Commercial Payments Bill [HL]

Baroness Kramer Excerpts

2nd reading
Tuesday 9th June 2026 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I am stepping in today for the noble Lord, Lord Fox, who unfortunately cannot be here. I will do my best to channel him, but I know the House would have had more incisive comments, as this is not my field of expertise. I will take the opportunity to discuss an issue that very much concerns me; it will not surprise people that I will raise an in my comments whistleblowing.

Late payments have been one of the most persistent and damaging barriers facing small businesses, sole traders and the self-employed. We all know that it is not a new problem. Successive Governments have promised action, yet too many small firms still find themselves acting as unwilling lenders to much larger organisations, waiting months for money that they have already earned and that they are already owed.

We all know the consequences are not merely administrative; they are economic and they are human. Recent research commissioned by the Small Business Commissioner found that late payments cost the UK economy almost £11 billion every year, affect around 1.5 million businesses, and contribute to the closure of some 14,000 firms annually—what a waste—and around 38 businesses every single day. Businesses affected spend an average of 86 hours a year chasing overdue invoices rather than growing their companies, investing in new products or serving customers.

As Liberal Democrats, we have long argued that strong action is needed. Our 2024 general election manifesto committed us to strengthening prompt payment requirements and ensuring that large organisations could no longer evade responsibility. We therefore welcome the central provisions of the Bill.

The introduction of statutory maximum payment terms of 30 days for public bodies and 60 days for most private sector transactions is an important step forward, as is the decision to prevent parties from contracting out of statutory interest. Large purchasers have been able to use their bargaining power to impose terms on smaller suppliers that they have little practical ability to refuse. We therefore also strongly support the intention to give the Small Business Commissioner real enforcement powers and regard this as a significant part of the Bill.

The current commissioner has done valuable work, but moral persuasion alone has never been enough. There must be meaningful consequences for persistent offenders. The ability to investigate poor practices, adjudicate disputes and impose financial penalties represents a significant shift in the balance of power. It is encouraging that so many organisations representing small firms—the Federation of Small Businesses, Enterprise Nation, the Institute of Directors and the ICAEW—have welcomed the direction of travel in this legislation. We are also very pleased to see action being taken on retention payments in the construction sector. Specialist contractors and subcontractors have campaigned for years against a system that allows money to be legitimately earned but then withheld indefinitely and sometimes lost entirely when a contractor becomes insolvent. Ending this practice is both fair and overdue.

However, support for the principles of the Bill does not remove the need for scrutiny of its detail. We will examine the protection of complainants very carefully. The success of the new regime will depend heavily on whether small businesses feel able to come forward. Many suppliers rely on a small number of customers for a significant portion of their income; they may fear that making a complaint will damage future commercial relationships. It is a very real fear for many small companies. We therefore want assurances that robust safeguards will exist for complainants and that information can be provided to the commissioner without exposing vulnerable businesses to retaliation.

That brings me to a subject which, as many know, is close to my heart: whistleblowers. A key power for the SBC is the power to investigate where poor practice is suspected. I do not think that the SBC can rely solely on the information that it gets from complainants. To do that, it needs broader information, and that means that it needs a safe channel for whistleblowers.

A whistleblower is not the same as a complainant, and it is important not to confuse the two. A whistleblower who is an employee of a construction company, for example, may be key in providing necessary information about that company’s persistent poor practice over retention payments, say, but I checked and the SBC is not a prescribed person, so the employee providing that information does not even have the protection that, in many instances, would be available under the Public Interest Disclosure Act—confidentiality and the ability, if there is retaliation, to go to an employment tribunal. That does not exist and I would like the Minister to address that.

I always find the Public Interest Disclosure Act to be very limited in scope, as many know. A supplier that is not complaining about itself but that has come across key information—these people will be crucial to the effective work of the SBC—has no protection from retaliation at all. Since informal blacklisting could easily happen, because a large company would have friends all over the place, contacts and connections, there has to be some mechanism for suppliers that provide information on bad practice in the sector to be protected from retaliation. I would like to know from the Minister how that gap will be remedied.

We also question whether the Government have been sufficiently ambitious on payment timescales. That issue has been raised around the House today. There is significant support for a 45-day maximum payment period, and we will explore whether that should be the eventual goal.

The Bill rightly introduces limits on when payment disputes may be raised, but there is less clarity about how quickly those disputes must be resolved. There is a risk that an unscrupulous purchaser could simply raise a dispute and then allow the matter to drag on indefinitely, exerting commercial pressure on a smaller supplier to accept a reduced settlement. Are stronger safeguards needed or does the Minister think that they are already embedded in the Bill?

Much of the Bill’s effectiveness rests upon the capacity and independence of the Small Business Commissioner. Powers on paper are not the same as powers in practice. We want to understand how the commissioner will be resourced, how enforcement priorities will be determined, whether penalties will be sufficient to deter large multinational firms rather than simply being treated as the cost of doing business, and how Parliament will scrutinise the exercise of these important new functions.

Finally, we note that significant elements of the framework are left to future regulations. Delegated powers may be necessary in some circumstances, but Parliament should be cautious whenever fundamental aspects of a regulatory regime are deferred to secondary legislation. We will therefore examine closely whether the balance between primary legislation and ministerial discretion is the right one.

The Bill addresses a genuine and long-standing injustice in our economy. Small businesses should not be forced to bankroll large ones. They should not have to spend weeks chasing invoices instead of serving customers and creating jobs, and they should not face insolvency because another business has chosen to treat prompt payment as optional. We look forward to working constructively across the House to ensure that the final legislation delivers the robust protections that small businesses, contractors and the self-employed have waited to see for many years. Consequently, I support the Bill.