Lords Strengthen Air Passenger Rights, Challenge Capita over Pensions

High-Level Summary

The House of Lords held Oral Questions on the Sustainable Farming Incentive (SFI), artificial intelligence and work, climate risks to housing finance, and protections for chalk streams ahead of a forthcoming Clean Water Bill. Peers agreed that the Railways Bill should go to Grand Committee, approved several statutory instruments, and completed Lords scrutiny of the Steel Industry (Nationalisation) Bill, which returned to the Commons with amendments. A ministerial Statement on Civil Service pensions detailed significant failures since Capita took over administration, plans to recover performance, and options including future insourcing. Report stage of the Civil Aviation (Consumer Protection and Regulatory Reform) Bill [HL] dominated: the House added new accessibility duties, removed the domestic cap on compensation for damaged wheelchairs, required annual CAA enforcement reporting, and voted for a review of airport drop‑off charges, while defeating an economic‑growth amendment (158–239) and an airline reimbursement scheme related to NATS failures (41–118).

Detailed Summary

Farming Practices: Sustainable Farming Incentive – Oral Question

Baroness Hayman of Ullock said the Sustainable Farming Incentive is “largely aligned with regenerative agriculture” with actions for cover crops, no‑till and insect‑rich habitats, plus precision application of nutrients and pesticides. On certainty, she said the Government would keep the main SFI offer “largely stable from now until the end of this Parliament”. On common land, she said it is in principle eligible for SFI and the higher tier of countryside stewardship, but “for technical reasons, it is not currently possible for common groups to apply”; the RPA is engaging stakeholders and “we are looking to introduce the ability to apply in respect of common land under the stewardship higher tier later this year”. Peers queried support for species‑rich grassland and the scope of environmental land management. The Minister highlighted uptake and targeting of smaller farms, saying “50% of the SFI budget has been allocated”, confirmed SFI will be “open to all farms” from September, and said processes are being simplified and targeted support offered to smaller farms.

Employment: Artificial Intelligence – Oral Question

Baroness Lloyd of Effra outlined the Government’s approach: an assessment of AI labour‑market impacts published in January, creation of the AI Economics Institute, an AI skills boost to “upskill 10 million people” and the £187 million TechFirst programme, plus a £20 million Early Careers Jobs Alliance. She later added, “we will upskill 10 million people in work, and we have already reached 1.7 million”. The Future of Work Unit will consider whether AI recruitment guidance needs updating. Peers raised risks of algorithmic bias, creative‑sector harms and regional disparities. The Minister said the Government will consult on digital replicas and would “take back” the question on “in the style of” outputs, committed to monitor course quality on the AI skills hub, and said the Government is “being very active in understanding the technological change coming” through the new unit and Institute.

Climate Change: Housing Insurability, Mortgage Lending and Financial Resilience – Oral Question

Lord Livermore said climate change “poses a long‑term risk to financial stability and household resilience” and that the Climate Change Committee’s evidence will inform the fourth national adaptation programme. He added that the Bank of England’s work suggests it would take a severe shock to put aggregate debt servicing under pressure, so the Government “do not expect climate change to have an immediate impact on mortgages” while recognising longer‑term pressures on property value and insurability. He cited IPCC findings that breaching 1.5°C risks “severe and irreversible damage” and listed investments including “£2.6 billion to decarbonise transport”, “£1.4 billion to support the uptake of electric vehicles” and “£13.2 billion to support the rollout of heat pumps”. On insurance, he said the UK insurance gap is “currently low relative to most countries” but will grow without adaptation, and Flood Re’s effectiveness is being reviewed, noting “around 6.3 million properties in England are at risk of flooding”. He confirmed the PRA and FPC consider climate risks within their mandates.

Clean Water Bill: Chalk Streams – Oral Question

Baroness Hayman of Ullock confirmed the Clean Water Bill “was announced in the King’s Speech in May, to be introduced during this Session” and highlighted protections for chalk streams through ELMS incentives, abstraction‑licence reforms and prioritisation in the storm overflows plan. She said the Government would “abolish Ofwat and bring together the different functions of Ofwat, the DWI, the Environment Agency and Natural England into one new body” via the Bill. On enforcement, she said the Government has created the ability to hold water‑industry directors to account, “including through criminal charges”. She cited “£2 billion that water companies are investing over the next five years into targeted actions towards chalk stream restoration” and public funds for local projects. She reiterated, “we will bring in the clean water Bill this Session”, and on special administration for Thames Water said, “we have said that we will keep all options on the table”.

Railways Bill – Order of Consideration Motion

Questioning why the Bill would be taken in Grand Committee, Lord McLoughlin argued it “should be discussed not in Committee but on the Floor of the House”. Lord Grayling called it “the biggest change to our transport system for more than 30 years”. Lord Hendy of Richmond Hill said, “It is perfectly normal for Bills to be committed to Grand Committee” and that such scrutiny “does not hinder, curtail or prevent detailed scrutiny”. Motion agreed.

Secondary legislation approvals

The House approved the Electricity Capacity (Amendment and Transitional Provision) Regulations 2026; two REACH (Amendment) (No. 2) Regulations 2026; the Criminal Justice Act 1988 (Offensive Weapons) (Amendment) (England and Wales) Order 2026; the Wireless Telegraphy Act 2006 (Directions to OFCOM) (Revocation) Order 2026; and the Children’s Wellbeing and Schools Act 2026 (Establishment of Schools) (Consequential Amendments) Regulations 2026. All had been considered in Grand Committee on 7 July.

Steel Industry (Nationalisation) Bill – Third Reading and Passage

Lord Leong updated the House on legislative consent: the Scottish Parliament granted consent on 23 June; a motion was tabled in the Senedd; and in Northern Ireland consent had not been sought. He said the Bill “gives us the tools to act decisively if strategic steel‑making capability is at risk”. Lord Hunt of Wirral listed changes secured in the Lords, including a tighter sunset, cost‑consideration duties and stronger parliamentary controls. Lord Fox said, “The Bill has been materially changed” and hoped the Commons would accept the amendments. The Bill “passed and returned to the Commons with amendments”.

Civil Service Pensions – Statement

The Statement reported that when Capita took over the Civil Service Pension Scheme, its “system was overwhelmed, which resulted in a backlog that skyrocketed to a staggering 120,000 unresolved cases” and that it missed its April and June recovery milestones. The Cabinet Office has withheld “£9.9 million in payments” and is considering further action, including independent auditors and a remedial adviser. From April 2027 a new public interest test will “end outsourcing by default” with in‑house viability assessments before contract renewal. Baroness Anderson of Stoke‑on‑Trent told peers that over £15.6 million in interest‑free loans had been issued to affected members, the Government would “claw back every single penny” of surge costs from Capita, and Capita had been “instructed… to provide a full rectification plan by 14 July”. She said current pension recipients “have not been affected” and committed to a comprehensive update in October.

Civil Aviation (Consumer Protection and Regulatory Reform) Bill [HL] – Report

Economic‑growth purpose: Ministers opposed Lord Moylan’s proposal to require growth to be prioritised when making passenger‑rights regulations, arguing growth is already reflected in policy and the CAA’s growth duty; “the Government’s position remains unchanged”. The House divided and the amendment was defeated, Ayes 158, Noes 239. Passenger rights and accessibility: The House agreed a statutory duty requiring the Secretary of State to begin an accessibility consultation within 12 months of Royal Assent and to have due regard to principles that “all persons travelling by means of air transport services should be treated with dignity” and to facilitate independent journeys. The cap on compensation for destroyed, lost or damaged wheelchairs and mobility aids on domestic flights was removed so “the liability of the carrier … is unlimited”. The CAA must report annually on the performance of its consumer‑law enforcement functions. Ministers said the UK will “use appropriate fora to champion the UK’s approach to accessibility” in ICAO and ECAC. Airport drop‑off charges: Despite ministerial opposition, the House voted to require a review of the impact of airport drop‑off charges; the amendment carried 142–138. Slots and enforcement: The Government removed the power for any reformed slots regime to create new criminal offences and said they will consult on policy changes while retaining flexibility for emergencies: “This power may need to be used in response to urgent disruption in the aviation sector”. CAA rule‑making and scrutiny: Following Delegated Powers Committee recommendations, the Government added statutory criteria for reserving matters to Ministers (including public interest, environmental protection and the interests of disabled passengers), required CAA directions to be laid before Parliament, and accepted that regulations defining reserved matters are subject to the affirmative procedure. Proposals to mandate further consultation on airspace and with safety‑critical professionals were withdrawn after assurances that existing processes already require “environmental assessment and consultation” and that “Safety is, and will remain, the priority”. Other aviation matters: Amendments on cabin‑air quality and flight‑time limitations were not pressed after Ministers confirmed the CAA could regulate under Clause 8 and that a review of flight‑time limitations is under way. A manuscript amendment on restoring EGNOS GNSS access was withdrawn; the Government is reviewing options and “any move to rejoin EGNOS would … require agreement with the European Union”.