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Mr. Breed: Does the hon. Gentleman accept that, although the Bill offers business men an opportunity to claim interest, they do not have to do so, and are not statutorily required to do so? The instrument is available to business men to encourage payment.
Mr. Page: I appreciate that perfectly, but the teeth to require payment will not be there. Companies will argue, as I have argued, that it may take 56 days to pay. We have the Grant Thornton figures for Europe. We have the statistics of Intrum Justitia, the debt collection organisation, which show a figure of 49 days. I fear that the difficulty for small business will be that the payment period of 56 days--or thereabouts--will become the norm, not the exception. I fear that the 21-day period that currently exists in the middle of the month will start to go out of the window, and that firms will think in terms of two months rather than one.
I feel that the Bill will not be effective in operation. That is one reason why we did not introduce it ourselves. Anything that is done to try to help small businesses should involve looking more closely at the way in which the courts and the small claims system operate to help--or not to help--the small business man and woman. In particular, we should consider bailiffs and sheriffs. Their operation strikes me as highly arbitrary, and I have grave doubts about its effectiveness. Most people who end up in court are "can't pays" rather than "won't pays".
Mr. Tony Colman (Putney):
Let me first declare an interest as a director of GLE Development Capital Ltd. I chair that company on a pro bono basis, and it has a factoring and invoice-discounting subsidiary. The Bill is part of a package to help small businesses. I praise the work by factoring, invoicing and discounting businesses to help small businesses to deal with their cash-flow problems.
I was previously the director of the Burton Group. I particularly remember working in the late 1960s, in the early days of Top Shop, the fashion chain, with many small clothing manufacturers, many of whom are international names. It was extremely important, in terms of supporting their development, that they were able to receive seven-day payments. The charge was 5 per cent., but it was extremely important that the clothing manufacturers, the designers, were able to buy the cloth perhaps on a 30-day term, to make up the garments and to receive payment from Top Shop before they had to pay their cloth manufacturers. If we are to support creative industries, it is important that large manufacturers are particularly aware of the need to help start-ups, as occurred at that time.
It is particularly interesting to follow the hon. Member for South-West Hertfordshire (Mr. Page). He may not know it, but I stood for that seat in 1979 before the by-election that brought him to the House. He gave the example of Italy, where there is a very large clothing manufacturing sector, which we know through household names such as Benetton. I assure him that that firm does not operate on 90-day terms. In fact, it largely pays for the cloth, trimmings and materials on time to ensure that its suppliers are able to stay in business and make a good profit out of Benetton. If we are considering the position in Italy, it is extremely important to remember that the successes of its small and medium enterprise sector are very much related to the fact that, in its payment system, the larger companies support the smaller companies.
Mr. Tim Boswell (Daventry):
Nevertheless, does the hon. Gentleman agree that the Intrum Justitia figures show that the actual average payment period in Italy was 87 days, compared with the European Community average of 54 days and the UK average of 49 days? That may suggest that, if some are doing as well as Benetton, there must be others that are not complying with the principle.
Mr. Colman:
Obviously, I would not wish to question those figures, but I am trying to point out merely that, in examining why Italy has such a strong small and medium enterprise sector, we find that late payment is not a negative factor there, and that large companies work strongly with small companies to ensure that the small companies are looked after. If the hon. Gentleman visits the area, he will discover that.
I am obviously pleased that there is cross-party support for the Bill. I was a little concerned to hear the hon. Member for Chesham and Amersham (Mrs. Gillan) perhaps being overly critical, but I note that she supports it and so she should: she has a record of supporting such a measure. I was hoping that she would still be on the Front Bench so that we could perhaps again take up the point that, in opposition, she is one of the hon. Members who support the early-day motion that calls for a statutory right of interest.
The residents of Putney who work with and have small firms are extremely concerned that this problem should be dealt with. Business Links in south-west London views this as the major problem in terms of expanding the small-firms sector there.
Mr. Page:
The hon. Gentleman touches on an important point, but does he accept that one of the tasks of Business Links is to ensure that those small companies operate a correct credit procedure, that they vet the people for suitability before they give them credit and that they do not get so carried away that someone has had the wit and brain to place an order with them that they automatically give them the goods straight away?
Mr. Colman:
Business Links in south-west London certainly does that, and I would hope that it is done throughout the UK. The problem is that larger companies do cheat on those small companies--that is what it is: cheating. After payment terms are agreed, payment is not made within the time that has been agreed. It is extremely important to recognise that we are talking about vulnerable companies.
The hon. Member for Chesham and Amersham talked about contracts that have been freely entered into by both parties. When a large company has a contract with a small company, it cannot be a freely entered into contract. I agree that the small company could choose not to go forward, but, if it refuses, obviously it will not get the business. Contracts are being imposed on it by the larger company.
The hon. Member for Chesham and Amersham pooh-poohed the figures that have been produced in support of the Bill. As a member of the Institute of Directors, I was particularly pleased that my hon. Friend the Minister pointed out that the statutory right to interest was favoured by 69 per cent. of the respondents to the IOD survey. What she did not say was that 78 per cent. of the respondents said that late payment created problems for their businesses, and that 93 per cent. said that it created problems for British business generally, so the Bill has the institute's support.
Earlier today, I was in discussion with the CBI. Its briefing states:
The other two concerns are somewhat surprising. One is that the planned threshold to define small and large firms is too low. The CBI believes that, in the first phase, the threshold should be not 50 employees, but 100 employees in a firm. It is important for the Bill to bed down with the smaller size of company initially--I am getting nods from Opposition Members--rather than including much larger companies in the first phase. Again, the Minister may wish to respond to that.
The last point that was raised by the CBI--I see this as a rather minor proposal; it is important, but it does not in any sense undermine the thrust of the Bill--is that large companies should be able to sue public bodies in the first phase. When I read that, I asked, "Why should they not be able to sue large private bodies as well?" The CBI said, "Oh yes, those too." In my experience--I have moved from the private sector into the public sector--the public sector is a darn sight better at paying on time than the private sector. It is important to recognise that.
In preparation for this speech, I spoke to the director of finance for the London borough of Wandsworth, who said, interestingly, that, as the Bill was coming forward, he would report every quarter to the relevant council committee on how the council was getting on in terms of achieving the 100 per cent. target; in his knowledge, it was close to it. I mention that primarily to demonstrate that the Bill is necessary in terms of changing the climate. People should receive those reports. If companies have to state their policy in their annual reports, they could also show how they are doing and whether they are delivering that policy. Public bodies locally and nationally should do the same.
"the Bill represents a sensible way to proceed."
It is concerned about three items, but, in general, it supports the Bill. One involves the definition of the default credit period. I believe that that is already containable within the Bill. I understand that the matter has been raised in discussions between the Minister and CBI and that it can be dealt with in terms of custom and practice, but she may wish to respond to that in her winding-up speech.
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