Small Businesses: Late Payments (Hansard, 3 April 1996)

§ The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie)
My Lords, the Government fully recognise the problems that late payment of invoices and bureaucracy can have on small businesses and have an ongoing commitment to work with business to address these issues. The Prime Minister announced on 11th March this year a package of new measures to tackle late payment and deregulation which will be taken forward by the Department of Trade and Industry and the Cabinet Office respectively.

§ Lord Dean of Beswick
My Lords, I am grateful to the Minister for that reply and welcome Mr. Major's statement of some weeks ago. However, the Minister must be aware that substantial numbers of small companies are still going bankrupt because of late payments. Therefore, will the Government urgently consider introducing legislation to make the practice of withholding payment illegal? If it is not made illegal, there will still be victims of the predators in big business who indulge in this practice far too frequently.

§ Lord Fraser of Carmyllie
My Lords, as I am sure the noble Lord appreciates, in 1993–94 we consulted on measures to tackle late payment, including the possibility of legislation. At that time very divided views were put forward on whether that was desirable. However, my honourable friend the Minister with responsibility for small businesses indicated in January this year that he is prepared to consult business again on the need for legislation and in the light of the responses would hope to announce the outcome of that shortly. Every recent indication has been that most of the organisations representing small businesses, with one clear exception, seem to have shifted their position and are no longer in favour of legislation.

§ Baroness Sharples
My Lords, is my noble and learned friend aware that in 1980, 1991 and 1994 I asked similar Questions to that asked by the noble Lord, Lord Dean of Beswick? The Answer I received in 1994 was that ministries were instructed to pay their bills within 30 days. Is that still the case, or has the position improved since then?

§ Lord Fraser of Carmyllie
My Lords, there are certainly clear guidelines to government departments on paying bills on time. Some perform better than others; but there is generally a clear indication of the payment that should be made. We should look not only at payments made by public bodies but, as the Prime Minister indicated, there will now be some consultation on whether public companies should be under a requirement to publish their payment performance. That might be of significant value to small businesses.

§ Lord Clark of Kempston
My Lords, does my noble and learned friend agree that serious consideration should be given to the imposition of mandatory interest for late payers? There should be mandatory interest on late payment by public offices and local authorities because if a taxpayer is late in paying income tax he is charged interest, whether he likes it or not.

§ Lord Fraser of Carmyllie
My Lords, as I am sure my noble friend will recall, in his statement of 11th March the Prime Minister indicated that there would be more rigorous measurement and reporting of government payment performance and there would be discussions with the Audit Commission to ensure that local authorities follow the lead of government. With regard to his point on legislation, I can only repeat that further consultation is under way, but there appears to have been something of a shift in attitude among those who represent small businesses as to the desirability of such a step.

Lord Bruce of Donington
My Lords, will the noble and learned Lord inform the House whether the Government have had consultations with the Deputy Prime Minister, the right honourable gentleman the Member for Henley, who demonstrated in writing some time back the skills of his companies which enabled them to avoid prompt payment? Has the right honourable gentleman had a change of heart; will he be advising the Government; or what?

§ Lord Fraser of Carmyllie
My Lords, the Deputy Prime Minister set out his views fully in an article in the Mail on Sunday of 11th February which drew on his experience as a small businessman. What he indicated clearly is that where small businesses have troubles, it is not surprising that they look to their own cash flow problems before they look to those of their creditors.

§ Lord Haskel
My Lords, does the noble and learned Lord agree that if statutory interest for late payment is imposed, it must go hand in hand with a fast and cheap summary legal procedure for creditors to collect late payments without having to use a lawyer? Does the noble and learned Lord agree that that would make things much easier and improve the position a great deal?

§ Lord Fraser of Carmyllie
My Lords, the key question is to determine whether there should be such legislation. My understanding is, as I say, that more recently those who represent small businesses have been shifting their position, appreciating that if such legislation were to be introduced, small businesses might be reluctant 269 to use it for fear of jeopardising future business. It is not so much a matter of whether lawyers' fees are too great, but reluctance to use legislation because small businesses want to keep existing customers happy.

§ The Earl of Lauderdale
My Lords, does my noble and learned friend agree that in using the word "slowly" regarding the Government's procedures on this matter, my noble and learned friend is using the slogan of all late payers all the time; namely, always slowly?

§ Lord Fraser of Carmyllie
My Lords, I am not sure that I used the word "slowly". I have indicated that the Prime Minister wishes to ensure that where the Government make payment their performance should be more rigorously measured and monitored.

Viscount Addison
My Lords, will my noble and learned friend the Minister look kindly on the owners of abattoirs and other beef-related businesses who, having spent a vast amount of money in trying to comply with EC regulations, now have very little income at all to pay off bank loans and pay other organisations requiring money from them?

§ Lord Fraser of Carmyllie
My Lords, I am only too well aware of the difficulties confronting abattoirs and other businesses connected with the beef industry at the present time. I am bound to say that my noble friend's question goes a little beyond the issue of late payment to small businesses. But I am sure that my noble friend is well aware that the Minister for Agriculture has been in Europe for the past few days and been as vigorous as he can in promoting the cause of those businesses.

§ Lord Peston
My Lords, I take it that the Minister is not saying that legislation is in the post? Clearly, the Minister is right in that if we take the legislation further, businesses will be a little worried for fear of losing customers. Does he agree at least that if a culture of non-payment begins to dominate British industry, to say the least it will add to inefficiency? In essence, a great deal of trust is involved here. That trust is deficient if we end up with people not paying; it makes businesses that much harder to run, which may benefit lawyers and banks, but it certainly will not benefit the real economy. Will the Minister confirm that that is the real problem that we have to solve one way or another?

§ Lord Fraser of Carmyllie
My Lords, if there is a culture of non-payment developing, and if to any extent public bodies are responsible for it, I very much hope that the approach that the Prime Minister has urged is welcomed by one and all—that is to say, if government payment performance is slipping or is not as good as it should be, it should be carefully measured and reported on. Similarly, local authorities should have their performance on payments monitored. It might be equally desirable, as I indicated, to ensure that public companies are under an obligation to publish their payment performance. I would have 270 thought that that package of measures will go a considerable way to destroying the type of culture which the noble Lord is anxious should not emerge.