National Minimum Wage (Amendment) (No. 2) Regulations 2024

Lord Leong Excerpts

Tuesday 12th March 2024 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Scotland Office (Lord Offord of Garvel) (Con)]

My Lords, the purpose of these regulations, which were laid before the House on 31 January, is to raise the national living wage and the national minimum wage rates on 1 April 2024.

The Government will increase the national living wage for workers aged 21 years and over by 9.8%, to £11.44 an hour. This record cash increase of £1.02 per hour means that we will hit this Government’s long-term target for the national living wage to equal two-thirds of median earnings for those aged 21 and over in 2024. With this national living wage uplift, this Government are also delivering their long-held ambition to extend the national living wage to workers aged 21 and over, as we reduce the age threshold from 23 and over this April, meaning that those aged 21 or 22 will see a £1.26 cash increase in their hourly pay.

This is a historic moment, as we are ending low hourly pay for those on the national living wage in the UK. The UK was the first country in the world to set such an ambition, and we are now proud to achieve it. A full-time worker on the national living wage will see their gross annual earnings rise by over £1,800 per annum. In total, the average earnings of a full-time worker on the national living wage will have increased by over £8,600 since it was announced in 2015. That is double the rate of inflation.

The Government will also increase wages for young people under the age of 21. For those aged 18 to 20, the national minimum wage rate will increase to £8.60, which is an increase of 15%. For those aged under 18, the national minimum wage will increase to £6.40 an hour, which is an increase of 21%. The minimum hourly wage for an apprentice under the age of 19, or in the first year of their apprenticeship, will increase to £6.40 an hour, an increase of 21%. The accommodation off-set will also see an increase to £9.99.

The new rate increases are based on recommendations from the Low Pay Commission, following its extensive consultation with stakeholders and consideration of the current economic data and circumstances. The Low Pay Commission is an independent expert body made up of employer and worker representatives and independent commissioners. This year has seen some challenging economic circumstances for both workers and employers, including high inflation. When the Low Pay Commission recommended the new rates for the minimum wage, it took into account many of these economic circumstances, including how affordable the rate increases are for businesses and the current state of the economy. By accepting these recommendations from the Low Pay Commission, the Government are striking the right balance between the needs of workers and the affordability to business, while also ensuring that we deliver on our long-term commitments on the national living wage.

The Government would like to place on record their thanks to the Low Pay Commission, its previous chair Bryan Sanderson and the commissioners for their commitment to gathering thorough evidence and providing these recommendations. I also welcome the noble Baroness, Lady Stroud, to her role as the new chair of the Low Pay Commission.

We expect that this increase to the minimum wage will put more money in the pockets of around 3 million of the lowest-paid people in every corner of the country. The new rates are due to come into force on 1 April 2024. In the meantime, any worker who is concerned that they are not being paid the correct wage should check their payslip and speak with their employer. If the problem is not resolved, they can contact ACAS or complain to HMRC.

Since 2015, the Government have more than doubled the budget for compliance and enforcement to £27.8 million in 2022-23. HMRC enforces the national living wage and national minimum wage on behalf of my department. I thank HMRC for its ongoing work with employers and workers to ensure that all workers receive the pay they are due and help give businesses the right resources to stay national minimum wage compliant.

I remind the Grand Committee that, on 1 April, regulations will also come into force to ensure that so-called live-in domestic workers are paid at least the relevant minimum wage rate, providing protection from exploitative low pay. This will help protect these workers, giving them a new right to the entitlement to the national living and minimum wage for the first time. These regulations, alongside the regulations debated today, will aim to reward the lowest-paid workers in every sector and in every part of the country for their contribution to our economy.

This Government are aware of the cost of living pressures and will continue to closely monitor all the impacts of increases to the national living wage and national minimum wage rates on workers and businesses alike. We will continue to carefully monitor economic developments as the NLW target is implemented. The Government will shortly publish this year’s remit to the Low Pay Commission and ask it to provide recommendations for the rates, which will apply from April 2025.

[Lord Leong (Lab)]

My Lords, we are pleased to welcome this instrument and thank the Minister for introducing these regulations. As he referred to, they implement the recommendation from the Low Pay Commission to lower the age of eligibility for the national living wage from 23 years old to 21 years old. We also welcome the inflation-related annual increases in the national minimum wage and in the apprentice hourly rates for those aged under 21.

However, even after the increases enabled by this instrument come into effect on 1 April this year, under-18s will earn just £6.40 per hour, while 18 to 20 year-olds will earn only £8.60 per hour. Unfortunately, as young people know, most shops, landlords and services do not offer lower prices for customers aged under 21. Ironically, many of these businesses actually employ people under 21 on the national minimum wage. What further sanctions will apply to businesses that do not pay the national minimum wage?

If we are privileged to be elected, the next Labour Government will use its New Deal for Working People to eradicate in-work poverty by tackling the structural causes of inequality. We are committed to raising the national living wage to ensure that it is adequate and addresses the rise in the cost of living and inflation. Having a national minimum wage that does not reflect the actual cost of living particularly impacts people who do not have family who can support them; care leavers are one severely affected group.

Some of the most disadvantaged and economically insecure young people in the country, even if they try to do the right thing and work hard, can find themselves unable to meet basic costs. As most noble Lords know, the previous Labour Government proudly introduced the national minimum wage. The next Labour Government would make sure that the national living wage actually lives up to its name. We would ensure that a genuine national living wage is applied to every adult worker and is properly enforced, because we know that giving working people more money in their pocket means that more money will be spent in their community and in the everyday economy, nourishing their neighbourhoods and creating more and better-paid jobs locally.

Without hesitation, we support these regulations. I look forward to the Minister’s response to my question about sanctions.

Digital Markets, Competition and Consumers Bill

Lord Leong Excerpts

Report stage
Monday 11th March 2024 Lords Chamber

[Lord Fox (LD)]

My Lords, Amendment 60 is in my name. I was expecting to be ploughing a rather lonely furrow on this amendment, so I welcome the enthusiasm of the noble Baroness, Lady Kidron, particularly as it is based on such relevant experience and came with such authority. I thank her for that.

The Minister has been very open in our discussions on these issues, which focus on two areas: interoperability and standards, which are, of course, inextricably linked. One critical area to be clarified is the importance of vertical and horizontal interoperability and the fact that each requires different responses. Clause 20 covers vertical interoperability; for example, the promotion of the use of platforms as neutral distribution channels to market for all kinds of apps. The Bill does not explicitly include interoperability between an app and a platform that operates as a distributor and, in a network sense, among websites that compete with each other and with the platforms. This is horizontal interoperability.

The department’s view is that Clause 12 is wide enough to catch all of this. The Minister said in Committee that it is the department’s contention that defining interoperability is unnecessary because it considers it to be a “commonly understood technical term”. That is welcome, but it relies on a level of interpretation and inference by the DMU because the department’s interpretation is not clear by the letter of the Bill. As such, it would be helpful if the Minister could confirm the explicit inclusion of horizontal interoperability between websites in promoting competition. Will he please confirm that Clause 20(3)(e) will not limit conduct requirements to promote interoperability with a platform only, and set out how the Bill permits the DMU to consider requirements relating to interoperability in a range of contexts, including web browsers, apps, operating systems and websites?

As far as standards are concerned, I think we agree that there is a need for open and non-discriminatory international standards to support interoperability and promote the competition at which the Bill is so firmly targeted. That this is important is illustrated by the fact that Apple recently publicly threatened to block access to the open web from its devices. For there to be competition, the open web needs to interoperate with Apple and Google browsers. This is quite a serious point. This activity is controlled via W3C standards.

The amendment I have tabled is designed to be helpful. It ensures simply that the DMU understands its role in seeking to ensure that international standards bodies are promoting interoperability, both vertically and horizontally, and hence promoting competition. Given the central importance of standards to competition, my aim is to emphasise that this is not an add-on for the DMU but a core activity. I thought the Minister might be able to accept this amendment, but if he feels unwilling to do so, I feel sure that if he could put on record this important role for the DMU, it will be an important step forward, and I look forward to his response.

[Lord Leong (Lab)]

My Lords, it has been illuminating to listen to the varied and valuable contributions from all noble Lords who have spoken in this debate. I thank all those who have risen to speak. As may be expected, a broad range of knowledge, differing views and important concerns has been shared and expressed. The noble Lord, Lord Clement-Jones, referred to Apple’s dominance and it not being prepared to comply with any digital legislation. This should make us mindful of what big tech is getting up to. One thing is very clear: there is a strong consensus in the House that legislation is needed to catch up with, and indeed anticipate, the rapidly changing digital landscape which even the most technophobic among us can no longer afford to ignore.

I shall speak specifically to Amendments 14, 15, 23 and 24 in the name of my noble friend Lady Jones of Whitchurch. I thank the noble Baronesses, Lady Harding and Lady Kidron, and the noble Lord, Lord Clement-Jones, for adding their names. The principle behind Amendments 14 and 15 is to ensure that the Competition and Markets Authority can tackle anti-competitive conduct in a non-designated activity, provided that the anti-competitive conduct is related to a designated activity. These amendments do not seek to hamper digital innovation but rather to create a pro-competition market in which consumer interests are safeguarded.

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Moved by

[Lord Leong]

14: Clause 20, page 12, line 30, leave out from “to” to “in” in line 31 and insert “harm competition in the relevant digital activity or the other activity”
Member's explanatory statement
This amendment, along with another to Clause 20(3)(c), seeks to ensure that the CMA can tackle anti-competitive conduct in a non-designated activity, provided that the anti-competitive conduct is related to a designated activity.

[Lord Leong (Lab)]

My Lords, I have listened to the Minister, and I respectfully regret that I am not convinced. Our amendment is more comprehensive and would really provide a level playing field. As we have seen in the EU, big tech companies will go out of the way to circumvent any regulations. Therefore, I wish to test the will of the House.

--- Later in debate ---

Moved by

[Lord Leong]

23: Clause 29, page 16, line 13, leave out paragraph (c)
Member’s explanatory statement
This amendment, alongside another in my name to Clause 29, would revert the Clause back to the one first introduced in the House of Commons. This would narrow the ability of bigger platforms to claim their anti-competitive behaviour presents countervailing benefits.

--- Later in debate ---

[Lord Leong (Lab)]

My Lords, I have listened to the Minister and I am afraid I am not persuaded. Our amendment would take the Bill back to the original version as in the other place and, on that basis, I wish to test the will of the House.

Regulator of Community Interest Companies

Lord Leong Excerpts

Monday 11th March 2024 Lords Chamber

[Lord Johnson of Lainston (Con)]

I am grateful to the noble Lord for his input in this important area. These principles absolutely need to be kept under review. I have looked into this myself in great detail; only 38 complaints were made last year about these entities, which, considering there are 31,000, is not a significant amount. I do not believe that any CIC has been struck off the company register. We have updated the procedures around Companies House—director verification, statements of accounts, and so on—which will also apply to CICs. I am therefore very hopeful that we will see continuing reforms. I refer back to my original comment about the work that the noble Lord, Lord Harris, is doing to regulate fundraising. That is a separate point that is not necessarily related to company law, and we fully support his efforts in trying to make sure that it is properly regulated and ordered.

[Lord Leong (Lab)]

My Lords, as the Minister said, there are 31,000 CICs in the UK. They deliver significant benefits to communities across sectors including the environment, education, health and sports. However, the number of CICs being dissolved is increasing year on year, reaching an alarming 3,100 last year. What assessment have the Government made of whether dissolutions are the result of fraudulent activities, potentially putting community assets at risk?

[Lord Johnson of Lainston (Con)]

I thank the noble Lord, Lord Leong, for that point. This is not an assessment that the Government have undertaken; it is the responsibility of Companies House. With more data now available following our reforms, the registrar will be able to undertake this research. I would say, however, that this is a sector where there will be relatively high turnover. A lot of these are social businesses with very limited amounts of capital; some are experimental and it is absolutely right that they behave like companies, with the element of success or failure. Ultimately, the number of CICs is growing every year, in significant compensation for those that are being dissolved, and we are very pleased to see that.

Brexit: Benefits to Economy and Society

Lord Leong Excerpts

Wednesday 6th March 2024 Lords Chamber

[Lord Offord of Garvel (Con)]

I thank the noble Lord. Yes, this is an issue, and it relates to 24% of our pie chart of exports; that is, our manufactured goods exported to the EU. Some 41% of our exports go to the EU 27 today, and it is 49% if you make it the Europe 34, so this idea that we do not trade with Europe any more, when half of our exports go there, is simply not the case. On the matter of friction on trade, we are making massive strides with the single trade window, the Electronic Trade Documents Act, the new border target operating model, and the ecosystem of trust. We are moving into a new digital world where goods will move much faster, and we recently had a situation where we sent a batch of valves from Burnley to Singapore without any paperwork, thanks to the Electronic Trade Documents Act.

[Lord Leong (Lab)]

My Lords, spring is in the air and love is all around. With Valentine’s Day last month and Mothering Sunday this weekend, florists’ businesses should be blooming. Unfortunately, they face additional costs and paperwork on the 80% of flowers that are imported from the EU, due to the border target operating model. The Government’s lack of a plan for Brexit has been particularly exposed when it comes to trade. What steps are the Government taking to avoid further disruption to businesses importing from the EU?

[Lord Offord of Garvel (Con)]

There have certainly been some difficulties and friction in certain areas and sectors, as I have identified. Those are being worked on and will be considerably improved by the new border target operating model, of which more later.

Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2024

Lord Leong Excerpts

Tuesday 5th March 2024 Grand Committee

Finally, do the Government have any further plans for reforms to the network access charges? Do they plan to publish the technical guidance, or has it been published already? If not, can I get a timetable for that? Has a full monitoring and evaluation scheme been agreed, and how will its findings be published?

[Lord Leong (Lab)]

My Lords, I thank the Minister for setting out these instruments so clearly and the noble Earl, Lord Russell, for his contribution. These four instruments implement key aspects of the British industry supercharger, as mentioned by the Minister, a package announced in February 2023 to make energy-intensive industries—EIIs—in Great Britain competitive. These industries face challenges in the coming decade. The primary issue is the relatively high cost of energy in the UK, which makes it difficult for them to remain internationally competitive. Furthermore, there is a need for them to implement transitions toward greener technology, with lower carbon leakage, as we strive to move towards a net-zero economy. We recognise these challenges and broadly support these instruments, in so far as they seek to address them for these industries, which are vital for our national security and the literal fabric of our national growth.

The first instrument exempts eligible EIIs from the costs associated with funding the capacity market and seeks to ensure that there is sufficient supply despite fluctuations in demand, especially at peak times of day or in colder periods, and in supply, for example when wind generation is low. While we support this instrument, have the Government considered whether this will lead to any shortfall in the capacity market? If so, what measures are in place to mitigate this?

The second instrument concerns additional costs due to green levies which the UK imposes and some of our international competitors do not. We do not want this differential cost to drive our energy-intensive industries abroad, so this instrument adjusts an already existing scheme and exempts EIIs from 100% of the costs of funding various environmental schemes. Industrial electricity costs in comparable neighbouring countries are evidently not static, so will the Government keep them under review? If there is movement, do they have plans to make further adjustments if necessary?

For both these instruments, the Government’s calculations accept expected increased electricity bills for non-eligible users, including small businesses, charities and households. For this instrument, that is cited at 20p to 30p per megawatt hour. With the current spot price at just under £60 per megawatt hour and the reduction since the start of this year already being closer to £30, that certainly does not seem a massive amount. However, will the Minister outline how much these regulations, in conjunction, will add to the average household electricity bill per annum? The third instrument follows by necessity to enable the Secretary of State to revise the renewables obligation level from 2024-25.

The fourth and final instrument makes minor amendments to the Energy Act 2023, sets out funding for the payments via a levy on suppliers and appoints an administrator. Such support payments are to be made to the EIIs quarterly. Will there be an automated process for eligible recipients to receive these payments with the minimum administrative fuss? Have the Government made forecasts as to whether the costs of this scheme will outstrip the contributions from the electricity suppliers, which will effectively be funding the EII support levy? Are there any provisions in place for this possibility, so that the scheme does not collapse if it is successful?

This instrument allows corrections to be made to support payment entitlements. It will also make provisions for the administrator to hold a reserve fund so that EIIs will always be able to receive payment. Do the Government expect this will need to be used? If so, how big will it be and is there a maximum time limit over which the administrator will be expected to cover the shortfall?

We will be very happy to support these four instruments if the Minister can provide some assurances on the concerns I have mentioned. I look forward to his response.

[Lord Johnson of Lainston (Con)]

My Lords, I am grateful to the noble Earl, Lord Russell, and the noble Lord, Lord Leong, for their comments. These measures are extremely important if we are to have a sustainable heavy industry in this country. If I may take my own experience as Investment Minister, I have unquestionably been able to land a significant amount of investment—some of the biggest investments that we have announced to date, particularly in the car and advanced manufacturing industries—because we have these mechanisms in place. It is not even ambiguous. It is a clear point of fact in these discussions and is very important.

The noble Earl rightly raised that we do not want to be subsidising carbon-intensive businesses out of some desire to keep historic organisations going, contrary to our net-zero ambitions and our overall industrial policy. It is right to challenge the principle of carbon leakage, which is exactly what would happen if we did not operate this process. It is designed to help these businesses to decarbonise. For example, for Port Talbot, which will obviously be a receiver of these support packages, the intention is clearly that it will decarbonise. If you look at the car industry, it is going to an EV industry, and rightly so.

The noble Earl asked when the next review will be, how we will review it and how we add companies. This is an issue with novel technologies coming forward and with industries that need this support, which may not already be under a current and easy-to-define classification. Quite rightly, we will review this. The next review point is 2026. This measure will come into force next month so it seems logical that there is an 18-month or two-year period for review. I am absolutely sure that, at that point, there will be some quite significant changes. It gives us an opportunity to take companies and sectors out and put new companies and sectors in. I am positive about that.

I am also positive about the ability to spread the cost. The noble Lord, Lord Leong, rightly asked how much this will add to the electricity bills of an average household. These are the dreaded averages but we are looking at £4 to £5. I am very aware that there is a cost of living crisis and that there are other pressures on people’s households but, when you look at the ability to target this type of support for that type of diffuse outcome, it makes a lot of sense. The noble Earl, Lord Russell, mentioned the power-generating and petrochemical industries, which do not qualify for this. I am sure that there are others that do not qualify; we would be happy to provide a specific list. It is a 1% increase overall.

Noble Lords will know that I have spent many years in investment and looking at financial markets. The energy markets present a high degree of volatility. The gas prices now are lower than they have been for a considerable period. We are very dependent on gas, which is why our own power structure is so complex to manage. Looking at the network costs, the capacity market charges that are made and other exemptions, these mechanisms are really about removing the obligations to invest in the net-zero ambitions of the UK while expecting businesses to do it for themselves. There is a sensible trade-off there. It is well balanced.

The noble Lord, Lord Leong, asked whether there would be a shortfall in the capacity market point because of the effective compensation being paid. As I understand it, that charge has never been utilised. We are confident that there is no effect on the capacity market in terms of the charges that are being made; I would be happy to investigate that further. On technical guidance and the transparency around these processes, let me say that, as Minister for regulatory reform, better regulation or smarter regulation—whatever the current title is—impact assessments are important to me. I hope that all noble Lords have read the impact assessment reports for these statutory instruments; anyone listening to this debate is also welcome to do so. It is a transfer rather than a new cost so it does not show up on the impact assessment process as clearly as it would do if it were a new principal regulation.

It is important that there is as much transparency as possible because these are, in effect, transfer charges. This is a transparent system; to some extent, it requires the complicit consent of industry in general and the public. It is important that this is happening in a private sector capacity with government direction. We feel that this is absolutely the right thing to do. It is highly diffuse in its impact and very targeted. We believe that it will allow the UK to be incredibly competitive when it comes to developing its advanced manufacturing ambitions.

I hope that I have answered all the questions from noble Lords today. If I have not, I will certainly scrutinise Hansard and welcome any follow-up, but this is a relatively uncontentious series of statutory instruments.

In summary, the noble Earl, Lord Russell, mentioned that he was not going to address each statutory instrument individually; he was quite right not to, not just in the interests of time but because this is one package—they are naturally separated for reasons of legislative complexity but this is the British industry supercharger. It presents a powerful package to industry and sends a strong message to the country and internationally that we want to support businesses as they develop and decarbonise. Support for our economy gives us great growth for the future. With that, I commend this instrument to the Committee.

Employment and Trade Union Rights (Dismissal and Re-engagement) Bill [HL]

Lord Leong Excerpts

2nd reading
Friday 1st March 2024 Lords Chamber

[Lord Leong (Lab)]

My Lords, I thank all noble Lords who have contributed today, and especially acknowledge the contribution of the noble Lord, Lord Balfe, on the Conservative Benches.

I declare my interests as the director of several businesses and companies, as set out in the register. I have been in business for the past four decades and employed several thousands of people. One of the most important things I have learned from my time in business is that good employee relationships are absolutely vital for business success. My employees have worked hard to enable the business to succeed and grow, and several of them have become very close family friends. I believe that most businesses are good, responsible employers that do the best for their employees. This Bill is not targeted at businesses like those. No, the Bill will affect only a few bad apples in business, those who disrespect their employees and seek to exploit them. As already mentioned by my noble friends Lord Woodley, Lord Hendy, Lord Browne and Lord Davies, the Bill will not prevent any employer changing the terms of its employee contracts or arrangements because of an impending financial cliff edge.

I pay tribute to the dogged determination of my noble friend Lord Woodley, no stranger to long, drawn-out bargaining over employment rights, in bringing the Bill to the House. He has spent decades fighting for workers’ rights as a union official and a union general secretary, and now in this place he brings his Private Member’s Bill, the third attempt in recent years by Labour parliamentarians to seek to make this Government act and recognise that current employment law fails to address the injustice of fire and rehire. This omission, as others have argued, enables companies to threaten their workers with losing their jobs if the management decides it wants to weaken agreed terms of employment. Every year, such shameful bullying has a devastating impact on the security, lives and livelihoods of millions of workers in this country, and despite recent high-profile scandals, fire and rehire continues to be used. Naming and shaming does not work. Expecting bosses to do the right thing has not worked. It is long past time to change the law to make it work for workers.

When the most recent scandals appeared in the media, warm words from the Prime Minister were cold comfort to those who have suffered from the sharp practice of fire and rehire. It is not just the high-profile cases of well-known, iconic British companies that my noble friend Lord Woodley famously described as trading under this country’s name but not in this country’s interests. What is especially galling is that it appears that some of the companies that treat their workers so poorly in fact received financial support from the Government during the pandemic. The Government could have required that companies receiving assistance would not engage in such practices. They chose not to do so. Most shockingly of all, government departments, including local authorities and statutory bodies that really should know better, have offered procurement contracts to companies known to have threatened workers with fire and rehire tactics. Even with my low expectation of the Government, even knowing their heartless attitude towards hard-working people in the public sector, this came as a surprise to me.

There has also been an attempt to give the impression that fire and rehire has mainly been a last resort in the exceptional circumstances of the Covid pandemic. The thorough response from the TUC to the Government’s proposed code of practice demonstrates that this practice was being used before Covid, was used during Covid and has in fact gained prominence in negotiations during the years since the lockdowns ended. The TUC has estimated that one in 10 workers, almost 3 million people, have been subjected to fire and rehire tactics since the first lockdown. Young workers, women, black, Asian and minority-ethnic workers, as referred to by my noble friend Lady O’Grady, and those on low pay have been disproportionately impacted, which only exaggerates the inequalities that many of them already face. This alone is reason enough to consign fire and rehire to the history books by getting this Bill on to the statute book. Roads paved with good intentions, whether labelled promises, pledges or non-binding, just-published codes of practice, lead only in one direction. It is the workers, threatened with either losing their job or continuing to do it in worse conditions, who will always feel the heat. That is why so many of us support my noble friend’s Bill.

Labour’s new deal for working people recognises that outlawing fire and rehire means that workers can be safe in the knowledge that terms and conditions negotiated in good faith cannot be ripped up on threat of dismissal. They will be more secure and more able to plan and save for the future with legislation that gives them security in their pay and terms.

The Bill enshrines in law necessary improvements in consultation procedures where employers want to change employees’ contracts. It will make it illegal to dismiss workers for failing to agree to a contract that leaves them worse off. The Bill ensures that the highly restrictive trade union legislation introduced by this Government does not inhibit action to protect existing terms and conditions for employees. Recent experience shows that fiddling with a code of practice will not be enough. I agree with Unite the Union’s response:

“The idea that a ‘code of conduct’ is going to stop employers like P&O from doing this is just a bad joke”.


The TUC and lifelong veterans of the union movement, such as my noble friend Lord Woodley, know from bitter experience that in the real world, without legislation to prevent fire and rehire, workers will continue to be exploited.

The Bill offers the Government a chance, an opportunity to do the right thing to get ahead of the curve and outlaw this cruel and unjust practice, and to do it now. It will be a terrible irony if the issues addressed by the Bill are dismissed by the Government in favour of a non-binding code that offers weaker legal protections. The time is long overdue to put an end to fire and rehire with robust and binding legislation. My noble friend Lord Woodley’s Bill does just that.

Does the Minister agree that good industrial relations result in higher productivity? Also, will the Government bring forward the long-awaited employment Bill? I look forward to his response to my and other noble Lords’ questions.

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

I am, as always, extremely grateful to noble Lords for this debate. Before we begin, I direct Members of the House to my register of interests, although I do not believe there is any conflict relating to the Bill today. I am very grateful to the noble Lord, Lord Woodley, for bringing this Private Member’s Bill to this House. It affords us an extremely helpful debate, and I will go through some of the points shared by so many Members of this House who are rightly concerned that the primary function of a strong economy is a fair workplace regulatory framework.

I absolutely agree with the noble and wise comments of the noble Lord, Lord Leong, at the end of his address, that we should have strong relationships between the people who work in our industry and the people who employ them—with the shareholders, investors and consumers, and in fact with our entire habitat and environment. That is exactly the sort of harmony that this Government are trying to deploy.

I will talk about some of the technical elements around the Bill and dispel some misconceptions. The first misconception to dispel, if noble Lords will allow me, is that the P&O situation was a dismissal and re-engagement process. It was not. If I may, I will correct noble Lords who have conflated that situation—which in my view was absolutely abhorrent behaviour by an organisation with such lineage as P&O towards its staff, who had such loyalty to the company. It was strongly condemned at the time by the Government and is continually condemned by the Government today, and by me personally. I am aware that there is an inquiry by the Insolvency Service into P&O, on which it would be inappropriate for me to comment, but at no point should noble Lords conflate what P&O did with the concept of dismissal and re-engagement.

I will also touch on the principles around the proclivity of companies to use this practice to control their workforce. There is a great deal of anecdotal evidence, but there is not a great deal of specific evidence to suggest that this is as widespread as noble Lords may recommend. In fact, some of the high-profile cases—they tend to be so because they are relatively unique; this is important—often resulted in better outcomes for the employees post the relationship renewal with the unions. It is important to understand how big a situation we are dealing with here; it is not as significant as people suggest. The statistics vary significantly—from one in 10 to 3%, whatever that may be—which causes me concern. I am delighted to make a commitment to continue to do more work on how significant a so-called problem this is.

I will make two very important points about the principle of dismissal and re-engagement. First, for me, it is an extremely useful and powerful mechanism to allow employers to engage effectively with their workforce to create and establish new terms and conditions that may be appropriate for the modern age or for the needs of the company at the time. It is very important that we retain those flexibilities. The concept of dismissal and re-engagement is also very valuable in resetting and clarifying employment terms; I am sure that I am surrounded by people with far greater legal expertise on that than me. As I said, it is not simply a question of using this as a mechanism to bully staff; it is a very important legal process for the contractual relationship between the employer and the workforce.

My next point is something I think we are all agreed on. While I have great respect for the Bill of the noble Lord, Lord Woodley, and indeed for the noble Lord himself, we must have the flexibility to enable companies to manage their workforce in times of crisis. I am sure that, when we are faced with these situations ourselves, either as employers or workers, and we need to come together to respond to an economic crisis such as Covid, it is absolutely right that we have mechanisms to enable us to protect the workforce. This is about fairness, protecting workers and allowing us to have a flexible workforce. It will allow me and my friends, associates and children, and the rest of our citizens, to have the opportunity to work in a flexible environment that has not become too rigid or ossified to respond to economic volatility.

However, very importantly, this should never be used to bully the workforce. The code is very strong on this; it is extremely clear that it is not to be used inappropriately to try to force unacceptable terms on a workforce. Instead, what the code does is clarify the obligations of the employer to ensure that they have to consult with their workforce. For the first time, they have to—this is very important, when you look at the other reasons for dismissal and re-engagement—look at alternatives, not just to the overall plan but to how the individual workers themselves are treated.

There is the 25% uplift, and I take noble Lords’ comments, including those of the noble Lord, Lord Browne, on the tribunal service; I am very sensitive to that. I will come back to the noble Lord on his comments on the workability of that process, because it must be an easy-to-use process that is accessible; that is absolutely at the core of protecting workers’ rights. But we do have the 25% automatic uplift that can be fed into the process. There is an obligation—I believe the code advises it in every case—to consult ACAS when it comes to using dismissal and re-engagement. These are actually quite significant.

Clarity is very important. As we know from statutory codes—again, I defer to noble Lords who have greater legal experience than me—they are central in ensuring that we have a strong framework for navigating employment law and giving protections to workers, and, very importantly, also giving obligations to employers. Having been on both sides, and certainly as an employer, the more clarity I can have about how I can work with my workforce, the better. It is very clear from the tone of the document and this Government that it is the expectation that this is a last resort, that there is a significant degree of consultation and that every other option is exhausted before it is appropriate to use dismissal and re-engagement.

[Lord Leong (Lab)]

I thank the Minister for giving way. Does he agree that the Bill offers employers the flexibility to consult their workers before the terms of the employment are changed? It does not ban the practice; it is just a last resort that offers a consultation period with the employees.

[Lord Johnson of Lainston (Con)]

I am very grateful for that challenge. I will now turn to the Bill. As I said, many elements of its sentiment are wholly welcome, but its practical application would result in less fairness, wealth and job security than the noble Lord might wish. There are several reasons for that. First, the increased consultation becomes extremely onerous on companies. Often you have a very limited period of time to react to a significant economic circumstance. As I said, this is dismissal and re-engagement, rather than simply some type of long-term planning for a business. We must be extremely careful about the onerous conditions that we are placing on companies. I have looked through the Bill, and they are substantial and, I am afraid, heavily tilted towards union practices—maybe because every Member of the House who has spoken so far, apart from the Front-Bench spokesman opposite, is a member of a union. In many instances, not all companies have union bodies represented within them and not all workers are members of unions, so it is possible to conflate those two consultation processes, which is inappropriate.

It is also very difficult. While I have a great deal of sympathy with the principle of a so-called bankruptcy clause, it is not a position that those running a business want to be in that they can do something only if they are about to go bankrupt. The reality, as I think Hemingway said, is that you go bankrupt:

“Two ways. Gradually, then suddenly”.


You have limited time to act and have to be precipitous. You must try to prevent the point at which you go bankrupt, because otherwise all your staff will lose their jobs.

The principle of what we are discussing is how to protect as many workers as possible, in a difficult situation. The code does, but I am afraid that the Bill that the noble Lord, Lord Woodley, has put forward would put at risk the security of more workers than it would protect. Importantly, it removes the breadth and range of principles around which dismissal and re-engagement can be used. That is difficult, because businesses require flexibility and it should not be up to politicians to decide this on a case-by-case basis. That would cause enormous problems, reduce flexibility, make it far harder for businesses to operate appropriately, and reduce employment in this country and security for workers.

However—and I personally will be pleased to engage in this—before the code comes into force in the summer, there will be a full debate in both Houses. I have been very clear with my officials in the department and to my colleagues that we will keep this under review. It is right that we understand exactly how many companies are using this practice and to assess that more appropriately. As I said, I will look into the comments from the noble Lord, Lord Browne, around tribunals.

As the noble Lord, Lord Woodley, knows, I continue to be extremely desirous of continuing to engage with him on this important subject. Nothing is more relevant to this Government than strong relationships between investors, companies, the people who work in those companies, consumers, the broader citizenry and the environment to create the sort of harmony that gives us growth and security for the future.

Economic Crime and Corporate Transparency Act 2023 (Consequential, Supplementary and Incidental Provisions) Regulations 2024

Lord Leong Excerpts

Monday 26th February 2024 Grand Committee

[Lord Fox (LD)]

Those are laudable aim, Minister. Those of us who laboured long and hard into the night on the then Economic Crime and Corporate Transparency Bill welcome the arrival of this statutory instrument. When we considered the other ones last week, I asked when the commencement statutory instrument was due. I think that this is what I was asking for, so that is good news.

I have nothing to add. As I say, we debated long and hard on the Bill, now the Act. The proof of the pudding will be in Companies House and how it gets motoring on its new mission. I know that the Minister and the department know this; anything that we can do together to help it get there is to the benefit of all of us. We wish this statutory instrument godspeed and we wait hopefully for the other 50-something that will come hard on its heels.

[Lord Leong (Lab)]

My Lords, as stated earlier, I declare my interest as a director of several companies, as set out in the register. I thank the Minister for clearly setting out this set of regulations. I agree with the noble Lord, Lord Fox: we on these Benches are content to support this set of technical regulations and have nothing further to add.

Reporting on Payment Practices and Performance (Amendment) Regulations 2024

Lord Leong Excerpts

Monday 26th February 2024 Grand Committee

[Lord Fox (LD)]

My Lords, we, too, welcome this statutory instrument in as far as it goes. When I saw that my friend the noble Lord, Lord Aberdare, was speaking, I knew that my speech would get shorter, because he has already covered much of the ground that I wanted to talk about. Late payment is just about the number one issue facing SMEs. If you listen to the organisations that represent them, it is the issue they always come back to. It will not be solved merely by transparency; we know that is the case. We have some transparency, but we are not getting solutions.

There is a culture in certain sectors. As the noble Lord, Lord Aberdare, just set out, some sectors are worse than others. SMEs rely on a small number of large customers. The Minister said that publishing information would help SMEs to make informed decisions about whom they would work with. However, in many cases SMEs do not have the luxury of a decision about whether to sell their product or service to one company or another. That is the market and those are the businesses that operate; if there is a culture of late payment or retention in that business and, if those SMEs want to continue to trade, they have no choice about with whom they will trade. There is very little jeopardy for those companies that continue to practise late payment. That is the point the noble Lord made about enforcement.

I will make one other point about the building sector. Although it is a somewhat dated example, we can go back to 2018 and the Sandwell hospital project, which was managed and run by a company called Carillion. When that company went bust, it was very clear that its entire cash flow was managed through the late payment and retention of its contractors and subcontractors. The transparency situation has not appreciably changed since then.

A big issue that has to change is the Government’s view to their management of public procurement. The issue of late payment came up a number of times when we considered the public procurement Bill. Can the Minister ask his department what it can do, using the new Procurement Act, to help bolster enforcement on these issues? From our point of view, we would make it compulsory to sign up to a prompt payment code then seek ways to enforce it. Without that, the small improvement of this statutory instrument will continue to leave many of our small and medium-sized businesses in a position where their cash flow is used for the benefit of their customers’ cash flow.

[Lord Leong (Lab)]

My Lords, I thank all noble Lords who have spoken. I declare my interests, as set out in the register, as a director of several businesses and companies. I thank the Minister for setting out the regulations and welcome the Government’s campaign, declaring 2024 as the year of the SME.

I have advocated for provisions such as those provided by this instrument since long before I became a Member of your Lordships’ House. As a businessperson, I welcomed the original instrument’s introduction in 2017, and support the extended sunset clause and the expanded reporting requirements contained in this legislation.

As noble Lords have said, for too long and far too often, SMEs that have supplied goods and services to larger companies and public sector organisations have not been properly respected regarding payment terms. A relatively small amount of money for a large organisation can be, for many SMEs, a question of whether wages or rents are paid on time. It is stressful enough running a business, and late payments from large customers, whether through inefficient systems or the deliberate withholding of payments, are an all too common factor. Late payments can lead to additional borrowing costs for SMEs. Further, some SMEs may be reluctant to chase late payments for fear of jeopardising the business relationship. When payments have to be chased, good will, time and energy are unnecessarily wasted on both sides.

In tough economic times, as costs rise and margins are squeezed, SMEs are particularly vulnerable to cash-flow problems. Yet, in 2022, SMEs were owed an average of £22,000 in late payments. This has massive negative impacts on reinvestment, liquidity and market operation.

We know that we have a serious productivity problem in our economy. We can also agree that SMEs are the lifeblood of a healthy economy. So I am unsurprised that a consultation on these regulations last year strongly supported their extension and expansion. The expansion requires companies to publish additional information on both the proportion of disputed invoices resulting in payments exceeding the agreed times and the value of invoices paid late, in addition to the number of such invoices—an important improvement, in my view. It also requires companies to report on the percentage of invoices paid before 30 days, within between 31 and 60 days, and after 61 days or longer.

--- Later in debate ---

[Lord Johnson of Lainston (Con)]

I greatly thank noble Lords for their passionate inputs into this debate. This is a serious issue. I should say that, although I do not believe I have any personal conflict, I would recommend that all noble Lords inspect my register of interests because, clearly, I have interests in businesses. Indeed, the noble Lords, Lord Leong and Lord Fox, and I have all had experience of working in small businesses, and late payment is a significant issue. We have these dry statistics, but the reality is that it has an effect on people’s lives, induces stress and wastes time, with an impact on the economy. It is something that we have to take very seriously. We are all in agreement that extending these rules until 2031 makes absolute sense. I am grateful to my colleagues for supporting us in this cross-party and cross-Committee view.

Some relevant questions were asked, and I will try to cover them briefly, but I would be absolutely delighted to have a further conversation. I know that my colleague, Kevin Hollinrake, is certainly available to hear further input from noble Lords, if that would be useful.

The noble Lord, Lord Aberdare, made a point about the Small Business Commissioner. Let me say something; it may help to cover some of the other points made by noble Lords. The Payment and Cash Flow Review Report issued by Minister Hollinrake at the end of last year—I thought that it was a clear and excellent report—covers nearly all of the questions asked by noble Lords today, in particular the point about the Small Business Commissioner. The intention, to which we are absolutely committed, is to introduce broader responsibilities, which will allow said commissioner to undertake better investigations and publish reports; this will help significantly, I think.

The noble Lord, Lord Leong, asked who currently enforces the payments process. It is the Department for Business and Trade. We publish that data—it is on the Government’s website—and we also have a team tasked specifically with ensuring that we monitor late payment. That information is published.

I am sensitive to the point made by the noble Lord, Lord Fox, about the competitive case. As someone running a small business, one is—I was, and we were—obliged to take whatever business one can get. That is not irrelevant when it comes to the publishing of businesses’ competitive positions among each other; it is important. Similarly, the work that we have done on Companies House, with input from many noble Lords opposite, allows us to have better data around companies’ behaviour, which will have a significant impact. As I understand it, at least anecdotally, there is a concept in the consultation of competition between companies in terms of wanting to be a better payer is something that is not to be taken lightly.

I refer noble Lords to the report, looking at concepts such as late payments to be embedded in environmental, social and corporate governance standards, and so on. This will all have ultimately important impacts.

I have two other points, before I conclude, about the construction sector. Again, we have been very clear that we are looking to severely control the principles around retention payments, how they can be levied and how that operates in the information that we publish on that. We have been working very closely with an organisation called Build UK, which now publishes league tables on payment performance within the construction industry. This is a very clear flagged issue and something we are certainly working on. I am happy to write to noble Lords with further information if that is useful.

Lastly, the noble Lord, Lord Fox, raised a very important point about government procurement: how can we ensure that the Procurement Act is used more effectively to ensure that, through the supply chain, government procurement, which accounted for however significant a percentage of all procurement in the UK, is used to drive payment terms from its suppliers? That is a core element of this and it is worth saying that, since legislation was brought in in 2017, average payment times have reduced from 81 days to 36 days, which is a significant reduction. That is a single statistic, and I am very aware that it does not represent the value of the deals or go into a huge amount of detail, but that is the information that I have been given and I think it is very encouraging. Clearly, there are outliers and industries where there are still issues over payments. The Government take this point extremely seriously. It is a cornerstone part of our policy agenda to help small businesses, and indeed help the economy, to function properly. I am very grateful to all noble Lords for their input.

[Lord Leong (Lab)]

The Minister mentioned the drop in procurement payment from 81 days to 36 days. That is obviously very encouraging, but do the Government have figures for how long it takes the main contractor to pay its subcontractors?

[Lord Johnson of Lainston (Con)]

I am grateful to the noble Lord, Lord Leong, for that point. We will have this data. I am looking, and average payment times between businesses peaked in December 2020 at 30 days and is now down to 35.6. I do not have the data in front of me for what it was before these regulations came in, but there is a very clear downward trend that can be seen in a chart in the report. I am happy to show noble Lords and to write with more specific information. The whole point about this exercise is to have the information to demonstrate what the trends are and who is not following the right courses of action.

National Minimum Wage

Lord Leong Excerpts

Wednesday 21st February 2024 Lords Chamber

[Lord Offord of Garvel (Con)]

I thank my noble friend for that. The cost to business is a consideration that we must consider. The cost of this particular increase will be £3 billion over six years and I emphasise that it will fall largely on the SME community. Some 99% of our companies are SMEs, with 2.5 million VAT-registered companies. Setting aside the 10,000 companies that employ 30% of the workforce, 60% of the workforce are employed in SMEs and they are bearing the brunt of exactly these wage increases. We survey employers and they want to pay higher wages. We want a good, well-paid workforce but we must do so in a way that balances the needs of business and workers.

[Lord Leong (Lab)]

My Lords, I thank the noble Lord, Lord Bird, for his tireless campaigning to tackle homelessness and poverty. Even at my advanced age, I enjoy celebrating birthdays, but I have never believed that my hourly work increases by 50% simply by ageing a year—yet that is implied by the national minimum wage banding between 17 and 18 year-olds. These days it is a real struggle to survive on the full national minimum wage. Does the Minister agree that lower rates represent unfair age-based discrimination and send the wrong message to young people at the start of their working life?

[Lord Offord of Garvel (Con)]

I thank the noble Lord for that. I think I have already addressed that question. We have to set the national minimum wage as high as possible for young people without damaging their prospects. We have to encourage them into the workplace. We have to avoid the longer-term scarring effects from long spells of unemployment that I have talked about. That is what this metric achieves.

Registered Office Address (Rectification of Register) Regulations 2024

Lord Leong Excerpts

Monday 19th February 2024 Grand Committee

[Lord Fox (LD)]

My Lords, as someone who has spent a lot of his professional life working on annual reports, I have often had questions about GAAP, but the Minister will be pleased to know that I will not ask them today.

The four SIs before us are to be welcomed. They are steps on the way from our discussions on both the last economic crime Bill and the one before that. We are moving forward, in a sense. I am glad that the noble Lord, Lord Vaux, introduced what I call the Knighton collection of companies that were registered to a terraced house in the Welsh borders, not far from where I live—as I believe does the noble Lord, Lord Bourne. I would like some reassurance that the statutory instrument on registered office addresses would deal with that.

As the noble Lord, Lord Vaux, eloquently set out, there are a lot of steps to go through to eliminate falsely registered companies. It comes back to the question of whether Companies House is capable of really handling this, ceasing to be a filing cabinet and starting to be an investigative organisation. To echo the point made by the noble Lord, Lord Vaux, it would be very helpful to have an update on how the huge cultural change that Companies House needs is going. Many of us were impressed by the team that we saw, but also a little frightened by the huge task that it has in front of it to make these SIs and the next 51—or however many there are—come to life.

I have some trepidation on the second of these SIs, on limited liability partnerships, because the noble Baroness, Lady McIntosh, seated opposite, is our Scottish legal expert. I wondered where Scottish partnerships come in, because the territorial extent of that statutory instrument is the whole UK. Where do Scottish partnerships sit within that?

The service address and principal office address regulations are useful and important too, but expose the central weakness that is still within our system. After all the work we did on the Bill, those with control still have the ability to hide that control. We welcome the Service Address (Rectification of Register) Regulations and the Principal Office Address (Rectification of Register) Regulations, but can the Minister set out, either now or in writing, how we are going to eliminate the cancer within this system of people obscuring the real ownership of assets to the authorities and wider society? With that, we welcome these four statutory instruments.

[Lord Leong (Lab)]

My Lords, I thank the Minister for setting out these regulations and everyone who has spoken in this short debate. I will take these instruments one at a time.

Under the current system, criminals can—often by using data unwittingly shared or stolen and for sale on the dark web—fraudulently register an individual residential address as a registered office with Companies House, without the knowledge of the actual residents. Since 2011 it has been possible for companies to be incorporated within 24 hours for as little as £12, with Companies House making no checks on the veracity of the address. Once this has been done, the perpetrators can apply for credit, business loans and other financial arrangements. This fraud often does not come to light until the individual wants to apply for credit and finds that they are unable to do so, often resulting in considerable problems.

This instrument relates to where individuals have had their residential address hijacked. It allows the registrar to change the address to a default address and to strike the company from the register of companies if a genuine new address is not provided. It establishes criminal offences for companies and officers where they do not comply. We welcome the streamlining of this process and expansion of the registrar’s powers that this instrument provides, including that, as well as acting on the basis of applications, the registrar can when necessary act unilaterally based on any information in their possession to move swiftly to change a company’s registered office address without giving notice in advance.

However, I would like to know how the Government seek to protect and support victims of these fraudulent practices, as mentioned earlier by the noble Lords, Lord Vaux and Lord Fox. Can the Minister say how they will be informed of developments? Will victims be supported if issues continue for them beyond the changing of the registered address—for example, if they have negative notes or ratings on their credit file? If so, how will this be addressed?

Given that this is clearly a widespread practice, does the Minister have any information about provisions to actively check business addresses? There could be existing situations in which fraudulent addresses are in use but currently unchanged or undetected; they may not come to light until the innocent victims have their lives blighted by the discovery of a fraudulent registration of which they were unaware, as in the case in Wales that was mentioned. Does the Minister have accurate figures for how many addresses are registered? Surely it must be in the millions. If, as I suspect, it is on that scale, what analysis has been done on whether this instrument will create an influx of work for the registrar? Has resource been allocated for this?

I move on to LLP. This instrument will ensure that the reforms to company law made by the Economic Crime and Corporate Transparency Act 2023 also apply to the law governing limited liability partnerships. It will ensure that company law applies without arbitrary differences between companies and LLPs. It pertains to straightforward administrative amendments relating to a company’s name, registered office and email addresses, its directors, annual confirmation of accuracy on the register, information about persons with significant control and so forth. We support this legislation, which seems both reasonable and straightforward, and so on this occasion I do not have any further questions for the Minister.

I move on to the Service Address (Rectification of Register) Regulations 2024. As many noble Lords will know from personal experience, directors and secretaries of companies and persons with significant control over companies are required to notify the companies registrar of their service address—that is, a location where documents may be deemed effectively served on that person.

This instrument empowers the registrar to change the registered service address to a default address nominated by the registrar where the registrar is satisfied that the registered service address does not meet the necessary legal requirements. The registrar may change the address by their own motion or on application and may also, at their discretion, change the address without notice or after a period for objections, the length of which may also be at the registrar’s discretion. Clearly, the situation in which company directors, secretaries and persons of significant interest could attempt to delay or evade being held to their legal responsibilities by providing non-compliant addresses would be unsatisfactory.