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Mr. Newton: On the question of a debate, I shall ensure that that is added to what I sometimes call my list.
On the rest of what the hon. Gentleman said, I should perhaps make the point that council tax payers in London contribute only about 8 per cent. towards the cost of policing London, compared with an average contribution of about 12 per cent. elsewhere, and that in 1997-98 the spending power of the Metropolitan police will be £55 million more than in 1996-97.
Mr. Iain Duncan Smith (Chingford):
My right hon. Friend has announced a debate on the constitution for next Thursday, and he will know that last week and on other occasions I have pressed him for just such a debate. My concern is that he announced today that my right hon. Friend the Prime Minister would not lead the debate. He also said that he would accept and welcome the idea that the Leader of the Opposition should come and make clear his position. I put it to him that unless the Prime Minister speaks on behalf of the whole country--not only Scotland and Wales and my constituency in England--at the Dispatch Box, we will not have the opportunity to hear from the Leader of the Opposition exactly what the Labour party's policy is towards English electors as well as those of Scotland and Wales.
I urge my right hon. Friend to reconsider the position. The Prime Minister must come to the Dispatch Box and speak on behalf of the whole United Kingdom.
Mr. Newton:
I cannot add to what I said earlier on the matter. As with other remarks that have been made this afternoon, I am sure that my hon. Friend's remarks will be carefully noted.
Mr. David Winnick (Walsall, North):
Why is the Leader of the House so coy about telling us the date of the Easter recess, and particularly the day on which, theoretically, we are due back, especially bearing in mind
Mr. Newton:
I have not seen myself as being coy about that or anything else. The difficulties of giving advance notice of the Easter recess have been clear to everybody for a long time.
Mr. Tony Banks (Newham, North-West):
Has the Leader of the House had an opportunity to watch the highlights of last night's England v. Italy World cup qualifying match? It would be a short programme and he could no doubt fit it into his busy day. Is he aware that the vast majority of the population were denied the experience, perhaps thankfully, because it was not available on a terrestrial channel? It was available only to Sky subscribers. May we have a debate on sport soon to discuss the growing concentration of sporting events being televised only by Sky, thus denying them to many people who want to watch our national games?
Mr. Newton:
I did not have the opportunity of seeing either the highlights, or what the hon. Gentleman evidently regards as the rather larger lowlights of the match, because I was doing other things. As always with his questions, I am sure that my right hon. Friend the National Heritage Secretary will study them with the care that they deserve.
4.4 pm
The Minister for Small Business, Industry and Energy (Mr. Richard Page): I beg to move,
- That the draft Companies Act 1985 (Directors' Report) (Statement of Payment Practice) Regulations 1997, which were laid before this House on 27th January, be approved.
The regulations will help small businesses to gauge the fairness of the cash payment records of larger companies. Hon. Members will know that the problems caused by late payment continue to cause concern to small businesses. That was one of the major concerns highlighted last year, when we gave small firms the opportunity to shape future policies through the regional "Your Business Matters" conferences.
While there are no easy ways of tackling the problems caused by late payment, the Government are committed to helping small businesses. We have introduced a number of positive measures to tackle the problems associated with late payment. The regulations are another step along the way to helping small businesses to help themselves and to change the culture of payment practice.
In 1993, we consulted on a variety of possible ways in which payment performance could be disclosed in accounts. During the consultation, it became clear that the option of reporting payment policy and performance in the directors' report was supported quite strongly. In the light of that, we consulted again in February 1995 on that measure. As a result, in January last year, the Second Standing Committee on Delegated Legislation approved regulations requiring public limited companies and their private subsidiaries to disclose their payment policies in their directors' reports. That dealt with publication of payment policies.
However, concern continued to be expressed by small companies about the effects of late payment of commercial debt, most recently by delegates to the "Your Business Matters" conferences--the largest ever exercise in consulting small business, which the Prime Minister launched in 1995. He gave a commitment to act on every recommendation that "Your Business Matters" made. We returned to the issue of whether, and how, payment practice might be reported.
Before deciding on a method of payment performance, officials in my Department met a large number of interested parties, including a selection of large companies and small firms representative bodies, to test out possible methods of calculating payment performance. Our aim was to find a method that would not be too burdensome and that would be relatively straightforward for companies to produce and report in their annual accounts. Of all the companies that responded to the consultation, none identified any alternative preferable to the method proposed, and all were agreed that that option has the merit of being the least burdensome, as it is partly based on data that are already collected for accounts.
I come now to the details of the new disclosure requirement set out in the draft regulations. As I have already noted, we tried to find a straightforward way of stating payment performance, which provides useful
information in a readily understandable way. We could not require companies to put into their accounts details of the time taken to pay every invoice. That would not only compromise commercial confidentiality but impose an impossible burden on companies. Therefore, any figure will have to be based on some form of averaging.
The regulations will require companies to state the figure, expressed in days, which bears the same proportion to the number of days in the year as the amount owed to year-end trade creditors bears to amounts invoiced by suppliers during the year. It might be helpful to the House if I illustrated that by a practical example. Suppose that a company has purchased £100,000-worth of supplies during the year and has at the end of the year some £10,000 of trade credit outstanding. Trade creditors therefore represent 10 per cent. of the amounts invoiced. Ten per cent. of the number of days in the year is 36.5 days. So the company would have to disclose that figure in the directors' report. That would be simple for the companies to do and would provide a ready and easy reckoner, so that the small company could realise just how a company paid its bills. The figure would help meet the needs of small suppliers, by providing additional and easily understandable information on the payment practices of larger companies.
There are a number of advantages to using that measure. As I have shown, it would be easy to calculate. It would be readily understood and interpreted. It would use the amount for trade creditors that appears separately in the annual accounts--except for banks and insurance companies--and require little additional work to identify the purchase amounts to be used in the calculation. The average will be comparable year on year in respect of individual companies and comparable across companies with trading activities of the same style and nature.
The new disclosure requirement is a logical next step to complement the payment policy disclosures that we introduced last year. It is therefore sensible that it should apply to the same companies--public limited companies and their large private subsidiaries. The new requirement will go into the directors' report alongside the policy disclosure. That should help people in smaller supplier companies, who will not have to go through pages of notes to the accounts to search for one figure.
That would also enable users of the information to keep track, in a relatively straightforward way, of how a company's performance measured up to its stated policy year on year. No doubt, it would give directors the opportunity to explain any divergence in the figures at annual general meetings, if the occasion demanded it.
Indeed, most small firms organisations have welcomed the regulations and the added value that they will provide to small businesses that trade with those larger public companies and their private subsidiaries. I echo those thoughts.
As to timing, the new regulations will come into force in relation to the report and accounts for financial years ending after 24 March 1997.
As the Minister who has responsibility for deregulation in my Department, I am aware as anyone, perhaps more than most, of the need to cut red tape wherever possible. However, that does not mean that there should be no regulation. I believe that this modest intervention is
necessary, to help to discourage any large company from succumbing to the temptation to abuse its position. It is clearly a matter of balance.
It is necessary to ensure that the costs to business of the additional administrative burden of monitoring payment performance do not outweigh the prospective benefits of tightening up payment times. It is of no benefit to suppliers if the requirement to collate and publish figures forces large companies to incur significant additional administrative or other compliance costs. The statement, therefore, relies on the public presentation of information that is already collected for the accounts or otherwise readily available. That is why we have opted for the mechanism set out in the regulations. It is a balance between ensuring that valid information is provided and minimising the cost of producing that information.
Tackling late payment is, of course, not just about company reporting. We must see the measures in the context of our wider policies. The House will be aware that I announced in June last year that following a thorough review, the Government would not be legislating for a statutory right to interest. That review was informed by updated submissions from representative bodies that had responded to the public consultation on the matter in 1993; the "Your Business Matters" conferences; and detailed research by the university of Bradford and others.
It was clear from the review that there had been a significant shift in opinion against legislation, particularly by all but one of the small firms representative organisations. Concerns were expressed that legislation would have a negative impact on small businesses; that it would add little to existing rights; and that it might not actually be effective. In fact, it became clear that it was the view of small business that a statutory right to interest would be more likely to harm small businesses than help them.
The evidence from Europe, where most countries have a statutory right to interest, suggests a scant connection between such legislation and evidence of early payment. A statutory right to interest would still involve a small business man or woman appealing to courts, an option that is, in any case, open to them at the moment. It is for such reasons that eight of the nine small firms representative organisations that responded to the consultation rejected the imposition of a statutory right to interest.
Therefore, the view of small business is clear. Steps to eradicate late payment must be taken, but a statutory right to interest is not the solution. Good practice, like most things, begins at home. It is right that the Government should lead by example and ensure that their own house is in order. Departments and agencies are already required to pay their bills within contract terms or 30 days where alternative terms have not been agreed. All Departments have signed up to the Confederation of British Industry's prompt payments code and are required to monitor and publish their actual performance. In addition, the Prime Minister announced in March last year that the Government would publish each year a league table of Departments' payment performance, based on a rigorous system of measurement.
The House will be aware that, on 17 December, my hon. Friend the Economic Secretary to the Treasury published and made available to it the results of that first league table. It is worth noting that the vast majority of
Departments perform well. Those that have underperformed have been left in no doubt about the need to improve. I can assure the House that that is absolutely correct. I have received assurances that those improvements will happen.
Concerns were also expressed at the regional "Your Business Matters" conferences that local authorities were late payers. On 29 November, the Audit Commission published payment performance figures for local authorities, which showed that the average figure for settling invoices on time was 77 per cent. That was based on voluntary returns from 57 per cent. of local authorities. I do not know what hon. Members may think, but I do not believe that either of those figures is satisfactory.
Hon. Members will wish to be aware that the Audit Commission has now announced that it will be issuing a direction to all local authorities requiring payment performance to be a performance indicator for 1997-98. That information will help to inform businesses bidding for local authority contracts just how quickly they will be paid. We can, therefore, see that the regulations build on what the public sector is already doing--providing information to suppliers on when they will be paid.
In the 1994 White Paper on competitiveness, we also announced that we would work with the business community to develop a British Standard for prompt payment. That standard was duly developed by the CBI, to which I wish to pay tribute, with the support of the Department of Trade and Industry. BS7890, "British Standard for Prompt Payment", was launched by myself and the Economic Secretary in September 1996. The standard sets out basic principles of credit management and best practice. It should help to bring about improvements in payment practice and, ultimately, the cash flow of businesses.
We also said that we would look at the court systems as a means of recovering debts. The Lord Chancellor has introduced a number of changes to simplify and streamline court procedures, including raising the small claims limit to £3,000 and making it easier for small businesses to transfer cases to the High Court for enforcement by sheriff's officers.
I have made a personal commitment to take up any case where a small business is facing late payment from a large business. However, the majority of cases that come before me are more likely to involve the provision of poor-quality goods or services rather than late payment. Nevertheless, my open promise stands and any small firm that is not being paid on time by one of the top 100 companies or by any Government Department can approach me.
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