Commercial Payments Bill [HL]

Lord Lansley Excerpts

2nd reading
Tuesday 9th June 2026 Lords Chamber

[Lord Lansley (Con)]

My Lords, I am pleased to follow the noble Baroness, Lady Alexander of Cleveden, who made some important points about enforceability and escaping avoidance of the provisions. I will come on in a few moments to talk about some of the other issues raised by the proposed ban on retention payments.

I am also pleased to follow my noble and learned friend—for these purposes—Lord Thomas of Cwmgiedd, with whom I served on that Special Public Bill Committee on the Electronic Trade Documents Act. From what I heard, I entirely agree with him on the importance of us trying to see the progress that we are making, under English law, in securing the electronic dispatch of documents being reinforced through the mechanisms that we are bringing into force in relation to payment terms.

I draw attention to my entry in the register of interests. I am a director of a small business and chair of the Cambridgeshire Development Forum, although I should again emphasise that I do not speak on behalf of any of the members of that forum. My views are entirely my own.

As my noble friend on the Front Bench may have done, we have worked on this issue from time to time over quite a long period, not just in the parliamentary sense. I was once upon a time the deputy director general of the British Chambers of Commerce and remember, back in the late 1980s, talking at length to David Trippier, who was then the Small Firms Minister, about the introduction of the code of practice on payment of bills on time. It is fair to say that where we are now, all those years later, has demonstrated that while it has always been desirable for us not to proceed by way of legislation and making payment terms mandatory and interfering in contractual terms between businesses, in practice we were never effectively able to overcome the obstacle that many small businesses would not challenge the payment terms of large companies to which they were suppliers. We have to be prepared to step in.

That is indeed, as other noble Lords have said, where the Small Business Commissioner is a very important addition to our armament. The work of the Small Business Commissioner and her team is really central to ensuring that small and medium enterprises can be protected, because they are not themselves having to raise complaints against their larger customers. I hope that we thoroughly support greater powers for the Small Business Commissioner.

Is there a means by which the interventions that the Small Business Commissioner can undertake might be prompted and supported occasionally by working with the large audit firms? We know that payment terms tend to be longer in larger businesses and, when the audit firms are examining larger businesses, it would be possible for them to sample their payment terms and report to the Small Business Commissioner so that the commissioner’s team could, where necessary, investigate particular large firms without necessarily having to do so off the back of a complaint by a particular supplier.

I have one other principal point about payment terms. The Government have chosen the 60-day approach, not the option to move over time—after, say, five years or so—to the 45-day approach. I have been trying to work this out in my head and thinking about it simply in practical terms. If one is, as a company, in receipt of an invoice in the first part of the month, it should be paid at the end of the month. Quite often companies have end-of-the-month payment runs and often rest on that as an excuse for delay. But if it is in the first part of the month, it should be paid by the end of the month and if it were to move to the following month, it would exceed 45 days. If, however, one receives an invoice in the latter part of the month and it passes over the end of the month in the payment run, it would go to the end of the following month and therefore would probably just about fall within 45 days. Thinking about it in practical terms, it always seemed to me that 45 days ought to be the logical maximum payment term, and I am not quite sure I understand where 60 days comes from in relation to the practicalities of when one receives an invoice. I hope we might think carefully about whether moving to 45 days might be better in the long run.

I have one point—an important one from my point of view—on retention payments. I have never been persuaded and am still trying to be persuaded. I think I would be more persuaded if I felt confident, as my noble friend on the Front Bench was saying, that we had other mechanisms for dealing with snags and defects.

In that context, if not today then in further discussion, we might look at whether the Government are now in a position to activate fully the new homes ombudsman scheme, under the auspices of the new homes quality board. I am very much persuaded of the value of this. Many major contractors are signed up to that scheme, and we are pretty close to the point where it could essentially be made nationwide and mandatory. That might well give people the assurance they are looking for about desnagging for residential dwellings, which is an abiding problem that many buying new homes have to put up with.

As far as retentions are concerned, I have received a brief from the National Housing Federation. We were talking about social housing last week and I noted, with some concern, that it shared the concern that I have. Let me quote the National Housing Federation, which of course represents housing associations and registered providers, generally speaking, of social housing. It said that retention clauses are one of the strongest practical mechanisms housing associations have that enable them to hold developers to account on good quality standards, strong aftercare services and agreed delivery timelines for Section 106 homes. Noble Lords will recall that the Section 106 obligation on developers is the single largest mechanism by which we provide affordable and social housing.

The National Housing Federation went on to say that a ban on retention clauses will increase the risk for housing associations buying Section 106 homes. We know that housing associations buying Section 106 contracts is a particular problem; they have lacked the cash resources to do this because they are so busy trying to remedy aspects of their housing stock and meeting building safety requirements.

I ask the Minister to reflect carefully on whether we can deal with the problems raised by the National Housing Federation. It looks for an exemption for registered providers, which is not a small exemption. It would be a substantial one, but I want to be sure that we do not do something that would inadvertently further inhibit us in providing social housing. As we all know, at the same time as we are supporting the business community, we absolutely need to increase the supply of social housing. With those reservations for the moment, and with questions about the ban on retention payments, I say how much, generally speaking, I welcome the Bill that the Government have brought forward. I hope that the House will give it its fulsome support.