HC Deb 01 June 1998 vol 313 cc129-43
Mrs. Gillan

I beg to move amendment No. 5, in page 8, line 5, at beginning insert 'Subject to subsection (2A) below,'.

Mr. Deputy Speaker

With this, it will be convenient to discuss the following amendments: No. 11, in page 8, line 5, after 'force', insert—

  1. '(a) as respects contracts where both the purchaser and the supplier employ more than 50 persons, at the end of the period of three months beginning with the day on which this Act is passed; and
  2. (b) as respects any other contract,'.
No. 6, in page 8, line 10, at end insert— '(2A) The power to make orders under subsection (2) shall not be exercised so as to provide for this Act to come into force, as respects contracts where the purchaser is a government department or a local or public authority, on different dates according to whether the supplier employs more than a prescribed number of persons.'. No. 7, in page 8, line 10, at end insert— '(2A) Where the power under subsection (2) to make different provision for different purposes is exercised by reference to the number of persons employed by a supplier, the Secretary of State shall publish—
  1. (a) the criteria used in specifying that number and,
  2. (b) the steps taken to ascertain whether that number is regarded as appropriate for the purposes of this subsection by persons representing businesses and other commercial undertakings.'.

Mrs. Gillan

Once again, the amendments have been tabled to allow the Minister to clarify her thinking and to reveal her views on an extremely important part of the Bill's enabling powers—the phasing-in proposals. Sadly, the Minister proposes to prevent a significant proportion of businesses from using the Bill against Government Departments and agencies—the public sector. Businesses employing 50 or more employees will have to wait for four years before they can use the measure in their dealings with Government. In Committee, the Minister gave me the impression that she could change the proposals if she wanted to. However, she then bottled out and ducked the issue, which was of great regret to Conservative Members. I hope that, in tabling the amendments, we have given her a final opportunity to make amends.

In my discussions with the Forum of Private Business—an organisation with which I know the Minister is familiar—I discovered that it felt aggrieved that she had not responded to my proposals or to its requests. There is a strong case for making the public sector subject immediately after the measure's implementation to payment of interest on all contracts. That is important both because of the trickle-down effect of better payment and because the public sector will largely escape liability until the final phase, as it principally trades with those business that the Minister defines as large—those with 50 or more employees. That does not seem to fit well with the Government's objective of leading the change.

In Committee, I cited a case in which the company Davall Relays had suffered at the hands of the Meteorological Office—the Meteorological Office withdrew a contract when the company asked it to pay within 30 days. I suspect that the Minister will say that the Meteorological Office was operating under the same terms and conditions that applied under the previous Government, but she must realise that the case I mentioned happened under the Labour Government, at a time when she was saying that no one should pay debts late.

The Minister has done me the courtesy to reply to my letter, although I received her response only at 8.30 pm. I was wondering whether I would receive a response before our considerations tonight, but she replied just in time, which is better than what happens when one writes to some other Government Departments, which take three or four months to reply. I raise the matter as I have yet to be satisfied that the Minister is not, yet again, protecting Government to the disadvantage of smaller businesses—certainly those with 50 or more employees.

The letter that I received confirmed that the Meteorological Office, when asked for a written undertaking that a payment be made within 30 days, "technically" thought that that constituted a counter-offer to its order, and therefore cancelled the order. The Minister wrote: I understand that the contracts used to purchase items with an order value less than £500 that applied to the order that we are discussing— had been in use for many years. It seems, unfortunately, that the Meteorological Office were reluctant to make an isolated change to the long standing standard conditions of their contracts. They therefore withdrew their offer. That was at a time when the Government were legislating for statutory interest on late payment of debt, with all the warm words being issued by the Minister and her Department.

There was light at the end of the tunnel, however. The Minister's letter continued: I am pleased to report that the Meteorological Office has now, in anticipation of enactment of the Late Payment of Commercial Debts (Interest) Bill, changed the terms of their orders to expressly reflect that they will pay all valid invoices on orders less than £500 within 30 days of receipt of an invoice. What of those over £500? Will the Minister tell us now whether she will insist that the Meteorological Office change its terms and conditions to apply to all contracts? If not, I think that business will see that this is a sham. It is appalling that a letter from a Minister who is taking legislation through at this stage should say only that it will apply to another Department for "orders less than £500". I am astounded.

Mr. Forth

I hope that I am not pre-empting my hon. Friend. Should not the Minister also reassure us that she has reassured herself—in detail—that the Meteorological Office is capable of fulfilling the undertakings given in the letter? Given the expert analysis that our hon. Friend the Member for South-West Hertfordshire (Mr. Page) has made repeatedly, I wonder—and I suspect that my hon. Friend may wonder—whether the office is capable of meeting the very tight undertaking that it has given. If not, is that undertaking worth the paper on which it is written?

Mrs. Gillan

My right hon. Friend makes a valid point, with which I think the Minister will have to deal when she responds. If she does not, serious question marks will remain over the Government.

Equally important is the danger that, unless the measure is applied to all public sector debts, small businesses—as the Minister has defined them—may face discrimination in public procurement, as purchasing bodies avoid suppliers against whom they could face statutory interest. That is particularly pertinent in the light of the health service's record. More than 2 million bills are paid late by the health service alone, and it would, therefore, be in the interest of another part of Government to adjust its purchasing patterns for the next four years to avoid more expenditure in an area of Government that has already been grossly let down by the present Labour Administration.

I hope that the Minister will set some targets according to which she can measure the success of the Bill, which in my view is otiose. It has long been feared that the legislation will lead to longer payment periods. I am not aware of anything that will prevent purchaser companies with a dominant position in the market from renegotiating payment terms to run into, for example, 120 days instead of 40 days. That means that the vendor will not get his money more quickly if too high an interest rate is set. Will the Minister now confirm that she expects no supplier to be worse off under the Bill, and will she now undertake to set and monitor the criteria by which her progress can be charted and her warm words can be judged by real commercial standards? I await her response with interest.

11 pm

Mr. Brian Cotter (Weston-super-Mare)

I rise to speak to amendment No. 11, tabled in my name and that of my hon. Friend the Member for Eastleigh (Mr. Chidgey). As hon. Members will be aware, the Liberal Democrats have long argued for a statutory right of interest on late payment of debts, and we welcome the legislation. However, as is often the case, the devil is in the detail, and our amendment would rectify a glaring error.

At all stages, the Government have argued that the Bill is for the benefit of small businesses, and is intended to improve the crippling late-payment culture and to begin to put an end to the commercial exploitation of small firms by large firms. The Minister has also argued that the Government should give an example. However, as the Bill stands, large businesses are exempt from the right to charge statutory interest on other large businesses at the initial phase. In fact, large business will not be able to charge large business until the final phase of introduction. Why? Clearly, there is no economic rationale for that aspect of the phasing arrangements. In fact, the arrangements clearly contradict the intentions of the Bill, which are to improve the late-payment culture, specifically for small businesses, and will not enhance those objectives.

The Government are sending out the wrong message to small businesses in that they are not prepared to make large firms part of the initial phase. A better payment practice between large companies would also have a desirable trickle-down effect on the economy, as the hon. Member for Chesham and Amersham (Mrs. Gillan) said. The late-payment culture would be improved, and firms would be encouraged to use better credit management procedures, as was discussed on Second Reading.

Our amendment would also ensure that government, at all levels, would be liable to pay statutory interest to firms with 50-plus employees—the public sector will largely escape liability until the final phase is introduced. That does not seem to accord with the Government's intention, which was to lead the change, and does not provide the example that the Government should be setting. The Minister will acknowledge that she accepted during Trade and Industry questions that the Government's record on payment was not good, so it seems hypocritical of them to put businesses in a position in which they are liable to pay, when they are not prepared to put themselves in a similar position.

Businesses have had and continue to have problems receiving payment from government at all levels. A colleague produced one example, and I have been assured that the legal aid fraternity is not good at settling bills. I am also greatly concerned about local government. We know that it is under some pressure with regard to financial settlements and that there will be the temptation for it to find all the ways it can in which to hold up payments, with the effect that I described.

The wait-and-see approach that the Minister seems to be adopting is unsatisfactory. There is a general consensus in support of the phasing arrangements, but there is also a clear feeling that the Government should give an example. Feedback from various business organisations suggests that the current large against large arrangement, particularly the public sector aspect, is inadequate. The Forum of Private Business has conducted discussions on the issue, and seems to be well informed on the Bill. In discussions with representative organisations on the Better Payment Practice Group, it has found strong support for idea that the Government should be brought into the first phase.

If the Government are not prepared to accept the amendment, the Liberal Democrats will certainly monitor Government payment practice.

Mrs. Gillan

Oh gosh.

Mr. Cotter

We will, indeed. We will name and shame when the opportunity arises, in line with the Government's argument.

Our significant amendment would weigh the Bill in favour of small businesses. I ask the Minister to consider it seriously.

Mrs. Roche

As regards amendments Nos. 5 and 6, there was extensive discussion in Committee of possible extension of phasing arrangements to include claims by all businesses against the public sector. As I have said, however, support for the Government's phasing proposals was considerable, as 87 per cent. of the business respondents to our Green Paper who expressed a view supported phasing. The hon. Member for Weston-super-Mare (Mr. Cotter) would surely agree that all small businesses will be able to claim against the public sector immediately the Bill becomes law. What is important about phasing is the opportunity that it gives to small businesses, which suffer most from late payment, to take advantage of the Bill straight away.

Mrs. Gillan

How many businesses employing fewer than 50 people have contracts with the Government, and how many businesses employing more than 50 people have such contracts? What percentage of businesses fall into the Minister's categorisations of small and large businesses?

Mrs. Roche

I can see why the hon. Lady is moving to sunnier climes. Her question exposes her ignorance of the way in which the sector is structured. We are talking about not only direct contracts with the Government, but the whole contractual supply chain. That is why it is important that the phasing arrangements give small businesses the right to take action straight away.

We shall monitor carefully the effect of the legislation, not least through the payment observatory of the credit management research group at Bradford university, the establishment of which the hon. Member for Weston-super-Mare has welcomed. If there seems to be a need to extend the right to large businesses earlier than we intend at present, we can do so under clause 17(2), after consulting interested parties, including the Better Payment Practice Group. However, given the support for the Government's proposals, I do not feel bound to amend the Bill at this late stage. We shall keep the matter under review.

The same arguments apply to amendment No. 11, which seeks to extend phasing proposals to allow large businesses to claim against other large businesses from initial commencement. Should experience show that it is desirable to extend that right earlier than currently planned, the Government will do so. I made that clear in Committee, and I repeat it now.

Mr. Cotter

indicated assent.

Mrs. Roche

I am pleased to see that the hon. Gentleman agrees.

As regards amendment No. 7, we fixed a threshold of 50 or fewer employees to define a small business, because a definition is needed for the initial transitional phases of the legislation, and it is important to small businesses that that definition should be transparent.

We have set the threshold at 50 employees, which catches all micro-businesses, because we believe that any company employing more than 50 should be able to employ someone to manage the payment of bills. In using 50, we have used one of the limbs of the definition of a small firm in the Companies Act.

The Government are pursuing other measures to ensure that small businesses, that is, those employing 50 or fewer staff, have the opportunity to develop the skills necessary to manage their payments. Reference has rightly been made to the Forum of Private Business. Its survey of its membership showed that only 29 per cent. of respondents opposed the size criteria.

I thank the hon. Member for Chesham and Amersham (Mrs. Gillan) for her kind remarks about my speedy response to her inquiry. I am delighted that, in anticipation of the Bill, we have been able to correct a payment practice that had existed in the office concerned for some years under the Government of which she was a member. That shows our commitment.

Mrs. Gillan

Will the Minister now get to the point and say whether she will insist that the Meteorological Office applies the same new criteria to all bills over £500?

Mrs. Roche

rose— [Interruption.]

Mrs. Roche

Perhaps the hon. Lady would have the courtesy for one moment to let me answer; I know how impatient she is. She knows that all Departments are required to pay their bills within 30 days or as otherwise agreed. I am glad that she gave me the opportunity to point out, through the illustration provided by that case, that the thought of this legislation is biting already. It ill behoves someone who served in the Government of the former Deputy Prime Minister, who boasted about stringing along his creditors and set such a bad example to small business, to criticise this Government. If the amendments are pressed, I urge the House to reject them.

Mr. Cotter

rose—

Mr. Deputy Speaker

Order. The hon. Gentleman cannot speak a second time. Only the mover of the lead amendment can do so.

Mrs. Gillan

I am shocked by the Minister's response. It is obvious that she is being blackmailed into her position by her colleagues. She says that she relies on the consultation, which showed that the phasing in was widely supported; but, of course, that consultation was deeply flawed. If she had asked all businesses, "Should all businesses be able to take the protection of this legislation from day one?" they would have replied with a resounding and overwhelming yes in dealing with the public sector. It is obvious that she is seeking to protect other Departments, particularly those with gross late payment records, which may incur large sums of interest by way of penalty. In particular, I am thinking of the Department of Health, which, by the Government's own admission, will pay some 2 million bills late.

I am very sad that the hon. Lady, who appeared to be cracking in Committee, has been forced back into this position. She is now introducing legislation that discriminates against all firms with more than 50 employees and cuts them off from the very lifeline that she has purported to extend to them. This is a gross abrogation of the duties that she took upon herself in taking on her ministerial duty. I am very disappointed. It is obvious that she cannot move her position, having been forced into it by other Departments—no doubt by Ministers in her Department as well as the Treasury. It seems pointless to ask the House to vote on the amendments, but it remains as my swan-song to this Bill that the Minister has proved to be a deep disappointment.

Mr. Deputy Speaker

Is the hon. Lady asking leave to withdraw the amendment?

Mrs. Gillan

indicated assent.

Mr. Deputy Speaker

It would have been helpful if she had said so.

Amendment, by leave, withdrawn.

Order for Third Reading read.

11.14 pm
Mrs. Roche

I beg to move, That the Bill be now read the Third time.

It has given me great pleasure to have the honour to pilot the Bill through the House of Commons. As I have said all along, the Bill is a long-overdue measure—[Interruption.] I am sorry that the hon. Member for Christchurch (Mr. Chope), who is to assume a position on the shadow Trade and Industry team, should laugh at the Bill, which has been warmly welcomed by small businesses. It does not bode well for his shadow ministerial career; however, I look forward to welcoming him to his new responsibilities at Trade and Industry questions, when he might be in a better frame of mind.

The Bill is a long-overdue measure to tackle late payment and the genuine harm that it does to small businesses. It is fair to say that small businesses are the lifeblood of the economy. I am happy to be able to provide to our small firms a statutory mechanism that they have wanted for a long time. Some in the House and elsewhere have wondered whether small businesses will be willing to use that mechanism and take up their new right when it becomes available. A recent survey by the Midland bank found that 79 per cent. of businesses support the legislation, and 77 per cent. of small businesses would use it. It is welcome that small businesses are looking forward to the legislation being passed.

The Bill will recompense creditors who are kept from their money through no fault of their own. It will move the uncertainty regarding cash flow that is usually faced by those who are paid late to those who pay late. The issue of uncertainty is important, and I share the view of the Forum of Private Business that the legislation provides uncertainty for the late payer of the debt. That uncertainty manifests itself in three ways. First, there is the possibility of late payers having to provide a contingent liability in their balance sheets. Secondly, late payers risk facing a demand for statutory interest from receivers of their former late-paid suppliers. Thirdly, those who are paid late will be able to claim statutory interest from notoriously late payers when they retire, or are no longer trading with them.

As a consequence, businesses will see that, should they pay late, they may be pursued by the creditor, a factoring company, or a debt collection agency that has been assigned that debt; and that that pursuit may take place at any point within the six-year statute of limitation, or other period in Scotland. That is a good reason to pay on time. I am sure that accountants in firms that habitually pay late would rather pay on time than carry such contingent liabilities financial year to financial year.

As I have stated all along, the Bill provides small businesses and, in the not-too-distant future, all businesses the opportunity to exercise a new right in the fight against late payment. However, the Bill in itself is only one plank of the Government's efforts in that respect. The Government are committed to continuing work in direct partnership with businesses and their representative organisations. We want to ensure, through the provision of quality information and support, that businesses can improve their credit management. We shall also ensure that Government Departments understand that they are to lead by example. That is why Departments will be required to pay within 30 days or as otherwise agreed and why we are committed to publishing payment timetables.

I pay tribute to my noble Friend Lord Clinton-Davis for his efforts in piloting the Bill through another place; and to all my right hon. and hon. Friends who on Second Reading and in Committee so ably assisted the passage of the legislation.

I take this opportunity also to thank all the business representative organisations that provided an input during the Bill's progress. I thank Stan Mendham of the Forum of Private Business, whose unflagging dedication has been evident to all, certainly to the House.

The Bill's time has come. It will be warmly welcomed by the business community, particularly small businesses, which are the backbone of our economy. I commend it to the House.

11.19 pm
Mr. Page

Despite the Minister's brave words just now, as the Bill made progress in Committee, we could see dawning on her face the appreciation that the Bill was slipping into the category of "It seemed a good idea at the time".

The weaknesses of the measure became more and more apparent and we could see why all but one of the small firms' organisations said no to the statutory right of interest. The one that said yes was the smallest and the noisiest. My right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) exposed on Second Reading why that organisation concluded that the Bill would be a good thing: the survey was carried out in such a way that the answer could only be yes, yes and yes. When those small firms realise that they will still have to go to court and plough through legislation, there will be a group of disillusioned small business men and women.

The Minister has behaved in a courteous and friendly fashion. Courtesy is not universally noted among the Ministers in the Department of Trade and Industry, but she is a pleasant exception. She has loyally plodded on, but she has dodged a number of questions. I do not blame her for doing so. If I were in her shoes and I were being asked those questions, I, too, would dodge them. However, even at this last stage, those questions should be put to her again.

Conservative Members asked about the methods for calculating the interest rate above the base rate. Having read clause 6, we were left with the image of the Secretary of State with a wet towel around her head, drinking black coffee and doing abstruse calculations to make sure that they picked the right figure. When we asked to see those calculations and the basis on which they were made, there was nothing—not a sausage. We discovered that the draft European Union directive being debated happened to use the figure of 8 per cent. above the base rate as the measure. That could well be a coincidence, and I would be prepared to accept that if we could see the calculations that led to that figure, which exactly matches that in the draft EU directive. That is a coincidence too far.

The Minister has dodged the request by my hon. Friend the Member for Chesham and Amersham (Mrs. Gillan), who has so ably led us in the proceedings on the Bill, for examples of how the Bill's success will be measured. Not a single idea has been put forward to explain how we will examine whether the measure has been a success. Of course, examples will be produced to show how company A took company B through the process and obtained a statutory right of interest. Apart from the fact that there will be a little more interest, that could, and would, have happened under the existing system.

I should be interested to see whether the Forum of Private Business, which has so valiantly championed the cause for a number of years, will be prepared in three or four years to survey its members to discover whether they feel that the statutory right of interest has been of benefit to them. It should leave aside the fast-track procedures when they are eventually decided by the Lord Chancellor and the extra rate of interest and let them give an accurate answer to the question whether the statutory right of interest has been of advantage to them. I have a strong feeling that the boxes towards the insignificant end will be given most attention.

The Minister dodged the fact, which was covered in an amendment tabled in Committee by my right hon. Friend the Member for Bromley and Chislehurst, that the Scottish Parliament will be able to amend the legislation. It is worrying that, on each side of Hadrian's wall, legislation may be interpreted and operated differently. That is not the way to maintain a united kingdom. Does Labour want a united kingdom?

The Minister dodged the question why the Government should not give a lead. She gave some reasons for the Government's view, but they do not add up. The Government should lead by example. They should not cower behind and come in at the last possible stage. The Minister dodged two or three times the question of what the Government will do if perceived unfair terms and conditions are imposed by a dominant purchaser or supplier. There has not been a whisper from the Government about what they will do in such circumstances. The Minister will not have to dodge such questions for much longer, because the Bill is in its final stage.

The Minister used some fine words about the break point of 50 employees, but the reason for choosing 50 is peculiar, and the calculation that led to it is not clearly understood by all hon. Members, not least by me. Why will she not adopt the European draft directive which, in the case quoted, uses the sum of 20,000 euros as the basis for court action or for operating a statutory right to interest? That is a matter for the future.

We all agree that the Bill will regularise credit terms. However, even the Minister is starting to accept that it will not be surprising if credit terms for small businesses lengthen rather than shorten. All that the Bill tries to achieve could have been achieved by a better fast-track procedure in the small claims court, which is what has been promised. The Lord Chancellor is working on that, but he is rather like Dr. Who, because now and again he goes into the Tardis and comes out reborn and reinvigorated. The latest one popped out on 1 May and has promised that there will be a better fast-track procedure in the small claims court. That is the best way to help small firms to collect outstanding debts.

The Bill is unnecessary. Guidance could be given to a court on the amount to be charged over baseline interest, and the court could be told that it should be higher than the current 3 per cent. In time, small firms will realise that they still have to go through procedures and go to court and that the companies that they are pressing for late payment have a right of reply. The 77 per cent. of companies that say, "This is what we want, this is right and we support it," will rapidly dwindle to a much smaller percentage.

The Minister made an inaccurate statement, I am sure inadvertently, to my hon. Friend the Member for Chesham and Amersham. She chided my hon. Friend for a memory lapse, but I remind the Minister that the previous Government got all parties in the small business sector to sit down together. The previous Prime Minister launched at 10 Downing street "Your Business Matters". The list of attendees—I have been writing them down—is impressive. Apart from representatives of all the small firm organisations, the Governor of the Bank of England, the Chancellor of the Exchequer, the President of the Board of Trade, representatives of the four clearing banks, several senior civil service officials and even the Minister for Small Business, Industry and Energy were there. After that, regional meetings were held throughout the country and a final meeting took place at the Queen Elizabeth II conference centre, where many measures to help small businesses in the payment sector were brought forward. I remind the Minister that this unity is not exclusive to her and to her Government. I was glad that all sectors of the business community combined to try to tackle the serious aspect of late payment.

What will go through today pales into insignificance against what has happened over the previous few years. What is being done to make Government set an example in payment on time is absolutely correct. Making large firms state payment policy and payment practice in their accounts is a positive move in the right direction. The endorsement of the prompt payment CBI code was again the right move. The British standard on payment policy has real teeth, the only real teeth that I can see. If a company that has signed up to the British standard does not pay on time, trading standards officers can go in. Apart from training through business links, on which I know the hon. Lady is working—I am glad that she is—the other matter on which the previous Government should be commended is the removal of the iniquitous pay-when-paid system. Many small businesses and subcontractors welcome the passing of such an iniquitous operation. That is a roll-call of honour of which every Conservative Member can be proud.

To sum up the Bill, I can do no better than quote one of the four clearing banks. When asked for its views, it said, "This won't work, but it might help to change the culture." Let us hope that it does, because this is a very expensive and tedious method of achieving very little.

11.32 pm
Mr. Cotter

I welcome the Bill and congratulate the Government on introducing it. Unlike my Opposition colleagues, I believe that, in the round, the uncertainty of late debt should be reversed following the Bill and that the culprits of the crippling problem of debt will find the boot on the other foot; so I congratulate the Government and, at the same time, hope that they have taken on board various points that have been made by me and colleagues nearby.

The American writer Dorothy Parker once said that the two most beautiful words in the English language were "cheque enclosed". We hope that that will be heard much more in future. The statement will have a powerful and, I hope, true meaning when the Bill is implemented. Many businesses will have the right to break free from the late payment millstone which has hung around their necks and, in many cases, ruined their businesses. Small businesses in particular depend on tight budgeting to realise investment and to advance their projects. The Bill will help to create a better payment culture, providing a stick as well as a carrot.

Over the next few years, it will be exciting to see how the Bill progresses. In that connection, I welcome the Minister's commitment to monitoring and to accepting the need for the Government to produce annual reports on their record.

I am concerned about some local authorities. Many of them have clear guidelines and procedures for payment. Bradford council has a computer system that is programmed as a matter of policy to pay bills on time automatically. I hope that others will follow that example.

Concerns have been expressed by the Forum of Private Business. Discussions have been held in the past few days on the problem of parties sidestepping or avoiding paying interest as a result of subsequent actions. I understand that that has been considered carefully and that the Minister is satisfied that the issue will be covered. I hope so.

I should not like to conclude without referring to the hon. Member for Chesham and Amersham (Mrs. Gillan), who has taken a strident part in the debate. I wish her much success in her new role. There was a worrying moment in Committee when she referred to fish being used for payment. I had an awful vision of fish being overdue and being dead and rather smelly. I was concerned about what state the fish would be in when it came to the two fish required to provide the interest.

Mrs. Gillan

Tinned fish.

Mr. Cotter

Tinned fish may be more acceptable. The hon. Lady threw fresh light on the expression COD—cash on delivery. I wish her well in the future. I also thank the Minister for ably conducting these proceedings and for courageously pushing ahead with the Bill, which I warmly welcome on behalf of the Liberal Democrats. I believe that it will provide a solution for small businesses, which has been long overdue.

11.36 pm
Mr. Forth

I am almost as worried about legislation by survey as I am about legislation by referendum. As my hon. Friend the Member for South-West Hertfordshire (Mr. Page) said, it depends on the question that is asked. If people are asked, "Do you want a better life? Would you like life to be more pleasant? Would you like the Government or legislation to relieve you of your problems?" the odds are that they will say yes. According to the Minister, many bodies that claim to be representative have tended to say yes to these simplistic questions. I doubt whether their response would be the same if they were asked, "If penal rates of interest were to be introduced for late payments, would you like dominant purchasers to renegotiate their contract with you such that the payments would be even later than they already are?"

As ever, the answer depends on the question. Whether we are dealing with legislation by referendum or legislation as a result of a survey, the danger is that we may mislead innocent people into believing that a legislative wand can be waved over their problem to make it disappear. By asking the wrong question, we are likely to get the wrong answer and to legislate in the wrong way, resulting in disillusionment.

We have tried over and again to persuade the Minister of this danger, but she has not yet been persuaded. I suspect that we are unlikely to do so at this stage of the legislative process. I have this dream that she will rise at the end of Third Reading and seek to withdraw the Bill, but that is unlikely. The Government should take much more care, because they are increasingly resorting to the seductive technique of survey or referendum. They ask simplistic questions and receive, unsurprisingly, positive answers. They then cite that as proof positive that the legislation has widespread support and will therefore succeed.

I will not try to emulate the analysis offered by my hon. Friend the Member for South-West Hertfordshire of how this impractical legislation is supposed to take effect. We have already heard this evening undertakings to the effect that public bodies will make payments of invoices within 30 days. I doubt whether anyone, public or private, has the mechanisms to guarantee that. How many organisations of any size, public or private, have in place the procedures to enable them to pay at that speed? The danger, then, is that—without a renegotiation of terms of trade—nearly everyone will become liable to the penalties specified in the Bill.

Herein lies the danger: we are threatening to penalise people for acting in a perfectly normal and respectable way. That means running the risk that a number of businesses will seek to renegotiate their terms with their suppliers to avoid the penalties introduced by the Bill. That, in turn, will mean even later payments than are the norm now. I sincerely hope that that backlash will not follow enactment of the Bill; I fear that it may, however.

Mr. Page

My right hon. Friend is powerfully putting the point that no company can run a monthly credit system for each individual article purchased during the month. To do so would wipe out the whole purpose of a monthly account.

Mr. Forth

I agree, of course: my hon. Friend understands how business works. Regrettably, all too few of those involved in drawing up the Bill share his understanding. It is impossible to imagine businesses completing each and every invoice as an individual item, with no cut-off point, standard procedure, or mechanism of the kind that any efficient business must have.

My hon. Friend and I both know—it would seem that no one in the Government does—that the assumptions underlying the Bill are quite impractical and will ultimately lead to the destruction of its aims.

For reasons not yet satisfactorily explained—very little about the Bill has been—we are asked to accept that Government Departments will be treated much more leniently than the private sector; there is also an arbitrary cut-off point for numbers of employees. That, too, will lead to anomalies in the implementation of the legislation. We have made that point time and again and received but scant explanation in reply.

There has been little understanding—uncharacteristically—by the Minister. We are left at this late stage of the Bill's progress with a large number of unanswered questions which are germane to the purposes and effects of the measure. Because those questions have not been answered, doubts must have been sown in the minds of those involved in business—large or small, representative or practicing—who must by now be extremely concerned lest the Bill prove to be counter-productive.

Far from protecting the interests of small businesses, this legislation could harm businesses in general, and possibly small businesses more than most. It would be tragic if that were to be the outcome of the Bill's passing into law.

I give these warnings not with a sense of joy but with a sense of foreboding. I hope that I am proved wrong, but I fear that if the Government persist in basing legislation on answers to fatuous questions asked in superficial surveys, this is the kind of legislation that will result. If, during the legislation's passage through this House and the other place, we do not receive satisfactory answers from Ministers, perhaps it is because we are failing in our purpose—perhaps we have not kept the Minister here long enough, grilling and questioning her, or perhaps we have not tabled sufficient amendments, probing and substantive. If that is the case, we may have learnt our lesson this time, and perhaps next time we shall be much more rigorous in our approach. In any event, there are lessons to be learned by all of us.

I hope that, even at this late stage, we may have got the Minister to think rather more carefully about the approach that she and her Department will take to legislation, and that the lessons learned from this Bill are not borne by the very businesses that it was designed to help.

11.45 pm
Mrs. Gillan

We have certainly had an interesting Third Reading debate, and I have no intention of repeating the excellent points made by right hon. and hon. Friends.

I make it clear at the outset that there is no difference between Conservatives and the Government in so far as we do not support the late payment of debt. However, the Minister has not justified the legislation or even thought it through sufficiently. I think that she latched on to what she thought was a good idea to validate her new business-friendly credentials and pursued legislation that she herself has admitted was not supported by 60 per cent. of the organisations representing small businesses. Indeed, just before the Government came to power, I believe that the current Prime Minister received a letter from the Confederation of British Industry, the Institute of Directors, the Association of British Chambers of Commerce and the Federation of Small Businesses outlining their opposition to the measure.

During the Bill's passage, the Minister has failed even to refer to the remedies introduced by the previous Government in an attempt to change the culture of late payment. Instead, she has sought to gain notoriety from legislating, rather than putting in a sustained effort. In short, she has manoeuvred the legislation to provide excess protection for her friends in other Departments.

I do not know whether you, Mr. Deputy Speaker, or the Minister are familiar with the Anglo-Irish poet Jonathan Swift who, in 1709, wrote: Laws are like cobwebs, which may catch small flies, but let wasps and hornets break through. However, during the Bill's passage, the Minister has certainly taken Swift to heart by allowing the Government, or the hornets and wasps, to remain a protected contractor for four years, while condemning the small flies—businesses with 50 or more employees—to the wilderness, without the protection of this legislation to fall back on when they deal with the public sector.

It was a Conservative Government who started the publication of Government Departments' payment records. Although the Minister tried to make cheap points in Committee, it was under a Conservative Government that improvements in the timeliness of payment by the Government were evidenced. Just as the minimum wage was not set during the passage of the National Minimum Wage Bill, thus hampering discussion on that Bill, the results of payment records under the present Government were not made available to the House to enable us to judge the progress that they have made. How much better it would have been if those records had been available and if the Minister could have persuaded her colleagues to guarantee timely payment to all suppliers, thus leading by example.

It does not surprise me that the records were not made available. The responsibility of the Government is to govern and, in those terms, we do not seem to have a Government at all. When they are not delegating to others—for example, decisions on interest rates or the level of the minimum wage—they are pretending to be sympathetic to everyone and saying that they will carry out a review. Many of those reviews have been outstanding for more than 12 months.

In this case, however, the Government decided to govern. They promised to establish interest on late payments. What do we find? They have tabled amendments to their own Bill at every stage. We have to be sceptical about the effects of this convoluted legislation, which is hardly likely to be understood by the small companies that are to benefit. So much was admitted by the Minister, who will be sending out explanatory leaflets, but we did not expect the Government to have second, third and fourth thoughts about their own measure.

We are not confident that the Bill will produce the benefits that the Minister claims, but of course we hope that it does not cause the damage that we have outlined and for which there is so much potential. The House will appreciate that if one payment period is extended, the Minister will have failed.

The Conservative party believes in supporting small businesses, so we shall not oppose the Bill at this stage. In summary, the Government make a lot of sympathetic noises towarfds businesses, but continue to heap greater burdens on them. Businesses already face a tax bill of more than £25 billion during the lifetime of the Government. In addition, they have to contend with the minimum wage, the working time directive, union recognition, paternity leave, works councils, the introduction of the euro and the fact that manufacturing industry is now officially in recession. Like a leopard, the Government never change their spots.

It is with great pleasure that I hand over the mantle for this brief to my hon. Friend the Member for Christchurch (Mr. Chope). I am sure that he will continue to argue, as I do, that all Labour Governments are bad for business.

Question put and agreed to.

Bill accordingly read the Third time, and passed, with amendments.