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Mr. Forth: If that is so, I am even more worried about the Bill than I was. If the Minister is saying that she is seeking, by legislation, directly to intervene in freely negotiated terms between businesses in the private sector, the Bill goes much further than I had imagined. That is more than a step too far; it is a gross intervention in what has hitherto been regarded as very much the preserve of private business in the private sector to negotiate terms freely with one another.
Mrs. Roche: I am sure that the right hon. Gentleman is aware--I know that he has had an interest in these matters--that Acts of Parliament such as the Unfair Contract Terms Act 1977 have a role to play in contracts. The Bill is certainly not new against that legal background.
Mr. Forth: That is a different point altogether. When the Minister replies, I hope that she will reassure not just the House but the entire private sector that it is not the Government's intention to intervene in terms of trade freely negotiated between commercial businesses and commercial partners. If that is the Government's intention, the Bill is much more iniquitous than even I had imagined.
Mr. Boswell: Does my right hon. Friend agree that, if the Minister is right in saying that a typical net 30 days contract between a large purchaser and a small supplier would be struck down if the terms were changed to, say, 45 days, the likely recourse of the larger firm as the purchaser would be to find a fresh supplier on 45-day terms, cutting out the original supplier's business altogether?
Mr. Forth: Indeed; I am grateful to my hon. Friend. That is the result of the process that I was describing. Depending on the extent to which either the legislation or the Government seek directly to intervene in commercial relationships between companies, the change of culture which has been referred to could be adverse--not favourable or helpful. I hope that we would all wish to ponder on that at some length before approving the Bill.
Another element in the process is an old friend which is referred to in the explanatory memorandum as the supplier performing the obligation--by which I assume is meant meeting the requirements of the contract. Anyone who has been in business, even for a short time, will know that one of the most difficult matters in this regard is agreeing that the quantity delivered is that ordered and that the quality or specification is that required. Everybody will also know that, the more one seeks to intervene in the terms of trade or the mode of operation of companies, the more one drives companies down the route of using queries on delivery about quantity, quality or specification as a means of delaying payment, either legitimately or not. My hon. Friend the Member for Lichfield (Mr. Fabricant) referred to that point in an intervention, and I am sure that he will want to elaborate on it. It is an important point.
Mr. Richard Ottaway (Croydon, South):
First, may I apologise to the Minister for missing the first few minutes of her speech? I confess that I thought that the Magistrates' Courts (Procedure) Bill would take up more than 13 minutes of the time of the House. I was caught short, as they say.
I rise briefly as the hon. Member who, in 1986, introduced the Right to Interest Bill, the private Member's Bill which the House approved. Hon. Members may be interested to know that among those who sponsored the Bill were such moderate politicians as my hon. Friends the Members for Teignbridge (Mr. Nicholls) and for Sevenoaks (Mr. Fallon) and Mr. Michael Forsyth, whose presence in the House we very much miss.
The history of the Bill is quite interesting. The proposal was first considered by the Government under my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath), who asked the Law Commission to look at the matter. It decided that a statutory right to interest was right and appropriate. During the 1980s, the Government were very interested in the matter and undertook to introduce a Bill if the Confederation of British Industry and the Institute of Directors supported it. There was a time when the CBI supported the proposal, but the IOD did not. Then the IOD supported it, but the CBI did not. Both never supported it at the same time, which is why the matter never came to a head in the mid-1980s.
After the energetic campaign by the Forum of Private Business, a Bill was mooted in the 1994 Budget. The then President of the Board of Trade, my right hon. Friend the Member for Henley (Mr. Heseltine), was invited, when I was his parliamentary private secretary, to look at the issue by the then Chancellor. We were faced with two piles of submissions: one for a Bill and the other against it. There was, of course, no way in which we could proceed on such division, so there the matter lay.
There is no argument that there is a problem of late payment of debt: the theme unites all speeches in the debate. The problem lies with the chain. For a large construction project, there will be a main contract, a subcontract and a sub-subcontract. Smaller contractors at the base of the pyramid are without contracts and, therefore, do not have any protection from late payment of debt. The only way in which such subcontractors can obtain interest is to issue a writ with the invoice. That, of course, is no way in which to conduct business. Indeed, if subcontractors tried that, they would not get any more business.
Some would say that parties are free to negotiate terms and that they live by the sword and die by the sword, but it is not that easy if one is the small man at the end of the chain who wants business. If such people are asked whether they want the work or not, and are told, "Get out there with your camera and take photographs of that building," it is not easy for them to say that they want a contract, which includes a right of interest, before they leave their office. It just does not work that way. When someone writes on an invoice "Payment within 30 days", it is not binding. It is not a term of the contract; the parties did not mutually agree it.
Mr. Michael Fabricant (Lichfield):
The hon. Member for Putney (Mr. Colman) said that the Bill would protect small firms that are at the mercy of large firms. I broadly welcome the Bill, but if its objective is to protect small firms from the strictures of larger firms, it will not achieve it--other than, as my hon. Friend the Member for Croydon, South (Mr. Ottaway) said, by changing the climate of opinion.
Before I entered the House of Commons, I ran a company in what might be called nowadays a sunrise industry. It manufactured electronic equipment for broadcasting companies. Originally, our plan was to build small independent radio stations in the United Kingdom, but, after 10 years, we had expanded and set up radio stations in some 48 countries. Therefore, I have experience of how, in a niche market, a small company trades in its early years and of how it can grow into a reasonably sized company. One thing above all told me that the company would survive in its early days--not its profitability, but its short-term cash flow.
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