HC Deb 13 June 2002 vol 386 cc993-4
8. Mr. Wayne David (Caerphilly)

What further measures she is taking to tackle the problems caused to small businesses by late payment of invoices. [58224]

The Parliamentary Under-Secretary of State for Trade and Industry (Nigel Griffiths)

The Government take the issue of late payment very seriously. That is why from 7 August we are giving all businesses a new right to claim interest on late payments, a new right to claim a fixed sum of compensation for debt recovery costs, and a new right to have a trade federation or other appropriate organisation to challenge any attempt contractually to reduce the right to statutory interest.

Mr. David

I thank my hon. Friend for his reply. I am pleased that the third phase of the 1998 legislation is being introduced. Will my hon. Friend say how effective current legislation has been in reducing late payments?

Nigel Griffiths

The latest information that we have from the European business survey by Grant Thornton confirms that the average time taken to pay invoices is down from 50 days before legislation came into effect to 41 days. That is a cut of almost 20 per cent.

Mr. Nicholas Winterton (Macclesfield)

I warmly welcome the Minister's response to the main question, but does he not agree that smaller businesses are squeezed at both ends? Often, a large business will squeeze them because it uses them as what I would call a cash-flow till. At the other end of the scale, the banks levy substantial charges against smaller businesses. Is it not important that we ensure that the acorns that we hope will produce the big businesses of the future are allowed to use their money to expand, rather than allowing bigger companies to use them as a cash-flow mechanism?

Nigel Griffiths

The hon. Member puts the point well. I think that the whole House greatly welcomed the action taken by the Secretary of State in ensuring that there was a proper inquiry into bank practices. The banks have been instructed to modify those practices to the benefit of small businesses.

The hon. Member is also right about the issue of a minority of irresponsible large businesses who regrettably seem to follow the advice of a former Secretary of State for Trade and Industry, then President of the Board of Trade, in his previous business career of delaying payment to the last possible moment. That is deplorable advice, and it is not the advice being given by the Government.

John Mann (Bassetlaw)

The small business community will undoubtedly welcome that further improvement. Some of the worst culprits are Government Departments and agencies. Will the Minister monitor them and name and shame those that cost the Exchequer money because of interest levied as a result of their failure to pay up on time?

Nigel Griffiths

Yes, and my hon. Friend makes a particularly good point, as we now publish information on the time that Government Departments and agencies take to pay. The target is 100 per cent. prompt payment. Government Departments and agencies achieving that now exceed 95 per cent, so there is room for improvement, but they are setting quite a good standard. However, we want them to achieve the full target.

Mr. Mark Prisk (Hertford and Stortford)

Does the Minister accept that beyond the changes that will take place then, the overwhelming priority for most small business organisations is the promotion of best practice in credit management rather than the imposition of new regulatory controls?

Nigel Griffiths

Of course, but small businesses and small business organisations tell me that they need tough action to back that up, perhaps contradicting the messages from one or two people, and regulations are necessary to achieve that. If we are going to introduce measures on 7 August, which the hon. Member welcomed, we need regulations. To my mind, those regulations do not impose any burdens but, I hope, help to liberate small businesses and allow them to play the vital part in the economy which the House knows they need to play.