Electricity Capacity (Supplier Payment etc.) (Amendment and Excluded Electricity) Regulations 2024

Lord Johnson of Lainston Excerpts

Tuesday 5th March 2024 Grand Committee

Moved by

[Lord Johnson of Lainston]

That the Grand Committee do consider the Electricity Capacity (Supplier Payment etc.) (Amendment and Excluded Electricity) Regulations 2024.

Relevant document: 12th Report from Secondary Legislation Scrutiny Committee

Motion agreed.

Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2024

Lord Johnson of Lainston Excerpts

Tuesday 5th March 2024 Grand Committee

Moved by

[Lord Johnson of Lainston]

That the Grand Committee do consider the Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2024.

Relevant document: 12th Report from Secondary Legislation Scrutiny Committee

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

My Lords, as a matter of good practice, I refer the Committee to my interests. I do not believe that there is any conflict with these specific measures.

The Electricity Supplier Obligations (Excluded Electricity) (Amendment) Regulations 2024, the Electricity Capacity (Supplier Payment etc.) (Amendment and Excluded Electricity) Regulations 2024, the Energy-Intensive Industry Electricity Support Payments and Levy Regulations 2024 and the Renewables Obligation (Amendment) (Energy Intensive Industries) Order 2024 were laid on 23 and 24 January this year. I acknowledge that the Joint Committee on Statutory Instruments provided a helpful review of these instruments and did not draw the special attention of this House or the other place to them. I also acknowledge that the Secondary Legislation Scrutiny Committee has reported these statutory instruments as instruments of interest to Members.

Together, these four instruments make up the British industry supercharger, which aims to support our most energy-intensive industries with the cost of electricity. Energy-intensive industries, known as EIIs, include important foundational manufacturing sectors such as steel and metals in Port Talbot, for example; chemical manufacturers; paper, glass, ceramics and so on. As foundation industries, these businesses are critical in the development of new projects including offshore wind. They therefore play an important role in the transition to net zero.

The British industry supercharger also provides relief for new and emerging industries such as battery manufacturers, which are critical to electric vehicles and manufacturers of semiconductors, which are critical to the high-tech economy. Due to their nature, these industries require significantly more electricity use than other sectors. As a result, they are disproportionately impacted by high electricity prices.

The Government already provide some electricity price support to these industries, but there remains a competitive gap with other nations. In the UK, our electricity prices for medium and large industrial users were the highest in western Europe in 2019, so these regulations importantly seek to close that gap, ensuring that British industry can thrive and grow, attracting new investment rather than losing out to cheaper production overseas, and helping to mitigate the risk of carbon leakage due to cheaper energy costs elsewhere.

This existing support was put in place in 2017 and, since then, over 370 businesses have benefited from an 85% exemption from certain renewable energy levies. Under these new measures, those business that are eligible for the exemption scheme will not only see an increase in the value of their exemption, up to 100%, but benefit from a new exemption from capacity market charges, as well as receiving compensation for a proportion of their network charges.

Taken together, the Government estimate that this support could be worth, on average, around £24 to £31 per megawatt hour, closing the competitive gap between UK industrial energy prices and those faced by international competitors.

These savings are funded by spreading the cost widely among all other electricity consumers, which is estimated to add between 5 to 10 pence per week to the average domestic bill, and increase electricity costs for non-domestic consumers by about £1 a megawatt hour, once all measures have been fully implemented by 2025-26. These are clearly estimates, since the energy market is highly volatile, but these are our projections and it is important to understand the scale of the effect.

The sectors eligible for the British industry supercharger support scheme employ around 400,000 workers and account for more than a quarter of total UK exports. Many are located in areas of economic disadvantage and provide good, high-paid jobs. This carefully crafted support will mean strategically important UK industries remaining competitive on the world stage. We will back these businesses to keep on growing our economy and delivering into the UK both high-quality jobs and investment as well as the products that we rely on for our everyday lives and work.

I shall summarise for noble Lords. These regulations amend the Electricity Supplier Obligations (Amendment & Excluded Electricity) Regulations 2015, which make provision for indirectly exempting eligible energy-intensive industries from the full costs of funding the contracts for difference scheme as set out in the Contracts for Difference (Electricity Supplier Obligations) Regulations 2014. They amend the Electricity Capacity (Supplier Payment etc.) Regulations 2014 to make provision for indirectly exempting eligible energy-intensive industries from the costs of funding the capacity market. They make provision under the Energy-Intensive Industry Electricity Support Payments and Levy Regulations 2024 for electricity support payments to be provided to energy-intensive industries for the purpose of alleviating the impact of electricity costs under the proposed network charging compensation scheme. They amend the Renewables Obligation Order 2015 to allow the Secretary of State for the Department for Energy Security and Net Zero to revise the renewables obligation level for the 2024-25 scheme year; this will allow the implementation of the increased EII exemption rate under this scheme from 1 April 2024 onwards.

In conclusion, this suite of regulations will help bring electricity costs down for the most energy-intensive and trade-intensive industries—such as steel, chemicals, glass and battery manufacturers—to a level similar to those of their European counterparts. In my view, this is crucial in helping UK-based firms remain competitive, incentivising investment and a move towards decarbonisation through electrification. With that, I beg to move.

[Earl Russell (LD)]

I thank the Minister for introducing the regulations. Before I start, let me say that I will not speak for longer than I would do if we were dealing with just one set of regulations; I will treat all the regulations together and not go through them individually. I will conclude by asking just a couple of questions. I apologise in advance if any of my questions are wrong. These are quite complicated regulations so I offer any advance apologies as necessary.

These four draft instruments propose to implement jointly the key aspects of the British industry supercharger, a package of measures that the Government announced back in February 2023. It aims to make strategic energy- intensive industries, or EIIs, in the UK—for example, steel production, cement production and glass manufacturing, as well as other areas including critical national infrastructures such as steel and chemicals—more competitive. This is to be achieved by closing the gap in electricity prices between the UK and our competitor countries, especially in the European Union. I note that these measures apply only in the UK and not in Northern Ireland.

Despite the technical names of these regulations, there is a back story to all of this, with the war in Ukraine, Covid and our continued reliance on importing energy. We know the impact that this has had on the increase in energy bills in the domestic sphere. These measures are the equivalent of saying, “It’s a question of the Government supporting these energy-intensive industries to make sure that they can continue, survive and flourish in a market where energy prices are rising”. However, I want to be clear: they water down some of the reforms to our carbon markets that have previously been agreed.

I understand that the impact of these measures will be that the cost of emitting 1 tonne of carbon under the UK’s emissions trading scheme will fall from almost £100, as it was a year ago, to about £47. I also understand that the costs will be borne by bill payers, be they domestic consumers, small and medium-sized industries, charities, the health sector or the education sector in this country. I understand that, for these industries, the percentage of their operating costs that is represented by the cost of energy has risen; in some cases, it has risen from 3% of their operating costs to 10% or in some cases 15%. So I recognise that these instruments are important and necessary. I will not go through them individually; I had a sentence on that but, in the interests of time, I will cut that out.

--- Later in debate ---

[Lord Leong (Lab)]

My Lords, I thank the Minister for setting out these instruments so clearly and the noble Earl, Lord Russell, for his contribution. These four instruments implement key aspects of the British industry supercharger, as mentioned by the Minister, a package announced in February 2023 to make energy-intensive industries—EIIs—in Great Britain competitive. These industries face challenges in the coming decade. The primary issue is the relatively high cost of energy in the UK, which makes it difficult for them to remain internationally competitive. Furthermore, there is a need for them to implement transitions toward greener technology, with lower carbon leakage, as we strive to move towards a net-zero economy. We recognise these challenges and broadly support these instruments, in so far as they seek to address them for these industries, which are vital for our national security and the literal fabric of our national growth.

The first instrument exempts eligible EIIs from the costs associated with funding the capacity market and seeks to ensure that there is sufficient supply despite fluctuations in demand, especially at peak times of day or in colder periods, and in supply, for example when wind generation is low. While we support this instrument, have the Government considered whether this will lead to any shortfall in the capacity market? If so, what measures are in place to mitigate this?

The second instrument concerns additional costs due to green levies which the UK imposes and some of our international competitors do not. We do not want this differential cost to drive our energy-intensive industries abroad, so this instrument adjusts an already existing scheme and exempts EIIs from 100% of the costs of funding various environmental schemes. Industrial electricity costs in comparable neighbouring countries are evidently not static, so will the Government keep them under review? If there is movement, do they have plans to make further adjustments if necessary?

For both these instruments, the Government’s calculations accept expected increased electricity bills for non-eligible users, including small businesses, charities and households. For this instrument, that is cited at 20p to 30p per megawatt hour. With the current spot price at just under £60 per megawatt hour and the reduction since the start of this year already being closer to £30, that certainly does not seem a massive amount. However, will the Minister outline how much these regulations, in conjunction, will add to the average household electricity bill per annum? The third instrument follows by necessity to enable the Secretary of State to revise the renewables obligation level from 2024-25.

The fourth and final instrument makes minor amendments to the Energy Act 2023, sets out funding for the payments via a levy on suppliers and appoints an administrator. Such support payments are to be made to the EIIs quarterly. Will there be an automated process for eligible recipients to receive these payments with the minimum administrative fuss? Have the Government made forecasts as to whether the costs of this scheme will outstrip the contributions from the electricity suppliers, which will effectively be funding the EII support levy? Are there any provisions in place for this possibility, so that the scheme does not collapse if it is successful?

This instrument allows corrections to be made to support payment entitlements. It will also make provisions for the administrator to hold a reserve fund so that EIIs will always be able to receive payment. Do the Government expect this will need to be used? If so, how big will it be and is there a maximum time limit over which the administrator will be expected to cover the shortfall?

We will be very happy to support these four instruments if the Minister can provide some assurances on the concerns I have mentioned. I look forward to his response.

[Lord Johnson of Lainston (Con)]

My Lords, I am grateful to the noble Earl, Lord Russell, and the noble Lord, Lord Leong, for their comments. These measures are extremely important if we are to have a sustainable heavy industry in this country. If I may take my own experience as Investment Minister, I have unquestionably been able to land a significant amount of investment—some of the biggest investments that we have announced to date, particularly in the car and advanced manufacturing industries—because we have these mechanisms in place. It is not even ambiguous. It is a clear point of fact in these discussions and is very important.

The noble Earl rightly raised that we do not want to be subsidising carbon-intensive businesses out of some desire to keep historic organisations going, contrary to our net-zero ambitions and our overall industrial policy. It is right to challenge the principle of carbon leakage, which is exactly what would happen if we did not operate this process. It is designed to help these businesses to decarbonise. For example, for Port Talbot, which will obviously be a receiver of these support packages, the intention is clearly that it will decarbonise. If you look at the car industry, it is going to an EV industry, and rightly so.

The noble Earl asked when the next review will be, how we will review it and how we add companies. This is an issue with novel technologies coming forward and with industries that need this support, which may not already be under a current and easy-to-define classification. Quite rightly, we will review this. The next review point is 2026. This measure will come into force next month so it seems logical that there is an 18-month or two-year period for review. I am absolutely sure that, at that point, there will be some quite significant changes. It gives us an opportunity to take companies and sectors out and put new companies and sectors in. I am positive about that.

I am also positive about the ability to spread the cost. The noble Lord, Lord Leong, rightly asked how much this will add to the electricity bills of an average household. These are the dreaded averages but we are looking at £4 to £5. I am very aware that there is a cost of living crisis and that there are other pressures on people’s households but, when you look at the ability to target this type of support for that type of diffuse outcome, it makes a lot of sense. The noble Earl, Lord Russell, mentioned the power-generating and petrochemical industries, which do not qualify for this. I am sure that there are others that do not qualify; we would be happy to provide a specific list. It is a 1% increase overall.

Noble Lords will know that I have spent many years in investment and looking at financial markets. The energy markets present a high degree of volatility. The gas prices now are lower than they have been for a considerable period. We are very dependent on gas, which is why our own power structure is so complex to manage. Looking at the network costs, the capacity market charges that are made and other exemptions, these mechanisms are really about removing the obligations to invest in the net-zero ambitions of the UK while expecting businesses to do it for themselves. There is a sensible trade-off there. It is well balanced.

The noble Lord, Lord Leong, asked whether there would be a shortfall in the capacity market point because of the effective compensation being paid. As I understand it, that charge has never been utilised. We are confident that there is no effect on the capacity market in terms of the charges that are being made; I would be happy to investigate that further. On technical guidance and the transparency around these processes, let me say that, as Minister for regulatory reform, better regulation or smarter regulation—whatever the current title is—impact assessments are important to me. I hope that all noble Lords have read the impact assessment reports for these statutory instruments; anyone listening to this debate is also welcome to do so. It is a transfer rather than a new cost so it does not show up on the impact assessment process as clearly as it would do if it were a new principal regulation.

It is important that there is as much transparency as possible because these are, in effect, transfer charges. This is a transparent system; to some extent, it requires the complicit consent of industry in general and the public. It is important that this is happening in a private sector capacity with government direction. We feel that this is absolutely the right thing to do. It is highly diffuse in its impact and very targeted. We believe that it will allow the UK to be incredibly competitive when it comes to developing its advanced manufacturing ambitions.

I hope that I have answered all the questions from noble Lords today. If I have not, I will certainly scrutinise Hansard and welcome any follow-up, but this is a relatively uncontentious series of statutory instruments.

In summary, the noble Earl, Lord Russell, mentioned that he was not going to address each statutory instrument individually; he was quite right not to, not just in the interests of time but because this is one package—they are naturally separated for reasons of legislative complexity but this is the British industry supercharger. It presents a powerful package to industry and sends a strong message to the country and internationally that we want to support businesses as they develop and decarbonise. Support for our economy gives us great growth for the future. With that, I commend this instrument to the Committee.

Motion agreed.

Renewables Obligation (Amendment) (Energy Intensive Industries) Order 2024

Lord Johnson of Lainston Excerpts

Tuesday 5th March 2024 Grand Committee

Moved by

[Lord Johnson of Lainston]

That the Grand Committee do consider the Renewables Obligation (Amendment) (Energy Intensive Industries) Order 2024.

Relevant document: 12th Report from Secondary Legislation Scrutiny Committee

Motion agreed.

Energy-Intensive Industry Electricity Support Payments and Levy Regulations 2024

Lord Johnson of Lainston Excerpts

Tuesday 5th March 2024 Grand Committee

Moved by

[Lord Johnson of Lainston]

That the Grand Committee do consider the Energy-Intensive Industry Electricity Support Payments and Levy Regulations 2024.

Relevant document: 12th Report from Secondary Legislation Scrutiny Committee

Motion agreed.

Employment and Trade Union Rights (Dismissal and Re-engagement) Bill [HL]

Lord Johnson of Lainston Excerpts

2nd reading
Friday 1st March 2024 Lords Chamber

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

I am, as always, extremely grateful to noble Lords for this debate. Before we begin, I direct Members of the House to my register of interests, although I do not believe there is any conflict relating to the Bill today. I am very grateful to the noble Lord, Lord Woodley, for bringing this Private Member’s Bill to this House. It affords us an extremely helpful debate, and I will go through some of the points shared by so many Members of this House who are rightly concerned that the primary function of a strong economy is a fair workplace regulatory framework.

I absolutely agree with the noble and wise comments of the noble Lord, Lord Leong, at the end of his address, that we should have strong relationships between the people who work in our industry and the people who employ them—with the shareholders, investors and consumers, and in fact with our entire habitat and environment. That is exactly the sort of harmony that this Government are trying to deploy.

I will talk about some of the technical elements around the Bill and dispel some misconceptions. The first misconception to dispel, if noble Lords will allow me, is that the P&O situation was a dismissal and re-engagement process. It was not. If I may, I will correct noble Lords who have conflated that situation—which in my view was absolutely abhorrent behaviour by an organisation with such lineage as P&O towards its staff, who had such loyalty to the company. It was strongly condemned at the time by the Government and is continually condemned by the Government today, and by me personally. I am aware that there is an inquiry by the Insolvency Service into P&O, on which it would be inappropriate for me to comment, but at no point should noble Lords conflate what P&O did with the concept of dismissal and re-engagement.

I will also touch on the principles around the proclivity of companies to use this practice to control their workforce. There is a great deal of anecdotal evidence, but there is not a great deal of specific evidence to suggest that this is as widespread as noble Lords may recommend. In fact, some of the high-profile cases—they tend to be so because they are relatively unique; this is important—often resulted in better outcomes for the employees post the relationship renewal with the unions. It is important to understand how big a situation we are dealing with here; it is not as significant as people suggest. The statistics vary significantly—from one in 10 to 3%, whatever that may be—which causes me concern. I am delighted to make a commitment to continue to do more work on how significant a so-called problem this is.

I will make two very important points about the principle of dismissal and re-engagement. First, for me, it is an extremely useful and powerful mechanism to allow employers to engage effectively with their workforce to create and establish new terms and conditions that may be appropriate for the modern age or for the needs of the company at the time. It is very important that we retain those flexibilities. The concept of dismissal and re-engagement is also very valuable in resetting and clarifying employment terms; I am sure that I am surrounded by people with far greater legal expertise on that than me. As I said, it is not simply a question of using this as a mechanism to bully staff; it is a very important legal process for the contractual relationship between the employer and the workforce.

My next point is something I think we are all agreed on. While I have great respect for the Bill of the noble Lord, Lord Woodley, and indeed for the noble Lord himself, we must have the flexibility to enable companies to manage their workforce in times of crisis. I am sure that, when we are faced with these situations ourselves, either as employers or workers, and we need to come together to respond to an economic crisis such as Covid, it is absolutely right that we have mechanisms to enable us to protect the workforce. This is about fairness, protecting workers and allowing us to have a flexible workforce. It will allow me and my friends, associates and children, and the rest of our citizens, to have the opportunity to work in a flexible environment that has not become too rigid or ossified to respond to economic volatility.

However, very importantly, this should never be used to bully the workforce. The code is very strong on this; it is extremely clear that it is not to be used inappropriately to try to force unacceptable terms on a workforce. Instead, what the code does is clarify the obligations of the employer to ensure that they have to consult with their workforce. For the first time, they have to—this is very important, when you look at the other reasons for dismissal and re-engagement—look at alternatives, not just to the overall plan but to how the individual workers themselves are treated.

There is the 25% uplift, and I take noble Lords’ comments, including those of the noble Lord, Lord Browne, on the tribunal service; I am very sensitive to that. I will come back to the noble Lord on his comments on the workability of that process, because it must be an easy-to-use process that is accessible; that is absolutely at the core of protecting workers’ rights. But we do have the 25% automatic uplift that can be fed into the process. There is an obligation—I believe the code advises it in every case—to consult ACAS when it comes to using dismissal and re-engagement. These are actually quite significant.

Clarity is very important. As we know from statutory codes—again, I defer to noble Lords who have greater legal experience than me—they are central in ensuring that we have a strong framework for navigating employment law and giving protections to workers, and, very importantly, also giving obligations to employers. Having been on both sides, and certainly as an employer, the more clarity I can have about how I can work with my workforce, the better. It is very clear from the tone of the document and this Government that it is the expectation that this is a last resort, that there is a significant degree of consultation and that every other option is exhausted before it is appropriate to use dismissal and re-engagement.

[Lord Leong (Lab)]

I thank the Minister for giving way. Does he agree that the Bill offers employers the flexibility to consult their workers before the terms of the employment are changed? It does not ban the practice; it is just a last resort that offers a consultation period with the employees.

[Lord Johnson of Lainston (Con)]

I am very grateful for that challenge. I will now turn to the Bill. As I said, many elements of its sentiment are wholly welcome, but its practical application would result in less fairness, wealth and job security than the noble Lord might wish. There are several reasons for that. First, the increased consultation becomes extremely onerous on companies. Often you have a very limited period of time to react to a significant economic circumstance. As I said, this is dismissal and re-engagement, rather than simply some type of long-term planning for a business. We must be extremely careful about the onerous conditions that we are placing on companies. I have looked through the Bill, and they are substantial and, I am afraid, heavily tilted towards union practices—maybe because every Member of the House who has spoken so far, apart from the Front-Bench spokesman opposite, is a member of a union. In many instances, not all companies have union bodies represented within them and not all workers are members of unions, so it is possible to conflate those two consultation processes, which is inappropriate.

It is also very difficult. While I have a great deal of sympathy with the principle of a so-called bankruptcy clause, it is not a position that those running a business want to be in that they can do something only if they are about to go bankrupt. The reality, as I think Hemingway said, is that you go bankrupt:

“Two ways. Gradually, then suddenly”.


You have limited time to act and have to be precipitous. You must try to prevent the point at which you go bankrupt, because otherwise all your staff will lose their jobs.

The principle of what we are discussing is how to protect as many workers as possible, in a difficult situation. The code does, but I am afraid that the Bill that the noble Lord, Lord Woodley, has put forward would put at risk the security of more workers than it would protect. Importantly, it removes the breadth and range of principles around which dismissal and re-engagement can be used. That is difficult, because businesses require flexibility and it should not be up to politicians to decide this on a case-by-case basis. That would cause enormous problems, reduce flexibility, make it far harder for businesses to operate appropriately, and reduce employment in this country and security for workers.

However—and I personally will be pleased to engage in this—before the code comes into force in the summer, there will be a full debate in both Houses. I have been very clear with my officials in the department and to my colleagues that we will keep this under review. It is right that we understand exactly how many companies are using this practice and to assess that more appropriately. As I said, I will look into the comments from the noble Lord, Lord Browne, around tribunals.

As the noble Lord, Lord Woodley, knows, I continue to be extremely desirous of continuing to engage with him on this important subject. Nothing is more relevant to this Government than strong relationships between investors, companies, the people who work in those companies, consumers, the broader citizenry and the environment to create the sort of harmony that gives us growth and security for the future.

Reporting on Payment Practices and Performance (Amendment) Regulations 2024

Lord Johnson of Lainston Excerpts

Tuesday 27th February 2024 Lords Chamber

Moved by

[Lord Johnson of Lainston]

That the draft Regulations laid before the House on 10 January and 1 February be approved.

Relevant documents: 10th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 26 February.

Motions agreed.

Post Office: Executive Remuneration

Lord Johnson of Lainston Excerpts

Tuesday 27th February 2024 Lords Chamber

[Lord Sikka]

To ask His Majesty’s Government on which dates since 1999 they exercised their right as the sole share- holder of the Post Office to (1) approve, or (2) disapprove, the executive remuneration policies and amounts.

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

Under current arrangements, the Government, as shareholder, approve the targets underpinning executive performance pay. Targets are typically approved on an annual basis as these schemes are usually revised each year to ensure that targets are up to date. The Government also approve CEO and CFO remuneration, in principle before their formal appointment. For the CEO, this was provided in June 2019 and, for the CFO, in January 2015. Such approvals have historically been made in line with the Government’s guidance on senior pay in the public sector at the appropriate juncture.

[Lord Sikka (Lab)]

My Lords, it is shameful that year after year, the Government approved remuneration of Post Office directors boosted by a higher bottom line number and inflated by theft from sub-postmasters. Why has none of that so far been clawed back, and why have the Government approved bonuses for Post Office directors for appearing at the Horizon inquiry?

[Lord Johnson of Lainston (Con)]

I am very grateful to the noble Lord for raising this point. I think we all agree that this is an extremely distressing situation for the postmasters involved. A committee hearing is going on in the other place, which I believe we will discuss later this afternoon. I reassure all Members of this House that the Government never approved the bonuses for the section relating to co-operation with the Horizon inquiry. Frankly, the idea that you should reward executives for performing their duty is surprising, and we certainly did not confirm those bonuses. That is a very important point. The second important point to make is that the executives, as I understand it, have paid back the portion of the bonus relating to that, but that does not change the fact that we need to review how Post Office executive remuneration functions. There has been a number of different reviews of the governance of that, and the Government are taking significant note of them.

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, the noble Baroness, Lady Brinton, is participating remotely.

[Baroness Brinton (LD) [V]]

My Lords, the Minister’s Answer just now was very interesting, given that the Post Office Limited: Shareholder Relationship Framework Document says at paragraph 7.6 that

“the remuneration of all Board members will require approval by the Shareholder”,

and remuneration that exceeds the threshold must also be approved by the Chief Secretary to the Treasury. Can the Minister say what bonuses were approved after 2015? Have any additional approvals been required by the Chief Secretary to the Treasury since 2015? If the Minister does not have this information, I would be grateful if he wrote to me with it.

[Lord Johnson of Lainston (Con)]

Again, I am very grateful for this challenge; it is a very important discussion to have. The Government are responsible for setting remuneration for the board, while the bonuses that I think the noble Lord, Lord Sikka, was referring to relate to the Post Office executives, so we should separate the two. Both still need to be investigated—absolutely. I do not have the specific answer to the question relating to the Chief Secretary to the Treasury, but I will be delighted to write to the noble Baroness.

[Lord Arbuthnot of Edrom (Con)]

My Lords, either the Post Office is an independent arm’s-length organisation, or it is one for which the Government are fully responsible. Does my noble friend agree that the Post Office Horizon scandal shows that never again should Ministers refuse to answer questions relating to a body in which they own all the shares?

[Lord Johnson of Lainston (Con)]

I pay tribute to my noble friend for the astonishing work he has done on this great travesty. I am very grateful to him personally for driving this agenda, and I agree in principle with some of the comments he has just made. There seem to be an air gap between arm’s-length bodies, the Government and Ministers. It is very important that this situation allows us to review exactly how the principle of arm’s-length bodies functions, in the sense that it does not mean they are entirely out of Ministers’ or the Government’s remit and our lines of inquiry. Noble Lords would expect that of us. They remain within reach, and the inquiry will allow us to have a significant investigation into how culture and practices can be improved in the governance of such institutions.

[Lord Reid of Cardowan (Lab)]

My Lords, as the Minister said—well, as he implied—it is an absolute disgrace that people should be paid a bonus to turn up at a public inquiry. I am afraid it is not good enough for him to say that the Government did not approve it, because if they acquiesce in it, in practical terms they are giving their approval. So, will he take measures to disapprove of that payment? If he is not prepared to do that, I can tell him that, since retiring as a Minister, I have been at 16 public and other inquiries—so can he tell me who I write to for payment?

[Lord Johnson of Lainston (Con)]

I am grateful to the noble Lord for submitting his claim for attendance at public inquiries. He is absolutely right. I have to be careful with my language for many good reasons, but the idea that we should reward staff for attending an inquiry of such seriousness did seem clearly out of kilter with how the governance should have functioned at the time. Two reports have been written, the Burton report and the Simmons & Simmons report, both of which are very clear on the governance of paying Post Office staff; that the remuneration committee should have clearer direction and more resourcing; and on how the department’s policy team should interact with the Post Office. The fact that there were not necessarily enough personnel in the department overseeing some of these arrangements is now going to be reviewed very clearly.

When the Horizon inquiry moved on to a statutory footing, the idea that you should reward people for attending what was effectively a quasi-judicial environment was of course a bit bizarre. It certainly would not happen in any other environment going forward. There are huge lessons to be learned, not just for one party or one Government but for the body politic and the institution of our bureaucracy, so that we do not have bureaucratic indifference. Ministers have the opportunity to take responsibility for doing the right things and to take an active part in organisations that perhaps we felt should be completely ring-fenced and separate. I do not believe that that is the right thing to do.

[Lord Forsyth of Drumlean (Con)]

My Lords, I should declare an interest as chairman of a public company. The Government and the regulators insist that public companies have proper arrangements for malus and clawback, so that bonuses which have been paid to people who did not deserve them can be clawed back. Does the Post Office have such a system in place? If not, why not, because the Government insist that everybody else should have outside the public sector?

[Lord Johnson of Lainston (Con)]

My noble friend raises a very good point. I am aware of people’s frustration over the longevity of the processes, but Sir Wyn Williams’s review will be extremely important in informing us about what has happened. I agree with my noble friend’s point: long-term incentive plans should be as common in public sector bodies as they are in the private sector. I encourage that when looking at how we review governance in these sorts of organisations.

[Lord McNicol of West Kilbride (Lab)]

My Lords, a recent Post Office board meeting refers to a “toxic culture of disbelief” persisting at the top, including a continuing view that some postmasters and postmistresses were guilty as charged. Until the Post Office is taken out of the compensation process altogether, nothing will change. The Minister knows that one of the advisory board’s recommendations is to do exactly that. Have the Government made any recent assessment of the impact of the Post Office’s involvement on the delivery of the compensation scheme? Also, regarding the last question put by the noble Lord, Lord Forsyth, the answer is yes—the Government do have a clawback mechanism.

[Lord Johnson of Lainston (Con)]

I am grateful to the noble Lord for that point. On the reference point at the end, I assume that we are awaiting the outcome of the inquiry, which is only right, so that we can ensure that the right things are done at the right time in the right way. I am also grateful for the prompt regarding the Government taking over the entire management of the compensation system. There is a great deal of demand for that—half the compensation processes are managed by the Government, and they have been effectively delivered. It is not for me to make such commitments, but it is clear that these discussions are going on within government to give people confidence that we are trying to do the right thing for those who have suffered so much.

[Baroness Butler-Sloss (CB)]

My Lords, the person who was appointed to the board by the Government—what was his or her job?

[Lord Johnson of Lainston (Con)]

I am not sure I fully understand the noble and learned Baroness’s question.

[Noble Lords]

Oh!

[Lord Johnson of Lainston (Con)]

Do forgive me, my Lords. Perhaps it relates to the chairman or the independent director, and it is a good point in terms of the governance of these arms-length bodies and non-commercial government companies. It is right that we review how governance functions. We all want to hear the results of the review and then work out ways to ensure that these organisations can operate with the independence they need, but with the right level of ministerial scrutiny and oversight. Ultimately, we are accountable to everyone in this House and the other place. Noble Lords and all parliamentarians need to know that we are doing our job without a high degree of interference but are accountable. That is very important, and more will be said in the future.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, is it not encouraging that my noble friend Lord McNicol has already started answering questions from the Dispatch Box? Does that not bode well for the future?

--- Later in debate ---

[Lord Johnson of Lainston (Con)]

In this instance, I would be delighted if the noble Lord, Lord McNicol, and I swapped places. He would be welcome to take on answering the rest of this Question, but I am afraid it has now concluded.

Post Office Horizon: Compensation and Legislation

Lord Johnson of Lainston Excerpts

Tuesday 27th February 2024 Lords Chamber

[Lord Fox (LD)]

My Lords, I thank the Minister for allowing this Statement to be debated in your Lordships’ House. We welcome its direction of travel.

Everything that could be said about the horror and unfairness of this scandal has been said, but we need to remind ourselves, as the noble Lord did, of the crushed human lives that sit beneath this issue. The move to quash these wrongful convictions at the point of the forthcoming Act’s commencement without the need for people to apply to have their convictions overturned is welcome, and the fact that it is being designed to reduce or eliminate the bureaucratic application process is promising. But clearly we need to understand it.

To qualify for this, as I understand it, there is an understandable list of criteria that have to be met, including the offence, the contract that people had, the timings, their exposure to Horizon, technology and other things. Here I have concerns. Can the Minister confirm that it will not be Post Office Ltd that will be sifting through who qualifies to have their conviction overturned? Experience has shown that it cannot be trusted; it has neither the good faith nor the processes to do this effectively and efficiently. But even if it is removed from this part of the process, it is Post Office Ltd that owns and controls most of the documentation and information that is needed to decide who qualifies for exoneration. As such, the upcoming legislation must include a duty on POL to provide documentation within a timeframe, with sanctions if they do not.

There is an overall communications issue that needs to be engaged with around those victims—what is happening to them, and how is the process going forward? If people who believe that they should be on the exoneration list are not on it, we need to know what the appeals process for them will be.

Of course, once their convictions are quashed, then we move into the compensation zone. Minister Hollinrake agreed yesterday that compensation has been delivered too slowly—I think we can all agree with that. We welcome the Minister’s comments about attempts to speed up payments, but it is clear that having three separate schemes and five different classes of victims has been a nightmare for those victims when it comes to getting through the system, and they have not been helped by Post Office Ltd—quite the opposite.

The chair of the Horizon Compensation Advisory Board, Professor Chris Hodges, speaking on the radio today made it clear that in his view POL should be completely removed from the role of processing and setting compensation payments. We agree, so can the Minister confirm that that is the Government’s intention? Of course, as the noble Lord said, this announcement covers only England and Wales, so we need to know intentions in respect of the two remaining countries. As the noble Lord asked, what is happening in Scotland and Northern Ireland? We understand the issues around devolved authorities, but what is the timing going to be and when could we see it?

There is also the issue of those who have been convicted in relation to the Capture system. Kevan Jones MP has been very clear on this, and we would like to know where that is going to go and how fast it is going to move, as with people who paid back sums to avoid the scandal that the Post Office was hanging over their heads. How will they move into the compensation zone? It is still not clear.

When will the legislation happen? The Minister talks about a July Royal Assent, which was my understanding. Given the sell-by date of this Parliament, that is running things a little fine. If possible, we need to move much faster.

As the noble Lord said, this legislation is unprecedented, and we will need time to get into the detail of what the Government are proposing. Your Lordships’ House needs time properly to assess both the effectiveness of the legislation and its constitutional implications. That is not to hold it up, but it is to do our job properly. Can the Minister tell your Lordships’ House when it will be tabled in the Commons and when we are likely to see it here? We need time for proper scrutiny, but let us get on with it. Victims are dying, victims are in financial need and victims need closure.

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

I thank all noble Lords for participating in all these debates and of course my two opposite numbers for their comments in their opening statements. Without me going through a great grandstanding point, it is better if I address each individual point, because that will allow me to clarify the situation as it stands.

I share the sentiments expressed by the noble Lord, Lord McNicol, about the cross-party support: we have all come together to ensure that these people are properly compensated, and we have come up with an extremely bold and unique mechanism for exonerating those who were wrongfully convicted. I am very grateful to my colleagues, and I think I speak on behalf of my noble friend Lord Offord in this House and Minister Hollinrake, who has done an exceptional amount to progress this entire process. I take this opportunity to pay tribute to him.

The further details of what needs to be worked out following the quashing of convictions Bill that we hope to introduce as soon as possible cover a range of issues, some of which have been raised today. The details of eligibility are certainly something that we need to ensure we get right. The noble Lord, Lord Fox, raised the principle of linking the appeals process to people who feel they should be on this list but are not included. I can say that it will be the Government who, in effect, compile the list of people who are eligible, according to the criteria. We set out the criteria very clearly in the Written Statement yesterday and they seem to me entirely logical. Clearly, you have to have been prosecuted by a certain prosecutor, such as the Post Office or the Crown Prosecution Service; you clearly have to have worked for the Post Office between certain dates; and I believe the evidence has to be linked to the Horizon scandal and to certain specific crimes, such as theft or fraud. I have looked carefully through the list, and it seems to cover key areas that we are trying to cover. However, there may be individuals who feel that they should be eligible for their convictions to be quashed but who may not necessarily fulfil the specific and very narrow criteria, so these are the sorts of details that I believe we will have to work on. We look forward to developing those as the time comes.

The principle around the devolved nations was raised and is very relevant. As noble Lords will understand, they are different legal systems, certainly in Scotland. I know that my colleague, Minister Hollinrake, met his counterparts yesterday, or over the last few days certainly, to progress what we believe will be a logical replication of this concept. I am not aware of any decision on the part of the devolved nations to change the principles that are operating, but of course it is up to them. We very much hope that they will follow our suit.

I agree that the situation of the postmasters who were convicted and have since passed away is indeed terrible, but the convictions will be quashed automatically through the Bill and by the sheer nature of the individuals’ eligibility. This is not the same as applying for compensation; postmasters will not have to apply to have their conviction quashed. The whole point about this sweeping Bill and why it requires, as both noble Lords have said, considerable scrutiny is that all convictions will be quashed en masse at the moment it becomes an Act. That is an important point; the families of anyone who is deceased will know that their conviction has been quashed and they will have that relief.

I agree that the entire tone regarding the speed of compensation has changed dramatically over the past two and a half years. I am very grateful to Minister Hollinrake for the work he has done to ensure, most importantly, that interim payments can be made before final payments. He recently increased the payments for those who have been convicted to £400,000, which gives people the immediate payment they need before they decide to take the next step. There are also substantially increased fixed offers; the record so far is quite significant: 78% of claims have now been paid and there is a clear focus on ensuring that all offers are fully completed within 40 working days in 90% of cases for the GLO scheme.

The comment was rightly made about the number of different compensation schemes. As a Minister answering questions on this, I want to get the facts right. It is clear that there are many different pools and mechanisms for making sure that people are fully compensated. There is a great historical tale as well, which further complicates things. The Government are very aware of this; we have been doing a huge amount to make sure that people have interim payments, that there is no playing with the detail when it comes to compensating them, and that we are forward-footed in assisting postmasters in making claims. We are reviewing how the payments processing is operated, particularly in those cases operated by the Post Office. As I said in Questions, this is not a decision to be taken by me, but it is obvious that all these points remain under constant review. We want people to be compensated; the Government have allocated an enormous amount of money to ensure that they are so that there is no discussion about quantum and people can be properly compensated. As soon as the Bill goes through, I would expect a significant number of new compensation claims to be made. To claim their compensation, people will have to sign a form saying that they are eligible and have not broken the law, which is a sensible measure to take.

Finally, this is a significant and wholly unprecedented move. I am grateful to be joined by my noble and learned friend Lord Bellamy, who is a greater legal expert than me and is keen to make sure that his wise counsel is included in this process. This House will have the opportunity to debate in detail this unprecedented and unique situation. However, it is absolutely the right thing to do, given the historic tale, the sheer quantum and the clarity around the falseness of these convictions in so many cases. I hope that all noble Lords will agree and support the Government in executing this crucial move.

[Lord Arbuthnot of Edrom (Con)]

My Lords, I declare my interest as a member of the advisory board, which is now meeting not exactly in continuous session but every few days.

The Post Office itself is under investigation by the police. Is it not quite inappropriate for the Post Office to express any view as to the correctness of overturning convictions and is it not quite wrong, coming back to the point made by the noble Lord, Lord Fox, for it to have any position or play any part in the compensation process?

[Lord Johnson of Lainston (Con)]

I am grateful to my noble friend and pay tribute to his work. The Post Office will not play a role in deciding the correctness of the overturned convictions in the Bill; that will be a matter for the Government. The statement about the Post Office paying compensation is well heard. I am grateful for that and I hope I have made the point that the Government continue to look into it. Having said that, the Post Office has paid a very large quantum of compensation payments—several thousand, I think. It would be extraordinary if the team there were not completely aware of the need to ensure that they get this right, I hope including significant cultural change. There has been a wholesale change of individuals on the board of directors since 2021 and 2022. Currently, the important thing is to get the compensation payments paid and, in parallel, review how the process is working.

[Lord Browne of Ladyton (Lab)]

My Lords, because of the moral imperative, when I was Secretary of State for Defence, in 2006 I amended the Armed Forces Act with two clauses to pardon 309 of the 346 shot at dawn for cowardice. The evidence suggested that most of them were suffering from PTSD and the records for the rest were poor. I was told that this would be a slippery slope and that I would undermine military justice by so doing, and historians told me that I was changing history. Military justice has survived and is just as robust as before, and on the “Today” programme I said to a historian that I was not remaking history but making it. Ministers are making history now, absolutely rightly, because of the moral imperative.

The Post Office’s lawyers, who were responsible for a number of these convictions, have tried to influence Ministers. I have not seen the letter, but I understand from the way in which it has been reported that they said

“it is highly likely that the vast majority of people who have not yet appealed were, in fact, guilty”

because there were

“clear confessions and/or other corroborating evidence of guilt”.

From what I have seen of the way in which these interrogations were conducted, it is no wonder that some of these people confessed. They had this evidence from the Horizon system rammed down their throats and were told what the consequences would be if they did not confess. It seems to me that these confessions are pretty poor and I cannot think of any other evidence that could corroborate the false information that this system was producing. I do not see the argument here.

The Government should look very carefully at these cases before exoneration or quashing the convictions. As I understand it, the Minister said that they will ask people whose convictions are quashed to sign a statement that may later cause them to be prosecuted for fraud. We should not leave anyone with that hanging over them. We should check all these cases and see exactly what Peters & Peters is talking about, because I cannot think of anything that was not poisoned by Horizon.

Finally, my noble friend raised this crazy presumption that computers always produce the truth. When will we do something about this in the laws of evidence in this country?

[Lord Johnson of Lainston (Con)]

I thank the noble Lord for those points. I was reminded of his making of history in an unprecedented and wholly unique way only a few years ago. I think he will agree that that was the right thing to do then and that this is the right thing to do now. It does not set a precedent; these are truly specific circumstances. I agree with him about the principle around the confessions. The excellent and important TV series powerfully demonstrated the relevance of this point; in a number of cases, people seem to have been given ultimatums to accept an admission of guilt for a lower level of penalty. It is right that this legislation, when it becomes an Act, will exonerate all those who fulfil these criteria.

I push back on the principle that each of the cases should be reviewed in the detail that the noble Lord suggested, because the whole point is that we want to move with a sense of pace. It has been widely reported—and, I am sure, discussed among everyone who has been following the case—that it is certainly possible that some people who have committed a crime will be exonerated. It is the Government’s view—I call on the legal experts in this House in saying this—that the clear uncertainty on which the evidence was based would impact the retrials. I would have assumed that, if there was a retrial for each case, the baselessness of the evidence being used would mean that, even if those people were guilty of committing a crime, they would probably be exonerated in many instances. It is not simply around the technical element of the necessity; it is the fact that we want to move fast, and we want to exonerate these people who are aging—in many instances, sadly, some have already passed away. It is the right thing to do, and it sends a very clear message that this country and our two legislative Chambers want to redress a significant wrong.

[Lord Bichard (CB)]

My Lords, the Minister said that this is unprecedented, which of course it is in many respects. However, we are seeing a number of examples at the moment of the state finding it very difficult to deal with its failures, so I wonder whether we can be reassured that some lessons are being learned. In May of this year, we will see the publication of the infected blood inquiry’s report, which will be devastating. It would be even more devastating if the victims of those events experience the same problems that we are debating today and that we have debated around Windrush and Grenfell. Can the House be reassured that discussions are taking place in government to ensure that that does not happen?

[Lord Johnson of Lainston (Con)]

I am genuinely grateful to the noble Lord for that point. I agree in many instances. Governments—or the state, as he rightly said; this is not party political or individually associated —and large bureaucratic machines find it difficult to accept fault. I think that there are fears of precedent-setting and financial conversations. Indeed, for those in the wrong, quite rightly there are the principles we are debating today—with significant cost to the citizenry of this country, as well as the reputational damage and other issues we have inflicted on the individuals, both those involved and those who have suffered the consequences.

Unquestionably, there will be—and rightly so—a significant discussion about how arm’s-length bodies of this nature are managed by government departments and Ministers, and how those Ministers are then called to account by Parliament. The issue, probably over the last 30 years or so, has been a culture of creating more and more arm’s-length bodies, the virtue of which seems to be their so-called independence. At a time when there should have been higher degrees of scrutiny, the culture was the issue, not necessarily the governance processes, because the governance is there in many instances. In the case of the Post Office, the Government is the only shareholder, so they were clearly in the line of slight; of course, the Post Office was also being heavily subsidised by the Government. In many instances, the structures are there, but the culture around the so-called ability for Ministers to interfere or take a greater degree of scrutiny, interest and responsibility has been reset. I think there is a significant view that a review of how those governance processes work in a cultural sense is absolutely right. We should be aware of the chilling power of bureaucratic indifference—we certainly are; it is something I take very seriously in my own role.

[Lord Bellingham (Con)]

My Lords, I speak from the experience of a former MP who represented a number of sub-postmasters and sub-postmistresses. There were two in particular in my constituency who, with hindsight, we know were wrongly accused, but they simply handed their leases in and left. Their lives were turned upside down and ruined. Across the whole country, there must be many more in that position who have not appeared on the department’s radar screens. Can the Minister say what can be done to help that cohort? How can we find ways of stopping them being ignored? Can he find a way of including them in the scheme?

[Lord Johnson of Lainston (Con)]

I thank my noble friend. Absolutely, we can compensate only people who come forward. In the different pools, a large number of people who have been identified have not submitted claims for compensation yet. That makes some of the data look as though we have not been responding, when that is not in fact the case. We are here to respond, we are keen to respond, money has been allocated to respond, and we want to make sure that we do the right thing and redress those cases.

My ask to all Members of this House, if they have former constituents, neighbours or people of their association whom they believe should be entitled to compensation, is to ask them to come forward. There is no final date. The closing date has been removed— I think there was supposed to be a closing date in August this year. Clearly, we do not want this to go on for ever; we want people to come forward and get the compensation that is right. I press people to spread the word.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, notwithstanding what I said at Question Time, the Minister has been really helpful in all his replies. I wonder whether he can help me with another. When I was a lot younger, the Post Office and the railways used to run extremely well and they were run by people who had been in the industries all their lives; they knew everything about the Post Office, how it worked, the problems and so on, or about the railways or others as well.

These people were paid reasonable salaries but not hugely differently from the people who worked on the ground. What we have now is chief executives or chairmen who move from industry to industry and then to something else—if you look at Nick Read, he has been at Tesco, Vodafone, HBOS, Lloyds and Thomas Cook. They are supposed to bring the experience from one into the other but they are entirely different kinds of organisations. Then they get paid a salary of £415,000 and a bonus of £455,000. Something has gone wrong. I heard Nick Read give some evidence today and it was not very impressive. We have these people—mostly men, by the way—who move from company to company, getting bigger and bigger salaries and bonuses. Should something not be done about that?

--- Later in debate ---

[Lord Johnson of Lainston (Con)]

I am grateful to the noble Lord for allowing me to carry on in my position, at least until the end of this Statement. I am glad he has such halcyon memories of the railways when he was a younger man; I am not quite sure when that was.

We need to be aware of something which has struck me in the discussions around this. There is naturally a sense of reflection over the salaries paid to senior executives in an organisation such as the Post Office which is going through such a traumatic time, and the view that we want to punish the current executive leadership. While that is a very natural instinct, we want the best people possible running the Post Office today. It is an intensely complex situation, not just in terms of compensation and the issues around the Horizon scandal but running 11,000-odd Post Offices around the country and all the issues around that. What is important is that we get value for money; if the Post Office was making a great profit, everyone was happy, all the staff were delighted and we were not in this situation, we would be extremely pleased, probably, to pay the chief executive more than he is currently paid.

It is not necessarily about the quantum; the point is the governance around how salaries and bonuses are fixed. There was a question earlier in this House about long-term incentive plans compared with short-term ones. In the financial services sector, where I come from, you are paid your bonuses over three, five and often more years, which is considered to be quite onerous but I think it has resulted in changes in behaviour. It is absolutely right that we should look at these sorts of plans for these highly paid executives in these public corporations.

[Lord Lansley (Con)]

My Lords, I draw the House’s attention to my registered interest as UK chair of the UK-Japan 21st Century Group. Can my noble friend update the House on the prospects of securing a significant contribution to the financial redress from Fujitsu? Of course, Fujitsu is a Japanese company but in this context this is consequential upon its acquisition of ICL during the 1990s.

[Lord Johnson of Lainston (Con)]

I thank my noble friend for raising that point. I think it has been widely publicised that Fujitsu has apologised for its role in this —as one would expect and hope—but has also accepted a moral responsibility. It has also suggested that it will look to see how it will participate in this process and my colleague Mr Hollinrake has been very clear that this overall envelope of compensation to postmasters is not to be borne solely by the Government. Clearly, there is an ongoing inquiry. This is an extremely complicated process to comment on at this stage but the tone of what my noble friend is suggesting chimes completely with the Government’s view.

[Lord Fox (LD)]

To build on the question from the noble Lord, Lord Foulkes, in his reply the Minister talked about the remuneration of the executive team, but actually the sharp end of the Post Office is the people working behind the counters—who we all see when we are getting service from the Post Office. This can be nothing but a demoralising series of news for those people. Their morale within that business is really important, as they work for a company that has been so vilified publicly and hauled through the mud. Does the Minister think that the executive team, the evidence of which we saw today, is the team that can rebuild the morale and the spirit within the Post Office, which will be needed to deliver the sort of turnaround that the Minister was talking about?

[Lord Johnson of Lainston (Con)]

I thank the noble Lord, Lord Fox, for those comments. I should say that the Government have full confidence in the CEO and in the board whom we have appointed over the last two to three years. I am told they are extremely grateful for the services of the government representative and the UKGI representative. There are two postmasters, who I think are elected to the board, so it is a diverse board that represents the interests of the Post Office. Its members are not tarnished, as it were, by previous activities, and they have been doing a good job in responding to what can be described only as a crisis.

I echo the noble Lord’s points. The Post Office personnel are the absolute core of the business, of many communities and of this country, and it is agonising to see them put through so much distress. I agree with the comment made, I think by a colleague of mine, that in some respects the sheer greatness of our Post Office staff around the country has been magnified by this event, and I am sure that more of us will use our local services when we get the opportunity. This has also drawn a lot of attention to the needs of the postal service around the country, the conditions that its employees work in and the opportunity to improve them, with more recruitment and more people entering the Post Office service. I totally support the noble Lord’s aim; it is a magnificent organisation in its principal core ambitions of delivering great service to communities. The people who work there should be celebrated, and we certainly do that.

[Lord Arbuthnot of Edrom (Con)]

May I come back on a point that was raised by the noble Lord, Lord Browne, about the declaration that is to be signed by those whose convictions are overturned? I am not sure that I understand this declaration. If you have signed accounts which you know to be wrong and yet you have had your conviction for false accounting overturned by the Court of Appeal on the basis that it is an affront to justice, do you sign something saying you have not committed false accounting when maybe you have? I do not understand this declaration.

[Lord Johnson of Lainston (Con)]

I thank my noble friend for raising that point. The signing of the form saying that you are innocent is not to do with the conviction being quashed but is in order to receive compensation. The Government do not think that it is unreasonable, and I hope noble Lords would not think it is unreasonable, that there is an element of a threshold for people to say that they were not guilty of a crime and that they deserve their compensation. The nature of the application alone should probably cover that. It is a very sensible move to make, and I do not think it distorts the process. However, clearly, these are live conversations and we will have them in more detail.

[Lord McNicol of West Kilbride (Lab)]

Just to be clear on that as we go into the last few seconds, with regard to the quashing of the convictions, is it the case that the individual postmasters or postmistresses who received judicial sanction will not need to do anything for their convictions to be quashed, as the signing is purely to do with compensation?

[Lord Johnson of Lainston (Con)]

Absolutely. In conclusion, the Bill will immediately exonerate everyone whose conviction is being quashed. It is not a requirement to apply to have your conviction quashed; the Government will draw up their list. Detail has been raised about how people could appeal if they feel they should be on the list and are not, and there are clearly some details that need to be worked out about how that process will work. It will happen the moment the Bill becomes an Act of Parliament. It is absolutely the right thing to do, it is our intention that it will happen before the end of the Summer Recess, and I very much look forward to all sides of the House supporting us in that move.

Reporting on Payment Practices and Performance (Amendment) Regulations 2024

Lord Johnson of Lainston Excerpts

Monday 26th February 2024 Grand Committee

Moved by

[Lord Johnson of Lainston]

That the Grand Committee do consider the Reporting on Payment Practices and Performance (Amendment) Regulations 2024.

Relevant document: 10th Report from the Secondary Legislation Scrutiny Committee

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

My Lords, as we all agree, small businesses are the backbone of our economy. They make up 99.9% of UK businesses, employ millions of people and enrich our daily lives. That is why the Government have declared 2024 to be the year of the small business. So far, we have strengthened our “Help to Grow” campaign, established the Small Business Council and are extending the payment performance reporting regulations which we are here to debate today.

However, small businesses are being let down by late and long payments, which contribute to an estimated 50,000 UK business closures each year. In addition, 56 million hours are wasted each year by businesses chasing late payments. I will outline the key elements of this statutory instrument and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) 2017.

The first objective of this instrument is to extend the reporting requirements beyond the expiry of the Reporting on Payment Practices and Performance Regulations 2017 and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) 2017 on 6 April this year until 6 April 2031—a very clear extension. Since the 2017 regulations and the Small Business Commissioner were introduced, instances of late payment by large businesses have fallen across the UK. If the 2017 regulations were to sunset without extension, we would remove payment time transparency entirely. I hope that noble Lords agree with me on that. We would also be removing the healthy dose of competition that drives large businesses to improve their payment time. Without the reporting requirements, businesses would not have to worry about being the outcasts of their peers due to poor payment practices.

My colleague Kevin Hollinrake MP, the Minister for Small Business, launched a consultation early last year which asked the public for their opinion on the regulations and our proposals for improving them. Trade associations and businesses across a wide range of sectors provided us with overwhelming support for the extension of the regulations and for the new reporting requirements which we will be introducing.

The second objective of this instrument requires large companies and limited liability partnerships in scope of the 2017 regulations to disclose additional information and report two new payment performance metrics. We will make it a requirement for businesses to provide the value of the invoices paid during the reporting period. Small businesses told us that this would provide them with even more clarity over how large businesses behave. We will also be introducing a requirement for businesses to report on the percentage of invoices that they dispute. Small businesses told us that they are concerned that some of their customers use frivolous disputes to avoid making timely payments. We listened to them and have taken action to address this.

The third objective of this instrument is to clarify the reporting requirements when supply chain finance is used by large businesses. This amendment will ensure that the impact of the use of supply chain finance is more accurately reflected in the reporting data, providing small businesses with a clearer picture of a business’s payment practices.

Like their predecessor, these regulations will require a review in April 2029, before their statutory expiration on 6 April 2031. It is critical that this legislation remains in place and is further improved to provide small businesses with the transparency that they need. By increasing the level of transparency, we will be arming small businesses with more information to help them make informed decisions about who they work with, while applying additional pressure to large businesses to improve their behaviour. We are incredibly grateful to the 137 respondents to the consultation on these regulations. They included small and large businesses as well as a range of representative trade bodies. There was overwhelming support for the extension of the regulations and for the new metrics that we will be introducing. I sincerely hope that my colleagues here with me today can see the benefits that these regulations provide and can agree with the introduction of this affirmative statutory instrument. I beg to move.

--- Later in debate ---

I look forward to the Minister responding to the question from the noble Lord, Lord Aberdare, on retention payments, especially in the construction sector. This is a bone of contention among many construction companies, whereby companies are holding back retention payments to benefit their cash flow. I look forward to the Minister’s response.

[Lord Johnson of Lainston (Con)]

I greatly thank noble Lords for their passionate inputs into this debate. This is a serious issue. I should say that, although I do not believe I have any personal conflict, I would recommend that all noble Lords inspect my register of interests because, clearly, I have interests in businesses. Indeed, the noble Lords, Lord Leong and Lord Fox, and I have all had experience of working in small businesses, and late payment is a significant issue. We have these dry statistics, but the reality is that it has an effect on people’s lives, induces stress and wastes time, with an impact on the economy. It is something that we have to take very seriously. We are all in agreement that extending these rules until 2031 makes absolute sense. I am grateful to my colleagues for supporting us in this cross-party and cross-Committee view.

Some relevant questions were asked, and I will try to cover them briefly, but I would be absolutely delighted to have a further conversation. I know that my colleague, Kevin Hollinrake, is certainly available to hear further input from noble Lords, if that would be useful.

The noble Lord, Lord Aberdare, made a point about the Small Business Commissioner. Let me say something; it may help to cover some of the other points made by noble Lords. The Payment and Cash Flow Review Report issued by Minister Hollinrake at the end of last year—I thought that it was a clear and excellent report—covers nearly all of the questions asked by noble Lords today, in particular the point about the Small Business Commissioner. The intention, to which we are absolutely committed, is to introduce broader responsibilities, which will allow said commissioner to undertake better investigations and publish reports; this will help significantly, I think.

The noble Lord, Lord Leong, asked who currently enforces the payments process. It is the Department for Business and Trade. We publish that data—it is on the Government’s website—and we also have a team tasked specifically with ensuring that we monitor late payment. That information is published.

I am sensitive to the point made by the noble Lord, Lord Fox, about the competitive case. As someone running a small business, one is—I was, and we were—obliged to take whatever business one can get. That is not irrelevant when it comes to the publishing of businesses’ competitive positions among each other; it is important. Similarly, the work that we have done on Companies House, with input from many noble Lords opposite, allows us to have better data around companies’ behaviour, which will have a significant impact. As I understand it, at least anecdotally, there is a concept in the consultation of competition between companies in terms of wanting to be a better payer is something that is not to be taken lightly.

I refer noble Lords to the report, looking at concepts such as late payments to be embedded in environmental, social and corporate governance standards, and so on. This will all have ultimately important impacts.

I have two other points, before I conclude, about the construction sector. Again, we have been very clear that we are looking to severely control the principles around retention payments, how they can be levied and how that operates in the information that we publish on that. We have been working very closely with an organisation called Build UK, which now publishes league tables on payment performance within the construction industry. This is a very clear flagged issue and something we are certainly working on. I am happy to write to noble Lords with further information if that is useful.

Lastly, the noble Lord, Lord Fox, raised a very important point about government procurement: how can we ensure that the Procurement Act is used more effectively to ensure that, through the supply chain, government procurement, which accounted for however significant a percentage of all procurement in the UK, is used to drive payment terms from its suppliers? That is a core element of this and it is worth saying that, since legislation was brought in in 2017, average payment times have reduced from 81 days to 36 days, which is a significant reduction. That is a single statistic, and I am very aware that it does not represent the value of the deals or go into a huge amount of detail, but that is the information that I have been given and I think it is very encouraging. Clearly, there are outliers and industries where there are still issues over payments. The Government take this point extremely seriously. It is a cornerstone part of our policy agenda to help small businesses, and indeed help the economy, to function properly. I am very grateful to all noble Lords for their input.

[Lord Leong (Lab)]

The Minister mentioned the drop in procurement payment from 81 days to 36 days. That is obviously very encouraging, but do the Government have figures for how long it takes the main contractor to pay its subcontractors?

[Lord Johnson of Lainston (Con)]

I am grateful to the noble Lord, Lord Leong, for that point. We will have this data. I am looking, and average payment times between businesses peaked in December 2020 at 30 days and is now down to 35.6. I do not have the data in front of me for what it was before these regulations came in, but there is a very clear downward trend that can be seen in a chart in the report. I am happy to show noble Lords and to write with more specific information. The whole point about this exercise is to have the information to demonstrate what the trends are and who is not following the right courses of action.

[Lord Aberdare (CB)]

Before the noble Lord sits down, if that is the right phraseology, I have no doubt about the Government’s commitment to some of these further developments in reporting on retentions, for example. My question was very much about how and when that is going to happen, and why it does not happen. Here we have regulations which seem to me to be ideal for that quite simple reporting of retentions. It does not go nearly far enough, in my view, towards actually scrapping retentions, but it does at least produce the sort of transparency that the Minister is talking about.

[Lord Johnson of Lainston (Con)]

I thank the noble Lord, Lord Aberdare, for those points. The timeline is genuinely as soon as possible. We felt it was more important, given the timing of the cliff edge and the sunset around this legislation, to make sure that we extended that to 2031. I am aware, without speaking on behalf of my ministerial colleagues, that retention payments and issues around construction are absolutely on top of the priority hopper, so I hope the noble Lord will be satisfied with that.

[Lord Fox (LD)]

My Lords, finally—I am not to be outdone—the Minister sets a lot of store on the public embarrassment issue. I come back to the balance of jeopardy: the Minister is a businessman of the world and he knows that, if you have a publicly listed company, it can make sure it reaches its numbers by the end of the year by extending its outgoings into the following year—it happens all the time. Which is more embarrassing to the board, not meeting its financial projections to the Stock Exchange or having a rather dirty note in its annual report 12 months later?

[Lord Johnson of Lainston (Con)]

I am grateful to the noble Lord for the direction of his question. I do not necessarily think that I can answer it specifically. It would be unfair to deviate away from the main thrust of what we have been discussing today: a very sound extension of the right type of legislation for gathering information and including new areas within which to gather information, such as on value, to ensure that the supply chain funding and the data from companies using that system are not distorted. This is sensible, frankly, and has the support of everyone here.

However, the Committee is absolutely right to put pressure on the Government regarding potential payments around the construction industry and, importantly, the Small Business Commissioner. The plan is that the commissioner will be given significantly more powers—and not simply to publish the league tables, which I agree with the noble Lord is soft power. As I understand it, we are looking at opportunities to give the Small Business Commissioner, or whatever office it evolves into, real teeth when it comes to ensuring that companies are fulfilling their obligations.

There is more work to be done. This is a quite a new concept for the UK economy. We are looking at legislation that is just under 10 years old whereas, previously, we did not have any such legislative structures.

Motion agreed.

Registered Office Address (Rectification of Register) Regulations 2024

Lord Johnson of Lainston Excerpts

Monday 26th February 2024 Lords Chamber

Moved by

[Lord Johnson of Lainston]

That the draft Regulations laid before the House on 18 December 2023 be approved.

Relevant document: 8th Report from Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 19 February.

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

My Lords, with the leave of the House, I beg to move the four Motions standing in my name on the Order Paper en bloc. In doing so, I declare my interest as a director and person with significant control of some companies. I do not believe there is a direct conflict, but I inadvertently omitted to declare my interests in Grand Committee last week, for which I apologise.

Motions agreed.