| Previous Section | Index | Home Page |
Mrs. Gillan: The Financial Times article said that fewer than 2 per cent. of finance directors in large businesses fully understand the Bill. If that is so, there must be a process of education, and it will be interesting to see how the Government embark on that process and how much money they are willing to provide to back up the Bill.
Mr. Colman: The public sector leads the way, and I had no problem talking to the director of finance of my local council about the Bill: he knew all about its contents and how to implement them. I am sure that the CBI, which is an excellent organisation--although the hon. Lady may not rate it very highly--is continuing this discussion and ensuring that its members fully understand the provisions of the Bill.
Mr. Page: The hon. Gentleman rather casually referred to 30 days. I have done my best to show that, with
computer accounting and monthly cut-offs, the 30 days may have to be increased if the statutory right to interest is to be rigorously applied.
Mr. Colman: I covered that point earlier in my speech, and it was dealt with in the debate in the other place.
Mrs. Gillan: I think that I heard the hon. Gentleman correctly when he said that I did not rate the CBI very highly. I should like to pay tribute to the CBI, which sent me a message containing further remarks on the Bill while I was in the Chamber making my speech. I have a very high regard for the CBI, with which I have a good working relationship. I hope that the hon. Gentleman understands that.
Mr. Colman: I am pleased that the hon. Lady has such a good relationship with the CBI. This morning, when I asked staff at the CBI for a briefing, it had not been prepared. I spoke to them at some length and it was faxed to me. I am pleased that they managed to get it to the hon. Lady this afternoon, and that I was able to help her in that regard.
Mrs. Gillan: I am not sure where the hon. Gentleman is going with his argument. I have been in conversation with the CBI in the past few weeks on this matter. If the hon. Gentleman is trying to imply that I received a last-minute briefing, perhaps he would like to step outside the Chamber and compare the briefing he received with the up-to-date one that I have received within the hour.
Mr. Colman: I have obviously prompted a strong response from the hon. Lady. Like many Conservative Members, she is concerned about the fact that they lost the business vote last year and they have not got it back yet. I see confirmation of that from the Opposition Front Bench.
Mr. Brian Cotter (Weston-super-Mare): I broadly congratulate the Government on this long-overdue legislation. The Liberal Democrats have, for a long time, believed in a statutory right to interest, and we welcome the Bill on behalf of businesses. I run a small business, so I am glad to be part of the statistics in saying that, as a small business person, I approve of the legislation.
The Conservative Government understood to some extent the problems that late payment of debt caused business, but they produced nothing substantial, which is why I welcome the Bill. The business community was offered the option of voluntary measures to aid good business practice. Hon. Members should note that those voluntary measures dismally failed, and that the commercial debt problem has worsened. Why? Because late payment is often intentional, so late payers must be penalised. A stick as well as a carrot is needed to get companies to pay on time: we need both.
Small businesses form the backbone of the United Kingdom and European economies. Small and medium-sized enterprises are not a minority interest, but hold the key to a dynamic, successful and competitive economy in the United Kingdom, in Europe and globally. It is the Government's duty to help SMEs to achieve and succeed in that aim. Improving payment practice will benefit the whole economy.
In the United Kingdom, it has been estimated that about 50 per cent. of all SME bank borrowing by value is used to fund commercial credit. Late payment is a huge impediment to competitiveness, and threatens the very survival of many firms, particularly small businesses.
The Liberal Democrats have long realised that late payment is a millstone around the necks of many businesses. It has a crippling effect on SMEs, which are dependent on tight budgeting in order to realise investment projects and consolidate their markets. Denying SMEs ready access to capital has brought many companies to the brink of collapse, if not to actual collapse. It has prevented a large number of promising small firms from realising their economic potential. Our aim should be to create a business environment in which potential can thrive and prosper. The Bill will help in that respect.
This legislation, in itself, will not solve the late payment problem. Other complementary measures need to be taken through trade organisations and appropriate bodies to ensure that small firms in particular promptly render invoices in a correct form and get paid promptly. If they do not promptly render their invoices, they often lose time.
In 1978, the Law Commission recommended statutory rights to interest, and, ever since, the campaign for such rights has received overwhelming support from all sectors of business and from business organisations. As a small business man, I have also supported it.
As the hon. Member for Putney (Mr. Colman) said, 78 per cent. of respondents to a recent Institute of Directors' survey said that late payment created a problem. Moreover, 93 per cent. of respondents said that late payment created a problem for British business generally. Those percentages are obviously very high.
Only this morning, I was at a meeting of the Institute of Management, where I was told that 75 per cent. of the institute's managers support the Bill.
Another survey published last summer showed that late payment is threatening the survival of one in four firms employing up to 50 staff and costs millions in reduced profitability for almost 75 per cent. of those businesses.
The Forum of Private Business--which has been recognised as an ardent campaigner for a statutory right to interest--has already been mentioned in the debate. The forum frequently conducts in-depth research, which has shown that late payment of bills imposes significant costs on both individual businesses and the overall economy. The forum estimates that the average cost of late payment to a business with a £500,000 annual turnover could be as much as £10,000.
Mr. Page:
Can the hon. Gentleman tell us whether the forum has calculated how much such a company has saved by not paying its bills on time?
Mr. Cotter:
As I said, we all agree that all companies have to pay on time. Moreover, small
Evidence from Europe suggests that effective legislation could reduce the average cost of late payment to £1,000, thereby saving such businesses £9,000. The Bill's opponents should at least bear in mind those facts and figures, and realise that their opposition rides against much information contradicting their opposition.
Late payment has a domino effect on business, and, undoubtedly, the worst offenders are large companies. A Dun and Bradstreet survey revealed that, as recently as October 1997, fewer than 10 per cent. of large businesses pay their bills on time.
Mr. Page:
I am sorry to keep interrupting the hon. Gentleman's speech, but--as this debate has been coloured by people making grand statements--what does "being paid on time" mean? Is it within 30 days, or perhaps within a computer programme's monthly cut-off date? What does it mean? Are companies really as bad as is suggested by that percentage?
Mr. Cotter:
The Dun and Bradstreet survey stated that only about 6.6 per cent. of companies paid within the agreed terms--which is what we are debating.
Potential complications have been mentioned, and I agree that there will be difficulties after the Bill is passed. However, over time, some practices in businesses and industry--we all know, for example, about those two or three days at the end of the month--will have to be dealt with. I believe that the problems can be solved.
Late payment is a vicious circle. Most small firms believe that their large business debtors often pay late to gain. We have heard in the debate of examples of such practice. One company that was mentioned earlier certainly used the practice, which is very bad news, to expand its bank balance.
For all those reasons, the Liberal Democrats support the legislation. Nevertheless, our support for the Bill does not mean that we are uncritical of it. I urge the Government to reconsider some aspects of it, so that it will operate more effectively and there will be no casualties along the way.
The first aspect that Ministers should reconsider is the phasing-in periods. The Bill will allow government at all levels to escape from its provisions until the later phases. Although we have already debated the matter today, I should like to propose that, in the first phase, businesses of all sizes should have the right to charge interest on outstanding bills owed by government. Moreover, the Government should be prepared to set an example in the matter.
The Minister will recall that, on 5 March 1998, I asked her:
The question remains: why is government being exempted from the provisions in the early stages? I welcome the fact that the Minister has promised a league table, and reiterated that promise today. I hope that the table will be considered as an annual commitment, by which the Government may demonstrate how they are improving the payments record.
It is extremely important that quoted businesses also should have to declare their payment record in their annual accounts. I am sure that the Bill's passage will ensure that such declarations are made.
Earlier in the debate, the crowing of the right hon. Member for Henley (Mr. Heseltine) of his ability to delay payment was both mentioned and robustly defended. I do not think that the point was made clearly that he was talking about his own practice and not about the general practice of business. I was a member of the public when the comment was made, and thought that, coming from a Minister, it read very badly indeed. It was not a good example.
The hon. Member for Chesham and Amersham (Mrs. Gillan) has been very keen to promote statistics and to ask for apologies. I remind her of the fact--which she has not dealt with terribly well--that she signed early-day motion 912 1993/94, which stated that
"Does she agree that, often, both local and national government are very bad at paying? I hope that she shares my view that the Government should give a lead in that direction."
5 May 1998 : Column 612
She replied:
I ask the Minister only to dwell on that point--which she accepted when I asked my question--and to consider whether there is really any reason why government should not be covered by the legislation's provisions in the first phase. Only today, a colleague told me that he is very concerned that, because of financial strictures, local government is using late payment of debt to increase the amount of money that it has to hand. I ask the Minister urgently to consider that practice.
"I absolutely agree . . . That is why I intend to provide in the summer a league table of Government Departments, and I have taken the opportunity this week to remind local authorities of their obligations as well."--[Official Report, 5 March 1998; Vol. 307, c. 1178.]
"the only effective solution to the problem of late payment of business debts is the implementation of a statutory right to interest".
As we are debating statistics, I should say that that motion was signed by 328 hon. Members--representing a very large part of the House's then membership, and showing the strength of support for the motion, even among Conservative Members. The hon. Lady's support for the motion should be mentioned again, as she did not feel that she needed to apologise.
| Next Section
| Index | Home Page |