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.

Commercial Payments Bill [HL]

Baroness Kramer Excerpts

Committee stage
Tuesday 21st July 2026 Lords Chamber

My final amendment on ESG is not really about ESG at all or about seeking more and burdensome reporting requirements on small businesses and micro-businesses. Rather, it goes to the point, which has been raised in many previous groups, about how we give clarity at every opportunity on which businesses are not currently good or “gold” when it comes to payments. Given that these ESG requirements exist for large businesses, it would make them more effective and more useful not to add to those 93,000 words but potentially to reduce them, to have some more meaning in them and, particularly in the S and G of ESG, to have the sense that that company has to give detailed reporting on its payment practices. If the large companies made the S and G have far greater meaning in those reports, they could even be shorter as a consequence.

[Baroness Kramer (LD)]

My Lords, my Amendment 81 in this group addresses a single issue. There is no possible way that the Small Business Commissioner can achieve his or her purpose without a strong whistleblowing framework incorporated into the office.

In this legislation, the commissioner is not even a prescribed person required to keep the disclosures of a whistleblower confidential. A complainant—someone raising an issue about wrong that they believe has been done to themselves—is very different from a whistleblower, who is identifying information which they believe demonstrates some form of bad practice, but they are not the victim of that practice and they are not bringing a complaint about themselves. That is one of the weaknesses in this legislation. Without those protections of being a prescribed person, even if the commissioner wants to keep an issue that she—later, it could be he—has discussed under wraps, all that will be subject to FOIs and subject access requests. Although there can be some redaction in those, it becomes extremely difficult when there is not a right of confidentiality.

Many suppliers who are paid late will be afraid to complain. That is simply a reality. They will be afraid to complain directly to the commissioner for fear of getting a reputation as troublemakers and losing future business. That is why the investigative powers of the commissioner are so important and such a significant part of the Bill. But in many cases, there is no way that the commissioner will be able to pursue an investigation without getting insider information. Insider information comes from whistleblowers, but very few will disclose the relevant information if it means the end of their careers and financial ruin.

The Bill presently offers no confidential route for a whistleblower and very little protection from detriment. An employee of a large company that is paying late, who speaks out to show that his or her employer is abusing payment rules and is consequently fired, can go to an employment tribunal. Some would say that is fine; that is the way to avoid retribution. He or she needs £40,000 to £50,000 to be able to get to a preliminary hearing. The case will not start for three years, because the tribunals are so backlogged. With appeals, even winning cases can take five to seven years. The word gets quickly around the industry, ensuring that the whistleblower cannot get another job. Some whistleblowers belong to trade unions. That trade union may well have an insurance agreement to pay for legal representation at the tribunal, but the terms of the insurance mean that the insurance company can withdraw if it decides the case is unlikely to succeed, or it can press for early settlement, which has the effect of silencing the content of the issue about which the whistleblowing was raised. Most insurance companies do one or the other; very rarely do they ever see a case through. For whistleblowers who are not employees—suppliers, associates, directors and competitors—there is not even the protection of the employment tribunal. There is absolutely nothing they can do to stop revenge and detriment.

The best investigators that we have in the finance and business sphere—HMRC, the SFO, the NCA and the CMA—all understand that whistleblowers are vital and have been strengthening their whistleblower framework, some of them very significantly, including with rewards. Most of their successful cases involve whistleblower-obtained evidence. The old trope that monitoring and supervision are sufficient has long been discredited. I would like to see an overarching office of the whistleblower sitting under the Cabinet Office, able to act as a hub with spokes going out to various people, including the Small Business Commissioner, but we are where we are and that does not exist.

I hope the Minister will look very seriously at the amendment I have put down and either accept it or come up with his own version. It provides for the Small Business Commissioner to have an office of the whistleblower within their purview. It provides a place for a whistleblower to make a disclosure that is protected and confidential, unless he or she gives permission for that disclosure to be made public—sometimes people will do that, particularly when taking a case to court. It provides for redress where the whistleblower suffers detriment. At the base of this, the commissioner would be a prescribed person and Parliament would receive annual reports. This is a missing element from the Bill and I hope that the Minister will address it, because, frankly, the effectiveness of the Bill will depend on there being an effective whistleblower route.

[Lord Thomas of Cwmgiedd (CB)]

I make one brief observation on Amendment 83. When one looks back at the last group of amendments and at this one, one sees that what is happening, in effect, is the creation of an entirely alternate system of dispute resolution—a new form of court or adjudication procedure. It is also apparent from the focus of the debate that this is not easy legislation to follow. I therefore think that, if one is to provide access to justice—that justice now being provided by the Small Business Commissioner—we must put the rights into ordinary language.

As experience showed in the 19th century, when the county courts were created—which had the same idea as all this—once you let lawyers in, you destroy them. It is imperative that lawyers do not become involved because it will destroy the system. It destroyed the county courts and it destroyed workmen’s compensation. Tribunals were created to get away from the lawyers. I will come back to this in a further amendment, but the key is to make procedure and law accessible without lawyers, or this system will not work.