Digital Markets, Competition and Consumers Act 2024 (Consequential Amendments) Regulations 2025

Lord Fox Excerpts

Monday 17th March 2025 Grand Committee

[The Minister of State, Department for Business and Trade and Treasury (Baroness Gustafsson) (Lab)]

My Lords, this instrument was laid before the House on 18 December 2024 and relates to the Digital Markets, Competition and Consumers Act 2024—the DMCC Act—which received Royal Assent in May 2024. The instrument makes amendments to legislation in consequence of Parts 3 and 4, and Chapter 2 of Part 5, of the Act.

Part 3 updates and strengthens enforcement of consumer protection law. Part 4 updates the legislative framework of consumer protections against unfair trading, introduces substantive new consumer rights in relation to subscriptions contracts and consumer savings schemes, and introduces reforms to alternative dispute resolution. Chapter 2 of Part 5 allows UK regulators to provide investigative assistance to overseas regulators in relation to competition, consumer protection and digital markets.

Many noble Lords contributed to this legislation through their scrutiny of it during its parliamentary passage, but I particularly thank the noble Lord, Lord Tyrie, who made the recommendations that led to the granting of the CMA’s new enforcement powers, and the noble Lord, Lord Offord of Garvel, who took the Bill, as it was then, through this House.

To ensure the provisions of the Act take effect as Parliament intended, it is necessary to make consequential amendments to the enactments listed in the Schedule to the regulations. These are relatively minor changes that do not materially alter policy but are needed to ensure the seamless functioning of consumer protection law and enforcement.

The amendments within the instrument fall into three broad categories. The first extends the application of legislative provisions that permit public authorities to share certain information with consumer enforcers. At present, persons or bodies that gather information using powers under certain statutes may share that information to facilitate consumer enforcement, consumer protection or overseas investigatory assistance, in certain circumstances.

This sharing is permitted by sections of the relevant statutes, which I will refer to as information gateways. These information gateways list the consumer protection legislation in relation to which information may be shared. For example, where Ofcom gathers information using powers in the Telecommunications Act 1984, the information gateway in Section 101 of that Act permits it to share that information with the Competition and Markets Authority for the purpose of enforcement of, among other things, the Consumer Protection from Unfair Trading Regulations 2008.

As I have already said, the DMCC Act introduces a new consumer enforcement framework, new and updated consumer protections, and new provisions on investigative assistance to overseas regulators. It is therefore necessary to add references to these provisions to the information gateways in various statutes. Were these provisions not to be updated, the current approach, whereby public authorities may share information gathered under statutory powers to facilitate consumer enforcement, consumer protection or overseas investigatory assistance, would be unavailable. This would compromise consumer protection, which could lead to consumer harm.

The second group of amendments is to Schedule 5 to the Consumer Rights Act 2015. These amendments ensure the CMA can use relevant investigatory powers in respect of its new direct enforcement powers. This will enable the CMA to monitor compliance with its direct enforcement notices as it currently can in relation to court enforcement orders. For example, at present, the CMA can require a person to provide information for the purposes of ascertaining whether a person is complying with a court enforcement order against them. This enables the CMA to ensure the enforcement orders are being complied with, and therefore that enforcement proceedings are having the desired effect. Under the DMCC Act, the CMA will also be able to use investigatory powers to monitor compliance with certain of its direct enforcement functions.

The DMCC Act introduces a new power for the CMA to give final enforcement notices for failing to respond to an information notice alongside its other direct enforcement powers. The amendments in these regulations are necessary to ensure that the CMA is empowered to monitor compliance with this new power in the same way as in relation to the rest of the court-based and direct enforcement regime.

Finally, this instrument updates references to consumer laws that have been repealed and replaced by the Act with references to the relevant new provisions introduced. These amendments do not materially change the policy or effect of the underlying law; they simply keep the statute book up to date in the usual way. As I hope is clear from my remarks, the intention of these regulations is to update and maintain the frameworks that underpin consumer law and its enforcement to ensure that the DMCC’s consumer reforms can be introduced seamlessly, with no inadvertent detriment to consumers.

I invite noble Lords to support the passage of this instrument. I commend these regulations to the Committee.

[Lord Fox (LD)]

My Lords, the shocking thing is that it was only in May of last year that we were working on the then DMCC Bill. It feels, frankly, a great deal longer ago; an awful lot has happened and a lot has changed. Some of the substantive aspects of what I will ask the Minister include getting some sense of how the tone has changed in our relationship with digital issues; and a question to get some sense of how the Government see things now, rather than how the previous Government saw things when we initially debated some of these issues.

As the Minister ably and clearly set out, this statutory instrument deals with three areas: consumer protection and law enforcement; unfair commercial practice and consumer rights; and international co-operation. On the latter, the measures facilitate Chapter 2 of Part 5 of the Act, which allows UK regulators to assist overseas regulators in matters related to competition, consumer protection and digital markets. This involves updating information gateways to permit the sharing of relevant information for investigative purposes.

That is really important when we look both to the west and to the east—that is, to the United States and to the European Union—because that bridge between our three data regimes is vital to the commercial future of this country. Although, when we were discussing the then Bill, there was relative harmony between the European Union and the United States in establishing their own data bridge, which underpins many of the issues that this part of the statutory instrument could change, I would suggest that that relationship is at best taut, if not snapped. We have yet to see the consequences of that snapping but, at some point, it will happen. Our relationship is almost literally sitting in the middle: we have an equivalence relationship with the European Union, and our data relationship with the United States rides on the back of the European Union’s data bridge. So a huge political issue is welling up here. I would like the Minister to tell your Lordships that the department is aware of it and is doing work; there is as much diplomatic work as data protection work to be done here because, in the end, it will be crucial to our service industries that we get this right, and calling it is going to be no easy measure. That is my first point.

Secondly, the Minister will be aware that there have been discussions about the Act’s scope—or, indeed, the lack of it. Some issues, such as secondary ticketing and greenwashing, have not been addressed by the Act; that is still seen as a limitation by stakeholders. As the Minister knows, a secondary ticketing review is going on. It would be useful if she could update your Lordships on where we are with that and when we might see some resolution. Also, how might any recommendations of that review find their way into statute, given that the Bill has already passed?

There is a general issue I would like to address before I address a specific one. We have heard a lot in the last week or two about bonfires of quangos. We have also seen a regime change in the CMA. I think it would be helpful for the Minister to set out that we will not see a stepping back by the CMA in doing its job, which is enabled through this Act. In her speech, she made clear the central role of the CMA, but it has to have the support of the Government to go after these sorts of things. We need to know that the Government still support the CMA in these kinds of activities.

One further point is that the noble Baroness, Lady Stowell of Beeston, asked His Majesty’s Government

“when they plan to make regulations under Schedule 7 to the Digital Markets, Competition and Consumers Act 2024 to provide limited exemptions for permissible investment funds associated with foreign powers”,

such as sovereign wealth or public sector pension funds, to invest in UK newspapers and news magazines. This was an important point, which has been debated at length. Section 130 of the DMCC Act introduced Schedule 7, which makes provisions for the purposes of preventing foreign powers from gaining control or influence over newspaper enterprises. There is more that I will not go into, but there is also a debate around particular exemptions that might or might not exist—a state-owned investor exemption and a diversified business exemption.

All of these are still in the wash. The UK Government announced plans to commence parts of the Act, including those related to competition reforms, in December 2024 or January 2025. A technical consultation, which included draft secondary legislation that also debated the threshold points I just mentioned, was launched in mid-2024 to gather feedback before the implementation of these additional statutory instruments. These are expected to be laid before Parliament for scrutiny before entering into force. However, the Library tells us that this has not yet happened, nor has DCMS published a formal response to that consultation. It is high time that we knew where we are on this and that these statutory instruments see the light of day.

There is an ominous feeling around this. Look at the Answer that the noble Baroness, Lady Twycross, gave to an Oral Question.

“On the SI to which the noble Baroness referred”—


this is the one that the noble Baroness, Lady Stowell, raised—

“there has been a general election in the interim since the legislation was passed by the previous Government. Ministers recognise the high importance of foreign states not being allowed to influence the policy of UK newspapers, but there should be a balance to encourage investment into the press sector. Therefore, we are carefully considering a response to the consultation. We hope to publish a response very soon”.—[Official Report, 5/3/25; col. 251.]

That is an ominous response given the debate that we had in May last year. I would like the Minister to put it into context.

--- Later in debate ---

[The Deputy Chairman of Committees (Lord Ashton of Hyde) (Non-Afl)]

My Lords, we will resume. By popular request, the noble Lord, Lord Fox, is going to quickly repeat what he said as we adjourned for a Division in the House.

[Lord Fox (LD)]

Lest you forget, my Lords. The rest of the Minister’s response to the question from the noble Baroness, Lady Stowell, was:

“Ministers recognise the high importance of foreign states not being allowed to influence the policy of UK newspapers, but there should be a balance to encourage investment into the press sector. Therefore, we are carefully considering a response to the consultation. We hope to publish a response very soon and lay the SI shortly after that”.—[Official Report, 5/3/25; col. 251.]


We need to be reassured that this will not see a watering down of the intentions of the original Act.

[Viscount Camrose (Con)]

My Lords, I thank the Minister for introducing this SI and the noble Lord, Lord Fox, for his characteristically thought-provoking remarks, particularly those on the dynamics of data bridges between the EU and the US, which were very pertinent.

The measures in this SI are intended to facilitate the effective implementation of the DMCC Act 2024. His Majesty’s Opposition do not object to the instrument in principle, given that it implements a Bill introduced under the last Government, but we still welcome the opportunity to scrutinise its provisions carefully to ensure that they deliver the outcomes intended. In that spirit, let us consider the impact of these measures.

This SI makes amendments to existing legislation to facilitate the implementation of the DMCC Act, whose purpose is to enhance consumer protections and improve their enforcement. Part 3 strengthens the powers of regulators to investigate and enforce consumer protection laws and Part 4 introduces stronger safeguards for consumers, particularly regarding unfair commercial practices, subscription contracts and alternative dispute resolution. Chapter 2 of Part 5 enables UK regulators to assist their international counterparts in matters related to competition and consumer protection.

The amendments in this SI update existing consumer law frameworks to align with the changes introduced by the DMCC Act. These provisions enable the necessary disclosure of information for enforcement purposes and ensure consistent application of the statutory provisions across different regulatory contexts. This is particularly important, as the updated consumer protection measures require regulators to access relevant information in order effectively to carry out their functions.

The SI also ensures the continuity of consumer policy during the transition to the new framework. While Part 4 of the Act will replace existing regulations, transitional provisions are in place to allow for the continued protection of consumers’ rights to redress for unfair trading until the new regulations are fully implemented. The instrument also updates the Consumer Rights Act 2015 and the Consumer Protection from Unfair Trading Regulations 2008 to facilitate a smooth transition to the new framework and ensure that consumers’ protections remain intact during this period.

While we on these Benches broadly support the measures, I have a few questions to clarify some important aspects. First, the instrument extends the ability of regulators and public authorities to disclose information to consumer enforcers, enabling them to more effectively investigate and enforce breaches of consumer protection laws. This includes amendments to various Acts, including the Water Resources Act 1991, to allow such disclosures. Can the Minister give an overview of the safeguards in place to ensure that information shared between bodies remains secure and is handled appropriately, particularly with regard to sensitive business or personal information? While information sharing is crucial for effective enforcement, it is equally important that the privacy and confidentiality of individuals and businesses are respected.

Secondly, the instrument seeks to ensure that the protections in Part 4 of the DMCC Act, particularly around subscription contracts, prepayments to savings schemes and unfair commercial practices, are properly enforced. Subscription traps have been a long-standing concern and, while the DMCC Act aims to address this, we must consider whether the proposed changes are sufficient to prevent such practices. How will the Minister ensure that the protections in place will be fully effective in addressing subscription traps? Can she assure us that businesses will be held to account under the new regime in a way that is both transparent and fair?

Finally, this instrument updates various references across the statute book to ensure that outdated provisions are replaced with those in the DMCC Act. This helps maintain the clarity and consistency of the legal framework. However, can the Minister confirm that relevant stakeholders, including regulators and businesses, have been adequately consulted on and prepared for the transition to these new rules, especially where they replace long-standing regulations?

I acknowledge the positive steps taken by this SI, but we must ensure collectively that they meet their three goals: to protect consumers, to promote fair competition and to ensure the right balance between privacy and transparency. I look forward to the Minister’s response and to further assurances that will aid the successful implementation of these important reforms.

National Minimum Wage (Amendment) Regulations 2025

Lord Fox Excerpts

Monday 17th March 2025 Grand Committee

[Lord Jones (Lab)]

My Lords, it is instructive to follow the noble Lord, Lord Sikka, who has a professorial exactitude that excites considerable interest in someone such as me. I thank the Minister for the precision, cogency and persuasiveness of her introduction. I rise on the principle that the Executive should be challenged and questioned. That is what a Parliament is for, and the Westminster Parliament will always acknowledge the need to challenge the Executive.

I greatly welcome the regulations. Anyone who offers a 6% or more increase must be acknowledged and thanked. I must say that the complexity of the regulations is considerable, and the weight of the document is evidence of that. Each year these regulations present themselves, but the data changes. I am grateful for the helpfulness of the Explanatory Memorandum. I know that a lot of work goes into the presentation of it and the regulations by the Minister’s departmental officials.

Can the Minister indicate how many people in Wales are on the national minimum wage? Is there a figure for the number of apprentices in Wales on the national minimum wage?

There is a need to consider the context to these regulations. The Explanatory Memorandum says that the legislation went forward and got parliamentary approval in 1998. I was present in the other place Her Majesty’s Government made those proposals, and I recollect the intensity of the determination of Prime Minister Blair and Chancellor of the Exchequer Brown. But we also experienced the angry and persistent opposition to these proposals in the other place. There was a considerable amount of anger, but now everyone would agree, I think, that it was a measure of social justice that was overdue, bearing in mind that unemployment was considerably high in the 1980s—indeed, there was mass unemployment. The memory of those tumultuous times enabled the Opposition of the day to include a national minimum wage in their manifesto and, when elected in 1997, to proceed to organise legislation.

I would like to point to paragraph 5.2 of the Explanatory Memorandum. In reading it, I acknowledge that this is a noble objective. It says:

“The Government has set a policy aim to deliver a genuine living wage for every adult worker, and the increases to the rates this year are intended to make progress towards that, both by increasing the headline NLW rate and narrowing the gap between the 18-20 NMW rate and the full adult rate”.


That has to be really good news and it deserves commendation. It is also worthwhile indicating that in paragraph 9.2 there is a reference to employers:

“These costs to employers represent a transfer to low-paid workers, and include the estimated cost on employers in the public sector. Over 3 million workers are estimated to receive a direct pay rise due to the increase to the NMW and NLW in April 2025”.


These regulations must be welcomed, and the Minister commended for her introduction.

[Lord Fox (LD)]

My Lords, we have heard two spirited supporters of this statutory instrument. I will add my spirits to the support of these regulations.

As the noble Lord, Lord Sikka, observed, many millions of workers have suffered a severe fallback in their living conditions as a result of a variety of measures, not least inflation, energy costs and the like. This has happened to a great degree over the past few years. Therefore, to some degree, this instrument is getting them back to a place they have slipped from. It is debatable whether it is protecting millions of workers, as the noble Baroness said, or helping ameliorate some of the problems they have. On that basis, we should be welcoming it.

In her speech, the Minister talked about the fair work agency, which will be enforcing this. It would be useful for us to find out what will be different. What will the fair work agency be doing that has not been done before? Quite clearly, this provision has been on the statute before and, as the noble Lord, Lord Sikka, pointed out, there have been many businesses that do not uphold it. How will the fair work agency be any different? What will it be doing to achieve that?

We have to put this into context. The noble Lord, Lord Jones, spoke about the aim to create a genuine living wage for everyone. To do that, we have to have businesses that are profitable and workers that have the skills to earn those wages. This measure cannot be taken in isolation. For business, there is not just this instrument, which I think most good businesses will welcome. Most good businesses are paying more than these wages already, but the cumulative effect on our businesses is already rolling up. It is the perception of that roll up that is causing the problems for the Chancellor at the moment, with very low growth and investment falling back.

I think we all welcome this measure but then we have the employers’ national insurance contribution, which we do not welcome. The noble Lord, Lord Sharpe, and I will be in the same camp on this. There is then the non-domestic rate rises for businesses in the retail, hospitality and leisure sector, which are the businesses most likely to be paying the minimum wage. They will have a huge increase in their rates, notwithstanding the small variations that can happen. The loss of the Covid reliefs will leave them paying two or three times the non-domestic rate that they are currently pay. These are the businesses that will be laying off workers because they cannot afford to pay them even the current minimum wage. There is a big discontinuity in government policy at this point.

Finally, the noble Baroness mentioned the Employment Rights Bill. There are good and bad things in that Bill; there are puts and takes. Contrary to what the noble Lord, Lord Jones, said, only four pages of these documents are the statutory instrument. The rest is an Explanatory Memorandum, which is an example of what we want from those and from impact assessments. It is a comprehensive and well-prepared document. I hope the noble Baroness will pass that on to all her colleagues.

On page 13, the impact assessment says that the aim—the Government’s preferred option—has been to minimise “administrative and compliance costs”. When we come to the Employment Rights Bill, the minimising of administration and compliance costs should be their preferred option for those rights. The little work I have already done on that Bill indicates that it is complicating things and making things harder for businesses to comply. Even where we agree with the measures in that Bill, the legalistic approach through which they will be brought about will not meet the Government’s objective, which, quite rightly, was applied to this legislation.

--- Later in debate ---

[Baroness Gustafsson (Lab)]

Before the Division, I was about to turn to the observations of the noble Lord, Lord Sharpe, the first of which was about the impact on SMEs and businesses. I remind noble Lords that we have accepted in full the recommendations of the Low Pay Commission. We are confident that these increases will help millions of families across the country without placing excessive burdens on businesses. The remit of the LPC asks it to take into account the impact on businesses, including SMEs, competitiveness, the labour market and the wider economy. The LPC draws on extensive labour market and pay analysis and stakeholder evidence when recommending rates.

Regarding support for businesses as they adjust to these new rates, the 2025 national minimum wage and NLW rates were announced in the Autumn Budget 2024, more than five months before the rates came into effect. These timelines are consistent with previous years, providing businesses with the maximum adjustment time. Similar to previous years, the Government will undertake an extensive communications campaign to increase awareness and understanding of the changes to the rates coming into effect from 1 April 2025 and to ensure that businesses and workers are prepared. The communication campaign is expected to include targeted activities specifically to support SMEs. The Government also publish extensive guidance online to support businesses in understanding the legislation and the steps required to comply.

This Government are proud to be delivering the biggest upgrade to the rights of working people in decades. An ambitious minimum wage, backed by robust enforcement, will always be a cornerstone of a Labour Government’s employment rights framework, and we are grateful for cross-party support on this vital measure. As noted, the Government’s impact assessment, which was published alongside this legislation, estimates a direct pay rise for more than 3 million people, covering all the nations and regions of the UK and every sector of employment. It is worth repeating that a full-time worker on the national living wage will receive a gross annual pay rise on 1 April of £1,400, while an 18 to 20 year-old working full time on the national minimum wage will benefit to the tune of £2,500 a year.

I reiterate the Government’s thanks to the noble Baroness, Lady Stroud, and the Low Pay Commission. Once a new remit is issued to the LPC, we will look forward to hearing its next recommendations later this year as we continue our path towards a genuine living wage for all adults. I commend these regulations to the Committee.

[Lord Fox (LD)]

May I just take the Minister back to before the Division, when we were starting to talk about the fair work agency? Either she has nothing more to tell us or it somehow got lost in the wash. Her response was somewhat thematic but really short on process. It is not clear to me how the fair work agency will be juxtaposed with other enforcement activities. In her answer to the noble Lord, Lord Sikka, the Minister talked about the role of HMRC. Will HMRC no longer have that role? If not, will the fair work agency have access to the data that HMRC has in order to make its prosecutions? That is just one of the outstanding queries about how this new agency will operate in the context of enforcing this important change.

[Baroness Gustafsson (Lab)]

I thank the noble Lord. I talked about the additional rights and enforcing the wider roles and rules of the domestic agency, but on how that will be impacted operationally, as well as the interface with HMRC, I will write to the noble Lord, Lord Fox, with some details on exactly how that will be undertaken.

Capital Investment and Share Ownership

Lord Fox Excerpts

Thursday 13th March 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. As I say, the Government will publish a cross-cutting 10-year strategy for the UK’s social, economic and housing infrastructure in June, alongside the spending review. It will help to drive growth, deliver net zero and support improved public services by providing more coherence across different types of infrastructure than has been the case in the past. Of course, I am more than happy to meet my noble friend and the group he mentioned.

[Lord Fox (LD)]

My Lords, some public/private partnerships have worked very well. The contract for difference system has been very good at getting a huge amount of private sector investment into the offshore wind sector. Others have proved far less successful. For example, there have been crippling costs for schools that have had long-term, low-quality, high-cost maintenance programmes. It would be helpful if the Minister could tell your Lordships’ House how the Treasury is learning from this. How is it involving the private sector in developing the right risk and reward structures for the right projects? How is it involving local authorities, which often end up picking up the cost of these public/private partnerships

[Lord Livermore (Lab)]

The noble Lord is absolutely right in much of what he says. The private finance initiative was a specific public/private partnership model that was developed 20 years ago. The Government are actively managing the legacy PFI portfolio and learning lessons from that. The Infrastructure and Projects Authority believes that there is an opportunity for the public and private sectors to reset relationships, improve performance and deliver high-quality public facilities and services. Of course, lessons have been learned from the past. On 24 March the National Audit Office will publish a report called:

“Lessons learned: Private finance for infrastructure”.

Growing the UK Economy

Lord Fox Excerpts

Monday 3rd February 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, the Government have told us that growth is their number one mission. That is the promise they have repeated again and again, and, given the difficult circumstances the country faces, that is sensible. That being the case, I am afraid that the Government’s statements—both that of the Chief Secretary to the Treasury to Parliament and the speech given by the Chancellor—do not measure up to the scale of what is required.

Above all, we need a recognition that the first steps of this Government—spreading pessimism; rewarding recalcitrant unions with large pay increases without them being tied to productivity increases; increasing stifling regulation, particularly on employment and renting; and increasing taxes—are precisely what should be avoided. Instead, we need an optimistic mindset—seizing the issue, and shaking up those who are not contributing and could do more—and a determination to make real progress, not a flabby wish list with no indication of how it will be achieved in practice.

Last week, Lloyds Bank announced 1,600 job cuts after the CBI warned of a “significant fall” in business activity in the private sector, and the normally robust supermarkets announced large job losses. This is before we start to feel the effects of the Government’s most burdensome measures, which come into force in April. Businesses are fearful, and consumers are showing caution in case they lose their jobs or face price rises that affect their families.

That does not mean to say the Government’s proposals are not welcome, up to a point, if they contribute to stability and growth as we hope. The expansion of Heathrow seems to be central to the Government’s plans to “unlock further growth”, but this will take well over a decade to come to fruition and seems to be highly contentious in the Cabinet. Will the present proposal outlive the Chancellor? It seems doubtful.

The Chancellor highlighted the importance of the life sciences sector and referenced AstraZeneca. It must have been embarrassing for the Government to hear of its decision not to go ahead with the much-needed new vaccine manufacturing plant in Speke—a £450 billion investment. I know that the value for money rules are not straightforward, but could matters not have been managed to secure a better outcome?

Having studied the discussion in the other place, I would be interested to know more about how the growth package will help Northern Ireland and how the Office for Investment will provide a line of sight to opportunities across the country.

We agree with the Chancellor that we must focus on removing barriers to growth, and that that means cutting regulation. It also means reversing the way in which the public sector has started to crowd out the more productive private sector since its necessary expansion to a wartime footing during Covid, yet the Government seem determined to do the opposite. Can the Minister explain what assessment the Government have made of the impact of their extra regulations on economic growth?

I am particularly concerned about energy. History shows that cheap energy is vital to growth. Our businesses in the UK already have to cope with the highest energy prices in the developed world, and that is set to get only worse. That is terrible news for industries such as steel, cement and ceramics. I am sure the Government will come to regret their decision not to support the Rosebank field and the punitive tax on oil and gas, alongside the delays in nuclear rollout and grid connections. I would not want to be the Energy Minister when the lights start to go out.

This is not a debate about welfare, but it is clear that more needs to be done to get people off welfare and into work as part of the growth mission.

Perhaps I could end on some positives. I am glad to see the plans for new investment in reservoirs. Successive Governments have been slow to meet that need. The Thames Tideway tunnel has been an early success in the water area, on time and largely on budget, in an impressive partnership with the private sector.

The Government are right to press ahead with more housing and to lift some of the regulatory constraints, although they should be doing more in the London area, where the pressure of population is worst. I am particularly pleased to see the new focus on building around railway stations, a recommendation of the Meeting Housing Demand report by the Lords Built Environment Committee, which I chaired at the time. How do the Government propose to report progress in this area?

[Lord Fox (LD)]

My Lords, I thank the Minister for sharing the Statement.

In a Janus-like switch from the gloomiest person in Whitehall, the Chancellor was all smiles last week. To cap that change in mood, she gave her much-heralded growth speech. The most notable feature, as far as I was concerned, was what was not in the speech.

We all know that committing the UK to a genuinely closer and more efficient trading relationship with the EU would be the quickest and most effective way of driving growth. That is why the Liberal Democrats have suggested a customs union as the most significant route to growth. If the Government do not believe us, they should commission the Office for Budget Responsibility to analyse the impact that a customs union with the EU would have on the economy and public finances, and then we could discuss the numbers.

Instead, the Statement was, in essence, a list of projects—some of them interesting, some of them less so. I believe they were intended to communicate as much a mood as actual projects. To cap the message was an exclamation mark: the announcement on Heathrow. I suppose the point of that was to suggest that the Chancellor and the PM were such growth ultras that they would even allow Heathrow an extra runway. Even though that is patently the wrong thing to do, seemingly the Chancellor was using Heathrow as a badge of her serious intent on growth. However, as we discussed just now in the previous Question, it is so far into the distance that it is growth window dressing. The numbers that are used are highly selective, and the estimated timings hopelessly defy reality when it comes to projects of that scale.

I think it was the former Chancellor George Osborne who coined the phrase “shovel-ready”, implying that some projects could start immediately. This is rarely the case, so it would be good to get an idea of the start time for some of the projects that the Chancellor listed. For example, when will we get the announcements on Gatwick and Luton, and how shovel-ready are they? When does the Minister expect those expansions to have any effect on our economy? Similarly, the suggestions that talks may be reopened regarding Doncaster Sheffield Airport are welcome, but is that idea backed by any central government investment or is it just talks with cash-strapped local authorities?

With such a heavy emphasis on air travel in the Statement, it was inevitable that, by way of some sort of offset, the Chancellor would talk about sustainable aviation fuel. Can the Minister tell your Lordships’ House the Treasury’s estimate for what the percentage and volume of SAF used for air travel departing the UK will be by 2030? How effective will its implementation be?

Finally, on the Oxford-Cambridge growth corridor, I can understand how some would see this as a great idea, but how will the idea be made flesh? The noble Lord, Lord Vallance, is to be the champion, but what is he championing? Your Lordships will be aware that the journey between the two university sites passes through many local authorities. Each, I am sure, will have their own idea and vision of what this corridor would or could be. Will the ministerial champion have any powers to compel a joined-up plan? Will he have any money to cajole authorities to bend to his will, or is this corridor a possible railway link for some time in the future, with a few road works?

Meanwhile, the bird has flown. As we just heard, AstraZeneca, Britain’s biggest public company, has pulled out of its proposed £450 million investment in a new vaccines plant, reportedly after “protracted discussions” with the Government. It is now no longer pursuing its plan for Speke. The implication is that the Government not only reduced the money on the table but did so very slowly. I do not want to hear from the Minister that the previous Government had not funded the offer. We know that they did not fund the offer; they funded virtually none of it. What I want to know is what thinking in the Treasury stopped the present Government funding this project? While having a Chancellor announcing airport expansions might make the odd headline, what delivers an effective message to future investors in this country is an announcement of the start-up of a project such as that.

As a result of this failure, can the Minister tell your Lordships’ House that he now recognises that it is the job of politicians much more positively to drive negotiations such as those? It is politicians who have to step in and remove administrative barriers, and it is up to them to make projects like this happen.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, I am grateful to the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Fox, for their comments and questions. As noble Lords will know, and as the Chancellor reaffirmed in her speech last week, growth is the number one mission of this Government. Without growth, we cannot cut hospital waiting lists, put more police on the streets or improve the lives of working people.

The noble Baroness, Lady Neville-Rolfe, spoke about our growth mission. As she knows, there was no bigger failure of the previous Government than their failure on growth. With their austerity, their disastrous Brexit deal and their Liz Truss mini-Budget, the combined effect was devastating. Had the economy grown by the average of other OECD countries over the past 14 years, it would be more than £150 billion larger today. We did not hear much humility for that record from the noble Baroness, and there has still been no apology for it to the British people.

As the Chancellor said last week, low growth is not our destiny, but growth will not come without a fight. While this country has incredible potential, the structural problems in our economy run deep; the low growth of the past 14 years cannot be turned around overnight.

The strategy that this Government have consistently set out is to grow the supply side of our economy, recognising that, first and foremost, it is businesses, investors and entrepreneurs that drive economic growth, alongside a Government who systematically remove the barriers that they face. Our strategy is based on three elements: stability, which is the basic condition for secure growth; reform, which makes it easier for businesses to trade, raise finance and build; and investment, the lifeblood of economic growth.

On stability, the noble Baroness, Lady Neville-Rolfe, spoke about the Budget. It was this Government’s duty in October last year to fix the foundations of the economy and repair the £22 billion black hole in the public finances that we inherited. We have always been clear that there are costs to responsibility—the increase in employers’ national insurance contributions will have consequences for businesses and beyond—but the costs of irresponsibility would have been far greater. I think the noble Baroness knows that, which is why we have still heard no alternative put forward by the Conservative Party: no alternative for dealing with the challenges we face, no alternative for restoring economic stability and, therefore, no plan for driving economic growth.

The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Fox, both asked about AstraZeneca. Government funding must demonstrate value for the taxpayer; a change in the investment proposition by AstraZeneca led to a reduced government grant offer being put forward. We remain closely engaged, though, with AstraZeneca on work to develop our new industrial strategy and our thriving life sciences sector, which is worth £108 billion to the economy and provides more than 300,000 highly skilled jobs across the country.

The noble Baroness, Lady Neville-Rolfe, asked about job figures. The OBR forecasts that, over the course of this Parliament, employment will rise and unemployment will fall. Our announcement last week about the third runway at Heathrow could create 100,000 new jobs. The investment zone that we announced in Wrexham and Flintshire with JCB and Airbus could create 6,000 new jobs and the investment by Prologis at East Midlands Airport 2,000 jobs. There are plenty of reasons to be optimistic about the ability of our economy to grow and to create jobs.

The noble Baroness also spoke about business sentiment. In the Budget, we capped the rate of corporation tax and extended capital allowances for the duration of this Parliament. I hope that she will have seen the reaction of business leaders to the Chancellor’s speech last week. A business survey, which came out straight after the speech, suggested that two-thirds of businesses now feel more confident about our country’s growth prospects because of what the Chancellor announced. Rain Newton-Smith of the CBI said that businesses will welcome the Chancellor

“grasping decisions that have sat on the desk of government for too long”,

showing that the Government are serious about growth and prepared to take the tough decisions necessary. Shevaun Haviland of the BCC said that

“these proposals can light the blue touchpaper to fire up the UK economy”,

and Tina McKenzie of the FSB said:

“The positive energy in today’s speech … has our backing”.


The noble Baroness spoke about an optimistic mindset; I hope that she will respond by showing some of that same positive energy when it comes to the country’s and our economy’s prospects.

The second element of our strategy is reform. The noble Baroness, Lady Neville-Rolfe, spoke about welfare reform. We published our Get Britain Working White Paper at the time of the Budget to begin to tackle the unacceptable levels of inactivity that we inherited. We will publish a further welfare reform Green Paper this spring to begin to correct some of the incentives in the system.

The noble Lord, Lord Fox, asked about reform of our relationship with the EU. I know that he and I agree very much in our analysis of Brexit, and on the fact that the previous Government’s disastrous Brexit deal permanently reduced GDP by 4%, so we have to reset our relationship with the EU—our nearest and largest trading partner—to drive growth and support business. He will have seen that the Prime Minister is in Brussels today to meet European Union leaders for the first time since Brexit.

The noble Baroness, Lady Neville-Rolfe, spoke about regulatory reform. We know that business has been held back by complex and unproductive regulation, which is a drag on investment and innovation. We have already issued new growth-focused remits for our financial services regulators and announced a new interim chair of the CMA. We will publish a final action plan in March to make regulation work better for our economy. On her question about a specific assessment, as she will know, the OBR sets out the economic consequences of all our policies.

The third pillar of our growth strategy is investment. As noble Lords will know, at the international investment summit, we saw £63 billion of additional private sector investment committed to our economy. In the Budget, we announced an additional £100 billion of public sector investment, which the IMF has been clear is vital to unlocking high levels of growth.

The noble Baroness, Lady Neville-Rolfe, asked about energy prices. I completely agree with her that that is one of the biggest contributions that we could make to our growth prospects. It is why the transition to clean energy is so important in driving those energy prices down. I am grateful for her support on our housing policy.

We are seeing some encouraging signs in the British economy. The IMF has upgraded our growth prospects for 2025—the only G7 country outside the US to see this happen—which gives us the fastest growth of any major European economy this year. A global survey of CEOs by PwC has shown that Britain is now the second-most attractive country in the world for businesses looking to invest, the first time the UK has been in that position for 28 years. This is all welcome news, but we are, of course, not satisfied with the position we are in. We know that we need to go further and faster, which is why the Chancellor made the announcements that she did last week.

Whether it is the third runway at Heathrow, the Oxford-Cambridge growth corridor—creating Europe’s Silicon Valley here in the UK—the new stadium at Old Trafford, investment in Teesside in sustainable aviation fuel, or reopening the airport in Doncaster, all of these things are the next steps of our ambitious plan to grow our economy and make working people better off.

The noble Lord, Lord Fox, asked specifically about the Oxford-Cambridge growth corridor, and the role of my noble friend Lord Vallance. My noble friend absolutely is there to join up all the different bodies that exist. The noble Lord, Lord Fox, asked about the specific powers that my noble friend has. Obviously, the Government have many specific powers in this respect and it is my noble friend’s job to bring what is needed to the attention of the Deputy Prime Minister and the Chancellor so that they can use their considerable powers to do what is necessary to achieve the objectives that we have set out.

The noble Lord, Lord Fox, asked a specific question about Heathrow and sustainable aviation fuel. I will have to write to him on that point if he does not mind. I disagree with him overall in respect of his position on Heathrow, as I think he would expect. I see it as absolutely central to our growth prospects. The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Fox, asked about the timescale of the third runway expansion. We have asked Heathrow to come forward with plans by the summer. We then want to grant a development consent order in this Parliament. We will have spades in the ground at Heathrow in this Parliament, not years and decades into the future.

The noble Baroness, Lady Neville-Rolfe, also asked about Gatwick and Luton expansion. Decisions on those are both due to be made very shortly, but I cannot say more at this point about a specific timescale. She asked a question about Northern Ireland, about which I will also write to her if she does not mind.

We are making progress towards our number one mission of economic growth but, of course, we are not satisfied. We must go further and faster, so that we can put Britain on a better path and deliver for the British people.

Register of Overseas Entities (Protection and Trusts) (Amendment) Regulations 2025

Lord Fox Excerpts

Monday 3rd February 2025 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I welcome the noble Baroness to her post, as it is the first time I have been across the table from her. She was not here when we were debating the two economic crime Bills, but I am sure she is aware that the subject of the use of trusts to obscure the beneficial ownership of UK property on the ROE and obscure ownership of UK companies, which this instrument does not cover, was one of the major areas of our debates at the time.

These regulations are a small step to improve transparency around the use of trusts to own UK property. I understand the balance around the protection of minors and others at risk, so I welcome the regulations, but slightly question how much difference they will make in practice. At least the progress is in the right direction.

I will ask a couple of questions about some general, related areas, if I may. I could not resist this opportunity. First, the latest information that I could find indicates that the true identity of the beneficial owner of UK properties owned by overseas entities—there are 152,000-odd—is not published in about 70% of cases, at the moment. For about 35% of cases, the true beneficial ownership is not known even to law enforcement agencies. There may be a number of reasons for that, including simple non-compliance, which accounts for about 10% in the last numbers I saw; the use of opaque corporate structures, which claim no beneficial ownership, or the use of nominees; and the use of trusts, which is the biggest one, particularly in our overseas territories. Transparency International’s latest numbers identify about £6 billion worth of suspicious transactions in UK property coming through our overseas territories, using trusts.

Could the noble Baroness provide up-to-date statistics on both level of compliance with the rules and the number of properties where the ultimate beneficial ownership remains unknown, for whatever reason? I am happy for her to write, if necessary, if she does not have the numbers to hand. Is she happy with the level of identification of beneficial ownership as it stands? What impact does she think these regulations will have on that? What further steps are planned to make sure that we know who beneficially owns the properties? In particular, what plans does she have to make the information from our overseas territories more transparent? The British Virgin Islands, in particular, appear to be the jurisdiction of choice for obscuring beneficial ownership, at the moment.

Of those entities that have not complied—10% was the number that I saw, which is about 15,000 entities—how many have been fined? Of those, how many have paid those fines and gone on to comply subsequent to payment? How many charges have been taken against the properties in relation to non-payment of the fines? In other words, does Companies House have sufficient powers to deal with non-compliance, and is it using those powers effectively?

Secondly—and I hope that the noble Baroness will forgive me for going slightly off-piste—another way to hide beneficial ownership is through the use of nominee shareholders. I notice the noble Lord, Lord Fox, smiling; I hate to be predictable, but there we go. This is particularly true for UK companies, where the persons with significant control or PSC rules can be sidestepped by the use of nominees. An entire industry has built up around that. The previous Government accepted that there was an issue around the use of nominees for this purpose and agreed to include a power in the Economic Crime and Corporate Transparency Act 2023 to take further action against the use of nominee shareholders and the industry that supports them, if they felt it was necessary. This is now Section 790IA of the Companies Act 2006. I want to take this opportunity to ask what assessment this Government have made of the use of nominees in that respect and whether they intend to make use of the powers they have under the Companies Act to address it.

[Lord Fox (LD)]

When the discussions were had with the noble Baroness about her becoming a Peer, I wonder whether they mentioned that she would be in the Moses Room presenting statutory instruments. I bet they did not. But I welcome her, and thank her for the clear explanation as well as the Explanatory Notes, which worked very well. To some extent, the Minister is at a disadvantage—or perhaps it is an advantage—in that the three speakers in this debate are the old gang getting together. We were all involved very extensively in both this and the predecessor Bill that came though.

--- Later in debate ---

[Lord Sharpe of Epsom (Con)]

My Lords, the register of overseas interests—the ROE—was introduced under the Economic Crime (Transparency and Enforcement) Act 2022, which, if I may say, is an excellent Act. I know this to be true because I took it through the House of Lords with considerable advice and assistance from the noble Lords, Lord Fox and Lord Vaux—I have been looking forward to saying that, if I am honest.

The aim of the Act was to increase transparency regarding overseas entities, as has been noted—and let me thank the noble Baroness for her extensive introduction to these regulations. The primary objective was to ensure that beneficial ownership information was accessible, so that the public and authorities could better understand who owns land in the UK. However, as we consider these regulations and whether these measures truly enhance transparency or complicate the process and introduce further risks, we have a couple of concerns that are legitimate to raise.

The Government justify these amendments as a means to protect individuals at risk of violence or intimidation, while simultaneously permitting greater access to information on trusts. The reality is that these changes appear to broaden the scope of who can apply for protection as the noble Lord, Lord Fox, noted. That would make it easier for individuals to hide behind the shield of protection, even when they do not necessarily have a legitimate interest. It reads as if it is potentially an invitation to game the system. So I ask the Minister: are the Government convinced and happy that these regulations, as currently drafted, are robust enough to prevent that potential risk?

Additionally, the amendments propose new mechanisms to address trust information, but the conditions for such access, especially in bulk applications, also raise concerns about the potential for misuse. While the intention might be to make certain information available to those with a legitimate interest, the Government have only partially clarified what constitutes a legitimate interest, which we think leaves room for exploitation and, potentially, unnecessary legal battles.

There is also an application question as, again, the noble Lord, Lord Fox, mentioned. How will the registrar judge things such as how the disclosed information will be used? What criteria will they use to judge legitimacy? For example, is it okay if it was the Times of London asking and would it not be okay if it was some obscure online publication? How exactly will that situation be resolved? It is something I will come onto in a second, but will it be explained in greater detail in the explanatory guidance that will be published shortly?

These measures are proposed to expand the category of individuals who can apply to Companies House to have their information protected, where it may be disclosed under the register of overseas entities. It would also enable trust information on the register that is currently restricted from public inspection to be accessed by application if certain conditions are met.

A significant measure is that of the protection of information. Although expanding the categories of individuals who can apply for protection may sound like a good way to shield vulnerable persons, we are concerned that it risks creating opacity in the system where more people, beyond those in positions of risk, can hide their information from the public eye. The original purpose of the economic crime Act was to shed light on overseas ownership and its implications; we worry that that is now at risk of being undermined by this expansion.

As I and other noble Lords have noted, the Act aimed to simplify and enhance transparency, but these proposed changes seem to introduce additional layers of potentially complex bureaucracy. The process for accessing and protecting information could become more complicated, adding unnecessary burden both for the authorities responsible for managing the data and for the public. Will these changes create a more efficient system in the end, or will they merely add unnecessary red tape to an already complex regulatory landscape?

The Explanatory Notes say:

“Guidance will be made available”.


Can the Minister tell us when it will be made available and whether it will address some of these concerns, such as by going into considerably more detail on the definition of and circumstances surrounding “legitimate interest”? We agree with the Explanatory Notes that, if this measure is to work, extensive and expansive communications are absolutely key.

Broadly speaking, we support these regulations, of course, but we have legitimate questions. The noble Lords, Lord Fox and Lord Vaux, also asked legitimate questions, including about exactly how these regulations will be applied and so on.

[Lord Fox (LD)]

I have one further question, which I meant to ask earlier. The Minister talked about national security interests in the context of legitimate interests. How can national security interests be reflected in Companies House when it is almost certain that nobody there will have sufficient security clearance to be told what the national security interest is in order to apply it in its decision-making process? Clearly, it will not forward every single application to someone who does have security clearance, so how on earth will this be mechanically organised?

--- Later in debate ---

[Lord Fox (LD)]

I asked whether judicial review is applicable. If the Minister is able to write to me on that, that would be helpful.

[Baroness Gustafsson (Lab)]

I absolutely will write to the noble Lord to follow up on that.

I was asked whether Companies House is equipped to deal with this volume of applications and what the administrative burden will be of undertaking a lot of these reviews. It is important to note that most applications for disclosure are going to be fairly straightforward and will not require the demonstration of legitimate interest. This requirement is required only for specific types of requests, such as those involving minors or bulk data, which we talked about. In those cases, applicants must provide evidence that they are investigating money laundering, tax evasion, terrorist financing or sanctions, and must explain the intended use of the information.

Companies House will draw on mechanisms similar to those used by HMRC, where applicants demonstrate a legitimate interest in disclosures from HMRC’s trust registration service. The registrar may request additional information or evidence to determine an application or refer a question to another party who they consider may be able to assist in determining the application. With extensive experience in handling sensitive requests, Companies House is well prepared; it has contingency plans to manage any surge in applications promptly and efficiently. I note that a nominal fee will be required of applicants to make sure that this is cost-neutral with regard to the Government. I think that covers most of those questions, but do correct me if I am wrong.

I shall now move on to the questions asked by the noble Lord, Lord Sharpe, about what legitimate interest is, how it is pursued and followed up, and what the application process is. To apply for access to information about a specific trust, applicants must provide their personal information, the name of the trust related to the relevant protected trust information, and the overseas entity’s name and ID. Applicants seeking trust information related to minors or bulk access—that is, applying for information on more than one trust in a single attempt —must demonstrate a legitimate interest, such as investigating money laundering, tax evasion, terrorist financing or a breach of sanctions imposed by regulations under the Sanctions and Anti-Money Laundering Act 2018. They must provide a statement to Companies House that they are requesting the relevant protected trusts’ information to further their investigation and a statement of how they plan to use the information. Companies House is not obliged to disclose the information if it could prejudice an ongoing criminal investigation or adversely affect national security; if it involves a pension scheme; and where the individual has applied for protection.

With regard to how someone will show that they are investigating money laundering et cetera for the legitimate interest test, applicants are expected to provide comprehensive details of the investigation that they are undertaking, supported by evidence to demonstrate the legitimacy and seriousness of their request. This will help ensure that applications are valid and that the process is not misused.

--- Later in debate ---

[Baroness Gustafsson (Lab)]

I think that you talk to the problem at hand, which is how you balance off disclosure from harm. There will often be legitimate reasons for wanting to access this information, but there are also legitimate reasons why you would not want someone to have that information. I do not think that this is a policy where you can describe a single selection, or parameters, that will defend both sides, which is the exact reason for this process, I believe.

The applicant who requires the information has to give full and detailed information as to their identity and why they would need the information, and the individual whose details are being disclosed has the opportunity to write and say that this is information that could cause them harm were it to be disclosed—and proactively make that statement, so that the registrar has the ability to protect those interests. Then it is the registrar’s role to take that information and ensure that they are getting that balance right. They have the information about the applicant, and they can make that judgment based on whether something is a legitimate interest and this is not a bulk access—someone trying to get the full list of all the trustees so that they can sell their local accountancy advice, or whatever that motivation is. On the other hand, they also have the register for people who believe that interest would be detrimental to their personal ability. Their role is to balance the two, providing that transparency but also protecting them from harm.

[Lord Fox (LD)]

I am sorry to labour the point, but the way in which it is being depicted is as if people will accept the registrar’s ruling and say, “Oh, yeah, right, I understand why you’re not letting me do this”, or, “I understand why you’re letting this person look at my identity”. It seems to me that human nature will operate in exactly the opposite direction and that there will quickly be a huge backlog of people who do not agree with the registrar’s decision, one way or the other. There does not seem to be a defined appeal process. If it is all getting lumped into judicial review, we all know how long that takes and what it leads to—and if there is no system and it all ends at the registrar, there is huge pressure on the registrar to be right every time, which will be extraordinarily difficult. While I can understand how it is being described, my sense is that it will be a lot messier than that.

[Lord Vaux of Harrowden (CB)]

Just to add to that, I cannot see anywhere in the regulation where the registrar has to inform the subject of the application that an application is being made. I can see that they can, but I do not see that they have to.

EU Law

Lord Fox Excerpts

Tuesday 28th January 2025 Lords Chamber

[Baroness Gustafsson (Lab)]

We are resetting the relationship with our European friends to strengthen ties, secure a broad-based security pact and tackle barriers to trade. We are working with the EU to identify areas where we can strengthen co-operation for mutual benefit, such as the economy, energy security and resilience. There will be issues that are difficult to resolve as well as areas that we will stand firm on, and we have been clear that there will be no return to freedom of movement, to the customs union or to the single market. We will work together and with respect to international law and shared institutions.

[Lord Fox (LD)]

My Lords, I am glad the Minister mentioned the reset. Have the Government responded formally to the offer by the EU’s chief trade negotiator that the EU is interested in discussing with the UK the prospect of the UK joining the pan-Euro-Mediterranean convention?

[Baroness Gustafsson (Lab)]

I thank the noble Lord for that question. That is something that we are willing to discuss.

Competition and Markets Authority Chairman

Lord Fox Excerpts

Monday 27th January 2025 Lords Chamber

[Baroness Gustafsson (Lab)]

I thank my noble friend for that question. He is right; regulation and growth need not be mutually exclusive. This is about creating sustainable long-term growth that protects not only consumers but businesses, so that they have a fair, competitive and open ground on which to compete.

[Lord Fox (LD)]

My Lords, whether you characterise the change in chairmanship of the CMA as a sacking or not, all the government statements are clearly designed to create a change in behaviour within the CMA. If this change of behaviour had been applied for the past two years, say, could the Minister tell us which decisions the CMA made would have been different? How much more growth would we have had over those two years, had the CMA been applying the Government’s new strictures?

[Baroness Gustafsson (Lab)]

I come back to a prior answer; this is not about how we look at independent tactical decisions on a case-by-case basis and reflect on what would or could have been. This is about no longer accepting dormant growth within the economy, viewing our regulators through the lens of how we create long-term sustainable growth and making sure that we are aligned with that. To that end, we are consulting on a new strategic steer regarding the CMA, which is expected soon.

Reporting on Payment Practices and Performance (Amendment) (No. 2) Regulations 2024

Lord Fox Excerpts

Monday 13th January 2025 Grand Committee

[Lord Fox (LD)]

My Lords, it is useful to have heard from the noble Lord, Lord Aberdare, and the noble Baroness, Lady Neville-Rolfe, as they have made it their business to address this issue over a number of years. I am pleased that they view this instrument with some positivity and I am happy to concur.

For too long, we have seen large companies use the cash flow of small companies to bolster their own cash flow. This happens not just in the construction sector, but it has been particularly apparent there. Of course, in some famous cases, such as Carillion and others, it became an industry unto itself and the core purpose of the organisations seemed to be to run cash flow on other people’s profit and loss accounts.

We have moved on some way, but I call into question the Minister’s comment—I also welcome her to her place—that it enables companies to make informed decisions about whom to trade with. In many cases, these companies already know what treatment they will get from those they trade with. They do not have a choice about with whom they trade, if they wish to continue in business. Sanctions and whistleblowing on those companies becomes an issue, as they dare not call foul because they will not get contracts in the future. That is the nature of the relationship: it is an abusive relationship, almost literally, between the contractor and the lead company. We need to understand the nature of that relationship to put into context some of the things we are talking about here.

Without wishing to sound nerdy, the average payment time can hide an awful lot of sins. Standard deviation could be more useful—as the noble Baroness will understand—because companies can be played against others.

I also wonder, rather suspiciously, whether retention becomes something else. It would be easy to look at this from the other end of the telescope, call it a completion bonus and retain that instead. We have to be a bit careful about naming things rather than describing them.

I was happy to be reminded of those halcyon days when we were working on the Procurement Act and of the mercurial rise of the noble Baroness from critical Back-Bencher to Front-Bench proponent. I ask a simple question: would it be legal, under current procurement regulations, for me as a local authority to refuse to take on a contractor which was in all other factors equal to a competitor bidder but had reported poor retention and payment numbers? Is it legal for me to turn it down on those terms?

[Lord Sharpe of Epsom (Con)]

My Lords, I join other noble Lords in welcoming the Minister to her place. The construction sector in the UK is not only one of the largest but one of the most vital industries underpinning our economy, as both noble Lords noted. In 2022, the sector achieved a turnover of £487 billion and employed over 3 million individuals, representing about 8% of the UK workforce. Its contributions are therefore fundamental in driving economic growth, fostering innovation and advancing development throughout the nation.

However, the sector is also characterised by considerable fragmentation. There are over 444,000 businesses engaged in a broad spectrum of work, ranging from contracting and product supply to associated professional services. The fragmentation is compounded by complex, multi-tiered supply chains, as major projects often involve 50 or more firms working collaboratively.

This brings us to the topic of retention sums, which are a long-standing practice in the construction sector. Retention—as it is still called for now—sums serve as a financial safeguard and ensure that work meets the required standards. Typically, half of the retention is released upon project completion while the remaining portion is withheld until the expiration of the defect’s liability period, proving additional assurance that all specifications are met. That, at least, is the dictionary definition of retention.

Given the current practices within the sector, we need to focus on the amendment introduced by these regulations. They all come into force on 1 March 2025 and apply to the financial year starting on or after 1 April 2025. The changes impose specific reporting requirements for qualifying companies and limited liability partnerships operating within the sector. The amendment extends existing reporting regulations and requires qualifying companies to disclose detailed information about their payment practices, policies and performance in relation to retention clauses in construction contracts.

Companies will be required to report on whether retention clauses are included in their contracts, the percentage of retention withheld and the procedures followed for releasing these sums. Additionally, businesses will be asked to disclose the contract value thresholds under which no retention clause applies and outline the standard rate of retention typically applied in their agreements. By 1 March 2025, qualifying businesses will be obliged to publicly report on their payment practices, specifically concerning retention clauses in construction contracts.

It is important that this amendment acknowledges the significant challenges caused by fragmentation within the construction sector, which of course affects businesses of all sizes. We understand that the aim of these regulations, as the Minister noted, is to enhance transparency by requiring businesses to report not only the inclusion of retention clauses but whether their retention practices align with industry standards or are more onerous than typical practices. Furthermore, companies will be required to provide clear descriptions of the processes that they follow to release retention sums, which is intended to ensure greater clarity and fairness for all parties involved. However, there are several important points on which further clarification is needed.

These amendments are said to provide increased transparency, fairness and clarity within the construction sector, but can the Government explain the mechanisms by which the regulations themselves will be enforced? How will compliance be monitored and what penalties will be applied to businesses found to be in breach of the new requirements? Additionally, while the new regulations seek to promote fairer payment practices, can the Government elaborate on how they plan to ensure that large companies are not able to exploit their market position, despite the new transparency measures? Will there be any safeguards in place to prevent larger firms imposing even more burdensome retention clauses on SMEs?

The regulations are presented as a solution to the ongoing issue of delayed payments, which have long caused a financial strain on SMEs, yet how will the Government measure the effectiveness of these changes? What evidence is there to suggest that requiring businesses to disclose their retention practices will have a significant impact on the cash-flow issues faced by smaller companies? As an aside, the noble Lord, Lord Fox, has raised an important point about how we will judge these companies in future, based on these particular metrics. These are not, of course, the only things by which one should judge a company or its potential to complete a project successfully and efficiently, so will there be some way of measuring that as well? If that has not been considered, it is something that should be.

While these measures are presented as steps towards promoting better cash-flow management and financial security for smaller businesses, we would urge the Government to further clarify how the regulations will be implemented and monitored to ensure that they achieve their intended outcomes. Will there be a review process to assess whether these regulations are having the desired effect on industry practices and the broader economy?

[Baroness Gustafsson (Lab)]

My Lords, I am grateful for the support for these regulations from across the Committee. I thank the noble Lords and noble Baronesses present for their constructive comments on this measure. Allow me to try to address each of the questions that they asked in order.

First, we heard from the noble Lord, Lord Aberdare. He asked a number of questions, the first of which was: have the previous regulations come into effect yet? The answer is yes; they came into effect and required a report as of 1 January 2025.

The noble Lord’s second question was about how the regulations will be enforced and how the accuracy of the data will be monitored. For that, the Department for Business and Trade will implement a more visible compliance and enforcement approach with non-compliant businesses going forward. Businesses that do not take action to meet their reporting obligations will be prosecuted.

We had a question, supported by the noble Baroness, Lady Neville-Rolfe, about why we would not just abolish retention payments altogether—that is, why are we taking this measure forward and not abolishing it in its entirety? The Government are aware of the impact that retentions have on the supply chain. We are very committed to going further to tackle poor payment practices: in September 2024, we announced our plans to consult on new legislative measures. Now, as part of that consultation, we intend to consult on measures that will address poor payment practices.

Moving on, I refer to the questions asked by the noble Lord, Lord Fox: does defining retention create a potential loophole for companies? Will they suddenly be redefined as completion bonuses? This is one of the arguments in favour of taking this sort of measured, proportionate approach, because we will be able to identify any unintended consequences of some of this legislation, but a key aspect of addressing the naming convention is that it is very clearly defined in a schedule not by what it is called but by the behaviours that it exhibits. Of course, we will monitor this and make sure that, if it requires an update, we will do so accordingly.

The noble Lord, Lord Sharpe, asked what the penalties are for failure to comply. The penalty for a breach of the 2017 regulations is an unlimited fine where a company fails to report or makes a false report.

Lastly, the noble Lord, Lord Fox, asked about sanctions, whistleblowing and the imbalance of power in the supply chain. I say in response that the imbalance of power in the construction supply chain is an ongoing challenge; that is widely understood and acknowledged. However, through the introduction of payment reporting measures for retentions and the enforcement of them, we will be able to create an incentive for firms to improve their payment practices in relation to retentions, as has happened following the introduction of the payment reporting regulations. As I talked about in my introduction to this instrument, we have seen the number of businesses paying within 60 days improve from 82% to 96%, so we should be encouraged that we are supporting correct behaviours with regard to policy.

This Government are committed to making sure that we tackle late and long payments. We want the UK to be the best place in the world for both large and small businesses to thrive. This work on retention payments aligns closely with the department’s wider policy on late payments and will strengthen the existing payment reporting regulations. It will provide for enhanced transparency in relation to the practice of withholding retentions—a practice that, as we have heard, is all too often unfair to small businesses and can, of course, be subject to abuse. It will also provide information to small firms and the construction supply chain about the policies and performance of firms that they are considering working for, enabling them to make better-informed decisions and to secure the payment of moneys due.

[Lord Fox (LD)]

Before the Minister sits down, I asked a very specific question around public procurement. I ask it again: if I am a public procurer and two bidders are more or less the same—or exactly the same—in their bid, but one of them has late payment, am I legally allowed to use late payment as the reason for not accepting that bid? Secondly, developing that question, if the late payer has the cheapest bid, can I also use late payment and retention payments as a reason for not awarding to that bid?

[Baroness Gustafsson (Lab)]

I apologise for not addressing that specifically. My understanding is that this information will help support a party in a commercial negotiation and will, ultimately, form part of its decision-making. As regards the technicality of whether one could legally use that as a way in or out of a contract, I will make sure that we write to the noble Lord on the specifics of that.

[Lord Fox (LD)]

It is really important because we are seeing, not necessarily under the Procurement Act but under the NHS, major legal tussles over the misapplication of the assumed rules of contract awards—not least in clinical waste disposal, where another six or seven health authorities are being taken to court. This is expensive; it will cost the public and the Exchequer. So it is important that we and public procurers understand from the outset whether this is window dressing or material to the procurement process.

[Baroness Gustafsson (Lab)]

I acknowledge that. I agree wholeheartedly with the noble Lord about the importance of getting that clarification; we will be sure to write to him in that regard.

Public Finances: Borrowing Costs

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Thursday 9th January 2025 Lords Chamber

[Lord Livermore (Lab)]

I am happy to say to the noble Lord that the Government are absolutely committed to working in partnership with business to grow the economy and to doing what is required to do so. As he knows, the Government are committed to economic and fiscal stability. We have put in place those robust fiscal rules, and there is a significant fiscal consolidation during the course of this Parliament, taking borrowing as a share of GDP from 4.5% to 2.1%. If achieved, this would be the biggest current budget surplus in over 20 years.

[Lord Fox (LD)]

My Lords, the growth of which the Minister speaks will need investment and, given the state of the public finances, a significant proportion of that investment has to come from the private sector. In my experience, that sort of investment requires not just a realistic analysis of the present but a persuasive picture of the future. The Minister has rehearsed the analysis of the present, but does he agree that the Government have to step up and better articulate their vision of the future in order to attract the investment that this country so desperately needs?

[Lord Livermore (Lab)]

I agree with a lot of what the noble Lord says. He and I are both strong supporters of an industrial strategy. The Government’s new modern industrial strategy is a core component of what the noble Lord is asking for. We are introducing a new industrial strategy that will give the private sector the guidance it requires about the sectors that we would like to see investment coming into. We are doing planning reform, which is one of the biggest reforms that we can possibly do to unlock new levels of private sector investment in the economy. We are doing pension reform, which the Chancellor set out in her Mansion House speech. We are doing skills reform—another key component of unlocking investment in our economy. All those things will significantly boost growth in our economy, but none of them is yet included in the OBR’s forecast.

Economic Productivity

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Thursday 5th December 2024 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to my noble friend for his support for the policies we have announced for small businesses. He is absolutely right that we protected small businesses in the recent Budget. SMEs are, of course, an essential part of a growing economy. We set out clear plans for small businesses in our manifesto and we will deliver on those in the coming months.

[Lord Fox (LD)]

My Lords, the Minister was right to mention skills being central to bringing productivity up. Both our parties had large chapters on skills in our manifestos and, since coming into office, the Government have announced initiatives, consultations and suchlike. Will the Minister tell your Lordships’ House when the first cadre of employees who have benefited from any of the skills measures that the Government intend to bring in will reach the workplace?

[Lord Livermore (Lab)]

The noble Lord is correct to say that both parties are absolutely aligned on the importance of skills reform, which is why we have announced Skills England. We will be increasing the number of people in training and they will enter the workforce as soon as they graduate.