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Mrs. Roche: I thank the hon. Lady for her courtesy in giving way, but does she not accept that every survey of small businesses shows overwhelming support for a statutory right to interest? She supported that not merely by signing the early-day motion, but by being one of the first six sponsors.
Mrs. Gillan: The hon. Lady has pursued the matter twice. She is highly embarrassed to be quoted as saying that 60 per cent. of small business organisations are opposed to a statutory right to interest. She intends to impose her will on the business community, regardless of what it thinks.
The Minister should have used her energies to ensure that the Government pay their bills on time, as the previous Government did. More than 50 per cent. of Departments improved their payment records in the last full year under our government, some substantially. In answer to my question on national health service trust payments, the Minister of State, Department of Health said that
Mrs. Roche:
On payment performance, will the hon. Lady confirm that when she was a Minister at the Department for Education and Employment, it paid a quarter of its bills late? Will she apologise for that?
Mrs. Gillan:
I have no apology to make. The Paymaster General said in a written answer in Hansard on 27 November, at column 662, that the DFEE's record was 92.2 per cent., which is an improvement, because the Department for Education's payment record was 75.2 per cent. I hope that the Minister will
I congratulate the Minister on the better payment priorities group and hope that it will be backed by more than her warm words. She has the arduous burden of making the winding-up speech, because no other Minister has come to support her. Will she say how much money will support the group's proposals? How much will go into the development of the national vocational qualification in credit management? How much will go into the credit management information and advice service? How much will go into business links to support credit management?
I believe that the Minister, disingenuously, did not mention the Lord Chancellor's review.
Mrs. Gillan:
I stand corrected; I must have been distracted when the Minister mentioned it. However, we do not know when the review will be forthcoming. We know that the Government hit the ground reviewing last year, but few reviews have come to fruition, except when a review has become a consultation.
The sad thing about the Bill is that, despite the massive cull of prawns to sustain the Government's offensive to convert old Labour into new Labour, the Government still do not understand the essential ingredients of a successful business recipe. As soon as they perceive what they regard as a problem, they want to jump in and legislate. In 1994, rather than the previous Government legislating, their consultation on late payment resulted in British standard 7890, the standard for specifying procedures for good payment priorities and credit management, which business supported. Some of our most successful companies are outsourcing, but the hon. Lady does not seem to understand business relationships as they develop.
Outsourcing builds up mutually beneficial customer-supplier relationships. They depend on long-term arrangements and can result in improvements on both sides. Rather than implementing legislation that interferes with contracts freely entered into by both parties, the Government should encourage that sort of business climate. Where such a relationship does not exist, it is naive to imagine that the development of mutual trust can be fostered by encouraging suppliers to take action against their customers.
The Government have not yet caught up with the need for good industrial relationships. Perhaps I should not be surprised, as some hon. Members will remember how old Labour defeated Barbara Castle when, as Secretary of State for Employment and Productivity, she produced her White Paper "In Place of Strife".
Mr. Clive Betts (Sheffield, Attercliffe):
That is pre-history.
Mrs. Gillan:
The hon. Gentleman says that that is pre-history, but "In Place of Strife" was defeated by Labour. Labour seems to believe that industry should thrive on strife. The Bill has the capacity to multiply that strife. Add to that the imposition of trade unions, the minimum wage and the other burdens that I have mentioned which are coming to haunt business, and we see that nothing has really changed.
If the Bill represents new Labour's concept of industrial progress towards international competitiveness as we move towards 2000, it is the Labour party which should be tested to see whether it has caught the millennium bug. That thinking seems to have flipped back to the year 1900.
This is a soundbite Bill. It sounds good, but it lacks real understanding of business. We shall not oppose it on Second Reading because businesses should pay on time, but we shall seek to probe the detail. We shall consider phasing in and thresholds, the large company's use of the statutory rate against other large companies in the public sector, the default credit period and many other matters. I hope that the Minister will look forward to discussing those matters, and I hope that she will keep an open mind on our suggestions.
Mr. Richard Page (South-West Hertfordshire):
No one could deny that the Labour party had a splendid election campaign. It was rumoured that it worked on the 60 per cent. principle--if 60 per cent. of the population was in favour of a policy, it adopted it. We could see that that would run into trouble in the fulness of time because the 60 per cent. in one group would not be the 60 per cent. in another.
There is no collusion in this, but I had intended to mention the question of taxation and hospital waiting lists as an example of two policies on a collision course. In my constituency, waiting lists have increased by 28.9 per cent. However, it would be wrong to continue listing the Government's broken promises, so I shall move on to the small business sector.
The Labour party in opposition had a real problem. It was regarded not as the natural friend of the small business man and woman, but as hostile to the small business world. It ran around desperately trying to find a policy that would convince the small business man and woman that it was on their side. It had a difficulty because most of the things were being done. I say that with natural modesty, as is my wont. I have a natural sympathy for the task.
The Labour party came up with two problems for small businesses, both of which I recognise--one was regulation and the other was late payment. The Labour party promised to control regulation and deregulate like no Government had done before. The Minister referred to my right hon. Friend the Member for Henley (Mr. Heseltine), who set up the deregulation unit. In the two years before the election, about 1,000 regulations were merged or abolished.
As a matter of interest, in January I put a parliamentary question to the Minister--no doubt life has moved on since then--and I discovered that between 1 May and the date of the answer, the Department had managed to deregulate three items. I shall pursue the Minister on that matter, just as she pursued me with regard to Departments paying on time.
We all recognise how damaging late payment is for small businesses. It can make or break a business, and in many cases it has broken businesses. We have all had
people coming to our surgeries to complain about how late payment has hurt their businesses. All hon. Members will be on the small business man and woman's side, but we must act sensibly and progressively. It is no good uttering honeyed words but not delivering in practice.
All Governments have considered the matter. The highly respectable accountancy firm, Grant Thornton, studied what was happening in the rest of the EU. In 1995, the United Kingdom was paying within 48 days and, in 1996, within 50 days. We were just slightly ahead of Germany, which took a couple of days more than us. I am told that a report by another organisation gives Germany a shorter period. However, it boils down to the fact that among all the countries with a statutory right to interest, we were right in the middle. The Scandinavian countries paid within about 27 days, and in Italy a company that is paid within 90 days holds a street party to celebrate, and life goes on from there.
Given those figures, is the statutory right to interest all that it is cracked up to be, or is it more a matter of national culture? That is what it comes down to. Reference has been made to all the surveys that have taken place, and hon. Members will not be surprised to know that such surveys also took place when I had a degree of responsibility. The result of the first survey was 50:50. Two years later, in another survey, 60 per cent. of organisations contacted were against the measure and about 40 per cent. were for it, but it was not conclusive either way. To sum up, we can do no better than to look to the clearing banks. Two of the clearing banks were against the measure and two were in favour of it, but one of those that was for it said that it would not work, but it might help to change the culture. That is a fair summary of the situation.
The Government commissioned research. The good Professor Wilson of Bradford university--I am sure that the Minister knows all about his work--was brought in. Unsurprisingly, he came forward with the startling news that companies that ran a good credit control department stood more chance of getting their money--a 38 per cent. greater chance. I do not know how he arrived at that figure and I do not intend to defend or explain it.
Taking all that into account, the Labour party, fighting its campaign, produced the statutory right to interest rather like the philosopher's stone--just rub it on a bit of bad debt or late payment and all will be turned to gold. I am rather worried that this is over-selling the situation, and many small business men and women might be rather disappointed at some of the outcomes. My hon. Friend the Member for Chesham and Amersham (Mrs. Gillan) said that the measure might even make the situation worse and, in certain circumstances, it could. I hope to explain that later.
I was grateful to my hon. Friend for her support in making Departments pay on time, an initiative which was endorsed by the then Prime Minister. Some Departments were not up to speed, and my hon. Friend was in there like a terrier. She harried and wrote all sorts of unflattering and unkind parliamentary answers. Nevertheless, the message went out, and those Departments came up to speed. I was glad to see that the Department of Trade and Industry managed to achieve
98.9 per cent. just before the election. That was a substantial move in the right direction, and an example which Governments and agencies should set.
There is a great misconception about what was done. When the good Professor Wilson did his research, he also concluded that small businesses were more likely to be sinners than sinned against. I put out a call saying that any small firm that felt it was not being paid on time by any large organisation should write to us. I had, if I remember rightly, 27 responses, of which only two were genuine late payment cases. One concerned late payment by a Department, which "rolled over" immediately, and a second concerned a major organisation, which did the same. However, the other 25 were complaints and queries about the quality of goods and service. That worries me. The position may be exploited by those who want to avoid paying the statutory interest.
Another thing that we did, which neither of the Ministers has mentioned, was to do away with the iniquitous pay-when-paid regime. We must thank Sir Michael Latham for his work in bringing that about. Some hon. Members may not know of that old system, which is now fading away. It meant that on a construction site, a subcontractor, such as a plasterer who plastered a suite of offices, would not be paid until the main contractor had been paid--and he would be paid only when the architect signed the contract off. Six months ago, a gentleman came to my constituency surgery who had not been paid for more than two years by a London borough because a pay-when-paid regime operated. The borough told me that he would be paid within two or three months. That is clearly unsatisfactory, and a wicked abuse. Everyone can be grateful that it has been done away with.
We also ensured that large companies included not only their payment policy but their payment practice in their annual accounts. It will--I hope--be up to the many small firms organisations to question those companies if they do not keep to that practice. We all know that small firms do not have the resources or facilities to be able to ride over cash flow problems.
Much has been made of the launch of the British standard payment code. It has been endorsed by the CBI, which has its own code. What has not been mentioned is that, if a company signs a British standard code but does not adhere to it, trading standards officers can be called in. Firms can be held to account if they fail to adhere to the code that they have signed.
A great deal has been done to try to help small businesses. What worries me about the statutory right to interest is that it could make the position worse. I have three invoices with me. The first, from Universal, a company which supplies many hon. Members with stationery, has simple payment rules written on it:
"80 per cent. of payments were made on time."--[Official Report, 30 October 1997; Vol. 299, c. 864.]
Trusts make more than 3 million payments a quarter, so in any quarter 600,000 bills are paid late, which adds up to slightly under 2.5 million bills a year paid late. Surely the Minister's priority should be to continue to build on the work of the Conservative Government and improve that performance, but we have not even seen the payment performance of Departments under her Government and, as she has admitted, will not see it until the recess.
"Except as otherwise agreed with the customer, payment of invoices consolidating separate deliveries shall be due not later than 15 days after the date of the invoice, payment of all other invoices shall be due not later than 30 days after the date of the invoice."
The second, for the carriage of horses, says:
"Payment is due within 30 days."
My third invoice, a vet's bill--I have tried to represent the market as broadly as I can--states:
"Payment due within 30 days of invoice".
5 May 1998 : Column 605
I believe that the Minister's heart is in the right place, but there is a misunderstanding of business practice. Nowadays, most companies run a monthly computer account. At the end of the month, there is a shut-off. If someone supplies goods that come in during the first two days of the month, the goods will be passed upward, the accounts clerk will sign them off, a statement will come in after the supplier's monthly shut-off, and it will be checked against the receiving company's remittance advice before the payment goes off perhaps two weeks into the following month. Immediately, six or seven weeks will elapse before the supplier gets the cheque.
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