House of Lords

Thursday 12th March 2026 Lords Chamber

Thursday 12 March 2026

11:00

Prayers—read by the Lord Bishop of Norwich.

Children in Care: Illegal Accommodation

Thursday 12th March 2026 Lords Chamber

Question

11:07

Asked by

[Lord Wood of Anfield]

To ask His Majesty’s Government what steps they are taking to end the use of illegal accommodation for children in care and secure sufficient regulated care.

[Baroness in Waiting/Government Whip (Baroness Blake of Leeds) (Lab)]

My Lords, the Government are clear: unregistered placements must stop. Powers in the Children’s Wellbeing and Schools Bill will allow Ofsted to issue monetary penalties, enabling faster action against unregistered providers. We are investing £560 million in capital funding up to 2029-30 to increase appropriate registered placements, including through registered regional care co-operatives. We will strengthen kinship care and invest £2.4 billion in the families first partnership programme to support families, keeping them together, thereby reducing residential demand that is driving reliance on unregistered placements.

[Lord Wood of Anfield (Lab)]

I thank the Minister for that Answer. It should shame all of us in this country that for many years, our system for protecting the most vulnerable children has been and is pushing hundreds of them each year into unregistered homes—illegal homes that are not inspected. Addressing this, as the Minister says, is very complex: it involves kinship care and resource regulation. I welcome the Government’s commitment to clamping down on the growing unregulated sector. What are the Government’s plans specifically to expand foster care, which is a crucial part of alleviating the pressure on local authorities that leads to the growth in unregulated places?

[Baroness Blake of Leeds (Lab)]

I thank my noble friend for all the work he does in this area, regularly raising its profile. I assure him and noble Lords that places in loving foster homes for children who need them is one of our top priorities. In February, we published an ambitious fostering action plan, setting out urgent steps to reverse the decline in foster care numbers and reform the system. This involves investment of more than £88 million over the next two years and includes England-wide action, enhanced regional collaboration, a £12.4 million intervention fund and investment in foster care support and retention.

[Lord Young of Cookham (Con)]

Further to the Question asked by the noble Lord, Lord Wood, if we are to reduce the use of illegal accommodation, we need to provide more, safer and better accommodation. The Minister may know that some organisations, such as Home for Good, provide alternatives to hard-pressed local authority accommodation, and they do so with very strong outcomes and at a fraction of the cost of local authority provision. Will she do all she can to encourage organisations like Home for Good to provide these alternatives for vulnerable teenagers currently in care?

[Baroness Blake of Leeds (Lab)]

I thank the noble Lord, particularly for focusing on outcomes. That is the issue we face: too many young people who go through the care system do not have good outcomes, and we absolutely must address this. I welcome his highlighting the innovative approaches to providing supportive family environments for young people, giving them the stability and support they need. I absolutely support his request.

[Lord Bird (CB)]

Does the Minister agree that care is often the only time when a lot of people who come from disturbed family lives can get their hands on some social mobility? I would like the Minister to up the idea that care is a great contributor to social justice.

[Baroness Blake of Leeds (Lab)]

The noble Lord touches on a very important and sensitive issue. Too often, young people are labelled by what happens to them. It is critical that, where we get the opportunity to engage with young people, we bring together their peer group to give support, along with all the other agencies that can offer help and guidance and steer them on their way forward. I absolutely agree that social justice should be at the heart of everything we do in this place.

[Baroness Hussein-Ece (LD)]

My Lords, do this Government know exactly where these children are and where they are placed? Do we have the data available so that these children can be tracked down and protected in the way that they should be, and so that local authorities, where necessary, can step in to offer the support they need?

[Baroness Blake of Leeds (Lab)]

That, again, is an important point. The collection of data is critical, and local authorities need to submit that data annually. However, data is only as good as its interpretation and use. I am afraid that, although we have much data, we do not focus on what it is telling us and what we can do to bring improvements. That will be our focus going forward.

[Baroness Pitkeathley (Lab)]

My Lords, my noble friend mentioned the importance of foster parents and their significance in this area. Prospective foster parents often complain about the length of time it takes to be both approved and recruited. Is there any way of speeding up the process, while of course maintaining necessary due diligence?

[Baroness Blake of Leeds (Lab)]

Generally speaking, in trying to analyse why the number of foster carers has dropped, it is around the general areas of support, which are so important. Of course, when people make such a life-changing decision, they want to get on with it, but it is absolutely paramount that this be done in a supportive way, making sure that all aspects are considered, and that potential foster carers are fully apprised of what they are embarking on and where the support is to help them in that journey.

[The Earl of Effingham (Con)]

My Lords, helping local authorities to reach their sufficiency duty is one of the best ways to reduce the use of illegal accommodation. One of the most effective ways of achieving this, both in cost to authorities and outcomes for children, is by increasing the number of kinship carers. May I therefore press the Minister on kinship care regulations? Will the Government commit to re-examining their position on those regulations and make it easier for children to enter into care with family members, which must be a brilliant outcome if it goes well?

[Baroness Blake of Leeds (Lab)]

The noble Earl is preaching to the converted. My experience, going back over 16 years now, has all been about enabling the kinship care model to grow, thrive and be recognised. It has not been recognised before, and I am delighted that in the Children’s Wellbeing and Schools Bill, for the first time, it is getting the attention it deserves. When it is properly done, fully supported and with family group conferencing at the outset, it is a life-changer for children and young people themselves but also for their families. It is a very important area and we need to do more to support it.

[Lord Hannay of Chiswick (CB)]

The Minister has rightly made much of the Government’s commitment of more funds for kinship care. When are they are likely to report back to this House and the other place about the success of the pilot schemes they are now funding?

[Baroness Blake of Leeds (Lab)]

I will get back to the noble Lord; I do not have the exact timescales in front of me. The nine areas have been chosen and are up and running. The evidence they gather will be critical in enabling us to move forward and to make sure—hopefully in a very positive way—that all the lessons learned are available to children and families across the country.

[Lord Watts (Lab)]

My Lords—

[Lord Sikka (Lab)]

My Lords—

[Noble Lords]

Sikka!

[Lord Sikka (Lab)]

Thank you. My Lords, the largest providers of children’s care homes have average profit rates of 22.6%. Private equity is central to it. On 18 November 2024, the Secretary of State for Education said:

“We will crack down on care providers making excessive profits”.


Can the Minister explain why this promised crackdown has not materialised and when it might begin?

[Baroness Blake of Leeds (Lab)]

I am not sure if my noble friend sat in on any of the sessions of the Children’s Wellbeing and Schools Bill, but future regulations will enable a cap on the profits of non-local authority, Ofsted-registered providers of children’s homes. We have to do this carefully and sensibly. I urge all noble Lords to realise that we have an unprecedented number of children and young people coming forward into care. Our focus needs to be on preventing those young people coming into care in the first place.

[Lord Purvis of Tweed (LD)]

Looked-after children have the richest parents in the country—the state—but they have been let down over many successive Governments. One of the best sources of information to make improvements to the services is the life experience of looked-after children themselves. Can the Minister tell the House how young people who have gone through the system will be able to inform the decision-making process to enable improvements to the system?

[Baroness Blake of Leeds (Lab)]

It is not just about young people who have come out of care, but young people who are in care at the time. Most local authorities have very supportive groups through which young people come together and meet. We must not underestimate the power of peer groups sharing their concerns. The voice of the child and of young people is fundamental, critical, to taking this journey forward. For too long the state has taken an attitude of, “We know best; we will instruct what has to happen”. This cannot go on. I am delighted that children and young people are now being given the opportunity to be really involved in their futures.

NHS: Heart Valve Disease

Thursday 12th March 2026 Lords Chamber

Question

11:18

Asked by

[Lord McCabe]

To ask His Majesty’s Government what assessment they have made of whether NHS services for heart valve disease support healthy ageing and ensure older adults receive equitable access to timely treatment.

[The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)]

My Lords, to accelerate the 10-year health plan ambition to reduce premature mortality from heart disease and stroke by 25% and to tackle unwarranted variation across the country, this year we will publish a new cardiovascular disease modern service framework. It will support consistent, high-quality and equitable care while fostering innovation across the cardiovascular disease pathway.

[Lord McCabe (Lab)]

I thank my noble friend the Minister for her response. The guidelines of the European Society of Cardiology and the European Association for Cardio-Thoracic Surgery suggest that the UK is falling behind in terms of diagnosis and treatment for heart valve disease. Can she give an assurance that the new framework will take full account of these guidelines and pay particular attention to the diagnosis and treatment of older people?

[Baroness Merron (Lab)]

I am most grateful to my noble friend for his work in promoting the improvement of services for those with heart valve disease. I can say—it might be helpful—that we are driving down cardiology waiting lists. The number of people waiting over 52 weeks from referral to treatment was down 9% between the end of December 2025 and the end of January 2026. Yes, the modern service framework will accelerate this progress to reduce premature mortality and will set standards for the best evidence-based interventions.

[Lord Patel (CB)]

My Lords, management of people with heart valve disease is truly a low-hanging fruit in reducing deaths due to cardiovascular disease. Some 400 people a year die on waiting lists for transcatheter aortic valve implantation. It is simple for people who have breathlessness or suffer from decreased exercise tolerance or chest pain. Even I, within five minutes, could diagnose whether they were at risk of heart valve disease or not—line them up and I will tell you.

[Baroness Merron (Lab)]

I am reassured that the noble Lord can assist within five minutes—we might consider engaging him. The serious point is that early diagnosis is important, and the modern service framework will build on the work that has already been done. I know that the noble Lord is aware of this, but just the use of a stethoscope is the way to make an early and initial diagnosis. We are upping our game here by bringing in AI-assisted stethoscopes, which will be a massive assistance for diagnosis.

[The Lord Speaker (Lord Forsyth of Drumlean)]

My Lords, the noble Baroness, Lady Brinton, is taking part remotely. I invite her to ask her supplementary question.

[Baroness Brinton (LD) [V]]

My Lords, the Resuscitation Council UK, the British Cardiovascular Society and the National Council for Palliative Care have excellent and sensitive joint guidance on the use of cardiovascular implants towards the end of life. My family’s experience in different parts of the country shows that not all cardiac surgeons take account of end-of-life care in patients. In one case, a patient was told that she would not be allowed to leave the hospital until she had a pacemaker, despite the fact that, at 88 years old, she did not want one and, two years on, bitterly regrets finally agreeing. Can the Minister say whether the review that she just mentioned will ensure that surgeons follow the guidance and work not only with patients but with their other clinicians?

[Baroness Merron (Lab)]

I am sorry to hear the experience that the noble Baroness describes. We are indeed seeking to have a whole-team approach to the whole patient. I absolutely agree with her that it should indeed consider where somebody is in their life stage.

[Baroness Browning (Con)]

The noble Lord, Lord McCabe, referenced older people in particular in his Question—he did not say where he drew the line at old, but perhaps I will declare an interest. What happens, for example, when really older people need heart surgery but are considered to be an anaesthetic risk? With new developments in heart surgery, I wonder whether the Minister can tell us what progress there has been in carrying out procedures without necessarily needing to have invasive surgery.

[Baroness Merron (Lab)]

I can privately share with the noble Baroness that I suspect that “older people” covers both of us: it is over 65. The point that she makes is important. The option of what is called a TAVI intervention is far less invasive than a surgical intervention, as she referred to. That activity has grown significantly year on year, with something like a 16% increase on 2024-25. That is a very welcome step forward as we move towards minimally invasive procedures.

[Baroness Andrews (Lab)]

My Lords, it is obvious that early testing for heart valve disease is an exemplary form of preventive medicine, which is where we all need to get to. The House owes my noble friend gratitude for organising heart valve testing through the Heart Valve Voice, which was extremely successful. Does my noble friend agree with me that, because of the absence of routine testing, we should look for opportunities to link heart valve testing with the other sorts of routine testing where there is a captive audience? These could include, for example, occasions when people go for cholesterol testing or possibly even flu vaccination, which are becoming more routine? If we could get that in operation at an early stage, it could make a significant difference.

[Baroness Merron (Lab)]

My noble friend is right and, certainly, as we move through our 10-year health plan, the opportunity to make every contact count is very important. I refer my noble friend to the advances that we have made in services available in community pharmacies, because measuring blood pressure is hugely important. Our pharmacies, I am glad to say, have delivered nearly 4.2 million blood pressure monitoring checks since October 2021. We have more than 7,500 pharmacies now available in our high streets delivering this service. That is the kind of thing that my noble friend is looking for.

[Lord Kakkar (CB)]

My Lords, I declare my interest as chairman of King’s Health Partners. The Minister made reference to AI stethoscopes aiding in the diagnosis of patients with heart conditions. The evidence for this was established in a very large trial—the TRICORDER trial—involving some 1.5 million patients and more than 200 general practices in our country. What it demonstrated was, compared to the use of the ordinary standard of care, a doubling of the rate of diagnosis for heart failure and a tripling of the rate of diagnosis for heart arrhythmias. The problem was that, subsequent to the trial, the diagnostic rate did not increase, suggesting that it is necessary to invest in training and the establishment of new working pathways to ensure that innovation can be properly established in routine clinical practice. Is His Majesty’s Government funding such activity?

[Baroness Merron (Lab)]

The noble Lord is right to make the point that innovation research is one part of it, but it is actually its implementation that matters. However, the faster and more frequent detection of cardiovascular conditions is the key thing and training is certainly a part of that.

[Lord Kamall (Con)]

My Lords, I am grateful to the Minister for giving me time for this question. She will be aware that studies analysed in around 155,000 diagnoses of aortic stenosis in England have found that women were significantly less likely to be referred to specialists and far less likely to receive valve replacement. This also applies to patients from deprived areas and in some ethnic minority groups. What assessment have the Government made of these disparities and what action are the noble Baroness’s department and NHS England taking to ensure that patients have access to heart valve treatment regardless of their gender, ethnicity or where they live?

[Baroness Merron (Lab)]

The noble Lord is quite right: women are underdiagnosed, they are undertreated and some ethnic minority groups face poorer access. That is why I very much welcome the fact that, in the framework to which I referred, dealing with inequalities will be absolutely key. Research, in which we are partnering with the British Heart Foundation, will focus on tackling inequalities in higher-risk groups as well as unequal cardiovascular disease outcomes. Inequalities and tackling them will be at the heart of all our acceleration of progress as well as our research.

Peatland Restoration

Thursday 12th March 2026 Lords Chamber

Question

11:29

Asked by

[The Lord Bishop of Norwich]

To ask His Majesty’s Government what assessment they have made of the benefits of peatland restoration for flood resilience and nature recovery.

[Lord in Waiting/Government Whip (Lord Katz) (Lab)]

My Lords, peatland restoration provides multiple benefits. It improves flood resilience by slowing water leaving the uplands and significantly reducing peak flows. Peatlands make up the UK’s largest extent of semi-natural habitat, so action to restore them makes an important contribution to delivering biodiversity targets. In the environmental improvement plan, this Government committed to restoring 40,000 hectares of peatland by 2030. To help to achieve this, we will extend our peatland grant scheme by a further year.

[The Lord Bishop of Norwich]

My Lords, I am grateful to the noble Lord for his reply. My understanding is that so far we have restored a quarter of a million hectares, against a target of 2 million hectares by 2040. That is only 10%. As the noble Lord says, it is crucial that we do this, to keep water higher up in the catchment area for biodiversity and for carbon storage. What plan do the Government have to enable degraded peatlands to be restored? Will that plan be produced in conjunction with the devolved powers? How are the Government proposing to engage with people in communities that regularly use peatland for farming and other purposes? I declare an interest because my forebear Bishops of Norwich largely controlled the digging of peat that created the Norfolk Broads.

[Lord Katz (Lab)]

I thank the right reverend Prelate for his questions and for claiming that inherited responsibility. He is absolutely right about the importance of peatlands. They have been referred to as the UK’s rainforest. They store vast amounts of carbon, regulate water flow and support biodiversity. Restoration is currently funded through the national peatland grant scheme, which we have extended for an additional year, as I said. Following this, restoration will primarily be supported through environmental land management schemes such as Landscape Recovery and Countryside Stewardship, which are expected to bring at least 35,000 hectares of peatland into restoration by 2050. We expect that to happen under the most recent round of the Landscape Recovery scheme.

The Government regularly speak to a wide range of stakeholders including those involved in peatland restoration, such as wildlife trusts, national parks, the horticultural sector, landowners and farmers, as well as our partners in local, regional and other national Governments. By 2030, we will invest £85 million to restore and manage our peatlands, which will include support for water infrastructure, peatland restoration and the trials of farming on higher water tables.

[Lord Bellingham (Con)]

My Lords, I am grateful to the Minister for his reply to the right reverend Prelate and to the right reverend Prelate for referencing his diocese’s historic interests in the Norfolk Broads. I had the privilege of serving on the original Standing Committee to set up the Broads Authority. That was taken through, incidentally, by the noble Lord, Lord Moynihan. Is the Minister aware that the Broads Peat Partnership is doing a great deal of work to restore these habitats? Will he make sure that his department works with the Broads Authority carefully on this project? Is he satisfied that the Broads Authority is striking the right balance between commercial interests, such as boating and navigation, and protecting the natural environment?

[Lord Katz (Lab)]

The noble Lord is right to single out the importance of the broads and the wider lowland agricultural peatlands. They are responsible for 88% of all emissions from England’s peatlands. We are working with all our partner organisations, including the Broads Authority, to support the restoration of peatlands, be they lowland or upland. Over the next four years, for the lowlands, Defra will fund water infrastructure facilitation grants and wetter farming trials, which will enable farmers and land managers to make changes to their water management and undertake more sustainable actions on peat. We will continue to work with them to ensure that they get that balance right between their more high-profile activities, such as supporting tourism, and that essential activity on lowland peatlands.

[Baroness Grender (LD)]

My Lords, does the Minister agree with the widespread public concern that peat for horticulture continues to degrade our vital peatlands? Can he update the House on the Government’s response to the Horticultural Peat (Prohibition of Sale) Bill tabled by my Liberal Democrat colleague Sarah Dyke MP? Can he explain the delay on this, given that it was in the Government’s manifesto and was already a broken promise by the Conservative Government?

[Lord Katz (Lab)]

The noble Baroness is absolutely right that this is a very important issue. I am sure that she has read in detail our environmental improvement plan that was published at the end of last year. This was set out as one of our key actions on peatland and peatland restoration. The Government are committed to protecting these nature-rich habitats, including peat bogs, and we plan to legislate for a ban on the sale of peat and peat container products when parliamentary time allows. I am afraid that I am not going to predict what will be in any forthcoming King’s Speech, but this is a priority for this Government.

[Lord Vaux of Harrowden (CB)]

My Lords, I declare my interest as a trustee of the Galloway Fisheries Trust and chairman of the Fleet District Salmon Fishery Board. The single biggest cause of peatland destruction has been the historic indiscriminate planting of non-native conifers on peatlands. About 18% of UK peatland has been destroyed in that way. While new planting on deep peat is rightly no longer allowed, the position of replanting after felling is not so clear. Can the noble Lord assure me that replanting of conifer woodland on peatland will not be allowed and that the peatland will be restored after felling?

[Lord Katz (Lab)]

The noble Lord is absolutely right about the action that has been taken in previous years that has degraded our peatland, including, as he said, the planting of conifers. I will have to write to him on some of the detail on that, but I want to be clear that we see the importance of restoring peatland to its natural state. That way we create a virtuous circle—wet peatlands that are both good for water management but also good for climate change.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, I thank the Minister for his responses so far. Further to the question from across the House on a ban on the sale of peat for horticultural purposes, could I encourage the Minister to talk to his ministerial colleagues to ensure that such legislation is in the forthcoming King’s Speech? Could I also encourage him to talk to Ministers in the devolved Administrations about such a ban in order to protect our precious landscape, which has been scarred for quite a number of years?

[Lord Katz (Lab)]

I thank my noble friend for her persistence in pursuing this important matter. She is asking me to undertake a lot of conversations; I like having a chat, so I will see what I can do. I cannot make any commitments about the forthcoming King’s Speech, but I just underline what I said to the noble Baroness, Lady Grender. This is a clear priority for this Government. We have put it in our environmental improvement plan. We understand its importance and, as she said, it is also important that we work with the devolved Governments, so that when we ban something it is banned completely. It will happen, but when parliamentary time allows.

[Lord Blencathra (Con)]

My Lords, the United Kingdom peatlands hold over 3 billion tonnes of carbon. I welcome the Government’s commitment to continue funding the Conservative Government’s innovative £50 million England Peat Action Plan, since the benefits of peatland restoration are significant and multiple. While the Peatland Code is a valuable source of revenue to incentivise this work, based on reducing carbon emissions, it is not enough in many parts of England. Will the Minister go back and press Defra to encourage greater private sector investment in the other goods provided by restoration, for example from the water and insurance sectors? Crucially, does he share the concerns of many organisations that the environmental delivery plans, the EDPs, in the UK’s Planning and Infrastructure Act, risk damaging nature-based markets by allowing developers to bypass legal obligations for on-site protection and just pay into a general centralised fund instead?

[Lord Katz (Lab)]

The noble Lord is absolutely right in drawing our attention to the Peatland Code and the work of other organisations and he is right in saying that private finance will be vital if we are to meet our peatland restoration objectives. It is important that peatland projects are able to make the most of new revenue streams, including carbon finance. We are acting in a number of different ways as a Government to ensure peatland restoration. A key constraint on restoration delivery is the size of the sector, which is why we are launching a new sector capacity grant of over £1 million in the summer, which will provide funding for training, skills and equipment. In terms of development, peatland policy works alongside planning systems, rather than prohibiting development. It guides developers to design schemes that avoid unnecessary peat loss and manage water tables safely.

[Earl Russell (LD)]

My Lords, last year we had a record number of wildfires, including in our peatlands and moorlands. I take this opportunity to ask the Minister if he could update the House on progress on the Government’s wildfire strategy and action plan, which is now overdue. If the Minister does not know the answer, perhaps he could write to me.

[Lord Katz (Lab)]

I will have to write to the noble Earl to update him on the wildfire plan strategy, but I would say that, just at the end of last year, the House debated and passed updated regulations around the burning of peatland, heather land and moorland, which is obviously an important aspect. I can tell him that over 675,000 hectares of peatland are now protected under those regulations; fewer than 2,000 hectares were burned last year.

Anti-Muslim Hostility: Non-statutory Definition

Thursday 12th March 2026 Lords Chamber

Question

11:40

Asked by

[Lord Harries of Pentregarth]

To ask His Majesty’s Government what assessment they have made of how the new non-statutory definition of anti-Muslim hostility will (1) protect Muslims, and (2) safeguard freedom of speech.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)]

My Lords, the Government have adopted a definition of anti-Muslim hostility focused on protecting individuals. The definition provides a shared practical framework to help victims, communities and services respond to anti-Muslim hostility while improving understanding across wider society. It also explicitly safeguards free speech, making it clear that criticism, debate or even ridicule of religious ideas remain lawful. Keeping citizens safe is a fundamental duty of government. I would always hope that we did not need these definitions, but we know we do, and this definition is a crucial step in strengthening the protection for our citizens.

[Lord Harries of Pentregarth (CB)]

I thank the Minister for her reply, and I appreciate that the Government have made a real attempt to balance protecting Muslims on the one hand and safeguarding freedom of speech on the other. While I can see that the definition might be quite useful from a cultural point of view, it is very difficult to see how it is going to work in relation to the law. The Government’s statement specifically says:

“The definition does not change what is or is not a crime, nor does it equate anti-Muslim hostility with crime”.


My question is really this: in what way, if any, does this definition make a difference to the application of the law? After all, violence against Muslims is already a crime. By having this definition, what difference does it make?

[Baroness Taylor of Stevenage (Lab)]

The noble and right reverend Lord is quite correct to say that this definition does not change the law. However, it describes distinct forms of unacceptable hostility that many Muslims experience. We know the terrible things that happen, online and in person, to members of our Muslim community. This should increase understanding across wider society. It gives victims confidence that what they face will be recognised and taken seriously. By setting clearer boundaries around what is and, importantly, what is not anti-Muslim hostility, the definition helps create space for a much more open and honest discussion of sensitive—we know how sensitive these issues are—but wholly legitimate issues. The definition does not restrict criticism, debate or even ridiculing. It is about unacceptable behaviour towards people, not the protection of belief systems.

[Baroness Chakrabarti (Lab)]

My Lords, I congratulate my noble friend and the working group on a very clear, common-sense definition. Does she agree that it is a very useful public educational tool, not least for signposting actual hard law, such as articles in the human rights convention on free expression and discrimination, and, as my noble friend said, for being clear that free speech, including critique of religion, is protected?

[Baroness Taylor of Stevenage (Lab)]

I thank my noble friend for making the point about thanking the working group. This has been a very sensitive and very detailed piece of work for it to do, and I am very grateful to the working group, my honourable friend the Minister for Faith in the other place and, of course, my noble friend Lord Khan, who started working on this and did a great deal of work on it previously.

My point, which my noble friend echoed, is that if we cannot clearly define an issue, we cannot properly identify, measure or address it. A definition provides the clarity needed to respond consistently and effectively. It helps distinguish between legitimate debate—which remains fully protected—and unacceptable hostility, prejudice and discrimination directed at individuals. Very importantly, there are elements of the definition that refer to legal procedures and other elements that are aimed more at society’s acceptance that we should not be hostile towards our communities.

[Baroness Gohir (CB)]

My Lords—

[Lord Singh of Wimbledon (CB)]

My Lords—

[Baroness Deech (CB)]

My Lords—

[Lord in Waiting/Government Whip (Lord Lemos) (Lab)]

We will hear from the Conservative Benches.

[Lord Ahmad of Wimbledon (Con)]

My Lords, to build on the Question from the noble and right reverend Lord, Lord Harries, of course the Minister will be aware that the previous Government back in 2016—I know because I was instrumental in that—brought in the specific crime of anti-Muslim hatred, but the approach they took was one of inclusivity; that is, it was not just for one faith but for ensuring that all religious hate crime could be reported. Indeed, the statistics we have now reflect that. I respect very much Dominic Grieve, who I worked with very closely. How will this definition fit in specifically? The second element is on education and ensuring that hate crimes are reported and accurately recorded.

[Baroness Taylor of Stevenage (Lab)]

Yes, it is really important that we make sure that the reporting and recording are done. In terms of support for other faith groups, we will work with and celebrate our faith and belief communities to improve the understanding of different religions, to support tolerance and to build a more cohesive and resilient country. A very detailed action plan sits behind the whole of Protecting What Matters, which is where the definition is included. The education the noble Lord refers to is very clearly and consistently part of that action plan—we will have another opportunity to debate that on Monday when I will answer questions on the Statement on it. We continue to support programmes such as Near Neighbours which bring people together in religiously and ethnically diverse neighbourhoods to make sure that they are collaborating on community initiatives. The action plan supports all that work as well as providing this very clear definition of anti-Muslim hostility.

[Baroness Hussein-Ece (LD)]

I welcome the action plan and pay tribute to all the work that has gone into arriving at it. In 2019, the then Conservative Communities Secretary, James Brokenshire, said:

“The government is wholeheartedly committed to ensuring that Muslims are not targeted for hatred, persecution or discrimination”.


The Government’s press release at the time said that they agreed that

“there needs to be a formal definition of Islamophobia to help strengthen our efforts against anti-Muslim hatred”.

In recognising, as the Minister has set out, that this definition is not about preventing free speech but about protecting individuals, can I ask her to articulate how this plan and this definition would operate on exactly the same principle as the widely adopted working definition of antisemitism, and that those who claim this is an Islamophobia law or a blasphemy law—which is widely being put out there now, very destructively—are simply spreading disinformation and sowing division? Hate speech is not free speech.

[Baroness Taylor of Stevenage (Lab)]

I want to be absolutely crystal-clear on the point about blasphemy. There are no blasphemy laws in England, and the Government have no plans to introduce any. The UK has a very proud tradition of religious tolerance within the law, and the Government are committed to building a strong and integrated society in which hatred and prejudice are not tolerated and where everyone is free to express their religious identity and live without fear of discrimination or harm. Muslims are currently subject to 45% of hate crime and we have seen horrific incidents aimed at our Jewish communities and, shockingly, a spike in antisemitism in our communities following those incidents. We need to support those communities, and the Government are absolutely committed to doing so.

[The Archbishop of York]

My Lords, it has been a great honour in the last few weeks to have been the guest at several iftar meals with the Muslim community in Yorkshire, where I am based. I know the noble Baroness mentioned the debate on Monday, but knowing how real Muslim hate crime is and hearing stories from Muslim neighbours just in the last few days, it would be good to hear more about how this is going to be implemented, because this is a definition not to sit on a shelf but to be used to help us become a more tolerant society.

[Baroness Taylor of Stevenage (Lab)]

I agree with the most reverend Primate. I am going to the iftar in Stevenage tomorrow evening, and it has been great to see the cross-community participation in iftars around the country. The Government are taking a number of steps to support this definition, with funding that will help to tackle some of the anti-Muslim hostility that we have seen. For example, we have put additional funding for cohesion into the Pride in Place programme to enable us to tackle some of these issues. I will go into more detail on Monday.

[Baroness Scott of Bybrook (Con)]

My Lords, the anti-Muslim hostility definition allows things to be said that are “in the public interest”. Can the Minister clarify who decides what the public interest is, and how?

[Baroness Taylor of Stevenage (Lab)]

The definition of anti-Muslim hostility is accompanied by a statement very clearly setting out what the definition does not do. It is not legally binding; it does not override or change the law; it does not affect sentencing or create new crimes, and it does not prevent raising concerns in the public interest. It is very important that people feel able to raise concerns where they feel that they are in the public interest. It is not about protecting religion from criticism but only about protecting people from targeted hostility. Where people want to raise criticisms of a religion, and if that is in the public interest, they are perfectly able to do so.

Finance (No. 2) Bill

Thursday 12th March 2026 Lords Chamber

First Reading

11:51

The Bill was brought from the Commons, read a first time and ordered to be printed.

Supply and Appropriation (Anticipation and Adjustments) (No. 2) Bill

Thursday 12th March 2026 Lords Chamber

Second Reading (and remaining stages)

11:53

Moved by

[Lord Livermore]

That the Bill be now read a second time.

Bill read a second time. Committee negatived. Bill read a third time and passed.

National Insurance Contributions (Employer Pensions Contributions) Bill

Thursday 12th March 2026 Lords Chamber

Third Reading

11:54

Motion

Moved by

[Lord Livermore]

That the Bill do now pass.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, the cost of pension salary sacrifice was set to treble to £8 billion a year by the end of this decade. That increase has been driven mostly by high earners, with additional rate taxpayers tripling their salary sacrifice contributions since 2017. This includes individuals sacrificing their bonuses without paying any income tax and national insurance contributions on them. The status quo is neither fair nor fiscally sustainable. We simply cannot afford to allow the cost of pension salary sacrifice to balloon, benefiting predominantly higher earners.

The Bill therefore introduces a cap of £2,000 under which no employer or employee national insurance contributions will be charged on any pension contributions. It protects ordinary workers by using salary sacrifice and limits the impact on employers while ensuring that the system remains fiscally sustainable. The majority of those currently using salary sacrifice will be unaffected.

Saving into a pension, including via salary sacrifice, will also remain hugely tax-advantageous under these changes. The Government currently provide over £70 billion of income tax and national insurance contributions relief on pension contributions each year. That spend will be entirely unaffected by these changes. These are fair and balanced reforms. They protect lower and middle earners. They give employers many years to prepare. They preserve the incentives that underpin workplace pension saving and they ensure that the tax system is kept on a sustainable footing. I beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, as we said at Second Reading, in Committee and again on Report, this is a poorly conceived Bill, because it prioritises the hope of short-term tax gain over the far more important task of sustaining a system that encourages and rewards responsible pension saving. Throughout the Bill’s passage, we have sought to examine it line by line to see what the Government’s policy will actually mean in practice, and what has become clear is deeply troubling.

This measure risks deterring pension savings. It will hit those on lower and middle incomes, including some earning under £30,000 a year. It will impose yet more compliance, payroll and administrative burdens on business, particularly on small businesses and charities that are already under considerable strain. It will particularly penalise those who are repaying student loans.

Against that background, I am proud of the scrutiny that the House has brought to the Bill. Your Lordships have approached it with care, expertise and determination to improve it where we can. As a result, with unusual speed, good order and good humour, the House agreed five amendments last week which seek to limit some of the Bill’s most damaging consequences.

First, our Conservative amendments ensure that basic rate taxpayers, those on the lowest incomes, are protected from the NICs charge. If the Government insist that this policy is directed at higher earners, not those on modest incomes trying to save for their retirement, this should be explicit in the Bill.

Secondly, we proposed an exemption for small and medium-sized enterprises and small charities. These organisations are the backbone of our economy and our communities, and they should not be burdened with yet more payroll, compliance and administrative costs as a result of this policy. We have all seen the impact on them of last year’s £25 billion hit.

Thirdly, we proposed that most of the regulations under the Bill should be subject to the affirmative procedure. Given the uncertainty that surrounds how these provisions will apply, it is only right that Parliament has the opportunity to scrutinise those regulations properly.

Fourthly, my noble friend Lord Leigh of Hurley successfully secured an amendment to limit the impact of the Bill on those repaying student loans, who would be hardest hit by the measure.

Finally, the amendment by the noble Baroness, Lady Kramer, raised the cap to £5,000, helping to mitigate some of the worst impacts of the Bill on those least able to bear them.

In recognition of the seriousness of the issues raised by the Bill and the progress made here, I shall take a moment to thank a number of noble Lords for the diligence with which they have scrutinised it. I am particularly grateful to my noble friends Lord Leigh of Hurley, Lord Fuller, Lord Ashcombe and Lord Mackinlay of Richborough, and the noble Baroness, Lady Altmann. They have worked tirelessly, both with me and my noble friend Lord Altrincham, and their amendments have prompted important debates. I am also grateful to our Whips’ Office team, especially my adviser Oliver Bramley, for their unstinting and effective support, and I thank the noble Baroness, Lady Kramer, for the constructive way in which she has engaged with us during the course of the Bill. Hers has been a powerful voice in holding the Government to account.

More broadly, I thank other noble Lords across the House, including the noble Lords, Lord de Clifford, Lord Londesborough and Lord Freyberg, for their thoughtful contributions in scrutinising the legislation. Finally, it would be remiss of me not to thank the Minister for the way in which he has engaged with the House during the passage of the Bill. I am particularly grateful to him and his officials for their response to the letter I sent following Committee. It addressed a number of the questions raised during our debates and was both timely and informative.

I hope that, as the Bill proceeds, the Government will reflect carefully on the points raised and show a willingness to move on the issues that have united so many across this House.

[Baroness Kramer (LD)]

My Lords, this was a very short Bill but, frankly, I do not know how it got through the House of Commons and came to this House without clarity on the fundamental issue of whether we were talking about a cap that was per employee or per employment. I thank the noble Lord, Lord Livermore, for seeking the answers to that and making sure we were informed on Report. We were looking at two different Bills, not knowing which one we were working on, until we reached that point in the conversation, so I thank him.

I also join in saying that this was a collaborative effort, not in opposition to the Government but because we were of common mind across the Conservative Benches, my Benches and the Cross Benches—the noble Lords, Lord Londesborough, Lord de Clifford and Lord Freyberg, as the noble Baroness, Lady Neville-Rolfe, mentioned, all played a crucial role in this. I particularly congratulate my Benches on taking a vow of omertà not to speak on many occasions on the Bill so that we moved it rapidly through the House. I think the whole House was grateful that, on Thursday, when we finally came to vote, we were done in less than two hours rather than delaying everyone from departing on a Thursday. I thank my team very much for their discipline. I also thank Ulysse Abbate in our Whips’ office, who is new to this kind of work, but my goodness is he good at content and co-ordination.

This was a good example of people, having realised they are taking the same position, working together to make sure that it is effective. I very much hope that the Commons will appreciate the significance of the amendments passed to the Bill. Of all the Bills I have ever seen, this contains so many unintended consequences that, even if you believed in the fundamentals behind it, you would need to make substantial change for it to be in any way workable and not ending up targeting unintended groups, such as those on basic incomes. It would be devastating for people repaying student loans, which has to be fixed, and very difficult for SMEs. We chose different routes to try to make those changes and ended up with a very solid group of amendments. I thank the House for co-operating on this issue.

[Lord Livermore (Lab)]

My Lords, I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer. I beg to move.

Bill passed and returned to the Commons with amendments.

Greenhouse Gas Emissions Trading Scheme (Amendment) (Extension to Maritime Activities) Order 2026

Thursday 12th March 2026 Lords Chamber

Motion to Approve

12:03

Moved by

[Lord Whitehead]

That the draft Order laid before the House on 13 January be approved.

Relevant document: 49th Report from the Secondary Legislation Scrutiny Committee

[The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)]

My Lords, I thank the House for its consideration of this draft order, which was laid before the House on 13 January.

The UK Emissions Trading Scheme was established under the Climate Change Act 2008 by the Greenhouse Gas Emissions Trading Scheme Order 2020 as a UK-wide greenhouse gas emissions trading scheme contributing to the UK’s emissions reduction targets and net-zero goal. The scheme was established to increase the climate ambition of the UK’s carbon pricing policy while protecting the competitiveness of UK businesses.

The scheme is run by the UK ETS Authority, a joint body comprising the UK Government and the devolved Governments acting together. A cap is set on the total amount of certain greenhouse gases that can be emitted by sectors covered by the scheme, and the cap is reduced over time so that total emissions must fall. Under the UK ETS, operators participating in the scheme are required to monitor, report on and surrender allowances in respect of their greenhouse gas emissions. The scope of the UK ETS is being expanded to maritime activities as part of the Government’s strategy of decarbonising all sectors of the UK economy to meet our net-zero target by 2050. It is an effective lever to reduce emissions and delivers on a key commitment in the UK’s maritime decarbonisation strategy. We expect this to help overcome key barriers to maritime decarbonisation by incentivising low-carbon fuels and fuel-efficient technologies and operating practices. Last week, the Government also brought forward £271 million of funding to help industry with the changes to vessels, fuelling and infrastructure required for maritime decarbonisation.

This statutory instrument makes amendments to the legislation that gives effect to the UK ETS. It expands the scheme’s scope to include coverage of carbon dioxide, methane and nitrous oxide from domestic voyages and in-port activities in the UK, effective from 1 July 2026. The instrument amends the legislation to require maritime operators to participate in the scheme, and to allow them to bid at auction for UK allowances. It will apply to ships of 5,000 gross tonnage and above, but a small number of exemptions apply, such as for government ships, including military and law enforcement ships, and ferries operating services to Scotland’s islands and peninsulas. Ferries serving Rathlin Island and the Isles of Scilly are out of scope of the instrument as they are below the 5,000 gross tonnage threshold. We consulted on the potential inclusion of Crown dependencies and overseas territories in the recent international maritime consultation, but they are not in scope of this instrument, which expands the scheme to domestic maritime emissions only.

The provisions set out in the instrument require the maritime operator of a ship, either its registered owner or the company responsible for its compliance with the International Safety Management Code, to obtain an emissions monitoring plan. This plan will document the processes used to ascertain its ships’ emissions. For each scheme year, maritime operators will then be expected to monitor, independently verify and report their maritime emissions to the relevant regulator, and surrender an equivalent level of allowances. The instrument also introduces the concept of “surrender deductions”, reducing by 50% the number of allowances for surrender in respect of voyages between Great Britain and Northern Ireland, to deliver equivalence in carbon-pricing coverage on routes across the Irish Sea. Operators will be assigned to a UK ETS regulator based on the location of their registered office or place of residence. This is the same approach that applies to aircraft operators.

One emissions monitoring plan will cover all the ships for which the maritime operator is responsible, and emissions must be monitored using one of the four methods prescribed in the instrument. Maritime operators will be required to report emissions from all ships for which they are responsible through an annual emissions report, which must be submitted to the regulator on or before 31 March in the year following the scheme year to which it relates. Maritime operators have an obligation to verify their annual emissions report. The verification must be carried out by an impartial and accredited verifier, independent from the maritime operator. If satisfied, the verifier will draft a verification report, which will be submitted to the regulator alongside the annual emissions report.

Maritime operators will also be required to surrender a level of allowances equivalent to their emissions by 30 April in the year following the scheme year. However, the instrument introduces the concept of a “double surrender”, whereby the date by which allowances must be surrendered in relation to the first scheme year—2026—is 30 April 2028 and not 30 April 2027, as would otherwise be the case.

Neither the UK carbon border adjustment mechanism, CBAM, nor its EU equivalent applies to maritime emissions, and this instrument does not introduce any CBAM obligations for maritime operators.

These changes follow comprehensive engagement and consultation with stakeholders. The UK and devolved Governments carried out a consultation in 2022 which was concerned with the development of the UK ETS, including whether to include maritime activities in the scheme. A second consultation ran between 28 November 2024 and 23 January 2025 and sought views on the details of how maritime would be incorporated into the ETS from 2026. The relevant responses to this consultation were summarised in the interim and main authority responses, published in July and November 2025 respectively.

I recognise the fatal and non-fatal amendments tabled by the noble Baroness, Lady Hoey, and the noble Lord, Lord Moynihan, for our discussion today. I wish to ensure that noble Lords in attendance today are aware that this legislation was approved by the Northern Ireland Assembly two days ago. This is of particular importance, as the amendments tabled identify potential issues with respect to Northern Ireland. I hope that this provides the noble Baroness and the noble Lord with some reassurance as to their concerns. Noble Lords will be aware that this instrument needs to be approved by all the UK legislatures. That has now been the case with the approval of this instrument by the Northern Ireland Assembly.

Further, I urge noble Lords to consider the importance of this legislation for our wider relationship with Europe, in particular in enabling a link with the EU ETS, which includes these emissions and will provide for a mutual exemption from CBAM. This exemption will protect UK businesses from charges on £7 billion-worth of goods and services. Linkage of our emissions trading systems, combined with the sanitary and phytosanitary—SPS—measures, is set to add nearly £9 billion to the UK economy by 2040. I strongly urge my fellow noble Lords to consider these benefits, and the costs they would be placing on UK businesses today should they vote in favour of the amendments tabled by the noble Baroness and noble Lord.

In conclusion, the expansion of the UK ETS to cover maritime activities will support its role as a fundamental pillar of the UK’s climate policy. It plays a key part in the Government’s strategy of decarbonising all sectors of the UK economy to meet our net-zero target by 2050. It also delivers on a key commitment within our maritime decarbonisation strategy. I beg to move.

Amendment to the Motion

Moved by

[Baroness Hoey]

Leave out all the words after “that” and insert “this House declines to approve the draft Order laid before the House on 13 January because while the Scottish Islands are protected from the Order, Northern Ireland, which is already marginalised from the rest of the UK through the imposition of the Windsor Framework, is denied the same protection; and because in a context where no viable fuel alternatives exist the only impact of the Order will be to increase bureaucratic burdens on business and impose additional costs on those living in parts of the UK that depend on maritime transport”.

[Baroness Hoey (Non-Afl)]

I thank the Minister for his remarks and for his kindness in reaching out to me asking for a meeting when I tabled the amendment. Without wanting to in any way ruin his career prospects, I suggest to noble Lords that if this particular Minister had been in charge, this SI would not be going forward—it would be being dropped at this stage while we await future negotiations over any linkage between the EU ETS and the UK ETS.

As noble Lords will know, I have tabled several regret and fatal amendments over the past number of years, all to draw attention to the way in which the Windsor Framework has affected businesses and people in Northern Ireland. But this is a very different SI: it has absolutely nothing to do with the Windsor Framework and the protocol, although it does compound the further isolating of Northern Ireland from the rest of the country. This SI is a deliberate and calculated attack by His Majesty’s Government on business and consumers in Northern Ireland by introducing what is effectively a new maritime carbon tax, while not recognising Northern Ireland’s total reliance on maritime transport. The consequence will be that businesses and households will be disproportionately affected by it.

Noble Lords need to understand why this matters so much to Northern Ireland. It matters because we are uniquely dependent on maritime connectivity: 90% of goods entering or leaving Northern Ireland move by sea. Ferry services are absolutely vital. They are not a choice; they are an absolute must, as a route to the market in GB. These routes are vital for—to give some examples we all know about—agri-food exports, manufacturing parts, supermarket and retail distribution, supplies for construction and, of course, passenger movement.

12:15

It is important that noble Lords realise that this is going to increase the cost of travel for families who wish to come from Northern Ireland to GB or GB to Northern Ireland. In the midst of a cost-of-living crisis—many in Northern Ireland rely on oil, the price of which we are seeing spiralling at the moment—this is just not the right time to introduce something such as this for Northern Ireland people. For many, especially from lower-income families, Stena Line ferries to Birkenhead or Cairnryan offer a cheaper way to travel than the ever-increasing cost of flying from Northern Ireland, as those of us from Northern Ireland see the prices increase each week.

As a result of this SI, any increase in maritime operating costs will flow directly through the entire Northern Ireland economy. Initial estimates suggest that compliance could increase freight costs by around £15 per trailer. If we look at the thousands of freight movements each week, there will be a roughly 6% increase in average freight costs. Those costs will simply not remain with shipping operators; they will ultimately be passed on via higher export costs for Northern Ireland businesses—including our haulage firms, which have been doing a brilliant job—increased supply chain costs and higher prices for consumers.

In order to understand why these regulations are particularly toxic and misjudged, we must appreciate two critical facts. First, we must remember that these regulations are supposedly being introduced to help us reach our net-zero targets. Introducing a tax on less carbon-neutral fuels makes sense if it results in a switch to more carbon-neutral fuels, but these regulations do not have that effect. There are no commercially viable alternative fuels to begin with, and in order to use electrically powered shipping, there would first need to be developed major electricity charging capacity in our ports, which currently does not exist.

In this context, these regulations will actually undermine net zero by allowing that to be used as a means of simply increasing taxes, when doing so will have no positive environmental consequences. The revenue raised is going into general taxation. So, the only thing these regulations will do is increase the cost of travelling by sea. It is a tax on UK citizens who depend on sea travel to access the greater part of their country—as if we have not suffered enough as a result of the Windsor Framework.

Secondly, what makes these regulations indefensible is that they completely exempt Scotland from having to pay the tax. What possible justification can there be for exempting Scotland but not Northern Ireland? These regulations, in effect, discriminate against the people of Northern Ireland, saying that while the people of Scotland are worthy of protection from the cost of this new carbon tax, the people of Northern Ireland are not.

There is an obvious logical difficulty that arises from this arrangement. Given that part of Scotland can access the rest of the UK by land, while 100% of Northern Ireland can access the rest of the UK only by sea and air, common sense would argue that if there one part of the country to exempt from the tax, it is Northern Ireland, not Scotland.

I congratulate the Scottish Administration, who campaigned to be exempt; I am glad that they have been exempted. I had my DNA tested recently, and I am actually 74% Scottish, so I suppose I have to declare an interest. The Scotland Office obviously stood up for its people in Scotland, unlike the Northern Ireland Office.

Moreover, the mistreatment of Northern Ireland by these regulations has to be seen in the context of the existing disbenefits of the Windsor Framework. The regulations are blatantly discriminatory and completely unsustainable—they show the Government at their worst. When the point is made that there are 37 Labour MPs in Scotland and none in Northern Ireland, people will draw their own conclusions. I remind noble Lords that the Labour Party does not even let people vote for MPs in Northern Ireland. It takes their money and gives them membership, but it will not put up candidates. That is another discrimination by that party.

[Lord Weir of Ballyholme (DUP)]

The noble Baroness referenced the good work of the Scotland Office in lobbying to ensure that Scotland was exempted. Does she agree that this stands in sharp contrast to the Northern Ireland Office, which was instead lobbying parties in Northern Ireland to back this order and ensure that it was implemented?

[Baroness Hoey (Non-Afl)]

The noble Lord almost pre-empts what I was about to say, so I thank him. As if this is not enough to give politics a bad name, the events of last week, I am afraid, leave a nasty taste in the mouth. The Northern Ireland Assembly’s DAERA scrutiny committee met last Thursday and heard from Stena Line, the key ferry company linking GB to NI, and the UK Chamber of Shipping. All parties there, bar the Alliance, expressed concerns. The Minister is an Alliance member, of course. The committee was ready to reject the order but was told that there was a Northern Ireland-specific impact assessment around, and agreed to postpone its decision until Monday this week so that members could read the impact assessment. On Monday, the committee met again and was presented with no NI impact assessment because no such impact assessment existed. Officials suggested that the impact on Northern Ireland was already assessed but, again, this is not true.

The Frontier Economics study often cited was commissioned in 2023 by Whitehall departments, not the NI department. It mentions Northern Ireland a few times but provides no quantified estimates of the impacts on Northern Ireland’s consumers or business. It also spends a lot of time emphasising cruise liner shipping, which is not even covered, and barely touches on freight routes. The Government have acknowledged that Northern Ireland is more exposed to cost transmission through maritime freight but surely then there should have been a dedicated economic impact assessment carried out. Did the Secretary of State for Northern Ireland ever even discuss it with Secretary of State Miliband to point out the unfairness? Sometimes we almost question the role and purpose of the Northern Ireland Office. The impact assessment statement was just a ruse to prevent a vote last Thursday that would have gone the wrong way, and to buy the Government time.

Over the weekend, Northern Ireland officials lobbied MLAs very hard. Even the Secretary of State was engaged in texting and maybe even telephoning party leaders with the argument that had never been mentioned in the other place when this was discussed, saying that the entire EU reset would be threatened if the Assembly blocked the SI. The people of Northern Ireland expect their Secretary of State to at the very least put forward the arguments as to why they should not be subject to discriminatory treatment, leading to higher fares. It is clear that Northern Ireland does not have a Northern Ireland Office that works for the people of Northern Ireland the way in which the Scotland Office does.

The committee voted by five votes to four to approve the SI. One MLA, Michelle McIlveen, described these events in the following terms in the Assembly. She stated:

“What happened was, frankly, disgraceful. Last-minute pressure was placed on parties by UKG. A new dimension associated with CBAM and impact on EU negotiations was introduced. No facts, detail or proper briefing, just smoke and mirrors. That is not the way that we should do our politics, and interference at such a late stage is highly suspicious”.


The EU reset argument is nonsense. It played on the suggestion that if this order is not passed, that would be the end of any discussion on maritime greenhouse gases. In truth, however, as noble Lords know, regulations are pulled fairly regularly to make corrections and replaced a few days later with a new set of corrected regulations with “(No.2)” added at the end. The order that we are discussing is blatantly discriminatory and I call on the Government to commit at the very least to withdraw it and table a draft (No.2) order, which can have the same wording as the current order but applies the same exemption to Northern Ireland or Scotland. I appreciate that there may be noble Lords who wish to mention some other areas of the United Kingdom that have not been exempted.

Stena Line and the UK Chamber of Shipping have asked for reasonable adjustments: a 12-month delay to allow them to prepare, a Northern Ireland-specific economic assessment, a phased introduction period, and revenues raised to be targeted towards maritime decarbonisation. All those seem eminently sensible to me, as I hope they do to other noble Lords. I support the regret amendment from the noble Lord, Lord Moynihan, but I feel very strongly that we are fed up with regretting things—regret does not change anything. That is why, unless we get a very strong response from the Minister—although I appreciate that he is not making these decisions—I believe that, for the sake of the people of Northern Ireland and for the sake of decency and fairness, I will be forced to push this to a vote.

I will mention something that came up in the other House. The honourable Member for North Antrim and the honourable Member for South Antrim both spoke against this and the Conservative Members voted against it in Committee, but of course with the huge Labour majority it went through the House. The 50% reduction was raised, which Northern Ireland is of course getting. The Minister there responded by saying:

“I wanted to clear up a couple of points … The 50% reduction that applies to Northern Ireland is there to create parity between vessels that operate between Great Britain and Northern Ireland and those that operate between Great Britain and the Republic of Ireland”.—[Official Report, Commons, Second Delegated Legislation Committee, 3/2/26; col. 13.]


Of course, the Republic of Ireland is under the EU’s 50% reduction. The honourable Member for North Antrim responded:

“The Minister is telling the Committee that parity with the Republic of Ireland is more important to him than parity with the rest of the United Kingdom”.—[Official Report, Commons, Second Delegated Legislation Committee, 3/2/26; col. 14.]


That tells us something. I beg to move.

[The Deputy Speaker (Lord Geddes) (Con)]

My Lords, I should inform the House that, if this amendment is agreed to, I will be unable to call the amendment in the name of the noble Lord, Lord Moynihan, by reason of pre-emption.

[Lord Moynihan (Con)]

My Lords, I am grateful to the Minister for introducing this SI, to which I have tabled a regret amendment. I also echo all the comments made by the noble Baroness, Lady Hoey, on the role of the Minister. I will speak both to my regret amendment and to the noble Baroness’s fatal amendment.

There are two important issues regarding this SI, which places a carbon tax on the ferries that service principally Northern Ireland but also the Isle of Wight. First, as this House knows, the arguments for a statutory instrument must be identical in both Houses of Parliament and, in this case, in Northern Ireland, Scotland and Wales as well. They are expected to be consistent in substance and fact. Neither has been applied on this occasion, as was evidenced in the debate in Northern Ireland this week.

My concerns are twofold. The first is procedural: frankly, there has been a total lack of respect for the House of Commons and the Northern Ireland Assembly. The second is political: this is nothing more than a carbon tax on those who rely, for their livelihoods and travel, on the ferries captured by this legislation. Unlike the European scheme, it is not hypothecated with revenues invested in decarbonisation. Instead, as has been pointed out, it is the Treasury that pockets the proceeds, with no benefit to the environment, nor, most importantly, to the people of Northern Ireland. It is just another carbon tax to make Northern Ireland in particular less competitive than like-for-like companies in GB.

On 13 January this year, the SI was introduced in both Houses. On 3 February, it passed the House of Commons without reference at any point to the implications of the EU CBAM. However, when debated on 3 February, the good news in another place was that this SI had nothing to do with the EU CBAM. If it had, it would have read differently, and the impact assessment would have shown a range of options outlining what would happen to the emissions trading system under the EU CBAM.

12:30

Without the CBAM sword of Damocles hanging over the SI, Andrew Bowie MP, shadow Secretary of State for Scotland and shadow Minister for Energy stated:

“This instrument extends the ETS burden to the UK shipping industry to the tune of £175 million in administrative costs alone. That is utterly absurd. This is without doubt one of the worst pieces of legislation I have seen come before us in three Parliaments and nine years on Government Front and Back Benches and now in opposition. For every £1 spent on decarbonisation as a result of the framework, £8 will be spent on bureaucracy. That is insane”.

He also said:

“This is not a mechanism to decarbonise; it is a pernicious tax being levied on one of our most successful industries”.

Jim Allister, MP for North Antrim, went further, saying that

“the inevitable result is that Northern Ireland consumers will pay for this carbon tax ... Net zero fuel is four to five times more expensive. Shoreside electricity infrastructure just does not exist, and will not exist within six months”—

in fact, it will not exist for another 10 years—

“There is no support whatever for the transition. The coffers of Government will be expanded by this carbon tax … If we are a United Kingdom, then we need to be a United Kingdom of equals, not with those who are taxed while others are not, and not with consumers who pay more while others do not”.

The chief executive of Wightlink, the Solent ferry operator delivering lifetime services between the Isle of Wight and mainland England, providing many of the same services to local people that inconsistently led to the exemption of Scotland, where the ferries have the highest per capita passenger pollution in the UK, pointed out that imposing significant ETS costs under these circumstances would divert essential investment away from clean technologies. Putting a carbon tax on the ferry to the Isle of Wight to allow people to go to and from their homes is deeply damaging and of no benefit, except for the Secretary of State and his net-zero zealots.

Chris McDonald MP, the Minister, wrapped up the debate in another place on 3 February by informing members of the Delegated Legislation Committee that:

“These changes have the support of all four Governments of the United Kingdom ”.—[Official Report, Commons, Second Delegated Legislation Committee, 3/2/26; cols. 5, 6, 10, 11 and 15.]

That was untrue. Did the Minister in saying this mislead MPs on that committee?

While the order could pass only if each and every one of the home nations voted in favour of the measure, the process had not even started in Stormont. In Northern Ireland, on 19 February, officials gave evidence to the relevant committee. Rather than going through the telling points that the noble Baroness made, it is important to place on the record what happened in Northern Ireland, not least this week.

On 19 February, officials gave evidence to the relevant committee. Mr Richard Coey from the Department of Agriculture, Environment and Rural Affairs specifically pointed out that this was, as we thought, a stand-alone SI. DAERA’s evidence was unpersuasive and the committee unanimously, as we heard, decided to take evidence from the two expert bodies, the Chamber of Shipping and Stena Line. It was at this point, just a fortnight ago, that officials trumped everything they said in another place and introduced a major issue that had not been debated and did not appear in the statutory instrument or the analysis behind it. DAERA officials sent an email on 25 February to the Chamber of Shipping and Stena, highlighting that CBAM “has come to light” and urging them to reconsider their positions. CBAM considerations had been absolutely dismissed as out of scope in another place and are not present anywhere in the impact assessment. Indeed, page 12 of the impact assessment states:

“Activity scope: Initial expansion covers UK domestic maritime only; international maritime is out of scope”.

There is no reference to CBAM in the many pages of this document.

Last week, on 3 March, a conference call was held with the Chamber of Shipping. Now the big guns were lined up on the ridge. For the first time, HMT, DESNZ, DfT and DAERA were all on the call. The Government had introduced a new major argument: the importance of linkage and future CBAM exemptions to this SI. Had they told the Minister that they were going to do that? Why did they not inform the House of Commons at the time? This has become the key issue for the passage of this legislation in Northern Ireland, and it was not even considered in another place.

This is in total contradiction to the Minister’s arguments for the measure in the Commons. For reasons the Minister in this House knows, our ETS is incompatible with the European ETS and will need renegotiating and redrafting, along with reconsideration of the future of CBAM. Accordingly, the step we are taking today is a costly, unnecessary, short-term blight on the people of Northern Ireland in particular, who are being asked to pay the additional carbon taxes from 1 July and then will be asked again, when the negotiations—which we now know are under way—take place. I understand that the Secretary of State reached for his phone, as the noble Baroness said, and spoke to some key politicians involved two weekends ago, saying that not to support the measure would jeopardise the much wider negotiations with the European Union, without giving any details and absolutely out of scope with what happened in the House of Commons.

So we arrived at Monday of this week, 9 March. DAERA officials gave evidence to the Northern Ireland Committee for Agriculture, Environment and Rural Affairs, emphasising by now the vital significance of CBAM. Jane Corderoy, director of climate change policy at DAERA, confirmed—I quote for the record:

“The Committee was advised on 26 February about the significance of the SI in relation to linkage discussions between the UK Government and EU in respect to the emissions trading scheme and securing CBAM exemptions. Discussion of these two matters together must be handled sensitively as we do not want to invite speculation on the progress of negotiations”.

This turns the SI that we are looking at today into a smokescreen. Officials can continue with the wider agenda, in which politicians are told in no uncertain terms that the detailed consideration of the consequences must be handled sensitively as we do not want to invite speculation on the progress of negotiations. That is a political gagging order for this House, whose principal function is to use its expertise to review, revise, hold Ministers to account and seek to improve the legislation before us. If we cannot do that then this legislation should be withdrawn until we can. This is not the way to introduce legislation.

The discussions between the EU and the UK Government regarding CBAM are, we are now told, intricately linked to this order. That I will accept, but reference to that or analysis of the consequences appear nowhere in the SI or the impact assessment before us. There is no way to legislate for ferry passengers to and from Northern Ireland or the Isle of Wight, or the ferry operator, in this context, because we simply do not know how much it will cost in the wider context of the entry into the European CBAM, or indeed exemptions from it.

Perhaps the Minister can answer some questions on this. Surely the SI before us undermines the Government’s negotiating position in key areas such as enforcement and data quality. Is it not the case that these concerns risk creating an uneven playing field for operators, which impacts on customers in Northern Ireland in particular, as well as higher administrative burdens and market distortions? Can the Minister outline how the CBAM trade tax interactions work and provide an impact assessment to evidence the assertions by officials raised on the various scenarios to consider the specific concerns in Northern Ireland? Why is that not in the impact assessment today?

With the late introduction of CBAM into the debate, it was understandable that Michelle McIlveen, the Northern Ireland unionist politician, serving as deputy leader of the Democratic Unionist Party since 2025, and a member of the committee that looked at this, said:

“It feels like Northern Ireland has been bounced into this”.

She then said that it put them

“into a position where we are nearly blackmailed to vote for something that they are uncomfortable with because there was plenty of time in advance of this to have a proper conversation about CBAM so I am not happy about this”.

It was under this last-minute political duress that the vote was taken, and it was quite clear that the Minister in Stormont referenced CBAM numerous times in his speech to the Assembly this week—in fact, the day before yesterday. The chair of the Northern Ireland committee which looked at this also spoke in Stormont. Reflecting on the many concerns raised by members of his committee, he said:

“Officials have also suggested that, if Northern Ireland does not adopt the ETS maritime extension, the costs arising from the CBAM could be higher”,

but there is clearly no quantified estimate of CBAM costs for Northern Ireland. Without transparent evidence, the CBAM argument remains an assertion rather than a demonstrated fact. Our job in this House is to look at demonstrated facts, argue them, and look in detail at the impact assessment behind them rather than make law based on wild assertions. We in this House should look at these facts.

Not surprising but deeply worrying are the comments that Michelle McIlveen made in conclusion, which have been put on the record by the noble Baroness. This process is wholly disrespectful not just of this House but particularly of Northern Ireland and the hard-working Members of the Assembly and committee members from across parties who sought clarity on the statutory instrument and were bounced into a decision. No wonder Michelle McIlveen felt “nearly blackmailed” to vote. Where is the importance of the union to the Government, who took Northern Ireland for granted before seeking to impose the carbon tax on their ferry passengers while exempting all the ferries to the Western Isles of Scotland?

Before we move forward with this legislation, it would be helpful, with my noble friend Lord Caine sitting next to me, for the Minister to tell the House what ETS linkage would mean for Northern Ireland, to say whether the EU CBAM will apply to electricity, and to detail the action required under the Windsor Framework. Does he believe it will reopen debates in Northern Ireland and is that now intricately connected to this SI as a first step towards the much wider goals of energy integration with the EU? If so, this SI has been introduced without full government disclosure to politicians in Northern Ireland as well as in another place.

Indeed, how many months before the Government anticipate coming back to this House to repeal all this and bring forward legislation in favour of whatever deal they may be negotiating behind the scenes? It is now apparent that this is an essential part of wider negotiations with the EU, which will inevitably mean that this instrument will be torn up and a new one presented to Parliament within the lifetime of this Government at a substantial cost, if not a multiple of the costs to ferry operators and, particularly, to passengers on ferries going to and fro between Northern Ireland and GB.

Of course, it will be for another place to determine what should happen. We are doing our job in scrutinising the SI before us and we have found it wanting. I will advise my noble friends not to vote, in the expectation that this measure should be withdrawn as soon as possible and reintroduced with clarity as to what the implications are for those affected by this SI. We need respect for the union, and we need constantly to be reminded, as I know from having spent many years on the Delegated Powers Committee, that it is important that arguments for a statutory instrument are—I repeat—identical in both Houses of Parliament and in all home nations where applicable. They are expected to be consistent in substance and fact. The very fact that the Minister went on to talk about CBAM, which was never mentioned in another place and was never analysed in the impact assessment, is a classic case in point. It is vital for the management and the debate over SIs to be consistent in substance and fact.

I am coming to the conclusion. Actually, there is no time restriction in this debate; I have known that for many years. Despite the Government not wanting to listen to this, I conclude by saying that in not voting, the expectation is that this measure should be taken away and analysed in detail. We need to see the implications for those affected by the SI. We need respect for the union, for the Northern Ireland Assembly and for all the Parliaments and people in the United Kingdom.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

I note that, according to paragraph 4.42 of the Companion, the usual advisory speaking times still apply. It is 20 minutes for openers and winders and 15 minutes for everyone else. That includes the noble Lord and the noble Baroness, Lady Hoey.

12:45

[Earl Russell (LD)]

My Lords, I will respond to this SI and the regret amendment in the name of the noble Lord, Lord Moynihan. My noble friend Lady Suttie will respond to the specific points raised in the fatal amendment tabled by the noble Baroness, Lady Hoey.

This order extends the UK trading scheme to cover emissions from carbon dioxide, methane and nitrous oxide from domestic maritime activities for vessels over 5,000 gross tonnage, including in-port emissions, from 1 July 2026. It implements decisions of the UK ETS authority, agreed by all four Governments of the United Kingdom, and has already passed by a substantial majority in the other place. It is part of our broader strategy to decarbonise all sectors of the UK economy and to meet our legally binding 2050 net-zero targets.

To be clear, we support the order and we will not vote in favour of either the regret amendment or the other amendment. We believe, though, that the SI needs to meet three tests: it needs to have environmental integrity, economic fairness and practical deliverability. It must also support the UK’s wider trading interests, including our growing relationship with the European Union. The Liberal Democrats start from a clear point of principle: carbon must be properly priced and the polluter must pay. The UK ETS is a flagship decarbonisation instrument, a cap and trade system that sets a declining cap on total emissions and auctions allowances, each representing one tonne of CO² equivalent. Tightening that cap over time sends a clear signal to businesses about what they must reduce and by when.

Emissions trading is, in our view, the most effective way to cut total emissions at the lowest cost. It enables the market to identify and invest in the cheapest abatement options, rather than relying solely on prescriptive regulation, and that reduces carbon leakage. Extending the logic to domestic maritime completes a missing piece in the system that already covers power, heavy industry and aviation. Maritime emissions matter. They are a significant and growing source of CO² emissions. A key barrier to their reduction is that fuel prices do not adequately reflect the environmental costs and therefore reduce incentives for change. Including domestic maritime in the ETS helps to remove the barriers, putting a clear technology-neutral price on emissions from voyages and time spent at berth.

The Government’s impact assessment estimates a central net reduction of around 645,000 tonnes of CO² equivalent, delivering greenhouse gas savings valued on the central estimate of around £155 million and around £179 million in air quality benefits. Overall, the measure has a positive net social value on the Government’s central estimate of £132 million. That is a measurable gain for people and planet. Consultation material suggests that vessels over 5,000 gross tonnes account for two-fifths of domestic maritime emissions. Is the Minister confident that the scope and the threshold align with our overall carbon budgets?

Our climate policy must also be fair. Costs must not fall disproportionately on those who are least able to bear them. The Government’s impact assessment suggests limited consumer impact: typically 1% for most goods and around 2% for some—

[Baroness Butler-Sloss (CB)]

I am grateful to the noble Earl, Lord Russell. Can I ask him two things, from a state of ignorance? First, why is Scotland being omitted and Northern Ireland put in? Secondly, we seem to be dealing with an issue on CBAM that was not referred to in the House of Commons. It seems extraordinary that we should be looking at it from a different perspective from the House of Commons.

[Earl Russell (LD)]

I welcome the noble and learned Baroness’s intervention. The Scotland issue relates to devolved legislation and legislation that Scotland has passed. The issue in relation to the CBAM is in relation to—

[Lord Rogan (UUP)]

Does that not also apply to Northern Ireland?

[Earl Russell (LD)]

There is a reduction in place in Northern Ireland. There is not specific legislation around that.

[Lord Weir of Ballyholme (DUP)]

The noble Lord gave one of his key considerations as a test of economic fairness. Perhaps he could explain to the House how it is economically fair to have an 100% exemption for Scotland but 50% for Northern Ireland. How is that fair?

[Earl Russell (LD)]

It is not for me to respond to what is a question for the Minister. The Government’s impact assessment estimates central abatement investment of around £22 million, with administrative costs of £179 million over the period. The allowance-purchase cost is largely a transfer to the Exchequer and devolved Administrations, with many operators being non-UK based. Carbon pricing must therefore be matched with a credible transition plan. Without that, this becomes not a nudge for transition but could simply be a tax. However, the Government have announced £448 million for the UK Shipping Office for Reducing Emissions—UK SHORE—between 2026 and 2030, the largest public investment yet in commercial maritime.

Phase 2 will support larger projects through the Clean Maritime Demonstration competition and the Zero Emissions Vessels and Infrastructure competition. That is the industrial policy that must sit alongside carbon pricing. At the same time, the measure is expected, on the Government’s central estimate, to generate around £1.9 billion in allowance-sale revenue: around £95 million a year. Will the Minister confirm that a material share of ETS maritime revenues will be reinvested in maritime decarbonisation, including cleaner vessels, shore power, alternative fuels, and support for local transition in coastal and island communities, rather than simply disappearing? Will the Minister commit to publishing annually how much is raised from maritime ETS and how much is invested in maritime decarbonisation?

The cruise industry is an important and growing part of our economy, calling at some 50 UK ports and making over 2,500 calls a year, supporting tens of thousands of jobs and adding billions to the UK-wide economy. The industry’s concern on ETS is that revenues are not being visibly recycled into cleaner fuels and infrastructure specific to their industry. We only have a handful of onshore connections for cruise liners at the moment, so will the Minister tell us what investment will be made as a result of this scheme to bring shore power, and on what timetable for the cruise industry?

The Government and the UK ETS have done substantial preparatory work, including consultations, a digital monitoring platform and voluntary onboarding since November 2025, ahead of the July 2026 start. The Government’s impact assessment estimates an average administrative cost of around £5,700 per operator per year. This may be modest, but it has real implications for real firms. We recognise that this should reduce over time.

We welcome the formal review at the end of 2028 to assess emissions outcomes, administrative burdens and any needed adjustments to scope or thresholds. We have a number of specific concerns about any plans to expand the scope to international voyages. My noble friend will address the specific issues relating to Northern Ireland aspects. We believe the right approach is to keep these provisions under review and match carbon pricing with practical support, not to abandon maritime decarbonisation. Extending the UK ETS to domestic maritime emissions also helps keep our scheme aligned with greater integration with the EU. In turn, a genuinely linked system will help strengthen our trading relationship.

The fatal and regret Motions both reflect genuine anxieties about costs, competitiveness, and the union, but neither justifies rejecting this order. The suggestion that there is no alternative is not borne out by the evidence. Improved operating practices, routing efficiency and gradual fuel switching all represent viable abatement pathways.

Near-zero emission fuels remain expensive and infrastructure is incomplete. But that is exactly why revenue recycling and UK SHORE matter. The right course is to pair a robust carbon price with predictable investment that keeps the maritime sector on its net-zero path, while keeping the UK economy competitive. To call this measure simply a tax misunderstands how the ETS works. It is designed to minimise the cost of meeting our climate goals, to give business flexibility and to limit carbon leakage: this is a practical measure. It becomes a tax only if the Government pocket the proceeds and fail to reinvest them. Revenue is a byproduct: the purpose is to cap and reduce emissions over time. We are supportive of the extension of emissions trading to domestic maritime. Done well, emissions trading drives real reductions, supports innovation and underpins our net-zero transition.

[Lord Dodds of Duncairn (DUP)]

I am grateful to the Minister for introducing the statutory instrument in the way that he did, to the noble Baroness, Lady Hoey, for introducing her fatal Motion, and to the noble Lord, Lord Moynihan, for introducing the regret Motion. It is very important that we in this Chamber debate these issues: this matter got 47 minutes in the other place. Often, matters that affect Northern Irish consumers and businesses in a very direct and detrimental way do not get any time at all in the other place. It is therefore all the more important that your Lordships have the opportunity to debate these matters.

The noble Baroness, Lady Hoey, and the noble Lord, Lord Moynihan, have powerfully set out what happened in relation to the Northern Ireland Assembly’s consideration of this matter. This Government are supposed to be pro growth; they are supposed to have the cost of living at the heart of their consideration, and indeed they say that they are pro union and are committed to this through various command papers and policy statements. Thank goodness we are not debating the Windsor Framework edifice today, but it always needs to be taken into consideration, because it was certainly a matter for the Secretary of State when he was interacting with party leaders on this particular issue. This statutory instrument runs counter to all these priorities of the Government, yet they proceed with it nevertheless.

The noble Lord, Lord Moynihan, and the noble Baroness, Lady Hoey, referenced the intense lobbying on the part of His Majesty’s Government, at Secretary of State and ministerial level, to parties in Northern Ireland when it became clear that they were deeply concerned about the effects on Northern Ireland. The introduction of the CBAM argument led Ms Finnegan, the Sinn Féin MLA, to say just this week in the Assembly debate:

“While the challenges facing businesses as part of the changes remain, doing nothing is simply not an option. Failure to implement the ETS would result in the costs being incurred through the carbon border adjustment mechanism”.


That proves that this argument changed minds. This was the deciding argument for Sinn Féin. Interestingly enough, it was Sinn Féin, and the SDLP and the Alliance Party, who succumbed to the arguments of the UK Government. It was an interesting turn of events that those parties succumbed to that type of argument. But that is mainly to do with their total allegiance to anything that advances the cause of the EU, even above the interests of their own constituents, as has been evidenced in many debates in the Northern Ireland Assembly.

I also raise the fact that not only was the CBAM argument introduced at a very late stage but, in messages to party leaders, and certainly my party leader, the issue of the SPS agreement and the EU reset negotiations was also raised, and it was explicitly said that this would be put at risk if this SI was not passed by the Northern Ireland Assembly. These are very serious matters. Raising issues such as these as threats and blackmail, at the last minute and without any proper consideration, as the noble Lord, Lord Moynihan, pointed out in the other place, or indeed when the matter first came before the Northern Ireland Assembly, is totally unacceptable.

It is an outrage that these matters should be considered in this way, especially when we consider what is at stake for Northern Ireland, because this is a discriminatory measure. It is a measure that disproportionately affects Northern Ireland, as has been said. I am not going to repeat all the arguments that have been set out on the economic detriment to Northern Ireland—they have been powerfully set out already—but given our dependence upon maritime transport, it is absolutely clear that this is going to have a knock-on, detrimental effect on businesses, on consumers and on every aspect of life in Northern Ireland.

13:00

Already, at our Northern Ireland Scrutiny Committee, on which I have the privilege to serve, we have heard evidence from representatives of the Northern Ireland Retail Consortium and the Northern Ireland Chamber of Commerce and Industry about the grave detriment that the Windsor Framework is having on trade between Great Britain and Northern Ireland. The retail consortium said it was no gain and all pain. I urge noble Lords to read that evidence and to understand what is really going on in the economic damage being done to Northern Ireland. It is extremely important that the Government think again.

[Baroness Foster of Aghadrumsee (Non-Afl)]

Does the noble Lord have any information as to whether the Government have considered this scheme under the United Kingdom Internal Market Act 2020, given that we are told that the exemptions for the Western Isles come from a duty under, I think, the Scotland Act? Surely, the discrimination that is evident here is contrary to that UK internal market Act.

[Lord Dodds of Duncairn (DUP)]

I thank the noble Baroness, who raises a very important point, because when the Safeguarding the Union Command Paper was published, and was heavily sold in order to get the restoration of the Assembly and the Executive and so on, great emphasis was put upon this guarantee in the United Kingdom Internal Market Act that this would ensure Northern Ireland would not be put at any detriment by the introduction of new measures and so on. So, I echo what the noble Baroness has said and ask the Minister to address that specific piece of legislation, which is meant to protect Northern Ireland as part of the UK internal market. The sad reality, of course, is that that is overridden. Not to pre-empt the Minister’s answer, but I suggest he will probably say that it is overridden by the superior obligation to the EU under Section 7A of the European Union (Withdrawal) Act 2018. That is the real answer, even if he does not say it, and until we address that point we will not get any satisfactory resolution to the problems that we have.

I have a number of questions for the Minister. On the issue of the Scottish exemption, he really needs to come forward and explain, on this issue of economic unfairness, what the rationale is for excluding Northern Ireland. What is the rationale for comparing Northern Ireland with the Irish Republic in saying that a 50% reduction is satisfactory, given that this is what applies on trade between the Irish Republic and Great Britain, when Northern Ireland businesses are in competition with their British counterparts on the mainland? This is the comparison that needs to be made. Traders, consumers and businesses in the rest of the United Kingdom do not have to concern themselves so much—hardly at all, most of them—with any maritime transport issues, but Northern Ireland is utterly dependent upon that, so the issue of why the Scottish islands are exempt and Northern Ireland is not needs to be addressed.

There is an issue about where the money is going from this. There is no reference to the fact that this money will be used in any particular way. It is important that the Minister clarifies how the revenue is going to be used to help in relation to decarbonisation, if at all. I want to ask the Minister about the time to prepare, since the order was published on 13 January. It seems to me that there is an inordinate rush to get this through. What is the reason for that? Would one solution not be to give more time for consultation before this is brought into full implementation?

I want to ask about the maritime decarbonisation fund, with £271 million in funding to support shipping and coastal communities. Will Northern Ireland have access to that fund? I want to ask about state aid provisions in this regard, because under the Windsor Framework we are under the EU state aid regime, not the UK state aid regime. Is there any impediment to access to that fund for operators in Northern Ireland as a result of those state aid obligations? I would like a clear answer, because there seems to be some confusion on the issue and it would be helpful if the Minister would spell it out.

This is a very important debate. It raises a number of issues, not only substantive ones to do with the economy and trade. Those are important, but it has exposed a wider issue about the political process, which has been very helpfully and skilfully brought to light by both the noble Lord, Lord Moynihan, and noble Baroness, Lady Hoey, in introducing their Motions. It will do damage to the political process in Northern Ireland. This type of manoeuvring by the Northern Ireland Office is extremely unhelpful to the Assembly set-up, which is fragile and difficult enough.

It seems that the NIO engages with the Assembly only on its terms and when it is in its advantage to push its particular arguments. It does not seem to operate as a voice for Northern Ireland within the Cabinet or Whitehall machinery, and that really needs to be looked at. We were promised that there would be an engagement unit set up between the Cabinet Office and the Northern Ireland Executive under the Safeguarding the Union Command Paper. What has happened to that? It seems that the NIO picks and chooses whatever it wishes to raise as issues but does so to implement its view of what should happen, rather than advancing the cause of Northern Ireland within the Whitehall set-up.

[Lord Berkeley (Lab)]

My Lords, I am grateful to my noble friend for introducing this draft order and the many noble Lords who have expressed concern. The noble Baroness, Lady Hoey, and the noble Lord, Lord Moynihan, have both set out their concerns, which I share because I live in the Isles of Scilly. Although the Minister briefly mentioned the Isle of Wight, the comments made about the difficulty of getting to and from, and living in, the islands—I include Northern Ireland in that—are well known. We have been fighting the Government for years to try and get some benefit for the Isles of Scilly and Isle of Wight, in some kind of support for transport—which is ships, of course. Although the Scottish Government were clever in sticking with what they have, we have so far failed.

Some noble Lords may say, “Well, you’re talking about little baby ferries”—those that go across to the islands I mentioned—whereas this order is at the moment limited to 5,000 tonnes. That is true, and none of the ships that go to the Isles of Scilly, except cruise ships, weigh more than that. However, we are also told by many, and I am sure it is true, that when the European Union reviews all these related regulations it will wish to reduce the limit from 5,000 tonnes to much less, so that could affect the freight and passenger ships to the Isle of Wight and the Isles of Scilly. Let us be clear that, at the moment, the costs of services to these islands are very high. The cost of freight to the Isles of Scilly probably means that it comes out at about four times what you would be paying on the mainland for a bag of cement or a tin of baked beans. It is very serious.

The second issue I have with this draft regulation is the timing, as my noble colleague has just mentioned. The timing is quite serious if we are to come up with some alternative means of propulsion. It is fine to say that they can all be electric, and electric ships exist—but not everywhere. In parallel to electric ships, you need a lot of power to ports, but, at the moment, we seem to have a shortage of power. We have had many debates here about the high-power demands for AI, railways, buses and everything else like that. To say that ports must have enough power available to service all the ships that are going to come in in two or three months is cloud-cuckoo-land. We are talking just about ferries—nice though it is to talk about ferries to Ireland. Cruise ships have also been mentioned, as have general cargo and container ships. All kinds of different craft that could reach the 5,000 tonnes or less in the future need to know what the future limits are going to be and to assess what they will do in terms of rebuilding, refitting, or whatever.

I conclude by asking my noble friend the Minister what information has been given to the industry about the need for and the availability of shore power. I also ask him whether he thinks it would be a good idea to ring-fence some of the shore power availability to some of the bigger ports, and whether there is enough generating capacity. I hope my noble friend will be able to tell me that.

I support other noble Lords who suggest that this regulation should be delayed until we have much better proof of alignment with the EU and are given a much longer-term feed-in notice so that the industry, be it ports, shipping lines or anyone else, can adapt and avoid being fined, because that is not what we want for this business. I hope also that we can continue to have a good debate and get some exemptions for Northern Ireland, which I fully support, and for the Isles of Scilly and the Isle of Wight.

[Lord Ashcombe (Con)]

My Lords, we have heard from the noble Baroness, Lady Hoey, my noble friend Lord Moynihan and from other noble Lords regarding the situation facing Northern Ireland’s ferry services and the shenanigans that are certainly coming to light today. Having been raised in the Republic of Ireland, I well remember our reliance on maritime trade to keep the country supplied. I therefore appreciate the pressures described today and suspect those pressures have only intensified in the current era.

I want to turn my attention to a rather smaller stretch of water, near my home in the New Forest; namely, the ferry routes to the Isle of Wight from Portsmouth, Southampton and Lymington. I have used all three of these depending on whether my journey takes me to the east of the island, to Cowes, or to the west. The distances involved may be only four to 12 miles, depending on the route, but what truly matters is that there is no alternative means of travelling to or from the island. The Government seem to have forgotten—or, dare I say, ignored—the Isle of Wight.

As a result, the Isle of Wight will face immediate and disproportionate impacts from the proposed extension to the emissions trading system to domestic maritime vessels of 5,000 gross tonnes and above. The Government’s final-stage impact assessment argues:

“Expanding the UK ETS to include domestic maritime emissions is critical for maintaining regulatory alignment with the EU ETS … Without coverage, UK operators could gain a competitive advantage over EU counterparts, creating market distortions and increasing the risk of carbon leakage”.


There are no foreign vessels trading between the south coast of England and the Isle of Wight, nor between the mainland and the Scottish islands. It is therefore difficult to see how exempting UK domestic island services would in any way undermine the relationship with the EU.

The Isle of Wight has a population of about 142,000—higher in summer as tourism swells the numbers. The island is wholly dependent on its ferries for passenger travel, as well as for the movement of freight, being fuel, food and essential goods, and exporting fresh produce. These services are part of the island’s critical national infrastructure.

13:15

Wightlink alone carries two-thirds of the island’s passengers and 55% of its freight, alongside providing indispensable support for emergency services, particularly as the island’s only hospital relies increasingly on specialist facilities in Southampton and Portsmouth. Yet Wightlink faces a serious dilemma. Two of its vessels exceed the 5,000 gross tonnes ETS threshold. One is a hybrid ferry, built specifically to reduce emissions, at a cost of some £30 million. However, the vessel cannot operate on electricity alone, simply because neither Portsmouth nor the Isle of Wight has sufficient grid capacity to support such operations, as the noble Lord, Lord Berkeley, alluded to earlier. Indeed, the electricity provider has indicated that the necessary grid connection will not be available until 2037—11 years from now; a lot of us might not even be here by then. Even then, Wightlink would be required to commit £12 million up front with no guarantee of time delivery. That is an extraordinary ask.

The company is also seeking to replace an ageing vessel. Once again, insufficient grid capacity means that it will have to opt for another hybrid vessel or, alternatively, build a smaller ship to avoid the 5,000-tonne limit, yet downsizing to a less efficient diesel vessel with reduced capacity runs directly counter to the company’s overall ambition to cut emissions by 25,000 tonnes annually. This cannot be an outcome that the Government should desire. The ETS alone is expected to cost the company £1 million, an expense that will inevitably fall on ferry users—residents and visitors alike.

The company is caught between a rock and a hard place. It cannot electrify its fleet because the grid cannot support it; it has invested in hybrid technology and seeks to do more yet is, in effect, penalised for doing the right thing. The only practical remedy is to exempt these essential UK ferry services from the emissions trading system. If Scotland can do it for its island routes, and Portugal can do it for Madeira—a distance of some 6,000 miles—England can and should do likewise for the Isle of Wight and Northern Ireland. Such an exemption would protect the economy of the Isle of Wight, support its residents and prevent yet another cost being imposed on companies and individuals by this Government since their election in 2024.

[Lord Greenway (CB)]

My Lords, following on from the noble Lord who has just spoken, it is my understanding that the new ferry on the Isle of Wight service which he mentioned has considerable battery capacity. During her voyages, those batteries can be charged, allowing her to operate without shore power when she is in port. She is an advanced ship, one of the first in this country.

The noble Lord has very well covered the Isle of Wight scene. Given the Government’s slavish following of the EU, I find it strange that the EU can derogate ferry services to islands until 2030 but we are not doing the same. Why not? It would save a lot of the problems we are discussing today. It would also give ferry companies more time to invest more in decarbonising their vessels.

I am not going to mention Northern Ireland, because I think that it has been covered very well. I would just like to say a few words about the emissions trading scheme, which seems rather a vague thing. Nobody ever mentions it; we do not hear anything about it. I only learned yesterday that there have been some problems with it—some malpractices, one might say. I do not know whether the Minister is aware of that, but it is something that we should take into consideration.

Traditionally, maritime regulation has come from the International Maritime Organization, based across the river. People think that shipping has not taken much notice of reducing emissions, but huge strides have been made and millions, in fact billions, of pounds have been spent. The main container operators are hedging their bets because there is no silver bullet to replace the internal combustion engine, so they are producing hybrid vessels that can run on normal diesel fuel, liquefied natural gas or methanol. Companies are also looking at ammonia. In the smaller fields, especially Norway, which has been very advanced in this area, there are electric ferries and hydrogen ferries. In order to cut down their emissions, the shipping companies are looking at all ways of reducing fuel use, even going back to wind—modern computerised sails, 100 feet high, can help to reduce fuel costs considerably with the right conditions.

Likewise—this is the only mention of Northern Ireland that I will make—somebody might have noticed a ship with something that looks like an old-fashioned factory chimney sticking up in the air. A German invention of the 1920s called the Flettner rotor has been resurrected. It is a rotating cylinder that has high pressure on one side and low pressure on the other and produces force to drive something. Bulk carriers up to 400,000 tonnes can have five of these things. At over 100 feet high, they can fold down when the vessel is working in port. They are coming into increasing use. The maritime industry has not been standing still. I heartily agree with the comments that the funds—call it a tax, if you like—gained from this system should be ploughed back into the industry and not disappear into the maws of the Treasury.

As regards shore power, which the noble Lord, Lord Berkeley, mentioned, we certainly have three ports that have it—Aberdeen, Portsmouth and Southampton—and the Government have been assisting with the UK SHORE unit, which has considerable funds available. A scheme has been put into operation in Portsmouth. The Government put in £20 million and I think that the local authority put in another £5 million. What happened? The two French ferries that use the port will not use it. Why? Because the cost of electricity is too high in this country. If that is not shooting yourself in the foot, I do not know what is. Certainly, there are many other ports looking into this. Take Dover-Calais, one of the major ferry routes in this country. Calais has already committed to funding three berths by 2030 and Dover is looking to form a partnership to try to do something similar. But I think Dover, as a trust port, has a problem in that it has to have an Act of Parliament to be able to deal with electricity.

Cruise ships have been mentioned. There are two berths in Southampton, but only one can be used at a time because of lack of capacity in the grid. The real problem, as I see it, is that we have to increase capacity in the grid. The Minister might be able to tell us that some things are beginning to take place, but I would have thought that, before investing billions in offshore wind, it would have been more sensible to have upgraded the grid, which would have avoided a lot of these problems.

This could well be the last time that I address your Lordships, as I shall be leaving shortly, so I would like to add my regret on another matter. I have been talking on maritime matters for over 50 years in this House. When I came in, we had a very sizeable merchant fleet and a sizeable Navy. What do we have today? In terms of trading vessels, we are number 31 or 32 in the world. That is a great regret and an utter disgrace.

[Lord Weir of Ballyholme (DUP)]

My Lords, it is an honour and a privilege to follow the noble Lord in what may be his valedictory speech. It is perhaps a little disappointing that it was on this SI, which seems to have been based on false premises. A range of factors that were not available in the other place were introduced only at a late stage. Also, it has been sold on the grounds of the consent of the devolved institutions. Where consent is obtained through duress and blackmail, as we have heard detailed today, how genuine is it?

It is clear that this SI will be deeply detrimental to the ferry companies. Even at this late stage, they have not been given all the technical information that they need to implement it in full. They have been given a six-month window to introduce and implement it, when even the EU gave a three-year period for introduction and implementation for a similar scheme.

The SI is deeply disproportionate. Domestic ferries account for around 1% of the UK’s carbon footprint and, as outlined by the noble Baroness, Lady Hoey, and others, we are not even in a position to take action immediately to counteract that 1%. But this clearly goes beyond the implications for ferry companies. There are implications for passengers, haulage companies and companies in Northern Ireland and the Isle of Wight—and companies in Great Britain looking to send their goods there—because, inevitably, the only way this can be dealt with is to pass those costs on to the consumer and the companies concerned.

As the noble Baroness, Lady Hoey, highlighted, Northern Ireland relies on 90% of its goods coming in and out by ferry. That is not simply a convenient choice; it is a necessity. Let me give an example from my own life—I think the term in vogue today is “lived experience”. In the last two years, I have on two occasions had to get my electric wheelchair sent back to the manufacturer for adjustments. It happened once in London and once in Belfast. In London, I could get the wheelchair to the manufacturer in Birmingham; I could have arranged for it to be picked up or got a car to take it there. As it happens, I brought it there by train. In Northern Ireland, there was no such alternative. The only opportunity that I had was to ship it by freight to Birmingham. I suppose that I could have tried driving it there, but I would have got a little wet in the meantime. The reality is that that is the level of dependence we have.

This could not come at a worse time. Because of the conflict in the Middle East, we are faced with rising fuel and transport costs and a clear knock-on effect on the cost of living, with inflation set to increase. To be fair to the Government, they will say that those are all factors outside their control. But this measure is a self-inflicted wound on top of all those factors, which will impact different parts of this United Kingdom disproportionately. We are sometimes, somewhat erroneously, referred to as an island nation. That is not accurate. We are a nation of islands. There is rightly an exemption of 100% for the Scottish islands, but to have only a 50% exemption for Northern Ireland and similar problems for the Isle of Wight is not treating all parts of the United Kingdom fairly.

I had a number of questions, nearly all of which were covered by my noble friend Lord Dodds, but I will add one. There is widespread concern that there has not been much specific assessment of the economic impact on Northern Ireland. Will the Government give a commitment today that when they review the trading scheme in 2028 there will be a Northern Ireland-specific economic impact assessment? Many of us fear this will add to an already difficult situation for many companies and many consumers in Northern Ireland. The Government must face up to that.

13:30

[Baroness Bennett of Manor Castle (GP)]

My Lords, I offer the Green Party’s support for this statutory instrument and oppose the regret and fatal amendments. I will add some extra points to this debate that have not yet been made. We must look at this in the context of global shipping, which, back in 2018, represented around 2.9% of global emissions caused by human activities and is projected to rise by up to 130% by 2050, which, essentially, would blow our climate restrictions out of the water, to use an appropriate metaphor.

In July 2023, the International Maritime Organization committed to new targets for greenhouse gas reductions and was going to adopt a basket of measures globally last year. Since then, as in many areas, we have seen President Trump put a spanner in the works. That makes it even more important for the UK to hold the line and set the standard in being, as we so often hear people saying, a world leader. If we take steps to get the fossil fuels out of these vessels and adopt alternatives then this will be world-leading. These are steps that will address the cost of living. I refer noble Lords to the report out this week from the Climate Change Committee. It noted that delivering net-zero targets will cost less than a single oil shock across the economy. Relying on fossil fuels is an extremely expensive, risky economic choice, as well as all the other issues.

There has been a fair bit about the Isle of Wight, but I want to build on what the noble Earl, Lord Russell, and the noble Lord, Lord Ashcombe, said. I had extensive comments, but they have said quite a bit of what I was going to say. The key point to add is that this is expected to add £1 to £2 extra to a ticket. We have grossly expensive transport options for the people on the Isle of Wight and a grossly unreliable transport system. We need huge improvements and huge changes. I speak as someone who goes to the Isle of Wight quite regularly.

Today, there are no wheelchairs, prams or bikes permitted on the FastCat due to a technical issue. The Fishbourne to Portsmouth car ferry sailings have been cancelled due to a combination of forecast wind conditions and the “St Clare” ferry running on three out of four engines due to a propeller issue. There are big problems with the Isle of Wight’s transport provision, but this is tiny in the scale of the broader problems that desperately need to be addressed.

It is worth noting what can be achieved and what is possible. On 10 March, the “Baltic Whale” took part in its first commercial voyage from Scandlines, which aims to operate without direct emissions by 2040. On the Rødby to Puttgarden route, the freight ferry makes the 10-mile crossing in 45 minutes. It has a charge time at each harbour of 12 minutes. Other countries are making huge advances. Interestingly, the “Baltic Whale” makes far less noise, which is of huge benefit to the natural environment, to the wildlife in the Baltic Sea and to human life.

I go back to the Air Quality Expert Group’s 2017 report, Impacts of Shipping on UK Air Quality, as not much has changed. It noted that shipping makes “significant contributions” to emissions of nitrogen oxide and sulphur dioxide, as well as PM2.5 and PM10—particulate matter. That includes emissions of black carbon and carbon dioxide. All those have major impacts on public health. If we get away from fossil fuels, we will make important steps to improve public health.

Finally, I have a direct question to put to the Minister, where I will stop supporting the Government and ask a challenging question. Everything I have just said—and what this SI does—is contradicted by the UK cruise growth plan, which aims to increase the amount of cruise ships. I draw here on a very useful briefing from Transport & Environment from the end of last year. Cruise ships are already having a huge impact on air quality in ports and can be responsible for up to 96% of toxic sulphur oxide pollution at the busiest terminals. That is particularly an issue at Southampton. It is also a very big issue in Belfast. How can the Minister justify taking steps here that are both public health measures and climate measures while the Government are in other ways promoting more pollution and more health damage?

[Lord Rogan (UUP)]

My Lords, in common with my noble friends and Ulster Unionist Party colleagues at the Stormont Assembly, I cannot support this legislation, which is detrimental to Northern Ireland, given the Province’s huge reliance on sea transport. We note that ferry services for the Scottish islands are exempt from this provision. Perhaps if Ministers were chasing votes in Northern Ireland in May, as they are for elections in Scotland, the exemption might have been extended across the Irish Sea as well. The Irish Sea is nothing less than an economic lifeline for the Province, with around 90% of its trade and passenger movements coming via ferries and shipping routes.

I have raised the issue of the lack of competitiveness in air services between Northern Ireland and Great Britain on numerous occasions in this House. Flying to and from Belfast on domestic routes has become incredibly expensive. Given the ongoing events in the Middle East, prices will likely rise still further. Unlike most other parts of the United Kingdom, the use of sea transportation is therefore not optional for many people and businesses in Northern Ireland.

I fully appreciate the Government’s aspiration to advance decarbonisation through the use of alternative fuels. However, if the world has learned nothing else over the past two weeks it is that there will be a continued reliance on fossil fuels for the foreseeable future in the UK and elsewhere, whether we like it or not. As such, the consequence of this order is the creation of what can only be described as a carbon tax in Northern Ireland, which would not have to be borne in anything like the same degree by the rest of the United Kingdom.

Of course, this comes as the Province continues to struggle with the seemingly ever-growing burden of costs on its people following the imposition of the Irish Sea border. The previous Conservative Government claimed to have removed it by dreaming up the Windsor Framework. It did not work. In opposition, the Labour Party pledged to improve matters if it came to power. It has not. Indeed, we have yet more costs being slapped on the Province through the order to keep Brussels happy, because the EU sets the rules in Northern Ireland now, not our supposedly sovereign UK Government.

If this order was for any purpose other than pleasing Brussels, the Government could and should have chosen to direct its proceeds into the Northern Ireland economy, perhaps with an emphasis on supporting our shipping industry and its transition to alternative means of propulsion, but they have not done so. Instead, we have yet another example of Whitehall taking the simplest option, with all the damaging implications it will have for that part of the United Kingdom, about which it knows little and, I feel, cares even less.

[Lord Redwood (Con)]

I agree with the contributions from Northern Ireland. This order is discriminatory against Northern Ireland in favour of Scotland, and it will do considerable damage to consumers and business in Northern Ireland.

I also welcome the remarks of my noble friend Lord Moynihan, who told us that we are engaged in a much wider debate on this rather narrow instrument now that the Government are saying that this is an important part of the United Kingdom’s participation in a carbon border adjustment mechanism—or carbon tariff—and, through the ETS at European level, in a carbon taxation scheme, which is even dearer than the United Kingdom one we have inflicted on ourselves. I urge the Government to think again. This has carried very badly in every part of the United Kingdom, represented here, that will be affected by it.

However, it is part of a much bigger error that government policy is creating. Over the last decade, the United Kingdom has been a world leader in reducing its CO₂ output and has been dutiful to a fault to treaty obligations that actually relate to more distant years. As a result, we have seen a catastrophic deindustrialisation, which has gathered huge pace and momentum in the last two years with the intensification of the net-zero policies this Government have welcomed and introduced. To extend part of this system to the maritime sector would cause further damage.

Many years ago, I had the privilege to lead a big international industrial group. In those days, the group had its headquarters and most of its main factories in England. We were proud of that. We struggled to compete, but we did compete. Where we had a problem, we remedied the problem. We needed to raise our capital efficiency, so we had to spend money and investment on better plant. We needed to train our staff and use our staff better so that it was a better organisation. We stayed in the market, and we stayed producing. For example, we were responsible for a large part of the ceramic tile industry in the Potteries, with its very distinguished tradition of innovation—and domination, at times—in that very important market.

While I was there, we managed to make the investments and stay competitive enough, although the Italians were very good. I watched with sadness and shame as my successors gave up the battle through no fault of their own. At our current energy prices, we are so far away from being able to do even something relatively simple in industrial terms, such as making good industrial tile for all the homes with bathrooms and kitchens that need it. That is replicated sector by sector now.

We have heard the Green case, feeble as it is, briefly sketched today in this short debate. My response to that is that practically every policy initiative this country has taken to reduce its own CO₂ has contributed to an increase in world CO₂. Why on earth is that good for the environment, let alone good for our economy? We will not get our own gas out of the ground, and so we import LNG, which generates three or four times as much CO₂ in the process than using our own. It is crazy, and we must stop doing this.

We need to have better-paid jobs and more investment in the United Kingdom. We need to rebuild our maritime industry. We heard from a very well-informed noble Lord, who told us that over his lifetime, supporting what was once a great industry, we have seen it almost disappear and vanish. This great maritime nation cannot now carry its own goods, because it did not create the right tax and regulatory conditions to sustain shipping in this country.

I urge the Government to think again. This is a small part of a big crisis. This is undermining our capacity to do well and make the things we need in this country. Dear energy is a killer. This is part of a package of measures that lumbers us with energy so dear we cannot make things for ourselves.

[Lord McCrea of Magherafelt and Cookstown (DUP)]

My Lords, it is a pleasure to follow the noble Lord, Lord Redwood. I give my wholehearted support to the fatal amendment in the name of the noble Baroness, Lady Hoey. In her amendment, the noble Baroness poses a concerning question: how did the Government feel justified to introduce special protections for the Scottish island groups but not even to pause to consider special protections for Northern Ireland, which is more structurally dependent on sea transport?

The question was asked to the noble Earl on the Liberal Democrat Benches, who said that his remarks would be based on a point of principle. It seems that the noble Earl has one principle in his pocket for Scotland and then moves to his other pocket to take out another principle for Northern Ireland. When he was asked specifically to justify it, he said it was not for him to answer for the Government. He was asked not about the Government’s position but about how he would justify it, because he supports this SI. He was asked specifically to justify his support for it, but he failed to do so.

13:45

Why is it that we are continually on the back foot of trading policy, when we are the most severely impacted by it because of the Windsor Framework? It may be useful to remind the House that we are continually told by the Government that we are still an integral part of the United Kingdom internal market. The proposed UK ETS extension to maritime transport could be catastrophic for Northern Ireland. As has been said, approximately 90% of goods and passenger movements between Northern Ireland and the rest of the United Kingdom rely on ferry routes. These routes are not simply commercial links; they are the essential arteries through which everyday economic and social life flows. Food, construction materials, fuel, manufactured products and retail goods all move across the Irish Sea as part of the ordinary supply chain. We do not have alternative land routes. Maritime transport is not a choice; it is a necessity. We cannot risk the possibility of the projected 6% freight rate increases in compliance with ETS costs—it is just not feasible.

Moreover, the advanced infrastructure required to enable the genuine success of the ETS simply does not yet exist in Northern Ireland at the required scale. The notion that this scheme will be up and running by July 2026 is fanciful. The proposal is foredoomed to failure with such an inconsiderate timeframe for preparation. Rather concerningly, government analysis shows a £179 million administrative cost versus £22 million in abatement investment, meaning that £8 is spent on bureaucracy for every £1 spent on genuine emissions reductions. These are not numerical comparisons intended to stoke feelings of pride or contentment in the Government; they should be frightening.

Rightfully, much of the sentiment around this debate has centred around alternative fuels. However, alternative fuels are much more expensive—almost five times the cost of conventional fuels—and they are not widely available and often inefficient. In some cases, such as shore power facilities, they are not available at UK-Northern Ireland ports, and nor is grid capacity adequate. The Government ought to think carefully about the implications of this policy before pushing it through. In its current form, the proposal risks manufacturing cost increases for industry, business and consumers, rather than achieving decarbonisation.

The UK Chamber of Shipping estimates that higher transport costs will increase the price of everyday items such as fuel, food, essential goods, construction materials and retail products, all of which heavily rely on the NI-GB ferry supply chain. It made the point that the Government’s 50% surrender reduction for NI-GB routes does not level the playing field. Ultimately, businesses in Great Britain will not be faced with the same maritime transportation costs—it is not an even playing field. That is totally unfair. The Government seem intent on ignoring the fact that Northern Ireland is shackled by the debilitating effects of the Windsor Framework and its chokehold on our economy.

Indeed, the existing UK-EU ETS alignment remains unresolved and further regulatory divergence, as this policy would create, risks burdening Northern Ireland with even more costs. In this vein, why have this Government not compiled a dedicated impact report of their proposals on Northern Ireland? It seems ludicrous that this has not been thought of. Are the Government comfortable with the imposition of higher costs and onerous regulations upon the working people of Northern Ireland? Most ironically, this proposal is intended to yield decarbonisation, despite the fact it looks set to become a carbon tax if implemented. It is therefore essential that we support the fatal amendment of the noble Baroness, Lady Hoey, for the sake of Northern Ireland and its business.

[Lord Bew (CB)]

My Lords, I support the intervention of my noble and learned friend Lady Butler-Sloss on the question of Scotland and the Scottish intervention. I do so because it makes me profoundly uneasy. When I was reading the explanatory comments from the Government for this new SI, the emphasis is on the Northern Ireland protocol of 2020. The Windsor Framework is designed to correct quite explicitly the disproportionate destabilisation of,

“Northern Ireland’s place in the United Kingdom internal market”.

One of the ways in which it does so is clear in paragraph 51. It says it insists on,

“Northern Ireland’s central place in the UK market, on an equal footing with counterparts in England, Scotland and Wales.”

Scotland is specifically mentioned there.

As my noble and learned friend Lady Butler-Sloss points out, this SI simply does not give treatment “on an equal footing” with Scotland. I know that Charles de Gaulle gave a famous and cynical statement about treaties: that they lasted as long as pretty young girls and roses. I have always assumed that this was not the view of this Government and that they are committed to international law. There is a real problem with what they are doing with this SI. It is not compatible with the central commitment in paragraph 51 of the Windsor Framework.

My second point is broader, and has already been touched on by the noble Lord, Lord Dodds. The fact is that the institutions in Northern Ireland are not in as stable a condition as they should be. When the Government talk in the Explanatory Notes about the actual impact of this SI on individuals in Northern Ireland being small, I absolutely accept that. The trouble is that the number of these SIs is mounting and every few weeks, we are back in this Chamber. By the time it comes to the next Assembly elections, there will be those politicians in Northern Ireland who will have momentum to say, “Look at this list of statutory instruments. Look at these things that have moved away from the Windsor Framework.” Those who have listened to this debate will realise that the Windsor Framework is not enormously popular within the unionist population in Northern Ireland. But that having been said, it was part of the means by which the institutions were returned, so what is at stake here?

Above all else, in the broader sense, it is the survival of the institutions of the Good Friday agreement. The Government, I am sure, are absolutely determined to see the survival of those institutions—a great Labour achievement. However, they will not be assisted in this task if they proceed to take solemn commitments in the Windsor Framework that they supported strongly in opposition, and just say, “That doesn’t matter. We could have a Scottish exemption now. We can forget the commitment in paragraph 51 that there would be no such thing.” The stability of the institutions of Northern Ireland in the longer term require the Government to rethink on this matter.

[Lord Empey (UUP)]

My Lords, I feel a bit sorry for the Minister because he introduced what appears to be a bland SI and now finds himself in the midst of a debate covering a whole range of other issues, but I am afraid that I am going to add to his discomfiture. In his powerful address earlier, the noble Lord, Lord Moynihan, mentioned—as have others, including the noble Baroness, Lady Hoey—the difference in treatment relating to what the other place was aware of, and what we and the devolved institutions are aware of.

It might be useful to kick off by telling the House precisely what information was given to the parties in Northern Ireland by the Northern Ireland Office. It said: “I am getting in touch with you about the Assembly debate on the maritime emissions trading scheme legislation scheduled for 10 March. I hope very much that the Ulster Unionist Party will be supporting it. It is really important, and not getting the SI through would have significant adverse consequences for Northern Ireland’s economy. If we do not link, and all the other devolved Governments have agreed to pass this legislation already, the UK would risk losing CBAM exemption, exposing £7 billion of UK exports to EU CBAM, i.e. businesses would have to pay the CBAM which we are trying to get exemption from in our negotiations with the EU. The cost of this, if we are not successful, would be far greater than the impact of the maritime emissions charge. Northern Ireland would be uniquely exposed. There could also be knock-on consequences for the SPS negotiations. SPS and ETS linkage would be worth nearly £9 billion to the UK economy by 2040”. The Minister referred to that. It continued: “This would benefit Northern Ireland directly through trade and a level playing field with the EU. The costs of purchasing allowances for GB-NI voyages in the ETS is only around £10 million to £15 million per annum and the impact on consumer prices will be low. I would be very happy to discuss”, et cetera.

That information was put through over the couple of days before the Assembly debated and people may not be aware that, had the parties fully appreciated the realities, a petition of concern could have been launched which would have prevented the Assembly passing the legislation, but parties were influenced by information that was submitted to them that is false. I therefore believe the parties in Northern Ireland were deceived, which is a big issue in and of itself.

Let us move back to the realities here on this order. It is often said that if you look after the pennies, the pounds take care of themselves. In the document on the greenhouse gas emissions scheme and its analysis, estimates of the impact on consumers are at the back. It says:

“the overall impact is estimated to be small”.

I make the point that I have sat in your Lordships’ Northern Ireland Scrutiny Committee and its predecessor for five years. We get a series of EMs through from Brussels and often the relevant government departments in Whitehall say that the impact is estimated to be small. If you add all these impacts together, it is not small; it is significant.

The document goes further. It says:

“Consumers in Northern Ireland may be more exposed to any cost pass-through, due to their relatively higher reliance on goods moved via domestic maritime than GB consumers, though the overall impact is … expected to be minor”.


For me, this is the clincher:

“The exact impact is difficult to quantify, given the lack of data about the contents of containers travelling between Great Britain and Northern Ireland”.


That is nonsense. Every article that is in a container must be specified under the Windsor Framework. We know exactly what is in every container and, in fact, every container can be opened. Pallets can be taken out and, if the inspectors are not satisfied, it can be held at the ports. We already have to provide the European Union with the details of the contents of every container, yet the Government are saying in their own document

“given the lack of data about the contents of containers travelling between Great Britain and Northern Ireland”.

That is fundamentally wrong.

14:00

The other thing I draw to the House’s attention is the environmental side of things. When the noble Baroness, Lady Bennett, was listening to the noble Earl, Lord Russell, her head was nearly nodding off her shoulders. In the Government’s contribution at the weekend there was no mention of the environment. The only thing that was mentioned was the negotiations with the EU. The environment did not even come into it. On that, I have to say that unless we go back to sailing ships, there is nothing on the horizon that will be available as an alternative fuel. In Belfast’s case, they are talking about 2040 before it would even have a facility to charge an electrically powered vessel. There is nothing on the scene in the short term. I understand this and I think colleagues on the Lib Dem Benches do because of the Scottish dimension.

I appreciate the isolation of the Scottish islands, and it is perfectly reasonable that those communities should be exempted—I am not saying that they should not be. But if we go back into the Government’s own document and look at the contribution of the different regions to emissions, the fact is that Scotland produces between six and seven times more emissions per person than we do in Northern Ireland. If the rule is, as the noble Earl, Lord Russell, said, that the polluter pays, that is a fair enough argument. Let the polluter pay. How do you stand on the fact that the Scottish islands produce proportionately seven times more than the people of Northern Ireland? What is fair about that?

The Minister is doing a job here, and we understand the overall objective. We all want to see pollution reduced, even though, as noble Lord, Lord Redwood, said, we are simply exporting the pollution, by and large, at a rate of knots. We all want to move in that direction, but it has to be equitable and fair and have a bit of common sense applied to it. This does not contain any common sense. In my view, this is an EU-driven process. That is the issue. The cat was let out of the bag by ensuring that Northern Ireland would not have a competitive advantage over sea traffic to the Irish Republic. That seems to be the driving force—not within the United Kingdom, as others have said. The Minister should be taking this back because if we are having negotiations, as mentioned in the Northern Ireland Office’s contribution, why are we starting by agreeing something and then sitting down to negotiate? It seems to me that if we are negotiating with the European Union our negotiators need to take extra shoes and socks with them because every time they come out of Brussels, they come out in their bare feet.

[Lord Jackson of Peterborough (Con)]

My Lords, I strongly support the amendment in the name of the noble Baroness, Lady Hoey, and congratulate her on her indefatigability and persistence on these issues, although that is usually on the basis of debating the Windsor Framework, which we are not doing today. I commend my noble friend Lord Redwood on his tour de force speech, and the forensic interpretation outlined by my noble friend on the Front Bench Lord Moynihan. I have a rule of thumb: if I agree with the noble Lord, Lord Empey, I am on the right track. It may be that I am cynical, but he is right to draw out the issue of constitutional propriety and whether central government has shown proper respect for the devolved Administrations, particularly the Northern Ireland Assembly and the Northern Ireland Executive, on this occasion.

We all remember that at the time of Brexit, a senior official called Martin Selmayr stated that the two imperatives for the EU after Brexit were that Brexit should be as painful as possible for the United Kingdom, and that the European Union should never have a competitive disadvantage vis-à-vis the economy and commerce of the United Kingdom. Therefore, as a student and fan of true crime, I see all these pieces of the jigsaw puzzle coming together, because I have to repeat the question raised by the noble Lord, Lord Dodds: why the rush? Why are we in a position where what has been told to individual Members of Parliament by Ministers in the other place is different from issues that were raised in the Northern Ireland Assembly and its committees?

I read the deliberations of the committee in the Northern Ireland Assembly, as well as the Delegated Legislation Committee that met last month. The fact is that this is a pernicious carbon tax, and it does not present that sector with an opportunity to adapt in a timely way. It has a disproportionate impact on Northern Ireland, as we have heard: on supply chains, on inflation, on food prices and on transport costs. There is obviously an unfairness between the way that the Scottish island ferries have been treated and Northern Ireland. I challenge the Minister, once again—and going back to the comments from the noble Lord, Lord Dodds of Duncairn—as to what is the rationale for the different treatment between Scotland and Northern Ireland. Incidentally, Scotland does not get off scot free: as I understand, 145 gas and oil supply and support vessels will also be caught by this order. If the oil and gas industry has not already been clobbered almost into oblivion by the abysmal policies of this Government, and the zealotry of the Secretary of State in seeking to destroy that industry and reduce the employment prospects in Aberdeenshire and other places, this will be another nail in the coffin.

I must ask whether this is linked to wider negotiations with the European Union, in terms of the timescale and timeframe, because that is an important question about the propriety or otherwise of these proposals. At the moment, there is no evidence of likely behavioural change as we run up to the implementation of the order in July this year. As we have heard, the revenue that will accrue from this carbon tax, imposed disproportionately on Northern Ireland but across the sector, is non-hypothecated. As we know, His Majesty’s Treasury is always keen to see an income stream but not to disburse that back to a hypothecated source of the income.

I finish with some questions for the Minister. When will the Government produce clear, technical guidance on the scheme? What support will be provided to the industry to source alternative fuels in a timely and cost-effective way? What analysis has been done by His Majesty’s Government as to the availability of appropriate sector infrastructure to enable the maritime industry to transition to a low-carbon or net-zero regime? What estimate has been made of the costs of compliance annually, particularly the administrative costs, such as producing risk assessments? What impact will there be on the 145 oil and gas support vessels supporting operations in the North Sea? Why have His Majesty’s Government not included measures in the order to support retrofitting, or alternative quayside power supplies at ports, to facilitate the use of alternative modes of propulsion? That issue was raised very astutely by the noble Lord, Lord Berkeley. What discussions has he had, along with his ministerial colleagues, with the EU interlocutors on the timescale of this order, on securing the legal effect of it, and how might this impact on negotiations following the UK-EU common understanding in May 2025?

The Minister needs to listen to the widespread disquiet across this House and the consensus that this order is inappropriate to be laid at the moment. There are too many issues which are unresolved and too many questions still to be answered about the impact on Northern Ireland and the wider economy. I have to say to the Minister that he needs to pause the order and tell our friends in the EU that our pre-eminent priority is British interests, not the arbitrary timetable imposed by the European Union.

[Lord Mountevans (CB)]

My Lords, it is a pleasure to follow the noble Lord, Lord Jackson of Peterborough, who had more of a maritime emphasis, particularly in his questions. I acknowledge the strong contribution made by my noble friend Lord Greenway. The reality is that the SI before the House is not suitable in its current form. I will talk particularly from a maritime aspect.

Many of the leading international and, indeed, local ship owners in the industry are committed to net zero by 2050. The UK Chamber of Shipping called for the global shipping industry to reach net-zero emissions by 2050—prior, in fact, to the UK Government and the IMO. The industry has consistently supported the effective mechanisms to cut emissions. Across the sector, owners have invested in new technologies and pioneering innovation such as new hybrid vessels, and invested to enable shore power connections to meet commitments and lead the drive towards net zero. But the SI inflicts significant new expenses on the ship owner and operator, without the Government committing to invest the substantial sums raised in net-zero-related investment, as has been agreed by the EU.

An obvious potential use for the funds might be in shore power. Significant investments have already been made by ferry operators and cruise ship owners in ships that are already fitted to link up to shore power, with obvious benefit to the environment and the atmosphere. But, as we have heard from the noble Lords, Lord Berkeley and Lord Ashcombe, there is very little installed power in the UK. These significant costs on the owner are expected to curtail the scope for further investment on the ships side in measures and equipment that will reduce emissions.

Let us be very clear: there is an immediate impact on costs. The Government’s own impact assessment calculated, as we heard, the administration cost of the scheme at £179 million, far exceeding the estimated abatement investment of £22 million, implying that, for every £1 spent on decarbonisation, £8 is spent on admin and bureaucracy. Does this sound like good business sense?

The additional costs will impact on businesses and communities. We should not forget that these businesses and communities are located on islands or along the coast, which are already recognised, typically, as economically disadvantaged. Surely, the Government do not wish to further disadvantage these communities. Estimates show that, without exemption, annual fuel costs may increase by up to 25% to 30%. The EU ETS has increased intra-EU maritime and transport costs by around £1 billion annually, with ticket price impacts estimated at up to 15%. Similar outcomes are expected under the UK ETS.

We know that the challenges faced by the Scottish islands have been recognised, and they are excluded from the scheme; and I certainly support the view that the Isles of Scilly, in the case of a larger ship, and the Isle of Wight should also be excluded.

Introducing new monitoring requirements alongside responsible emissions from 2026 adds administrative burden, compliance burdens and risk, and working capital costs. At the same time, vessels cannot yet access alternative fuels, onshore power or adequate grid capacity to reduce emissions, none of which exists in meaningful degree in UK ports today. Without a clear commitment on the part of the Government to recycle the revenue from maritime, the UK ETS will simply divert capital from decarbonisation investment in vital infrastructure, shore power and alternative fuels—and, as has been noted, it may very well just disappear into government coffers.

The industry wants rule introduction to follow that of the EU in, for example, timelines, enforcement mechanisms and data systems, to avoid divergence that could hinder linkage. The recommendation of the industry is for a phased implementation for the necessary data reporting, like the EU did and the UK has, in fact, already done for the waste incineration industry. Phased introduction in allowances to surrender, which start at 40% obligation in the first year and are 70% in year two, rising to 100% in year three, would also be a suitable introductory system.

14:15

Britain is an influential member of the IMO. We are also very fortunate to have it located here in London, just a few hundred yards up the river. We should support fully the IMO efforts to decarbonise on a global scale and not do anything to undermine it. Despite the setback last October, when the United States and Saudi Arabia torpedoed efforts for an early worldwide agreement, vigorous efforts continue in that direction, albeit more modestly. With a lifetime in international shipping and world trade, I implore the Minister not to do anything to undermine the efforts to retain as far as possible a universal international set of requirements. These are good for the planet and essential for the owners, who already have tomes of maritime compliance requirements. Please do not regulate for international emissions until IMO negotiations are completed. UK maritime competitiveness is already affected by EU ETS. Unilateral UK action risks a further deterioration. I add my voice to those urging the Minister to delay extending UK ETS to international voyages until a complete impact analysis is finished.

The Government seek implementation by 1 July this year—just three and a half months away. I urge the Minister to delay inclusion of maritime in the UK ETS until full evidence and guidance is published, to ring-fence maritime ETS revenues for decarbonisation, to exempt the lifeline ferries to island communities about which we have heard much, and to pause the UK Government regulation for international emissions until IMO negotiations are completed. Can we also have, as the noble Baroness, Lady Hoey, said, an SI example, as requested?

[Baroness Butler-Sloss (CB)]

My Lords, I too share the disquiet—without, I have to say, any knowledge of the subject—of most noble Lords who have spoken so far, but I, like others, will be voting so I have three questions for the Minister. First, what was said to the other House? Apparently, the other House was told that CBAM was irrelevant. Today we are told that CBAM is entirely relevant. Is it really appropriate for both Houses to have a statutory instrument put to them on different bases? I find that very unattractive.

Secondly, we are told that misinformation, or false information, has been given to other parts of the United Kingdom. That seems to me a serious allegation, one which the Minister needs to answer. Thirdly—I will not dwell on it, because it has been dwelt on—there is an obvious element of discrimination between Scotland and Northern Ireland. That really needs a sensible, understandable answer.

[Baroness Suttie (LD)]

My Lords, this has been a characteristically impassioned debate, which is perhaps not surprising given the subjects of EU alignment, devolution and greenhouse gas emissions. It is inevitable that people are going to feel very strongly about this subject. If the noble Lord, Lord Empey, expressed his concern for the Minister in trying to reply to this debate, I would add that it is slightly difficult, as the only Scot who has so far spoken in this debate. In well over two hours, I think I am only the fourth person to vaguely talk in favour of this statutory instrument. I thank the Minister for both his time, when he gave us a briefing, and his introduction to these regulations. I also thank the noble Baroness, Lady Hoey, for tabling this fatal amendment—even though we will not be supporting it—because it is incredibly important that we get the time to debate these matters.

As the noble Lord, Lord Dodds, said, it is incredibly important that this Parliament has a chance to debate these issues, not least because we are going to see an increasing number of them as we approach dynamic alignment with the European Union on ETS, as well as potential agreements on SPS and the electricity market. We have to find a way to allow this Chamber and those at the other end of the building to debate these things properly. I hope that the Government are giving some considerable thought to how effective parliamentary oversight on these matters can and will take place if and when these additional agreements are made later this year.

These regulations, it should be recalled, stem from regulations introduced by the Conservative Government in 2021 and the creation of the UK ETS following our departure from the EU ETS after Brexit. As these issues are devolved, they have had to be decided by the four parts of the United Kingdom. In answer to the noble and learned Baroness, Lady Butler-Sloss, I am the only Scot speaking here today, but it was the Scottish Government who effectively campaigned for the exemption for the Scottish islands. They are not my party, but they obviously campaigned very successfully on this matter. The noble Baroness, Lady Foster, who is no longer in her place, was right when she said that these regulations stem from regulations introduced in the Scottish Parliament in 2018.

It is important to note that these regulations were agreed last month by both the Scottish Parliament and the Welsh Senedd, and this week by the Northern Ireland Assembly, notwithstanding the comments from noble Lords about that process. It was voted for by the Northern Ireland Assembly by 44 votes to 23 this Tuesday. As I said, the noble Baroness, Lady Foster, was quite right. My understanding is that the exemption for Scottish ferries is not a general maritime exemption; it stems from the Islands (Scotland) Act 2018, which was passed by the Scottish Parliament eight years ago to protect specific lifeline services for small, isolated island communities. Clearly, protection for small island communities is very important. Will the Minister confirm that this Scottish exemption for island ferries will form part of the review in 2028? I feel it is important for us to know.

I also thank the Minister for clarifying that ferries to small island communities in Northern Ireland are already exempt from these regulations, as they do not involve vessels of over 5,000 cubic tonnes. As my noble friend Lord Russell clearly set out, we on these Benches strongly support measures to reduce the quantity of greenhouse gases produced by maritime activities, but we none the less believe that these must be accompanied by port upgrades or cleaner fuel infrastructure, as well as by encouraging innovation and economic development in a cleaner maritime sector. I note, in passing, that those who constantly oppose measures to reduce climate change never seem to factor in the cost of non-action. We also support the general principle of aligning as closely as possible with the EU ETS to minimise friction on trade.

It is important to bear in mind, however, the impact that other noble Lords have set out on the economy of Northern Ireland and on the cost of living in these increasingly challenging times for the global economy, not least in terms of energy because of the war in the Gulf. It is also important to allow a full and transparent review of how the scheme works in practice and to correct any unintended consequences once it is introduced later this year. Given that the Government’s own impact assessment states that Northern Ireland

“could face disproportionate administrative burdens”,

it is important that we continue to monitor the situation extremely closely. Can the Minister say whether they intend to give regular reports to this Parliament, as well as to the devolved parliaments, on how the regulations are working in practice once they are introduced? Can he confirm that they will continue to consult closely the maritime sector, businesses and consumer organisations?

As there is currently a distinct lack of viable low-carbon alternatives for many maritime routes serving Northern Ireland, have the Government carried out any analysis regarding the extent to which additional ETS-related costs could be passed on to consumers by shipping operators and retailers? The EU ETS currently covers 50% of emissions from international voyages starting or ending in an EU member state, which, for example, currently includes container ships travelling from GB to the Republic of Ireland. It is therefore welcome that there is a 50% deduction for GB-NI routes, as it provides for a level playing field with Irish ports. However, if and when there is increasing—or indeed eventually full—alignment with the EU ETS, can the Minister say whether he expects this 50% deduction for both the Republic of Ireland and GB-NI routes to be removed? I appreciate that might be a rather complicated question, but I would very much appreciate his answer. Can he also say what measures the Government intend to put in place to avoid a cliff edge following the review of these regulations in 2028?

In conclusion, we support these regulations as we welcome the move towards greater alignment with the EU ETS, and we do not support either the regret amendment or the fatal amendment. None the less, we recognise the need for proportionality as well as strong transitional and review measures. I look forward to hearing the Minister’s reply.

[Lord Whitehead (Lab)]

I thank noble Lords for their valued, valuable and very wide-ranging contributions to this debate this afternoon. I am, I think, a fairly plain and straightforward person, but I have at times in the debate failed to get to grips with exactly what it is supposed to be about. It is about the decarbonisation of the UK economy, how the emissions trading scheme is probably the most efficient way of ensuring decarbonisation in our economy, and what should and should not be in that emissions trading scheme. We have also heard in the discussion how that trading scheme might be more widely based so that its decarbonisation effect is improved.

A part of that is of course the entry into the ETS of the maritime sector. For those who say that this statutory instrument is very rushed, I might have to go down a brief historical byway and mention that one can trace back this particular SI to a 2022 consultation on whether the maritime sector should be included in the ETS—a consultation under the previous Government, not this Government, I might add. The response to that consultation was a strong indication that, yes, the maritime sector should be in the emissions trading scheme. Since then, there has been a series of consultations with the maritime industry and many other people about exactly how that should be done, what part the maritime industry should play in its own decarbonisation and how it can contribute substantially to the UK overall trading emissions picture. I have to say that the UK maritime industry has done very well in its contribution so far to making that transition as effective as it can be.

Taken in that context, I am a little surprised at the regret amendment that has been tabled, because essentially this is a past Government regretting their own actions. Yes, there is plenty to regret about the previous Government, but to have the previous Government regretting themselves seems to be a step further forward than was previously the case.

14:00

We have also heard about the various procedures that took place before the final one of the four Governments within the UK acceded to this statutory instrument. That is the Northern Ireland Assembly decision of this week, which was agreed by a substantial majority. We have heard about what happened in various corridors leading up to that debate. I must say, I do not recognise people attempting to inform various people within the Assembly as to what this SI consists of as the sort of arm-twisting and threats that we have heard about this afternoon. Thinking of my own participation in that, I am grateful for the acknowledgement of those actions by the noble Baroness, Lady Hoey, at the beginning of the debate. I reached out to her to discuss her fatal amendment and we had a very pleasant, friendly discussion. I do not think I twisted her arm or intimidated her in any way.

I think that is the basis on which this debate has gone forward as far as the Northern Ireland Assembly is concerned. The Northern Ireland Assembly is grown-up enough to take its own decisions without worrying too much about who is giving it what information in what place in order to inform those decisions. Indeed, it took a decision to support this SI, so all four of the Governments in the UK are now behind this SI and the road is clear, therefore, for it to be agreed by this House if it wishes to do so.

In terms of the overall debate, it is difficult for me to respond easily to every one of the interventions that have been made because we have had a lot of canards this afternoon—indeed, so many canards that if we added them up, between us we would have a very successful duck farm running across this House and elsewhere. If there are points that have been made by some noble Lords that I am not able to respond to directly this afternoon, I will attempt to write to those noble Lords to try to get as accurate a picture as possible across to them in response to the points that they have raised.

As I said, the UK Emissions Trading Scheme plays a key part in the Government’s maritime decarbonisation strategy and decarbonisation strategy overall. It sets a cap on emissions in the sectors covered, which, following the inclusion of the domestic maritime sector, will represent roughly 26% of the UK’s total emissions. This guarantees that the covered sectors, which are set to include the domestic maritime sector, as I have mentioned, will reduce their emissions in line with our world-leading net-zero target. We expect the UK ETS to be an effective leader to help reduce maritime emissions, alongside a number of key policies, including £448 million of funding for marine decarbonisation, which I will return to in a moment, through the UK Shipping Office for Reducing Emissions. By setting a clear trajectory for emissions from the covered sectors and driving green investment as part of our industrial strategy, an expanded UK ETS will continue to help deliver a just transition, growing the UK’s economy and securing good jobs for people across the country.

It is important to put this debate in that context because this SI is not an attack on Northern Ireland or on particular communities; it is trying to put the detail right of a policy, which I believe has widespread support in this Chamber and elsewhere, to bring the UK Emissions Trading Scheme into the maritime sector. Of course, we have the problem right now that as soon as you try to put such a scheme into place, there will be issues, problems, exceptions and concerns about how the policy will go forward, and I am grateful to the noble Lords who have underlined some of the problems in getting a policy exactly right. Indeed, I think noble Lords can see how this SI has attempted—for example, with a 50% reduction in chargeable allowances, the additional year before allowances are surrendered, and the review in 2028 being put into the process—to meet a number of those concerns with implementation. The same thing applies to noble Lords’ concerns about parts of the UK’s—let us call them—internal seaways.

As a resident of Southampton and former MP for Southampton, I am obviously very concerned about the whole issue of the Solent and the relationship between the mainland and the Isle of Wight—although the residents of the Isle of Wight would say the opposite. It is true that there are problems with how this policy can best be implemented. There are, for example, a couple of ships in the Isle of Wight over the 5,000-tonne exemption mark, which, by the way, is in this SI precisely to deal with issues relating to smaller islands and smaller communities, such as the Scilly Isles. We know that the vessels traveling to the Scilly Isles are below 5,000 tonnes and are therefore completely exempted.

However, there are also a number of Isle of Wight ferries under the 5,000-tonne mark and considerable progress is being made towards the decarbonisation of the ferry fleet in general. I say that concerning not just Wightlink but Red Funnel and various other fleets plying their trade between the mainland and the Isle of Wight. So the question is: how do you levy exemption points at particular levels? Are you net benefiting the overall picture by how you set those exemption levels and what you do in order to implement them, and indeed what you do subsequently to support the trade to decarbonise itself and make sure that it is working very effectively in that respect?

There is also the question of whether the activities that are taking place in Scotland—

[Lord Ashcombe (Con)]

We have a problem with the Isle of Wight. One of the vessels has done everything that it could possibly do to decarbonise. It has no option to go anywhere else because the power is not there. It is a fully hybrid boat, as the noble Lord, Lord Greenway, pointed out with a great deal more technical ability than I have. These vessels cannot go anywhere else, so this is a straight tax that will end up primarily on the residents of the Isle of Wight.

[Lord Whitehead (Lab)]

The noble Lord makes a strong point about the power supply to the Isle of Wight. This is also the case with some other ports. Other noble Lords have said this in their interventions, including the noble Lord, Lord Greenway, for whom I have a great deal of respect and admiration, through our long relationship with the Maritime and Ports Group in another place. He speaks with great authority and considerable knowledge and wisdom on this subject.

Shore power and an electrical supply to ports to enable decarbonisation to take place is a serious question. Both the port of Portsmouth and, in parallel, the port of Southampton suffer from particular cable connections from the substations in their area, which could, at a sub-national grid level, provide sufficient shore power and power for the electrical hybrid ships that may visit these ports. That can be effected by what is called a reopener of the arrangements for distributed network operations to ensure that this power can come forward at an early date. This is what Southampton has done. The power is likely to be forthcoming long before the 2037 date that the noble Lord mentioned. If Portsmouth has not done this yet, I would suggest that it does so. The power is there and readily available to get to the ports. It is a question of putting it in early, rather than later, to make sure that this transition can take place. That is part of a wider problem about grids and grid power in the country as a whole, which this Government are addressing urgently to make sure that we have the power to get ourselves across the transition in the way that we want.

Because of the time available, I will have to address some of the issues by writing to a number of Peers. In this debate, I want to emphasise that this is not a conspiracy to do anybody down or to try to isolate particular communities. Nor is it aimed at undermining the economic prosperity of the country. It is a decarbonisation measure that has to happen as part of our general decarbonisation route to net zero. It would be anomalous if the maritime sector were to be excluded from that decarbonisation route and if we were not to take measures, which I have known about for a long while, to make sure that that decarbonisation route is as effective as it can be in how it aligns with the EU ETS and eventually with the CBAM process. At present there is some problem of alignment because the EU CBAM process is proceeding earlier than the UK CBAM process. These need to be aligned in the longer term. As has been mentioned in this debate, the prize for that alignment is a substantial bonus for UK trade—£9 billion or so over a longer period. It would be remiss of this Government if they did not have that largely in view in what they are undertaking as far as this SI is concerned. Indeed, the Government do have this in view.

I can certainly say to noble Lords that the effect of this SI will be seriously reviewed in 2028. It is likely that, should everything come into proper alignment with CBAM and the EU, some of those shorter-term exemptions and changes will come jointly into alignment for the net benefit of everybody, including Northern Ireland, the Republic of Ireland and the UK. That alignment will mean a joint overall benefit all round.

14:45

I hope that I have been able to put this SI into its proper context. That is what it is about and that is what we would be voting on this afternoon on either the fatal Motion or the regret amendment. I do not think that either is well founded in terms of the overall aims of the SI, which I emphasise are benign, in line with what we want to do on decarbonisation and to the benefit of British trade and industry in the long term. The SI has thought out the problems of dealing with the practical issues of implementing the wider picture of the EU ETS and the maritime sector. Although progress will certainly be regularly reported on ahead of the review in 2028, we can best have a good look at it in 2028 to see whether we have done as well as we think we have done already to make this work for the future.

[Lord Empey (UUP)]

The noble Lord did not address the main point in the debate at all, or the fact that his document says:

“The exact impact is difficult to quantify, given the lack of data about the contents of containers travelling between Great Britain and Northern Ireland”.


That was not mentioned. This is not benign; if it were, there would be 100% reductions and everybody would literally be in the same boat. This will have no practical impact on reducing pollution, because it is an impossibility for the next 15 years.

[Lord Whitehead (Lab)]

It is not an impossibility for the next 15 years. Getting an accurate picture of trade always involves a range of calculations—you cannot get it exactly right. However, so far the impact of this proposed order has been assessed at below 1% of those costs; the Government do not recognise the figure of 6% put out by some parts of the industry. That is set against the gain that could come from those bodies being in the ETS, the alignment with CBAM in future and so on.

I might add that, although the product of this particular entry into the ETS has not and will not be hypothecated—indeed, no British Government have ever hypothecated anything that has come into their coffers—what we need to judge it by is how much money has already gone out. Just last week, £271 million went out to further support the maritime industry in its transition to a low-carbon basis. The SHORE fund has several hundred million in it, including £18 million that has already gone to Northern Ireland. All of these are paying back the money that is going into the fund in the future, for the benefit of the maritime industry and its transition.

[Baroness Hoey (Non-Afl)]

My Lords, at the beginning of this debate, when I was being nice to the Minister and thanked him for the meeting he asked for with me, I said that I did not want to spoil his career prospects and that I thought that, if it had been his decision, he might have chosen to withdraw the SI at the beginning. Now, by the end of this debate, perhaps he would have been even more keen to withdraw it.

This has been an extremely good and wide-ranging debate, as the Minister said. It has brought together two or three key issues—I will not go over them again. It is the first time I have had an SI dealing with not only Northern Ireland but other parts of the United Kingdom, and it has been very good to see so many of the Government Benches full. If one benefit of tabling a fatal amendment is to get a lot of Labour Peers to come here and listen, it is probably worth it.

I thank in particular those Peers who do not normally speak on issues related to Northern Ireland. My fatal amendment is very much geared to the inequality of Northern Ireland and the way it is treated differently from Scotland. It was particularly good to hear from the noble Lords, Lord Berkeley and Lord Ashcombe, on the wider aspects of the SI in relation to the Isle of Wight and the Scilly Isles. It was also good to hear from the noble Baroness, Lady Bennett, and the noble Lords, Lord Mountevans and Lord Greenway—I am very sorry if this might well have been his last speech in the House—who brought their genuine experience of shipping.

If there is any lesson to learn today about speeches, it is that we should all, including me, follow the example of the noble and learned Baroness, Lady Butler-Sloss, who, in her two very short interventions, hit the nail right on the head about how this issue has been handled. Despite the meetings on this side, what happened over the past few days in Northern Ireland was a very bad way for government to be working. The way that the Northern Ireland Office has completely ignored the wishes and needs of Northern Ireland, in terms of business opportunities and what will happen with this carbon tax, has been quite deplorable. Worst of all, as has been said by a number of Peers, was the way the statutory instrument was dealt with in the other place: absolutely different information was given right up to the very last minute. The MLAs were cajoled, blackmailed and treated by the Government as if they were pretty stupid and would not understand that they were being told things that were different from what had been said in the other place.

I thank all Members who have spoken. Of course, all the Northern Ireland Members know the issue and how strongly people will feel its effects. The unfairness to part of the United Kingdom, which comes up over and over again in this place, is becoming ridiculous and quite unsustainable if we care about the union and equality between all parts of the union. Having said all that, I really do not want to waste people’s time when they have sat through and listened. I would like to test the opinion of the House.

14:55

Division 1

Amendment to the Motion disagreed.

Ayes: 26

---

Crossbench: 8
Conservative: 7
Democratic Unionist Party: 4
Non-affiliated: 4
Ulster Unionist Party: 2
Labour: 1

Noes: 134

---

Labour: 89
Liberal Democrat: 29
Crossbench: 9
Non-affiliated: 4
Green Party: 2
Independent: 1

15:05

Amendment in the name of the noble Lord, Lord Moynihan, not moved.

Motion agreed.

Universal Credit (Removal of Two Child Limit) Bill

Thursday 12th March 2026 Lords Chamber

Second Reading (and remaining stages)

Northern Ireland Legislative Consent granted.

15:06

Moved by

[Baroness Sherlock]

That the Bill be now read a second time.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, this Government believe that the UK should be a country where every person has the opportunity to fulfil their potential. That is why we are so committed to removing the barriers that stop people thriving and becoming all that they can be. Doing this will benefit not just the individuals, it will benefit our country. So I am delighted to be here today to move Second Reading of the Universal Credit (Removal of Two Child Limit) Bill. It makes a major contribution to tackling the poverty that limits children’s chances in life, and often for life.

There are now four and a half million children in poverty—900,000 more than there were in 2010. To put that in context, if we picture a classroom of 30 children, at the moment around 10 of them will be living in poverty. Some 2 million of our children are in deep material poverty, lacking the basic essentials such as a warm home or healthy food—things without which no child should be growing up. It is shocking enough that so many of our children have to live through childhood like that, but it is even more shocking when we consider the hugely detrimental consequences that growing up in poverty has on children’s health, education and future employment prospects.

Just one in four children in families with the lowest incomes gets good GCSEs. As adults, those who grew up in poverty are more likely to be unemployed or to find themselves in low-skilled, lower-paid jobs. Those who grow up poor clearly do not lack talent; what they lack is opportunity. As a result, our country is missing out on their gifts and their contributions. We are determined to break this link between children’s backgrounds and their future success. That is why, since coming into office, we have taken significant steps to help families tackle poverty and give every child the best start in life: increasing the minimum wage, expanding free school meals for over half a million children, investing in social and affordable housing, and funding more Best Start Family Hubs. We are now pulling the single most cost-effective lever available: removing the universal credit two-child limit, which will lift 450,000 children out of poverty.

This is the right move to extend opportunity, and it is right because our system should not be penalising so many of our children for the circumstances of their birth—circumstances their parents may not have chosen or expected. Life is unpredictable, and crisis can hit anyone regardless of the choices they have made or the size of their family. Marriages break up; parents lose their jobs or get sick, or injured, or die.

That unpredictability is reflected in the fact that half the families who will benefit from lifting the two-child limit were not on universal credit when they had any of their children. These are people who found themselves in need of help after decisions about family size had been taken. It simply is not right to draw dividing lines in the way the two-child limit sought to do, especially when over half the families affected by the two-child limit are already in work, and, of those who are not working, a significant number are affected by serious health conditions or caring responsibilities.

Illness, disability, bereavement, unemployment, becoming a carer—these things can hit any one of us, and have probably hit many of us in this Chamber already. Our welfare state exists to pool risk, to give all of us some protection from the impact of life’s slings and arrows. Some will look only at the cost, without looking at the cost of failing to offer support. We simply cannot afford to sit on our hands and wait for the costs of poverty to spiral. Without intervention, 150,000 more children will be pulled into poverty by 2030. That is 150,000 stories of missed opportunity, of deeper inequality, of lost productivity. But if tackling poverty is vital not just for the lives and opportunities of children, it is vital for our economy. Every pound we spend lifting children out of poverty saves so much more in future health, education and social security costs.

Few investments will reap rewards as great as investing in the next generation, in our future workforce. Failing to act on child poverty will cost Britain far more than investing now. That is why removing the two-child limit is part of our wider child poverty strategy. We committed in our manifesto to making good work the foundation of our approach to tackling poverty. Parents are doing all they can to support their children. Parental employment rates are already high but, with almost three-quarters of children in poverty being in a working family, too many parents find themselves in jobs where they are still struggling to support their families.

Meanwhile, too many of those who are not in work face barriers to entering the labour market, whether that is down to health, disability, a lack of childcare, poor skills, public transport not working in their area, or all kinds of other barriers. We want every parent who can work to feel the benefits of secure, rewarding jobs that enable them to get on in life, to support their families and to set an example to the next generation. That is why we will deliver a step change in employment and skills support for parents, helping them to balance work and caring responsibilities through high-quality, flexible jobs and improving access to affordable childcare.

The expansion of childcare comes alongside other measures in our child poverty strategy to drive down working poverty, including raising the minimum wage and creating more secure jobs by strengthening rights at work. The measures and the strategy will lift 550,000 children out of poverty. These interventions will lead to the largest expected reduction in child poverty over a Parliament since comparable records began. Together, all this represents a strong start. It kick-starts action and ambition over the next 10 years, responding to the immediate pressures families face now while delivering change to fix the structural drivers of child poverty.

But we do not underestimate the scale of the challenge: to build a society where every child grows up safe, warm and well fed, not held back by poverty but helped forward by government. So we will monitor our progress using two main metrics. First, we will use the internationally recognised and well-established “relative low income after housing costs” measure to monitor overall child poverty. Secondly, there will be a new measure of deep material poverty, which we have developed to assess families’ ability to afford the essentials. This takes account not just of their income but of the cost of essentials, their overall financial situation and the support they receive locally. It is not just the number of children in poverty that matters; it is the depth of that poverty too.

We are committed to ensuring that removing the two-child limit, along with other measures in the child poverty strategy, delivers the results children need and deserve. To support this, we have published a monitoring and evaluation framework alongside the strategy. That sets out how we will track our progress and the success of these policies, as part of an ongoing commitment to transparency, accountability and continued learning. This includes focused analysis to understand what drives child poverty and the impacts of the changes we are making, so that we can build on our successes and continue to make the case for further intervention. We will publish a baseline report in the summer setting out the latest statistics and evidence, with annual reports thereafter to monitor and evaluate progress.

This Government will not stand by while millions of children face the long-term harm that poverty brings. Families in poverty cannot afford to give their children what they need to grow and to achieve their potential. We will boost family incomes through employment and social security, drive down the cost of essentials and strengthen local support services. We are investing in the future of our children and will hold ourselves to account on delivering the impact we promised through this Parliament and beyond. We will remove this cruel policy, which has pushed 300,000 children into poverty.

I look forward very much to this debate and especially to the maiden speeches of my noble friends Lady Antrobus and Lord Walker of Broxton and the noble Baroness, Lady Teather. Between them they bring an amazing wealth and breadth of experience and knowledge to our House. I am delighted that they have chosen this extremely important Bill to make their first contribution to our proceedings. I beg to move.

15:15

[Baroness Stedman-Scott (Con)]

My Lords, I too am pleased to contribute to this important debate and look forward to the maiden speeches of the noble Baronesses, Lady Antrobus and Lady Teather, and the noble Lord Walker of Broxton. We welcome these wonderful people to our House and look forward to their contributions.

I feel I must set the scene and set it out very clearly. I say from the outset that we on the Opposition Benches do not support this Bill; in fact, we oppose it. That does not mean in any way that we do not care about children and families—quite the contrary. We believe there are other ways to support them that mean that money can be used differently to achieve the objective of improving their lives. I state publicly that I respect the consistency and tenacity of the Minister and, indeed, the noble Baroness, Lady Lister, in their campaigning in this area. We respect it. We may not agree with it, but we give credit where it is due.

We are far from alone in opposing the Bill. On this question, we stand with a clear majority of the British public. Polling consistently shows that more than 60% of people in this country support retaining the two-child benefit cap, with that support stretching across voters of all major political parties. What this debate increasingly appears to be about is not responsible public policy but political party management. As events over the past year have made clear, this measure is not being brought forward because the public have demanded it. Indeed, they are clearly opposed to it. We should all pause and consider why hard-working taxpayers are being asked to shoulder the financial consequences of the Government’s inability to manage their parliamentary party. That is not responsible government; it is a deeply troubling response from the Government to unrest.

Many across this Chamber will have their own principles and reasons for opposing this policy, but I begin with a simple illustration of what this policy and this debate mean in practice. Let us take the London Borough of Hackney. There, 29% of children live in households affected by the two-child limit without an exemption—the highest proportion anywhere in the country. As of August last year, there were 92 households in Hackney on universal credit with five or more children where the youngest child was born after the 2017 cut-off date. Unless they qualify for one of the limited exemptions, those households fall within the scope of the two-child limit. In other words, they already receive less than the maximum universal credit they would otherwise be entitled to. Yet even with the cap in place, these households receive on average £5,152 per month in universal credit. That is more than the take-home pay of someone earning around £88,000 a year. Across the country, the welfare bill for five-child households within the scope of the cap is already around £720 million per year. That is with the two-child limit still in place.

Set that against the reality faced by many working families. In Hackney and communities across the country, there are parents in work earning far less than that level of take-home pay who would love nothing more than to have a third child. But they sit down at the kitchen table, look at the household finances and make the heartbreaking decision that they simply cannot afford it. At the very same time, their taxes are funding households down the road who receive an income from universal credit that, in effect, exceeds their own. If this cap is removed, those households will not face the same choices about how many children they can afford.

I ask the Minister a simple question: how can that possibly be fair? How can it be right that working people supporting our economy and paying the taxes that fund the system must carefully limit the size of their own families while being asked to fund a system in which those not in work face no such constraint? That is the fundamental question of fairness at the heart of this debate, and it is why a clear majority of the public vehemently support the cap.

There is a wider point about economic development. More than this, what separates us on these Benches from the Minister and her Back Benches is our view that a handout is not the same as a hand up. The evidence is clear that the most effective way to tackle poverty is to provide people with the means and the incentives to provide for themselves. The single biggest factor in a child’s life chances is whether parents work, and removing the cap reduces the incentives to work altogether. That is clearly not a route out of poverty. Of course support should be targeted at those who need it—we have no argument with that—but it should not create a model where households on benefits are rewarded in a way no working family ever would be. That undermines both fairness and the incentive to work. As I have said, work is the only meaningful way that we will solve the problem of child poverty in the medium and long term.

When the incentive in place is to get more on benefits than working, why would you go to work? I am concerned by the view expressed by Labour Back-Benchers and the Government that increasing the generosity of the welfare offer in some way solves the issue of poverty. This approach does nothing but provide a sticking plaster to mask the fact that a dramatically increasing number of people rely solely on the state for their subsistence. This comes at a major and increasing cost to those who work and contribute, as the Spring Statement disturbingly underscored when it revealed that welfare spending will rise by 5.8% this year to an absolutely staggering £330 billion—around 11% of GDP.

My party has been clear. We would reinstate the two-child cap. Only last week my right honourable friend, Kemi Badenoch, the leader of our party, set out why. The savings from this policy could be redirected toward one of the more fundamental responsibilities of any Government—the protection and defence of the realm. Again, I stress that it does not mean that we do not care about children and families, but those savings would allow the recruitment of 20,000 additional soldiers and fund the accommodation, equipment and support they need to do their jobs properly at a time when the demands on our Armed Forces are growing and the world is becoming more uncertain. That is a central priority.

After the extraordinary spectacle of recent weeks, when the world has seen the Government unable and unwilling to defend British sovereign territory, the case for properly funding our Armed Forces has become more urgent than ever. Our defence should not be an afterthought. It should be the first duty of the state.

That is why it is so troubling that money that could be strengthening our national defence is instead being spent to manage the Government’s internal policies and politics. The country is being asked to foot the bill not because the policy case has been won but because the Government and the Chancellor have chosen not to pursue the welfare reforms they themselves once supported because they are too weak to get them past their own MPs. Do His Majesty’s Government have any plans to review the welfare state and to change it to a system that incentivises people to work, rather than live permanently on benefits? The defence of the nation should always come before the management of the governing party but, unfortunately, the policy we are discussing today is a manifestation of just that.

Ultimately, this debate comes down to three simple principles: fairness, responsibility and the Government’s priorities. It is about fairness, because it cannot be right that working families who get up every day, pay their taxes and carefully weigh what they can and cannot afford for their own children, are asked to fund a system in which those same choices do not apply. A welfare system that loses sight of that basic sense of fairness will quickly lose the confidence of the people who sustain it. It is about responsibility, because tackling poverty cannot mean simply writing even larger checks from the state. Real and lasting progress comes from helping people into work, strengthening incentives and ensuring that welfare is a safety net, not a substitute for independence. A system that blurs that distinction ultimately fails the very people it claims to help. It is about priorities, because every £1 spent by the state is a £1 taken from taxpayers and other priorities. At a time of enormous pressure on the public finances and growing threats in the world around us, the Government must be honest about where those resources should go.

This Bill fails on all three counts. It weakens fairness, it risks entrenching dependency rather than tackling its causes and it diverts scarce resources away from the fundamental duties of government. For those reasons, and in the interest of fairness and sound policy, these Benches cannot support the Bill. We urge the Government to keep the cap; it is what the country wants and what the country needs. I know the Benches opposite will not agree with me one little bit—I am under no illusions about that. I remind the whole House that you cannot make a poor man rich by making a rich man poor and you cannot help the wage earner by punishing the wage payer.

15:27

[Baroness Teather (LD) (Maiden Speech)]

My Lords, I am grateful for the opportunity to make my maiden speech here during this Second Reading debate. Supporting children and tackling the impact of poverty and disadvantage have been core themes of my work, both in the other place and in my charity and NHS board roles since.

I will turn to the substance of the Bill in a moment and say some personal words about myself at the close. First, I hope noble Lords will indulge me in offering some heartfelt thanks. I am indebted to the many people who have guided me so patiently in my first few weeks. Having done my apprenticeship at the other end, this place is at once both familiar and very different. I am still navigating by reference to glimpses of green carpet that border red, meaning getting anywhere is taking me twice as long as it should.

I am particularly grateful to Black Rod’s team and to the doorkeepers, who made heroic efforts to support my husband, who is a wheelchair user, at my introduction, as they have today. He is here to listen, along with my parents, and I am very grateful to them for being here. I thank the clerks, the Lord Speaker, the attendants and my supporters—my noble friends Lord Dholakia and Lady Kramer—and the youthful staff team in the Lib Dem Whips Office, who are a daily source of facts, sanity and humour.

The Bill is hugely welcome. While some might say that it is not before time, I want instead to recognise the work done by the Minister in this House—the noble Baroness, Lady Sherlock—and the Secretary of State in the other place to bring this Bill forward. I served as Children and Families Minister, and I recall the uphill task of co-ordinating child poverty strategy across departmental silos and coalition “differences of opinion” as somewhere between cat herding and global hostage negotiation—skills that might yet come in handy if we end up in protracted ping-pong here.

I am strongly of the view that the removal of the two-child limit in universal credit is the right thing to do. I have always been a sceptic about arbitrary caps in welfare policy, which seem often to be performative rather than strategic. People are made vulnerable when policy cannot flex for the complexity of real life. More than 1.5 million children are currently affected by the two-child limit, denied what they need to thrive and growing up where hunger, cold and uncertainty are daily realities; missing opportunities to join school trips and activities; and leaving them more likely to be bullied at school—something I know from my most recent role leading a children’s charity dedicated to that cause. Poverty affects children in every community, which was the premise behind targeted support through the pupil premium, but this two-child limit falls on regions unevenly and disproportionately on families from Black and ethnic-minority communities, baking in inequality and damaging life chances for decades.

Removing the two-child limit will make an impact on hundreds of thousands of children. But in the spirit of a maiden speech, I suggest gently that mitigation of its forerunner, the benefit cap, which interacts with the high cost of rented housing, might also be needed. This might be, for example, by reviewing the cap annually in line with the cost of living or disregarding child benefit from the total.

I want to say something about language and narrative. The Joseph Rowntree Foundation’s UK poverty report this year describes the impact of an increasingly toxic public debate on those living in poverty, saying that the

“values of compassion, justice and equity … are too often missing”.

Stigma and scapegoating really matter. Money fills the electric meter, buys the school uniform and pays for breakfast, but it is language that limits expectations, hardens attitudes and severs relationships.

I spent most of my decade-long civilian sabbatical away from politics leading a UK charity in the refugee sector, the Jesuit Refugee Service. I learned much at JRS about the way destitution and homelessness eat away at dignity, but also about the transformative power of relationships and community. Towards the end of my time at the charity, we started a new project to train staff in mediation skills, encouraging them to listen and engage in conversations locally and to learn from people with different, even opposing perspectives about our work. It was experimental in form, but the othering that we had witnessed had been so devastating that we were convinced that we must not contribute to it further.

Our potential to create change and solve problems in this polarised age depends on how well we collaborate with people who do not always share our worldview—resisting the urge to stereotype and being open to the idea that working with people we do not agree with might yield new solutions. One of the great joys of my first few weeks here has been the warm and fascinating conversations with noble Lords from different parties. This cross-party opportunity is a seam that I hope to mine.

I finish my remarks by sharing with noble Lords something very personal. I have spent most of my adult life working with and for people who are sidelined—those who struggle to get their voices heard and their experiences understood. Then, four years ago, I suddenly lost my voice. A random neurological hit knocked out a nerve to my vocal cords, leaving me struggling to speak. It took two years of speech and language therapy at Guy’s Hospital and specialist voice rehab to teach my body to adapt to this state and return a singing and useful voice—help for which I am deeply grateful.

The words of the Letters Patent read by the clerk at our introduction to this House confer on each of us a voice in this place. I understand the privilege of this gift—it is something that my body knows to be true. So I pledge to use my voice here to create space for all those whose voices continue to be silenced and whose experiences are missing from our deliberations. I hope to use my voice to enjoy as many cross-party conversations and collaborations as tea in the Long Room will sustain.

15:34

[Baroness Janke (LD)]

My Lords, it is a great privilege to follow my noble friend Lady Teather’s eloquent maiden speech, and I congratulate her on it and welcome her thoughtful remarks. In her speech, her expertise and experience as a former Minister for Children and Families shone through, and her long-term commitment to work with charities and the NHS show her deep understanding of poverty in all its forms, particularly for refugees. I am sure we in this Chamber will very much welcome her experience and insight to the work we do here, particularly at this challenging time. I also pay tribute to her effective campaigning, having founded the APPG on Guantanamo Bay and chaired the APPG on Refugees when she was an MP. I am sure she is going to make valuable contributions to the work of this House as an enthusiastic and energetic colleague. Her voice will certainly be heard here, I am confident of that. It is a great pleasure to welcome her to these Benches; I wish her further success in the future and in her career in this House.

As we consider the Bill before us today, it is important to recognise the deeply egregious effects it seeks to remedy. The two-child limit is unjust and unfair and is a major driver of child poverty. It is discriminatory and hits hardest those who have the least and suffer the most, punishing children and setting siblings’ interests against one another within families. Some 25% of families affected are single parents with a child under three years old. Children of these families are doubly disadvantaged, having only one parent who is fully employed trying to make ends meet. Some 20% of all households affected by the two-child limit have at least one disabled child and 87,500 families affected lose around £3,500 per year.

Behind these figures, the reality of child poverty is about deprivation and misery. As a former teacher, I have seen it all too often: hungry children finding concentration in school impossible; teachers feeding the most desperate from their own pockets; parents missing meals so their children can eat; children and parents who have never known a holiday; the grinding anxiety and stress of trying to make meagre funds stretch even further and, quite honestly, just never having enough money. The humiliation and stigma of being poor compared to classmates and friends too often ends up in children being bullied in and out of school, for the old, cold and worn-out clothes that single out the poor or for not being able to go on school trips and visits or join sports and leisure clubs because your family simply cannot afford it. All this leads to a lack of confidence, feelings of inferiority and isolation, and subsequent poor attainment. It means that, by the age of 30, those who grew up poor are likely to be earning about 25% less than their peers. They are four times more likely to experience mental health problems, with growing consequences for worklessness and the benefits bill. They are more likely not to be in education, employment or training. I wonder whether the noble Baroness, Lady Stedman-Scott, thinks this is a route out of poverty; I certainly do not.

This pernicious policy was justified by the previous Government on the basis that it would make parents claiming benefits face the same financial choices as those supporting themselves through work. The argument was that the policy would achieve fairness. However, such evidence as there is points entirely to the contrary. No evidence has been produced to show that the policy has achieved its declared objectives. If the previous Government did not produce that evidence, I fail to see how those who were part of it can stand up and defend it.

Half the families who will benefit from the removal of the two-child limit, as the noble Baroness, Lady Sherlock, has said, were not on benefits when they had children, but catastrophes happen to families. People lose their jobs or become ill; families break up; people die or family members need extra care. This is why we have social security, as these misfortunes do not happen just to the poor; they happen to us all. Based on the arguments that the noble Baroness, Lady Stedman-Scott, has put, only a household wealthy enough to withstand all life’s disasters could responsibly decide to have more than two children.

It has been argued that the two-child limit will encourage families to increase their income by finding more work, but, for many, especially lone parents, the difficulty of finding affordable childcare means that they cannot increase working hours but need to make their meagre income go even further. All too often, it is their children who suffer. Expert institutions have attributed the rising tide of child poverty to the two-child limit policy. Some 59% of families affected by the two-child limit are in work, so, again, the false dichotomy between people having children on benefits and people at work does not stand up here.

Abolition of the two-child limit has been a common cause between many Members of this House and campaigners outside Parliament. I pay tribute to those who have worked to get this policy changed, and I very much hope the Bishop of Durham is listening, because he, too, was a key campaigner on this.

It is good to see that action is now being taken to remove this policy through the Bill, but there is still some way to go to eliminate child poverty, including the removal of the punitive benefit cap, which we hope will soon follow. A successful country invests in its children: the people who will deliver our nation’s future. Our country has failed to do this so far, and a record 4.5 million children are in poverty.

The Bill, though long overdue, is a welcome step forward for the nation’s children. We look forward to the full implementation of the Government’s child poverty strategy, and in this spirit, we are pleased to support the Bill.

15:42

[The Lord Bishop of Leicester]

My Lords, I warmly welcome the introduction of the Bill and the opportunity today to comment on it. I congratulate the noble Baroness, Lady Teather, on her truly excellent maiden speech, and I look forward to the maiden contributions of the noble Baroness, Lady Antrobus, and the noble Lord, Lord Walker, as well as of other noble Lords.

I count myself very fortunate to have never experienced true poverty myself, but I have spent much of my working life living in communities where poverty was very real—both the absolute poverty of one of the poorest nations in Africa, where I worked for several years, and the relative poverty of inner-city Sheffield, where I was vicar for a decade before becoming Bishop of Leicester.

I have seen first-hand, therefore, that poverty is not just about material resources but also has a much wider psychosocial impact. Amartya Sen argued that poverty should be understood not as low income but as capability deprivation: the lack of real freedom or opportunities to live a life one has reason to value. Martha Nussbaum expanded Sen’s framework by proposing a list of central human capabilities—such as life, bodily health, imagination, emotion, affiliation, play, and control over one’s environment—which all societies should secure for every citizen as a matter of justice.

Added to this is what some have called the poverty-shame nexus: the mutually reinforcing relationship between material hardship and the emotional experience of shame. People in poverty can experience shame through various mechanisms: social stigma, being judged as lazy, undeserving, or morally inferior; institutional interactions—for example, public services that treat people disrespectfully; or cultural norms that define success and worth in material terms. Research has found that people internalise stigmatising narratives about poverty and, as a result, have lower self-esteem and self-worth, and avoid social interaction with others.

Universal credit and its system of sanctions arguably institutionalise the poverty-shame nexus. Although I accept that its introduction in 2013 brought a necessary simplification to welfare payments, I nevertheless believe that the system of sanctions in particular has an implicit moralising message. Claimants must continually prove that they deserve support because they are both “poor enough” and “trying hard enough”. I have spoken with people who describe the feeling of being “presumed guilty until you are innocent”, on the assumption that every person looking for help might be “cheating the system”.

It is my belief that the two-child limit to universal credit has only added to the poverty-shame nexus. The assumption would appear to be that if you are on universal credit and have more than two children you are somehow not being responsible. Yet I have three wonderful children—I am sure that many other noble Lords also have more than two children—and I confess that I did not make a financial calculation ahead of deciding to have a third child. I wonder how many of us did. Surely, then, we have a duty to lift the sense of shame from others, not reinforce it.

Bishops on this Bench have consistently opposed the two-child limit right from its introduction. Indeed, as has already been mentioned, the former Bishop of Durham introduced a Private Member’s Bill seeking to abolish the limit in 2022. For us, this is part of a much wider calling to combat poverty in all its forms, addressing its causes and wider effects. I know that noble Lords on all sides of this House share that concern. Our differences are more to do with how, rather than whether, it is done. Yet I dare to hope that, once this policy is changed, we can work together to find other areas whereby those who are caught in poverty are enabled to contribute their gifts and skills to wider society.

15:47

[Baroness Antrobus (Lab) (Maiden Speech)]

My Lords, I thank you for the opportunity to make my maiden speech in this important debate on this universal credit Bill and the removal of the two-child benefit limit. This matter is personal to me. When I was 11 years old, state help in the form of child benefit became incredibly important to my single-parent household after my parents separated. My weekly trek to the post office to collect it—in cash, of course, in those days—helped us through a difficult period. Quite simply, it put food on our table. Mine was a middle-class family, and those who rely on support such as universal credit are not a static group, as has been said. Circumstances change: people face bereavement, job loss, or, as in my case, family breakdown. At moments of crisis, that support can be essential.

In fact, both my parents worked in this place as law reporters before the Law Lords moved to the Supreme Court. At no time did anybody imagine I would end up on these Benches. That I have joined the Labour Benches is probably less of a surprise. I have a proud heritage of Labour councillors from my grandparents’ generation, including the chair of Newton-le-Willows District Council, then part of Lancashire: my great uncle, Joe Noon. He taught me to play dominoes and to respect my Labour heritage, and he succeeded in both.

I also give heartfelt thanks to all the staff of the House, the clerks, officials, security and catering staff, and especially the doorkeepers, whose quiet professionalism sustains the dignity and daily functioning of this institution. I also thank Black Rod for his warm welcome and Garter for his guidance. I am deeply grateful to my noble friends Lady Royall of Blaisdon and Lord Coaker for introducing me, and to my noble friends Lady Smith of Basildon and Lord Kennedy of Southwark, not only for their generosity in time of support but for the confidence they placed in me.

I come to this House with a background that spans practice and theory, service and scholarship. For 20 years, I served in the Royal Air Force, including operational tours in the Middle East and Afghanistan, and in the Royal Navy. Those experiences shaped how I understand conflict—not as an abstract concept, but as something that has lifelong and often multigenerational impacts, both on combatants and civilians. Those conflicts still haunt me in many ways, but they also strengthen my determination to engage with politics in relation to defence and security. I wanted to walk towards that fight, not away from it, including standing as a candidate for the Labour Party in the 2015 general election, after I left the Air Force.

After 2015, I turned to academic research. I completed a doctorate examining the politics of air power between the wars in Whitehall. Some of the men who shaped the early Royal Air Force sat on these Benches. I studied their papers in the archives in Victoria Tower. I never imagined that I might one day follow them into the Chamber.

Indeed, 100 years ago, just this Tuesday, Lord Thomson of Cardington, the first Labour Secretary of State for Air and a subject of my research, spoke in an air policy debate in this House. With striking prescience, he warned that, should another European war occur, Britain’s ports and industrial centres would be exposed to devastating attack from the air and that the RAF would be central to national defence. Lord Thomson was tragically killed in the R101 airship disaster on its maiden flight in 1930. I hope that is not an omen for my maiden outing. However, the Oxford Dictionary of National Biography described him as a

“a clear and vigorous speaker, and his cheerfulness and good temper gained him many friends in the house”.

That seems an excellent example for me to at least aspire to follow.

My subsequent academic work has focused on contemporary warfare. I am co-director of the Freeman Air and Space Institute at King’s College London. I have written on many subjects, including organisational culture, air power, missile defence and deterrence in this increasingly dangerous and divided world. I commend my noble friend Lady Carberry on her speech in the International Women’s Day debate, when she highlighted continuing toxic behaviours in the Armed Forces—an issue that I have not and will not shy away from raising.

I began by explaining why the Bill has a personal resonance for me. It matters so much more for the 450,000 children it will lift out of poverty. I saw the impact of financial hardship on children while volunteering in food banks for four years.

To finish, some might wonder why a defence and security academic would choose this debate for her maiden speech. Yet the connection is clear: as we have seen time and again, global conflict and instability directly affect the cost of living. Defence, security and economic well-being are deeply intertwined. Britain’s ability to contribute to a more stable world depends on the credibility of our Armed Forces and the deterrence they provide. We are all affected by defence and security.

Your Lordships will have different perspectives and backgrounds from me. I am looking forward to working with and learning from you.

15:53

[Baroness Lister of Burtersett (Lab)]

My Lords, it is an honour to follow the wonderful maiden speech of my noble friend Lady Antrobus, which came from both the heart and the head—there is no better combination. As she said, she comes to your Lordships’ House with a background that spans practice and theory, service and scholarship. She is too modest to say just how eminent her record has been in all those spheres. Her speech demonstrates how valuable her contribution will be to the work of this House, at a time when conflict is engulfing so much of the world. I very much look forward to the wisdom that she will bring to debates on these matters.

My noble friend was also able to bring her personal experience of growing up in a single-parent family to bear on the subject of today’s debate. In doing so, she demonstrated the value of the knowledge that comes from lived experience—something that has helped to shape the Government’s child poverty strategy. She brought home very powerfully why it is wrong to suggest that the money spent on the abolition of the two-child limit would be better spent on defence, as the leader of the Opposition said recently. My noble friend’s speech made it clear how the security of the realm and the security of individuals in poverty are intertwined.

This brings me to the Bill. Let us rejoice as we read the death rites on what one eminent social policy professor described as the “worst social policy ever”. As we have heard, what UNICEF UK describes as a “transformative” measure will reduce both the numbers of children in poverty and the depths of poverty. As one mother responded, “Finally all my children will be seen as equals”. I pay tribute to those in government and in civil society who made sure it happened.

The Council of Europe Human Rights Commissioner recently observed that,

“without this step, it would be difficult to imagine an effective overall approach to combating child poverty. It is an important investment in the rights and wellbeing of children”.

He criticised the stigmatising preconceptions about people receiving social security that have marked some political and media reactions to the Bill. These reactions have suggested that somehow spending money on lifting children out of poverty is illegitimate—part of what is dismissed by the Opposition as the “ballooning benefits bill”. This ignores an estimated £50 billion a year hacked off that bill as a result of Tory cuts and restrictions, while official figures show that spending on working-age benefits as a percentage of GDP has not increased and is not projected to increase.

Arguments about the costs of the Bill also ignore, as we have heard, the cost of not acting, in terms of the impact of poverty on public services—notably, health, education and children’s care—and on future employment prospects. We are talking about preventive spending and investment in our children.

It is all too easy for the Opposition to hide their contribution to the worsening of child poverty behind the argument that the answer lies in paid work, full stop. This is despite the fact that, as we have heard, three-fifths of those hurt by the two-child limit have a parent in work and that an estimated 70% of the additional funding will go to that group. More fundamentally, there is a widespread consensus built on academic analysis that removal of the two-child limit is the one most effective measure open to the Government to reduce child poverty at a stroke. To quote CASE at the LSE,

“changes in parental employment, whilst important, will never deliver change to child poverty rates on the scale we need to see. We can only get significant and lasting reductions in child poverty by investing in our social security system. There really is no other way”.

Research by Public First suggests that, when provided with information about the cost-effectiveness of abolition of the limit in reducing child poverty, voters’ support for the measure increases significantly. The same is true of the overall benefit cap.

I am afraid that, here, I have to introduce a note of dissent, which I am sure will not surprise the Minister. It echoes the powerful maiden speech from the noble Baroness, Lady Teather. The Bill’s impact assessment estimates that in 2029-30 around 50,000 households will not gain and 10,000 will only partially gain because of the cap. I find it depressing that the same arguments are used about needing the cap to ensure work incentives as under the previous Government. Yes, the cap may push some parents into paid work, but by driving parents into deep poverty it creates stress and anxiety about making ends meet that makes them less effective jobseekers. This is not, as Ministers assert, in the best interests of children. Indeed, I remind my noble friend that, when the cap was introduced, the official Opposition supported the removal of child benefit from the cap on the grounds that it is received by equivalent working families and that, therefore, in order to create a more level playing field, it should not be included in the cap. Could this be looked at again, please, from the perspective of the best interests of children?

I also urge that, when the threshold limits are reviewed next year, a decision is made to uprate them annually in line with the UC standard allowance, so that we do not see more families pushed into deep poverty by the cap each year. As it is, they have been uprated only once since 2016, when they were cut. They are now worth £5,409 less in London and £4,702 elsewhere as a result.

Two other concerns have been raised about some families who will not benefit or fully benefit from the Bill. The first, raised by CPAG, of which I am honorary president, and Advice NI, relates to some families who, having migrated to UC through the managed migration process, may lose some of their transitional protection. The other, raised by Resolve Poverty, concerns families who may lose as a result of the knock-on effect on their council tax reduction. I do not think that either is mentioned in the impact assessment and I wonder whether my noble friend can throw any light on the numbers likely to be involved.

To return to the good news, the Bill will, in the words of a mother of four quoted by CPAG,

“make a world of difference”.

As the cornerstone of the first UK-wide child poverty strategy since 2010, it symbolises what a Labour Government can do to build a good society.

16:00

[Baroness Bennett of Manor Castle (GP)]

My Lords, I thank the noble Baroness, Lady Sherlock, for introducing this Bill. Her passion for this policy is evident and I am sure that she is very glad finally to bring it to us 615 days after the current Government took power. The Green Party called for the end of the two-child benefit cap during the 2024 election and has continued to do so subsequently.

As the noble Baroness said, this policy was introduced by the Cameron-Osborne Conservative Government in 2017, deliberately choosing to put children into poverty—children who had done nothing to deserve that situation. It was a cruel policy and it is very good news that it is finally going. I offer congratulations to the many campaigners who have worked for this day, including Labour Back-Benchers in the other place. It is a great pleasure to follow the noble Baroness, Lady Lister, who, I have no doubt, has been working very hard on this and rightly identified where the Government urgently need to go further, which is where I will particularly focus.

This is a missed opportunity, as it fails to act on the household benefit cap. According to Z2K, the charity that aims to fight poverty, at least 150,000 children in larger families will see no benefit at all because they are subject to that separate benefit cap. The household benefit cap means that many larger families will be trapped in deep poverty. In a case study cited by Z2K, Maryam is a lone parent of three who fled domestic abuse and now relies on universal credit. She has been affected by the two-child benefit limit and the benefit cap and is left with just £25 a week for the family to live on after rent. Even with today’s Bill, her income will not increase at all. If the benefit cap was lifted alongside it, it would allow her to meet her basic living costs and escape severe destitution.

There are also the families affected by disability. The Government’s child poverty strategy highlights that children living in families where a household member is disabled are at particularly high risk of both poverty and deep material poverty. Yet, under the changes in the universal credit legislation, financial support for seriously ill and disabled people under universal credit will be reduced by £215 a month. For a disabled family with three children affected by this, that universal credit change will wipe out 62% of the benefits from the two-child limit abolition. Policy in Practice, which did some very valuable work, found that one in 10 households currently held back by the two-child limit will not gain at all when the policy is reversed and one in 10 families will see only part of their potential gain as they become benefit-capped through the policy.

I am citing those figures, and I am sure others will come up with other figures, because there are no official figures on this. In fact, I asked the Minister in a Written Question in December for the Government’s figures on how many families who would have had money from the end of the two-child benefit cap would be hit by the household benefit cap. The Answer that I got on 5 January was:

“The requested information is internal analysis that is being quality assured to official statistics level. Plans to publish this in due course are ongoing”.


I wonder whether the noble Baroness can tell me how that is going.

Looking at the overall situation, the Institute for Fiscal Studies estimates that, without further policy action, child poverty rates will have crept back close to the 2024-25 level by the end of the forecast period in 2029-30, leaving a change of just 0.4% in those poverty levels. Another thing aside from the overall benefit cap is the local housing allowance, which is currently wildly inadequate.

I have two final brief points. I welcome the three maiden speakers today and look forward to those from whom we have not yet heard. They are obviously interested in child poverty but I urge them to think about branching out, as they find their feet in this House, into other areas that impact it. I spoke yesterday in the Moses Room about financial regulation. That is crucial to child poverty and a threat to the security of us all. Please think about engaging; do not just leave it to the banking insiders but pick up issues such as that as well.

Finally, to respond directly to the noble Baroness, Lady Stedman-Scott, I am slightly surprised that, as the Conservatives are very into history, their leader has not really looked into the history books on the Boer War. British society and this place became very concerned that poverty, poor diet and poor housing meant that young men were not fit to fight for Britain, because of child poverty. If you are going to recruit 20,000 more soldiers, how will you do it from a society blighted by child poverty?

16:06

[Lord Babudu (Lab)]

My Lords, I look forward to hearing the remaining maiden speech, from my fellow newcomer and noble friend Lord Walker of Broxton. I congratulate the noble Baronesses who have delivered excellent maiden speeches already. Before I get to the substance of my contribution, I declare an interest as the executive director of Impact on Urban Health, part of an endowed foundation that funds organisations that have contributed to the Government’s child poverty strategy, including Child Poverty Action Group and Changing Realities.

In preparing for this debate, I was heartened to read of the extent of cross-party consensus on the need to address child poverty. Given how it has risen over the past 14 years, we must be clear that the current approach is not working. Building on contributions from other noble Lords, I will speak briefly about how people come to be on universal credit and run up against the two-child limit, who ends up in that situation and what it costs.

First, on how it happens, as we have heard, around half of those affected by the two-child limit were not on universal credit when they had their children. This is a circumstance that can befall so many of us—a break-up with a spouse, the loss of a job or a worsening of health. These are routes to universal credit for so many. Who ends up running against the two-child limit? It is women, in large part. Of the 450,000 households affected, more than half are headed by single mothers and only around 6,000 by single fathers. Black and ethnic-minority households are up to three times more likely to be affected than white households and 40% of affected households have a parent with a disability. The approach we are taking disproportionately affects women, ethnic minorities and people with disabilities.

What does it cost? We have heard from other contributions that the proposed changes will have a cost of around £3 billion a year, in the end. That is a lot of money by any means, but, stepping back, what is the broader cost of letting this limit stand? Extensive research by Child Poverty Action Group, the Joseph Rowntree Foundation and the Department for Work and Pensions has shown that those affected are more likely to experience poor physical and mental health and less likely to be in employment, education or training or to earn a decent wage in the long run. In several ways, this limit costs people the opportunity to live in good health, to earn well and to contribute to society. We are losing tax contributions and well-being.

I am incredibly sympathetic to the need to control our welfare bill. I sat on the Commission for Healthier Working Lives because I believe that work plays a hugely important part in enabling people to live well. But we must not forget that the majority of those affected by the two-child limit are already in working households. In due course, I will speak to the changes I believe we need in welfare more broadly, but today I want to be clear about one thing: this is not the way to build a healthier society or to save money. It ultimately costs us money. We know that we do not want children to live in poverty and that it is scarring their lives.

We have this opportunity. Removing the two-child limit is simply the most effective way to achieve meaningful progress on reducing child poverty. Other approaches have not been working since the limit was introduced and with the opportunity to achieve the biggest reduction in child poverty within any single Parliament, I urge noble Lords to signal their support for His Majesty’s Government and grasp this opportunity with both hands.

16:10

[Lord Walker of Broxton (Lab) (Maiden Speech)]

My Lords, it was once pointed out to me that this place was designed to intimidate and I am indeed terrified right now, especially given the fabulous maiden speeches before me. That could not be more at odds with the kind and helpful welcome that I have received from every corner of this House—Black Rod, the clerks and officials, the doorkeepers, the catering staff, the police, and my gracious supporters and noble friends Lady Smith and Lord Blunkett. In fact, the cordiality of noble Lords who I have met on all sides of this Chamber has been lovely. I hear the vibe in the other place is somewhat different, so thank goodness I failed to obtain a seat there. In fact, it has been quite an unexpected and circuitous route for me to be standing here today, but here I am and I intend to contribute to the very best of my abilities.

I never met either of my granddads. They both worked hard down coal mines and died too young. My mum and dad met at school in West Yorkshire. Given their backgrounds, they knew all about graft. They tried no end of things to better themselves, from peddling strawberries on a Welsh roadside to running a late-night fish and chip shop and sending out chain letters, all before landing on the idea in November 1970 of selling loose frozen food from a tiny shop in Oswestry. Dad worked the stock and Mum the checkout. He wanted to call the business Penguin; fortunately, Mum won that debate and Iceland was born. As a kid, I had the privilege of being able to sit around the dinner table and listen to their conversations about what it takes to build something brick by brick—the highs and the lows, and the need for persistence and resilience. I promised myself that I would make the very most of what good fortune I had been dealt.

That resolve has carried me to the summit of Everest. It has helped raise large amounts for charity and driven me to campaign on many environmental and social issues from palm oil to plastics, from infant formula to ethical credit. When making my own way in the world, I was adamant about one thing: I did not want to sell frozen peas for a living. Instead, I qualified as a chartered surveyor before moving to Poland, starting a property company and becoming the entrepreneur I had always dreamed of. We made many mistakes, somehow survived the great financial crash, and today my firm Bywater is the leading low-carbon mass timber developer in the UK.

Joining the family firm was never really on the cards, but when my dear mum was diagnosed with early onset Alzheimer’s, I realised that my own time might be limited and I wanted to protect the amazing legacy she had created with Dad. I can tell you that high-volume, low-priced food retailing is a bit different to collecting rents. It is cutthroat and all about value. I hope the value that I can bring to this place is some high-street realism, shining a light on what I have learnt as a retailer and an entrepreneur, amplifying the voices not just of business but also of the millions of weekly customers that we serve across 1,000 communities around the UK.

In many ways, Iceland is a barometer of Britain and, right now, those communities are struggling. The cost of living crisis means the basic affordability of everyday items is out of reach for many. That is why in my new role as Cost of Living Champion to the Prime Minister I will be relentless in pursuing outside ideas and fresh thinking, and asking uncomfortable questions.

Recent events in the Middle East have made this both more important and more challenging than ever. But I like a challenge, so I am pushing No. 10 to use its emergency powers to protect consumers from opportunistic rip-offs by convening a weekly COBRA-style committee of regulators to act in real time to protect consumers. I want to bring in the energy companies and petrol retailers to hold them to account.

As well as affordability, poverty comes from a feeling that you cannot access basic services—a sense of an unequal system creating financial injustice and of Westminster politicians not listening. To cite the economist Amartya Sen for the second time in this debate, it is about a lack of the agency to develop all of one’s potentialities. The only way we can tackle this is through collaboration between business and government. Business needs to act with the utmost kindness, respect and obligation to all its stakeholders, not just its shareholders. On the flip side, government needs to remember well that it is only private enterprise that generates the wealth our nation so desperately needs to fund public services, and to spend that money wisely.

Speaking of which, that little shop I mentioned in Oswestry was started with a £30 loan from my grandma. It grew into what is today the biggest business in Wales, which, in the last 20 years alone, has proudly contributed more than £1.3 billion to the UK Treasury. I directly thank our team of 30,000 amazing Icelanders for making that possible. Shopkeeping is tough, but it is noble.

I turn to the topic of the debate. We see the impact of poverty in our stores every day as customers struggle to put food on the table to feed their families. We have taken up many initiatives of our own to try to help, from boosting Healthy Start vouchers to creating interest-free microcredit schemes which prevent the most vulnerable from falling into the hands of predatory loan sharks. We have also led many successful campaigns, such as making infant formula more affordable or becoming the biggest recruiter of ex-offenders in the UK, which is good for society, business and the economy.

Ultimately, there is a limit to what any business can do, so I am delighted to support this Government’s actions to lift hundreds of thousands of children out of poverty by removing the two-child cap. Socially, morally and fiscally, it is undoubtedly the right thing to do. Alongside this targeted intervention, remembering that a Government’s responsibility is to spend wisely, we must also reattain our fiscal prudence with our country’s welfare spending. I support the Labour Party, not the benefits party. It should strive to provide a safety net for those in real need, not those making a lifestyle choice. In particular, we must prioritise getting many more of our young people out of the NEET cul-de-sac and back to participating in society; otherwise, we are complicit in destroying their life chances. Acting on this is also a moral obligation.

I conclude by paying special thanks to my own family: my irrepressible dad, who has supported me at every turn, and my mum, who I know is looking down from the gallery in the sky today. Finally, I thank my two daughters, and my wife, Rebecca. She is the kindest, strongest, most beautiful person I know. I thank her for putting up with me. I hope that noble Lords will enjoy putting up with me too.

16:18

[Lord Bird (CB)]

I say “well done” to the noble Lord, Lord Walker. I was confused when I was asked to follow the noble Lord and, in the tradition of the House, to praise him. I thought to myself, “I don’t know anything about Walkers crisps”. That was the only Walker I knew. Then I thought, “Ah no, it is Johnnie Walker”. For a while I was confused, but I got there in the end.

What really excites me about what the noble Lord is doing, as well as putting a lot of people into work, is the idea that he extended the hand to people who had been banged up. He has given jobs to people who were in prison. I am glad that the noble Lord is in competition with Timpson. I think, in a way, he is a bit ahead of it and maybe it is going to have to catch up. It is a good bit of competition. The only problem I have with the noble Lord—and I really do have a problem—is: where was he when I needed him? I remind noble Lords that I am an ex-offender.

I turn to the Bill. What a wonderful Bill, to get rid of something like this. We may like it or not; we may or may not be with the noble Baroness, Lady Stedman-Scott, wanting to give hand ups rather than handouts. I have to say that the noble Baroness stole that from me; she knows that. I was the first person in the United Kingdom to use those terms, and I stole them from Bill Clinton, who stole them from Jesse Jackson. Is that not interesting? Is it not wonderful that we can talk about a hand up, not a handout? The whole of my working life, since starting the Big Issue 34 years ago, has been about giving people a hand up, not a handout.

My mother had six children. Every year that she had a baby, she got poorer—and poorer and poorer. Big families are not good for the bottom line. They are not good for you. But the problem with this Bill, and where I fall out with our Conservative friends, is that while it may punish mum and dad, it really punishes the children. To me, if we need anything in life today, it is to be behind our children. Our children are being undone before us: mobile phones and social media are undermining them. Our children are really at the sharp end of things.

I come from the pre-social security period. We were brought up with very little help from the state—in the 1950s and 1960s, there was none of that. We got five shillings per child: that was about one pound and 10 shillings for a family of six boys. Because Britain is a low-wage and low-investment economy, British capitalism is really good at making slithers of money out of jobs that are low-paid. It is very difficult now for a lot of people to nobly go out to work and earn enough money to feed themselves and their children, even though they are doing a 40-hour week. We are a low-wage economy because we are a low-investment economy.

Capitalism is quite happy with that. It does not matter if you make millions of pounds out of slithers of profit, or whether you buy and sell things that are worth £50,000 each. This is the thing that I came into the House of Lords to try to sort out: I came in to dismantle poverty, not to make the poor more comfortable, nor to keep them outside as though they were a different species. I have listened to the debate so far. I am not sentimentally attached to the poor; I do not cry over them. I think there are too many people who cry over the poor and who do not do anything. I want to get the poor out of poverty. I want to get the poor into a situation where they can make decisions about their own lives, where they can have the kind of life that they want, where they can get rich and socially mobile and get out of poverty. There is only one cure for poverty and it is not the state. The only cure is social mobility. If you get social mobility, you are out of it.

The funny thing is that most people in Britain, even Conservatives, will be a few generations away from the coalface. They will have morphed their way to better times. The problem is the inheritance of poverty—for example, 90% of the people I have worked with in prisons and on the streets come from poverty inherited from their parents. Until we work on that, we will not get anywhere.

16:25

[Lord Watson of Invergowrie (Lab)]

My Lords, it is common for noble Lords to start their speeches by saying that it is a pleasure to follow either a noble Lord or a noble Baroness, and that is generally true. There are certain circumstances when it is not true. A number of speakers in this House are just so impressive, often speaking without any notes, that it is a very daunting prospect to follow them—and the noble Lord, Lord Bird, is undoubtedly one of them.

I pay tribute to my new noble friends Lady Antrobus and Lord Walker and the noble Baroness, Lady Teather, all of whom made speeches of quality, with a passion and fluidity that show that they will make major contributions to your Lordships’ House in the months and years to come.

Turning to the Bill, I am very pleased that we have got to where we are today on the removal of the two-child limit, but I cannot disguise my regret that it took so long. Be that as it may, as of next month, the two-child limit will no longer apply. In a typically powerful opening speech, my noble friend the Minister highlighted how many children will be taken out of poverty by the final year of this parliamentary term. Add in the introduction of breakfast clubs and the extension of free school meals, and that figure will rise beyond half a million. Even more impressive is that all that is before the Government’s child poverty strategy properly gets under way—a 10-year plan aimed at delivering a lasting reduction in child poverty by tackling its structural causes.

The noble Baroness, Lady Stedman-Scott, spoke about the value of work, but during her party’s time in government, it completely failed to ensure that parents in work could keep up with the cost of living. In the Tories’ last year in office, 3.2 million children in working families were in poverty—up from 2.1 million when they came to power in 2010. More than any other policy, the two-child limit introduced in 2016 was responsible for driving child poverty to its current record high. To be honest, we should not be too surprised, because one of the last acts of the Labour Government who demitted office in 2010 was the Child Poverty Act, part of which was to establish a child poverty commission to tackle structural issues around child poverty. It took the incoming Tory and Lib Dem Government two years to introduce it, but they called it the Social Mobility and Child Poverty Commission. As the noble Lord, Lord Bird said, social mobility is of course very important, but the focus was meant to be on child poverty, and it had that name. Four years later, “Child Poverty” was dropped and it became the Social Mobility Commission. I think that reflected the fact that child poverty simply was not a priority for that Government and subsequent Tory Governments.

More than 60 children’s charities and other campaigning groups have welcomed the Bill. Tellingly, only right-wing organisations such as the Institute for Public Policy Research, the Centre for Social Justice and the self-styled TaxPayers’ Alliance—I am a taxpayer, but it certainly does not speak for me—have questioned the repeal of the two-child limit. Often, arguments in favour of retaining the two-child limit are couched in language such as a “benefits bonanza” or “welfare junkies”, appallingly pejorative terms that demean many people who are in receipt of state support while in employment, doing jobs where their pay is so low or unpredictable that they need extra help just to survive.

I say to my noble friend the Minister, with whom I worked on the shadow education team and for whom I have huge respect, how much I welcomed her use of the term “social security” in her speech. Can we please ditch the terms “welfare” and “benefits” and put “social security”, the description that we used to use, in their place? That is exactly what state support for families living with poverty is. Why should we not use the proper term? We can find a term that is not demeaning or in any way pejorative to people in need of help.

At Second Reading in another place, the shadow Secretary of State for Work and Pensions questioned the affordability of the repeal of this legislation, something that has been repeated today. I would flip that coin and ask: what about the affordability of not ending the limit, which my noble friend Lady Lister called preventive spending? Can the cost of lower educational attainment, poorer mental health and a much higher likelihood of being NEET ever be tolerated? Shamefully, I have to say that during the 14 years of Tory and the Tory-Lib Dem Governments, it too often was. We can say that it will not be tolerated any longer, because this Government are developing the child poverty strategy to which I referred earlier. That will result in children receiving the social security and social solidarity that they deserve and having better health and education outcomes, enabling more of them to build careers that will provide stable lives for families of their own. That will be the hugely beneficial outcome of this Bill, which is in itself hugely welcome.

16:31

[Baroness Dacres of Lewisham (Lab)]

My Lords, before I begin my substantive contribution to this debate, I want to pay tribute to those who have made their maiden speeches this afternoon. It has been wonderful to learn so much more about each of them and inspiring to hear them.

This Bill represents one of the clearest and most immediate steps we can take to reduce child poverty in this Parliament. Few policies in recent years have had such a direct and concentrated impact on larger families as the two-child limit. Its removal is therefore not just symbolic; it is practical, targeted and necessary. Around 470,000 households are affected by the two-child limit, impacting between 1.6 million and 1.7 million children. Six in 10 of those households include at least one adult in work. These are working families, as many have mentioned this afternoon. The parents rise early, commute long distances, juggle childcare and shifts, and contribute daily to our economy and our communities. Yet despite those efforts, many remain in poverty. That is a reality of in-work poverty today.

Families lose around £3,400 for each third or subsequent child not covered by the child element. For households already balancing tight budgets, that loss is not abstract; it means difficult trade-offs between heating and eating, falling behind on rent or relying on food banks. Behind every statistic is a family trying to provide stability and reassurance to children while quietly carrying the financial strain. The Joseph Rowntree Foundation has consistently identified the two-child limit as a key structural driver of rising poverty among larger families. Its research shows that children in families with three or more children now face poverty rates exceeding 40% after household costs. Poverty among larger families has risen markedly since the introduction of this policy, widening inequality between children based purely on their family size.

Joseph Rowntree Foundation modelling demonstrates that removing the two-child limit would significantly improve living standards for the lowest-income households. Scrapping the limit would more than halve the projected real-terms decline in income for the poorest third of households compared with retaining it. Government analysis similarly indicates that hundreds of thousands of children would be lifted out of relative poverty.

The Bill also sits within a broader effort to support families and strengthen living standards. It complements the expansion of free breakfast clubs, saving parents up to £450 a year, and the extension of free school meals to all children of households on universal credit, benefiting half a million more pupils. That broader approach matters because poverty is rarely the result of one single factor; it is shaped by wages, housing costs, food prices, childcare pressures and access to opportunity. Addressing it therefore requires income support and practical support, nutritious food at the start of the school day, predictable childcare that enables parents to work, and a social security system that reflects the real cost of living.

The heart of this legislation affirms a simple but vital principle that no child’s opportunity should be limited by the number of siblings they have, and that working families deserve stability, dignity and fairness. The measures before us today will not solve every challenge faced by families, but they will make a real difference to the lives of many children across this country—a responsibility worthy of this House. For those reasons, I support the Bill.

16:36

[Baroness Shah (Lab)]

My Lords, I start by congratulating my noble friends Lady Antrobus and Lord Walker of Broxton, and the noble Baroness, Lady Teather—it is always great to see a member of the Brent family on the Benches—on their brilliant maiden speeches. I am grateful for the opportunity to speak at Second Reading. The two-child limit was introduced by the Conservative Government in 2017 and its consequences for child poverty were felt immediately. On taking office, the Labour Government inherited an economy in a fragile state and have worked deliberately and responsibly to create the conditions in which bold action on child poverty could be taken. The Bill is the result of a Government who have prioritised why they came into power.

Let us be clear about what this policy has done to families across our country. The Child Poverty Action Group has described it plainly. This is a “tax on siblings”. It severs the fundamental

“link between what children need and the support they receive”.

Government data in July 2025 shows that more than 1.6 million children live in households affected by the limit—that is one in nine children in England, Scotland and Wales. That number grows every year. The Joseph Rowntree Foundation’s UK Poverty 2026 report is sobering. For 2023-24, it showed 4.5 million children living in poverty in the United Kingdom. That is a scandal. The Bill is a vital first step, not the last.

The case for this Bill is not just economic; it is educational. Children growing up in poverty already start behind their peers, and the gap widens every year. The Education Endowment Foundation has found that pupils eligible for free school meals are, on average, 18 months behind their classmates by the time they sit their GCSEs. The Social Mobility Commission has shown that children from the poorest households are significantly less likely to achieve the grades needed to access higher education or skilled employment. Poverty does not merely limit what children can afford; it limits what they could become. When we remove the two-child limit, we are not simply putting money into households; we are unlocking potential that this country cannot afford to waste.

For children growing up in households affected by the two-child limit, the barriers begin long before the school gates. Families are unable to afford school uniforms, school trips and even basic stationery—the small things that determine whether a child feels that they belong. Teachers report children arriving hungry and unable to concentrate. The Institute for Fiscal Studies has found that a 10% rise in family income during childhood leads to measurable improvements in educational attainment and earnings in later life. In other words, poverty is not a temporary inconvenience; it is a force that shapes a child’s trajectory for decades. The Bill is an investment in the education of future generations. The IFS, the Resolution Foundation, the Joseph Rowntree Foundation and CPAG alike all say that lifting the limit is the single most cost-effective lever the Government can pull to reduce child poverty.

Then, there is the so-called rape clause, which requires women to prove non-consensual conception in order to secure exemption for a third or subsequent child. It is degrading, traumatising and utterly incompatible with a just society, and I am proud that this Bill will consign it to history.

The Bill before us is not a merely a policy change; it is a moral statement. It says that we will not hold children responsible for the circumstances of their birth. The Resolution Foundation puts the figure as high as 500,000 children lifted out of poverty when the two-child limit’s removal is combined with expansion of free school meals. CPAG has estimated that the long-term cost to society of entrenched child poverty stands at £39 billion a year in lost tax revenue and increased demand on public services. We spend more managing the consequences of child poverty than it would cost to prevent it.

The Bill does not stand alone; it is the centrepiece of the most ambitious child poverty strategy in a generation. Taken together with measures in the Government’s child poverty strategy, these are not tinkering at the edges. This is structural change, addressing the root causes of poverty that has been allowed to deepen over the last 14 years of austerity. This is a rare moment of consensus across major research and advocacy organisations throughout this country. Ending the two-child limit is the single most cost-effective action this Government can take. The moral case is unanswerable, and the time has come. I end by quoting Cicero:

“What society does to its children, so will its children do to society”.

16:41

[Lord Redwood (Con)]

My Lords, I congratulate our maiden speech-makers today and join in the general welcome to them. I draw from the noble Lord, Lord Walker, a very wise remark when he reminded our governing party that it is indeed the Labour Party, not the “Benefits Party”. While I think that all of us here share the passion and the ambition to lift families out of poverty and to make sure that children can have fulfilling lives, in the strong words of the Minister, I think it is more difficult than just making a modest extension in benefit provision for certain families in our society. If only it were that easy, I am sure parties would have done it a long time ago. What we are embarking on, surely, is a very ambitious programme which is trying to help, without interfering unnecessarily, all those families in which the children do not get that right opportunity.

Some children in poor families are let down because there is simply a lack of money. They have loving parents, and if there were a bit more money, they would not have to make such invidious choices about meals and support for the children at school, and trips and outings. Others are let down by adults in their lives who control them, abusing them or spending the money on too much alcohol and drugs, and not concentrating on providing them with the stable financial background they need. Some children are born into families in which there may be plenty of money or too little money, but they lack those other important things. They lack love. They lack support. They lack ambition for the children. They do not provide the guidance that good parents and good grandparents try to provide.

The state cannot be everybody’s parent, nor do we want it to be. The state wisely says that the Government, or a local authority, will intervene and pre-empt the parents only in extreme cases. We are talking about influencing, encouraging and supporting the parents. That can be done by many of us. Everyone here has been on a remarkable journey in their lives to date. Many have overcome considerable difficulties, from background, resistance or opposition, and have achieved great things already, so the more we can get out and talk and engage and encourage, the more it is possible that we can turn on a light in young minds and that they can see that something is possible that the adults around them have not told them about. Or maybe we can enthuse their teachers, who need to put ambition into their lives. There is nothing wrong with ambition; it can be a force for good, and it is releasing children from poor backgrounds if we can communicate to them that maybe they can achieve great things too.

The noble Lord, Lord Bird, said it very well in his remarks on social mobility. But of course, we are interested only in one-way mobility: we want people to be able to move up. We are not so keen on people moving down, and we try to cushion or help if they move down too quickly. The more people we promote, the more people fall below the average; that is the way arithmetic works, but we want to live in a more prosperous society. There will always be people who are relatively worse off, but if it is around a much higher average living standard, then there will be so much more happiness in the world around us.

I say to the Government, given our shared ambitions to get more people out of poverty and give more encouragement to young people, that there are many other things than this Bill that they could or should be doing. The first thing is that it has to be much easier to get a job. Unfortunately, over the last 18 months, there has been a big rise in unemployment, and the combination of high taxes on jobs and on those businesses that need premises in our high streets—the shops and the entertainment and leisure businesses—has contracted the number of job opportunities. This will make it much more difficult for the Government to fulfil their ambitions, because this cannot be done without the good will and success of the entrepreneurs, as represented so ably here today by the noble Lord, Lord Walker.

The strand in Labour which is about the promotion of work and better working conditions is wholly admirable. Whenever I have been fortunate enough to run larger enterprises or be involved in their management, I have always been very encouraging of that strand in Labour. I have wanted people to be better paid, but it must be through bonuses or working smarter, so that the company can serve the public well without going bust. I have always wanted people to see that there is the chance of promotion. Most of us started with jobs we did not really want to do and had to work our way up. That is what ambition is all about.

The Government must think of a much bigger, bolder strategy. Paying extra benefits is not going to do it.

16:46

[Lord Davies of Brixton (Lab)]

I welcome strongly the Government’s decision to abolish the two-child limit. Scrapping it remains the single most effective step that we are taking to reduce child poverty in this country.

As we have heard, abolishing the policy will lift about 450,000 children out of poverty by 2030. When combined with the other measures in the Government’s child poverty strategy, this could lift more than half a million children out of poverty by the end of the decade. This is something that we should be celebrating and shouting from the rooftops. It is an incredible achievement and one of which the Government can be proud.

This is not an abstract statistic. It represents hundreds of thousands of individual children who will grow up with better security, better health and improved opportunities. One noble Lord has asked how the Government can justify the expense and mentioned the £3 billion figure. Quoting the £3 billion figure ignores the costs of child poverty—the poorer health outcomes, the lower educational attainment, the greater pressure on public services and the lost economic potential. Put together, that is an estimated £39 billion. The £3 billion saves the country as a whole £39 billion. How can we not wish to pursue that policy? It is not reckless spending. It is highly targeted and cost-effective, with serious and substantial long-term benefits.

Others have argued that taxpayers should not be expected to support larger families. Many of the comments of the noble Baroness, Lady Stedman-Scott, were about large families. The reality is that, now, only a limited proportion of families have four or more children. Of those families, the great majority are working hard to provide for them. Those who are unable to get jobs are still not to be dismissed as the feckless poor—that is the narrative which is always produced to try to prevent decent human services. The two-child limit has no measurable impact on family planning or the fertility rate.

Every child is to be celebrated and cherished, regardless of their birth order. They deserve enough food, a safe home and a fair start in life. When children are supported to thrive, they do better in school, remain healthier and contribute more fully as adults. That benefits not only those families but all of us—society as a whole. It is important—I think the point needs to be made to the noble Baroness, Lady Stedman-Scott—to note that this is not only about families out of work. As other speakers have explained, the majority of those who are caught by the current policy and will benefit in future are families who are in work.

Unfortunately, I am going to join my noble friend Lady Lister of Burtersett and raise the issue of the benefit cap. I do not think this policy will achieve all its objectives unless and until we remove the benefit cap. It was introduced by the coalition Government and it continues to place immense pressure on many families. I should have started by paying testimony to and welcoming the excellent maiden speeches that we have heard today, but it is worth mentioning that the noble Baroness, Lady Teather, can claim credit for opposing the introduction of the benefit cap when she was in government. I am sorry she is not here, but I acknowledge her important contribution to this debate.

To conclude, if we are serious about tackling structural poverty, we cannot remove one barrier, that of the two-child cap, while leaving another firmly in place. Lifting the benefit cap would complement the abolition of the two-child limit and ensure that the gains we make today are not undermined by other restrictions that fail to reflect the rise in the cost of living.

16:52

[Lord Sikka (Lab)]

My Lords, I support this Bill, though I am disappointed that some oppose lifting people out of poverty while constantly supporting greater spending on the welfare of corporations and the super-rich.

Eradication of child poverty could boost the UK economy by around £40 billion a year. Children in poverty struggle to realise their full education and employment potential, which leads to lower earnings and contributions to the public purse. They are more likely to have healthcare problems, make greater demands on public services throughout their lives and have shorter life expectancy. Lifting children out of poverty makes perfect economic and moral sense.

The £3 billion expenditure will boost the spending power of the poorest families and stimulate local economies. The real cost to the public purse would be much less, because it would, in large part, return to the Government in the form of VAT, other indirect taxes and lower demand on public services. The Opposition can support redistribution of income and wealth by, for example, calling for alignment of the taxation of capital gains with wages, which would raise £14 billion. There would be plenty there to cover the costs of this measure, but they do not actually call for redistribution.

I am concerned that thousands of children will not receive any improvement from this Bill because of the overall benefit limit, which is set at around £22,020 a year for most families and £14,753 for single adult households. Some 119,000 households have their universal credit capped and 82% of benefit-capped households include children. Can the Minister explain the impact of the overall benefit cap on child poverty and its relationship with the Government’s strategy for reducing or eradicating child poverty?

Child poverty is linked with parental poverty, so we need a strategy for that. The median gross wage of a UK employee is £31,056, or £25,880 after income tax and national insurance. Graduates take home even less. Inevitably, 14.2 million people live in poverty, and 25.3 million people live below minimum income standards. In other words, they lack the income to meet material needs and to enable participation in society. This comprises 48.6% of children and 35% of working-age adults. Some 81.6% of children in lone-parent families are growing up in households with inadequate incomes.

Those who oppose the Bill should be reminded of the horrific consequences. For example, the UK has a higher rate of infant mortality compared with peer countries, because many women cannot afford good nourishment, not only before but also during pregnancy. Due to poor food and living conditions, British five year-olds are up to seven centimetres shorter than children of the same age in Europe. One in four young people in England has a mental health condition, and illnesses such as rickets and scurvy have returned. Altogether, some 7 million children are growing up in households which lack the income needed for a dignified standard of living. So, there is a clear need for an effective strategy for parental poverty eradication.

Trickle-down economics has long failed. Average real wage has hardly moved since 2008; workers have no say in how wealth generated by their brain and brawn is to be shared; there are no curbs on profiteering; some 3 million people are malnourished or are at risk of malnutrition; and the poorest 20% pay a higher proportion of their income in taxes than the richest 20%. Due to the visible hand of successive Governments, the bottom 50% of the population has less than 5% of the wealth, and the bottom 20% has only 0.5%. Such an environment cannot banish child poverty. So can the Minister say something about how the Government are going to develop a comprehensive strategy for the eradication of parental poverty?

16:57

[Lord John of Southwark (Lab)]

My Lords, as an old-timer in this place, I congratulate my noble friends Lady Antrobus and Lord Walker, and the noble Baroness, Lady Teather, on their brilliant, inspiring and moving maiden speeches.

A Labour Government are about nothing if they are not about reducing poverty and inequality in our society: breaking down the barriers that separate rich and poor and opening opportunities to all, whatever our background. That is why I am so pleased to be speaking in this debate and in support of the Bill, which sees the Labour Government removing the two-child limit on universal credit. I am pleased that it is just one part of the Government’s comprehensive child poverty strategy, which aims to lift 550,000 children out of poverty by the end of this Parliament.

The noble Baroness, Lady Stedman-Scott, said there was a fundamental question in this debate. I say the fundamental question is why we have so many children living in poverty in this country. It is shocking that in 2026, in the world’s sixth-largest economy, around 4.5 million children live in relative poverty. It is even more shocking to consider than in 2010, at the time of the last Labour Government, that number was 2.3 million, having fallen from 4 million in 1997—figures I took from a paper prepared by the noble Baroness, Lady Teather. Our own national history shows us that child poverty can be tackled in a meaningful way if the Government of the day are willing to act. Those who oppose the Bill today are on the wrong side of history.

However, even if the Government’s objectives in this Bill and other measures are achieved, we must acknowledge that we will still have a long way to go. The scale of the challenge now makes the task of acting all the more urgent and necessary. A family of four, two adults and two children, living in relative poverty, is, according to statistics I have read, getting by on no more than about £400 a week. That is £400 to pay for heating, electricity, travel, food, clothing and all the costs that any family incurs before you consider anything that might be considered a treat. I need hardly remind noble Lords that that is a figure which is little more than the daily allowance which each one of us is entitled to receive for one day in this House. As others have said, we know that the costs of child poverty do not end when a child reaches the age of 18. They can blight an entire life, with a child growing up likely to earn less, work less and suffer greater ill-health if their life started in poverty.

When I was a local authority leader, I introduced two measures in particular aimed at tackling child poverty and the barriers to health for young people: free healthy school meals for all primary school children and free swim-and-gym use for all residents. As well as giving that hand-up to young people in my borough, we sought to grow our economy to lift even more people out of poverty. That is also the mission of this Labour Government. Today, though, we are talking about that all-important task that government at all levels faces of putting a supportive arm around those most in need. The people this Bill will help are those who need that supportive arm. They are not the feckless or work-shy, as some might claim. As we have heard, 60% of those families who will be supported are already in work, but just struggling to get by.

As the third child in my family, I am not sure how I would have felt if I had known that the state and the Government did not value me in the same way as my siblings; but this is the position we have put too many children in over the last decade. We live in challenging and uncertain times, particularly for children and young people who see a future marked by increased costs for educational opportunities and a significantly changing work environment with the revolution of AI—before we even get to thinking about their security at home and in this country. The mark of any society must be the way in which it looks after its most vulnerable. We rightly protect our older residents. At the moment, we protect some children, but now is the time for us to show that we care about every child who lives in poverty.

17:03

[Baroness Jenkin of Kennington (Con)]

My Lords, I am grateful for the opportunity to speak in the gap, which also gives me the opportunity to congratulate the maiden speakers and say that I look forward to their participation in our work here.

I would like to associate myself with my noble friend Lady Stedman-Scott’s remarks. As the Minister will be aware—but possibly not all noble Lords—my noble friend’s life before she came here, working for three decades for the charity Tomorrow’s People, was dedicated to helping people furthest from the labour market to get and keep a job in order to live an independent life. She knows better than many, and from long experience, that this approach is the best route out of poverty.

At the heart of this debate lies the principle of fairness. Across the country, millions of working families make difficult financial decisions every day about the size of their family and what they can afford to provide for their children. It is reasonable that the welfare system reflects the same considerations. A two-child limit ensures that the system remains sustainable and focused on supporting those who need it most, while also maintaining fairness between households who rely on benefits and those who support themselves entirely through work.

We must also consider the broader responsibility of government to manage public finances carefully. Welfare spending is the largest category of UK public spending, and policies such as the two-child cap help ensure that support remains available for the most vulnerable, both now and in the future. In difficult economic times, choices about public spending are never easy, but responsible government requires that we strike a balance. The Government’s first duty is the security of this country and the British people. We know that defence spending has to increase to fulfil that duty.

The OBR calculates that lifting the cap will cost the taxpayer £2.3 billion this year, rising to about £3 billion by 2029-30, which is unsustainable in the current economic climate. With an estimated 29 million households affected, the cost per household per year is projected to be £80 to £100, which would be an additional challenge at a time when so many are struggling with costs. Our duty is not only to provide support but to ensure that the system remains fair, sustainable and credible for the taxpayers who fund it.

17:05

[Lord Palmer of Childs Hill (LD)]

My Lords, I compliment the maiden speeches of my noble friend Lady Teather, the noble Lord, Lord Walker, and the noble Baroness, Lady Antrobus. They were a credit to this House and we look forward to further contributions, which I am sure will come from all three noble Peers. I thank the Minister for her excellent summing up of what is happening and what we hope to happen.

These Benches support the Bill and I am very much disappointed with the Conservative Benches for opposing it. It is an improvement on an overdue measure that I have long spoken in favour of. It removes one of the ugliest features of the social security system—the two-child limit in universal credit. My noble friend Lady Teather spoke eloquently on this when she said that more than 1.5 million children are affected and denied the essentials they need to thrive. For my party, this change goes very much to the heart of who we are. We exist to build and safeguard a society that is free, open and fair. We want a society in which no one is enslaved by poverty, ignorance or conformity. That is why opposition to the two-child limit is not a new or convenient position for us. I say this as a chartered accountant who would love to balance all the books, but a fair society does not balance the books on the backs of the children.

There is a moral case for this change. The two-child limit has always rested on a deeply flawed premise. It effectively says that a third or fourth child is somehow less deserving of support than older siblings. But children do not choose the circumstances of their birth. We should know that. They do not choose whether their parents face illness, bereavement, separation, disability, insecure work or rising living costs. They do not have much say in being born, either. Yet this policy has punished children for circumstances entirely beyond their control.

On the scale of the problem and why it matters, we are debating this against the background of child poverty. About 4.5 million children in the UK are living in poverty—nearly one in three. Child poverty is not an abstract statistic; it is hunger, cold homes, anxiety, missed opportunities and diminished life chances. It is also increasingly deep poverty. Millions of children are now living well below the poverty line. The burden falls disproportionately on larger families, lone parent households, households with disabled people and many ethnic minority families. The Bill matters because it begins—only begins—to unwind a policy that is one of the major drivers of rising deep child poverty.

On what the Bill does and why the Liberal Democrats support it, the Bill removes the two-child limit in universal credit so that support is available for all eligible children in a household, not only the first two. It applies across Great Britain and Northern Ireland, with commencement from assessment periods starting in a few weeks’ time on 6 April 2026. We on these Benches support the Bill because it is the right thing to do for children and families. It is targeted and effective. It is good value in public policy terms. The Government’s own assessment and the evidence cited in various briefings make it clear that removing the limit is among the quickest and most cost-effective ways in which to reduce child poverty.

There is a practical case. This is not only social policy but economic policy. Children who grow up in poverty are more likely to experience worse educational outcomes, poorer physical and mental health, and fewer opportunities in adulthood. That means that child poverty stores up pressure for the NHS, schools, local services and the welfare system itself. It also means lost productivity, lost skills and lost tax revenues. In other words, child poverty is not only a moral failure but an act of economic self-harm. If the policy is removed, there will be gains in household income and significant reductions in relative poverty and deep material poverty. The Bill is a down payment on healthier families, better outcomes and a stronger country.

I state, because of some of the comments from the Conservative Benches, that between 2010 and 2015, the proportion of children in absolute poverty before housing costs dropped from 18% to 17%. Under the Conservative Governments between 2015 to 2023, this proportionately increased back to 18%. That is their policy, and the Conservatives are putting that forward again.

The Bill asks a basic question: do we value each child equally? The Liberal Democrats believe that the answer must be yes. Children are not an afterthought to public policy. They are not a line in a spreadsheet—and I am all for spreadsheets. They are, as has been said, 20% of our population but 100% of our future. By removing the two-child limit, we will take a meaningful step towards a country that is fairer, healthier and more hopeful. We on these Benches support the Bill and will work constructively to build on it. For those reasons, these Benches support the Bill’s Second Reading and are disappointed with the Conservatives’ refusal to support it.

17:12

[Viscount Younger of Leckie (Con)]

My Lords, in winding up for the Opposition, I say that we have had three remarkable maiden speeches this afternoon. I will make a few comments about each.

I am so pleased that the noble Baroness, Lady Teather, has recovered and regained her voice. I have no doubt that we will be hearing much of it. I hope that she will rejoin the Parliament Choir; I declare my interest as a tenor in the choir.

I applaud the clear energy, entrepreneurship and communication skills of the noble Lord, Lord Walker of Broxton. I acknowledge that he provides employment to many in the retail sector. I have no doubt that he will have much to offer from his high street experiences and, as he said himself, a fresh way of thinking, however that can be defined.

The noble Baroness, Lady Antrobus, delivered an excellent maiden speech. She will be invaluable in using her experience and knowledge of the Armed Forces, both in the air and terrestrially, in contributing to the House. We have been very lucky this afternoon.

I thank all other noble Lords who contributed to this debate and set out their views with such conviction on what is—in my view and in our view on this side—a deeply mistaken policy. I say that as someone who is proud of the compassion that defines this country. The British people are generous, fair-minded and instinctively willing to help those in genuine need. That spirit of neighbourliness and of looking out for one another is something we should always cherish and protect. The noble Baroness, Lady Teather, is right: handling language and collaboration and getting these matters right are important factors in communities, where matters can be extremely sensitive.

However, compassion must also be balanced with fairness, as my noble friend Lady Jenkin alluded to. I am afraid that this policy tips that balance too far the other way. It asks those who work hard, pay their taxes and support the system to shoulder ever-greater burdens while expanding reliance on the state in a way that risks undermining the very foundations that sustain it.

It would be easy for me to say that raising the cap would be the right thing to do, and I was very pleased to note that the right reverend Prelate the Bishop of Leicester and, indeed, my noble friend Lord Redwood acknowledge that we all want to reduce child poverty—I personally want to, we all want to, but how we do it continues to divide opinion; that much I think we can agree on.

I was struck by the remarks from the noble Lord, Lord Bird, in his powerful speech. I believe his clarion call for greater social mobility is a key point: a hand up, perhaps, to a better future—or, indeed, to any future for those who are really wallowing in poverty, particularly children. The noble Lord, Lord Watson, echoed this sentiment.

As my noble friend Lady Stedman-Scott set out, it cannot be right that parents who do the responsible thing, who go out to work, contribute to our economy, and carefully manage what they can afford for their families, are expected to fund a system in which others face far fewer of those same constraints. At its heart, that is the problem with the Bill: it seeks to address a serious issue but does so in the wrong way. In trying to demonstrate compassion, it risks undermining fairness and, without fairness, surely public confidence in the welfare system itself will begin to erode. Is it any wonder that an overwhelming majority of the country oppose this policy, as my noble friend Lady Stedman-Scott said?

This policy comes at a time when our welfare system is facing what can be described only as a mounting crisis. At the Spring Statement, the OBR confirmed that welfare spending is set to rise by £74 billion over the next five years. Forecasts also show that spending on health and disability benefits alone will be £1.3 billion higher than previously expected. At the same time, the economic outlook is deteriorating. The OBR now forecasts unemployment reaching 5.3%, higher than the 4.9% peak predicted only at the time of the Budget.

Despite the Chancellor’s repeated claims of responsible fiscal management and careful stewardship of the public finances, the reality is that welfare spending continues to surge. The total welfare bill will rise by £18 billion this year alone, then by roughly £15 billion every year across the forecast period. In total, the OBR expects the Government to spend £333 billion on welfare this year—10.9% of our entire economy. By 2030-31, that figure is projected to reach £407 billion—11.7% of GDP. The think tank Onward has warned that on this trajectory welfare payments will, in effect, cost individual taxpayers around £3,000 a year by the end of the decade as Britain’s benefit system edges towards becoming unsustainable.

The noble Baroness, Lady Sherlock, stated in her opening remarks that some think it is all about cost. Cost is a big factor, but it is not the only one, and I make the point that other benefits are there, including for larger families, to help with essential household needs, such as the household support fund directed through local authorities.

I understand the points the noble Lord, Lord Babudu, and the noble Baroness, Lady Sherlock, made about those being in work making decisions at that time about family size and then finding themselves out of work—that is an obvious and important point—and the need, which I feel strongly about, to support single-parent families.

My noble friend Lord Redwood eloquently iterated that there are other reasons why children wallow in poverty, such as dysfunctional family life and, as he said, which is very important, a lack of love. The noble Lord, Lord Sikka, made the very important point about the need for better pastoral help for parents. Handouts are not just the key. In short, the system is lurching in the wrong direction. Costs are already enormous and continue to climb at the same time as unemployment is expected to rise. This is simply not a sustainable position.

We must remember who ultimately bears that cost. An additional £3,000 a year does not fall on some abstract entity called the taxpayer, but on ordinary working people—teachers, nurses, those who work in the retail sector and families who rise early, work long hours and try to balance their household budgets without the benefit of generous state support. These are not the super-rich; they are the people who make up the backbone of our country. Before we expand the welfare state still further, we should at least ask ourselves what burden we are asking them to carry. I am not convinced that the Government have asked a question more searching than how they can placate their Back-Benchers for another few weeks. My noble friend Lady Stedman-Scott was absolutely right to point that out. It has to be said, although I see the Minister shaking her head.

My noble friend Lady Stedman-Scott set out clearly the fundamental flaw in the Government’s logic. Ever-increasing welfare spending does not solve poverty; it helps conceal it. A welfare offer of this scale risks doing something else far more damaging. It will begin to erode the very foundations on which the welfare system depends. The system ultimately relies on a balance—a word we have heard this afternoon. Those who can work do so, and through their work they support a safety net for those who genuinely cannot.

However, that balance is now under real strain. Welfare spending is forecast to rise by around a fifth over the next five years, at the same time as one in five working-age adults is not in work. We are well aware of those statistics. That trajectory should concern all of us. The welfare state was never intended to become an alternative to work. If too many people come to rely on benefits rather than the rewards of employment, the model will simply cease to function. I was struck by the strong points made by the noble Lord, Lord Walker, in this area. The system depends on contribution as well as support.

Yet instead of confronting that challenge, the Government’s response has been to step away from reform and move in the opposite direction, expanding spending commitments that the public finances can scarcely sustain. A welfare system that discourages work does not reduce poverty in the long term but risks entrenching it. If we are serious about giving people the best chance of a secure and independent life, that is a reality we cannot afford to ignore. This policy tips that balance even further in the wrong direction and the Government should be really concerned about the long-term effects that it risks having on our public finances and the welfare system as a whole. Labour Back-Benchers, I fear, are too wedded to the idea of the welfare state. It is akin to somebody inching their way along the branch of a tree further and further until it snaps.

When we step back from the detail of this debate, the question before us is very simple: what kind of welfare system do we want for this country? Do we want a system that is fair to those who fund it, sustainable for the long term and focused above all on helping people into work and independence, or do we want a system that grows ever larger, more expensive and more detached from the principle that work should always pay? The British people instinctively understand that balance. My noble friend Lady Stedman-Scott pointed out the statistics and polling. They are compassionate, but fair. They believe in helping those who genuinely need support, but also that those who can work should do so and that the system should never place the greatest burden on those already doing the right thing. For that reason, and in the interests of fairness, sustainability and the long-term health of our welfare state, I cannot support the Bill and I firmly believe that the cap should be reintroduced as soon as possible.

17:23

[Baroness Sherlock (Lab)]

My Lords, I am so grateful to all noble Lords who have contributed to this debate. I love listening to maiden speeches, when we get an insight into the range and depth of experience coming into this House. Today we heard three magnificent examples. If anyone outside is listening, that exceptional richness of experience is what this House can bring to debates. We have heard about defence and air power; conflict and resolving conflict; climbing mountains, both literal and metaphorical; the importance of business; the compelling relational power of tea in the Long Room and learning to play dominoes—I may be better at one of those than the other, but maybe time will tell. I thank all noble Lords so much for coming in and contributing.

In developing our child poverty strategy, we engaged extensively with all kinds of people, including families, campaigners and experts. The aim was to try to work out what would have the greatest impact on the day-to-day lives of children living in poverty. The message was really clear: remove the two-child limit. I am grateful to my noble friend Lady Shah for pointing out the challenges we inherited and why it takes time for Governments to work through dealing with everything that comes out.

The Bill is supported by over 60 organisations, representing anti-poverty charities, which is perhaps not surprising, but also children’s doctors, teachers and health visitors—the people who know only too well the damaging effects of poverty and see its consequences every day. I remain very grateful for the work of the campaigning organisations, those professionals who support our children and all those who pushed for this change, including the Bishops’ Bench. I share the remembrance of the former right reverend Prelate the Bishop of Durham, who pushed for this in his time in this House.

The Bill is an investment to deliver a better future for children and for our country. Many noble Lords, including the noble Baroness, Lady Teather, and the right reverend Prelate the Bishop of Leicester, have set out the devastating impact that poverty has on children. Many, including my noble friend Lord Babudu, have pointed out that poverty is not evenly distributed.

Poverty imposes really significant costs on individuals and the country. Let me start with the Official Opposition, because they have set out clearly why they oppose this. It is my experience, in many years in and around politics, that, if you want to defend the indefensible, the first thing you do is set up some clearly false dichotomies. What have we listened to today? “It is children versus defence”. Of course it is not. If I were going to play politics, I would point out that, if the Conservatives felt that passionately about it when they were in government, maybe they should not have cut £12 billion from defence spending in their first term alone; maybe they should not have cut spending from the 2.5% the last Labour Government left, pushing us to raise it to 2.6% by next year; maybe they should have slashed child poverty. They were not choosing between the two things: they attacked both of them. Now, we could have that kind of conversation, or we could have a different kind of conversation. Let us take a step back and look at what actually happens with the policies.

What is the other false dichotomy? I think we fall into making a mistake if we try to set up social security versus work. I am not repeating the figure that 59% of families hit by the two-child limit are in work, in order to make a political point; I am pointing out that our social security system is there to help people in and out of work, and to help them get from being out of work into being in work. If the barriers get in the way of people being able to move into work, the system is not doing its job. Every time we start trying to pretend that this is contrasting people lying in bed all day with the blinds shut with those who go out to work, we do everyone a disservice. Please let us not have that conversation.

What we want to do is recognise that we have to enable work, encourage work and take away the barriers to work—that is really important—and that neither those in nor out of work are static populations: people move between those states, for a whole range of reasons. Our job is to make sure that, for those who can work, they stay in work as much as they can, for as long as they can, and, if they come out, to help them back into it when they can—but, if they cannot, to support them, because that is what we do by pooling risk.

The noble Lord, Lord Redwood, made some very interesting points. I parted company with him when he got to a certain point in his speech, but he made a really interesting point in saying that this policy is clearly not a panacea. The state cannot and should not pretend that it can solve all the problems families have, and the state does not raise children: families do.

The starting point, however, is that, if we want to tackle child poverty, as the noble Viscount, Lord Younger, said he does, the first thing we have to do is stop making it worse: stop tipping more children into poverty every year. The second step is to work out what the barriers are to people moving into work and developing in their lives. The noble Lord, Lord Redwood, mentioned some of those that are nothing to do with money, and the state can only do what it can to try to make it as easy as possible for families to do the right thing: investing in relationships education, supporting families —all kinds of education—and communities and relationships. What the state can do is tackle the things it can do something about. It is definitely not all about money, but it is not not about money: the statistics show really clearly, for example, the impact of poverty on family breakup and on parents struggling to do the right thing by their kids. We need to do both.

The next thing we need to do is create opportunities. I always hate disagreeing with the noble Lord, Lord Bird, because I know that he will come back at me, rightly, but we have to start to move not away from but beyond “handout versus hand up”. I absolutely agree with him that our job is to give people a hand up. He has done that in his time—as, indeed, has the noble Baroness, Lady Stedman-Scott—but I would not contrast that with any support the state gives to those who are struggling when they need it. A lot of what we do is on both those things. Like my noble friend Lord Walker, I have a real interest in how we use my department to help those who are struggling to get into work. Just this week, I was at a conference talking to businesses that are helping ex-offenders into work.

[Lord Bird (CB)]

My Lords—

[Baroness Sherlock (Lab)]

I knew I should not have mentioned him.

[Lord Bird (CB)]

Is it not wonderful that social security can be used as a hand up? That is the point I am trying to make. I am not trying to make the point of work versus social security. I am saying that a hand up is absolutely marvellous. The greatest hand up that I got was a probation officer.

[Baroness Sherlock (Lab)]

Indeed, and that probation officer clearly did a very good job: look where the noble Lord has ended up. Would that they were all that successful. I suppose that that is quite a high bar at which to set them, but I commend it. That is a really great point, and I am now violently agreeing with the noble Lord; but I will move on.

I want the social security system to do its job, and for most people its job is to support them into work, and in work, and to develop them in work. That is very much what this Government are seeking to do.

One of the challenges with universal credit is about assumptions. It was designed to move people into and out of work—to work in and out of work—and when it works it does so very well. All we are doing is making sure that the system works even better than it does. But the assumption that this Government are doing the wrong thing by spending money on tackling child poverty is fundamentally mistaken. My noble friend Lord Walker talked about the need to make sure we tackle NEETs, for example. We have one in eight of our young people not in employment, education or training. They did not start at 16.

[Baroness Stedman-Scott (Con)]

Will the Minister give way?

[Baroness Sherlock (Lab)]

Okay; it is going to be a long day.

[Baroness Stedman-Scott (Con)]

We are not saying that the Government should not spend money. It is about what you spend it on, and how it is spent to get the best outcome from what you are trying to do.

[Baroness Sherlock (Lab)]

My Lords, I understand that, but I have looked at what the last Government spent the money on and at the results, and I do not like them, so we are going to do something different.

My simple view is that if we will the end of tackling child poverty, we have to will the means. We believe that removing this barrier is fundamental. Those young people who were NEETs at 16 did not start at 16: they started without the opportunities, without the education, and without the start in life they should have had. The evidence shows quite clearly that children who grow up in poverty are likely to have poorer mental health, fewer opportunities and less chance to do all those things we want them to do. What we are doing is enabling those people to have opportunities, giving them the start they need. If we can get that in place, the whole country benefits. Instead of supporting people not to work, we are giving them the chance to flourish as individuals and to make the contribution to our society that they will not get the chance to make otherwise.

Before I get myself into any more flights of rhetoric, I should answer some of the questions that have been asked. My noble friend Lady Lister asked about council tax reduction. I think she knows this, but just for the record, local councils are of course responsible for designing and reviewing their own council tax reduction schemes. My department has been working with the MHCLG to communicate the change to local authorities, and they have been encouraged to consider the impact of their schemes in the light of the removal of the two-child limit. In 2029-30 an estimated 560,000 families will see an increase in their universal credit award, with these families gaining, on average, £440 a month. The impact of transitional protection is included in the impact assessment, but not on the numbers of households.

The benefit cap was raised by my noble friend Lady Lister, and by the noble Baronesses, Lady Teather and Lady Bennett, and by my noble friend Lord Davies and a few others. This Government want to preserve the fundamental principle that work is the best route out of poverty. We believe that leaving the overall benefit cap in place encourages personal responsibility while maintaining the incentive to work. Where possible, it is in the best interests of children to be in working households. Being in work substantially reduces the chance of poverty: the poverty rate of children living in households where all adults are in work is 17%, compared to 65% for children who live in households where no adults work. We will continue to protect the most vulnerable—those who are unable to work because of a disability or a caring responsibility are protected and exempted from that.

The noble Baroness, Lady Bennett, asked about numbers. When I answered her Written Question, the impact assessment had not been published at that point. I can say that among households in scope to gain from the removal of the two-child limit in 2029-2030, approximately 50,000 are estimated to be capped before the policy change, and a further 10,000 households will be capped afterwards. In contrast, 550,000 households in Great Britain will gain in full from the removal of the two-child limit in 2029-30, as will an estimated 2 million children in the United Kingdom.

The noble Baroness, Lady Janke, and my noble friend Lady Shah raised the impact of poverty on children and schools—

[Baroness Lister of Burtersett (Lab)]

I am sorry to interrupt my noble friend, but a number of us have made the point about the thresholds for the benefit cap and the fact that child benefit is taken into account. When we were in opposition, we said that child benefit should not be taken into account in the cap. Can she comment on that?

[Baroness Sherlock (Lab)]

I have given the same answer about the levels a number of times. The cap has to be reviewed by 2027. The Secretary of State will review it at the appropriate time, certainly within the statutory deadline, and he will make the judgments he makes at the time. I am happy to convey the comments made on this to my colleagues in the department, but the Government have taken the view that they have on the cap. We will simply have to leave it at that, I am afraid.

On schools and education, it is striking that schools are using their stretched resources on services such as food banks and providing essentials to children. Research by the Joseph Rowntree Foundation shows that now one-third of primary schools run food banks, one-quarter are providing essentials, and 38% say staff provide for pupils and families out of their own pockets. We got the Children’s Commissioner’s office to do some research to support the development of the child poverty strategy. Children and young people spoke about how low income impacts their education and at times limits their career aspirations, including by restricting their access to extracurricular activities. This is an incredibly important point made by my noble friend Lord John, or possibly by my noble friend Lord Walker—I am sorry, I am getting very bad at names. We listened carefully to families when we did that, and the consistent message was that a whole range of benefits came from lifting the two-child limit. It is not just about money; it is about all the things that enables. This goes also to the points made by the noble Lord, Lord Redwood.

As for paying for this, the Government have always made clear how they will pay for things when they announce them. It was made clear that the removal of the two-child limit was fully funded by policies in the Budget, including reforming Motability tax relief, clamping down on fraud and error in tax and social security, and reforming the assessment process. Together, those measures will save £4.9 billion in 2030-31 versus the £3.2 billion cost of removing the two-child limit.

The noble Viscount, Lord Younger, raised the OBR and the welfare cap. The Government are committed to ensuring that social security spending remains on a sustainable path. We set a new welfare cap in the Autumn Budget 2024 to make sure that it remains under control for the course of this Parliament. The forecast for social security spending is virtually unchanged from the last OBR assessment, increasing by only 0.1% in 2029-30 in the forecast. Welfare spending is forecast to rise by less than half the amount it did under the previous Parliament—just over 0.3% of GDP by 2030-31 compared with 0.7% previously—and health and disability spending is expected to rise by only 0.3 percentage points compared with 0.5 under the previous Government. This Government inherited a system which did not do all the things the Opposition say they wanted it to do. In fact, we saw growing numbers of people economically inactive as a result of ill health and disability. That graph went up. We have been working hard to bend that graph by taking the steps needed to do it.

On employment, parental employment rates are already high, but if we want to get more parents into work, it is important that we remove the barriers to getting them there. One of the key barriers is childcare. That is why we have announced 30 hours of funded childcare for working parents, saving eligible families using all 30 hours up to £7,500 per eligible child per year. When we talk about the parents in larger families being in work, one of the challenges was childcare again. We are extending eligibility for universal credit upfront childcare costs to parents returning from parental leave to ease that transition back to work, and we are providing UC childcare support to help with the childcare costs of all children, instead of limiting it to two children, so that parents who have larger families can afford to go back to work. It clearly is not about work or social security; it is about social security enabling work and supporting it, as the noble Lord, Lord Bird, said so clearly. We know that there is more to do, which is why we are committing to a review led by the Department for Education across government about access to early education and childcare support and delivering a simpler system.

What is coming next? We have been clear that the child poverty strategy will not solve problems overnight. This is one step in a journey looking forward 10 years. We have already made a number of significant steps: investing heavily in expanding free school meals; introducing a fair repayment rate into universal credit; investing in support to help people with their energy bills; investing in support across the piece; raising the minimum wage; looking at what is happening with affordable housing; and investing in helping people to get into secure jobs.

The most important thing will be to monitor that, to make sure that we do it. There will be a comprehensive programme of analysis, making sure that we know the exact impact of the changes we are making. If the Opposition are worried, we will be monitoring the impact of what we do. This will enable us to work with government departments and the devolved Governments to consider what we do in future and to capture the data as we go.

This Government are determined to break down barriers to opportunity, to deliver economic growth and to raise living standards. Removing the two-child limit in universal credit remains the single fastest and most cost-effective lever we have to reduce the number of children growing up in poverty. It is at the heart of a wider strategy to drive down child poverty and set the next generation up for success. Far from being anti-work, this strategy includes our plan to make work pay, to improve job security and living standards, and to enable people to get on into work. We do not simply want to move people from being out of work into jobs from which they can never progress. If we want social mobility, we need to enable people to develop skills so that we can become a high-skilled, high-wage, high-investment economy, as we have been challenged to do. We have also announced increased universal credit support, getting people into work and into more hours because, above all, we believe in the value of every person and the contribution they can make.

The noble Baroness, Lady Teather, and the right reverend Prelate the Bishop of Leicester made some very interesting points. Part of what we have to do is to invest in communities and relationships. All we can do with money is remove barriers. What we need to do as a country is look at how we engage with our neighbours and our communities, and how we can support all those in our communities to develop and to fulfil their potential.

My noble friend Lord John said that a Labour Government are nothing if they do not do something to tackle poverty and inequality. That is exactly what we are doing here today. The Bill, along with the wider actions in the child poverty strategy, will help deliver the biggest reduction in child poverty over a Parliament since comparable records began in the 1990s. It is time to put this counterproductive and cruel policy into the dustbin of history, and to focus instead on building a system that gives children and their families the security and opportunities to build a better life, no matter their background. I commend the Bill to the House.

Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.

Industry and Exports (Financial Assistance) Bill

Thursday 12th March 2026 Lords Chamber

Second Reading (and remaining stages)

17:43

Moved by

[Lord Stockwood]

That the Bill be now read a second time.

[The Minister of State, Department for Business and Trade and HM Treasury (Lord Stockwood) (Lab)]

My Lords, this is a simple Bill, which I am honoured to bring to the House today. The Bill has two main provisions. It raises the statutory limits in the Industrial Development Act 1982 and the Export and Investment Guarantees Act 1991. These provisions ensure that the Government can continue to support British industry and British exporters with financial assistance.

This matters because we know that exporting firms grow faster. They are more productive. They offer better jobs and higher wages than businesses that sell only domestically. Yet we know that access to finance can be a major headache for these same businesses. It is particularly tough for those that want to export millions of pounds’ worth of goods. Getting the necessary financial guarantees can be the biggest hurdle to exporting abroad, but noble Lords will know that these exports hold the key to a company’s growth. Just a single deal could be what makes or breaks a company.

Export finance is having a tremendous impact on our economy. Some £14.5 billion of UK Export Finance support last year is supporting up to 70,000 jobs, including across key industrial sectors such as clean energy, advanced manufacturing, life sciences and the automotive sector. Through existing provisions in the Industrial Development Act, the British Business Bank’s northern powerhouse investment fund II has directly invested £115 million-worth of capital into over 300 small businesses. Similarly, in the Midlands, the Midlands engine investment fund II has launched a £400 million fund to drive sustainable economic growth by supporting innovation and creating local opportunity for new and growing businesses.

We want to take this further, so that we can drive more growth across even more regions. With the Bill, we will ensure that transformational levels of government support will be there for industry tomorrow. The Bill contains some technical provisions, such as changing the currency from special drawing rights to pounds sterling, and it allows the delegation of future increases to UK Export Finance to secondary legislation. I am sure that noble Lords will champion the assistance provided through the Industrial Development Act and UK Export Finance that has helped businesses to grow through trade, creating jobs and fostering economic growth. It ensures that we can go faster and further, supporting more businesses to be pioneers in the sectors that are front and centre of the UK’s economy.

In tandem with the new trade strategy, more businesses than ever before will be empowered to export with the financial firepower of the Government behind them. The Bill can mean only better prospects for those businesses, our economy and the UK, and will boost economic growth in the coming years. I am thankful to colleagues in the other place for their scrutiny of the Bill so far and look forward to the wisdom and expertise that noble Lords will bring to this debate today. With that, I commend the Bill to the House.

17:46

[Lord Sharpe of Epsom (Con)]

My Lords, it is pleasure to follow the Minister, and I look forward to sharing some wisdom and expertise—at least I hope so.

I am grateful to the Minister for his introduction and for the opportunity to respond on behalf of these Benches. I say at the outset that we do not oppose the Bill. Updating financial limits that have sat unchanged for decades is both sensible and necessary as a piece of housekeeping. We recognise the importance of ensuring that the Government retain the tools to support British industry and exporters, where that support is genuinely warranted—the Minister gave some very good examples of that.

However, I will use this occasion to raise some broader concerns—not about the Bill in isolation but about what it may mean for the direction of the Government’s industrial policy more widely. The question we must ask is not merely whether the Government can provide financial assistance to industry but whether the cumulative effect of doing so—repeatedly, expansively and as a matter of instinct—risks becoming a substitute for the structural reforms that our economy needs.

Subsidisation has a seductive logic; it is visible and feels like action, and the Minister just called it transformational. However, we on these Benches believe that when the state steps in to cushion risk, it does not eliminate that risk; it merely transfers it to the taxpayer, while simultaneously distorting the market signals on which businesses depend to allocate capital efficiently. The Government should recognise that the misallocation of resources that follows is not always immediately apparent, but its effects compound over time.

The most powerful industrial policy this Government could pursue is one measured not in billions of pounds of guarantees and grants but in the burdens lifted from the shoulders of British businesses. We urge the Government to focus their energies there. Energy costs—in particular, the weight of environmental levies on businesses’ electricity bills—remain a serious competitive disadvantage for British industry. Unnecessary reporting requirements consume the time and attention of managers who ought to be focused on growth. I must mention the Employment Rights Act, which the Government’s own figures suggest will impose over £1 billion in administrative costs on business—a figure that, as businesses have warned, is widely regarded as a considerable underestimate. These are the frictions that erode competitiveness quietly and relentlessly, and no amount of export finance can compensate for them. Also, as we discussed in a Question earlier this week, they impact the quantity of foreign direct investment.

I will make a more fundamental point about risk. There is a tendency in industrial policy debates to treat risk as an enemy to be neutralised, yet risk is not merely a problem but a productive signal. It is the prospect of return that draws private capital towards genuinely promising ventures. When the state steps in to underwrite commercial risk too broadly or too readily, it does not simply help good projects that the market overlooked but sustains projects that the market had rationally declined to back. We should be cautious about inadvertently engineering away the discipline that risk imposes, because that discipline is part of what makes markets work. I appreciate that this was all debated in another place, but will the Minister explain the balance that he expects to see between private capital and UK Export Finance funding and how he expects this to work in practice?

That said, we are not dogmatic. We recognise that there are strategic sectors of the economy—the Minister highlighted some—where there is a case for targeted support, and that in some cases government has an instrumental role to play in getting exports over the line. We recognise that we live in a world of intensifying geopolitical competition. The rise of China as an industrial and technological power, the fragility of supply chains that was exposed so brutally during the pandemic, and the imperative of maintaining domestic capability in defence and critical technologies create a legitimate case for a limited role for government. We do not dispute that. What we dispute is the notion that broad, expansive subsidisation should always be the appropriate or default instrument and that it can substitute for the competitive fundamentals that underpin long-term industrial strength. A strong domestic industrial base is built on competitive energy, minimal regulations, a tax system that rewards investment and a labour market that gives businesses the flexibility to grow. Financial assistance of the kind that this Bill enables should sit atop those foundations and should not be deployed in their absence.

This Bill had its Second Reading in another place on 23 February. During a debate on my honourable friend Dame Harriett Baldwin’s eminently sensible and reasonable amendment relating to reporting requirements for UK Export Finance in relation to the steel industry, the Minister there argued that it was unnecessary because the steel strategy would be published in due course—I am sure the Minister knows what is coming. The steel strategy was originally promised last year. Without reopening the entire debate, but with costs mounting daily at British Steel—up to £370 million already according to a recent letter from the Minister’s colleague, the noble Baroness, Lady Lloyd, which I think is almost certainly a dramatic understatement, by the way—I ask the Minister to be more specific. When will we see the steel strategy?

It is worth heeding the very wise words of President Reagan, who once said that the nine most terrifying words in the English language are, “I’m from the Government and I’m here to help”. We will continue to press the Government on whether their industrial strategy is truly oriented towards building competitive strength or risks drifting towards a model of managed dependency where the taxpayer bears the risk, the market loses its discipline and British businesses are, in the longer run, no stronger for it.

17:52

[Lord Pitkeathley of Camden Town (Lab)]

My Lords, in my experience, smaller businesses rarely wake up in the morning worrying about statutory ceilings in the Industrial Development Act. What they worry about is whether they can secure the finance and insurance needed to win the next contract.

In my day job, I spend a lot of time around smaller and growing firms, particularly in the creative, technology and service sectors. These are precisely the sorts of businesses that increasingly make up the modern export economy. What they usually lack is not ambition—there is no shortage of that. What they lack is the financial tools that allow them to take on international contracts with confidence, manage risk and secure working capital.

That is why I broadly welcome the intent behind this Bill. Much of it is, in truth, a pragmatic adjustment. It updates the statutory limits under the Industrial Development Act and expands the capacity of UK Export Finance so that it can continue supporting British exporters at scale. In that sense, it is partially a piece of inflation catch-up. The limit for financial assistance under the Industrial Development Act has not been increased since 2009. Quite a lot has happened in the economy since then, and the scale of support required to compete internationally has inevitably grown. Updating these ceilings therefore seems sensible. However, raising the ceiling is the easy part. The more interesting question for Parliament is what happens beneath it.

UK Export Finance is already operating at considerable scale. In recent years, it has supported hundreds of businesses, thousands of jobs and billions of pounds of economic activity. Those are significant numbers, but the real test is whether the system helps the right kinds of businesses to grow and export. As we expand the capacity of these schemes, it would be helpful to understand how accessible they are to smaller firms, especially those outside the traditional large project and infrastructure sectors that export finance has historically focused on. Very often, these firms are not looking for a vast intervention from government. What they need is something more practical: the ability to ensure risk, unlock working capital and give a bank the confidence to support an export contract.

The Bill also makes future increases in UK Export Finance’s statutory limit easier. It allows the Government to raise the cap in increments of up to £15 billion through secondary legislation and removes the limit on how many times the mechanism can be used. I declare an interest as a member of the Secondary Legislation Scrutiny Committee in this House. That flexibility may well be sensible, but if Parliament is effectively creating the ability to expand the programme repeatedly over time, it seems reasonable that we should also have a clearer picture of how the portfolio is evolving. For example, it would be useful for Parliament to see a regular statement covering the composition of the portfolio, the share of support reaching smaller firms, the regional spread of activity and the level of financial risk and exposure being taken on—a dashboard, if you like.

The explanatory material also emphasises that UK Export Finance operates on a sustainable basis, with the aim of delivering no net cost to the taxpayer over time. That is an important discipline and, as the scale of the commitments grows, understanding how that principle is being applied in practice becomes increasingly important. Ultimately, the success of this legislation will be measured not by the size of the ceiling we approve today but by whether more British firms are actually winning business around the world tomorrow, so while I support the direction of the Bill, I would be grateful if the Minister could address two points.

First, how do the Government intend to ensure that the expanded capacity of UK Export Finance translates into wider access for smaller and newer exporters across the country? Secondly, given that the new mechanism allows repeated increases in the statutory limit, will the Government consider providing Parliament with regular reporting on the size, composition and risk profile of the portfolio so that this House can see clearly how that expanded headroom is being used? If the Government can provide reassurance on these points, many of us will feel comfortable supporting this sensible and pragmatic measure. I look forward to the Minister’s response.

17:57

[Lord Empey (UUP)]

My Lords, I speak as someone who served as a Trade Minister in Northern Ireland. I was also vice-president of the Institute of Export and International Trade for many years. The first committee I served on in your Lordships’ House was in about 2012. It held an inquiry into SMEs, and I listened very carefully to what the noble Lord, Lord Pitkeathley, just said. One of the interesting things was that at that time, UK Export Finance had just begun, I think, in its current iteration, away from the old Export Credits Guarantee Department, which still exists. That had only guaranteed companies in single figures, and they all tended to be the big battalions —Rolls-Royce, British Aerospace, et cetera. It has changed, and I have no issue with the perfectly sensible raising of the limits but, as the previous speaker said, it is about what you do with the raised figures.

It is supporting, allegedly, 2,700 companies in the current year. That is a tiny fraction of SMEs in the United Kingdom, which can be measured in their hundreds of thousands, and it has become increasingly challenging to get companies to export, because of the associated risks. We have only to look at our newspapers and television screens today to see some of those risks clearly and visibly exposed.

The scale at which it is helping SMEs is insufficient because it is not simply UK Export Finance putting money in its pocket and giving it to a company; it is guaranteeing it. A bank gives the money and then goes through its processes. That is where things start to unravel because the banks take their own attitude to lending, particularly to small and medium-sized companies. With a Rolls-Royce or BAE Systems, it is happy days. They are big companies with a lot of government contracts; that is easy stuff.

If we look at the need to resolve this matter, we have only to look at our balance of trade. This country has not had a balance of trade surplus since 1983. Look at the massive gap with China. I have asked on a number of occasions whether the departments will look at having a policy of providing information to companies on import substitution. It used to happen but if we are moving towards closer integration with the EU again, I guess that will be seen by them as a challenge to their way of doing things.

I agree entirely that raising the limits is perfectly sensible, but there must be a focus on getting our smaller businesses to export. There are challenges, and if simply we leave it to how the banks are going to measure these things, we will not get the breakthrough that we need. I therefore ask the Minister to take that back to his department because getting small and medium-sized businesses to get exporting into their minds, or even be open to the possibility of it, is the only way that we will fix our balance of trade. Relying on a diminishing number of large companies, which is the reality, will not be sufficient. We need the small, often family-owned companies. We know of the system with the two BMWs in the driveway—why take the risk? Why bother? But if we do not bother, we will not see those companies create the jobs for the next generation.

We are facing AI challenges and all the other things which we do not know how to measure at the moment. Will the Minister ask his department to look again at whether some kind of direction or advice can be given, not only to UK Export Finance but to our financial institutions as a whole, because that is the source of the guaranteed funding?

18:02

[Baroness Alexander of Cleveden (Lab)]

My Lords, it is a pleasure to speak on a three-clause Bill. I commend the Government on their brevity. It is a welcome change this week after the 220 clauses of the Crime and Policing Bill, the 178 clauses of the Tobacco and Vapes Bill and the 1,200 amendments that we will be wrestling with again tomorrow in the assisted dying Bill.

As every noble Lord who has spoken so far has noted, the Bill does not change policy, only financial thresholds. That narrow focus accounts for the broad cross-party consensus. More fundamentally, industrial assistance and trade policy remain a rarity in modern politics. They are matters of broad common ground. Like the noble Lord, Lord Empey, I served as a Trade Minister, for Labour in Holyrood, and then as a trade envoy for a different Government—proof that trade and industry can be common ground, at least in domestic politics. Of course, updating the financial thresholds after 16 years is eminently sensible, likewise using secondary legislation to raise the limits in the future.

I want to use my time to make one substantive comment on each theme. First, on the industrial assistance aspect, my own interest here dates to 1997, when I was working on the devolution settlement in the early days of the Blair Government. I can reliably report to the House that in all those years of campaigning for a Scottish Parliament, the minutiae of industrial aid rules had not caught the attention of even the most assiduous policy wonk, so in government it proved quite tricky. How do you devolve powers over trade and industry without undermining the financial level playing field within the UK? Today, rightly, financial selective assistance and export finance remain reserved matters but in an elegant constitutional arrangement, Scottish Ministers can prepare cases for financial assistance of up to £10 million for a single project, subject to a Commons resolution.

Last night, after we finished, I took a look at the most recent Industrial Development Act annual report, laid before Parliament in July, on Section 8 spending, which is what we are discussing today. It reported that neither the Scottish Government nor the Welsh Government had any Section 8 spending, compared with £2.9 billion of live schemes in England. There are complexities about the coverage of Section 7 and Section 8 areas and I appreciate, given that I am the last speaker in the debate today—at least from the Back Benches—that the Minister will not have had time to digest material from his officials on this matter. However, I would be grateful if he could write to me about the factors that he believes are influencing the uptake of Section 7 and Section 8 spending in the devolved Governments. These complex distributional issues should not detract from the value of industrial assistance, which is supporting thousands of jobs across the UK and leveraging in billions of pounds of private capital.

I therefore turn to export finance. The Government can take pride that their export finance portfolio is larger than at any point in history. At 70% current utilisation and with a strong pipeline of commercial opportunities, it is right to provide ongoing certainty to British businesses around future export support. Here, I echo the remarks of the noble Lord, Lord Pitkeathley, and others: on export finance, the devil is in the operational detail of the specific working capital and insurance schemes, and the ease of access to them by companies. I place on record that the Minister spent his entire pre-parliamentary life in the private sector, so he is well placed to ensure that bureaucratic creep does not diminish the effectiveness of support for exports—particularly, as others have recognised, for small and medium-sized enterprises. They are, in fairness, 88% of the beneficiaries of UK export finance, but we have to watch the opportunity costs for small firms caught in long, complex, unsuccessful applications that are deemed too high risk.

I come to my final substantive point. I ask the Minister to comment on the success of UK Export Finance in delivering its underlying mandate, which is to support exports at no net extra cost to the taxpayer over time. Therefore, echoing the question from the noble Lord, Lord Sharpe, I invite the Government to comment on their attitude to risk. Are the higher thresholds that we are being asked to approve a choice to adopt a higher risk appetite with respect to the likely return, or are they simply an attempt to anticipate greater demand in the pipeline and in the future? I welcome any guidance on that point.

In conclusion, I welcome the steps announced by the Government this week to crack down on sanctions-busting. This is a point that the Opposition raised in the other place. The Minister has responded this week with a new licensing scheme where there are any high-risk exports that could be used in sanctions-busting situations. Finally, I commend the focus of UK Export Finance in helping British business to be part of supporting the reconstruction in Ukraine. On that basis, I support the Bill and look forward to the Minister’s response.

18:08

[Lord Fox (LD)]

My Lords, the Minister called for wisdom and expertise. It is a great pleasure to follow the noble Baroness, Lady Alexander, who displayed both of those, but I am afraid the Minister now has me.

The Minister set the scene in his admirably concise introduction, but I want to look at some of the numbers. They are big numbers—not quite as big as our trade deficit with China, but big numbers none the less. We have heard that the Bill increases the Government’s ability to provide financial support to industry and exporters by raising long-standing limits. It boosts the cap on selective industrial financial assistance under the Industrial Development Act 1982 from £12 billion to £20 billion, which is a big increase. The maximum amount by which the Secretary of State can raise this limit has been increased from £1 billion to £1.5 billion, reflecting inflation over the period since it was last adjusted in 2009.

As we have heard, the Bill also significantly expands UK Export Finance’s statutory commitment limit under the Export and Investment Guarantees Act 1991, increasing it from the current equivalent of around £84 billion to £160 billion, converting the limit from special drawing rights to sterling to create some simplicity, and allowing further rises of up to £15 billion through secondary legislation without restricting the number of times such increases can be made. It will be helpful if the Minister can confirm that those numbers are correct. He did not use them in his introduction, but it is important for the record that we have them.

These changes are intended to maintain uninterrupted support for investment, exports and jobs, ensuring that the Government can back key sectors such as advanced manufacturing, life sciences and defence, without hitting the old limits. By raising these thresholds now, the Government say that the Bill prevents constraints on viable projects at a time when businesses are making critical investment and export decisions, providing necessary headroom to offer support only where justified, while safeguarding taxpayers and sustaining the UK’s credibility. On the face of it, this is a sensible uprating, which we support. However, its passage through the Commons was not without query and I will raise some of those queries again for the Minister to perhaps recap the answers.

In the Commons, MPs from several parties highlighted that the Bill authorises very large increases in industrial assistance and export guarantees with relatively light ex ante control. There are weak safeguards, limited transparency and scrutiny over what are, or could be, very large sums, and there are potential ethical and risk concerns around how export finance could be used. Critics argued that this scale of contingent liability exposes taxpayers to significant risk, with Parliament largely limited to retrospective annual reports rather than regular, detailed scrutiny of which firms and sectors are being supported—I think that was the point the noble Lord, Lord Pitkeathley, made about updates as to where the money is going.

In the Commons, cross-party amendments sought to block support where there is reason to believe that modern slavery or human trafficking are present in the supply chains. We on these Benches believe that it is unacceptable for any taxpayer-backed finance to underwrite that sort of exploitation, so it would be useful to know from the Minister how that will be overseen. Other amendments aimed to prevent UK Export Finance supporting goods which are likely to be re-exported to sanctioned destinations. It is very important that those safeguards are strengthened and any loopholes removed.

There are also questions about how all this fits in with the industrial strategy. The Bill certainly expands financial capacity, but what is the Government’s plan for which sectors and regions should benefit, particularly concerning steel, which is an ongoing issue, and other strategically important industries? Can the Minister confirm how the applications will be managed? Are they on a first come, first served basis? Does it stop when we run out of money, or will some sort of strategic overlay be put on to applications for drawing down on these funds? If it will, who will manage this overlay, and how will it be overseen and reported back to your Lordships’ House?

While we are talking about industrial assistance, I have spent the last eight years on the replumbing of the United Kingdom post Brexit. One of the many Acts I worked on was the Subsidy Control Act 2022. We would be very interested to know how industrial assistance will be managed within the Subsidy Control Act. The noble Baroness, Lady Alexander, also brought up the UK Internal Market Act, which was also part of the replumbing, and she asked some really important questions around that. There are constraints around what can and cannot be done, not least our own constraints, which were built looking at GATT and other things in the outside world.

Additionally, I am very grateful to the noble Lord, Lord Empey, for his really knowledgeable input on SMEs. I also have an observation that historically, the bulk of export finance money goes to larger firms; it does not go to SMEs. Although the Bill is being pitched as helping SMEs, there is no real indication in the Bill as to how that will be done. Experience shows that they will not be the major recipients of this uprating, so, like the noble Lord, I await the Minister’s views on this.

There is also this issue about government finance crowding out other finance, and how the process will be managed so that it is crowding in, not crowding out. It is really important that investment that would have come in any case is not being displaced. We really need to know that public money is going to be used genuinely as additional rather than substitutional. I look forward to the Minister’s response on these issues, but notwithstanding that, we support the changes being brought forward.

In conclusion, it is important to support investment, exports and jobs in sectors such as manufacturing, life sciences and defence, and it is vital that this support is extended to SMEs. On a broader note, a huge lever for UK exports would be to be included in the EU’s Security Action for Europe—so-called SAFE—financial instrument. As the Minister knows, this would give access to up to €150 billion of finance. Can the Minister update us on where we are on attempts to find our way into that programme? Of course, the looming threat of “Made in Europe” will do the opposite of what we are seeking to do here. It will exclude our businesses, our automotive businesses in particular, from exports. Clearly, the closer the UK is to the EU, the easier this will be to resolve—but, as the Minister knows, in this case, time is of the essence. The Bill is important, but sorting out our relationship with the European Union should be the priority. That said, we support the Bill.

18:17

[Lord Stockwood (Lab)]

I thank noble Lords for their contributions and feedback. I am also thankful for the general support for the provisions in this small but important Bill.

As aforementioned, the Bill will ensure that the financial assistance the Government have provided through UK Export Finance and the means available in the Industrial Development Act 1982 can continue. From the £1.5 million to support a Yorkshire manufacturer, to enabling Gloucestershire’s finest truffles to be exported across the world—and, indeed, to the Stockwood household—to £20 million in support of the aviation specialists in Surrey, all the way to over £8 million in support of a Scottish manufacturing SME, UK Export Finance is supporting growth and jobs across the whole country, and the Bill will enable it to go even further.

Additionally, financial assistance under the Industrial Development Act has provided £520 million of funding to generate private sector capital investments to support the continued growth of our life sciences sector via the life sciences innovative manufacturing fund. As I discussed in my opening remarks, these provisions ensure that the Government can continue to support British industry and British exporters, putting them on the strongest possible footing to contend in today’s increasingly competitive global landscape.

I now take the opportunity to address specific points raised in the debate, starting with my noble friend Lord Pitkeathley, who asked some important questions, and I am grateful for the advanced sight of his specific interests in today’s debate. On the issue of expanded capacity of UK Export Finance translating to wider access for smaller and new exports across the country, in 2024-25, that contribution to GDP was up to £5.4 billion, supporting 496 SMEs during that year. UKEF has also recently commissioned research from Oxford Economics, which showed that there are 115,000 businesses—predominantly SMEs, by the way—in the supply chains of the businesses which UKEF supports directly. These supply chains extend to all parts and regions of the UK.

Going even further in the support of SMEs, just in January, my right honourable friend the Secretary of State for Business and Trade announced a commitment from the UK’s top high street banks for a further £11 billion package to lend more to small businesses and medium-sized enterprises supported by UKEF’s guarantee. All of this will boost UK exports and economic growth.

On the question of providing Parliament with regular reporting, to which the noble Lord, Lord Fox, also referred, UK Export Finance reports to Parliament every year through its annual reports and accounts, which are both cleared through the National Audit Office, comprising details of all the transactions supported, their impact on the UK economy, and progress against the business plan targets. This also includes statutory obligations requiring reporting on spending levels under Section 7 of the Export and Investment Guarantees Act.

In relation to the Industrial Development Act, I can assure my noble friend that nothing in this Bill will change the existing reporting requirements around the use of support under the Industrial Development Act or the regular existing reporting arrangements. Sections 11 and 15 of the IDA require the Government to provide Parliament with annual reports setting out how they have discharged these functions under the Act, and that will continue. The annual report is presented to Parliament and includes detailed reporting on the provision of funding to support businesses through numerous different schemes and funds. This covers both expenditure and commitments for a given year, as well as the total commitment to date.

The noble Lord, Lord Sharp, noted broader concerns about the burdens on business of regulations, energy costs, et cetera. Before I fully answer, I would like to say that we largely agree that the role of government is not to de-risk businesses. It is largely to create confidence in our growth prospects and set the conditions of success for the private sector. It is one of the reasons I came into government: I believe firmly in that and took my own earning potential down to zero seven months ago in order to do that. As my noble friend Lady Alexander says, it is a place where we often find much common ground and it is one of the reasons I am proud to be part of this Government, because this Government firmly believe in it.

As part of that, we have a clear industrial strategy, a trade strategy, a plan for small and medium-sized businesses, and a plan to make work pay to address long-standing barriers to growth. These are underpinned by new policy co-creation approaches, with new initiatives being developed to respond to all businesses’ top concerns. I spend much of my time on round tables, speaking to CEOs, SMEs and businesses to ensure that we get the requisite feedback to ensure we are making the right decisions.

On energy prices, last month we concluded an eight-week consultation on the British Industrial Competitive Scheme—BICS, as it is called. This scheme will reduce electricity bills for eligible manufacturing businesses by up to 25%. We are keen to ensure we go further within the macro environment for energy prices. It is absolutely critical that we remain competitive, and we are trying to do as much as we can in that area.

To the question of balance between private capital and UKEF funds and project support, UKEF exists to help UK exporters win overseas contracts, deliver them and get paid for doing them. It does this by providing competitive finance terms to prospective buyers, supporting working capital and trade finance to help exporters develop, and insuring against buyer default. UKEF does not provide grants, state aid or equity support. I reiterate: it does not provide grants, state aid or equity support. It charges a premium for its products and UKEF complements rather than competes with the commercial sector and helps crowd in private investment. It is clear to say also that UKEF remains a hugely profitable part of UK P&L.

On the question of the steel strategy and when it is coming, I recognise the importance of that question from the noble Lord. The steel strategy is imminent.

[Noble Lords]

Oh!

[Lord Stockwood (Lab)]

Thank you for your vote of confidence. The strategy is imminent. We are hoping to announce something in the coming weeks. We recognise the importance of publishing the strategy for the industry. The Government are committed to putting the industry on a sustainable, long-term footing. It is vital for our broader strategic resilience as a country over the coming years.

To the question raised by the noble Lord, Lord Empey, about whether HMG have plans to provide information to businesses on import substitution, UKEF can provide support that is conducive to exports. Its overseas support is conditional on sourcing from the UK and shifting supply chains towards UK firms. UKEF’s customers support an estimated 115,000 UK businesses in the supply chain, which shows that, when UKEF promotes UK exports, the benefits cascade throughout the UK supply chain and throughout the UK economy. The Bill is not changing policy or the mandate underpinning this reality.

My noble friend Lady Alexander asked if I could write to her about the uptake of export support by the devolved Administrations. I will be happy to follow up with her on the specific statistics following this debate. On the further question on the UK’s success in delivering on its mandate, it operates at no net cost to the taxpayer over the economic cycle and has generated more than £850 million returned to the Exchequer over the past four years. Risk is carefully managed and monitored, with regular reporting to Parliament as part of its statutory obligation and HM Treasury oversight. I firmly believe that, as part of the portfolio of assets that we have supporting UK business, UKEF is one of our strongest and most prominent capabilities.

On the question from the noble Lord, Lord Fox, on whether the numbers he referred to are correct, I can confirm that they are. I am grateful to him for his role in advertising the great work that this legislation seeks to do in supporting UK businesses. On the question about the funding applications and the sector overlay that he mentioned, UKEF operates UK-wide, supporting exporters in every nation and region. Allocation is demand-led and based on commercial viability, as noble Lords would imagine, not on geography or sector. UKEF’s business plan includes an ambition that at least 80% of the businesses it supports will continue to be based outside London. That does not mean that London is not important, but regional development and support is critical to the whole of the UK’s success. On the question about the impending pressure of the “Made in Europe” policy, I firmly agree that it is critical and we are engaged on it with alacrity and pace.

In conclusion, I hope the arguments that I have set out satisfy colleagues that the provisions in the Bill are simple and straightforward. They are necessary to improve economic growth and will provide the Government with the means to give much-needed financial support to industry and businesses up and down the country. I thank noble Lords across the House for this informed debate and for their wisdom.

[Lord Baker of Dorking (Con)]

Before the noble Lord sits down, can I ask him about SMEs?

[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

I am sorry, the noble Lord should not be intervening because he is not on the speakers’ list.

[Lord Stockwood (Lab)]

The question was well made. I can tell the noble Lord that it is important and that there is a whole strategy with UKEF and the Government to ensure that the opportunity that the Bill creates is articulated to the SME community as well.

With that in mind, I thank noble Lords from across the House for this informed debate. It is with great pleasure that I beg to move.

Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.

Schools (Recording and Reporting of Seclusion and Restraint) (England) Regulations 2025

Thursday 12th March 2026 Lords Chamber

Motion to Regret

18:29

Moved by

[Lord Lucas]

That this House regrets that the Schools (Recording and Reporting of Seclusion and Restraint) (England) Regulations 2025 are accompanied by an impact assessment that underestimates the cost of implementation; and that they do not enable the best use of the information which will be recorded by schools.

Relevant document: 48th Report from the Secondary Legislation Scrutiny Committee

[Lord Lucas (Con)]

My Lords, I am grateful to the Secondary Legislation Scrutiny Committee for drawing my attention to these regulations. The committee is the punishment battalion of the House of Lords committee system. I have served my time on it and know that you get a huge pile of papers every week and you absolutely have to read and understand them all—there is no escape. It is a huge amount of hard work, and I am very grateful to it. The committee picked up on the impact assessment, but that focused on private schools only. My concerns run wider.

I do not disagree with the directions that the regulations are taking to make schools safer and involve parents more, particularly when we have the prospect of more SEND children in mainstream education. Incidents that require seclusion are unplanned, cathartic happenings. Suddenly, a child is banging his head on his desk uncontrollably, and the teacher, whoever they are, has to know what to do. There has to be an effective system of support for that teacher and the child, and proper records have to be made. Schools ought to be self-critical and self-improving places, and parents ought to be involved.

However, good things absorb time, especially what should be teacher downtime and senior management team time. Good things cost money and good things, if not thought through, displace other good things. It is important to think through carefully the objectives, methods and impact when we are creating things such as these regulations. In the case of these regulations, that was clearly not done.

The fact that the impact assessment covers only independent schools is ridiculous. Most of the impact of these regulations is on state schools. That is where the cost for the system and for the Government lies. We are told that the training requirement is two staff in the school. Who have the Government talked to? It is clear that they have talked to nobody. My local secondary school has every staff member trained—of course they have to be trained, as they are the ones in front of whom these incidents occur. They have to be masters of de-escalation and understand how to call in the support system. Every single one of them needs to be trained to a standard.

As for the response, in an average-sized secondary school with about 1,000 pupils, there are 20 fully trained staff members who are capable of dealing with the details of an incident. To say two staff are needed shows that the Government are living in a different world. On the time to record, the impact assessment says 30 to 120 seconds. Having talked to schools, lawyers and others, I know that a simple incident would take an hour and a complicated one a day. There is so much to be done and there are lots of people who have to be brought into the discussion. Time has to be taken to help the teacher wind down, quite apart from looking after the child. There needs to be care taken to record fully and accurately exactly what has happened and time taken to learn from it.

On frequency, the impact assessment uses the rate of internal exclusions, but that process is not in any way connected to isolation or restraint. In a secondary school, there are maybe 50 internal exclusions a week, varying in severity from 10 minutes to a day. There may be two seclusions a week. There is just no connection between the two. There is no way that internal exclusions should have been used, let alone suggested, as a measure for how frequent isolation is.

We are looking, all in all, in the state system, at a cost in the order of £100 million per annum—that is the steady state; I am not talking about the initial cost for getting everyone up to speed. In alternative provision or special schools, we have a totally different environment, where the sort of outbursts that are rare in mainstream education may be anticipated, part of the makeup of a child and something the school has to adapt to over the long term. They require a different approach and a different set of regulations. That does not seem to be provided for in the regulations or discussed in the impact assessment.

When it comes to the detail of which incidents are and are not seclusion, it is hard to tell from what is in the regulations whether what you have in front of you is or is not covered by them. It is acknowledged that we have very little data on what is happening on seclusion, but the Government’s proposals for gathering further data are limited. Altogether, the regulations and impact assessment are lackadaisical, unserious and uncaring, and they are unconnected to reality. It is important that the Department for Education does much better.

It is not hard. All it takes is to do what I have done and talk to some heads, some lawyers and the school unions, and sense check what has been produced. That takes only a few hours. I would like the Department for Education to review the processes, especially the supervision, that generated the regulations and the impact statement we have in front of us. Understanding reality, having the courage to trust professionals, working out which strategies will yield the best results and getting the wording right are important to make sure that the impact of these things on schools is kept within bounds. As I said, a sense check is needed. Have a set of friends that you can turn to and ask for advice. What is really going on in schools? How will these proposals work in practice?

The impact statement says, and I agree, that there is a lack of good data. The department and schools should be collecting all the data they need to understand what is going on with seclusion and restraint, how it varies through the system and how best to improve practice. The Government should be asking all schools for a simple record of everything, including incidents resolved without the need to employ seclusion or restraint. This data is there in the electronic systems of schools—it is quick and easy to produce. With a total picture of what is going on, it would be much easier for the department to formulate policy.

When the department wants to look at things in detail and gauge what is required, by way of detailed research, having the overall picture will make it much easier to select the right examples and the right coverage and for the department to gain a real understanding of best and worst practice in the system. Having the overall data will enable individual schools to benchmark themselves and look at how they compare with other schools in the system, and that will help their improvement.

I very much hope that the Government will also improve their proposals for data collection. The Government have a commitment to high quality in schools. They should have a commitment to high quality in their regulations. I beg to move.

[Lord Mohammed of Tinsley (LD)]

My Lords, I have spent many years working with young people, particularly the most vulnerable. We on these Benches support the main aims of this statutory instrument. The safety, dignity, and well-being of our children must always come first. When a young person is secluded, it means they are kept alone or physically restrained and their movement limited. It is a serious step. These sensitive situations must be handled with great care, and it is therefore right that we improve transparency. It is also right that parents receive a written record of what has happened, as soon as possible. The department is correct in recognising that seclusion can be just as harmful as the use of force. However, although the principle behind these regulations is sound, there are concerns about how the Government have gone about introducing them.

First, we should acknowledge the confusion that occurred during the rollout. As the Secondary Legislation Scrutiny Committee pointed out, the original measure had to be withdrawn and replaced because the Minister accidentally signed the wrong draft. We ask our students to check their work carefully before handing it in. It is reasonable to expect the same standards here. As the committee rightly said, this kind of mistake should not have happened.

However, the bigger concern is the Government’s impact assessment. The Government estimate that the cost of recording these incidents will be between £1.6 million and £6.3 million a year, equivalent to the time of about 137 full-time teachers. Yet this estimate only includes 2,443 independent schools in England. Why? Because the Department for Education decided that state schools are not businesses and therefore left them out of the calculations. This is a serious oversight. There are more than 21,000 state schools in England—almost nine times the number of independent schools. By leaving them out, the Government have avoided confronting the true cost of this policy. In reality, the amount of teaching time required will be far greater than the figures suggest.

We should also look at the assumptions behind these figures. The department estimates that it will take two teachers between 30 and 120 seconds to record an incident and report it to a parent. Has anyone making these calculations worked in a busy school recently? The idea that two teachers can promptly and sensitively record an incident involving restraint and seclusion in one or two minutes does not reflect reality. As the committee noted, the estimated time is unrealistically low. In practice, this will mean that already overworked, overstretched teachers will have to work longer hours or spend less time on the other important tasks such as teaching and supporting their pupils.

Let me be clear: we fully support the aims of protecting students and ensuring that parents are properly informed. However, how the Government introduced these measures raises legitimate concerns. There have been unavoidable procedural mistakes and very optimistic estimates of the time involved. The impact assessment leaves out 21,000 state schools, where most of this work will take place. What practical support will be provided to teachers in state schools to help them meet these new responsibilities without the unreasonable burden on staff—who are already working extremely hard?

[The Earl of Effingham (Con)]

My Lords, I thank the Minister for bringing forward this statutory instrument. We understand His Majesty’s Government’s intention. It has been some years since the last update on reasonable force policy, and there has never been a consistent and standardised measure across our schools on how seclusion and restraint are recorded and reported. His Majesty’s loyal Opposition support the principle of introducing such a regime, as does the noble Lord, Lord Mohammed of Tinsley.

However, much like my noble friend Lord Lucas, we would like to probe the Government on the impact assessment and the updated statutory guidance that will come into force in April. We understand the rationale behind the need for new guidance after many years, and we appreciate that the grounds on which teachers will be legally permitted to use reasonable force will be the same. However, there are several issues on which we seek clarification.

The new guidance makes it clear that teachers must be

“adequately trained in its safe and lawful use, and in preventative strategies”.

While it stops short of implementing a national training standard, the impact assessment assumes that each school will be responsible for ensuring that training is completed in accordance with the principles of the guidance. The impact assessment attempts to outline how this will work in practice. However, our concerns resound with those of my noble friend Lord Lucas and the noble Lord, Lord Mohammed.

As the Secondary Legislation Scrutiny Committee noted so well, the department has not accounted for schools in the state sector in its budgeting and suggests a cost of just over £350,000 to independent schools. Are the Government suggesting that there will be no cost to the state sector in implementing this change? If that is the case, can we please have clarification on how they get to their zero-cost calculation?

18:45

Equally importantly, the noble Lord, Lord Lucas, mentioned his local school and the noble Lord, Lord Mohammed, highlighted eloquently his numbers. This will have an impact on the efficacy of seclusions and the ability to restrain the most disruptive pupils. Is it realistic to assume that only two teachers from each school need to be trained for just two hours? Is the real number to ensure appropriate understanding and governance not a significant multiple of that? Children’s behaviour is irregular and unpredictable. Every teacher in the classroom must be confident that they have the legal right to use reasonable force and seclusions where necessary. It is of great concern to the Opposition that this measure may negatively impact teachers who have not received the official training to take the necessary steps of using reasonable force. Let me be clear: no teacher, pupil or parent desires any use of force, but sometimes, regrettably, it is the only option left.

Similarly, in assuming that only two teachers in each school receive two hours of training, it is likely that the assessment has materially underestimated the administrative time and cost of the new training, which the noble Lord, Lord Lucas, put a figure on and the noble Lord, Lord Mohammed, also referred to. It takes more than 30 seconds to two minutes to report these incidents. We should never be in a situation where serious disruption goes unchecked because a teacher is worried about repercussions; nor do we wish for an unexpected and overly burdensome cost on schools because the Government have unintentionally not costed the policy correctly. We would be most grateful if the Minister could provide detail on these key shortfalls in the impact assessment, highlighted so well by noble Lords.

Beyond the administrative costs that these regulations and guidance will impose on schools and teachers, there is also the question of their impact on behaviour. We welcome a standardised reporting measure in principle, but such a measure presupposes that restraint and, more importantly, seclusions will be part of school life. No teacher enjoys having to give seclusions and we accept that there are often negative consequences for the well-being of children as a result, but they are necessary because, unfortunately, there are children whose behaviour disrupts and threatens other pupils in the class and teachers. Therefore, the fact that one of the stated intentions of the guidance is to

“minimise the need to use restrictive interventions”

raises alarm bells on our side of your Lordships’ House.

In theory, intervening early, introducing intervention strategies or undertaking other preventive measures intuitively are vastly preferable to seclusion. Early interventions and strategies work, but they must not be mistaken for a replacement for more serious measures. As many noble Lords will know, disruption is unfortunately a natural part of school life, but it is clear from the evidence that cutting down on seclusions, exclusions and general punitive measures will not fix this. I simply refer to the Scottish Government’s research. Low-level disruptive behaviour has increased since 2006, with serious disruptive behaviour, including verbal abuse, physical aggression and violence towards staff and pupils, on the increase since 2016. That worsening behavioural trend is directly correlated with the loosening of tough behavioural sanctions. Temporary exclusions have decreased consistently by around 70% since 2006.

There were zero permanent exclusions in the last academic year, which I believe makes it crystal clear that replacing serious measures with lesser sanctions does not work. This is obviously not what the instrument intends to do, nor what the Government want. But will the Minister consider that by narrowing the scope of the use of strict punishments, including seclusions and exclusions in school, we can inadvertently fall into the trap of worsening behaviour trends, as just highlighted?

New early intervention strategies are of course an excellent idea, but when done in conjunction with upholding the sometimes necessary use of seclusions and exclusions. We simply ask that the Minister and the department commit to revisit the incoming recording and reporting process that many people, not just noble Lords here, feel is poorly costed and has inadequate oversight. Can she then reassure your Lordships’ House that the Government accept that seclusions and exclusions are, regrettably, sometimes a necessary part of school life?

[The Minister of State, Department for Education and Department for Work and Pensions (Baroness Smith of Malvern) (Lab)]

My Lords, I am grateful to have the opportunity today to respond to concerns raised by noble Lords and to clarify areas of misunderstanding, including in some of the analysis during this debate. The question of how schools use restrictive interventions, including physical restraint and seclusion, goes to the heart of how we keep children safe, support staff and uphold the trust of families. These interventions can have real and lasting effects, which is why this Government have taken such care in revising the Use of Reasonable Force guidance for schools and strengthening the framework around its use. Yet it is equally true that there will be moments, rare but critical, when the use of reasonable force or another restrictive intervention is both lawful and necessary to keep a child or those around them safe, and we cannot shy away from that reality.

In such circumstances, staff must be confident in what the law allows, clear on how to act safely and supported by leadership that builds strong partnerships with families, and provides parents with a clear and timely picture of their child’s experience. This sits at the heart of our wider approach of calm, caring and predictable environments supported by early, support-first intervention, as set out in our recently published schools White Paper. In doing so we ensure that every school and every classroom provides a safe, supportive place where every child, including those with special educational needs and disabilities, feels that they belong and can thrive.

It was with these principles in mind that we introduced new regulations requiring schools to record and report all incidents of seclusion and non-force-related restraint to parents, strengthening consistency and ensuring that parents are informed about significant events affecting their child. The consultation that we undertook early last year provided invaluable insight. While I understand the frustrations of the noble Lord, Lord Lucas, some of the words that he used about the department’s approach to engaging with schools, professionals and trade unions—that is widespread in the work that we do—were not fair and were significantly overstated.

During the course of that consultation, we heard clear concerns from parents, Ofsted and the Equality and Human Rights Commission about inconsistency in the monitoring of seclusion compared with physical force. There was real concern that this could lead schools to view seclusion as somehow easier or safer. That is not a message that any of us would wish schools to take, and the updated guidance directly addresses that risk. The revised guidance and new legislation equip schools to develop clear and inclusive policies, ensuring that safeguarding sits at the centre of decisions about restrictive interventions. It places strong emphasis on early help, understanding what sits behind behaviour, and using prevention and de-escalation strategies wherever possible. But it also recognises that when an intervention is necessary, staff must feel supported and able to act appropriately, lawfully and safely.

Importantly, every decision must take account of the welfare and needs of all children, including those with SEND, ensuring that responses are proportionate and rooted in an understanding of children’s needs and experiences. From April 2026, schools will be legally required, under these regulations, to record and report each significant incident of force, seclusion or non-force-related restraint to parents as soon as possible.

On the point about seclusion raised by the noble Earl, Lord Effingham, it is worth reminding ourselves of the definition of seclusion in this guidance. In these circumstances, we are talking about non-disciplinary interventions. I understand his concerns, which I share, about the need to ensure that teachers have the wherewithal and ability, through either suspension or other disciplinary measures, to maintain the calm classrooms that every child deserves. However, the seclusion covered in these regulations does not relate to those disciplinary areas.

On disciplinary provisions, the Government, in the most recent schools White Paper, came forward with proposals for how we can better handle, for example, internal suspensions. Those are not covered here. For clarity, seclusion here applies only where a pupil is prevented from leaving a space and is detained alone, other than as a disciplinary measure. That reflects the Equality and Human Rights Commission definition, which describes seclusion as the withdrawal of a pupil against their will and their confinement alone in a space they are not free to leave. In response to points raised by the noble Lord, Lord Lucas, in some of his communication, to be clear, seclusion does not include brief voluntary timeout, agreed calming arrangements or the planned non disciplinary use of separation or sensory spaces to support a pupil to regulate their emotions.

Schools must record all incidents of seclusion and non-force-related restraint. They may choose to record additional information, but such measures should not be described as “seclusion”. On the extent to which this process can be used for school improvement, we expect schools to use the data they collect to review their approaches and reduce the need for restrictive interventions through early, support-first approaches. Greater transparency will of course build trust with families and reassure the wider public about how such interventions are used.

I recognise the concerns raised about the evidence base underpinning the impact assessment. There is currently no national dataset on seclusion or non-force restraint. Therefore, internal exclusions were used as a cautious proxy because no better evidence exists. This is an imperfect measure, and the frequency of these incidents will vary significantly between settings—for example, in many secondary schools they are rare. However, in the absence of more robust data, it was the only viable approach. It may also be helpful to clarify that the monetised analysis of the impact assessment focuses on independent schools. Under Better Regulation requirements, as a department we must quantify the impact of new duties on businesses, and independent schools fall within that definition. State-funded schools do not do so, and so are not included in that element of the assessment. That is not to say there will not be an impact on state-funded schools—I will come to what that might be in a moment —it is simply to say that the approach taken in the impact assessment was in line with the Government’s Better Regulation requirements for how impact assessments are put together.

The noble Lord, Lord Lucas, and others also raised concerns about the department’s estimate of the time it will take school staff to record incidents. Although the evidence base is limited, I reassure noble Lords that this estimate assumes that schools already have or will put in place efficient and streamlined record-keeping systems. Our contacts with schools suggest that is the case in very many cases, and many do so already as part of wider safeguarding responsibilities. Our guidance is designed to support schools rather than add unnecessary burden. It is worth emphasising that many schools, as I already suggested, rarely use force or restrictive interventions. This has been fully reflected in our assessment of burden.

19:00

These regulations introduce no new training requirements. The only new cost is the time for staff to familiarise themselves with the reporting and recording requirements, and then the reporting itself. For many schools, this will simply involve logging an event using existing systems.

On the points noble Lords made about the level of training, it appeared to me, certainly in the case of the noble Lord, Lord Lucas, that he was talking about the level of training necessary to understand the nature of the different interventions, how they might be used and what should be put in place in advance of them. Of course it is right that training is necessary for that area of work.

As part of the public consultation, we heard a strong call from the sector for mandatory training standards—not for the recording and reporting, but for the understanding of when and how these interventions should be used. Respondents from schools, parents and specialist organisations told us unequivocally that strong evidence-informed training is essential if staff are to de-escalate situations confidently and use restrictive interventions safely and appropriately when they are necessary. We have listened carefully to that feedback and work is now under way on the next phase of this work programme, in which the department will explore the case for such standards and develop detailed recommendations on what robust, proportionate and deliverable training requirements could look like across different types of schools.

As I have suggested, the impact assessment therefore reflects only familiarisation time and the time required for recording. It does not relate to any wider workforce training that schools already undertake as part of their safeguarding responsibilities. On that basis, the assumption of two members of staff—not necessarily teachers, by the way—completing the familiarisation task is considered proportionate. Decisions about any broader training will remain with school leaders, shaped by the needs of their pupils and their setting.

On the other point raised by the noble Lord, Lord Lucas, it would obviously have helped to answer some of these questions if there was a mandated national data collection. I doubt, not only having taught in schools for 11 years but having previously been an Education Minister, whether schools would welcome the idea of an additional burden—and it would be a burden—of expecting a national data collection. As with all these things, we need to bear in mind the need and the wish for greater analysis and evidence alongside the requirements that we place on schools. I do not think the case is made for a national data collection in this particular circumstance.

In closing, I thank noble Lords for raising the points they have today, for prompting discussion and, I hope, for enabling me to clarify some of the points that have been made and to respond on the broader intention of the regulations. The Government will continue to work closely with schools, parents and the wider sector to ensure that restrictive interventions are used only when absolutely necessary, always safely, always lawfully and always in the best interests of children.

[Lord Lucas (Con)]

My Lords, I am grateful to the Minister for her comprehensive reply, much of which I completely agreed with. I take issue with only two points.

The first is the restriction of the impact assessment to independent schools. In understanding how regulations work and the effect they will have on the system, and sharing that information with Parliament, surely the policy should be that the coverage should be extended to include state schools, which will bear the great majority of the consequences of these regulations. Not to share that with Parliament, as the committee observed, is surely not the right way of going about things.

Secondly, when it comes to data collection, most schools will have this data. Data collection is just a matter of turning a switch or two in the central system so that that data then flows into the governance system, with no extra recording and no extra actions needed beyond adding a few fields to the data already going to government. I really do not understand that that is difficult. However, I am grateful to the Minister and I beg leave to withdraw my Motion.

Motion withdrawn.

Schools (Recording and Reporting of Seclusion and Restraint) (No. 2) (England) Regulations 2025

Thursday 12th March 2026 Lords Chamber

Motion to Regret

19:06

Tabled by

[Lord Lucas]

That this House regrets that the Schools (Recording and Reporting of Seclusion and Restraint) (No. 2) (England) Regulations 2025 are accompanied by an impact assessment that underestimates the cost of implementation; and that they do not enable the best use of the information which will be recorded by schools.

Relevant document: 48th Report from the Secondary Legislation Scrutiny Committee

Motion not moved.

House adjourned at 7.06 pm.