Small Businesses: Prompt Payment by Government (Hansard, 22 June 1994)

§ The Minister of State, Department of Trade and Industry (Lord Strathclyde)
My Lords, instructions to government departments are that payments should be made within the agreed credit period or within 30 days where no credit period has been agreed. Further, government departments are required to monitor their payment times and to publish the results in their annual reports.

§ Baroness Sharples
My Lords, I thank my noble friend for that Answer. However, is he aware that there has not been very much change in the situation since 1980 for small businesses? In the circumstances, does he feel that perhaps the appointment of a commercial debt ombudsman might help solve the problem?

§ Lord Strathclyde
My Lords, in the White Paper on competitiveness published a few weeks ago we announced a number of new measures which will go some way towards helping the small firms which suffer from the problem of late payment. As with all government departments, the introduction of the requirement for them to publish their results will, I believe, go a long way towards solving any problems which may exist.

§ Lord Mellish
My Lords, government departments are notorious for their late payments to small businesses in particular, and some of those businesses rely on immediate payment. Can the Minister say whether there has been any improvement in the situation?

§ Lord Strathclyde
My Lords, both I and the Government regard late payment most seriously. We believe that the situation within the Government has improved substantially. The announcement having been made in the White Paper, there is no get-out clause for government departments which do not pay up on time.

§ Lord Clark of Kempston
My Lords, can the Government not pressurise local authorities to pay their debts more speedily than they do at present? I ask that question because many small business men carry out a considerable amount of work for local authorities.

§ Lord Strathclyde
My Lords, the Government are leading by example by abiding by the CBI prompt payers code: they are stating in their reports whether they have abided by the code and are publishing their arrangements for dealing with late payment complaints. It is hoped that that example will be followed by other agencies and local authorities.

§ Lord Orr-Ewing
My Lords, is my noble friend aware that the banks are often the toughest people in this 267 respect? They do not take cognisance of the fact that public authorities owe a great deal of money to small businesses. They put pressure on the latter for quite small sums of money while sending hundreds of millions of pounds to very uncertain payers overseas. Does my noble friend agree that the banks should be pressurised to take some notice of what is good credit in public hands?

§ Lord Strathclyde
My Lords, whenever I meet senior bank staff I always take the opportunity to remind them of their responsibilities towards their small firm customers.

§ Lord Clinton-Davis
My Lords, I appreciate what the Minister has said, which has been helpful, but will he clothe those general answers by being a little more specific? Can he give some indication, without being too precise, of the volume of complaints in relation to government departments failing to honour the precept which the Minister has announced, say over the past three years? Has there been a marked reduction during that period?

§ Lord Strathclyde
My Lords, that is a perfectly good question. The trouble in the past has been that there was no central collation of complaints. Now under the terms of the White Paper government departments will be obliged to publicise how they have dealt with the problem of late payment and in the future we shall have a far better opportunity to consider that performance.

§ Lord Gisborough
My Lords, is my noble friend aware that the problem as regards big business, and probably government departments, is that when a small business complains of late payment, the business, or the government department, which owes the money will make certain that payment is made immediately but staff in middle management will not then award another contract to the small firm which was owed money because it has caused trouble?

§ Lord Strathclyde
My Lords, no small firm that complains about the Government in that regard should fear that it will be treated in that way.

§ Lord Mottistone
My Lords, is there any process by which the government departments concerned can be punished if they do not reach the standards my noble friend is calling for? When will a Permanent Secretary be sacked because his department has not met these standards?

§ Lord Strathclyde
My Lords, it would be severely embarrassing for a Permanent Secretary to have to accept an annual report which demonstrated that his department had not met the high standards set down under the CBI prompt payment code.

§ Baroness Oppenheim-Barnes
My Lords, is my noble friend aware that for small companies late payment is a jolly sight more than embarrassing—it can be an absolute disaster as far as they are concerned? By the time statistics have been collated it will be far too late to help those small companies.

§ Lord Strathclyde
My Lords, I entirely agree with my noble friend, but I can give her some comfort. Successive reports from a variety of independent consultants indicate that the late payment problem in this country is improving.