Late Payment of Commercial Debt (Hansard, 16 June 2004)

§ Lord Triesman
My Lords, the package of measures has had a positive effect on payment times. The Grant Thornton European Business Survey showed that the average time taken in the UK to settle accounts in 1997 was 49 days. By 2002, this had fallen to 42 days. By comparison, the average settlement time for our European neighbours was 50 days.
A recent survey by the REL Consultancy Group looked at average days payable outstanding and concluded that UK companies' payment performance was 33.6 days against a European figure of 42.4 days as a whole.

§ Lord Harrison
My Lords, I thank my noble friend for that Answer. Does he share my disappointment that, according to a report by Leeds University published by the Federation of Small Businesses, the average payment period remains stubbornly at 46 days. Some 17 companies are named in that report as having an average payment period of more than 200 days.
Secondly, will my noble friend turn his attention to the important issue of publishing in annual accounts the payment practices of plcs? Does he recognise that there has been an increase in the numbers of those who fail to publish those practices, thereby breaching 749 company law? Will the Government act against those reprobates to ensure that small businesses can prosper and survive?

§ Lord Triesman
My Lords, I have not seen the Leeds research, although I have seen reference to it very recently. I promise that I will get hold of it and study it because there is plainly a discrepancy between some of the research findings.
On my noble friend's second point, plcs have to disclose the payment times in their directors' reports as a result of regulations introduced in 1996 by the Conservative Government. We added and enacted a commitment to publish, and the published lists appear once each year. It is certainly true that fewer plcs are complying with that requirement.
The Companies House regime deals with auditors' reports, but not with directors' reports. It says that the burden would be too great and involve looking at about 6 million documents a year. I am quite convinced that we will need to look at that and ensure that there is an overall improvement.

§ Lord Shutt of Greetland
My Lords, are organisations funded by the public purse, whether they are government departments, nationalised industries, quangos or local government, any better at paying their debts than companies in the private sector?

§ Lord Triesman
My Lords, I think they probably are. The Government are committed to improving the payment culture in UK business in general and their own payment performance, which is an important part of the policy. The Government paid, on average, 95 per cent of their Bills on time in 2003–04, compared with a figure of 91 per cent in 1995–96. It is an improvement, it ought to get still better, and we intend it should do so, but we publish league tables and we come clean about where we need to make improvements.

§ Baroness Sharples
My Lords, can the noble Lord assure us that all government departments pay their small suppliers promptly, specifically the Ministry of Defence?

§ Lord Triesman
My Lords, I think that all government departments are now charged to make sure that they do exactly that. I have no reason to think that the Ministry of Defence is a poor performer in this regard. If it was, we would look at the league tables and be able to identify that.

§ Baroness Byford
My Lords, will the Government put any pressure on Defra to make sure that the outstanding claims going back to the foot and mouth outbreak in 2001 are met? These are two years out of date, and each of those companies is a small business or is linked to a small business.

§ Lord Triesman
My Lords, I know that this is not the first time that the issue of Defra and the payment of 750 bills in relation to foot and mouth has been raised in your Lordships' House. Defra has exactly the same responsibilities to pay small businesses on time as every other department. However, the National Audit Office has also pointed out to government departments that they have an official duty to protect public funds and should not pay bills which they believe should be challenged or when they are doubtful about the data. I believe that some delays may have occurred in that context. None the less, I think that there would be criticism in your Lordships' House if the advice of the National Audit Office were to be ignored in such cases.

§ Lord Swinfen
My Lords, will the Government or Defra pay interest on accounts that have been outstanding since 2001?

§ Lord Triesman
My Lords, under the legislation, not only is interest paid but there is a sliding scale of arrangements so that people can secure the legal costs of enforcing debt payment. That is all part of the current regulatory regime.

§ Baroness Greengross
My Lords, many charities in this country have contractual relationships, usually with local government, and care for very dependent children and vulnerable adults. Under company law, there is an obligation to pay those charities or contractual relationships on time. However, many are using charitable funds quite wrongly to cover debts. It creates a great many problems. Cannot the Government do anything to help them?

§ Lord Triesman
My Lords, I have a lot of sympathy with the point made by the noble Baroness. The reality is that the Act that applies to commercial debts applies only when an organisation is acting in the course of business. It is therefore unlikely to apply to payments to charities or the voluntary sector made by local authorities. There is no current plan to change the law in that regard. However, I would certainly be willing to look at any data that the noble Baroness may provide to consider what might be helpful.

§ Baroness Miller of Hendon
My Lords, given the disparity between the first Answer that the Minister gave and the figures quoted by the noble Lord, Lord Harrison—figures from the Credit Management Research Centre at the University of Leeds with which I agree—and given the questions that have been asked about the Government's own record, what I have to ask is very simple. Will the Minister confirm that the Government, through their departments, are wishing to set an example to other commercial people, and plcs in particular, about how quickly they pay? Given that they wish to set an example, is the Minister in a position to give the House any comparable figures about how the Government are performing? That is the most important issue in this Question.

§ Lord Triesman
My Lords, to take the last point first, the league tables show that the performance of 751 government departments is improving, from high figures to still higher figures. I hope that that will be a general encouragement to everyone in the private sector as well. I have undertaken to look at the data from Leeds. The discrepancies are not only with government data, but with commissioned data from other private research organisations. The best thing that I can do is to explore the discrepancies and see whether I can come to an understanding of the cause.

§ Lord Harrison
My Lords, given that at any one time some £20 thousand million is owed to small businesses by other firms, will my noble friend now consult with companies such as Next, BAA and BT, which have exemplary records of paying quickly and on time, to demonstrate that there is no competitive disadvantage in paying on time?

§ Lord Triesman
My Lords, I agree with my noble friend that there are obviously good examples of best practice. One of the functions of the Better Payment Practice Group is to look at those. It takes evidence from the Forum of Private Businesses, of which I know my noble friend has been a key supporter, the Federation of Small Businesses, the British Chambers of Commerce and so forth—I will not go right through the list. The attempt is made in that group to find and promulgate good practice. It is a very strong asset. It allows the business community to have a strong say in what is best for that community.