Grand Committee
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Arrangement of Business
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The Deputy Chairman of Committees (Lord Geddes) (Con)
My Lords, as is customary on these occasions, I must advise the Grand Committee that if there is a Division in the Chamber while we are sitting—I suggest that that will be a pretty close-run thing on timing—this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Conferral of Functions) Regulations 2026
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Lord Stockwood
That the Grand Committee do consider the Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Conferral of Functions) Regulations 2026.
The Minister of State, Department for Business and Trade and HM Treasury (Lord Stockwood) (Lab)
My Lords, I will speak also to the Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Consequential Amendments) Regulations 2026.
These instruments relate to the alternative dispute resolution, or ADR, chapter in the Digital Markets, Competition and Consumers Act 2024—the Act—which received Royal Assent in May 2024. The Act repeals the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 and replaces it with a strengthened framework in Chapter 4 of Part 4.
In most instances, disputes between consumers and businesses can be resolved without the need for any formal action. But when consumers and the trader cannot come to a resolution, ADR is an effective means to secure redress for the consumer without resorting to litigation. All ADR providers are independent third parties offering dispute resolution that is usually less confrontational to the consumers and businesses involved. But not all ADR providers have the same accreditations and standards, so consumers can experience inconsistent quality of services.
For ADR to be effective, it must be of high quality and meet certain standards. The Act aims to strengthen the quality of ADR available to consumers by: introducing a mandatory accreditation framework for ADR providers for consumer contract disputes; providing a robust set of accreditation criteria to ascertain ADR providers’ expertise, transparency, independence and accessibility prior to their being accredited; and providing ongoing monitoring and review to ensure that accredited ADR providers continue to meet those high standards. The Act includes the power to revoke or suspend accreditation, limit accreditation, or impose further conditions if a provider is found to be non-compliant.
The intention of mandating accreditation of ADR providers is to strengthen the ADR framework in the UK. The Government believe that these changes will help deliver a trustworthy, timely and fair service that consumers and businesses can trust to resolve consumer disputes, with improved oversight to monitor standards and ensure consistency.
Section 307 of the Act allows certain ADR functions to be conferred on another person. The regulations before the Committee confer on the Chartered Trading Standards Institute—CTSI—responsibility for managing the provision of ADR in consumer contract disputes in non-regulated sectors, including the functions of accreditation, monitoring and reporting on the operation and effectiveness of ADR provision.
This includes upholding the standards of ADR providers in the UK through powers to compel or sanction ADR providers to improve performance in the event that they do not meet their obligations. It also requires the CTSI to prepare quarterly and annual reports for the Secretary of State for the Department for Business and Trade.
The reports will contain information and metrics on the performance of the CTSI, ADR providers, and the ADR landscape in the UK to ensure accountability and transparency and enable the Secretary of State to maintain oversight of the operation of the system of accreditation and the provision and quality of ADR carried out in the UK. The decision to confer these functions on the CTSI has been taken in recognition of the CTSI’s authority, track record and expertise in this area, including its long-standing and constructive relationships with ADR providers.
Separately, the Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Consequential Amendments) Regulations 2026 make amendments to primary and secondary legislation in consequence of Chapter 4, Part 4 of the Act coming into force, and the revocation of the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015.
The consequential amendments deal with the redundant references to the 2015 alternative dispute resolution regulations and, in some cases, replace them with a reference to Chapter 4 of Part 4 of the Act. These amendments do not materially change the policy or affect the underlying law; they simply keep the statute book up to date in the usual way.
As I hope is clear from these remarks, the intention of both sets of regulations is to support and strengthen the ADR framework in the UK. They will put it on a stronger footing that provides a consistent, trustworthy, timely and fair service that consumers and businesses can trust to resolve disputes amicably, with improved oversight to monitor the service standards. I invite noble Lords to support the passage of these instruments.
Lord Stevenson of Balmacara (Lab)
My Lords, I am grateful to my noble friend for introducing the statutory instruments. This is not a very complicated issue and I do not have much to say about it, but I do have one or two questions.
First, this emerged from the digital markets Bill, which I was happy to play a part in. I was a bit surprised to see, on the duty to provide reports, that the reports have to be provided to the Secretary of State in writing on a “durable medium”. I wonder why the Government’s choice of words on this appears to rule out the possibility that we might go digital on these as well as many other things. Will my noble friend reflect on that when he replies?
Secondly, my more serious point is about costs and cost recovery. Clearly, an operation such as this under the CTSI must be paid for, but the way it is framed in the instruments before us means that these fees will come only from consumers. If the ADR is to work effectively, it really should be a benefit to both sides: it should be a benefit to the companies that are being queried about by consumers as well as to the consumers. I understand the point about the consumers being charged only a fair fee—this is well laid out in Schedule 1. Can the Minister say why we are not expecting costs to be recovered from those who also benefit from the system—the companies concerned? Obviously, the last thing we want is to find that this is a huge extra burden on already-burdened consumers, who have to pay through the nose both for their own case but also for the case being answered by the other side.
My third point is more general. There does not seem to be much in the documents before us about reviewing these arrangements. This is quite a big change; it is a measure that will set up quite a complex structure. It will be to the benefit of consumers, and I welcome it, but there is a question about whether it will be reviewed and looked at. Can the Minister reflect on that when he responds?
Lord Fox (LD)
My Lords, I am grateful to the Minister for his introduction, which was very clear, and to the noble Lord, Lord Stevenson, who asked some of the questions I was going to ask, which is good. I too worked on the Digital Markets, Competition and Consumers Act 2024. It seems longer ago than 2024, and it took a bit of dredging up to come back to this.
In general, we welcome the idea of strengthening the ADR process and how that might then get more people to use it, rather than go into more lengthy disputes —we can talk about that at the end. In the past, as we hear, there was a voluntary registration system, and it would be interesting to hear about the number of practitioners—it would be useful to know the scale—who will need to be registered. Of those, how many were already registered? Do the ones who are currently registered, having volunteered to register, have to reregister themselves and go through another process? What is the scale of the number of dispute resolution operations that will have to be registered? What is the actual process of registration? Is it, “Fill in this online form and you get your registration certificate over the internet”, or are there four-day visits from 15 inspectors—or is it somewhere between that and Ofsted? There is no sense of the scale of what getting registered will mean or indeed of what the cost of getting registered will be.
We need some sense of the scale of the task that the CTSI will have to undertake, which then raises the question: does the CTSI have the capacity to pick this job up? There will be a big fat bulge of people needing to be dealt with at the front end of this. What happens in the meantime? If I were a currently registered or unregistered practitioner and I put my application into the CTSI, would I not then be able to trade until such time as I had my registration, or is there a grace period through which I could continue to operate until the CTSI had sufficient resources to deal with my case? How does the conveyor belt work and will the CTSI have sufficient capacity to handle what will be a really heavy workload at the front, which will obviously then tail off?
The Minister talked about monitoring, which is an interesting concept. What is the CTSI? It is a group of people. How will they monitor these cases? What data will they use? How will they monitor the process? Will they require certain documentation from their registrants on a regular basis? Will a reregistration process be required after five years, three years or whatever? The monitoring is an important element, but it is not clear to me whether the CTSI has experience in any of this kind of process. It is not an organisation that I know and I do not wish to cast aspersions on it—I am not—but I wonder about it, because it is being thrust into a whole new set of operations.
Will there be a process that can be led, which puts together a register of what these businesses are and promotes that register so that people who are in dispute have somewhere to go? Frankly, if I was in dispute, I would not know off the top of my head that there was an ADR process or where to go to get sufficient help with it. Who has accountability for promoting the process and getting people to use it? Obviously, it is preferable to clogging up the courts with endless cases. As is often the case, in principle this is great but the practice is still a bit mysterious, so I would welcome some answers to those questions.
Lord Sharpe of Epsom (Con)
My Lords, I was not involved in the 2024 Act, so—to no doubt universal relief—I shall be very brief. As the Minister explained, the statutory instruments implement Chapter 4 of the Digital Markets, Competition and Consumers Act 2024, by replacing the voluntary accreditation system for alternative dispute resolution providers with a mandatory framework. It grants the Chartered Trading Standards Institute the powers necessary to accredit, monitor and, where necessary, sanction ADR providers and it introduces reporting requirements to ensure transparency and accountability.
I am interested in the answers that I am sure the Minister has ready for the noble Lord, Lord Fox, who raised some interesting practical points. I am also extremely interested to hear what a “durable medium” is.
Lord Sharpe of Epsom (Con)
Paper is not that durable in fire or water, so are we talking stone tablets, or vellum, perhaps? I am very curious to know the answer to the question from the noble Lord, Lord Stevenson.
Obviously, alternative dispute resolution plays an important role in enabling consumers to resolve disputes quickly and without recourse to the courts, so a clear and enforceable accreditation framework should strengthen confidence in that system. On that basis, His Majesty’s loyal Opposition are happy to support these instruments.
Lord Stockwood (Lab)
I thank noble Lords for their contributions to the debate. As I stated in opening, the purpose of these instruments is to place the UK’s ADR framework on a stronger footing and to provide a more effective service for consumers and businesses alike. This feeds into the broader work of the DMCCA to bring greater fairness to digital markets and to bolster consumer protections.
I will try to respond to the questions raised by noble Lords today. The most important question, raised by the noble Lords, Lord Stevenson and Lord Sharpe, was about durable mediums. I am reliably informed that this includes digital. We do not have to go as far as stone tablets, as the noble Lord, Lord Fox, suggested. The digital medium is included in that, so that is the acceptable format.
The noble Lord, Lord Stevenson, raised an important question around extra burdens on consumers. Accredited ADR providers can charge a fee only if provisions for doing so are agreed by the CTSI and published. The purpose is to limit fees that consumers may be charged, thereby incentivising the use of ADR. At the same time, this is intended to discourage frivolous claims. Those fees should be up front and should be clear. There is a balance to be struck between ensuring that consumers have adequate access to ADR and that the core costs of the service are covered. We hope that this addresses that balance.
The noble Lord, Lord Stevenson, also mentioned reviewing the regulations. The Government have no specific plans to conduct a post-implementation review of this instrument or the reforms to which it relates, but we will continue to monitor and evaluate the operation of the system of ADR accreditation under the 2024 Act and the provision of the quality of ADR carried out in the UK through the quarterly and annual reports that this instrument requires the CTSI to provide.
The noble Lord, Lord Fox, asked about the capacity of the CTSI, the number of practitioners, how many will have to reregister, the processes and the costs. Those currently registered will go through a light-touch process to transfer their original registration across to the new system. We recognise that this transition period will place some burden on the ADR providers and aim to minimise this. The transition period will be in the region of six months, when ADR providers can continue to operate without the accreditation. In part, this will ensure that current providers and cases can continue without disruption. It will also give the CTSI time to manage the transition. We recognise that this will cause some extra elements of burden, but this seems like the lightest-touch way of transitioning to the improved system.
The noble Lord, Lord Fox, also asked about the CTSI register and about promoting the process. The CTSI currently hosts a list of accredited providers on its website. This will be maintained under the new regime so will remain in place. On the question about how the CTSI is monitored, it is required to provide reports to the DBT SoS on a quarterly and an annual basis. We hope that will be sufficient, but we will be happy to review that if it proves not to be an adequate way of keeping an eye on how things are going.
To conclude, I am grateful for the Committee’s support for this instrument. I beg to move.
Lord Fox (LD)
Before the Minister sits down, perhaps he could take this away: simply putting something up on the website—the “If we build it, they will come” approach—is probably not the best way for consumers to know that they have this service. You have to know it exists before you can find it. I suggest that the Minister takes away and discusses with the CTSI and others whether there is some sort of consumer marketing process that can follow once the capacity for ADR is there, so that people actually know it exists. I suspect that nobody knows the organisation exists—or very few people do—and certainly very few people know that ADR is a service on which they can call.
Lord Stockwood (Lab)
The noble Lord makes a really important point. Let me take that away and consult with the team and I will come back to him with a response on that.
Lord Stevenson of Balmacara (Lab)
The Minister answered very fully the question about the fees and how they would be monitored, but those were the fees to the consumers. I asked a separate question about why it did not seem to be a cost to the provider of the services, who would also benefit from the ADR. If he does not have the answer, perhaps he could write to me.
Lord Stockwood (Lab)
I think I did cover that but, if I did not, I will come back. The accredited providers will charge only a fee that is agreed already with the CTSI. That will be agreed up front and that will be published so that consumers know the charges they will be subject to. Perhaps we can pick this up afterwards. If that is not sufficient, I am happy to take further questions and to come back with a more detailed answer.
Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Consequential Amendments) Regulations 2026
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Lord Stockwood
That the Grand Committee do consider the Digital Markets, Competition and Consumers Act 2024 (Alternative Dispute Resolution) (Consequential Amendments) Regulations 2026.
Energy-Intensive Industry Electricity Support Payments and Levy (Amendment) Regulations 2026
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Lord Leong
That the Grand Committee do consider the Energy-Intensive Industry Electricity Support Payments and Levy (Amendment) Regulations 2026.
Relevant document: 49th Report from the Secondary Legislation Scrutiny Committee
Lord in Waiting/Government Whip (Lord Leong) (Lab)
My Lords, this instrument was laid on 12 January 2026. I acknowledge that the Joint Committee on Statutory Instruments has provided a helpful review of these regulations and not drawn any special attention of this House and the other place to the instrument. I acknowledge that the Secondary Legislation Scrutiny Committee has reported this instrument as of interest to Members.
This instrument delivers one of the Government’s industrial strategy commitments to increase electricity price support to energy-intensive industries—or EIIs—through uplifting the level of relief offered by one of the measures in the British industry supercharger. EIIs include foundational manufacturing sectors, such as steel, chemicals, cement, glass, electrical components and gigafactories. These sectors are critical to the UK’s long-term economic security and for the delivery of the modern industrial strategy.
The British industry supercharger was introduced in 2024 to reduce the electricity price gap between Great Britain and comparable industrial countries in western Europe, such as France, Germany and the Netherlands. The supercharger comprises three measures: the EII exemption scheme, which offers a 100% exemption from contracts for difference, feed-in tariff and renewables obligation electricity policy levies; the capacity market exemption, which offers a 100% exemption from the costs of funding the electricity capacity market; and the network charging compensation scheme, which provides 60% compensation for the EIIs’ electricity network costs.
Despite the success of these measures in delivering critical relief to industry, the Government recognised in our industrial strategy that there remains an electricity price gap between Great Britain and comparable industrial economies in Europe. This places British EIIs at a competitive disadvantage, while increasing the risk of carbon leakage and the offshoring of vital manufacturing jobs and investment.
That is why we committed in the industrial strategy to increase the level of relief offered by the network charging compensation scheme from 60% to 90%. This will reduce electricity bills for the currently supported EIIs by a further £7 to £10 per megawatt-hour, bringing the total reduction offered by the British industry supercharger to between £65 to £87 per megawatt-hour. This uplift will ensure that the network charging compensation scheme will deliver up to £420 million of electricity price support per annum.
These regulations aim to further close the electricity price gap and ensure that foundational manufacturing is able to thrive and grow in Britain. They will help to ensure that the 550 companies that currently benefit from the supercharger will continue to retain well-paid jobs, investment and crucial supply chains across Britain’s manufacturing heartlands.
These regulations will amend the 2024 electricity support payments and levy regulations to make provision for increasing the level of relief offered through the network charging compensation scheme.
In conclusion, the regulations will help to reduce electricity costs for the most energy-intensive and trade-intensive industries, while helping to retain critical manufacturing investment and jobs in Britain. I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I am grateful for the opportunity to put a couple of questions on these regulations. Having represented a high energy user, a York brick company, for a number of years in the other place, I am well aware of the disproportionate energy costs for high energy-use industry. There is a theme here and it is put very well on page 8 of the impact assessment attached to the regulations, where at paragraph 6 it states:
“Electricity network costs paid by GB based EIIs are higher than in many other EU countries largely due to the discounts offered in some jurisdictions to EIIs that meet certain eligibility criteria regarding electricity consumption and off-peak grid utilisation”.
That explains the background neatly. Does the Minister agree that we have per se, across the board, higher energy costs in this country for both energy users and domestic users? What then concerns me is that it seems to be smoke and mirrors. If I have understood the purport and thrust of the regulations as best I can, the Government’s intention is to pass on to domestic consumers and non-domestic customers the differential between what the original costs would have been and now the reduction proposals under the EIIs and the supercharger scheme.
I am grateful to the Secondary Legislation Scrutiny Committee, which looked at this briefly. It states in paragraph 2 of the 49th report:
“The Impact Assessment estimates that some 320 EII businesses will save a total of £131 million per year because of the uplift to 90%, while average household electricity bills are expected to rise by not more than £1.50 per year.”
I pause there because that is £1.50 a year extra to what we are already paying. I understand that, at Prime Minister’s Questions today, the Prime Minister applauded the fact that the energy pricing cap will be reduced on average by £17, which all of us in the Committee would welcome. But NESTA, a government body set up to look at energy use, states, if you key in the question, “what is the cost per household of green energy projects?”:
“These levies make up 16% of the final price of electricity and 5.5% of the final price of gas. For a typical household, they add about £140 to the annual electricity bill and £50 to the gas bill”.
I know that all this started under a previous Government, but that does not make the situation any happier. It might be that those of us in this Room feel that we have broad shoulders and can carry this, but that is a staggering cost, especially when then adding another £1.50 to that. I also realise that 82% of the revenue raised from domestic levies comes from electricity bills and only 18% from gas bills, despite households consuming around three times as much gas each year, presumably, as electricity. My point is that this is an unacceptable additional cost.
Lord Fox (LD)
My Lords, it is always a pleasure to follow the noble Baroness, Lady McIntosh of Pickering, who is forensic in her detail. I should say that she has somewhat mixed her drinks with this measure and other things, but this measure and her comments indicate that the energy market in this country, which this Government inherited from their predecessor, is broken, in essence, and is not working properly.
While we are talking about this particular statutory instrument, it would be useful to have an indication from the Minister that the Government understand the malfunctioning way that energy works for both and consumers, and for him to undertake a process whereby the whole thing is properly reviewed. It is quite clear that there are many pushes and pulls, puts and takes, within our energy market: some are to do with green energy and some of them not; and some are to do with the way that the overall energy cost is assessed based on a floating gas price, rather than the actual cost of the energy being generated. It would help for the Minister to indicate, on behalf of the Government, that he understands that a proper root and branch review of the way in which the energy market is structured is long overdue. I do not blame the Government for what it is now, but I would blame them if they just sat on their hands without doing something about it.
Measures to bring down some of the highest industrial energy prices in the world—if not the highest—obviously come as welcome news to those businesses that have received them. Energy-intensive industries, as the Minister said, such as steel, chemicals, glass, ceramics and brickmaking, as the noble Baroness mentioned, face much higher energy costs than competitors overseas. They really are competing with not just one arm tied behind their backs but most of their limbs. They cannot pass on these prices because of the international market in which they operate. It is welcome that these EII businesses have been recognised, but we are concerned about the lack of support for other businesses across our manufacturing and energy use sector, which includes consumer businesses and the high street.
It is not just EII businesses that are facing an energy cost crisis; it is right across business. If we look in particular at small businesses, energy can be a high proportion of their total costs. They are the backbone of our economy and the heart of local communities. They create many of the jobs on which those communities rely, but they are struggling with uncertainties and changes around the cost of energy on top of the other costs that the Government have decided to put on those businesses, such as NIC costs and the change in the business rates system.
This is all part of a huge burden that all businesses are suffering, but SMEs are proportionately suffering more. They are exposed to the energy market with little support after the previous Government’s decision to slash energy bill support for businesses by an average of 85% when they replaced their energy bill relief scheme with the energy bills discount scheme, which itself ended in 2024. We estimate that 3.1 million SMEs saw a total bill increase of £7.6 billion when the initial energy bill relief scheme ended. That is a huge burden that the sector had to take during the previous Government’s oversight.
We welcome Ofgem’s announcement in December 2024 on enabling SMEs with up to 50 employees to use the Energy Ombudsman to challenge unfair energy rises and charges.
The Deputy Chairman of Committees (Lord Geddes) (Con)
I hate to interrupt the noble Lord but a Division has been called—
Lord Fox (LD)
I have literally three words and then I will sit down. What about the ones with more than 50 employees? That is just the start of the problems that we have in our energy market.
The Deputy Chairman of Committees (Lord Geddes) (Con)
That is most considerate of the noble Lord. A Division has been called in the Chamber; the Grand Committee stands adjourned until 5.02 pm.
Lord Sharpe of Epsom (Con)
My Lords, I am very grateful to the Minister for his detailed explanation, but it is difficult to consider this statutory instrument without reflecting on the circumstances that have made it necessary. The Government have presented these regulations as a modest and technical adjustment—an increase in the network charge compensation from 60% to 90%—but the scale of that increase speaks volumes. We are not dealing with marginal fine-tuning; we are witnessing the expansion of an emergency support mechanism designed to shield our most electricity-intensive industries from energy costs that have become structurally uncompetitive. If our electricity market were delivering affordable power to the productive economy, such levels of compensation should not be required.
The Government’s own impact assessment, and my noble friend Lady McIntosh of Pickering, have acknowledged that, even after the British industry supercharger package, UK electricity-intensive industries will still face costs of around £93 per megawatt hour, compared with roughly £60 per megawatt hour in France and Germany. I go back to the impact assessment, because the first sentence is also extremely instructive:
“Great Britain’s energy-intensive industries … continue to face some of the highest electricity prices in Europe, even after existing relief measures, due to higher network charges and policy costs compared to competitor countries”.
Those two words, “policy costs”, are extremely instructive. These charges are the result of policy choices.
A recent study by the Adam Smith Institute underlined the scale of the challenge. It showed that British businesses are paying nearly double the price of power paid by their French counterparts. The report identified as the most important factor in that disparity the United Kingdom’s reliance on what it described as
“a combination of expensive renewables and a gas backstop”.
The chief executive of the trade body Ceramics UK has said:
“The relentless drive towards net zero is moving far faster than either kiln or fuel technology. Despite massive investment by the industry, achieving decarbonisation is extremely challenging and will lead to further deindustrialisation”.
Of course, the impact assessment also refers to the decarbonisation issue.
The Confederation of British Industry has warned that high energy prices threaten the United Kingdom’s standing as a manufacturing nation. Pointing to the competitive disadvantage faced by British firms—
Lord Sharpe of Epsom (Con)
I do not imagine there is much clamour for me to start my speech again, so I will go back to where I got to; I made a note.
The Confederation of British Industry has warned that high energy prices threaten the United Kingdom’s standing as a manufacturing nation. It points to the competitive disadvantage faced by British firms relative to their continental counterparts. These are not the words of ideological opponents of decarbonisation; they are the considered assessments of employers who are attempting to maintain operations, jobs and investment in this country.
We have already seen troubling signals across energy-intensive sectors, including investment decisions delayed, production lines scaled back and uncertainty weighing heavily on the industries that form the backbone of our industrial base: chemicals, glass, ceramics and, most importantly, steel. Steel is vital for our construction, transport, defence and infrastructure, yet our steel producers have faced a combination of high electricity prices and carbon costs and political and policy uncertainty, which has left them at a clear disadvantage compared with their European competitors.
It is in that context that the continuing absence of a comprehensive steel strategy is so concerning. We were told that such a strategy would be forthcoming last year and then to expect it in spring this year. Spring has nearly run out, so where is it? We are still waiting. Businesses making multi-million-pound investment decisions cannot operate on the basis of repeated assurances and shifting timetables. I know that the Minister will not be able to answer the question of where the steel strategy is but perhaps he could write to us and let us know what is causing the hold-up.
The Government will say that the additional £100 million or so in relief and the estimated £131 million in annual savings for around 320 businesses demonstrate their commitment to protecting our industry. They will note that, as my noble friend Lady McIntosh of Pickering pointed out, the cost to households is forecast at no more than £1.50 per year. Yet the broader point remains: we are redistributing costs in order to compensate for a system that has produced persistently high electricity prices. Relief mechanisms may alleviate the immediate pressure but they do not address the underlying drivers of those costs or close the gap in competitiveness with Europe and our other competitors, particularly the USA.
As it stands, we will of course not oppose this instrument; the country and our strategic industries need this relief. However, we oppose the policy choices that have led to this most regrettable state of affairs.
Lord Leong (Lab)
My Lords, I thank all noble Lords for their valuable contributions to this debate. As I said in my opening speech, the increased relief offered through the network charging compensation scheme will provide critical support for foundation sectors across Great Britain, including steel, chemicals, cement, battery and semiconductor manufacturing, helping ensure delivery of the Government’s modern industrial strategy. These EIIs are located right across the country and provide thousands of well-paid jobs, both directly and in the wider supply chain. The Government intend to carry out a review of the data underpinning the British industry supercharger this year in order to assess how the scheme continues to meet the needs of EIIs and to ensure that support continues to be directed at those sectors most in need of the aid.
I will address some of the questions posed by noble Lords but, before I start, I pay tribute to the noble Baroness, Lady McIntosh, for all the work that she has done in National Energy Action, especially the action for warm homes. I acknowledge her expertise in this area. To address the point made by the noble Lord, Lord Sharpe, historic reliance on fossil fuels has left the UK exposed to volatile global energy markets, a vulnerability obviously highlighted by Putin’s invasion of Ukraine.
Lord Sharpe of Epsom (Con)
Yes, but of course we could have exploited our own reserves in the North Sea, and that was another policy choice. So that is not strictly a fair argument.
Lord Leong (Lab)
Well, it is one of the arguments, I will accept that. At the same time, I accept the point that this is a policy decision that was taken. But the mission is to make Britain a clean energy superpower, whereby we will reduce this dependency by transitioning to a diverse energy system based on renewables and nuclear.
At the end of the day, we also need to address—as the noble Baroness, Lady McIntosh, asked—the cost to consumers. The Government will continue to fund the NCC scheme through the EII support levy, which is charged on all licensed electricity suppliers to Great Britain, as the noble Baroness mentioned. To offset this, the Government will bear down costs across the energy system to ensure that domestic and non-domestic energy consumers do not see a net increase in their electricity bills as a result of the uplift of the NCC scheme. We are also taking action to reduce costs across the energy system, helping to ensure that the British industry supercharger and the British industrial competitiveness scheme are delivered in line with our wider priority of providing affordable power for businesses and households. The Government’s clean energy superpower mission sets out a long-term plan to strengthen energy security and reduce electricity prices by expanding clean energy and improving interconnections with EU markets.
The noble Lord, Lord Fox, asked about the broken energy market. This is precisely why the Government have the clean energy superpower mission, which is, as I have just said, to strengthen energy security and reduce electricity bills by expanding clean energy and improving the interconnection with EU markets. The noble Lord, Lord Fox, also made a point about other businesses. The supercharger is currently targeted at the EIIs most prone to carbon leakage. However, the Government will undertake a review of the eligibility criteria for the supercharger this year—we are undergoing a review of the various sectors.
Lord Fox (LD)
I thank the noble Lord for his response. The supercharger is in itself a good thing, but unless it is combined with a real understanding of the financial mechanisms by which the market is organised, it will not deliver energy at a price that will be less than our competitors around the world. So there is a second part; it is not just the generation and the distribution but the financial engineering behind that which will make it work.
On the second point on other businesses, I am very glad that the Government are having a review, but could they hurry up? If you sit down with any manufacturing business, anywhere in the country—not the ones that are benefiting from this scheme but those that are not—it will list energy costs as its number one or number two major concern. If this review does not get on with it, some of those businesses—hopefully not too many—will not be there to benefit from whatever the review comes up with.
Lord Sharpe of Epsom (Con)
Before the Minister comes back in, can I add to the noble Lord’s question? Of course, it is not just the manufacturing businesses that we are interested in; we need to attract data centres, which have enormous power requirements. That is partly for sovereign security reasons, as regards how we maintain our own data and the integrity of that data. What is being done to attract those businesses here? What sort of financial mechanisms are in place? Are there any plans to expand this sort of scheme to businesses that are not yet located here but that we so urgently need?
Lord Leong (Lab)
I acknowledge all the points made by the noble Lords, Lord Fox and Lord Sharpe. I am aware of the increased energy costs. I congratulate the previous Government on actually setting up the supercharger scheme and building it up. Yes, we need to look at the financial scheme and everything else, but we have what we have now, and we are increasing the relief from 60% to 90% as a stopgap—if I can use that word—to help businesses now. We are going to undertake the review to look at what we need to do, as a whole—especially on the SME point mentioned by the noble Lord, Lord Fox.
The supercharger is open to SMEs as well as larger businesses, provided they produce an eligible product. Currently, of the 550 businesses eligible for the scheme, 60% of them are SMEs, so SMEs are not being disadvantaged and can access the scheme. The key criterion is that the business, regardless of its size, is in an eligible sector—one that is highly traded and electricity intensive—and meets the business test for the relevant scheme.
I turn to the point that the noble Lord, Lord Sharpe, made about net zero. As I said earlier, this is a policy decision. Our clean energy superpower mission is a long-term plan to increase our energy security and reduce electricity bills. This includes investing in clean energy and strengthening our connections to the EU energy market, capitalising on the economic opportunities of the net-zero transition.
The other point to make is that these changes support our mission to bring down bills down for good, with homegrown clean energy or clean power that we control, ensuring that industry reaps the rewards of lower energy costs. We are developing further policies to narrow the electricity price gaps for non-domestic users. We intend to consult on options to reduce electricity costs and make low-carbon heat the economically natural choice. This will give stakeholders a clear opportunity to shape the next phase of electrification policy.
The noble Lord, Lord Fox, mentioned data centres. I must admit that I am kicking myself, because I know the answer to this: we are aware that data centres use massive energy and water, and we have a plan. I will write to the noble Lord setting out what we are doing as far as data centres are concerned. He also asked about our steel strategy. I had a quick check on BBC Online and, according to the BBC, spring is in March, April and May, so we are still getting into it. I hope to share our strategy with the noble Lord then.
As I said earlier, we are building on what the previous Government have done as far as the supercharger is concerned. We are supporting energy-intensive industries by uplifting the relief, and these regulations go some way to supporting that. I commend them to the Committee.
Child Benefit and Guardian’s Allowance Up-rating Order 2026
(1 day, 8 hours ago)
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Lord Wilson of Sedgefield
That the Grand Committee do consider the Child Benefit and Guardian’s Allowance Up-rating Order 2026.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
These regulations are made each year to uprate child benefit and the guardian’s allowance and set the national insurance contribution rates, limits and thresholds.
First, the Child Benefit and Guardian’s Allowance Up-rating Order 2026 sets the rates for both child benefit and the guardian’s allowance, and will ensure that these benefits are uprated by inflation in April 2026. Secondly, the Social Security (Contributions) (Rates, Limits And Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2026 set the rates of certain national insurance contributions classes and the level of certain thresholds for the 2026-27 tax year. The regulations also make provision for a Treasury grant to be paid into the National Insurance Fund if required, for the same tax year, through a transfer of wider government funds to the National Insurance Fund. Finally, they also extend the veterans’ employer NICs relief for two years until April 2028.
I turn first to the details of the Child Benefit and Guardian’s Allowance Up-rating Order 2026. The Government are committed to delivering a welfare system that is fair for taxpayers while providing support for those who need it. This order will ensure that the benefits for which Treasury Ministers are responsible and which HMRC delivers are uprated by inflation in April 2026. Child benefit and the guardian’s allowance will increase in line with the consumer prices index, which had inflation of 3.8% in the year to September 2025.
I turn now to the details of the Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2026. National insurance contributions, or NICs, allow people to make contributions when they are in work to receive contributory benefits when they are not working—for example, if they have retired or become unemployed.
National insurance contributions receipts fund these contributory benefits as well as helping to fund the NHS. The primary threshold and lower profit limits are the points at which employees and the self-employed start paying employee class 1 and self-employed class 4 NICs respectively. The primary threshold and lower profit limits will be maintained at their current levels until April 2031, and these regulations set the level for the 2026-27 year.
For employees, entitlement towards contributory benefits, such as the state pension, is determined by their earnings being at or above the lower earnings limit. For self-employed people, their entitlement is determined by their profits being at or above the small-profits threshold. These regulations uprate the lower earnings limit and small profits threshold. This is the usual process and maintains the real level of income where someone gains entitlement to contributory benefits.
Wage growth is currently higher than inflation, which means that, following the uprating by CPI, compared to last year, there will be a reduction in the number of hours that someone who has received a typical wage increase needs to work to gain entitlement. The upper earnings limit for employees’ national insurance contributions and the upper profits limit for self-employed national insurance contributions—both the points at which the main rate falls to 2%—are aligned with the higher-rate threshold for income tax of £50,270 per annum. These thresholds will be maintained at their current levels until April 2031, and these regulations set the level for the 2026-27 year.
As noble Lords are aware, the Government announced at the 2025 Budget that employer NIC thresholds, including the secondary threshold—the point at which employers become liable for secondary class 1 national insurance contributions—are also maintained at their current levels. The secondary threshold will be maintained at £5,000 until April 2031, with these regulations setting the levels for 2026-27.
I now turn to thresholds for employers’ national insurance contributions reliefs, including employees’ NICs reliefs for under-21s, under-25s, apprentices, veterans, new employees, free ports and investment zones. The regulations we are debating set these thresholds in line with other personal tax thresholds or maintain the existing level. The regulations also make provision for NIC relief for employers of veterans to be extended for a final two years until April 2028, from which point support for veterans into employment will be covered through spending settlements rather than this tax relief. This measure means that, for the next two years, businesses will continue to pay no employer NICs on earnings up to the veterans’ upper secondary threshold of £50,270 for the first year of a qualifying veteran’s employment in a civil role.
I now move on to the Treasury grant and National Insurance Fund, which is where the majority of NICs are paid and which is used to pay the state pension and other contributory benefits. The National Insurance Fund is generally self-financing, with NICs receipts paying for contributory benefits. However, the Treasury has the ability to transfer funds from wider government revenues into the National Insurance Fund, in the event that the balance of the National Insurance Fund falls below one-sixth of estimated annual benefit expenditure.
These regulations make provision for a transfer of this kind, known as a Treasury grant, of up to 5% of forecasted annual benefit expenditure, to be paid into the National Insurance Fund, if needed, during 2026-27. A similar provision will be made in respect of the Northern Ireland National Insurance Fund. The Government Actuary’s Department report laid alongside these regulations forecasts that a Treasury grant will not be required in 2026-27, but, as a precautionary measure, the Government consider it prudent to make a provision at this stage for a Treasury grant, which is consistent with previous years.
Lord Altrincham (Con)
My Lords, the Child Benefit and Guardian’s Allowance Up-rating Order 2026 sets the weekly rates from 6 April 2026. As the Committee will know, this instrument increases the weekly rates of child benefit and guardian’s allowance by 3.8%, in line with the rise in the consumer prices index between September 2024 and September 2025. As the Minister outlined, from 6 April 2026, child benefit for the eldest child will rise from £26.05 to £27.05, a rise of £1. For subsequent children, it will rise from £17.25 to £17.90, a rise of 65p per week. Guardian’s allowance will increase from £22.10 to £22.95, an 85p rise per week.
We do not oppose this order. It is standard practice to uprate these benefits in line with inflation, and it is right that families and guardians who rely on this support should see their payments maintain their value in real terms. However, uprating alone cannot substitute for a serious and coherent approach to welfare reform. Child benefit is paid to more than 6.9 million families, supporting 11.9 million children. These families are part of a substantial proportion of all households across the United Kingdom. This makes it one of the most widely accessed forms of benefit in the UK, and guardian’s allowance, while smaller in scale, plays a crucial role in supporting vulnerable children. Given that scale, the absence of a broader reform strategy is concerning. A system of this size must be sustainable, targeted and fair, both to those who depend on it and to the taxpayers who fund it. The Government’s retreat from broader welfare reform raises real concerns about long-term sustainability.
Turning to inflation, we must consider the economic climate in which this 3.8% uprating is taking place. Inflation has risen from 1.7% last year to 3.8%, a marked acceleration that is being felt in households across the country. Families are disproportionately exposed to increases in essential costs. Energy bills are an inescapable expense, particularly for larger households. Food prices inevitably carry greater weight where there are children to provide for. Clothing expenditure is cyclical and unavoidable as children grow.
When inflation is concentrated in essentials such as energy and food, the lived experience for families can feel far sharper than the aggregate CPI figure suggests. Uprating benefits preserves nominal value but does not necessarily ease the real pressure where cost increases are most acute. We must therefore ask whether the Government’s wider fiscal and regulatory decisions have contributed to the renewed inflationary pressures that families now face. Concerns remain about the cumulative impact of higher taxation and regulatory burdens, including those associated with energy policies, on businesses and households alike. When businesses face higher input costs, those costs are frequently passed on to consumers, and the result is sustained pressure on family finances.
In short, this order performs its narrow and necessary function: it uprates child benefit and guardian’s allowance in line with CPI. It does not alter policy, nor does it address the structural questions surrounding welfare reform or the economic environment in which families are living. With those observations, I conclude.
Lord Wilson of Sedgefield (Lab)
I thank the noble Lord for his speech and for the points that he has raised on this order. A lot of his points are outside of the scope of these SIs, but I will address them.
First, on inflation, it is in fact on the way down. These upratings have been with CPI for many years now, since 2011. Using a consistent period for uprating each year means that, over time, the index balances out. The Government will review benefit rates for child benefit and guardian’s allowance next year to determine whether they have kept pace with inflation for the 2026-27 financial year. The noble Lord made some general points about welfare and essentially the cost of living and what more we are doing for people on low incomes. He is right that energy and food costs take up a greater percentage of their incomes. That is why we annually uprate these benefits.
The Government are committed to reducing child poverty. For example, the two-child limit in universal credit will be removed from April 2026 in Great Britain, lifting a projected 450,000 children out of poverty in the final year of this Parliament. Our interventions will lead to the largest expected reduction in child poverty across a single Parliament since comparable records began. I think it is fair to say that because of that, we have a strategy for welfare and what we are going to do to alleviate poverty.
What else are we doing to tackle the cost of living? The Government are committed to meeting the needs of the most vulnerable. In April 2025, the Government introduced a new fair repayment rate to help low-income families on universal credit. This means that approximately 1.2 million families will keep more of their universal credit award each month, with families expected to be better off by around £420. The Government also provided £1 billion, including Barnett impact, to extend the household support fund. We have removed the two-child benefit cap as well, as I said. Across England, we are expanding free breakfast clubs by launching the first phase of national rollout, with 2,000 new schools joining over 2026-27.
In line with their commitment to maintain the triple lock for the duration of this Parliament, the Government will also uprate the basic and new state pension by 4.8% and will increase the national living wage from 1 April this year by 4.1% to £12.71. We are doing a lot to help a lot to help people on low incomes and those who rely on benefits, but our main focus is ultimately to get more people back into work.
As I set out in my opening remarks, the order we are considering will ensure that child benefit and guardian’s allowance increase in line with the September rate of the consumer prices index, which is 3.8%, thereby ensuring that these benefits keep their value in relation to prices.
The regulations on national insurance contributions set the limits and thresholds for the 2026-27 tax year. They allow for the collection of over £200 billion of national insurance contributions to fund contributory benefits, including the state pension, and to fund the NHS. These regulations will also extend the NICs relief for employers hiring qualifying veterans for a final two years up to April 2028. With that, I commend this order to the Committee.
Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2026
(1 day, 8 hours ago)
Grand CommitteeRead Full debate Read Hansard Text
Lord Wilson of Sedgefield
That the Grand Committee do consider the Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran’s Relief) Regulations 2026.