Question to the HM Treasury:

To ask His Majesty's Government what progress they have made in reforming environmental, social, and governance rules to ensure that they are not used by financial institutions to deny banking services, including loans, to the UK defence sector.

Answered by Lord Pitt-Watson - Parliamentary Secretary (HM Treasury)

The government recognises the vital contribution that the UK defence sector makes to national security and has been clear that investing in defence can be consistent with ethical investing and environmental, social and governance principles.

Last year the government laid secondary legislation to bring the provision of Environmental, Social and Governance ratings into scope of the FCA’s rule making powers. This will allow provide greater transparency around ESG ratings methodologies, support greater investor awareness – including for opportunities relating to defence companies.

The upcoming Defence Finance and Investment Strategy will look at how barriers to investment in defence can be removed while making the sector more attractive for private investment, including venture capital, private equity and pension funds.

Question to the Department for Business, Innovation, Science and Trade:

To ask His Majesty's Government, further to the remarks by Lord Leong on 21 July (HL Deb col 1078), whether businesses will be expected to determine their own size, and that of their business partners.

Answered by Lord Leong - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade)

For the purposes of the Commercial Payments Bill there is no general requirement for businesses to establish their size or that of their partners. Certain categories of business, will be able to benefit from exemptions from maximum payment terms – on the basis of size. Therefore, businesses wanting to rely on these exemptions will need to ensure they fall within the relevant category. This should be simple and pose minimal burden for those businesses seeking exemptions. Business size thresholds will be confirmed through regulations following a consultation with stakeholders.

The Small Business Commissioner will be able to examine whether the relevant size conditions have been met and take appropriate action where an exemption has been claimed improperly.

Question to the Department for Business, Innovation, Science and Trade:

To ask His Majesty's Government, further to the remarks by Lord Leong on 21 July (HL Deb col 1070), what assessment they have made of whether commercial contracts subject to sections 233, 233A and 233B of the Insolvency Act 1986 are treated differently to other creditors.

Answered by Baroness Lloyd of Effra - Parliamentary Under-Secretary of State (Department for Digital, Culture, Media and Sport)

All creditors in an insolvency are treated equally in their class according to a strict statutory priority. Without the provisions in sections 233 to 233B Insolvency Act 1986, essential suppliers could demand payment of existing debt, thereby undermining this priority. The provisions strike an important balance between the rights of the supplier and the benefits of business rescue, with mitigations included to prevent hardship. A 2023 review of the provisions found early positive signs that they are meeting their objectives and produced an estimated ongoing annual benefit to business creditors from increased company rescue of £73.2m.

Question to the Department for Business, Innovation, Science and Trade:

To ask His Majesty's Government, further to the remarks by Lord Leong on 21 July (HL Deb cols 1068-1070), what assessment they have made of the economic impact of the new section 2E(2) of the Commercial Payments and Interest on Late Payment Act 1998.

Answered by Lord Leong - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade)

The Government has assessed section 2E(2) as part of the wider impact assessment for the Commercial Payments Bill as a whole, where the measures are aimed at addressing the estimated £11 billion cost of late payments to cost the UK economy each year.

Section 2E(2) provides a targeted exemption from the statutory payment term restrictions, where the purchaser is the smaller party, preserving flexibility for smaller purchasers when contracting with larger suppliers. The impact assessment looks at the costs of businesses identifying and implementing exemptions. Exemptions introduce additional administrative burdens for businesses, with larger estimated costs for large businesses compared to smaller ones. The full assessment can be found in the costs and benefits analysis annex of the published impact assessment: https://assets.publishing.service.gov.uk/media/69c054b11263ce46c3690c7c/prompt-payments-primary-legislation-impact-assessment.pdf

Question to the Department for Business, Innovation, Science and Trade:

To ask His Majesty's Government, further to the remarks by Lord Leong on 21 July (HL Deb cols 1068-1070), whether they plan to review the 60-day maximum payment term for non-public authorities; and what plans they have, if any, to incentivise early payment.

Answered by Lord Leong - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade)

Large businesses are required to publish payment data through the Payment Practices and Performance Reporting Regulations 2017. The effects and impact of the Commercial Payments Bill will be monitored following its implementation. Sixty days is a maximum, not a target. The Government will continue to encourage businesses to agree and meet shorter payment terms. We will continue our work to encourage businesses to pay even faster with the Small Business Commissioner who administers the Fair Payment Code, encouraging businesses to pay in 30 days.

Question to the Department for Business, Innovation, Science and Trade:

To ask His Majesty's Government, further to the remarks by Lord Leong on 21 July (HL Deb col 1078), in which scenarios the Secretary of State would consider adopting a business-size definition different to existing definitions.

Answered by Lord Leong - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade)

For the purpose of exemptions to maximum payment terms under the Commercial Payments Bill, the Government will consider aligning with business size definitions in existing legislation. Definitions of business sizes will be set out in secondary legislation, following consultation with stakeholders. Any departure from an established definition will therefore require a clear and evidenced justification.

Question to the Department for Business, Innovation, Science and Trade:

To ask His Majesty's Government, further to the remarks by Lord Leong on 21 July (HL Deb cols 1068-1070), what assessment they have made of whether late payments may be the fault of a third party or a bank; and whether such payments should be subject to statutory interest.

Answered by Lord Leong - Parliamentary Under-Secretary of State (Department for Business, Innovation, Science and Trade)

The Government has not made a specific assessment of late payments being caused by third parties or a bank, but it does recognise late payments are often accidental and can arise due to issues with systems.

The Commercial Payments Bill preserves and strengthens the existing statutory interest regime, under which statutory interest arises where a qualifying payment is made late. Where a qualifying debt remains unpaid after the relevant date, statutory interest will generally accrue even if the purchaser attributes the delay to its bank, payment provider or another third party begins to run and strengthens enforcement of payment obligations.