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Column 571Mr. Leigh : If the Government have been so successful in tightening up their procedures, surely they should have no objection to the Bill applying to them? If it applied only to the Government, I should withdraw my objection to it.
What my hon. Friend the Minister had to say on the programme was interesting. Since he was made the Minister responsible for small businesses, he said, he had had only three complaints of late payment by Government Departments, two of which he had found unjustified and one of which he was investigating. That bears out my experience. Since the Government came to power, Government Departments have honoured their obligations to small businesses commendably.
Mr. Ian Taylor : Does my hon. Friend accept that problems have emerged in my constituency with the Ministry of Defence, especially in its relations with prime contractors, and in the relationship between prime contractors and sub-contractors? They cause great concern.
My hon. Friend the Minister pointed out on the "Today" programme that some bodies are regarded as Government bodies, yet are not--that is, health authorities. I know from experience that health authorities having trouble with their budgets towards the end of the year pay late.
Mr. Arbuthnot : Does my hon. Friend agree that the early payment of debt is a matter of morality and of agreement that applies to everyone in the land--not only to Government authorities or to large companies, but to small companies and people?
Mr. Favell : I quite agree. One of the arguments advanced by the opponents of the Bill is the idea that we are all big boys now and when we enter into a contractual obligation to supply or buy goods we must make our own decisions on whether to include interest. That does not apply to many people, however. Many still believe that an Englishman's word is his bond. Many small firms dealing with a large company such as British Steel, or GEC, or a health authority or local authority, believe it when they are told that they will be paid in 28, 30, 60 or even 90 days. They are terribly surprised when they are not paid on the stipulated day, as they were promised by those august bodies that they would be. By that time, it is often too late. Small firms must continue to pay wages ; people must continue to pay their mortgages ; they get caught in a downward spiral, and the banks charge them interest. The banks do not defer interest simply because a firm has been let down by someone else. It is a tremendous disadvantage to a new small firm to enter a contract with a large company that does not honour its debts.
The Department of Employment has issued a couple of pamphlets, and they are fine for people who believe that codes are to be followed and words kept. They are fine for the scrupulous, but the unscrupulous will take no notice of a voluntary code, especially as they will make 15 per cent. on the money by not paying it to the supplier. Why on
Column 572earth should they follow such a code? There is big money to be made in paying late, and the bigger the company, the more money to be made.
The man in charge of paying suppliers is told to pay as late as possible-- that is his job and if he wants to keep it, that is what he must do. For some concerns, the law of the jungle operates, not the law of the code. I see nothing wrong with the Government legislating against people who believe in the law of the jungle and in bringing down little people who have taken them at their word.
The Inland Revenue and Customs and Excise know that if interest runs from a certain date, people pay up. Lawyers know that, too. I intervened in the speech of my hon. Friend the Member for Hampshire, East on the subject of courts. The Supreme Court Act 1981 went some way towards the recommendations of the Law Commission by laying down that if proceedings were brought, interest became payable on debts paid late ; but if proceedings were not brought, interest did not run. So if a seven day letter is sent by a solicitor asking for payment, the recipient can avoid paying interest, even if there has been a six-month, 18-month or two-year delay, merely by paying up quickly before proceedings are issued.
Such a case went all the way to the House of Lords in 1984. There had been an appeal against a decision of the Court of Appeal that interest was payable on a late-paid debt. Lord Scarman's judgment ran as follows :
"I also reach with regret and reluctance the conclusion that the appeal must be allowed. The sooner there is legislation along the lines proposed by the Law Commission or some other solution achieving the same end, the better."
Ms. Joyce Quin (Gateshead, East) : On a point of order of which I have given notice, Mr. Deputy Speaker. Have you received a request from the Secretary of State for Trade and Industry to make a further statement to the House on the sale--perhaps I should call it the giveaway--of Rover to British Aerospace? The point of order arises from the disturbing report in today's issue of The Guardian that the European Commission may request British Aerospace to repay up to £283 million. That sum is well in excess of the--
Mr. Deputy Speaker : Order. The hon. Lady must not tell the House what she might have said had there been a statement. I have not seen any request for a statement to be made. No doubt what has been said will have been heard by Ministers.
Mr. Paddy Ashdown (Yeovil) : It is a pleasure to know that the hon. Member for Stockport (Mr. Favell) agrees with the Bill. I am sorry to be a little rough with him but he seems to have jumped to a conclusion about my brief absence from the debate for a total of about three minutes. He and the hon. Member for Gillingham (Mr. Couchman) sought to draw the conclusion that I had left the Chamber because the business for which I was here related only to Nelson Mandela. The hon. Member for Stockport should have taken the trouble to look into the background or should have consulted his hon. Friend the Member for Hampshire, East (Mr. Mates) who has known for at least 24 hours since I wrote to him yesterday that I would be taking part in the debate because I have had a long interest in this matter. During the debate I shall have to leave the Chamber from time to time because of events relating to
Column 573the release of Nelson Mandela. I apologise to hon. Members in advance for those absences. I assure the House that in no sense do they diminish the importance that I attach to the Bill.
Mr. Favell : I apologise to the right hon. Member for Yeovil (Mr. Ashdown) for having jumped to the conclusion that he was here merely to hear the totally bogus point of order. I reached that conclusion because he left immediately afterwards. However I am glad to see him back in his place. Perhaps he will understand my annoyance because I am sure he agrees that there have been an enormous number of bogus points of order since the television cameras arrived. It is most annoying to have to sit here from 3.30 until 4 o'clock every day listening to bogus points of order.
Mr. Ashdown : I congratulate the hon. Gentleman, not on raising a bogus point of order but on making an imaginative point in an imaginative way. I am grateful to him for the courtesy of his correction.
I congratulate the hon. Member for Hampshire, East on preseting the Bill and on deploying a most powerful case in its favour. He has left others of us who would like to comment in favour of the Bill with little to say, so I shall be brief. As I think the hon. Gentleman knows, my presence here is not just in relation to the importance that my party attaches to the Bill and to the whole matter of assisting small businesses. My interest dates back to the time when I was trade and industry spokesman for my party in the 1983 Parliament.
At that time I conducted a long debate with the then Minister with responsibility for small businesses, the hon. Member for Rossendale and Darwen (Mr. Trippier) who is now the Minister for the Environment and Countryside, about the importance of doing something about the problem of late payment. That is part of a problem, referred to tangentially by some Members, which is a big problem in its own right. That problem is the power of the buyer in the marketplace. We all know about the problem of the monopoly seller but the problem related to the buyer has grown to an extent that should concern those who, like me and the Government, are interested in a competitive free market. The word that describes the power of the buyer, monopsony is a fairly new one. Such buyers have power to effect discriminatory discounts. That should be looked at because it is one side of the problem. Late payment is another.
At the time when I took the matter up with the hon. Member for Rossendale and Darwen he shared all my concerns. I do not pretend to have been instrumental in anything other than a minor way in getting the Government to act on a code of practice. We had a long debate about whether legislation would be better than a code. At that time I took the view that legislation would be better, but I was persuaded by the Government that as a first step at least a code of practice would be more appropriate.
The debates on those matters sometimes took place in the House and sometimes they were carried out in correspondence with the hon. Member for Rossendale and
Column 574Darwen. He told me that he thought that a code of practice would be right in the first instance, but that if it did not work the Government should consider further action. For that reason this is an appropriate time for the Bill to be brought before the House. It is evident beyond any misunderstanding that although the code of practice may have been right as a first step and was put forward in a manner with which I agreed, it has not had the effect that the Government must have hoped it would have.
I remind the House that the figure for late payments is £57 billion. The Dun and Bradstreet report referred to by the hon. Member for Hampshire, East clearly indicated that the code of practice is not working. If I were to be overly critical I would say that the Government have not done much to publicise the code beyond its initial launch. The code has not worked to achieve what the hon. Member for Rossendale and Darwen hoped for as recently as 1987.
Mr. Arbuthnot : Is not the right hon. Gentleman being a little restrictive in his answers to the problem? He referred first to legislation and then to a code of practice about debtors. Does he agree that there is a third action that creditors could take by improving credit control? Would the right hon. Gentleman like to explore that?
Mr. Ashdown : That is a perfectly fair point with which I agree. I do not think that we will solve the problem overnight by a code of practice or by any single Act. It will require a combination of Acts. However, the case is clearly proved that part of the armoury that will solve the problem of late payments--which, as the hon. Member for Hampshire, East said, is borne disproportionately by the small business sector--is a decent framework of legislation. That is not the only instrument to solve the problem, but it is a major weapon. Three questions need to be answered. The problem has persisted, indeed grown, according to figures that are available to us. The first question is whether the means that we have available to solve the problem are sufficient. The conclusion that we must draw is that they are not, because the code of practice has not worked. Secondly, should we go further and, thirdly, will the Bill help? The legislation will assist.
I accept the case made so well by the Minister on the "Today" programme that in the last analysis the Bill is probably not enforceable. Many of our laws are not perfectly enforceable but nevertheless they perform a reasonable and useful function. The law on speed limits is an example. We know that all speed limits cannot be enforced because there is not the ability to do so. However, that is not to say that a speed limit does not have a prophylactic effect on people driving through towns and villages. The success of a law cannot be judged simply by the number of successful prosecutions ; it must also be judged on the basis of the number of infringements that it has prevented, and that, surely, is the major argument for the legislation.
I am delighted that the hon. Member for Hampshire, East has presented the Bill. I do not consider that it is perfect ; the hon. Member for Stockport made a good case for the opting-out procedures. On Second Reading, however, we are dealing with a principle. Amendments can always be made later.
The time has come for the Government to put into effect their rhetoric on small businesses. They should seize
Column 575the opportunity to legislate. The legislation will not distort the free market ; if anything, it will help to create competition and to shore up that market. Many small businesses, at least in the south, are soon to be faced with the burden of the uniform business rate in addition to the current extraordinarily high interest rates : no doubt Conservative Members, like us, have received many representations about the effect of that. Now, however, the Government have to hand a sensible piece of legislation that will carry forward their original moves to establish a code of practice, help to create a framework of competition in the free market and assist small businesses. Why do they not wish to take up that opportunity?
Mr. Jeremy Hanley (Richmond and Barnes) : The right hon. Gentleman cannot have it both ways. At the last general election it was his party's candidates who called on the Government to redress the north-south divide, and that is the specific aim of the uniform business rate. Do we gather that he cannot follow the Liberal path when it has to be paid for?
Mr. Ashdown : We have strayed slightly from the subject of the Bill, but the hon. Gentleman's question deserves an answer. He ought to recognise that correcting the widening north-south divide is the Government's problem, involving general taxation. There is no earthly reason why small businesses, especially retail outlets in the south of England, should pay the whole price for the economic regeneration of the north, as they are being asked to do. The uniform business rate may well achieve an aim that I would support, but it will do so through a mechanism that I consider utterly impractical and extremely damaging. Britain needs a proper regional policy, rather than an inadequate spatchcock system like the uniform business rate. The Minister and the Government now face the danger that their policy of encouraging enterprise, small businesses and
self-employment--a policy with which I wholly agree ; if I have a criticism, it is that they have not gone far enough or fast enough--will be subjected to close scrutiny. To avoid that, the Minister must be prepared to show the public and the House that he at least accepts the principle of the Bill, and is prepared to take it into Committee and make such amendments as are practical and necessary, so that we can implement legislation that is not only properly balanced and well-timed, but, in my view, extremely necessary.
Mr. Jacques Arnold (Gravesham) : I fully support the Bill, which will have the important effect of redressing a balance. Over the past few years the burden of delayed payments borne by smaller businesses--indeed, by industry in general--has risen from £45 billion to £57 billion, and all the current developments in the economic world militate in favour of an increase in the level of unpaid debt. Higher inflation, higher interest rates and greater financial sophistication all contribute to that effect.
Large firms gain a decided advantage from delayed payments : the transgressors are smart-aleck company treasurers who fully understand the importance of free balances and increased funds. They are the adepts of financial engineering. Equally guilty are incompetent administrators in the payments departments of large companies, and it is ludicrous that we should give them an
Column 576incentive to be inefficient. Apart from major companies, the principal transgressors are central Government and local authorities, and I appreciate the way in which the Bill concentrates on them. Delayed payment of suppliers, especially small suppliers, has added unplanned and uncosted pressures. Not a few of the bankruptcies of recent years have been caused by insolvency that has not been financed by banks, which will not extend overdrafts to deal with this problem.
There have been a number of unlikely spin-offs from delayed payment by Government. One of the strongest cases for it is the comparative advantage that it gives local financial management in schools. County councils have been among the worst offenders. Now they finance the schools and provide them with chequebooks to pay suppliers of services, books and so forth. Many suppliers had stopped doing business with the councils because of the delays in payment. Now schools have been able to go to suppliers and say, "Deliver today, at a good price, and we will pay today."
Mr. James Couchman (Gillingham) : My hon. Friend the Member for Hampshire, East (Mr. Mates) and I had an agreeable discussion over supper about the merits and otherwise of his Bill. I told him that I intended to be here this morning, and that I was generally fairly hostile to the intent of the Bill. He asked, "Have you read it?" I blushed a little and said, "No." He said, "Go and read it." He then proceeded to give me a fairly full trailer for his speech this morning.
My hon. Friend should have held on to his first piece of advice, which was that I should go and read the Bill. When I did just that, I found that my wavering had stopped, and I am afraid that I am still generally hostile towards its intent. Its aim is laudable : there are some legendary bad payers, who have been named and who include national Government. My hon. Friend has said, from a sedentary position, that the Ministry of Defence is notorious in this regard, and my hon. Friend and near neighbour the Member for Gravesham (Mr. Arnold) mentioned local government. I can never understand why small builders and others in the building trades wish to get on to local government lists. They carry out contracts, probably in innocence, not realising that payment will be delayed, and in the end far too many of them go bust.
My hon. Friend has mentioned some large public limited companies with very bad payment records. I must be careful when I mention GEC as it is the largest employer in my constituency. By virtue of that it is the largest contractor to small firms in my constituency. GEC is important to the local economy and has supported the local community. It has supported the Medway towns through some extremely difficult times since Her Majesty's naval base and dockyard at Chatham closed in 1984. Therefore, I shall be soft on GEC and support it to the extent of pointing out to my hon. Friend that GEC is an enormous supplier to the MOD which, as my hon. Friend
Column 577has said, is a notoriously bad payer. It may well be that GEC's bad paying is the result of contracting to the Ministry of Defence for many large contracts.
Large companies are increasingly outsourcing for components for their products to many small suppliers. I had the opportunity to visit General Electric in America to watch the manufacture of expensive medical diagnostic equipment. I asked what the proportion of outsourcing was. In terms of components it was virtually 100 per cent. The expertise that the large company brings to the product involves putting together components, testing them and bringing them up to a working specification.
It is the nature of business today that large companies buy in many of their components from small suppliers. Putting aside the question of naivety, small companies generally understand their credit relationship with large companies. In the light of its settlement record, those who contract with GEC will build into their contract prices a component for that difficulty. Small companies appreciate that large companies are, in effect, sucking in small companies' credit lines.
Mr. Matthew Carrington (Fulham) : That is an important point in understanding the relationship between the small company and the big purchaser. If a small supplier has the opportunity to build it into his price, he will do so, but only if other suppliers do the same. However, he is taking a gamble because he will build in an expected payment date which, in the case of GEC, may be 100 days. GEC may pay in 130 days and that adds unreasonable uncertainty to the payments.
The House will know because I have declared my vested interest frequently that I run a small business. However, I admit that my situation is very different from those whom my hon. Friend seeks to help. My major supplier is my own landlord, so I am not in much of a position to place long credit terms on my supplier. My supplier is much bigger than my own company and grants me but short credit and expects payment by direct debit--an increasing habit among large companies when they are selling as opposed to buying. Because mine is a retail business, so long as I keep my stocks right, my products are sold before I pay for them even by fortnightly direct debit. So I understand that there is a difference.
However, 25 years ago when I was a representative for the Regent oil company, now Texaco, I was expected to spend a large proportion of my time each month chasing up small customers for payments for products that were sold on a retail basis very rapidly after delivery. Therefore the question of late settlement of debt is not confined purely to national Government, local government and big plcs. It is almost endemic throughout the business world.
Column 578Apart from the fact that my hon. Friend's Bill runs against two of the 1978 Law Commission recommendations on contracting out and universality, my major disagreement is that it will distort adversely the relationship between contractors and suppliers. It represents an intervention in the market, and that is what concerns me. I believe that the market is best left to its own devices with regard to credit.
My local chamber of commerce somewhat belatedly asked me to telephone yesterday afternoon and put across rather a weak case on behalf of the Association of British Chambers of Commerce. I suspect that my hon. Friend the Member for Hampshire, East is smiling because GEC may well be the largest contributor to that chamber of commerce. The chamber of commerce has come out against the Bill, not because GEC may be a major contributor, but because it envisages the relationship between contractor and supplier breaking down to the extent that those small companies that have the effrontery to ask for interest--my hon. Friend has said that they may opt out of taking the interest, but there is a fine line between that and having a contract which excludes statutory interest--are likely not to gain repeat orders from their substantial contractors.
Mr. Favell : I understand my hon. Friend's desire to represent his local chamber of commerce to which he says GEC may be a large contributor. If I were in his shoes I would probably take the same line. However, does he find it surprising that chambers of commerce and other organisations are ambivalent about the proposal simply because they represent good boys and bad boys? Late payers and quick payers are members of chambers of commerce, the CBI and the Institute of Directors, so it is not surprising that they cannot make up their minds. Does it surprise my hon. Friend to know that my local chamber of commerce in Stockport is in favour of prompt payment so long as the same rules apply to everyone. Maybe in the north we have different ideas about these things than they do in the south.
My last point relates to the size of companies. I think that is arbitrary. I accept that it is defined by the Companies Act 1985 which includes quite definite terms for capital, turnover and staff. I cannot remember the capital or the turnover term for a medium company, which is defined as one employing 250 people or more, but they are substantial compared with my company which employs 30 or 40 people and has a turnover of about £1.5 million.
Mr. Mates : My hon. Friend is absolutely right to raise that point as it causes me some concern. I should be happy to discuss in Committee whether there is another difinition that would exclude some of the larger medium-sized companies. The reason that I have not included it in the Bill as drafted is that I did not want to make more complicated bits of law and thus give my hon. Friend even more reason to object to the measure. The virtue of that is that it is implicit in the Companies Act. If that is one of the reasons why my hon. Friend the Minister of State is unhappy about the Bill, let him say so and let us debate it in Committee, because that is what I am longing to do.
Column 579Mr. Couchman : I am grateful to my hon. Friend for that offer, which I am sure my hon. Friend the Minister will consider most carefully.
The problem with a medium-sized company employing 250 people, given the limits on capital and turnover applied to them, is that they may be the United Kingdom subsidiaries of large overseas corporations. Under the Bill, they would be drawn into the net of medium-sized companies, although they are representatives of vast corporations.
Mr. Couchman : I accept what my hon. Friend the Member for Stockport (Mr. Favell) said earlier. If the Bill applied to large, medium and small companies--the good boys and the bad boys--I would have more enthusiasm for it. The alternative is to limit it strictly to the public sector--central Government, local government and health authorities.
The Government want it both ways. I must pay value added tax. I know well that if I do not complete my return and send a cheque this month the clock will start pretty smartly, and the master of my hon. Friend the Member for Stockport will want some interest. Clearly, the Treasury has one law for itself but another for everyone else. I have some sympathy for the Bill and hope that it can be made workable in Committee. I am not sure that the changes that it proposes should be made by a private Members' Bill. Such initiatives should come from Government, wth the full panoply of Government draftsmen to work them out properly.
Mr. Couchman : My hon. Friend should not tempt me down that road. The Bill is complex and contains issues which, as my hon. Friend the Member for Hampshire, East (Mr. Mates) has freely admitted, he has been unable to address completely and to the satisfaction of all hon. Members.
I hope that my hon. Friend the Minister will say that the Government will consider this proposition to see whether the Department can do something more than the issuing of pamphlets, which my hon. Friend the Minister for Hampshire, East praised faintly. I have sympathy for the aims and intentions of the Bill, but it is imperfect because of the two exclusions that I mentioned. I wish my hon. Friend the Member for Hampshire, East luck, but I am afraid that I will be unable to stay until 2.30 pm ; he may see that as an advantage rather than as a disadvantage. I hope that this interesting debate will continue, because the House should be more enthusiastic about it and consider it more often.
Before becoming an hon. Member, I was in the banking business. I was responsible for lending not only to big and medium businesses but to small businesses. Much has been said about the small business man, but I should like to include in the debate the small business woman. The Government have encouraged many young people to start
Column 580their own businesses. In the north-west, especially on Merseyside and definitely in Southport, many young men and women have set up their own businesses.
I have seen quite a few bankruptcies and many small businesses fold. The main reason for their doing so was delayed payment not by the Treasury but by business or local government.
I remember when bills were paid within 14 to 21 days, but we are aware, not only from what has been said this morning but from correspondence sent to us, that on average that limit has been extended to 75 days, which is far too long for new businesses and small businesses. In the past year, an almost record number of bankruptcies were recorded ; I have received correspondence endorsing that point.
The Bill offers some help not only to the small business man but to the medium business man. Delayed payment is the illness of business. To exist, a medium-sized building company must deal with local authorities. Large contracts from housing associations are rarely available, so those building companies look to local government to provide large contracts, which used to be so profitable for them. Having to wait three months for payment places pressure on those business people. I have seen many small business men ask banks for help when they are in difficulties. The banks are prepared to go only so far to help because usually they have the security of a private house. In the end, when delayed payments cause too much trouble, the banks must decide what to do with the deeds that they hold. Banks are not as soft as they used to be, and nowadays they must foreclose on properties. That leads to family disruption, and as a banker I saw quite a few divorces because of payments being delayed to small businesses. The Bill may cause the Government to consider the plight of small businesses, especially the plight of young people who have started their own companies.
Many small businesses would like to continue, would like the help that banks offered in the past and would like the help of local finance. That involves the Government's scheme of letting businesses help themselves through themselves, but it does not happen when large concerns that have large amounts of capital demand credit. I hope that we can encourage local government, which faces squeezes, and big businessmen to read Hansard, look at the Bill and examine the Government's response. I hope that the Government will not try to talk out the Bill but will do something positive.
The Liberal Democrats initiated the discussion on small businesses in the House on Wednesday. It had been some time since that matter had been debated and I was pleased to hear hon. Members' contributions. There are many small businesses in all our constituencies. The Forum of Private Business is taking a grip on what business people are saying. It sends us queries on all aspects of small business so that we can ask questions and find out what can be done to help.
I hope that the Bill will be given a Second Reading and proceed to its Committee stage. The theories that are discussed in Committee will expose some of the base practices imposed on the small business man by those in power. I hope that the Bill will be successful.
Column 58111.41 am
The Minister of State, Department of Employment (Mr. Tim Eggar) : My hon. Friend the Member for Hampshire, East (Mr. Mates) has raised an important issue. I congratulate him on choosing this topic and on his argument and the great care that he has taken to discuss the Bill's implications with small business organisations and individual small companies and with the Government and other interested parties. That is typical of the way in which my hon. Friend tackles these issues. I regret that I shall not be able to stay for the whole debate--I gave my hon. Friend notice of that earlier. I have made arrangements to be here as long as I can.
As the Minister with responsibility for small firms, I appreciate my hon. Friend's intention in the Bill to assist small businesses and the small business community. That community is vital to our economy and has been remarkably successful over the past decade. I shall not rehearse the arguments that we heard in the debate on Wednesday on the small firms sector. In 1988, there was a net increase in VAT registrations of 1,200 firms every week. The latest figures indicate that in 1989 there was a net increase of 1,500 firms every week. That shows the vibrancy and strength of the small business sector, despite the slightly more difficult economic climate, to which a number of hon. Members have referred, in which small businesses operate.
Mr. Page : No doubt, we all take great pleasure in the 1,500 new businesses created every week, but I urge my hon. Friend to be cautious about his pride in that figure in case other people fasten on to it. Logically, we cannot have millions and millions of small businesses--there must be a finite number. Eventually, the number of small businesses created will decrease. I should hate anyone to use that as an argument that the Government are failing in their duty to small businesses.
Mr. Eggar : I understand my hon. Friend's point. I was making a point not about the absolute number of new businesses created--1,500 a week --but about the trend. As I pointed out in the debate on Wednesday night, early indications show that there were 80,000 new VAT registrations in 1989, compared with a net increase of 85,000 VAT registrations between 1974 and 1979. I was trying to show the strength of the small business sector in comparative terms. As my hon. Friend the Member for Hertfordshire, South- West (Mr. Page) knows, there has been a sharp increase in the number of self-employed people, from 2 million in 1980 to 3 million now. It has been a strong sector.
In previous debates on this topic, a number of my hon. Friends have referred to the major role played by the former Member for Nottingham, North, Richard Ottaway. I pay tribute to him for the way in which he raised the profile of this issue and gained much support throughout the House for his campaign. In debates that he initiated, the Government made it clear that we recognised that the late payment of bills was a problem for companies of all sizes in the United Kingdom, but one that particularly affected small businesses.
Mr. Hanley : My hon. Friend may recall, if he has read the two major debates that Richard Ottaway initiated on this subject, that on 24 July 1986, the then Under-Secretary of State for Employment--my hon. Friend the
Column 582Member for Rossendale and Darwen (Mr. Trippier)--stated that legislation would be introduced if the voluntary code did not work. The debate and the Bill show that, in spite of the excellent voluntary code, the system is not working. It is four years since the then Minister made that suggestion, yet my hon. Friend the present Minister seems to be saying that now is still not the time. Will he comment?
Mr. Eggar : I am afraid that my hon. Friend will have to wait, and I hope that the suspense will not harm his health, as I develop my arguments and explain the Government's position. He has made a valid point.
To revert to the point made by my hon. Friend the Member for Richmond and Barnes (Mr. Hanley), I have, of course, read the debates to which he refers. It is clear, as the right hon. Member for Yeovil (Mr. Ashdown) said, that there was a feeling that as a first step, we should consider issuing "Prompt Payment Please!" and other documents to try to influence the climate of opinion. The Government have never completely ruled out legislation in this area. If my hon. Friend listens to what I have to say, he will find that my policy is not unlike that of my predecessor, my hon. Friend the Member for Rossendale and Darwen (Mr. Trippier).
We have always recognised that the late payment of bills is a widespread problem. By definition, it affects small businesses more than larger businesses, for reasons that we all understand. Cash flow is a more critical element in the survival of smaller companies than it is, generally, for larger firms. I know that late payment causes some small firms real hardship.
Mr. John Butterfill (Bournemouth, West) : Does my hon. Friend accept that it is not always late payment of bills that have been demanded which causes the problem, but a reluctance by some firms to submit an account at all when they know that it is likely to be disputed? Although we have introduced in VAT regulations a threshold for firms with a turnover of £250,000--below that level people can account on the basis or receipts rather than invoices--there are many firms that he and I would not regard as large which have a turnover in excess of £250,000. The average solicitors' practice with two partners would qualify, although neither of us would call such a firm, or any small professional firm, "large". Their difficulty is that they are deterred from submitting an account if they know that it is likely to be disputed because they know that they will have to pay 15 per cent. VAT. In many cases, they choose to negotiate rather than--