Commercial Payments Bill [HL]

Lord Leigh of Hurley Excerpts

Committee stage
Tuesday 21st July 2026 Lords Chamber

[The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)]

I advise the Committee that if this amendment is agreed to I will be unable to call Amendments 3 to 5 for reasons of pre-emption.

[Lord Leigh of Hurley (Con)]

My Lords, I rise to follow my indefatigable noble friend Lord Holmes and congratulate him on his Amendments 2 and 3. I agree that there is a real risk that 60 days will become the default, whereas 30 days is the market norm. I took the trouble to check with one of the co-directors of my family company—for which I declare an interest along with the others on the register—and he told me that we always pay the week after receipt of invoice, which I did not know. Therefore, one does not want to do anything that encourages companies to pay longer than their current practice is the case. The Government perhaps might have made it clear that the maximum is a maximum, but to say, “Thank you, good luck, and carry on”, for people who were paying earlier.

In respect of Amendment 4, we do need to clarify what is a public authority for these purposes; it is very important. But on the meat of the group, in terms of a company involved in an SAR—a special administration regime—I am grateful for advice and guidance given to us by some suppliers who have been in touch and are affected by this. It is estimated that some £835 million will be written off by those who are Thames Water suppliers, and that is just a direct cost; there will be a ripple effect for subcontractors and others. It does not seem right that, even though a supplier will be paid after an SAR, they may have to write off all their invoices for services provided to Thames Water before an SAR. This could be a disaster for many SMEs. Of course, contractually they have to keep supplying to make sure that, for example, the sewage is not running in the streets, and that the other essential services of Thames Water continue. This is very acute and needs immediate attention on the part of the Government.

I am surprised that the noble Lord, Lord Fox, has not signed our Amendment 100, as he normally likes these sorts of reviews. But I hope he and all others see the merit in having that.

Amendment 51 is a bit of a probing amendment, but it could become very important, as we could see, in the future, large purchasers contractually forcing smaller companies to accept cryptocurrency. It is not specified in the amendment that it is cryptocurrency, but it is clear that is what we mean. Many people would not want to be forced to accept cryptocurrency, but such is the power of a larger company they may find themselves in a position so to do. The amendment is predicting what might happen in the marketplace and asking the Government to think about it now and let us know their view. It would be perfectly reasonable for this to happen if both parties genuinely agreed, but not if one is, frankly, bullied into it.

I am very interested in Amendment 52 from the noble Baroness, Lady Bowles, and look forward to hearing her arguments.

[Baroness Bowles of Berkhamsted (LD)]

That was a hint to rise. I will speak to my Amendment 52, but I must first apologise to the Committee that I was unable to speak at Second Reading, my scrutiny hours having been occupied in the passage of another Bill, which also accounts for why this was rather a last-minute—almost literally—amendment, so there was no pre-discussion with anybody, but I would have liked to give it some airing.

I wholeheartedly support the core intention of the Bill, and I will make no secret of the fact that I would have preferred an immediate 45-day limit rather than 60 days. But scanning through the Bill and the amendments once I was released to have the time to do so, it seemed to me that there is a blind spot in that there were no rules to ensure that small businesses could receive stage payments, leaving them at risk of being forced to rely on end-of-contract invoicing. In some instances, way-stage payments may be agreed, but many businesses feel that they cannot take the risk to bid for a contract in the first place. Others are exploited and put dangerously at risk of non-payment in contractor insolvencies, the very issues that the Bill seeks to resolve, so there is a huge loophole.

In the Government’s own consultation phase last year, small business federations and independent suppliers explicitly warned against an invoice-centric blind spot. Yet here we are, with it unsolved. We do not need to look far for a solution. Stage payments have been a standard procedure in construction for 30 years, so why not follow that precedent? If it works for construction, why not for the wider economy?

My amendment proposes a simple entitlement: for contracts exceeding 45 days, small undertakings—which I have defined as having up to 50 employees—must have the right to invoice at intervals of no more than 45 days. If you do the sums on this, under my amendment a small firm must fund its own costs for 45 days before invoicing, but then it still has to wait up to 60 days for payment. That is 105 days, or three and a half months, before a single penny arrives, during which all the salaries and business costs have to be paid. That is still an enormous burden. But without this amendment, that gap is effectively uncapped.

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The Government remain committed to ensuring payment is prompt and terms are as short as possible. Alongside the Bill, the Fair Payment Code encourages businesses to move towards 30-day terms, and the Reporting on Payment Practices and Performance Regulations 2017, which were brought in by the previous Government, provide transparency over payment performance. We will continue to monitor the impact of these measures and consider carefully whether further action is required. For that reason, I respectfully ask the noble Lord to withdraw his amendment.

[Lord Leigh of Hurley (Con)]

Before the Minister sits down, may I push him a bit on a point he made? He said that Amendment 43 could not be accepted because it would cut across all insolvency legislation by not treating all suppliers or creditors equally. Does he recognise the special situation of certain suppliers under the LPCDIA 1998 whereby those suppliers are obliged to carry on doing business with the company SAR, which is Thames Water in this case? They are not the same as any other creditor, and it would therefore be possible and appropriate to treat them differently.

[Lord Leong (Lab)]

I am grateful to the noble Lord for bringing that specific example. I need to be very specific about this, because it refers to a particular organisation; I need to get my facts correct and will write to him.

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[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow my friend, the noble Lord, Lord Fox, and to start with his Amendment 93, which I was delighted to co-sign. As he stated in finishing, it goes to the heart of this issue. A lot is being asked of an organisation that is currently small and obviously not set up to perform the tasks that are being asked of it by the Bill, as it is currently structured. To not have clarity as to what provisions are going to be put in place, while putting the obligations on the commissioner, does not seem to be the right way to get optimal results from this.

As the noble Lord, Lord Fox, said, there are a number of examples where regulators and other bodies have been given packages that sit alongside the obligations required of them from previous Bills that we have all worked on. So there is nothing extraordinary or unusual about this. It is critical to have sight of that before having a sense of the likelihood of success or, indeed, of what other route we may choose to take with amendments when we come to Report.

I support the principles behind all the amendments in the group. In many ways, they are all in pursuit of clarity and precision. We heard in earlier debates that certain phrases and sections of the Bill were need of precision. We see it again with some of the key phrases here. I support all these amendments. I look forward to the Minister’s response.

[Lord Leigh of Hurley (Con)]

My Lords, we now come, as my noble friend Lord Hunt of Wirral said, to the heart of the Bill, as far as I am concerned. For many, it is the most important part. I have tabled a number of amendments, starting with Amendment 62. As my noble friend said, it seems only sensible that if the Small Business Commissioner has decided not to adjudicate, she should set out in writing the reasons why. The particular emphasis on this is to understand whether that is because of a lack of resources within the commissioner’s office. If that is the case, we want to know, so that we can push harder for proper funding for the office. I hope the Minister regards the amendments in this group as being constructive. They reflect feedback from the world of business.

In respect of my Amendment 75, I think it is reasonable to push the Government to be more specific and explain what they mean by

“a sufficient number of occasions”.

It is, bluntly, fairly meaningless and extremely woolly as is, as my noble friend Lord Hunt of Wirral has indicated. There is no point giving us a number; it has to be a number in a certain period and perhaps quantified as well.

To be honest, I am not entirely happy with new Sections 2K and 2L, as amendments to Section 2 of the Enterprise Act 2016, as mentioned in Clause 19, headed “Publication directions” and “Enforcement directions and financial penalties for non-compliance”. The Bill does not specify all that might be required of a company. It gives examples in new Section 2L(2). Indeed, it actually rules out a larger business being required to publish information or make payments or comply with a decision given in legal proceedings, but I would like to see some greater powers here.

Therefore, I ask the Minister to have another look at new Sections 2K and 2L and perhaps, over the summer months, consider with us what might be included within “enforcement directions”. For example, I have in mind that a company that is in breach of late payments best practices should not be given government contracts. Has that been considered at all by the Government? It seems an obvious point that if there is a serious breach and a company is constantly paying late, why would the Government want to give it any contracts at all? That would bite and force companies to think again. It may be that the Government have this in mind but do not have it in legislation, and want to do it through regulation or something, but it would be helpful to hear from the Minister, now or later, his views on that.

In my view, a solution is that the guilty company should be given the cold shoulder by the Government and, indeed, the wider business community. To be given the cold shoulder is difficult to define, although it is used in the City, as the Minister knows, in the Takeover Code—it is very rarely applied, but with great effect. For example, I would be extremely disappointed to see the chairman of a company that consistently practises poor late payment policies be given any sort of honour or award. It may be difficult to put that into legislation, but the Minister might indicate to us his views on that, and there might be from the Dispatch Box, now or later, comfort given to us that the Government will not look kindly on such companies and will take such steps as are necessary to push them along.

We have quite a long time until Report, and indeed there will be, as I understand it, a new Minister in the other place. I hope that the Minister in this House, who I am confident and hopeful will be in his seat when we return, might invite participation and agree some further amendments to this part of the Bill.

[Lord Leong (Lab)]

First, I thank all noble Lords who have contributed to the group of amendments, and I acknowledge the work done by the previous Government in establishing the Small Business Commissioner. We are building on the work done by the previous Government to give the SBC more powers to do the work under the Bill. I listened to the very innovative suggestions from the noble Lord, Lord Leigh. I will definitely bear some of the suggestions in mind when I speak to my officials. I will not guarantee or promise him anything, but I will bring it up.

I recognise the shared objective behind Amendments 59, 66 to 68, 71 and 79. Payment disputes should be resolved quickly, fairly and with proper safeguards. That is what the Bill is designed to achieve. This group of amendments is huge, and I will try to address as many of the questions as I can. If I do not, I promise to go through Hansard and write to noble Lords.

The Bill enables regulations to set time limits for each stage of adjudication, including the adjudicator’s decision, and to make further provisions about investigation. It allows the detail of procedural rules to be informed by consultation and approved by Parliament, and, where appropriate, with the consent of the devolved Governments, it gives the scheme the flexibility to be adjusted, including to set a shorter timeframe than 60 days for an adjudicator to determine a payment dispute, if appropriate. I understand the desire to put firm deadlines and procedural requirements in the Bill, but doing so would risk making the scheme less effective. In particular, requiring both parties to agree to extensions could allow one party to frustrate the process and jeopardise a fair outcome.

Similarly, removing the adjudicator’s ability to give directions or take steps to secure fair adjudication of a dispute would make the scheme more rigid and could prevent adjudicators detailing properly, with complex or incomplete evidence. The Bill already contains important safeguards. Adjudicators must act fairly and impartially, give parties a reasonable opportunity to present their case, and operate within a framework that is set out in regulations and subject to scrutiny.

With regard to Amendments 55 to 57, 62, 64 and 65, the Government’s approach is deliberately targeted. The scheme is intended to address the power imbalance that can arise when a larger business owes money to a small business, including sole traders and the self-employed. It is not designed to duplicate existing consumer protections or create a general commercial dispute resolution service. Extending the scheme more widely would risk increasing complexity and case volumes and weaken the ability to provide a swift, low-cost route for small businesses—the group most affected by poor payment practices. The Bill sets out exclusions and grounds on which the commissioner may decline to adjudicate. The regulation-making powers will simply allow technical and proportionate refinements, informed by operational experience, so that the scheme remains effective.

On Amendment 62, I recognise the importance of transparency where adjudication is declined. The commissioner will usually give reasons to the smaller businesses, while retaining discretion where disclosure would harm commercial relationships or otherwise be inappropriate. For those reasons, the Government believe that the Bill strikes the right balance between clarity, safeguards and the flexibility needed to keep the scheme focused and workable.

On Amendments 69, 74 and 93, the Government are clear that these powers must be matched by the capacity to use them effectively. My department is already working closely with the commissioner to assess the staffing and funding needed ahead of commencement. The Bill also provides a practical mechanism for cost recovery in relation to adjudication so that the burden does not fall solely on taxpayers and larger businesses have a further incentive to resolve disputes promptly and pay suppliers properly. Those arrangements will be set out in regulations, subject to consultation and parliamentary scrutiny. The commissioner’s annual report will continue to provide transparency on staffing, funding and audited accounts.

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Moved by

[Lord Leigh of Hurley]

58: Clause 18, page 22, line 26, at end insert—
“(1A) It is not a defence for the larger business to claim that payment was withheld due to the small business not complying with non-statutory environmental, social and governance requirements that are not included in the terms of the contract.”Member's explanatory statement
This amendment seeks to remove the non-compliance of non-statutory ESG requirements as a defence for larger businesses not paying small businesses.

[Lord Leigh of Hurley (Con)]

My Lords, my Amendment 58 comes out of discussions I have had with SMEs which are supplying much larger companies. I raised this at Second Reading and have now tabled this amendment to reflect that discussion. It may not be the most important to some, but I feel strongly that this issue needs to be addressed. To the extent that it can be addressed in this Bill, through these amendments, that is great, but it is part of a wider issue which the Government should look at.

Many SMEs that I talk to—and they will not put their head above the parapet and say so publicly—are spending significant time and resources assisting larger companies to fulfil their ESG ambitions. Whether or not it is obligatory, they still find themselves having to do it. What does that mean in practice? It means that they have to go on courses and webinars and fill out forms, all of which are completely vanilla, bland and meaningless, but tick a box for a larger company to say that, yes, it has gone through its supply chain to ensure that it is performing to the same standards and way of doing business as they are. It is detrimental to so many small businesses. Can a company that employs only six people be expected to have a diversity policy that is meaningful? What if all six are women? Good luck to it, but should that company be punished? It might be encouraged, but if all six are male then there would be a sharp intake of breath and a cross on the ESG form.

It is the same for small businesses having to analyse their travel activities and the amount of water that they use in their enterprise. We are talking about businesses where staff sit in an office in a building where the only water that gets used is in the facilities and the roof, but they have to fill out the form telling someone how much water they use. It is a complete and utter waste and abuse of their time, but nobody is standing up for SMEs and saying, “Up with this we will not put”.

I hope that the Government take this siren warning and pick up this issue elsewhere. In the context of this Bill, my concern is that, at some point, larger companies might wish to withhold or defer payments to suppliers whom they regard as being unhelpful to them in their ESG drive. I have no evidence of this happening but want to prevent it happening and to raise the issue for a wider debate within what is now, I think, the BIST team. I am sure that the Government can see the point and hope that they will consider it.

Although I like very many of my noble friend Lord Holmes of Richmond’s amendments, as always I am nervous about legislation that requires more disclosure in companies’ accounts. The average FTSE 100 company annual report has—are you ready for this?—97,000 words. I hope that we do not legislate to make them put more words in those reports, partly because nobody reads them and they are huge documents when printed out. I challenge anybody to say that they have read the annual report of any FTSE 100 company in full. They are expensive to produce and are read increasingly infrequently. I beg to move.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow my noble friend Lord Leigh of Hurley. My amendments in this group largely fit into support and assistance for the small businesses that need to be put in a position to avail themselves of these new provisions from the SBC.

We will come to it in the next group, but it is clear, as my noble friend somewhat alluded to, that this will produce potentially a lot of data which goes nowhere, is of no benefit and is not used to drive any change whatever. But given the nature of the requirements currently set out in the Bill, that data will be produced. Therefore, it seems helpful to look at the various categories of small business and the equalities issues there. Since that data will be part of the collection in any event, having that angle on it will show what targeted support could come from the SBC to support those businesses to better avail themselves of the services. A small business payments charter would be a good focal point for the provisions set out in this Bill, to ensure that those it is aimed at are aware of it and enabled and empowered to make use of it, as and when they need it.

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[Lord Leigh of Hurley (Con)]

I beg leave to withdraw the amendment.

Amendment 58 withdrawn.