Arrangement of Business
The Deputy Chairman of Committees (Lord Haskel) (Lab)
My Lords, if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025
(1 day, 16 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Lord Livermore
That the Grand Committee do consider the Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025.
Relevant document: 28th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, I begin by extending my thanks to the Secondary Legislation Scrutiny Committee for the detailed and thoughtful consideration of this draft order in its report published last month; I will respond fully to the points raised by the committee. I also take this opportunity to welcome the support for these reforms from consumer groups, from firms offering buy now, pay later products, and from the Official Opposition, who first initiated the process which has led to this order.
The purpose of the legislation before your Lordships’ Committee today is to protect consumers and provide certainty and stability for business. I will begin by providing a brief overview of the issue which this order seeks to address before outlining the steps the Government are taking to mitigate these harms.
More than 10 million people in the UK now use buy now, pay later products, which allow consumers to pay for goods and services through interest-free instalments over a period of 12 months or less. Fintechs such as Klarna, PayPal and Clearpay typically partner with merchants, predominantly online retailers, which offer their buy now, pay later options to customers at checkout. When used responsibly, these products can help users manage their finances and make purchases more affordable, compared with using traditional, interest-bearing forms of credit such as credit cards and personal loans.
However, unlike these traditional forms of credit, interest-free buy now, pay later products are not currently regulated by the Financial Conduct Authority. This is because they fall under an exemption which was originally designed to help small businesses offer instalment payment plans to their customers: for example, a gym offering a 12-month payment plan.
The 2021 Woolard review, which investigated recent innovations in the consumer credit market, highlighted several potential risks facing people who use unregulated buy now, pay later products.
First, there are no rules on what information firms must give their customers. Too many people are left unclear about what they owe and when they need to repay it—and some do not even realise they have taken out credit at all. The Financial Conduct Authority previously found that nearly a fifth of buy now, pay later users were not aware they would be charged a late fee for missed payments from fee-charging providers.
Secondly, buy now, pay later firms are not required to check whether people can afford these products. This means that credit is being given to those who may not be able to pay it back.
Finally, firms are not required to check what an individual already owes. As a result, debt can quickly mount up when people take out several buy now, pay later products at once. For example, research from Citizens Advice found that almost a third of buy now, pay later users it surveyed had borrowed from elsewhere to pay off their buy now, pay later debts.
The Government believe that action must be taken to address these issues and protect consumers. That is why, under this draft order, buy now, pay later products offered by third-party lenders such as Klarna, PayPal, and Clearpay will be brought into regulation under the Financial Conduct Authority.
Under the new regulatory regime, firms will have to carry out robust affordability checks before lending to make sure that consumers are protected from taking on debt they cannot afford. Consumers will receive clear and transparent information about buy now, pay later products, including what support is available if they face financial difficulty.
In addition, for the first time, consumers will have the right to take their complaints about buy now, pay later firms to the Financial Ombudsman Service, guaranteeing access to fair and independent resolution if problems arise. These are rights and protections that users of other regulated credit products enjoy already; it is only right that users of buy now, pay later products receive them too.
The Government acknowledge concerns raised in the Secondary Legislation Scrutiny Committee’s report that buy now, pay later products offered directly by merchants will not fall under the new regulatory regime. We examined this issue carefully before publishing the order before your Lordships’ Committee. Protecting small businesses from regulatory overreach was central to our approach. Regulating buy now, pay later products offered directly by merchants threatens to capture simple, interest-free instalment plans, such as the gym membership example that I referenced earlier. Regulating these arrangements, which small businesses routinely offer to their customers, would create unjustified disruption for countless small businesses and their customers, imposing regulatory burden without sufficient evidence of consumer harm to support it. The Government are also confident that there are robust existing protections in place to safeguard consumers using merchant-offered buy now, pay later products; current consumer protection laws covering advertising, financial promotions and unfair trading practices apply to these products already.
Finally, our assessment is that it is inherently unlikely that many merchants will offer their own products because of the associated credit risk and the accrual of new liabilities on their balance sheet. Instead, we believe that many would be minded to create a subsidiary to supply the credit or to partner with separate credit providers—both of which arrangements would fall under the scope of these changes. We will, however, continue to monitor this market closely with the Financial Conduct Authority and through our regular industry engagement, and, if we see evidence of potential consumer harm, we will not hesitate to act.
The second key aspect of this order relates to the Consumer Credit Act 1974. The Secondary Legislation Scrutiny Committee’s report questions whether the Government should consider whether definitions in that Act can be amended to distinguish between low-risk buy now, pay later products offered by small businesses, such as private gym memberships, and buy now, pay later products offered by large-scale merchants. The Government agree that this is an important issue, which is why the forthcoming consultation on Consumer Credit Act reform will seek input from stakeholders to ensure that any potential changes we make to these definitions are appropriate.
I want also to touch briefly on the other provisions in the order as they relate to this Act. The order before us will ensure that users of buy now, pay later products will have protection under Section 75 of the Consumer Credit Act, making it easier to receive a refund if a supplier breaks a contract or misleads the customer. Under the current laws of contract, customers can seek compensation for defective goods or services only from the supplier for breach of contract. Our changes will strengthen consumer rights by making buy now, pay later lenders equally responsible for problems with purchases when they have provided the credit. This will give consumers a key statutory right enjoyed by users of currently regulated credit products.
Separately, consumers will also now receive clear and relevant information about buy now, pay later products, including details about what they owe and when payments are due. The new requirements will be set by Financial Conduct Authority rules, rather than the Consumer Credit Act. This change reflects feedback from both industry and consumer groups that current provisions on information disclosure do not suit interest-free, short-term buy now, pay later products. Although these changes will apply only to buy now, pay later products, the Government have also launched a consultation on reform of the Consumer Credit Act itself, which we are committed to doing at pace; the consultation includes proposals that would see the wider consumer credit industry benefit from modernised information disclosure requirements, too.
I turn finally to the impact of these changes on firms offering buy now, pay later products. The Government’s intention is that, while the changes outlined today will help protect consumers, they will also benefit providers. For years, buy now, pay later firms have faced regulatory uncertainty, stalling their growth and investment in the UK. This order ends that uncertainty and allows firms to innovate and invest in the UK. To ensure a smooth transition to the new regime, firms will also be able to continue lending under a temporary permissions regime while their Financial Conduct Authority authorisation is under review.
Twelve months after this order is made, the new regulatory regime for these products will come into force. In that time, the Financial Conduct Authority will consult on and finalise the rules that will govern buy now, pay later lending. The changes laid out in the draft order are fair, responsible and proportionate, and we are determined to deliver them promptly to protect consumers and to provide certainty for businesses. I beg to move.
Baroness Neville-Rolfe (Con)
My Lords, I thank the Minister for introducing this order and for his thorough summary. It is an important measure, and the Committee is surprisingly thin today.
Borrowing with a defined repayment period is a long-standing practice, with many well-established advantages that most of us have benefited from: for example, in respect of mortgages on our homes. It is a good thing that innovation—buy now, pay later—has developed the lending market but, as always, we need to have an eye on the potential downsides. In this case, that refers above all to the possibility of unsophisticated borrowers getting into financial trouble, probably because of an inaccurate assessment by lenders of the likelihood of any loan being repaid. I accept that in such cases a degree of protection may be justified. That is the philosophical and economic background.
However, there is a need for balance so that regulation does not simply close down the borrowing arrangements, which will make life harder for hard-pressed consumers and will risk pushing them into the hands of loan sharks. Another concern is the impact on small businesses, whether in financial services or retail, which we need to protect from overburdensome regulation. The spark of enterprise risks being snuffed out by this Government if they are not very careful about how they treat the smaller operators. Excessive red tape will simply reduce the services available to consumers and increase costs and prices.
Over the past few years, consumer spending habits in the UK have undergone a significant change. There has been a surge in the use of buy now, pay later schemes, with 14 million consumers recorded as using the agreements in the six months leading to January 2023. This is, however, still a much smaller market than credit cards. We recognise that there are growing concerns about consumer harm in the sector, with 44% of frequent users of such schemes overindebted in 2022, according to an FCA survey. Misleading promotions, lack of affordability assessments and the possibility of accumulating high debts are examples of the potential harms identified for consumers.
Under the previous Government, the 2021 Woolard review proposed the urgent regulation of buy now, pay later payments, but we did not have time to carry this through to completion, so I welcome today’s statutory instrument, which builds on this legacy and addresses lending practices that could harm consumers if they remain unchecked. The proposed order will require buy now, pay later product lenders to be authorised by the FCA, which will give consumers a wider range of protections, including access to the Financial Ombudsman Service for redress.
The instrument also requires firms to carry out affordability checks on borrowers and offer clear product information to consumers to prevent unaffordable borrowing. The proposed order rightly offers more protection for consumers, but we must also be sensitive to business voices operating in the buy now, pay later market. We must be conscious that being subject to FCA rules is not a walk in the park. I speak as a former non-executive director of a challenger bank. So I would like the Minister to explain how the FCA plans to develop and implement the buy now, pay later rules over the next 12 months and who they will affect. For example, would Klarna or Clearpay do all the consumer checks, or would they also pose a burden on the retailer—Boots, for example, or a specialist online retailer of the kind the Minister mentioned?
I also need an assurance that the regulator will have the capacity, and indeed the will, to approve the three significant suppliers and the others that are caught by the new regulations, and to do so comfortably within the 12-month timeframe. It will take time to develop the rules on creditworthiness and affordability, and a year is not long. In my experience, the FCA is much more concerned about its consumer duties than keeping business running and innovating. In the helpful impact assessment on this order, the compliance costs are assessed at some £19 million to £32 million over 10 years. This estimate seems far too low to me, from my experience of dealing with FCA regulation in three different entities. Of course we need to do the right thing, but the regulatory and legal costs in financial services such as these continue to mount, and that then hits innovation and growth.
So I would welcome some reassurance from the Minister on this score and an undertaking that there will be continued engagement between the industry and the Financial Ombudsman Service, because that can also be a vehicle for delay and inconsistency. To put the change in perspective, I would also appreciate an update on the current level of over-indebtedness by frequent users—the worrying figure of 44% that I quoted from 2022—and an indication of the proportion of the total number and value of buy now, pay later borrowers that they represent. I am interested in how many indebted purchasers there are and how significant in number they are in the big scheme of things.
Lord Livermore (Lab)
My Lords, I am very grateful to the noble Baroness for her comments and questions and for her support for these measures which, as she says, build on what the previous Government began. She rightly set out the importance of buy now, pay later products and pointed out the potential downsides, which we absolutely agree on, regarding borrowers getting into trouble and the need to prevent that. She also talked about the need for balance. She is right that the action that we take should not in any way close down an important route for consumers.
As I said in my opening remarks, these measures have been welcomed by consumer groups. Although these products can help people manage their finances by spreading the cost of purchases, they can put consumers at risk, particularly from unaffordable lending. The FCA will be able to apply appropriate, proportionate rules on assessing creditworthiness and affordability for buy now, pay later lending, so I am confident that it will not unduly close down these routes. It has been welcomed by the providers and consumer groups. The Government are committed to proportionate regulation.
On that point, the noble Baroness went on to talk about the impact on small businesses. Again, they have welcomed this measure to avoid the overly burdensome approach and the regulatory creep she spoke about. That is exactly why protecting small businesses from regulatory overreach was central to our approach. Regulating these products, offered directly by merchants, threatens to capture the simple gym membership example that we talked about. I am happy to give her those assurances on the approach and the way the FCA will approach that.
The noble Baroness asked a number of questions about the FCA and the next steps on regulation. Regulation will commence 12 months after this legislation is made. The FCA will consult after the legislation is finalised. The consultation will include the FCA’s proposed conduct rules for regulating buy now, pay later. The FCA will then consider stakeholder feedback and decide whether it needs to amend its proposed approach before making its final rules. Firms will need a period in which to digest and prepare for the final rules before they come into force. The FCA is keen to give industry as much opportunity as possible to prepare its systems and processes before the final rules come into effect. The FCA intends to publish its policy statement and final rules in early 2026.
The noble Baroness asked about capacity and my confidence in the FCA. Obviously, that is complete. The FCA is an independent, non-governmental organisation. Its independence is vital to its role. However, it is fully accountable to the Government and Parliament for how it exercises its functions. This accountability is critical to ensuring it advances the objectives given to it by Parliament and is performing optimally. Ministers in the Treasury have a very close working relationship with the FCA. We work together very effectively to solve problems and are able to exchange views frankly.
The noble Baroness asked about the second consultation process. Although the consultation is split into two phases, the Government intend to implement the reforms via one legislative vehicle when parliamentary time allows. Once the legislation is in place, the FCA will consult on a policy approach and draft rules for a reformed regime.
The noble Baroness also asked about exemptions, which I think I touched on. As I said in my opening remarks, we absolutely have the intention to keep these under review and if further action is required, we will not hesitate to act. I think I have covered all the points that she raised.
Baroness Neville-Rolfe (Con)
The one point the noble Lord has not really touched on is growth and innovation, but I take it from the points he normally makes that he sees this sitting within that context. I think the Chancellor sent a letter to the FCA some months ago encouraging an approach to growth in the way it regulates. So he is right that it is independent and does its own thing but, equally, it is important that it minimises bureaucracy and tries to be efficient and helpful, because it plays such an important part in the economy and with business, but also in protecting consumers.
Lord Livermore (Lab)
I completely take what the noble Baroness says; my apologies for not covering that in my initial response. The intention with these specific measures is to be proportionate. That is why we responded in the way that we did to the scrutiny committee, for example. These measures should boost growth and investment. There has been uncertainty in the sector for too long and we are now correcting that.
The noble Baroness is absolutely right about the wider response to the regulation. In her first Mansion House speech, the Chancellor set out very clearly that she wanted to see us regulating for growth rather than risk, and for the pendulum to swing slightly further back the other way. The Chancellor has her second Mansion House speech next week; I am sure she will have more to say on that point then.
Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment) Order 2025
(1 day, 16 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Lord Hanson of Flint
That the Grand Committee do consider the Proceeds of Crime (Money Laundering) (Threshold Amount) (Amendment) Order 2025.
Relevant document: 27th Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Home Office (Lord Hanson of Flint) (Lab)
My Lords, before I address the content of this statutory instrument, I will briefly provide some background. The fight against money laundering is an important element of the Government’s missions to deliver safer streets and kick-start economic growth. This year marks the 10-year anniversary of the public/private partnership which is central to the UK’s response to economic crime and which sets the international standard in this area. With approximately 1,200 UK law enforcement operations supported, over 400 arrests made, nearly £250 million seized and restrained and more than 100 alerts published, the partnership demonstrates the power of a whole-system response which combines the capabilities, resources and expertise of the public and private sectors. However, with the threat ever evolving, we must target our resources to where they will have the greatest impact.
Under the economic crime plan 2, the Government, law enforcement and the private sector have worked together to consider how public/private resource can be better directed to maximise our collective impact against the threat. The statutory instrument before the Committee today is one of the first outputs from this work. Quite simply, it raises the existing financial threshold for two exemptions which apply to principal money laundering offences under the Proceeds of Crime Act 2002 from £1,000 to £3,000. The aim is to move finite resource away from low-value activity towards higher-value investigations and to increase the effectiveness of the suspicious activity reporting regime.
This uplift in the threshold will enable law enforcement resource to focus on higher priority reports that provide greater opportunities for asset denial and disruption of criminal activity. The proposal before the Committee today will also free up business resources which can be redirected towards high-value activity that may have a greater impact on the threat. The measure is further expected to reduce the impact on banking customers by reducing the number of instances of legitimate customers being unable to access their accounts, particularly where no further action is taken.
The first exemption applies to acts in operation of account, such as paying expenses, by deposit taking bodies—in essence, banks and building societies—and to electronic money and payment institutions. The second exemption applies in the instance of a business in the anti-money laundering regulated sector ending a relationship with a customer and paying away any money or property to the customer. This means that for transactions below this threshold, businesses in the anti-money laundering regulated sector do not need to submit defence against money laundering suspicious activity reports, or DAML SARs as I will refer to them.
A DAML SAR is submitted to the UK Financial Intelligence Unit by a person proposing to deal with suspected criminal property which may make them liable for one of the principal money laundering offences under the Proceeds of Crime Act 2002. By submitting a DAML, a person can avoid committing one of the principal money laundering offences by obtaining consent or deemed consent for the act they propose to carry out; for example, as I mentioned earlier, a customer’s transaction to pay their mortgage. The DAML provides information to the UK Financial Intelligence Unit and prevents the business carrying out the activity referenced in the request until the UK Financial Intelligence Unit gives a consent decision, or seven working days pass, after which businesses can assume they have consent.
In 2023, the threshold was raised to £1,000 due to the rising volume of DAML regulation procedures, and the regulatory burdens on businesses to submit a DAML suspicious activity report, as well as burdens on law enforcement to review and the delay to customers who must often wait seven days for their transaction to process. Those are all good reasons why the original threshold was raised to £1,000.
Lord Davies of Gower (Con)
My Lords, I am sure that all parliamentarians will agree that tackling money laundering is a shared mission across both Houses to create a safer society and support our economy. I am proud that the previous Conservative Government introduced the economic crime levy, which raises some £100 million per year from the anti-money laundering sector. I am pleased that today’s proposals build on this legacy of tackling money laundering.
These proposals will raise the threshold for two exemptions that apply to principal money laundering offences under the Proceeds of Crime Act 2002 from £1,000 to £3,000. This will reduce the resourcing burden on law enforcement and enable our officers to dedicate more time to activities that yield greater asset denial and to disrupting criminal operations more effectively.
If we look at the number of defence against money laundering reports submitted to the UK Financial Intelligence Unit in 2024, we can see why there is a case for raising the threshold. In 2024, 23,000 reports were submitted relating to transactions between £1,000 and £3,000. Of these, only 182 were refused, leading to £209,565 of assets denied. This represents 0.1% of all assets denied as a result of defence against money laundering reports in 2024.
It is both necessary and appropriate that we ease the pressure on enforcement agencies at this level and allow resources to be focused where they can have the greatest impact on tackling the most serious crimes. This policy area has been under review following the threshold rise in 2023, and a targeted consultation was carried out on money laundering reports. The outcome of the consultation shows strong support for increasing the threshold to at least £3,000. Respondents cited multiple benefits, including a reduction in the reporting burden, the reallocation of resources to higher-value investigations, and improved outcomes for customers, particularly by reducing the number of legitimate account users who face access issues. Raising the threshold to £3,000 is supported by the UK Financial Intelligence Unit, which believes it will also reduce the reporting burden on business and free up its resources to focus more on high-value activity.
Although the case is clear to raise the threshold, the Government must also be aware of the potential risks of criminals splitting transactions to come under the threshold. This was raised by a respondent in the consultation. Although mechanisms are in place, this must be a consideration. I ask the Minister to confirm that crime rates under that £3,000 level will be monitored and that the threshold will be changed again if it becomes necessary.
In conclusion, I support today’s proposals, which will help to tackle money laundering. There is no place for crime groups attempting to launder their illicit funds through the UK financial system. It is right that we prioritise resourcing for the highest crimes.
Lord Hanson of Flint (Lab)
I am grateful to the noble Lord, Lord Davies, for having a shared approach to money laundering. He is right to point to the fact that there has been a consultation on this matter. He is also right to point out that, in essence, there is a shared understanding between all parties that the money laundering threshold needed to be reviewed. The figure of £3,000 that we have put in this order sets a balance. We will always keep it under review—there is potential for higher figures, which have been discussed as part of the consultation—but we have settled on a threshold of £3,000, which strikes the appropriate balance between reducing low-value reporting and mitigating the potential loss of asset denial outcomes.
The noble Lord is right to say that we need to ensure that we examine the risk of criminals splitting transactions into smaller amounts and seeking to avoid detection. The raising of the threshold is data led. It addresses an acute consumer duty risk and creates capacity in firms to tackle higher-value, more societally impacting economic crimes, all of which outweighs the residual risk of criminals circumventing the threshold limit as of now. The noble Lord was right to point to the very low level of transactions of interest between £1,000 and £3,000 in the previous regime, which resulted in further examination.
I am grateful to the noble Lord for his support. I can assure him that we will keep all matters under review, including the performance of this threshold, but I take and welcome his considered support. I commend the order to the Committee.
Combined Authorities (Adult Education Functions) (Amendment) Order 2025
Baroness Blake of Leeds
That the Grand Committee do consider the Combined Authorities (Adult Education Functions) (Amendment) Order 2025.
Baroness in Waiting/Government Whip (Baroness Blake of Leeds) (Lab)
My Lords, I thank the Secondary Legislation Scrutiny Committee and the Joint Committee on Statutory Instruments for the scrutiny provided on this draft statutory instrument, which was laid in Parliament on 19 May 2025. If this order is approved, the Department for Education will transfer an additional funding power to nine existing combined authorities to enable them to use their adult skills fund allocation to fund new technical qualifications that have been approved for adults from the academic year on 1 August 2025.
The function being transferred to these combined authorities is under Section 100(1B) of the Apprenticeships, Skills, Children and Learning Act 2009—namely, the power to
“secure the provision of financial resources … in connection with approved technical education qualifications or approved steps towards occupational competence”.
This power will be carried out by each of the combined authorities, in respect of their area, concurrently with the Secretary of State. This will enable combined authorities to fund new technical qualifications for adults approved for funding at level 2 and level 3 from 1 August 2025.
The new technical qualifications are of high quality, are aligned with occupational standards and offer learners clear routes into skilled employment. One hundred and ten reformed technical qualifications at levels 2 and 3 have been approved to be first taught in the next academic year. These qualifications have been co-designed with employers to ensure that the skills needs of business and industry are better served and that clear progression pathways are created, delivering the outcomes that learners need, either to enter a skilled job or progress within a skilled career.
Learners deserve high-quality qualifications that meet their needs. If this order is approved, these nine combined authorities with existing adult education powers will have the freedom to fund these qualifications in order to meet the local needs of learners and employers. Transferring this power is key to reducing regional disparities, by ensuring that all authorities have access to reformed, high-quality qualifications.
If this draft order is approved, the nine combined authorities can choose to fund new technical qualifications available for delivery from August 2025 onwards, if they wish. It is a statutory requirement for public consultation to take place before changes are made to a combined authority’s existing arrangements. The Department for Education carried out a public consultation in November last year, and 85% of respondents agreed that the Secretary of State should transfer this additional power to the existing combined authorities. Each of the combined authorities affected, and all their constituent councils, have consented to the transfer of this power and the making of this order.
An order can be made only if the appropriate consent is given and the Secretary of State considers that the statutory tests are met. Those tests are that making the order is: first,
“likely to improve the economic, social and environmental well-being of … the people who live or work in the areas to which this Order relates”;
and, secondly, is
“appropriate having regard to the need to secure effective and convenient local government, and to reflect the identities and interests of local communities”.
These combined authorities have already demonstrated effective administration of the adult skills fund allocated to them. They have a detailed understanding of the skills challenges facing their areas, and their strategic plans reflect the interests and identities of their local communities. Making the order will enable the combined authorities to provide the full range of technical qualifications that have been approved for adults. Therefore, I confirm that we have concluded that the statutory tests are met.
I take this opportunity to thank all our partner organisations and colleagues and the relevant combined authorities for their time, expertise and input. To conclude, this order will give nine combined authorities the ability to fund new technical qualifications delivery from August 2025 onwards, to meet local skills needs, to enhance economic growth and to bring greater prosperity to their regions. I beg to move.
The Earl of Effingham (Con)
My Lords, I thank the Minister for introducing this order. The adult skills fund plays a vital role in helping adult learners gain the practical skills and qualifications needed for meaningful employment across key sectors. The fund was introduced by the previous Government to support adult learners. Tailored learning helps to equip them with essential vocational skills such as English, maths and digital literacy, as well as covering a range of sectors from business management to health and social care.
Baroness Blake of Leeds (Lab)
My Lords, I thank the noble Earl, Lord Effingham, for his comments and his overall support of the direction of travel. I will pick up a couple of the points that he raised, in particular his comments about the reduction in adult skills funding allocations. I have to say that our analysis is that we have made a small reduction of 3%. The noble Earl referred to a reduction of 6%, but the overall reduction is in fact 3%. I emphasise that devolution is about giving freedom to those who best understand local needs, so that resources can be managed more effectively.
Baroness Blake of Leeds (Lab)
My Lords, I feel almost as though I should resume from the top for completeness.
I thank the noble Earl, Lord Effingham, for his comments and questions and, underlying those, for his welcome for the provisions through the adult skills fund. The important thing to remember is that devolution is about giving freedom to those who best understand local needs. We are looking for resources to be managed effectively and, in particular, to deliver greater positive impacts for local people.
I do not think I need to remind the Committee that this Government inherited a very challenging fiscal context. We know that adult skills play a vital role in driving economic growth, and we must make sure that we fix the foundations of the economy in the meantime. We acknowledge that there has been a small reduction of 3% to the overall adult skills fund for the next year. However, the Government will invest more than £1.4 billion in the adult skills fund next year, which is a significant amount of funding.
The budget has been reduced nationally for all devolved areas. However, the context in each area of the country is different. Each area will assess how it is managing its overall budget, and will make choices and priorities within that. Of course, the Government will continue to work closely with the devolved areas to make sure that they have the support to make the best use of the funding. I can speak from personal experience, as a former member of the West Yorkshire Combined Authority, when I say that all of the constituent local authorities take this responsibility very seriously and want to make sure that they are delivering the best outcomes for both the people who live in their areas and the businesses that perform in them.
On that basis, I completely agree that it is very important that we look at outcomes and that we always look for ways to learn and to improve from the devolved areas. Of course, because of local circumstances, each devolved area will come up with a slightly different approach to the opportunities and challenges that it faces. The Government hold areas to account through the English devolution framework; accountability is absolutely key for the significant amounts of public money that are now being devolved to those areas.
In conclusion, I reiterate that our priority is to build a skills system that will drive forward opportunity and deliver growth for our economy needs. Again, determination at the local level is absolutely fundamental to understanding where the economy needs the skills and how they should be co-produced. It is a really important aspect of the new qualifications that will be at their disposal, from the powers they will get, that employers have been very closely involved in the design of these qualifications. Making sure that adults can access these high-quality qualifications, no matter where they live, is an absolutely fundamental principle.
Sheep Carcase (Classification and Price Reporting) (England) Regulations 2025
(1 day, 16 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
Baroness Hayman of Ullock
That the Grand Committee do consider the Sheep Carcase (Classification and Price Reporting) (England) Regulations 2025.
Relevant document: 28th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, these regulations were laid before this House on 2 June. I draw the Committee’s attention to a correction slip that was issued on 5 June in relation to the draft instrument. This corrected a typographical error on page 20, in Schedule 2, in the heading to the second table, “Table 1”, which should read, “Table 2”. This does not affect the substance or intent of the legislation. Copies of the correction slip have been made available to Members.
I probably should declare an interest as sheep are kept on our smallholding.
For years, industry has been calling for mandatory sheep carcass classification and price reporting. This instrument will bring the sheep industry in line with the beef and pork sectors, where mandatory carcass classification and price reporting has been in place for many years.
This instrument mandates sheep carcass classification and the price reporting of sheep carcasses for larger slaughterhouses—those which slaughter at least 2,000 sheep per week. Smaller slaughterhouses that slaughter at least 1,000 sheep per week can voluntarily decide whether the regulations will apply to them. The legislation will also provide a process for the introduction of a system for the authorisation of automated sheep grading methods for slaughterhouses that wish to use automated carcass classification.
The reason we are introducing this legislation is that slaughterhouses are currently able to set their own standards for preparing and presenting sheep carcasses for classification and weighing. As a result, carcass weights across the sector lack consistency due to variations in the way the carcass is prepared, trimmed and presented. This inconsistency leads to a lack of transparency across the industry, with non-comparable prices being quoted or recorded. Consequently, farmers often struggle to achieve the best payment for the quality of their sheep carcasses when they sell their stock.
We want to see a more transparent, productive and efficient sheep market. By addressing this long-running supply chain fairness issue, we will both encourage farmers to improve productivity and ensure that they are paid a fair price based on the quality of their sheep. Producers can then also rear lambs that will better fit the market’s specifications and consumer demand.
The legislation will also introduce a consistent and robust mechanism for the evaluation of the carcasses of sheep that are aged less than 12 months old at the time of slaughter; this encapsulates the prime lamb market. The instrument requires the use of the EUROP grid, as it is commonly known, to assess conformation—that is, the shape—and the degree of fat cover. The meat industry is familiar with this carcass classification scale through the mandatory schemes for pig and beef carcasses. Several abattoirs have already been using it when voluntarily classifying sheep carcasses.
The new system will require operators to ensure that sheep carcasses are presented in a consistent way post-slaughter, at the point of weighing and classification. Regulated slaughterhouses will have to use one of two specified carcass presentations at this point.
The regulated slaughterhouses will be required to report the weight of the carcass and its classification details, along with the price being paid for sheep sold on a deadweight basis—that is, where payment for the sheep is dependent on the classification and weight of its carcass. These carcass and pricing details must be reported both to the supplier of the sheep and to the Agriculture and Horticulture Development Board, which will process the information under contract to Defra, as it currently does for beef and pork.
The instrument will apply a licensing regime to classifiers and to automated classification methods. The Rural Payments Agency, which will monitor and enforce the regulations, will assess and license carcass classifiers. This means that both manual classifiers and automated classifying technology in regulated slaughterhouses will need to be licensed for sheep classification. Provision is made for automated classification methods to be first subjected to an authorisation testing process, which must be passed before the automated equipment using that method can be put forward for licensing in regulated slaughterhouses. This will ensure that the method being used for automated classification can repeatedly and accurately classify carcasses. The Rural Payments Agency will be given the powers to inspect the regulated slaughterhouses and to take enforcement action where there are breaches to the regulatory requirements. The sheep industry, including farmers and meat processors, has been pressing us to create a mandatory carcass classification and price reporting system for sheep carcasses, which this instrument delivers.
I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I thank the Minister for, and congratulate her on, introducing these regulations, of which I wholeheartedly approve. This must be the most consulted-on SI in the history of SIs; obviously, it is a brilliant piece of work, because it was started under the outgoing Conservative Government.
I declare my interest in that I own one lot of shares in the Thirsk Farmers Auction Mart. For the purposes of Hansard, that is one lot—a very small group—of shares, not a lot of shares. I am also a patron of the Huby & Sutton Agricultural Society Show, which is not happening this year, sadly, because of the animal diseases that were prevalent earlier in the year.
I have a couple of questions for the Minister. I welcome the fact that there is a de minimis rule and that small abattoirs will be excluded. Is there any crossover with the requirements of the BSE and foot and mouth provisions, or are these are entirely separate? This instrument is stand-alone in that regard, I think.
My concern is that abattoirs are reducing in number. It is not my fault but the first time that this happened was, I remember, when there was a European directive on abattoirs. It might even have been under a Conservative Government. We gold-plated it, over-egged it and implemented it in a way that was never intended. That was down to the Home Department, I am afraid, which thought that birds flying around an abattoir was not a good idea when, in fact, all the carcasses were washed before they were cut up.
Since that time, the number of abattoirs has greatly reduced. The NFU is, as I am sure the Minister is aware, very concerned about the implications of abattoir numbers reducing for livestock farmers generally. Has the department done an impact assessment on where we are with the current number of abattoirs? I welcome the fact that, for one thing, this SI applies only to small abattoirs; and that, as the Minister said, we are equating sheep with pork and beef.
If we are not careful, though, all abattoirs will be large abattoirs because there will simply be no small abattoirs left. It is causing great concern among livestock producers, as well as—dare I say it very softly—among the animal welfare lobby, because animals have to travel further to slaughter. Obviously, given the extreme heat that we have seen recently, that is not something to be commended.
With those few remarks, I endorse entirely what farmers and the NFU are saying: we need more smaller abattoirs. Are the Government likely to look at this? I know that there was a small abattoir fund up until 2023. Locally, a lot of the Thirsk livestock went to Kilburn abattoir, but that is now gone. This is not acceptable. It is not fair on farmers that they must have this additional worry and the cost of sending their livestock a longer distance. I therefore welcome the regulations and congratulate the Government. I know that there were a number of reasons for the delay, but I would welcome the Minister’s support for small abattoirs; it would be good to see where we are in that regard.
Baroness Shephard of Northwold (Con)
My Lords, I echo my noble friend’s words: this consultation has been going on for a very long time. My noble friend Lord Deben and I absolutely can vouch for these issues being regularly raised but not always sorted in the time between us coming in and out of office. I therefore congratulate the Minister on this achievement.
I want to say one really serious thing about the decreasing number of abattoirs. In Norfolk, we now have one and a half abattoirs, if I can put it that way; I will not elucidate, but that is what we have. It means that if, for example, a farmer is selling to a supermarket—Morrisons, say—the abattoirs will be in Manchester, with the obvious consequences for the travel of cattle. In the recent hot weather, this has been intolerable for live animals. We are at risk with the number of abattoirs. I say to the Minister: this has never been a glamorous cause to pursue, but we are at risk of being accused of endangering the lives of animals.
Lord Deben (Con)
My Lords, I remind the Committee of my interests. First, I let land for sheep; as I have an organic farm, we want the sheep to be there so that we have the proper, natural way of producing vegetables and crops of all sorts. Secondly, I am in the hospitality industry, where we seek to provide locally produced food.
I thank the Minister for bringing this hugely important instrument forward. It reminds us that sheepmeat is just as important as beef and pigmeat, although we have not previously treated it in that way. I am also pleased that she made the distinction between the large abattoir and the small one. However, I am very worried about the provision of abattoirs. If you are trying to provide local food in a restaurant or a pub, it is not all that local if it has gone hundreds of miles to be killed then come back again. This is a very serious issue.
I am sure that the Minister will not mind me raising the question of climate change. This hot weather will be regular. It has not come just because there is a Labour Government—I want to ensure that the Minister is not blamed for anything she should not be blamed for. We have to be serious about this: the fact is that we are in really serious trouble in terms of how we handle agriculture in a world that is steadily getting warmer. Although I congratulate the Government on the excellent policies being put forward by Mr Miliband, I still do not believe that we are doing enough across the board and that a great deal more has to be done as far as agriculture is concerned.
I worry about these decisions. First, what happens when a small abattoir becomes a bigger abattoir? In other words, how does the department deal with the fact that, unfortunately, abattoirs have become bigger? When it comes over the level at which it should be reporting, what arrangements are made for that? That seems relatively important to me.
Secondly, now that we are treating the sheepmeat industry properly, is this not the moment for us also to look at the possibility of providing, for example, mobile abattoirs, which will enable sheep to be killed near where they are? I have a long history of trying to distinguish between cruelty to animals and sentimentality about animals. I am deeply opposed to the kind of cruelty that arises if they travel long distances. I have never understood those people who are worried about the export of live animals but do not mind if they go from Suffolk to Manchester—it is a very odd attitude.
Lord Deben (Con)
I was talking about Suffolk because that is the better of the two counties, but there we are.
The truth of the matter of simply this. Can we take this opportunity to give some real support for small abattoirs near to where the animals are? This means—in Suffolk and in Norfolk—having accommodation that just does not exist at the moment. I hope that now is the opportunity for the department to take this up.
The Earl of Effingham (Con)
My Lords, I start by thanking the Minister for introducing this set of much-needed regulations, which are aimed at bringing the sheep sector in line with the beef and pork industries through the introduction of mandatory carcass classification and price-reporting schemes. These schemes, long established in the aforementioned beef and pork sectors, have provided transparency, accountability and consistency across the market.
The Earl of Effingham (Con)
My Lords, these schemes, long established in the aforementioned beef and pork sectors, have provided transparency, accountability and consistency across the market. It is only right that the sheep sector now be afforded the same standards.
The proposed regulations, based on the existing Carcase Classification and Price Reporting (England) Regulations 2018, would require regulated slaughterhouses to submit weekly reports detailing price data by carcass classification for individual sheep under 12 months of age. Not only is this move logical, it is also timely. It will enable producers to better understand whether the prices they receive reflect the true value of their animals. It will also support better forward planning, evidence-based policy-making and market monitoring.
As it stands, the absence of a mandatory classification and pricing system has created a fragmented and inconsistent marketplace. While some abattoirs have voluntarily adopted classification systems and reported prices to the Agriculture and Horticulture Development Board, others have used their own internal standards for trimming and weighing carcasses. This misalignment of practices has led to inconsistencies in carcass weights and a lack of price comparability, leaving many sheep farmers at a disadvantage.
Non-standardisation presents real-world consequences. It means that farmers often struggle to negotiate fair payment for the quality of their livestock and lack the data needed to make informed decisions that may improve both their businesses and productivity.
The proposals put forward today have been supported by a consultation held by Defra and the Welsh Government last year, which found broad support from stakeholders. Notably, the National Farmers’ Union, which has long campaigned for the reform, welcomed the proposals. David Barton, chair of the NFU livestock board, greatly looked forward to the proposals, which will benefit farmers, processors and customers all across the wider supply chain. The Meat & Livestock Classification has also voiced its support, recognising the potential of these changes to promote transparency and high standards in the British sheep industry.
Those processing 2,000 sheep or more weekly will be required to comply, and smaller abattoirs slaughtering between 1,000 and 1,999 sheep weekly on a rolling annual average will have the choice to opt in. This threshold strikes the right balance, capturing approximately 85% of all sheep slaughtered, while avoiding unnecessary regulatory pressure on smaller operations.
The instrument also includes a licensing regime for classifiers and automated classification methods, with an authorisation process in place to ensure the reliability of automated systems before they are approved for use.
I shall briefly touch on the subject of mobile abattoirs and smaller abattoirs, as referenced by my noble friends Lady McIntosh, Lady Shephard and Lord Deben. I know from personal experience that abattoirs are on the decline; I do not know the exact statistics, but the decline has been significant. Will the Minister come back to us on what has already been asked, but also on the small abattoir fund, a fund that we introduced, of around £4 million? What are the Government’s plans for that fund? Will it remain? Will the funding be increased? How are the Government promoting it to smaller abattoirs? What regulations can we look at changing in order to make mobile abattoirs easier to be set up and used throughout the country?
In conclusion, we welcome today’s statutory instrument, which seeks to ensure that sheepmeat producers get a fair price for the product. It is a sensible, proportionate and long-overdue step towards a more transparent and equitable marketplace. It gives sheepmeat producers the clarity and confidence they need to ensure that they are receiving a fair price, and it should result in the system operating to a higher standard.
Baroness Hayman of Ullock (Lab)
My Lords, I thank noble Lords for their valuable contributions to today’s debate and their strong support for these regulations; it is much appreciated. These regulations are important, so it is very good that we can bring them in smoothly.
The key issue raised in the debate is that of small abattoirs: every noble Lord who spoke mentioned the problem of the closure of small abattoirs. One of the reasons we wanted to exempt small abattoirs from the scheme, in order not to put extra administrative regulatory burden on them, is because we know what pressures they face. I am acutely aware that many small abattoirs have closed over, I would guess, the last decade. It is much harder for abattoirs to stay open, and I am very aware of the extra stress that that puts on farmers. Farmers like to know where their animals are going, and with abattoirs becoming more centralised and larger, they do not necessarily know the abattoir and the people running it in the way they used to. As noble Lords have said, animals have longer travel distances, often in hot vehicles, so it is not great for animal welfare.
When I was president of the Rare Breeds Survival Trust, we had a campaign around small abattoirs, so this is something I know quite a lot about; it is very close to my heart. In fact, last year, I chaired the Oxford Real Farming Conference session on small abattoirs and talked to people from the industry, as well as to the people running mobile abattoirs, who were represented at that meeting.
The noble Earl, Lord Effingham, talked about the small abattoir fund, which Defra was running at that time. That fund was for a fixed period, which has now come to an end. I have been talking recently to the Farming Minister, Daniel Zeichner, about small abattoirs—I know that he has a particular interest in them—and what we can do next to support the industry, because we in Defra are extremely aware that this is particularly challenging in more rural areas. I know that the noble Baroness, Lady McIntosh of Pickering, is from Yorkshire, others are from East Anglia and I am in Cumbria, and we all have the same problem. Our nearest abattoir is probably a two-hour drive in a farm vehicle.
One of the issues we are coming up against is the skill set. It is an extremely skilled job, and there is a problem with staffing abattoirs. We need to look at that, because it is all very well having funds, but if we do not have people with the skills to do the job, and people who want to train to do that job in future, we are never going to solve the problem. We are looking at how we can encourage people to look at this as a career choice. It is not always an easy career choice to sell, but it is an important and valuable job and it can be very well paid.
Baroness McIntosh of Pickering (Con)
I am grateful to the Minister for raising this matter, because I understand that part of the problem was Brexit—in particular, attracting Spanish vets and people who would have done the job. Are the Government planning to find a means of recruiting people to that role?
Baroness Hayman of Ullock (Lab)
Obviously, the EU reset is looking at all sorts of different things and it is not something I can particularly comment on. What I can say, though, on the issue of vets being present, is that we have also been in discussion with the Food Standards Agency on the regulation of smaller abattoirs, the presence of vets, the level of inspection and so on. We are also working with the FSA on that.
The simple thing for me to say is that I do not have an answer to how we resolve the issue of the closure of small abattoirs. It is not just about them closing but about how you get them to reopen, because that is really important; the small abattoir fund was only to support existing abattoirs, not to open new ones. It is quite a complex issue, but I reassure noble Lords that it is very well recognised in Defra. We have officials who really know and understand the problems around this, and Ministers who are committed to try to do their best. If noble Lords have helpful information they would like to share with me, I will be very pleased to receive it.
On other issues, the noble Baroness, Lady McIntosh of Pickering, asked specifically about whether this instrument is separate from issues around FMD and so on. It is completely separate, just to reassure her on that point.
The noble Lord, Lord Deben, asked what happens if a small abattoir gets bigger. The answer is that, if it is then caught by the regulations, the abattoir itself has a duty to report it to the department so that it comes under the regulations properly.
Finally, I thank the noble Earl, Lord Effingham, for recognising the broad industry support for these regulations, because it is really important to recognise how important they are for industry. He also mentioned the devolved Governments. We have worked very closely with the devolved Governments, and they are working to ensure that retrospective legislation comes into force at the same time so that we have consistency across the country, because farmers and food processors need to get the value that their products deserve.
This instrument is an essential tool in our efforts to increase the fairness of the supply chain. It will establish a much-needed scheme that will result in a more open, fair and transparent sheep market.
Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) (Amendment) Regulations 2025
Lord Leong
That the Grand Committee do consider the Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) (Amendment) Regulations 2025.
Relevant document: 28th Report from the Secondary Legislation Scrutiny Committee
Lord in Waiting/Government Whip (Lord Leong) (Lab)
My Lords, I beg to move these regulations, which were laid before the House on 2 June 2025.
The Subsidy Control Act came into force in January 2023. This legislation was designed to balance the need for streamlined processes to ensure that public authorities can quickly and effectively give subsidies to support businesses where it matters with the need to ensure that subsidies are proportionate, represent good value for the taxpayer and do not unduly impact on competition and investment. The Subsidy Control Act also ensures that our international obligations on subsidy control are reflected in our domestic legislation.
When this Government were appointed last year, we were keen to test whether the legislation had achieved the correct balance or whether any changes should be made to improve the functioning of the UK’s subsidy control regime. Following discussions with officials, feedback from affected public authorities and a public consultation, we have decided to amend these regulations.
These regulations set out which subsidies must face mandatory referral for scrutiny by the Competition and Markets Authority’s Subsidy Advice Unit, and which may be voluntarily referred.
The CMA review process is designed to capture the largest subsidies, which have the greatest risk of distorting competition or investment. Once the CMA has accepted a referral, it must publish a non-binding report on the subsidy’s assessment of compliance with the Subsidy Control Act within 30 working days. Using feedback from the CMA’s report, the public authority awarding the subsidy should improve the design of its subsidy or its assessment of compliance, thus reducing potential harm caused by the subsidy and improving its design. As the CMA’s reports are published, this referral process also improves the transparency of subsidy giving, offering competitors the opportunity to better understand when their rivals are receiving subsidies and where they may wish to challenge an unfair subsidy.
This SI updates the existing regulations, changing the definition of a subsidy or scheme of particular interest, or SSoPI. An SSoPI requires mandatory referral to the CMA for scrutiny. The effect of the amendment on the definition of an SSoPI is to increase the threshold at which a subsidy must face mandatory scrutiny. Currently, this is set at £10 million for non-sensitive sectors, with the amendment moving it to £25 million. This is in response to stakeholder feedback that the £10 million threshold was too low and capturing subsidies that posed only a low risk of distortion. This includes subsidies for leisure centres and well-being hubs, which pose a comparatively low risk of harming competition or investment in the UK, or trade and investment internationally. The new £25 million threshold represents a proportionate approach that will allow the CMA to focus its resources on the effective scrutiny of the largest subsidies that pose the greatest risk to the UK’s internal market and to international trade.
Although we are adjusting the mandatory referral threshold, the voluntary referral threshold—currently set at £5 million—will remain the same. This will allow public authorities the opportunity to voluntarily refer subsidies that would previously have faced mandatory referral where they consider they would benefit from this additional scrutiny. The rules around cumulating related subsidies will also remain the same, ensuring that the cumulative distortive effect of subsidies to a particular enterprise is still captured and scrutinised.
We will also retain the existing list of “sensitive sectors” and the lower £5 million threshold at which subsidies in these sectors face mandatory CMA referral. There is a strong rationale for effective scrutiny of these subsidies to mitigate the risk of trade distortion and international challenge. Scrutiny by the CMA does not prevent the awarding of these subsidies but will give public authorities the chance to strengthen their assessment of compliance, as well as their subsidy, and mitigate any risks.
These sectors were previously deemed to pose a higher risk of international challenge, and at present there is little evidence to support amending this list. Indeed, on balance, the evidence provided in response to our recent consultation did not point towards amending the list.
As I hope is clear from my remarks, the intention of these regulations is to update the thresholds for CMA scrutiny in a measured and proportionate way, reducing administration while retaining effective scrutiny where it matters most. I invite the Committee to support the passage of this instrument and I commend it to the Committee.
Lord Hunt of Wirral (Con)
My Lords, I thank the Minister for introducing these regulations. It was in January 2023, under the previous Conservative Government, that the UK subsidy control regime was established by the Department for Business and Trade. The aim of the regime is to give public authorities, including local government and devolved government, the flexibility to award subsidies tailored to local priorities while minimising distortion to competition and, of course, driving economic growth. Designed post-Brexit, the regime was created to be less onerous and more flexible while still retaining protections for UK competition and investment.
As the Minister explained, under the regime, two categories of subsidy in non-sensitive sectors were identified as more likely to lead to distortive effects on competition: first, subsidies or schemes of interest with a current threshold between £5 million and £10 million; and, secondly, subsidies or schemes of particular interest with a current threshold of over £10 million, or over £1 million but cumulating to over £10 million with other related subsidies over the previous three financial years.
This statutory instrument proposes changes to increase the threshold for determining a subsidy or subsidy scheme in non-sensitive sectors as being of particular interest from £10 million to £25 million. I welcome these proposals, which will reduce the administrative burden on public authorities awarding smaller, lower-risk subsidies and will allow the CMA to focus on effective scrutiny of the largest subsidies, which pose the highest risk to the UK’s internal market and international trade.
As the Minister pointed out, today’s proposals are supported by the Department for Business and Trade, which has cited the threshold increase as a necessary step, and I agree. As it stands, the current threshold has resulted in subsidies with, as the Minister quoted, a “comparatively low risk” of distorting competition and investment, such as sports and leisure centres, well-being hubs and brownfield land regeneration, being unnecessarily referred to the CMA and therefore undergoing a disproportionate amount of scrutiny. It is essential that we learn from these reports and improve the regime to support competition and economic output across the country.
Reports from the Department for Business and Trade show that, from 2023 to 2024, the CMA received 68 referrals above the current £10 million threshold. If the threshold had been £25 million, there would have been 49 referrals—a reduction of 28%. I believe that this is proof that today’s proposals will improve the efficiency of the subsidy regime, maintain competitiveness and better support our public authorities across the country in driving local economic growth.
That is why we on these Benches support these draft regulations. Raising the threshold for subsidies and schemes of particular interest is a proportionate and pragmatic adjustment to the UK’s subsidy control regime. It strikes the right balance between ensuring effective oversight of high-risk subsidies and reducing unnecessary administrative burdens on smaller, lower-risk projects.
Lord Leong (Lab)
My Lords, I thank the noble Lord, Lord Hunt of Wirral, for his contribution and for his support for the regulations. He is absolutely right that changing the main threshold to £25 million while maintaining the existing thresholds ensured a proportionate approach to scrutinising these subsidies. He is also right that, in 2023-24, there were 68 SSoPI referrals. Had the threshold been increased to £25 million, 19 subsidies would not have been referred to the CMA, meaning a saving of some 20%. That saved time and allowed the CMA to look at the other referrals.
The CMA referral process was designed to foster good policy-making by public authorities across the UK and ensure an appropriate level of scrutiny for subsidies that are most likely to cause harm to competition—as mentioned by the noble Lord—trade or investment. These regulations will reverse the threshold for mandatory CMA scrutiny in a balanced and proportionate manner, reducing the administrative process while preserving robust oversight where it is most needed.