Employment Rights Bill: Productivity

Lord Sharpe of Epsom Excerpts

Monday 31st March 2025 Lords Chamber

[Baroness Jones of Whitchurch (Lab)]

The employment Bill that we have before us today is a very substantial piece of legislation. There will be further opportunities in the make work pay plan to come back to some of the wider issues and I look forward to debating those when the opportunity arises.

[Lord Sharpe of Epsom (Con)]

My Lords, at Second Reading last week, I asked the Minister to name one company—apart from the four that are routinely trotted out by the Government—that is supportive of this Bill. She did not answer the question, so I invite her to have another go, because we would really like to talk to them.

[Baroness Jones of Whitchurch (Lab)]

The noble Lord will know that we have had extensive discussions with all the employment bodies that are engaged. Those stakeholder discussions are continuing. I am sure that we can provide further details, but the important thing is that those stakeholders have been engaged and listened to. We are continuing with that engagement and that will help the policies going forward.

Employment Rights Bill

Lord Sharpe of Epsom Excerpts

2nd reading
Thursday 27th March 2025 Lords Chamber

[Lord Sharpe of Epsom (Con)]

My Lords, I join in thanking the Minister for her introduction, and, of course, in praising and commending the speeches of the four maiden speakers today: the noble Baronesses, Lady Berger and Lady Gray of Tottenham, and my noble friends Lady Cash and Lord Young of Acton. This has been a very interesting debate. Before I start, I should declare my interest as a minority shareholder in two businesses that employ people. It is a pleasure to follow the noble Lord, Lord Fox. I found myself nodding in agreement with much of what he said, and I will do my best not to repeat all of it.

Others have commented on the fact that this, overall, is a troubling Bill, and for numerous reasons—not least, as my noble friend Lord Hunt of Wirral articulated so expertly, its excessive reliance on secondary powers. I will not expand on that now, as the case has been made—and, indeed, reinforced just now by the noble Lord, Lord Fox—but I will focus my remarks on two areas where, to use a phrase coined by my noble friend Lady Penn, the balance is seriously wrong. They are the inevitable and disproportionate impact on SMEs, acknowledged in the Government’s own impact assessment, and the day-one rights and their inevitable impact on hiring.

I begin by turning to the bigger picture and quoting from the Government’s own impact assessment. It states:

“Many of the policies within the Bill could help support the Government’s Growth Mission … we conclude the direct impact on growth could be positive, but small”.


The word “could” appears 132 times in the assessment. That is the language not of confidence but of uncertainty and hesitation, and it shows a fundamental lack of conviction in the very legislation before us.

While the Government dither, businesses are suffering. Indeed, as we saw only yesterday, the OBR downgraded growth forecasts from 2% to 1%. A particularly telling phrase in the explanatory note—as already referenced by my noble friend Lord Moynihan—said

“we have not incorporated any impact of the Government’s Plan to Make Work Pay as there is not yet sufficient detail or clarity about the final policy parameters.”

It goes on to say:

“Employment regulation policies that affect the flexibility of businesses and labour markets or the quantity and quality of work will likely have material, and probably net negative, economic impacts on employment, prices, and productivity”.


That is an explicit acknowledgement of the uncertainty generated by this Bill, and an admission that implies that more downgrades are to come. Let us look at the facts. The business confidence index for the United Kingdom stood at 97.4 in December 2024, a sharp decline from the previous month and the lowest reading since July 2020. That, of course, was a time of extraordinary crisis, global shutdowns and economic freefall. Yet today, with no pandemic to blame, we find ourselves again teetering on the brink.

The Institute of Chartered Accountants in England and Wales’s Business Confidence Monitor, which is the most comprehensive measure of sentiment in our business community, plummeted from 14.4 to a mere 0.2 in Q4 2024. The Institute of Directors confirms this: its Economic Confidence Index dropped to minus 64 in February, close to the lows reached during Covid. Regarding this Bill specifically, the Institute of Directors’ survey suggests that 57% of business leaders will be less likely to hire.

ICAEW members across the UK have raised concerns about the Bill’s impact on costs, labour flexibility and business dynamism. According to a poll of its members, 73% expect the Bill to increase employment costs for new and existing employees. One said, “It is like rushing down a hill towards a lake and pressing the accelerator.” The OBR has told us how this ends: in unemployment, and it will be unemployment of the Government’s own making. On that subject, that is one statistic that noble Lords opposite failed to cite when making their international comparisons. For the record, it is currently 7.3% in France, 6.2% in Germany and only 4.4% here.

What is driving this collapse in confidence? It is the suffocating weight of excessive taxation and crippling uncertainty about the future, as many others have noted. Small and medium-sized enterprises, which concern those of us on these Benches considerably, are rightly hailed as the backbone of the British economy, and for very good reason. SMEs account for 60% of UK employment and 48% of business turnover. Their confidence has turned negative for the first time since Q4 2022, falling from 12.8 to minus 4.7. That figure is not just a dry statistic. It represents thousands of business owners lying awake at night, wondering whether they can afford to keep the lights on, let alone hire new staff or invest in their future.

We should be under no illusion: the cost of this uncertainty is devastating. The Federation of Small Businesses reported that a staggering 33% of small employers now expect to reduce staff. That number has doubled in just one quarter. Meanwhile, only 10% of small firms plan to take on new employees. The result will be a shrinking economy, a contracting workforce, reduced opportunities for young people and those seeking to move from welfare to employment, increased costs and bureaucracy, and a country that is clearly retreating from ambition rather than embracing it.

If more confirmation is needed of this picture, the Government’s own impact assessment for the recent SI, the National Minimum Wage (Amendment) Regulations 2025, confirms the difficulties facing small business. It states that

“there is some evidence of challenging business conditions for SMEs specifically. Around 42.7% and 36.8% of micro and small businesses, respectively reported having less than three months of cash reserves in September 2024 (compared to 19.2% for large businesses). Around 15.6% and 33.9% of micro and small businesses, respectively, reported the cost of labour as a challenge to business turnover in November 2024.”

It is not clear whether, by the “cost of labour”, it was talking about the workforce or the party opposite. SMEs will need many exemptions from the provisions of the Bill. Yet the picture I have just painted is about to be made worse, as the Bill chooses to add yet another burden: disastrous day one rights for unfair dismissals and statutory sick pay.

So I ask a simple question: who truly understands what a business needs to thrive and survive? Is it the entrepreneur who has built something from nothing, the employer who fights every day to keep their company afloat, or an employment tribunal that is removed from the realities of running a business yet is now empowered to make decisions that could determine its fate? As the data reported last year by His Majesty’s Courts & Tribunals Service makes clear, employment tribunals are currently not able to make any speedy judgments. The Law Society described the backlog as “spiralling” and a very well-known legal firm described the tribunals to us as

“a bit of a laughing stock”,

“creaking” and “hugely unreliable”. That firm might be expected to support the Bill out of self-interest, but it does not.

The Bill makes it harder for businesses to prove that redundancies are genuine. It creates a scenario where every decision could be second-guessed by tribunals that the legal profession thinks are a bit of a laughing stock. Every restructuring might have to be questioned and every difficult choice turned into an expensive legal battle. Why would a business fire for no reason? Businesses need motivated, skilled employees, and they need time to assess the likelihood of an employee acquiring those skills and demonstrating that motivation. The noble Lord, Lord Vaux, put this very well and comprehensively explained it. However, to quote one of his Cross-Bench colleagues—the noble Lord, Lord Moore of Etchingham—in a newspaper column the other day, this clause is,

“as if children, once admitted to a school, were immediately deemed to have passed all the ensuing exams”.

As my noble friend Lady Cash noted, this is not an us-and-them perspective. Even if there were no other reason, retention is cheaper than firing and rehiring. Yet the Bill assumes, without evidence, that businesses are acting in bad faith, that they need tribunals to intervene and that they do not already have a strong incentive to retain talent.

The cost of all this will be staggering. The impact assessment suggests £5 billion, which will inevitably prove to be optimistic and which will inevitably fall disproportionately, as the Government admit, on the very SMEs we need to power growth—SMEs that the facts say are already struggling as a result of this Government’s other misguided policies. Instead of managing their businesses and seeking new markets and customers, they will be bogged down in human resources. If they get it wrong, they will be bogged down in litigation, endless documentation and the endless hiring of legal experts to justify every strategic decision. This is not just bureaucratic overreach but an outright violation of business autonomy.

A business should be able to shape its own workforce in response to market demands, competition and innovation, yet under the Bill it seems that businesses can only make such decisions when faced with an existential crisis. What recourse would a company struggling with stagnation and trying to bring in fresh talent and stay ahead in a fiercely competitive world have? We must ask ourselves: do we want a thriving economy and businesses that grow, invest and create jobs, or do we want a system that strangles them in red tape, drags them into courtrooms and forces them into stagnation? The Bill, as it stands, will not boost our declining growth, restore business confidence or create jobs. Instead, it will leave many businesses trapped: unable to adapt, unable to compete and, ultimately, unable to survive.

So I ask the Minister: have the Government considered the likely impact of the measures in the Bill on their recently stated aim to move people off long-term welfare? Can they speculate as to the likely effect of day 1 unfair dismissal rights and statutory sick pay rights on that ambition? Can they answer why a prospective employer might take a risk on a potential employee who is recovering from a long-term medical condition? The obvious net effect of these measures will be to encourage employers to do more due diligence, be more risk averse and rely more on references and less on intuition. That will have a very damaging impact on social mobility and workforce diversity. How do society or the individuals and businesses affected benefit from that? How is that—to use the words of the noble Lord, Lord Livermore—either compassionate or fair?

Beyond the immediate damage to business confidence, we must consider the broader implications for the UK’s attractiveness as a destination for investment. Capital flow is where it is welcomed. Investment thrives where there is stability, flexibility and a regulatory framework that encourages and does not obstruct growth. The Bill sends precisely the wrong message to investors. It signals that the UK is becoming a more complex, risk-laden and bureaucratic place to do business. Why would international companies choose Britain when they can invest in economies with more business-friendly policies?

Ministers claim that employment protections will create a fairer economy, but they fail to acknowledge the reality: an economy that cannot attract investment is an economy that cannot create jobs at all, and surely that is the ultimate unfairness. Or, to put it another way, and to use the words of the noble Lord, Lord Watson, surely the greatest dignity of all is to have a job.

As we have heard, there is plenty more in the Bill that we will be addressing in Committee. My noble friend Lord Young of Acton made a brilliant maiden speech, drawing heavily on his experience with the Free Speech Union and talking to the invidious Clause 20. We will support him. As a reminder, my noble friend pointed out that employers are already liable for the sexual harassment of third parties under the worker protection Act. On flexible working, we struggle to understand the problem this is trying to fix. As my noble friend Lord Hunt said earlier, a majority of workers on these contracts seem to like them. The Recruitment and Employment Confederation states that 79% of respondents to their recent survey like flexible working because of the flexibility. The Chancellor says she wants to tear down regulation to boost growth, but this Bill introduces a new quango with perhaps alarming, to use the word of the noble Lord, Lord Fox, or even Kafkaesque powers.

We have spoken to all the major business organisations and many employers with real-world experience, and we can find none that supports the Bill. We found unanimity that it will cause considerable damage. Can the Minister give any examples, apart from those four that she has already mentioned and which have been trotted out fairly frequently over the past few months, of actual, real employers that support all the Bill? Please name just one, as we would love to talk to them to see what we have missed. We will of course also be turning to the subject of trades unions, to which a number of noble Lords have spoken. In particular, I commend the contributions of the noble Lord, Lord Burns, the noble Baroness, Lady Fox, and indeed the noble Lord, Lord Fox, from the Liberal Democrat Benches, for their thoughtful interventions on this.

We believe that the UK stands at a crossroads. We understand the intent behind the Bill, and of course there are some things in it that we can support. But we can either embrace policies that made us a global leader in investment and innovation, or we can burden ourselves and businesses with regulations that drive them elsewhere. I believe that the Government are serious about growth, but I have no choice but to conclude that the choice here is straightforward: they can have this Bill or they can have growth, but they cannot have both.

US Steel and Aluminium Tariffs

Lord Sharpe of Epsom Excerpts

Wednesday 12th March 2025 Lords Chamber

Asked by

[Lord Sharpe of Epsom]

To ask His Majesty’s Government what steps they plan to take to mitigate the impact of US steel and aluminium tariffs on the UK manufacturing sector.

[The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Information and Technology (Baroness Jones of Whitchurch) (Lab)]

My Lords, it is disappointing that the US has today imposed global tariffs on steel and aluminium. The UK will always be a champion of free and open trade, which is essential in delivering our Plan for Change. We are resolute in our support for the UK steel industry. This Government are working with affected companies today, and we back the industry’s application to the Trade Remedies Authority to investigate what further steps might be necessary to protect UK producers.

[Lord Sharpe of Epsom (Con)]

I thank the Minister for her Answer, and I am pleased to hear about the steps she is taking. To move on slightly, I was pleased to hear that the Prime Minister acknowledged, during Prime Minister’s Questions today, the Brexit benefit of seeking a trade agreement with the United States to avoid tariffs. However, while the UK looks to negotiate with Washington, the EU has already retaliated against US tariffs, so the Government must now recognise that resetting relations with the EU at this moment risks dragging the UK into an escalating transatlantic trade war. Last month, a close ally of Donald Trump, Stephen Moore, made it clear that Britain will have to choose between its special relationship with the US and closer ties to the EU. The time for vague statements and talk of all options being open is surely over; we need clarity. Now that the US and the EU are openly in a trade war, do the Government not see the urgency of making their position clear? What will the UK prioritise—the special relationship or Brussels?

[Baroness Jones of Whitchurch (Lab)]

My Lords, as the Prime Minister has made clear, when it comes to the national interest, he rejects having to make any false choice between allies. We are committed to continuing our work with both the US and the EU to remove barriers to trade and help UK businesses grow. Our number one priority will be the growth of the UK economy and free and open trade with our most economically important partners. We will only ever sign trade agreements which align with the UK’s national interests.

Neonatal Care Leave and Miscellaneous Amendments Regulations 2025

Lord Sharpe of Epsom Excerpts

Monday 10th March 2025 Grand Committee

[Baroness Wyld (Con)]

My Lords, I rise to support these statutory instruments wholeheartedly, and thank the Minister for setting them out so comprehensively and clearly. It was a great privilege to sponsor the Neonatal Care (Leave and Pay) Bill in this House. I am most grateful to Minister Justin Madders in the other place for writing to let me know that these SIs would be introduced.

The definition of neonatal care that the Government have arrived at is very good. Clearly, a lot of meticulous work went into that. At the end of last year, I finished serving on the Preterm Birth Committee, so brilliantly chaired by the noble Lord, Lord Patel. I reflect that, as with this Bill, it is so important that policy developments are rooted in the experience of families, as the Minister set out. As she said, these families are going through the most difficult situation.

I shall try to keep my remarks brief, but I wanted to put on the record my thanks to all the organisations and campaigners—and particularly the parents who told me their stories, and who have come back now and said what an impact this change will have. I thank Bliss for its briefings and for keeping up the pace on this. I reflect that, when the parents have come and campaigned, they have never asked for the world. They appreciate that, as the Minister said, one has to balance the needs of employers and employees, which is why the consultation with stakeholders that she referred to was so important.

This has been one of the best examples of cross-party working. When I came to this House, I never thought that I would work with the SNP, but it was a real pleasure so to do with Stuart McDonald in the other place in the last Parliament. I am proud that it was a Conservative Government that backed this Bill, but I also want to be generous of spirit and pay tribute to the Labour Party. When it was in opposition, it was incredibly helpful in getting this through. It was designed in close consultation with employers. As the Minister said, we always said that we hoped that employers would go further where and when they could. I just reflect that, as we go into future discussions about employee relations, dialogue is absolutely essential to ensuring that we can produce outcomes that everybody can get behind.

The Minister will be aware that groups of families will not be able to access this pay because of their different employment statuses. Can she say something about what the department is doing to look at what we might do in the future on that? She talked about making sure that HMRC is prepared, which will obviously involve raising awareness of these regulations and this change. Bliss and others have done a great job, but there is more we can do to make sure that parents know they are entitled to this—just to ease that anxiety.

This provision should make a real difference to many families—and families have told me that it would have done, if it had been there when they went through this. I hope that a lot of families will be spared some of the stress and worry that comes at the most difficult time. I thank the Minister once again for bringing these instruments before the Committee.

[Lord Sharpe of Epsom (Con)]

My Lords, I thank the Minister for her comprehensive introduction of these regulations. We on this side of the Committee support the introduction of these statutory instruments. As my noble friend Lady Wyld mentioned, the Conservative Party made a clear and firm commitment in its 2019 manifesto to introduce neonatal care, and it would be very remiss not to join the Minister in praising my noble friend Lady Wyld for her sponsorship of this Bill through the House of Lords. Her commitment was instrumental in delivering the Act, and she deserves enormous praise for that.

It is with a measure of cautious optimism that we now find ourselves in a position to support these measures—so long as we continue to build on the sensible and pragmatic improvements to workers’ rights that we, as Conservatives, introduced during our time in government. It was under our stewardship that we introduced shared parental leave, which affords families greater choice and flexibility. We also instituted carers’ leave, which granted employees valuable time off to care for their loved ones. Furthermore, we championed flexible working arrangements, giving both employers and employees the autonomy to determine working practices that best suit their needs.

As a result of these reforms, Britain now boasts one of the most generous systems of maternity and paternity leave anywhere in the world, ensuring that families are afforded the opportunity to spend vital uninterrupted time with their newborns. These advancements were not made in isolation; they were achieved, as my noble friend Lady Wyld said, through active dialogue and consultation with businesses and employees alike. That is how changes of this type should always be introduced; the Government may wish to take note.

I turn to the effects of this instrument, which aims to support employed parents of children born on or after 6 April 2025 whose babies require at least seven days of neonatal care within 28 days of birth. This measure is clearly a step forward, offering up to 12 weeks of paid leave for parents—one week for each week a child spends in neonatal care. The Official Opposition support this but there are questions to consider. How will the Government ensure that businesses, particularly small and medium-sized enterprises, manage these measures? Will the Government provide sufficient guidance and support to help employers navigate these changes smoothly? I notice that the Explanatory Memorandum says that guidance will be published before the regulations come into effect, but can the Minister reassure us that the guidance will be publicised widely and made available to employees? That may go some way to ameliorating the one-off cost of just over £4 million that the Minister pointed out would be an effect of these measures.

Additionally, although the Government have provided the statutory payment of £187.18 per week—or 90% of average earnings, whichever is lower—do they think this amount will be sufficient for parents to fully support themselves and their families during these challenging times? As my noble friend Lady Wyld pointed out, we hope that employees go further if they can, but, as she and I have said, we need to bring businesses with us.

There are several important questions regarding the scope and accessibility of these regulations. Although the provisions are designed to be inclusive, allowing parents in surrogacy arrangements and adoptive parents to take leave, what steps will the Government take to ensure that employers are fully aware of these provisions? How will they guarantee that leave is genuinely accessible to all those entitled to it, regardless of their work history or specific circumstances? Additionally, although businesses will be able to reclaim a portion of the statutory payment from HMRC, how will this process work in practice? Will the Government provide adequate support to help employers navigate the process smoothly, ensuring that there are no delays or confusion?

It is equally important to ensure that there is public awareness. The Government have indicated the development of a communications and stakeholder engagement plan to inform parents, employers and the public about these changes, but how will that work in practice? How will the Government ensure that the information reaches all parents, particularly those who may be unaware of their entitlement to neonatal care leave or pay? Can the Minister guarantee that the plan will be robust enough to reach every eligible family?

We support these measures but we must continue to scrutinise their practical implementation. Neonatal care leave and pay represent a significant step forward in supporting families during one of the most challenging periods of their lives. However, as with any new entitlement, the devil may well be in the details. How will the Government evaluate the success of these regulations over the first few years? Will there be a formal review mechanism to assess whether the scheme is meeting the needs of parents and businesses? It would also be most instructive to know how many parents are using this entitlement—whether it is the 60,000 estimated, or more, or less.

As I have asked a couple of times, how will the Government ensure that businesses, especially smaller ones, can manage the additional burden of these regulations? Will the statutory pay rate be sufficient for families already facing financial pressures? How will the public and employers be fully informed to ensure that the provisions are accessed effectively? Most importantly, can the Minister comment on the support that may be available to parents in Northern Ireland, as I believe these measures apply only to the mainland?

I look forward to hearing the Government’s responses to these questions and to ensuring that these regulations are implemented in a way that truly benefits the parents and children who need them most.

Tariffs: Canada and Mexico

Lord Sharpe of Epsom Excerpts

Tuesday 4th March 2025 Lords Chamber

[Baroness Jones of Whitchurch (Lab)]

My Lords, as I said, we are committed to working with both the US and EU to remove barriers to trade and to help UK businesses grow. It is obviously very early days, and we will continue to take a cool-headed approach to any possible tariffs. We remain prepared to defend the UK’s national interest where it is right to do so.

[Lord Sharpe of Epsom (Con)]

My Lords, it is very welcome to hear the Minister talk about the national interest, because the importance of a trade deal with the US obviously cannot be overstated. Indeed, the British Chambers of Commerce estimates that if a deal could be reached it would provide business with a stable basis for up to £1.5 trillion of bilateral investment between the two countries. The Prime Minister has said, very wisely, that he is neither with the EU nor the USA, but the EU would seem to be taking a different view. A spokesman said that we need to make up our mind who we are with. Given the regulatory differences between the two entities, what steps are His Majesty’s Government taking to ensure that closer alignment with the EU does not hinder progress towards a comprehensive trade agreement with the US?

[Baroness Jones of Whitchurch (Lab)]

My Lords, as I said, we are committed to working with both the US and the EU to remove barriers to trade and to help UK businesses grow. The noble Lord is quite right to draw attention to the fact that the US is one of our largest trading partners, with trade worth around £300 billion in September 2024, representing 18% of total UK trade. We have a long and deep relationship with the US, and we will obviously want to enhance that as the trade discussions continue.

Post Office: Capture System

Lord Sharpe of Epsom Excerpts

Thursday 12th December 2024 Lords Chamber

[Baroness Jones of Whitchurch (Lab)]

I thank the noble Baroness for that. There is a difference between Horizon and the Capture system. The Capture system was not networked to a central system like Horizon was, which meant the data in Capture could not be accessed or manipulated from elsewhere. However, notwithstanding that, we are looking at whether there have been miscarriages of justice. I am sorry to say this, but perhaps the noble Baroness should wait for the report we will produce next week. I feel frustrated saying this today, but I know noble Lords will understand how the machinery of government works. I hope to come back with clearer news next week.

[Lord Sharpe of Epsom (Con)]

More broadly, can the Minister tell us what safeguards are being put in place to ensure that no authority, public or private, can act with unchecked power similar to that exercised by the Post Office during the Horizon case?

[Baroness Jones of Whitchurch (Lab)]

The noble Lord is absolutely right to raise this; it is an issue that relates not just to the Post Office and Horizon. We are very aware of that and are looking at whether other actions should be taken on a more general basis. It is at the top of our list of concerns, and I hope we will be able to come back with more information on that.

Future of the Post Office

Lord Sharpe of Epsom Excerpts

Monday 18th November 2024 Lords Chamber

[Lord Sharpe of Epsom (Con)]

My Lords, I thank the Minister for the Statement. Like my honourable friend Andrew Griffith in the other place, I am pleased that the Government are building on the work of my right honourable friend Kevin Hollinrake to hasten the payments to the victims of the Horizon IT scandal. I am grateful to the Minister for this important update. Will she commit to regular updates going forward?

We learned with regret last week that the Post Office feels that it has no choice but to make radical decisions, announced by the chairman in the transformation plan, to reduce costs. We are told that this potentially threatens 115 branches and 1,000 jobs. This news prompts a variety of questions to the Minister. First, the Statement makes it clear that the Government expect the Post Office to consult postmasters, trade unions and other stakeholders. How disappointing that the communities that rely on these services have not been specifically mentioned. Surely the Minister agrees that the Post Office’s customers are an important group that should be consulted. Can the Minister therefore reassure the House that where closures are threatened, local communities are fully involved in the consultation process? Can she also assure the House that this will not herald another front in the Government’s current assault on rural communities, as epitomised by the family farm tax, and that the Government will review the family farm tax and other measures that affect rural communities to see how we can better support them?

In announcing these plans, the chairman of the Post Office said that the changes to national insurance in the Budget have made business more difficult for post offices. Can the Minister tell the House whether an impact assessment on the changes announced in the Budget for the Post Office was prepared and, if not, why not?

Business rates and national insurance contributions are going up. The threshold for paying them is going down, and obligations around the minimum wage are going up. It is impossible to conceive that, taken individually, these measures have not had some impact on all small businesses, but collectively they are devastating. As I do not believe that the Government would have been irresponsible enough to make these changes without assessing their likely impact, can the Minister commit to publishing all impact assessments?

The Post Office chairman made clear that his plans are subject to government funding. Can the Minister make a commitment that such funding will be forthcoming? Business rightly hates uncertainty.

Finally, it is welcome that the chairman has committed to increasing the number of banking hubs to 500 by 2030. We welcome that but, as my honourable friend in the other place noted, the devil is in the detail. I will repeat his question: has the Minister engaged with colleagues in the Treasury to discuss the impact of last week’s news on the banking framework negotiations, which are essential to underwrite this rollout of hubs?

[Lord Stoneham of Droxford (LD)]

My Lords, I welcome the noble Lord, Lord Sharpe, to his new Front-Bench role. The Post Office organisation is another problem area left by the previous Government. The Horizon compensation payments are still moving too slowly; there is confusion over the new IT systems in the Post Office; and the Post Office has been suffering from a lack of leadership for an organisation dealing with severe competitive pressures. Now we face, in recognition of high overhead costs, the announcement of the possible closure of 115 Crown post offices, with further damage to our high streets.

I have two initial questions. First, are the Government looking at simplifying the Horizon compensation process and speeding up decision-making? Secondly, is the expectation that many of the Crown post offices will be replaced by sub-post offices and franchise operations? On high streets and in rural areas, long-term sustainability of the post office network is vital to many communities, not least for those who cannot currently use digital alternatives to the post office services for cash, banking and financial services. Liberal Democrats have put forward proposals for the mutualisation of the Post Office. This would also give sub-postmasters more independence and control. It is welcome that the Government have announced broader reforms for the organisation and will publish a Green Paper next year. Can the Minister assure the House that this will include consideration of how mutualisation could ensure that the Post Office is fit for the future?

Will the Government also take this opportunity seriously to consider how to strengthen the role that post offices play in our communities so that they can offer more local services, from community banking to government services?

During many of the Horizon debates, when the Government were on the Opposition Benches, speakers often reminded us that then Ministers were the owners of the Post Office. The Secretary of State has levers to pull, so the fundamental question is how the Government choose to use this leverage now. Can the Minister confirm that the Government will use this ownership to ensure that, whatever happens, local communities will continue to have long-term access to Post Office offerings—all the services, including DVLA and passport services, that currently are on offer?

Economic Crime and Corporate Transparency Bill

Lord Sharpe of Epsom Excerpts

Consideration of Commons amendments
Monday 11th September 2023 Lords Chamber

Moved by

[Lord Sharpe of Epsom]

That this House do agree with the Commons in their Amendment 151A.

151A: In subsection (1), after first “body” insert “which is a large organisation (see sections ((Failure to prevent fraud): large organisations) and (Large organisations: parent undertakings))”

[The Parliamentary Under-Secretary of State, Home Office (Lord Sharpe of Epsom) (Con)]

My Lords, I will speak also to Motions F, G, H and H1. We cannot agree to the proposed amendments for practical reasons, not least that the burdens they would place on business would not just be justified. It is for this reason, and not because of any intransigence or party-political reason, that we are unable to agree with the proposed Lords amendments. I will now talk specifically to the Motions in this group.

Motion E would reinsert the SME exemption for the failure to prevent fraud offence. I have of course noted Motion E1, tabled by my noble and learned friend Lord Garnier. I appreciate that he has moved closer to the Government’s position on this issue, creating his own threshold that would exclude microentities from the failure to prevent fraud offence. However, the Government remain extremely mindful of the pressures on companies of all sizes, including small and medium-sized enterprises, and therefore do not feel it is appropriate to place this new, unnecessary burden on more than 450,000 of them.

The analysis on this issue remains clear: even reducing the exemption threshold to only microentities would increase the one-off costs on businesses from around £500 million to £1.5 billion. Further, the annually recurrent costs would increase from £60 million to more than £192 million. Those costs would still be disproportionately shared by small business owners.

I know some noble Lords have expressed scepticism about the burdens, but the fact is that when a small business person hears that they may be liable to a new offence and significant fines if they are judged not to have taken action on something, they will worry. They will take time out of their business to scrutinise the guidance and, whatever it may say, there could be widespread overcompliance. Furthermore, they may well have to pay their accountant or lawyer to do it for them. While this burden is eye-watering in its own right, the issue cannot be taken in isolation. We must be aware of the cumulative compliance costs for SMEs across multiple government requirements or regulations. Furthermore, I can assure noble Lords that 50% of economic activity would be covered by the organisations in scope of this new offence with the Government’s threshold in place. It is of course already easier for law enforcement to attribute and prosecute fraud more easily in the smaller organisations that fall below the threshold.

I hope that noble Lords who feel strongly on this issue will be reassured that this is not the end of the debate. The Government have future-proofed the legislation by including a delegated power to allow them to raise, lower or remove the threshold altogether. Of course, as with all legislation, the Government will keep the threshold under review and will make changes if there is evidence to suggest that they are required. I therefore urge noble Lords to support government Motion E, rather than Motion E1.

I now turn to government Motion G, which disagrees with Lords Amendment 158. This was also tabled by my noble and learned friend Lord Garnier and seeks to introduce a failure to prevent money laundering offence. I am pleased that no amending Motions have been tabled for today, as I fear this amendment is entirely duplicative of existing regulations. Much like my noble and learned friend’s other amendment, it would therefore impose yet further unnecessary burdens on UK businesses. The UK already has a strong anti-money laundering regime in the form of the money laundering regulations, which require regulated sectors to implement a comprehensive set of measures to prevent money laundering. Corporations and individuals can face serious penalties, ranging from fines to cancellation of registration and criminal prosecution, if they fail to take those measures. What is more, those penalties will apply even if no actual money laundering has occurred. No knowledge of or intention to commit an offence has to be proved.

The money laundering regulations and the money laundering offences in the Proceeds of Crime Act are directly linked and can be seen as part of the same regime. A failure to prevent money laundering offence would therefore be highly duplicative of the existing regime. This is not just the view of the Government: in our conversations with industry, it has been very clear that duplication would create a serious level of confusion and unnecessary burdens on businesses. We should support legitimate businesses, rather than hamper them with overlapping regimes. I therefore hope that noble Lords will agree with the government Motion to disagree with the amendment from Report.

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[Lord Coaker (Lab)]

My Lords, we have been pleased to support the legislation, which overall we think is very good, and we have said that to the noble Lord, Lord Sharpe. Indeed, the Government have listened, as have all the Ministers on the Bill, and made significant changes. Now we are left with just two amendments, put forward by the noble and learned Lord, Lord Garnier, and the noble Lord, Lord Faulks, which deal with two issues that remain outstanding but are of significant importance and deserve our support and consideration.

I want to reference one or two points made by the noble and learned Lord, Lord Garnier, because he made them particularly well. It is a proportionate and reasonable amendment to ask of the Government. There are all sorts of regulations and legislation—the noble and learned Lord referenced them—to which we say small businesses should be subject to, because we believe that it is the right thing to do and the right climate in which those businesses should operate. When it comes to the failure to prevent, the Government point out that 50% are covered by their legislation, which of course leaves 50% that are not.

Throughout the passage of the Bill, many of us have sought to ensure that the failure to prevent—which is a good step forward—applies, as far as possible, to as many businesses as it possibly can. The noble and learned Lord, Lord Garnier, asked why we would exclude many small businesses when they are not excluded from other legislation that may be seen as a burden. The argument is hollow and does not cut through. For that reason, and because the noble and learned Lord has put forward an amendment that takes into account what was said in the Commons, it deserves our support. Should he put it to a vote, as I think he suggested he would, we will support him.

Similarly, the noble Lord, Lord Faulks, notwithstanding the correction he made to the amendment, brings forward a very important point indeed. One of the great criticisms that is often made about dealing with fraud is that somehow law enforcement agencies are frightened of taking on the people who are committing fraud. I always thought it should be the other way around; the fraudster should be frightened of the law enforcement agency. Yet, for some bizarre reason, it is that way around—that cannot be right. It is not something that any of us want to be the case. Through his amendment, the noble Lord, Lord Faulks, has tried yet again to push the Government to do better and to do more than what is currently in the Bill. His amendment says to the Government, “Surely we should do better”. Indeed, the Treasury itself should be confident in the work of the law enforcement agencies. Some have suggested that those agencies should be indemnified against any costs they may incur.

I go back to two simple points. First is the point in the amendment from the noble and learned Lord, Lord Garnier: why should small businesses be excluded from this legislation, other than the micro-businesses to which he referred, when we do not exclude them from other legislation that we think is important? Small businesses adhere to that legislation in the same way as other businesses. Secondly, the amendment from the noble Lord, Lord Faulks, gives us an opportunity to turn the tables and ensure that, rather than the law enforcement agencies being frightened of costs they may incur in ensuring that fraudsters are brought to book, the fraudsters are frightened. That is why, if the noble and learned Lord, Lord Garnier, and the noble Lord, Lord Faulks, put their amendments to a vote, we will certainly support them.

[Lord Sharpe of Epsom (Con)]

My Lords, I thank all noble Lords who have spoken in this debate. I will respond relatively briefly; I think I have rehearsed the majority of the arguments widely and frequently, and there is not much point in saying more to some of them. However, the precise point I was trying to make in my opening remarks is, in essence, about proportionality. My noble friend Lady Noakes referred to that extremely eloquently.

My noble and learned friend Lord Garnier oftens points out that 99.5% of business is exempted, but I repeat that this is very much a judgment call because 50% of economic activity is captured. My noble friend Lady Noakes referred to the opportunity cost and the noble Lord, Lord Faulks, suggested that perhaps this is about businesses not checking whether they in some way have the right procedures in place to prevent fraud, but it is not about that. It is about many other factors that do not involve the business at hand, as my noble friend Lady Noakes referred to. Those other burdens are obviously partially financial, but not fully.

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Moved by

[Lord Sharpe of Epsom]

That this House do agree with the Commons in their Amendments 153A, 153B and 153C.

153A: In subsection (1), after “(Failure to prevent fraud)(1)” insert “and (2)”

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Moved by

[Lord Sharpe of Epsom]

That this House do not insist on its Amendment 159, to which the Commons have disagreed for their Reason 159A.

159A: Because the law already makes sufficient provision in relation to the prevention of money laundering.

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Moved by

[Lord Sharpe of Epsom]

That this House do not insist on its Amendment 161 and do agree with the Commons in their Amendment 161A in lieu—

161A: Page 172, line 44, at end insert the following new Clause—
“Report on costs orders for proceedings for civil recovery
Report on costs orders for proceedings for civil recovery
(1) The Secretary of State must assess whether it would be appropriate to restrict the court’s power to order that the costs of proceedings under Chapter 2 of Part 5 of the Proceeds of Crime Act 2002 are payable by an enforcement authority and, if so, how.
(2) In carrying out the assessment, the Secretary of State must consult such persons as the Secretary of State considers appropriate.
(3) The Secretary of State must publish and lay before Parliament a report on the outcome of the assessment by the end of the period of 12 months beginning with the day on which this Act is passed.
(4) In this section “the court” means the High Court in England and Wales.”