Commercial Payments Bill [HL]
Tuesday, 15 September 2026
Contributions
Report
Northern Ireland, Scottish and Welsh legislative consent sought . Relevant documents: 2nd and 10th Reports from the Delegated Powers Committee .
Clause 1: Payment terms
Amendment 1
Moved by
1: Clause 1, page 2, line 5, at end insert— “(1A) The purchaser must advise the supplier how the supplier should submit notice as set out in subsection (1).(1B) Where the purchaser fails to advise the supplier on how to submit notice, the supplier may rely on the notice commencing by submitting a written document (for example, a delivery notice or invoice) to the person requesting the goods or services within the purchaser’s business.(1C) The purchaser must adopt internal systems that recognise that the serving of notice commences at the point the supplier complies with subsections (1A) and (1B).”Member's explanatory statement This amendment seeks to require the purchaser to give instructions as to how notice should be given. Where the purchaser gives no advice on notice, the supplier may rely on notice having been given by providing a delivery notice or invoice to the person within the purchaser’s business who is requesting the goods or services.
Lord Sharpe of Epsom (Con)
My Lords, I will speak to this group on behalf of my noble friend Lord Holmes of Richmond, who sends his apologies to the House for his absence today. Before I begin, I note my gratitude to the Minister, who has been incredibly receptive in listening to and addressing our concerns with the Bill. I believe that we have ended up broadly in agreement on the final form that the Bill should take, so I commend him and his officials for the cross-party work they have put in. My noble friend’s two amendments from Committee seek to address three technical matters. Amendment 1 aims to provide the supplier with guidance on how to submit a notice. Amendment 5 seeks to clarify that a payment is defined as such only when the supplier has clear and unequivocal use of funds. Amendment 10 would prevent the import-export exemption being extended past the implementation of the Electronic Trade Documents Act. As in Committee, we remain broadly supportive of all three amendments. Amendment 1 reflects the fact that good payment practices can be ensured only if both parties are aware of the maximum payment terms and the supplier has submitted a notice in good time. Amendment 10 reflects a much-raised concern that imports and exports are currently exempt from the Bill. The Electronic Trade Documents Act means that this will not have to be the case, so I hope that the Minister can assure us that there are plans for incorporating import and export into the payment regime upon the full enactment of that Act. Finally, it is a shame to see that the aim behind Amendment 5 has not been accepted by the Government. The Bill aims to improve payment practices between firms, largely because, currently, too many exchanges are delayed at the expense of the supplier. If a payment is made through an intermediary and remains there for an indefinite period—perhaps beyond the 60-day payment term—and does not fall under the provisions of the Bill, the Bill is of little use to the supplier awaiting payment. Amendment 5 would ensure that payments were considered as paid only when they reached their final recipient. That principle was the reason for the Minister rejecting my Amendments 2 and 4 in Committee: that, regardless of delays, payments should count only when received by the supplier. I hope that the Minister can today confirm that this definition will be made explicit in all cases. I turn to my amendments. Alongside my noble friend Lord Hunt of Wirral, I have retabled several probing amendments arising out of concerns about the effects of the maximum payment terms. Amendments 2, 4 and 19 are concerned with payments that are delayed by either bank holidays or bank processing times. Amendment 9 probes the economic and opportunity costs of the exemption of upwards payments from payment term restrictions. Amendments 3 and 6 seek to add a definition of nationalised bodies to the Bill, reflecting the fact that, while they will be treated as regular commercial bodies, their business models are self-evidently different and, as such, there is a risk that their payment practices reflect this. These are all questions that we would benefit from seeing answered; however, that does not detract from the fact that we support the general aim of Part 1. It is also true that the best way of judging the effectiveness of a policy is through analysing its effects in practice. Therefore, I welcome the compromise that the Government have made with the noble Lord, Lord Fox, giving the Secretary of State the powers to shorten payment terms alongside mandating a consultation about the decision. The proposed new clause under Amendment 15 does not commit the Government to any specific action but simply requires a review of the effects of the maximum payment terms and allows for adjustment if necessary. That is a sound, self-correcting approach and I therefore thank the Minister for agreeing to this measure. I beg to move.
Lord Fox (LD)
My Lords, I feel a great wave of consensus flowing over me. I will speak to Amendment 8 in my name. As we discussed before the Recess, much of the consultation process proposed a 45-day limit, yet the Bill offers no easy route from the 60 days it proposes to a shorter timeframe. My amendment would require the Secretary of State, within five years, either to lay draft legislation reducing the maximum payment period for private purchasers from 60 to 45 days, or to explain to Parliament why not. The Minister’s reaction and response to this issue have been typical of the very strong consensus that we have been able to build. I echo the words of the noble Lord, Lord Sharpe, that both the Minister and his team have been extremely helpful in this. That is why I am delighted to note that government Amendment 15 and the various consequentials lock in very much what I was looking for, including—as the noble Lord, Lord Sharpe, mentioned—the need for consultation within five years, with a view to shortening the payment period. This government amendment is an excellent response to my Amendment 8, thereby making my amendment unneeded.
The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Leong) (Lab)
My Lords, prior to introducing the government amendments, I wish to express my personal thanks for the positive engagement across the House, and particularly to the noble Lords, Lord Hunt and Lord Sharpe, on the Opposition Front Bench, and the noble Lord, Lord Fox, and the Liberal Democrats for their very thoughtful scrutiny of the Bill. The Bill builds upon the important reforms that were enacted by the previous Conservative Government. The provisions in the Bill have been drafted following extensive consultation with businesses, with more than 850 responses to our consultation, which was undertaken between 31 July and 23 October 2025. We have brought forward a Bill that reflects that consultation. Our decision to impose stricter maximum payment terms of 60 days received support from 66% of consultation respondents. This is a significant strengthening of current law. No longer will large businesses be able to impose payment terms of over 60 days upon their suppliers. The question remains whether 60 days should be the end of that journey. We have heard loud and clear from smaller businesses that the Government should consider reducing maximum payment terms to 45 days or even 30 days. I have listened carefully to all noble Lords across the House encouraging us to go further on this. I am pleased to say that the Government have tabled amendments to provide a power that may be used in future to reduce the maximum payment terms. These amendments allow the Government to consult on whether payment periods should be reduced, ensuring that any future decisions are informed by evidence and experience of how the new measures are operating in practice. Furthermore, the Government will not use this power to reduce maximum payment terms for at least five years. I hope noble Lords will agree that this is a sensible change and a balanced approach, maintaining the payment periods consulted on and included in the Bill, providing stability and certainty while businesses adapt to the new reality of 60-day maximum payment terms, and ensuring that there is a clear route to go further in future if the evidence supports it. I turn to the amendments tabled by other noble Lords. In response to Amendment 2, increasing the maximum payment term for public authorities beyond 30 days would undermine the Procurement Act 2023 and delay payment to suppliers. In response to Amendment 4, increasing the maximum period for non-public authority purchasers beyond 60 days would delay payments to suppliers and move away from the position consulted upon with strong levels of support. Regarding Amendments 3 and 6, national ownership does not by itself determine the applicable payment regime. Under the Bill, a nationalised body that meets the definition of a “public authority” will be subject to a 30-day maximum payment period. A nationalised body that does not meet that definition will be subject to the 60-day maximum payment period that applies to other purchasers. I recognise the intention and ambition of the noble Lord, Lord Fox, in Amendment 8 to reduce maximum payment terms. On Amendment 19, the Bill takes important steps by introducing clarity and consistency around payment terms, building on the reforms introduced by the previous Conservative Administration. We are not aware of public holidays being raised as a concern by any businesses or stakeholders during last year’s extensive public consultation. Amendment 1 is already covered by the Bill. We are setting out clearly the trigger points that can be agreed to start the clock on payment and the implied term if payment is not explicitly made. Regarding Amendment 5, the Government believe that the Bill is clear. For the purposes of whether a payment has been made on time and when interest on late payment will start, payment will be considered made at the point that funds have been received by the supplier. On both Amendments 1 and 5, the Small Business Commissioner will provide advice and information on compliance with legal obligations on these points. On Amendment 10, I outlined in Committee how the removal of this exemption would place UK businesses at a competitive disadvantage.
I recognise the groundwork laid by the noble and learned Lord, Lord Thomas, and the noble Lord, Lord Holmes, in relation to the Electronic Trade Documents Act, and intend for the Government to take this into consideration when consulting and developing regulations regarding payments and imports or exports. I assure all noble Lords that the Government are actively supporting businesses to utilise digital trade documents, including through an SME capability programme, a dedicated GOV.UK webpage and a business awareness campaign.
On the question asked by the noble Lord, Lord Sharpe, about why the Government are not defining in the Bill when a payment is considered made, the Bill is clear on the payment terms that commercial contracts can contain and the consequences for not making a payment within those terms. So, where a payment has not been received by a supplier under the terms of a contract, that payment will be a late payment and interest will accrue. With those assurances, I hope that the noble Lord will feel able to withdraw Amendment 1 and that noble Lords will support the amendments in my name.
Lord Sharpe of Epsom (Con)
My Lords, as ever, I am grateful to the Minister for his response and, in particular, for the last piece that he mentioned, which is very welcome news, and I appreciate the clarification. As I outlined in my opening speech, a number of questions remain regarding the implementation and operation of maximum payment terms. I accept what the Minister said about consultation. I am generally dubious about the Government’s enthusiasm for consultations, but in this case, it was a good one. We very much agree with the principle. We still need to see how these measures will actually work in practice. That is why I am very optimistic about Amendment 15. The Government will have an opportunity to revisit these measures, and I hope in doing so that they consult stakeholders and those affected by all the potential issues that this group has raised. I say to the Minister: keep up the good consultation work on this case. I look forward to scrutinising the regulations when they appear but, in the meantime, I beg leave to withdraw my amendment.
Amendment 1 withdrawn.
Amendments 2 to 6 not moved.
Amendment 7
Moved by
7: Clause 1, page 3, line 37, at end insert— “2CA Payments collected by intermediaries(1) This section applies where, under or in connection with a contract to which section 2B applies (“the supply contract”), a person other than the supplier (“the intermediary”) receives all or part of a relevant payment from the purchaser for onward transmission to the supplier.(2) This section applies regardless of—(a) whether the intermediary acts as agent for the supplier or the purchaser or otherwise, and(b) the legal characterisation of any contract between the intermediary and the supplier or the purchaser.(3) For the purposes of this section, a relevant payment is not to be treated as made to the supplier until the amount received by the intermediary is received by the supplier.(4) It is an implied term of any contract between the intermediary and the supplier that the intermediary must pay to the supplier any amount received from the purchaser in respect of a relevant payment under the supply contract before the end of the period of 7 days beginning with the day on which the intermediary receives that amount.(5) A term of any contract is void so far as it purports to—(a) provide for payment to the supplier later than is required by subsection (4), or(b) treat a relevant payment as made to the supplier earlier than is provided by subsection (3).(6) Where the intermediary fails to comply with the implied term in subsection (4), the unpaid amount is to be treated as a qualifying debt owed by the intermediary to the supplier for the purposes of this Act (and statutory interest runs accordingly).(7) Subsection (4) does not require the intermediary to pay an amount to the supplier so far as the intermediary is entitled to deduct or withhold that amount under a term of a contract with the supplier that is fair and reasonable having regard to the matters specified in Schedule 2 to the Unfair Contract Terms Act 1977, and it is for the intermediary to show that any such term satisfies that test.”Member’s explanatory statement This amendment closes the online marketplace loophole by providing that payment is not treated as made to a supplier until the supplier actually receives the money, and by requiring any intermediary that collects payment on a supplier’s behalf to remit it within 7 days regardless of how the intermediary is legally characterised.
Lord Fox (LD)
My Lords, as we all know, economic activity is switching from familiar structures and supply chains to a situation where businesses market their goods or services via third-party online marketplaces or virtual intermediaries. The amendment would bring such marketplaces and intermediaries into the context of the Bill. It would close a loophole by providing that payment is not treated as made to a supplier until the supplier actually receives the money, which seems reasonable, and by requiring any intermediary that collects payment on a supplier’s behalf to pay it within seven days, regardless of how the intermediary is legally characterised. The Minister is Minister for Small Business, and I am sure that very many of the businesses that are now under his purview would agree that their cash flow can be majorly impacted by how quickly these online marketplaces settle. We have debated the role of online intermediaries in a number of Bills and contexts. For example, we have talked about their role when considering product safety. In every case, the Government—both Governments —have found arguments to eliminate these important businesses and sectors from whatever legislation we have been considering. So it is quite clear that we have to move on from where we are now. We cannot keep exempting what is becoming a major part of our economy from the legislation that we consider. An ever-increasing proportion of the UK economy is shifting in this direction, and we need to grasp the nettle. At the very least, I am looking for some assurance from the Minister that the Small Business Commissioner, the Government and departments can actually take a look at the role of these businesses in all walks of the economy and find a way of bringing them on board and making sure that they are not a loophole in the laws that the Government are very properly introducing. With that, I beg to move Amendment 7.
Lord Hunt of Wirral (Con)
My Lords, this amendment touches on very much the same point as my noble friend Lord Holmes of Richmond’s Amendment 6 in the first group. The principle that payments should be considered as such only when received by the supplier underpins several of the amendments that we on this side of the House have brought back from Committee. As such, His Majesty’s loyal Opposition support this amendment, as we did in Committee. I do not think that a payment should fall under a different regime from direct payments simply because it is made online and happens to travel through an intermediary. Similarly, ensuring the prompt forwarding of payments by intermediaries is an integral part of promoting good payment practices. This amendment aims to do that, and I warmly commend the speech of the noble Lord, Lord Fox. I join him in hoping that the Minister can confirm that these issues have been considered and addressed.
Lord Leong (Lab)
My Lords, I am grateful to the noble Lord, Lord Fox, for Amendment 7 and thank him for it. I recognise that it was tabled in a constructive spirit, and I thank him once again for the engagement we have had on this matter, both in person and by correspondence. The Government share his aims of ensuring that suppliers are paid promptly, payment processes are clear and purchasers cannot use contractual mechanisms to delay payment unjustly. I entirely agree that, when a small business sells through a platform or marketplace, the money due to that business should not be held unnecessarily. I want to be absolutely clear that the use of intermediaries does not affect a supplier’s right to be paid within 60 days. Chapter 1 of Part 1 ensures that, for business-to-business contracts for the supply of goods or services, the maximum payment time is 60 days. If payment is more than 60 days overdue, the purchaser is in breach of contract and liable to pay interest. The use of an intermediary does not alter this position. I reassure all noble Lords that persistent attempts to circumvent the maximum payment terms through intermediaries constitute poor payment practice. Under Clause 19, this constitutes grounds for the Small Business Commissioner to investigate and potentially levy a financial penalty on larger businesses that persistently engage in this practice. Under Clause 18, the commissioner will also be able to adjudicate payment disputes where a larger business owes money to a small business, including where the debt arises from the use of an intermediary. The Bill addresses late business-to-business payments. It is not intended to regulate broader business relationships such as those between retailers using agents to sell goods to consumers or between a platform or marketplace and others when the platform or marketplace is holding, processing or transmitting funds between them. Those are subject to separate regulation. The contracts through which the majority of small businesses trade on online marketplaces are either business-to-consumer or consumer-to-consumer contracts and are subject to consumer legislation. These contracts were outside the scope of our impact assessment and our public consultation. As tabled, the amendment would therefore not address the issue raised by the noble Lord, Lord Fox. Tackling the issue of late payments outside a business-to-business context would move the Bill into a completely different area of regulation and would require the establishment of a new statutory regime for online marketplaces and payment intermediaries. This would cut across existing legislation, rather than maintaining the Bill’s core focus on commercial payment practices between suppliers and purchasers. The amendment would also interfere with existing commercial models that operate in the interests of the relevant parties and serve legitimate purpose. For example, where most intermediaries operate a system in which payments are pooled in a small business account and are drawn down by the small business on a regular basis, the amendment would mean that each individual sale, however small, would have to be remitted directly to the small business, significantly increasing transaction numbers and costs and reducing the flexibility of the operating model. Another example is payment providers holding funds for more than seven days to allow for fraud checks or other compliance requirements. The amendment would increase small businesses’ exposure to fraud and undermine the regulatory and legal framework governing payment providers. However, I understand and share the noble Lord’s concerns about withholding funds from small businesses. I am therefore happy to ask the Small Business Commissioner to review this issue with a view to developing guidance for small businesses so that they understand how the Bill applies to trading activity on online marketplaces. This can build on the guidance that the commissioner produced last year to help small businesses understand why their accounts may be frozen or funds withheld and how they can take action to avoid this. This included a 10-point pledge to online marketplaces and payment providers which was signed and promoted by several major companies. As the Minister for Small Business, I commit to examining how the Government can further support small businesses in addressing this issue faced by those who use online platforms, including engaging with other government departments and regulators where they have responsibility. For those reasons, and given the commitments that I have made, I respectfully ask the noble Lord, Lord Fox, to withdraw Amendment 7.
Lord Fox (LD)
I thank the noble Lord, Lord Hunt, for his support for this amendment. One point of consternation or otherwise is that I would suggest that the supplier-marketplace relationship is a B2B relationship, not a B2C one. I am not sure where the argument that I am somehow pushing this to a different sort of relationship came from, but I will set that to one side and mull on it later. I thank the Minister for the latter part of his speech and his undertakings to focus the SBC on this issue and to ensure that his department looks at ways of making sure that small businesses understand their rights. That is really the point. The way in which the first part of his speech was set out made it clear that there are all sorts of rights for small businesses in this, but I am not sure that small businesses are necessarily aware of those rights or how they can go about exercising them and being sure that it is not a time-consuming, overwhelming process. It would be useful to hear from the Minister—and perhaps the Small Business Commissioner, as time goes by—how small businesses will be engaged to make sure that they are fighting on an even footing with the marketplaces, many of which are, let us face it, absolutely huge and very difficult organisations to take on. It can be difficult even to find the right person to speak to in them to start with. I thank the Minister for the work that he will do in future, and I beg leave to withdraw Amendment 7.
Amendment 7 withdrawn.
Amendment 8 not moved.
Clause 3: Exempted contracts: no restriction on payment terms
Amendments 9 and 10 not moved.
The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)
I should alert the House to the fact that, if Amendment 11 is agreed to, I will not be able to call Amendment 13 by reason of pre-emption. Amendment 11
Moved by
11: Clause 3, page 8, leave out lines 17 to 24 and insert— “(7) In subsections (2) and (3)—“a micro undertaking” means an undertaking which has no more than 10 full-time equivalent employees, and has—(a) a turnover of no more than £1 million, or(b) a balance sheet total of no more than £500,000;“a small undertaking” means an undertaking other than a micro undertaking which has no more than 50 full-time equivalent employees, and has—(a) a turnover of no more than £15 million, or(b) a balance sheet total of no more than £7.5 million;“a medium-sized undertaking” means an undertaking other than a small undertaking or micro undertaking which has no more than 250 full-time equivalent employees, and has—(a) a turnover of no more than £54 million, or(b) a balance sheet total of no more than £27 million;“a large undertaking” means any undertaking other than a medium-sized undertaking, small undertaking or micro undertaking.”Member’s explanatory statement This amendment, and others in the name of Lord Hunt of Wirral, seek to create a standardised definition of different sized businesses on the face of the CPILPA 1998.
Lord Sharpe of Epsom (Con)
My Lords, this group of amendments revisits the issue of the definitions of different-sized businesses. I note the new amendment in the name of the noble Lord, Lord Fox, which highlights the same concerns as we raised in Committee. Those concerns remain. There has been a proliferation of definitions for different-sized businesses to suit a multitude of aims of the Government of the day. Currently, a minimum of six statutory frameworks use materially different-sized criteria, as well as other definitions existing in sector-specific regulations and guidelines. I know that the Minister will agree when I reiterate that this is currently too complex a system. The Government should aim to place as few obstacles as possible in the path of business; that means cutting the bureaucratic paperwork and jargon that firms complete to meet their legal obligations. The proliferation of business size definitions is a case in point. They may not be entirely contradictory, but they are certainly not complementary, and I believe that everyone would benefit from a more streamlined approach. I entirely accept the Minister’s point in Committee that such a wide reform cannot take place in a Bill with as narrow a scope as this one. However, he should at least commit to restricting the definitions within this Act to those that already exist, to the best of his ability. Such a step clearly has support from all sides of the House. Similarly, given that the Minister has indicated his support for some reform of definitions, can he commit to revisiting this issue with me at a future point? I hope that he can agree to this and I look forward to his response. I beg to move.
Lord Fox (LD)
My Lords, the noble Lords, Lord Hunt and Lord Sharpe, were right to raise the issue of definitions in Committee. Rather than simply echo them, I decided to add something to the debate through Amendment 35, which sets out something of the Tower of Babel that exists around definitions. Subsection (2) of the new clause proposed in Amendment 35 gives examples of the many phrases and words that are used in a variety of different contexts. Proposed new subsection (3) identifies seven Acts—not the six that the noble Lord, Lord Sharpe, came up with; we managed to find another one—where these phrases are prevalent but not necessarily synonymous. Proposed new subsection (4) really sets out what we are looking for the Minister to do, which is work out to what extent the definitions in proposed new subsection (2) differ from those in subsection (3). There is a compliance cost to businesses in these differing definitions, because they have to make different decisions for different legislative frameworks. The extent to which this gives rise to uncertainty and undermines the law, and the effect it will have on the functions of the Small Business Commissioner, are just some of the things that should be taken on board by the Government to bring a state of order to what has been an organic process of legislation following legislation and definition following definition. To help the Minister’s new constituency of small businesses in particular, now is the time to bring these things under control and bring definitions into order.
Lord Leong (Lab)
My Lords, I thank the noble Lords for Amendments 11, 12, 13, 14, 35 and 46. I recognise the concerns raised by the noble Lords, Lord Sharpe and Lord Fox, in Committee regarding the number of existing definitions of company sizes on the statute book and their desire for clear and consistent definitions to avoid confusion for businesses. I would like to reassure noble Lords that our intention is to use the company size thresholds set out in the Companies Act 2006 and the Enterprise Act 2016 as the basis for defining company size in the Bill. However, it is important that we consult with businesses and industry experts to ensure that these definitions are appropriate for the purposes of this Bill. That consultation may indicate that, for the purposes of the Bill, company-size definitions should be revised or simplified. Any modifications to existing definitions will be made only when necessary. For example, we may choose to simplify definitions to make it easier for businesses to use exemptions, while still using existing definitions as the basis. We may find through consultation that different parts of the legislation require different definitions to ensure precision and effectiveness. For example, we might be required to simplify the size definitions for the purposes of the Small Business Commissioner’s powers, so that they are based solely on headcount. We should not constrain ourselves by introducing rigid definitions now, as this could make the powers and protections afforded by the Bill more difficult for businesses to understand and administer than is necessary. I also do not consider it necessary to delay the Bill’s commencement pending a further statutory review of definitions used across a range of legislation. The Government are already committed to consulting on any regulations made under these powers and to taking into account relevant existing definitions when developing them. The delegated power in Section 2E will be subject to consultation and parliamentary approval under the affirmative procedure, giving your Lordships’ House the opportunity to vote on the regulations before they are introduced. In conclusion, the definition of business sizes will be set out in secondary legislation. These regulations will be informed by consultation to ensure that they are appropriate. The Government intend to use the existing definitions as the basis for this Bill and will keep definitions as simple and effective as possible. I also commit that, before making any regulations in this area, the Government will have regard to the definitions in the Companies Act 2006, the Small Business, Enterprise and Employment Act 2015 and the Enterprise Act 2016. I also commit to meeting up with the noble Lord, Lord Sharpe, to look into these definitions going forward. For these reasons, I respectfully ask that Amendment 11 be withdrawn and that noble Lords do not move the remaining amendments in the group.
Lord Sharpe of Epsom (Con)
My Lords, again I am grateful to the Minister for his very comprehensive response. I am also grateful to the noble Lord, Lord Fox, for explaining his Amendment 35 and for digging out yet another example of an Act that governs the definitions of small business. Might I suggest to the Minister that, during this consultation, they include a question on how the nature of small business has evolved in the last 10 years? Obviously, there has been a spectacular explosion in e-commerce and other things, which will have a material impact on the types of definition we are talking about. As I outlined in my opening speech, the current landscape of definition is unnecessarily convoluted—expensively so, as the noble Lord, Lord Fox, pointed out. However, I recognise that this Bill is not necessarily the best vehicle for driving through that reform. I appreciate the Minister’s response on this issue. I will absolutely take him up on his offer of further talks on how we might improve a bit of a messy picture. I think I also heard him say that he is quite keen to find another legislative vehicle where we can address this in the future—if I am making that up, I am sure that he will correct the record. I beg leave to withdraw my amendment.
Amendment 11 withdrawn.
Amendments 12 to 14 not moved.
Amendment 15
Moved by
15: After Clause 3, insert the following new Clause— “Powers to shorten payment termsAfter section 2E of the CPILPA 1998 (inserted by section 3), insert—“2F Powers to shorten payment terms(1) The Secretary of State may by regulations substitute the number of days for the time being specified in sections 2B(2)(a) and 2D(3)(a).(2) Regulations under subsection (1)— (a) may not specify a number of days higher than 30;(b) must specify the same number of days in sections 2B(2)(a) and 2D(3)(a).(3) The Secretary of State may by regulations substitute the number of days for the time being specified in sections 2B(2)(b) and 2D(3)(b).(4) Regulations under subsection (3)—(a) may not specify a number of days higher than 60;(b) must specify the same number of days in sections 2B(2)(b) and 2D(3)(b).(5) The Secretary of State may by regulations substitute the number of days for the time being specified in section 2B(5), but the regulations may not specify a number of days higher than 30.(6) The Secretary of State may by regulations substitute the number of days for the time being specified in section 2C(3), but the regulations may not specify a number of days higher than 30.(7) The Secretary of State must, within the required period, consult such persons as the Secretary of State considers appropriate about whether to make regulations under subsections (1), (3), (5) and (6) and the number of days that might be specified in such regulations.(8) In subsection (7) “the required period” means the period of five years beginning with the day on which sections 2B and 2D come into force (or, if they come into force on different days, the later of those days).””Member’s explanatory statement This new clause enables the Secretary of State to make regulations to shorten the payment periods set out in various provisions of the Bill.
Amendment 15 agreed.
Clause 4: Statutory interest
Amendments 16 to 18
Moved by
16: Clause 4, page 9, line 4, leave out “2E” and insert “2F” Member’s explanatory statement This amendment is consequential on my proposed new clause.
17: Clause 4, page 9, line 4, leave out “3” and insert “(Powers to shorten payment terms)” Member’s explanatory statement This amendment is consequential on my proposed new clause.
18: Clause 4, page 9, line 7, leave out “2F” and insert “2G” Member’s explanatory statement This amendment is consequential on my proposed new clause.
Amendments 16 to 18 agreed.
Amendment 19 not moved.
Amendment 20
Moved by
20: After Clause 10, insert the following new Clause— “Special administration: continuity of payment obligations(1) This section applies where a purchaser under a contract to which the CPILPA 1998 applies is subject to a special administration regime.(2) The provisions of the CPILPA 1998 relating to payment terms and statutory interest (including sections 2B, 2C and 2D and Part 1B of that Act) continue to apply in relation to a relevant supply notwithstanding the special administration or any moratorium having effect in connection with it. (3) Nothing in this section affects the operation of any such moratorium specified in subsection (2) in relation to the enforcement of a debt.(4) In this section “relevant supply” means a supply of goods or services made after the appointment of the special administrator—(a) at the request of, or with the agreement of, the special administrator, or(b) in circumstances in which section 233, 233A or 233B of the Insolvency Act 1986 (as applied in relation to the special administration regime concerned) restricts the supplier from terminating the contract or the supply, or from making continued supply conditional on payment of outstanding charges.(5) In determining for the purposes of the CPILPA 1998 the maximum period within which a relevant payment or relevant construction payment in respect of a relevant supply must be paid, the purchaser is to be treated as if it were a public authority.(6) Sums payable in respect of a relevant supply, including statutory interest, are payable as expenses of the special administration.(7) Nothing in this section—(a) applies in relation to sums payable for goods or services supplied before the appointment of the special administrator takes effect (see section (Special administration: sums owed to suppliers required to continue supply));(b) except as provided by subsection (5), affects the order of priority in which debts, liabilities or expenses are payable under or in connection with the special administration regime.(8) In this section—“special administration regime” means a procedure under any enactment which provides for the administration of a company by a person appointed by the court and applies provisions of the Insolvency Act 1986, with or without modifications, for purposes that include securing the continued provision of a supply or service (including special administration under sections 23 to 26 of the Water Industry Act 1991, sections 59 to 65 of the Railways Act 1993 and sections 154 to 171 of the Energy Act 2004);“special administrator” means the person appointed to manage the affairs of the company under such a procedure.”Member’s explanatory statement This amendment seeks to provide that the maximum payment periods and statutory interest under the Bill continue to apply to supplies made to a company in special administration at the administrator's request or in circumstances where insolvency legislation restricts the supplier from ceasing supply, and would apply the 30-day period the Bill sets for public authorities to such supplies.
Lord Hunt of Wirral (Con)
My Lords, Amendments 20, 21 and 33 in my name and those of my noble friends Lord Sharpe of Epsom and Lord Leigh of Hurley have been brought back from Committee to address our concerns about special administration regimes and payment practices. I begin by acknowledging that the Minister did reassure us that the terms of this Bill will apply to companies that are required to continue supplying SARs following their being placed into administration, as Amendment 20 probes. Similarly, I acknowledge that the report on the interaction between insolvency moratoria and payment practices that Amendment 33 seeks to mandate may be unnecessary given this fact. We have, however, retabled these amendments as they lend themselves to my arguments surrounding Amendment 21. When this amendment was discussed in Committee, the Minister stated that it would “cut across the established insolvency framework. Providing preferential treatment to one group of suppliers would disadvantage other creditors and undermine the purpose of the existing insolvency regime ”.—[ Official Report , 21/7/26; col. 1070.] We do not agree with this argument. The very acceptance of Amendment 20 that suppliers to SARs will fall under this Bill implies a recognition that there is something unique about this set of businesses. Indeed, the entire reason we are having this debate is that Section 233 of the Insolvency Act 1986 makes it illegal to withhold supplies to an SAR on the condition of the payment of arrears. It would not be preferential treatment to offer to them what the Bill offers to every other business—the ability to recoup funds owed but not paid. That would place those firms on an equal footing with other creditors, given that they currently have less ability to ensure payment of arrears. Amendment 21 is proportional in that a cap could be set by the Secretary of State and the payment could not be of sums subject to genuine disputes. This Bill is designed to ensure fair and timely payment practices. This amendment seeks to ensure just that for a set of firms that currently have no means of recouping owed sums. I look forward to the Minister’s response and, in the meantime, I beg to move.
Lord Leong (Lab)
My Lords, I thank the noble Lords, Lord Hunt of Wirral and Lord Sharpe of Epsom, and the noble Lord, Lord Leigh of Hurley, who is not in his place today, for Amendments 20, 21 and 23. I am really grateful to both noble Lords for our recent meeting covering these points, and I hope that the follow-up information which my officials provided has been helpful. I am also grateful to the Insolvency Service for its expertise in supporting our position. The Bill does not seek to alter the existing statutory framework on insolvency. Regarding Amendment 20, I would first like to clarify the position of suppliers providing goods or services after a company enters a special administration regime. Clause 1 inserts new Section 2B into the Commercial Payments and Interest on Late Payment Act 1998, applying maximum payment terms to relevant payments under contracts within the scope of the legislation. The Bill does not exclude supplies made to companies in special administration. There is an important distinction between pre-appointment and post-appointment debts. Post-appointment supplies remain subject to the Bill where they are otherwise within scope. Payment obligations and statutory interest may continue to apply or accrue. Recovery and enforcement remain subject to any relevant insolvency moratorium and the wider insolvency rules. By contrast, debts relating to supplies made before the appointment are in a different position. They remain pre-insolvency claims and are dealt with under the established insolvency framework. The Bill is not intended retrospectively to alter their status or priority. The Government do not consider that entry into a special administration regime should of itself result in a purchaser being treated as a public authority for payment term purposes. Companies in special administration remain commercial entities operating within statutory rules. Special administrators are independent court-appointed officeholders, with statutory duties to manage the businesses within those rules. Applying public authority payment requirements solely because a company has entered special administration could have operational repercussions—for example, by exacerbating cash-flow pressures. Nor do we consider that the Bill should determine whether liabilities are to be treated as expenses of a special administration. Amendment 20 would make qualifying post-appointment sums, including statutory interest, expenses of the special administration. Amendment 21 would similarly elevate certified pre-appointment sums. These would be substantive changes to the treatment and priority of liabilities, potentially affecting other creditors. Such questions are matters for the insolvency framework.
On Amendment 21, I recognise the concern raised by noble Lords. Suppliers may be carrying unpaid debts when a company enters special administration. That can be difficult, particularly for smaller businesses supporting essential services. I appreciate the particular concern where insolvency legislation restricts a supplier’s ability to terminate a contract or make continued supply conditional on payment of pre-appointment debts. However, the relevant insolvency provisions contain their own protections and mechanisms, including provisions relating to payment for post-insolvency supplies and safeguards where continued supply would cause hardship. We do not consider that those carefully calibrated arrangements should be recast through the Bill. Giving one group of creditors preferential treatment could disadvantage others, including employees and HMRC, and would cut across established statutory priority rules. The Bill is focused on tackling late payment through clearer statutory payment periods and related measures, not on amending insolvency law, creditor priorities or special administration regimes.
Regarding Amendment 33, the Government do not consider the proposed statutory review necessary. The amendment specifically asks about the interaction between an insolvency moratorium and the Small Business Commissioner’s adjudication scheme. That scheme does not displace an insolvency moratorium or determine the status or priority of claims. Its operations must remain subject to applicable insolvency restrictions, including restrictions on recovery and enforcement. We therefore do not consider that a separate statutory review of this is required.
The interaction between the Bill and the insolvency framework is already governed by established legal principles. A report within six months of Royal Assent would be unlikely to provide meaningful evidence about provisions that may not yet have commenced or had sufficient time to take effect. The Government will nevertheless monitor implementation of the new payment framework, including its operation where a purchaser enters an insolvency procedure, and will engage with the Insolvency Service and relevant sector departments should evidence of practical problems arise. For those reasons, I ask the noble Lord to withdraw the amendment.
Lord Hunt of Wirral (Con)
My Lords, we will carefully consider what the Minister has said, but I think he will acknowledge that there is some doubt, some worry and some concern still in existence. I appreciate his reiteration that Amendment 20 will be covered within the Bill already and I accept that the information for a review is not currently available. On Amendment 21, while I accept that it does not fall within the scope of this Bill, I gently ask the Minister whether the Government are currently looking at insolvency moratoria and special administration regimes. There has been plenty of talk in recent months about placing certain industries into public hands, not least Thames Water. If businesses of this scale are in question, firms supplying them deserve some clarity. These firms are worried about their futures. The very need for this Bill demonstrates that poor payment practices and withheld arrears are a threat to their existence. I hope to see some solution reached in the near future, but I acknowledge that the Minister has gone a distance to try to address these concerns and that he has committed to continue to monitor the situation carefully. Therefore, in the meantime, I beg leave to withdraw my amendment.
Amendment 20 withdrawn.
Amendment 21 not moved.
Clause 11: Construction contracts: retentions
Amendment 22
Moved by
22: Clause 11, page 15, line 34, at end insert— “(3) A party to a construction contract is not precluded from engaging with a third party in the transference of money to another party to the construction contract under subsection (1).”Member’s explanatory statement This amendment seeks to probe whether escrow arrangements would still be permitted under the terms of the Bill.
Lord Sharpe of Epsom (Con)
My Lords, I begin by reiterating my support for the Government’s position on retention payments. We support the right to the free exchange of goods and services and the right of firms to enter into mutually agreed contracts, but it is also clear that retention payments have become misused and are therefore untenable. Some 65% of retention payments are paid back late, while almost 25% are never paid back at all. They have become a tool for big firms to retain cash flow to prop up other ventures while the supplier, often a smaller firm, suffers as a result. However, we must not lose sight of retention payments’ original purpose. Retention payments as a concept are wholly justified, in that they offer an insurance against defective or untimely work and incentivise the remedying of that. As I am sure many noble Lords would agree, I would hesitate to commission construction work on a private property if I did not have a way to ensure that it was done to an acceptable standard, and we should not expect firms to be any different. Therefore, some middle ground must be reached. As in Committee, I have tabled, along with my noble friend Lord Hunt of Wirral, two amendments that propose alternatives to retention payments; namely, escrow and staged payments. I am aware that the Minister has outlined that these would be permissible following the enactment of the Bill, but, as far as I am aware, they are currently a small part of the market share of construction insurance. The primary goal of these amendments is to seek clarity from the Minister on what steps the Government are taking to promote these, and indeed other, alternatives. They are consulting with industry; what conclusions have they reached from those discussions? Which other forms of insurance do the Government deem effective, and how are they acting to promote them? I hope the Minister is able to give some clarity from the Dispatch Box on all those questions. Amendment 24 would exempt resident-run or resident-owned blocks of flats from falling under the retention ban. The Minister has made it clear that this ban is intended to target commercial contracts rather than those of private citizens. Resident-run properties fall into an odd medium in that they are technically commercial properties, but they are run as if they are private. There is clearly a category issue here. Does the Minister accept that these are not run as commercial properties and, if so, does he have the data in front of him on the scale of this issue and whether the incoming ban will pose a risk to the resident-run property market? Finally, I will touch on Amendments 25 and 26 in my name and those of my noble friends Lord Hunt of Wirral and Lord Leigh of Hurley. These amendments seek to prohibit the imposition of requirements from large to small businesses. In particular, we are concerned about the forced use of specific currencies that advantage the larger supplier, or the imposition of ESG requirements that allow the larger business to meet requirements in its annual reports without having to bear any of the costs. Much of the Bill seeks to support small businesses by placing them on an equal footing. It recognises that there is often an asymmetrical relationship between the buyer and the seller when either is larger. Our amendments simply seek to extend that recognition to these two well-known practices. I hope the Minister will agree with me, and I beg to move.
Lord Fox (LD)
My Lords, there are no amendments in my name in this group, but I will speak very briefly on Amendment 24, which, as we heard, seeks to remove the ban on retention, with the very worthy aim of helping ensure that resident-owned or resident-run blocks of homes can police work done on the grounds of safety. On the face of it, that sounds like a worthy idea. I am concerned that it opens a can of worms, and my instinct is that there has to be a better way of ensuring that the work is done properly. Perhaps it is the noble Lord’s idea of escrow, which I believe could, if mutually agreed, be possible. There is a danger of watering down the retention ban if we were to accept the noble Lord’s ideas. The definition of “safety defect remediation work” could be broad, or it could be very narrow. I have had briefings from a number of different organisations which have been contradictory to each other, so I am passing the buck to the Minister to explain how he is going to solve the very worthy issue that the noble Lord, Lord Sharpe, has identified, which is resident-run or resident-owned properties, while not prising open the lid of the can of worms.
Lord Leong (Lab)
My Lords, first, I thank the noble Lords, Lord Sharpe and Lord Hunt, for the amendments in this group. I will take Amendment 22 first. I reassure the noble Lords that the Bill does not prevent parties in any sector, including construction firms, making use of payment arrangements through a bank or an escrow provider to facilitate the transfer of funds. The important distinction is between a third party facilitating payment of money that is due and a third party holding back that money as security for the supplier’s performance. The former remains permitted, the latter could amount to a retention and would therefore fall within the prohibition. Therefore, Amendment 22 is unnecessary. The Government’s view, shared by many in the industry, is that construction should move away from cash retentions and towards modern, more secure and equitable forms of surety. We know that there are alternative forms of surety, including performance and retention bonds, already available in the UK which can mitigate risks for clients and firms. There are also alternatives used in other countries, such as warranty bonds, which are very common in Europe and are available in the UK. We will be working with surety providers to ensure that a range of alternatives is available when the ban comes into force. In relation to Amendment 23, I reassure noble Lords that the Bill does not prescribe when stages or milestones must occur or prevent parties from agreeing interim valuations and payments. It regulates the period within which an amount must be paid once that payment becomes due. Genuine staged and interim payment arrangements will therefore remain entirely permissible. However, describing a withholding of money for work already completed and where payment is due as a staged payment would not prevent it falling within the prohibition on retention if, in substance, the money was being retained as security for the performance of contractual obligations. The right for firms to be paid in staged payments on projects lasting more than 45 days is already enshrined in Section 107(2) of the Housing Grants, Construction and Regeneration Act 1996. The Bill does not amend, qualify or undermine that right. Therefore, this amendment is unnecessary. In implementing the provisions of the Bill, the Government will engage directly and closely with construction industry clients, specialist providers and representatives of smaller firms to provide guidance that legitimate payment arrangements can continue while preventing contractual devices being used to recreate cash retentions under another name. On Amendment 24, we recognise the understandable intention that resident-led and resident-owned companies should have assurance that building work is completed properly and of high quality, and that defects are remedied without additional costs falling on leaseholders. We do not believe that retentions ensure this. To agree to this amendment would create a broad exemption for construction contracts entered into by resident management and right-to-manage companies. That would leave firms working on those buildings exposed to the risks associated with cash retentions. It could also create uncertainty where different ownership and management structures exist within the same building or development. In addition, the process required by the Building Safety Act 2022 for delivering work on high-risk building places an emphasis on safety and quality. It includes numerous gateways, information requirements and independent reviews of the building. If clients and firms in their supply chain are meeting the requirements of the Act, there should be no need to deduct retentions. As Dame Judith Hackitt has noted, retentions are ineffective and undermine the effectiveness of the supply chain, which is why alternatives are required. For this legislation to be effective, it must incentivise the industry and its clients to end the practice of cash retentions and to adopt alternative forms of surety, together with improved quality management. Finally, I address the request made by a number of noble Lords in Committee for further information about the work to develop alternatives to retention. The Construction Leadership Council has now appointed a new industry lead for this area, and we will be increasing our engagement with stakeholders across the industry in relation to alternative forms of surety and quality improvement from September. This will give us plenty of time to address those issues in advance of the introduction of the proposed ban.
On Amendment 25, I acknowledge concerns around the risk of small businesses being pressured into accepting payment methods they have not agreed, including cryptocurrency. However, this amendment is not necessary. The terms governing payment between parties are a matter for contractual arrangements, and a purchaser or supplier should not be able to impose new payment terms unilaterally. In adjudicating disputes, the Small Business Commissioner will determine whether larger businesses owe smaller businesses money under a contract. A breach may include a failure to pay, paying late, or partial payment because of a larger business attempting to unilaterally change existing contractual terms.
On Amendment 26, I agree that payments under the Bill should not be withheld where there has been no breach of contract by the supplier. The amendment is not necessary to achieve this. The same principle I outlined in response to Amendment 25 applies and includes ESG. The commissioner can determine what is owed under the contract through adjudication and has the power to investigate persistent poor payment practices. For those reasons, I respectfully ask the noble Lord to withdraw Amendment 22 and not to press Amendments 23 to 26.
Lord Sharpe of Epsom (Con)
My Lords, I am again grateful to the Minister for his response and, indeed, to the noble Lord, Lord Fox, for his comments. On the ESG impositions and the general risk of coercion of smaller businesses by larger ones, I accept that these are already prohibited by law but I gently raise that the risk of coming forward with complaints of this kind often outweighs the benefits of redress. Essentially, small businesses are being coerced into ESG practices. That is still a problem and one that I hope a Government will address in the future. I thank the Minister for his outline of the Government’s approach to the retentions issues. I am genuinely optimistic from listening to him, because he has talked about a variety of different products that are available. We have had some briefings on those: performance bonds, retention bonds and, as he mentioned, the warranty bond. They tend to be more common practice in Europe; I think warranty bonds are only offered by a single firm in the United Kingdom at the moment. I hope that the market will provide solutions to this problem, because we think that some form of insurance would be effective and necessary in these circumstances. It cannot really be accepted as a retention payment alternative if it is currently so scarce, so we need to make sure that it is well understood publicly and perhaps mount a campaign with industry to make sure this is very well understood. I accept the noble Lord’s arguments about the difficulty of creating an exemption for resident-run properties. I will have a think about that further when I have a chance to read Hansard , but he made some good points. I hope that the Government will be able to update the House in due course on their progress in promoting these various different types of instruments. In the meantime, I beg leave to withdraw my amendment.
Amendment 22 withdrawn.
Clause 13: Ban on retention clauses
Amendments 23 not moved.
Amendments 24 and 25 not moved.
Clause 18: Adjudication scheme
Amendment 26 not moved.
Amendment 27
Moved by
27: Clause 18, page 22, line 35, at end insert— “(5A) The adjudicator must reach a decision determining a relevant payment dispute before the end of the period of 60 days beginning with the day on which the dispute is referred to adjudication under the scheme.(5B) The adjudicator may compel parties to share relevant information with itself, if the sharing of such information is necessary for the fulfilment of the duty under subsection (5A).(5C) The Commissioner may extend the period in subsection (5A), in relation to a particular dispute, by such further period as the Commissioner considers reasonable, having regard in particular to the complexity of the dispute and the conduct of the parties.(5D) Where the Commissioner extends the period under subsection (5C), the Commissioner must notify the parties of the extension and of the reasons for it.”Member’s explanatory statement This amendment requires payment disputes referred to the adjudication scheme to be resolved within 60 days, unless the Small Business Commissioner considers a longer period reasonable.
Lord Fox (LD)
My Lords, in moving Amendment 27, I shall also speak to Amendment 34. They are both in my name. Amendment 27 would require payment disputes referred to the adjudication scheme to be resolved within 60 days unless the Small Business Commissioner considers a longer period reasonable. The Bill creates a 60-day limit by which large private organisations must pay back small businesses. However, although, in the case of a dispute, there is a time limit for the dispute to be raised, there is no such limit on when the case should be resolved. This means that large companies could, in effect, contest a dispute and delay resolution, putting pressure on the SMEs to settle. The amendment calls for the adjudicator to reach a decision determining a relevant payment dispute before the end of the period of 60 days, beginning from the day on which the dispute is referred to the adjudicator under the scheme. The 60 days suggested in the amendment is itself more generous than the 28-day time limit that is currently covered for the construction sector but should, at the very least, be seen as a backstop. I look forward to hearing from the Minister what limit he thinks the adjudication figure should be and how it would be applied in practice as the Bill stands. Amendment 34 simply looks to lock in sufficient funding and government support for the Small Business Commissioner, to reflect her vastly wider remit. I am persuaded that some moves have already been made and that some are in the offing that will boost the capacity for the commissioner, but, as we have seen with Companies House, transforming an organisation into an investigative body is a huge undertaking. It is a cultural change that requires both resources and great resolve from the leadership team in that organisation. Both Houses need to be reassured that sufficient resources and government support are being made available, because if the Small Business Commissioner fails that will undermine the whole pretext of the Bill. I beg to move.
Lord Hunt of Wirral (Con)
My Lords, we are all very grateful to the noble Lord, Lord Fox, for moving his amendment. Before I speak to this group, I once again thank the Minister for his engagement. We entered this part of the Bill with some apprehensions, not least regarding the funding of the Small Business Commissioner’s office. It is perhaps too soon to say that all those concerns have been quelled, but I appreciate the time that the Minister, the Small Business Commissioner herself and her team have taken to try to address the questions that we have all put forward. I begin by addressing the amendments to which I and my noble friend Lord Sharpe of Epsom have added our names, namely those in the name of my noble friend Lord Leigh of Hurley. Amendments 28 and 29 aim to bring some transparency to the Office of the Small Business Commissioner by requiring written reasons for declining to adjudicate a dispute, and by requiring the definition of a sufficient number of occasions to trigger an investigation into payment practices. On the latter point, I accept the Government’s reasoning that a numerical definition does not sufficiently account for the scale of different poor payment practices. However, I hope that the Minister can therefore confirm that there will be some framework on which these decisions to investigate will be based. I hope that the Minister will be able to outline the Government’s position on the former point—written reasons for declining to adjudicate a dispute. I understand that discretion and disclosure are considerations, so perhaps a middle ground that requires the informing of decisions to decline, without necessarily including the reasons for doing so, would be acceptable. My concerns remain about putting a time limit on resolving disputes, as Amendment 27 would do. Although disputes should of course be addressed in a timely manner, the fact is that different disputes will require different resources and be of vastly different scales. An arbitrary time period risks rushing the commissioner’s office or forcing it to prioritise, or perhaps even to accept trade-offs. We do not believe that the benefits of a 60-day limit off-set those risks. Finally, I am grateful to the Minister for providing us with a briefing beforehand on some of the previous funding of the Small Business Commissioner’s office and the Government’s plans for the future. We are satisfied that these have been modelled on the best predictions possible. I am sure your Lordships’ House would be grateful if the Minister could outline some of that data when he comes to reply to this debate—certainly at the Dispatch Box at some stage. I finish by asking whether there is a way to scrutinise the commissioner’s funding in the future. As I have said, we are satisfied with the predictions, but they are still only predictions. I am sure that there will be an internal review process into the effectiveness of these reforms, but this House deserves the opportunity to have some input into that process, so I look forward to hearing the Minister’s response.
Lord Leong (Lab)
My Lords, once again, I thank the noble Lord, Lord Fox, for Amendments 27 and 34, and the noble Lord, Lord Leigh, who is not in this place, and the noble Lords, Lord Hunt and Lord Sharpe, for Amendments 28 and 29. First, I recognise the constructive spirit in which these amendments have been tabled and the shared objective of ensuring that the Small Business Commissioner’s new functions are timely, transparent and effective. I agree that payment disputes should be resolved as quickly and efficiently as possible. In line with the construction adjudication scheme, we are considering whether a 28-day limit for the adjudicator to reach a decision, extendable where necessary, would be appropriate. I believe that noble Lords would agree that this time is sensible and reasonable. We will consult on this to ensure the final approach is informed by evidence and stakeholder views. Time limits will be set out in regulations subject to Parliament’s approval. This approach will give businesses confidence that payment disputes will be resolved quickly and efficiently, while maintaining flexibility to refine time limits in the light of feedback and operational experience. The Government recognise the importance of transparency, and I appreciate the sentiment behind Amendment 28. As a matter of principle, a small business should understand why the commissioner has declined to adjudicate a dispute. However, there may be occasions when disclosing the details of a referral to a larger business could harm commercial relationships or be otherwise inappropriate. As such, we believe such obligation should be subject to further consultation and addressed through regulations. Regarding Amendment 29, I understand the desire for clarity on how the commissioner will assess repeated poor payment practice, but this is precisely the kind of judgment that should be informed by real experience and evidence and guided by statutory criteria that the commissioner must consider on a case-by-case basis. If we try to prescribe an arbitrary number for vastly different practices, we risk creating an inflexible model that fails in practice and undermines the commissioner’s ability to act. On resourcing, I hear the concerns raised by noble Lords. I wholeheartedly agree that the provisions in this Bill will be effective only if properly enforced and that the resources available to the Small Business Commissioner are crucial to this aim. I reassure all noble Lords that the Office of the Small Business Commissioner is already being resourced for implementation, that I am the Minister responsible for the Small Business Commissioner and that I will ensure that it has the proper resources. I have recently facilitated a meeting between the commissioner and noble Lords to discuss preparation for the legislation coming into force. I can confirm that the commissioner’s budget has already received an initial 30% boost this financial year and that recruitment is under way for six new members of staff, bringing the existing team to 20. This has already allowed the office to begin building its capability ahead of the new enforcement powers in the Bill.
In addition, we have undertaken a rigorous assessment and benchmarking exercise to assess future demand for adjudication, enforcement and investigation. I assure the noble Lord, Lord Hunt, that I will ensure that he gets the data regarding the assessments that we have done.
The department will provide further resources, doubling the commissioner’s resource base in 2025-26, to ensure that the office’s delivery capability is ready on day one. We are also considering options for appointing third-party adjudicators to provide further flexibility and capability. These will provide the commissioner with a strong operating base and, together with the ability to recover the costs of adjudications and investigations, ensure we have a funding model that is sustainable and flexible enough to manage demand.
I am happy to go further to provide noble Lords with assurance on this. I am willing to commit that, before the new adjudication and investigation functions commence, the Government will provide Parliament with a clear statement on implementation readiness, including staffing, systems, operational capability and arrangements for keeping resources under review. Resources will not be treated as a one-off issue. We will keep the commissioner’s capacity under review as the regime settles, caseloads become clearer and evidence emerges on the use of adjudication, investigation and enforcement powers. The commissioner’s annual report will continue to provide transparency on activities, performance, staffing, funding and audited accounts. In addition, the Government are prepared to provide further assurance to Parliament on implementation before the relevant new functions are brought into force.
These are concrete commitments that show the Government are already taking the necessary steps, so there is no need to include a separate budget publication requirement in the Bill. I will be happy to provide further updates ahead of commencement. For these reasons, I respectfully ask the noble Lord to withdraw Amendment 27 and not to move the other amendments in the group.
Lord Fox (LD)
My Lords, I thank the Minister wholeheartedly for his response to both my amendments. The response to Amendment 27 was more ambitious than I was proposing, so I am very happy with that. His response to Amendment 34 on resources has been more than fulsome. On that basis, I beg leave to withdraw Amendment 27.
Amendment 27 withdrawn.
Amendment 28 not moved.
Clause 19: Investigations into payment practices
Amendment 29 not moved.
Clause 24: Enforcement of duty to publish report on payment practices and performance
Amendment 30
Moved by
30: Clause 24, page 37, line 42, leave out “in the United Kingdom” Member's explanatory statement This amendment concerns regulations enabling the Small Business Commissioner to impose financial penalties for breach of payment reporting requirements. This amendment has the result that the penalties need not be linked to turnover in the United Kingdom.
Lord Fox (LD)
My Lords, I shall move Amendment 30 and speak to Amendments 31, 32, 43, 44 and 45, which sounds daunting but they are all the same amendment. These amendments are in my name, and I am happy to say that they have been countersigned by the Minister. The effect of these changes would be to remove the requirement for the Small Business Commissioner to use UK turnover alone when making an adjudication. I thank the Minister for his contribution to this. There may well be cases where it is appropriate for UK activity only to be the basis for any fine—in fact, in most cases that will be the case—but there may be others where a broader turnover is appropriate; for example, where a company’s accounting practices effectively shrink UK turnover in order to shrink a penalty. In these cases, we need to give the Small Business Commissioner the power to prevent avoidance through profits-shifting and turnover-shifting. In Committee, I used the example of the Digital Markets, Competition and Consumers Act 2024, which makes the same point and puts in place a different solution. Removing the UK from the description of how the Small Business Commissioner calculates any sanctions or giving that option to the Small Business Commissioner would give flexibility for the commissioner to pitch the right sanction to an errant business. For that reason, I beg to move Amendment 30.
Lord Sharpe of Epsom (Con)
My Lords, as we come to the end of Report, I once again place on record my thanks to noble Lords on all sides of the House for their engagement with the passage of this Bill. Up to this point, we have had a very chummy time with a lot of cosy consensus, so noble Lords will be very pleased to know that I intend to introduce a note of disagreement on this amendment. I begin by stating that I do not disagree with the premise of Amendment 30, in the names of the noble Lord, Lord Fox, and the Minister. Companies should ensure that they have good payment practices and that these are reported, and should be incentivised where necessary. I equally understand the reasoning behind giving the Small Business Commissioner the powers to both oversee and enforce the reporting of payment practices and performances. The office will have a closer knowledge of small business payment practices than regular departmental officials, so it makes sense that it is given this responsibility. The issue is therefore not one of principle but one of proportion. Two other arms of the Government have the power to fine businesses based on global turnover rather than domestic turnover. They are the Competition and Markets Authority and the Information Commissioner’s Office. These bodies deal with some of the most important and wide-reaching areas of our economy: the former with the upkeep of fair and competitive markets, the latter with the protection of the public’s private information. Those issues are far greater in scale and gravity than what Clause 24 and the new Section 3A will give the SBC—the Small Business Commissioner—powers over. These powers are not even dealing with payment practices; they are dealing with the reporting of payment practices. Yet the office will be able to fine companies 1%, without even the discretion to fine less than 1%, of global turnover. To His Majesty’s loyal Opposition, this seems disproportionate, to say the very least. We do not believe that this is the right vehicle to address the subject of the profit shifting that the noble Lord Fox mentioned. One of the key concerns that we have heard from stakeholders during the passage of this Bill is that, while they support maximum payment terms, there will be a transition period to implement the technology and payment systems. This is particularly the case with large multinational corporations. These companies have incredibly complex systems that organise payments across borders, time zones and legal frameworks. It is not outside the realm of possibility that a business such as Amazon, for example, has some teething problems and fails to accurately report payment practices and performance within the UK. The result would be that the commissioner, based on a failure to report practices within the United Kingdom, would have the power to fine Amazon based on its global turnover. That would equate to more than £700 million for a potential technological error or delay. I do not think that power reflects the duty that we are dealing with. Lastly, there is the question of incentives. The Office of the Small Business Commissioner justifiably prides itself on saving more money for small businesses than it costs the taxpayer. If value for money is the justification for the office’s existence, its incentive is to use its powers to raise money in order to continue its operation. I am not accusing the SBC of this; I am simply reflecting on the perverse incentives that occur when an arm of government relies on action to justify its continued existence. I do not think, given these natural incentives exist, that we should give any arm of the state the power to tax multinational businesses based on their global turnover for actions within the United Kingdom. We should especially reflect on this when we are not even discussing payment practices; we are discussing the reporting of payment practices. Given that this amendment has the support of the majority of the House, we will not oppose it, but I would like to place on record my, and indeed His Majesty’s loyal Opposition’s, concern about this measure. It would go some way to allaying my worries if the Minister could outline how many times a fine has been given under the existing Section 3, but I am still concerned that this is a disproportionate step that places far too much power in the hands of an ultimately unaccountable body. I look forward to the Minister’s response.
Lord Leong (Lab)
My Lords, I thank the noble Lord, Lord Fox, for his amendment regarding turnover and financial penalties. These amendments raise an important question about how turnover should be calculated for financial penalties under the payment reporting regime following an investigation by the SBC. I thank the noble Lord for the constructive discussions that we have had on this issue. The Government agree that this issue merits proper debate. We want penalties to be meaningful and capable of driving compliance while ensuring that the approach is proportionate, relevant and workable for businesses in scope. The Government support the aim of the amendment, at this stage, to open up the debate on the appropriate basis for calculating turnover. However, I want to be clear that the Government have not reached a final view on the most appropriate approach. The Government will want to engage with businesses, business representatives and other interested parties before determining how turnover should be calculated for these purposes, including—given that the Bill addresses UK payment practices—whether it should be limited to UK turnover or extended more widely. Further detail on how turnover is calculated will be provided in secondary legislation. That secondary legislation will be informed by a process of consultation to determine how turnover should be calculated. Additionally, that secondary legislation, which will be debated in Parliament, will allow the final position to be properly tested. This approach will ensure that the regime retains the flexibility required to operate effectively and proportionately. On that basis, I once again thank the noble Lord, Lord Fox, for raising this important issue and for engaging positively with the Government. The Government support Amendments 30 to 32 and 43 to 45, to which I have added my name. Before I sit down, I once again thank all noble Lords, especially those from the Opposition Benches—the noble Lords, Lord Sharpe of Epsom and Lord Hunt of Wirral, as well as the noble Lord, Lord Fox—for their thoughtful and constructive engagement throughout the passage of the Bill. It just shows that we can get things done if we work collaboratively.
Amendment 30 agreed
Amendments 31 and 32
Moved by
31: Clause 24, page 38, line 2, leave out “in the United Kingdom” Member’s explanatory statement This amendment mirrors my amendment of clause 24, page 37, line 42.
32: Clause 24, page 38, line 5, leave out “in the United Kingdom” Member’s explanatory statement This amendment mirrors my amendment of clause 24, page 37, line 42.
Amendments 31 and 32 agreed.
Amendments 33 to 35 not moved.
Clause 28: Power to make consequential provision
Amendment 36
Moved by
36: Clause 28, page 40, line 19, after “Act” insert “or regulations made under this Act” Member’s explanatory statement This amendment ensures that if the powers proposed by my new clause were exercised to change a payment period, the necessary consequential changes could be made to other statutory provisions.
Amendment 36 agreed.
Schedule 1: Chapter 1 of Part 1: further amendments
Amendments 37 to 42
Moved by
37: Schedule 1, page 43, line 20, leave out “2F” and insert “2G” Member’s explanatory statement This amendment is consequential on my proposed new clause.
38: Schedule 1, page 43, line 23, leave out “2F(1)” and insert “2G(1)” Member’s explanatory statement This amendment is consequential on my proposed new clause.
39: Schedule 1, page 44, line 21, at end insert— “(e) section 2F(1),(f) section 2F(3),(g) section 2F(5), or(h) section 2F(6),”Member’s explanatory statement This amendment deals with ancillary matters relating to the powers proposed by my new clause, namely consultation before exercise of powers, consent of devolved authorities and Parliamentary procedure, as set out in section 15 of the Commercial Payments and Interest on Late Payment Act 1998.
40: Schedule 1, page 44, line 23, at end insert— “(3A) The duty in subsection (3)(e), (f), (g) or (h) may be satisfied by consultation that took place in compliance with the duty in section 2F(7).” Member’s explanatory statement This amendment has the effect that if the Secretary of State has consulted about whether to shorten payment terms as required by my new clause, that counts as satisfying the consultation requirements set out in section 15 of the Commercial Payments and Interest on Late Payment Act 1998.
41: Schedule 1, page 46, line 10, leave out “2F(1)” and insert “2G(1)” Member’s explanatory statement This amendment is consequential on my proposed new clause.
42: Schedule 1, page 47, line 32, leave out “2F(1)” and insert “2G(1)” Member’s explanatory statement This amendment is consequential on my proposed new clause.
Amendments 37 to 42 agreed.
Schedule 3: Investigations into payment practices: financial penalties
Amendments 43 to 45
Moved by
43: Schedule 3, page 58, line 3, leave out “in the United Kingdom” Member’s explanatory statement This amendment concerns financial penalties that may be imposed by the Small Business Commissioner in relation to poor payment practices. This amendment has the result that the penalties need not be linked to turnover in the United Kingdom.
44: Schedule 3, page 58, line 4, leave out “in the United Kingdom” Member’s explanatory statement This amendment mirrors my amendment of Schedule 3, page 58, line 3.
45: Schedule 3, page 59, line 30, leave out “in the United Kingdom” Member’s explanatory statement This amendment mirrors my amendment of Schedule 3, page 58, line 3.
Amendments 43 to 45 agreed.
Schedule 4: Further amendments: Small Business Commissioner
Amendment 46 not moved.
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Source: UK Parliament Hansard API. Debate ID: 5408146.