English Devolution and Community Empowerment Bill

Baroness Thornhill Excerpts

Thursday 5th March 2026 Grand Committee

Moved by

[Baroness Thornhill]

243: Clause 74, page 70, line 20, at end insert—
“(3) In performing its functions, the Local Audit Office must pay immediate regard to and investigate any issues concerning risk management identified by audit committees established under section 33A.”

[Baroness Thornhill (LD)]

My Lords, I will speak to Amendments 243, 249 and 250 in the name of my noble friend Lord Shipley, who regrets that he is unable to be with us today. We on these Benches absolutely understand why the Government have created this new entity of the local audit office in the Bill, but we will still listen with interest to the arguments put forward by the noble Lord, Lord Jamieson, and the noble Baroness, Lady Scott of Bybrook, on Clause 74. However, I believe that our concerns are different. These amendments speak directly to a problem that the Committee fully understands all too well: what happens when power runs ahead of scrutiny.

Amendment 243 is an early warning: it would require the local audit office to take immediate notice of serious management concerns raised by local audit committees. This is not an abstract concern. We have seen authorities where internal warnings were repeatedly raised about governance, liabilities or control systems, yet decisive action was delayed until failure became unavoidable. Audit that intervenes only after a Section 114 notice is not an oversight; it becomes a post-mortem.

I speak from bitter experience. When I was a councillor in opposition, we had our accounts disclaimed for two years on the trot. Apparently, this had never happened to any local authority before; we were not aware of it and we did not even know what the word meant until the auditor himself took the unprecedented step of breaking the story to the local Watford Observer—hence my passion to make this system work.

Analysing all those past failures, I find that they were not accidental. They were often accompanied by a pattern of executive overreach. Major decisions were taken at pace, scrutiny bodies were sidelined and challenge was treated as obstruction rather than protection. In some cases, significant financial commitments were entered into through mayor-led vehicles with limited transparency, optimistic assumptions and weak democratic oversight. In others, scrutiny committees raised concerns only to find themselves ignored, overridden or marginalised.

Amendments 249 and 250 are to deal with what happens next. They would ensure that audit scrutiny extends not only to money already spent but to how resources are planned to be used. They would allow serious findings to be made public where the audit committee considers this to be in the public interest.

Past failures were not hidden in the accounts; they were embedded in business plans, regeneration strategies and commercial ventures that were never properly stress-tested. Audit that cannot interrogate those plans early and that cannot speak publicly when necessary is simply too weak for the system that the Bill is creating.

This brings me to the local audit office itself. Done well, it could be a real asset. It could provide consistency, expertise, early challenge and a clear line of sight across a fragmented audit landscape. It could join up intelligence, spot emerging risks and give local leaders, mayors and central government the confidence that problems will be confronted early, rather than quietly managed until they explode.

We must be honest about the starting point—where we are now. The current local audit system is not working as it should, and I am absolutely certain that the Minister is aware of that. Audits are delayed, capacity is stretched and expertise is uneven. Serious concerns too often circulate without traction. The danger is that we create a local audit office in name but not in reality—an institution with responsibility but insufficient muscle.

This is now coming to the heart of our concerns, and this is what makes it more pertinent. The new system deliberately concentrates power in the hands of directly elected mayors over strategic planning, major investment decisions, long-term borrowing and delivery bodies operating at arm’s length. That concentration of power may deliver momentum, but it also magnifies risk when challenge is weak.

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I have set out the reasons why the Government will resist these amendments. I hope that noble Lords will feel able to withdraw or not press them.

[Baroness Thornhill (LD)]

I am going to be very honest and say that the Minister packed one heck of a lot into that response. I struggled to keep up with her and really understand the ramifications, because this matter is technical and detailed. I will revisit Hansard. I know that my noble friend Lord Shipley and I will have some detailed questions, which it did not seem appropriate to ask here but which we would like the Minister to go through with us. For us, this is about early, robust and public challenge. I am not sure that, with the Bill as it stands at the moment, we can be assured of that in the face of catastrophic failures that are shameful to local government, as well as this imbalance of power. The Minister knows that I want this to work, but I believe that it will work only if the scrutiny is as balanced as the powers of the new mayoral authorities.

With that caveat, in the hope that we will be able to have some specific discussions—and with the aim of reading the Minister’s detailed response in Hansard, perhaps tomorrow—I beg leave to withdraw the amendment, which was tabled by my noble friend Lord Shipley.

Amendment 243 withdrawn.

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We have tabled this amendment and these stand part notices because the evidence from legal practitioners, investors and the sector points overwhelmingly to the same conclusion: the blanket ban on upward-only rent reviews proposed by the Government is a blunt instrument with the potential to cause significant harm to the commercial property market, local regeneration and the very businesses that we all want to see thrive. If there is to be any reform in this area, it must be built on evidence, in partnership with the sector, with a commitment to economic stability.

[Baroness Thornhill (LD)]

Your Lordships will be pleased to know that I have taken a scythe to my speech, so it might come out a bit disjointed. The short version should be directed to noble Lords at the other end of the table: I understand their position because turkeys do not vote for Christmas. It depends on which lens you look at this through.

So it is no surprise that I rise to oppose the stand part notices for Clause 85 and Schedule 34. They are the mechanism by which the Bill ends upward-only rent reviews for new and renewed commercial releases. Removing them would preserve the system that has been quietly hollowing out our high streets and small businesses for years. The noble Lord talked about evidence and there is plenty of evidence to show that. The real-world effect of upward-only rents is very simple: when trade is good, rents go up, and when trade is bad, rents go up. Rents do not come down. That might look neat in a contract but, on the ground, it has meant businesses paying yesterday’s rents in today’s economy.

We have all seen what that looks like: a shop where footfall has dropped, but the rent is still set at pre-pandemic levels and is going up; a café that has survived lockdowns, energy shocks and staff shortages, only to be hit by a rent review that moves in one direction regardless of takings; or a small local business doing everything right but that is forced out because the lease allows rents to rise but never to reflect reality. I confess to my hairdresser being exactly in that position: after 40 years of work in Watford, she is no more. “The rent rise”, she said, “was the final straw”. This is real.

Clause 85 matters because it allows rents to move down as well as up, so that they can reflect what is actually happening on a street, in a town centre or in a local economy. Markets work both ways and leases should be able to do the same. If we remove Clause 85, we are not defending the market; we are defending a one-way ratchet that has already failed our high streets.

I will blot out a big paragraph here. That does not mean that we should ignore the risks. Markets will adapt and some landlords may try to push the risks elsewhere through higher initial rents or shorter leases. This is why scrutiny, monitoring and review matter, but they are arguments for refining Clause 85, if necessary, not for removing it altogether. Perhaps the Government might consider this on Report.

Likewise, a small caveat: this is a broad reform applying across all commercial sectors, not just retail and hospitality, where the effects and problems are most visible. I would be interested to know what work has been done to understand the impact of this change on commercial property investment, particularly in struggling town centres and regeneration areas. How do the Government justify the big-bang breadth of this measure? Have they considered whether a more targeted approach might have achieved the same aims over time?

If we are confident that this is the right direction—we believe it is—we also have to be confident enough to measure its effects. Therefore, we have some sympathy with Amendment 254 in the names of the noble Baroness, Lady Scott of Bybrook, and the noble Lord, Lord Jamieson, but we feel that 12 months would not be enough time to measure the true effects of this significant change.

[Baroness Taylor of Stevenage (Lab)]

My Lords, I thank the noble Baroness, Lady Scott, for Amendment 234. I will start with the stand part notices for Clause 85 and Schedule 34.

Upwards-only rent reviews have been a long-standing issue for businesses throughout England and Wales. The British Independent Retailers Association and UKHospitality gave evidence in the other place about just how damaging the practice is and why they have campaigned for decades for the Government to take action. The practice of upward-only rent reviews has an invidious effect on the efficiency and accessibility of the commercial property market—not to mention the impact on our high streets and town centres that the noble Baroness, Lady Thornhill, outlined. It is designed to ensure that landlords and investors are insured against market conditions, but there is a cost to this, which falls chiefly on the business tenants left paying excessive rents when they are already stretched to breaking point, unable to invest or improve their productivity, or, in times of hardship, to keep the lights on or pay their staff wages.

Ultimately, these clauses make running a business less viable, damaging the competitiveness of the economy. Alongside reform of business rates, banning these clauses will help make commercial rents fairer and more efficient, help businesses invest and give them greater resilience to economic conditions. In recognition that these clauses can provide some security to investors, we have committed to consult on how caps and collars could be used. I reassure noble Lords that the Government intend to work carefully and closely with the property industry and others to implement this policy, help manage risk and maintain confidence in the market, without relying on one-sided mechanisms such as upwards-only rent review clauses.

I turn to Amendment 254. I understand the desire to consider the impacts of legislation once it has passed. However, 12 months is too limited a period to see the ban fully implemented and the market adjusted. The Bill’s impact assessment also finds that the ban is likely to have a net positive impact on the UK economy because it will make the commercial property market more efficient, reducing rents for tenants who can instead invest in their businesses and help keep consumer prices low. For those reasons, I hope that noble Lords will not press their amendments.

[Lord Jamieson (Con)]

I am grateful to both noble Baronesses for their comments. There may be a slight misunderstanding here. Our key point is that this is a very significant change to the commercial property market, and it has not been done with the industry. The Minister said that she would “work carefully and closely” to implement it. It would have been better to have worked closely and carefully with the industry in developing it. I agree with the noble Baroness, Lady Thornton. Our issue is with a blanket ban rather than looking at how we can come up with a potential system that works better for all parties. I am glad that she is more supportive of our amendment.

[Baroness Thornhill (LD)]

The noble Baroness, Lady Thornhill.

[Lord Jamieson (Con)]

I am dreadfully sorry; I apologise to the noble Baroness, Lady Thornhill. Can we have that officially minuted? I share those concerns. The key point is that we need something that works.

I wish to point out that upward-only rent reviews are nowhere near the biggest problem facing businesses up and down the high street. They are contending with devastating increases in business rates and are facing increased regulation, increases in national insurance charges and the effects of changes to the minimum wage. Although we would all like a higher minimum wage, it must be affordable.

The Government’s solution—tearing out a long-established market measure without proper consideration, without careful engagement with the sector and without understanding the consequences for investment and lending to commercial markets—is a high-risk strategy. The question today is not whether commercial tenants deserve fair terms—they do—but whether the proposal before us is the right one. There are too many uncertainties and risks that have been left unaddressed.

We will seek to revisit this issue on Report. I hope that, by then, the Government will have reflected on the concerns raised today and will come forward with proposals grounded not in assertion but in evidence, balance and economic reality. In the meantime, I beg leave to withdraw my clause stand part notice.