey! Yeah.

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Hey! Yeah. My Lord. Firstly, let me thank Lord Mott Lord Fox for his amendment regarding turnover and amendment regarding turnover and financial penalties. These amendments raise an important question about how turnover should be calculated for financial be calculated for financial penalties under the payment reporting regime. Following the an reporting regime. Following the an investigation by the SBC. And I'd like to thank noble Lord Fox for the constructive discussions we've had on this issue. The government agrees that this is an issue that merits proper debate.

We want penalties to be meaningful and capable of driving compliance, whilst ensuring the approach is proportionate, relevant and workable for businesses in scope. The government supports the aim of this amendment at this stage, to open up the debate on the appropriate basis for calculating turnover. However, I want to be clear that the government has not
18:54
Lord Leong Portrait Lord Leong, Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade) (Labour)
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reached a final view on the most appropriate approach. The government will want to engage with businesses, business representatives and other interested parties before determining how turnover should be determining how turnover should be calculated for these purposes, including whether it should be limited to UK turnover. Given that limited to UK turnover. Given that the Bill addresses UK payment practices or extended more widely, practices or extended more widely, further detail on how turnover is calculated will be provided in secondary legislation. That secondary legislation will be informed by a process of consultation to determine how turnover should be calculated.

Additionally, that secondary legislation, which will be debated in Parliament, will allow the final position to be properly tested. This approach will ensure the regime retains the flexibility required to operate effectively and proportionately on that basis. And once again, my thanks to noble Lord Fox for raising this important issue and for engaging with the government in a positive manner. The government supports amendments 30 to 32 and 43 to 44, to which I have added my name. My Lords, before I sit down, I just want to thank again all noble Lords, especially from the opposition benches, noble Lord Sharpe of Epsom, and noble Lord Hunt of Wirral and noble Lord Fox, for their very thoughtful and constructive engagement throughout the passage of this Bill.

And it just shows that we can get things done if we work collaboratively, effectively.

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I take it that amendment 30 is to be agreed. Can I have to be agreed. Can I have confirmation of that from Lord Fox that the noble Lord wishes to move that the noble Lord wishes to move that amendment? The question is that amendment 30 be agreed to. As that amendment 30 be agreed to. As many of you have that opinion will say content. To the contrary, not content. The contents have it. content. The contents have it. Amendments 31 and 32 moved formally Lord Fox.

The question is that amendments 31 and 32 be agreed to. En bloc as many as are of that opinion will say content. Of the contrary, not content. The contents have it. amendment 33. Lord Hunt not moved. Not moved. Amendment 34 Lord Fox not moved and 35 Lord Fox not moved. Amendment 36 Lord Leong moved formally. And sorry, I should also add amendments. 37, 38, 39, 40, 41 and 42 moved formally. En bloc. The question is that these amendments be agreed to.

En bloc as many as are of that opinion will say content to the contrary, not content. The contents of amendment. Amendment 43 Lord Fox moved formally. The question is that this amendment be agreed to. Together with amendments 44 and 45, the question is that these amendments be agreed to En bloc. As many as are of that opinion will say. Content to the contrary, not content. The contents have it in amendment 46. Lord Hunt not moved. Not moved. My Lords, I think it would be appropriate to take a short pause before next business.

In order for noble Lords who wish My Lords will now move to next business. Batteries placing on the market. Northern Ireland Regulations 2026. Baroness Hayman of Ullock.
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18:59
Baroness Hayman of Ullock Portrait Baroness Hayman of Ullock, The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Labour)
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regulation. This updated placing on the market requirements covering the market requirements covering design specifications for batteries and requirements relating to information and labelling. These information and labelling. These requirements designed to support environmental and safety performance of batteries, relate to carbon footprint, performance and durability. Recycled content and removability and Replaceability of removability and Replaceability of batteries from devices. The new EU regulation has also introduced specific safety requirements for stationary battery energy storage systems and updates the information requirements to include state of health and expected lifetime.

Finally, the EU regulation also introduces the digital battery, passport and supply chain due diligence policies for larger organisations. Previous requirements relating to the restriction of certain substances in batteries are carried forward. The EU Batteries Regulation also introduced conformity Assessment, where the CE mark is required to demonstrate compliance with the requirements that I have just listed. These requirements apply directly in Northern Ireland as in European Member States. They apply in Northern Ireland under the Windsor Framework as a regulation, the obligations within it apply directly without need for transposition.

They phase in meaning that some requirements are already in force and others are due to come into force on future dates. These changes have been introduced in light of the rapid growth in sectors such as electric vehicles, e-bikes, portable electronics and energy storage. Alongside the increasing volume and complexity of batteries that are now in circulation. The new EU regulation also makes changes to waste and extended producer responsibility requirements. Those matters are not covered by this instrument and I will come back to next steps there.

The instrument laid before the house, which is a reserved policy area, is the domestic legislation required to enable effective enforcement of these obligations. Implementing these measures helps Northern Ireland to maintain its dual market access. It does this by establishing a proportionate enforcement offences and penalties regime in Northern Ireland for the placing on the market requirements of the EU Batteries Regulation. The office for Product Safety and Standards enforces the existing placing on the market requirement across the UK, and will act as the market surveillance and enforcement authority for this instrument in Northern Ireland.

The SI also includes supplementary measures arising from the requirements related to conformity assessment. It amends the batteries and accumulators placing on the Market Regulations 2008 by revoking them in respect of Northern Ireland. To be clear, it does not introduce new policy objectives or regulatory standards beyond those arising from the EU batteries regulation. I will also set out timing regarding UK wide batteries regime to which this SI is linked. The EU batteries regulation required the penalty regime established by this SI to be in place by the 18th of August last year.

As I've already indicated, there are further parts of the EU batteries regulation that remain to be implemented in Northern Ireland. The UK has had an integrated UK wide approach to batteries and waste batteries for many years, and I want to be clear that we will take any steps necessary to continue to meet the government's commitment to protecting the UK's internal market. I recognise the concerns raised by the Lord McCrea in respect of the application of EU legislation in Northern Ireland under the Windsor Framework.

Indeed, I was in this place recently addressing another regret motion in relation to plant health regulations. The measures before us reflect necessary updates in a rapidly evolving sector that supports higher standards of battery safety, environmental performance and supply chain transparency. We believe these measures would deliver practical benefits across the whole United Kingdom, and that is why we will consult this autumn on an aligned regime in Great Britain that is consistent with the EU's 2023 matches regulation. This consultation will be UK wide and conducted with the Department of Agriculture, Environment and Rural Affairs in Northern Ireland and other devolved governments.

As a four nation approach. This approach will avoid duplicative administrative burdens by providing a unified framework across the UK and EU for batteries, and will also deliver against our environmental objectives. Battery manufacturing is a highly sophisticated global sector, and major manufacturers are already adjusting to the new standards by the EU, and a unified approach is therefore what businesses is asking for. The autumn consultation will seek views on both. Applying the placing on the market obligations in Great Britain, but also the waste and producer responsibility provisions which in doing so will complete the implementation of the EU Batteries Regulation in Northern Ireland.

It is our firm view that pursuing this approach provides the best outcome for the EU. I do welcome the collaborative approach taken in the development of this instrument, which has drawn constructively on expertise from industry and government departments. The enforcement provisions set out in this SI meaningfully strengthen the application of the EU batteries regulation in Northern Ireland, where it has been law since its publication in 2023. By improving compliance in key areas such as battery safety, hazardous substances and environmental performance, it is reasonable to expect positive environmental outcomes through reduced risk of unsafe or environmentally harmful batteries being placed on the market.

I am also reassured by the de minimis assessment undertaken in respect of this instrument, given that the associated costs are minimal and that the instrument introduces no contentious or disproportionate impacts, this approach seems to be both reasonable and appropriate. Of course, it is right that this House scrutinises delegated legislation carefully. I am satisfied this instrument falls within the scope of the Parent Act and represents an appropriate use of powers. It is

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for these reasons that I beg to move Lord Dear. The question is that this motion

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The question is that this motion be agreed to. Amendment Lord McCrea of Magherafelt and Cookstown. My right to.

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right to. Speak to the motion in my name. I will make four main points. First I will make four main points. First of all, these regulations provide a graphic demonstration of the humiliating nature of the Windsor
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Lord McCrea of Magherafelt and Cookstown Portrait Lord McCrea of Magherafelt and Cookstown (Democratic Unionist Party)
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humiliating nature of the Windsor Framework because the substantive legislation which they enforce is EU regulation. EU 2023. Stroke. 1542. Now this legislation took effect in Northern Ireland automatically on the 17th of August 2023 by means of dynamic aligning the EU, the UK with respect to Northern Ireland, with the EU effectively treating part of the United Kingdom as an EU colony. Now, Northern Ireland legislators were not even briefed on this matter. The first we learn of it was three years later, reading the explanatory notes to the regulations before us today, whose purpose it is to serve the EU and their legislation by providing a means for its enforcement.

Secondly, the enforcement that these regulations provide is deeply problematic. Speaking when these regulations were debated in another place in the 8th of July, the Minister stated, and I quote, offences are put in one of three penalty groups. Summary only offences such as those subject to a fine which can be unlimited. Either way of cancers or imprisonment for up to 12 months and or an unlimited fine for the most serious indictable only offences. Offences include failure to keep appropriate due diligence, documentation, failure to of a supplier of battery cells and modules to provide documentation to manufacturers.

Failure by an importer to comply with certain battery safety regulated obligations. Those fall into three penalty groups one, two and three, respectively. My Lords, let's just take a step back for a moment. If the norm of the 18th century was such that there could be no taxation without representation, then plainly we can. We cannot contemplate fines and imprisonment in the 21st century. Further, to contravention of contravention of laws. Unless the citizens in question were represented in the making of those laws that they have broken.

Now the EU is expecting the United Kingdom government to not only subject part of its self to EU law, but it expects the United Kingdom to introduce a legislative mechanism whereby their law can be imposed with sanctions, depriving UK citizens of money in the form of fines or potentially their liberty through imprisonment. This is constitutionally, completely absurd and absolutely unacceptable. Thirdly, we need to confront how these regulations are implicated in destroying the United Kingdom internal market for goods by providing enforcement.

The regulation before us today bring. EU regulation 2023 1542 into full effect, creating a new legal market for batteries as a matter of practice, subject to different rules from the rest of the United Kingdom. Now the regulations are called the placing on the Market regulations, where the market in question is the EU internal market, not a United Kingdom internal market, which necessarily becomes by default a GB internal market for goods for these purposes. Now in this, the principal economic challenges for Northern Ireland are this if we manufacture our own batteries, we will not do so on a level playing field with the rest of the United Kingdom because we will be subject to EU regulations that do not apply to Great Britain.

If, as a small and until recently completed integrated part of the United Kingdom economy, we get most of our batteries from GB. We will not be able to do so going forward unless GB companies a provide batteries to the quality of EU law and b also pay to get additional Northern Ireland market marking. Will they do this for a tiny market? This necessarily represents or presents a very real supply chain concern. Fourthly, the explanatory memorandum attending these regulations is unlike the memoranda accompanying many other regulations, forced and forged in deference to the Windsor Framework.

Often, they state that the government is planning to. To prevent divergence between Great Britain and Northern Ireland by bringing GB into line with Northern Ireland and thus with the EU. However, the explanatory memorandum accompanying these regulations do no such thing. This
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