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Trade Credit Insurance Scheme
5. Lindsay Roy (Glenrothes) (Lab): What eligibility criteria will apply to assistance under his Department’s trade credit insurance scheme; and if he will make a statement. [273164]
The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Ian Pearson): In the Budget, the Chancellor announced a £5 billion trade credit insurance scheme to support businesses that have suffered reductions in their level of cover. From 1 May until 31 December this year, businesses of all sizes and in all sectors will be able to purchase six months of “top-up” insurance from the Government if credit limits on their customers are reduced by their insurance provider. The level of cover held under a whole turnover trade credit insurance policy must be in place for at least 30 days before it is reduced, but that criterion has been backdated to 1 April.
To be eligible, the trade concerned needs to take place within the UK, with payment terms of no more than 120 days. Further details of the scheme are on the Business Link website.
Lindsay Roy: I congratulate the Minister on taking that initiative, which has been warmly appreciated by several businesses in my constituency. However, will my hon. Friend clarify whether the scheme applies only to the UK? If so, are there plans to extend it to overseas suppliers and customers?
Ian Pearson: I can confirm to my hon. Friend that the scheme applies only to the United Kingdom, but he will be aware that we are considering a proposal for confirming letters of credit, and we intend the Export Credits Guarantee Department to operate it. The ECGD will consult on the proposal shortly. The plight of UK exporters must be addressed, and that is why we are considering that proposal along with other measures that might be implemented to help our exporters. However, I should point out that we have a very competitive exchange rate, some very efficient UK businesses and some opportunities to take advantage of.
Mr. Elfyn Llwyd (Meirionnydd Nant Conwy) (PC):
Back in mid-November, I questioned the Prime Minister about the need for this kind of scheme. He gave me a
typically long, convoluted and laborious answer, implying that the issue was already being addressed. Imagine my surprise when I discovered that the scheme came in only last Friday; five and a half months have been lost.
Ian Pearson: I would like to think that the hon. Gentleman would welcome the trade credit insurance scheme, which has been welcomed by a wide variety of business organisations. It will now provide support that, as I said, will be backdated to 1 April. We believe that it will help companies on the margin whose cover has been reduced. It will help businesses, and I would like to think that the hon. Gentleman’s party will welcome that part of the Budget.
Mr. Adrian Bailey (West Bromwich, West) (Lab/Co-op): I welcome and acknowledge the help that the scheme is giving UK businesses. However, I want to reinforce the message that has come from other Members about the difficulties faced by exporters. Although I welcome the Government’s consultation, may I urge the Minister to carry it out quickly and act as soon as possible, before some companies go to the wall?
Ian Pearson: My hon. Friend comes from the same neck of the woods as I do, and I am very aware of businesses in the black country that are exporting and have found life difficult because of tightening credit conditions. I am keen that we should move on with the proposal on confirmation of letters of credit—consult on it and get it implemented as quickly as possible. The business community has asked for the scheme and it will be of benefit. Obviously, however, there will be a consultation and we want to hear the responses to it.
Miss Julie Kirkbride (Bromsgrove) (Con): As a fellow west midlands MP, the Minister will be only too well aware of the importance of Jaguar Land Rover to the west midlands economy. The company employs more than 14,000 people directly and many more indirectly, and it anchors the automotive engineering business in the region. The Minister must therefore understand the huge concern about yesterday’s BBC reports that talks between the Government and Tata, the owner of Jaguar Land Rover, are breaking down. I would be grateful for any update from the Minister that I might relay to my constituents who work at the company.
Ian Pearson: As the hon. Lady will be aware, Tata has denied those reports. Discussions are ongoing. The Government regard JLR as a viable company with good long-term prospects. We want to see the company through difficult trading times and to provide it and its employees with stability. That is why we have been having confidential discussions with JLR and its parent company about both the short-term and long-term financing in its business plans. Those negotiations are ongoing.
It is important that those discussions should be handled professionally and face to face, rather than through the media; handling them through the media is not helpful to the company. We have not yet had any response to the proposal that we put to JLR last Friday, but obviously we would welcome one and we continue to have discussions with the company.
Mr. David Drew (Stroud) (Lab/Co-op): One of the problems is how few trade credit insurance firms there are. We all have examples of how difficult it is for a company that has lost its trade credit insurance to find another trade credit insurance firm to take it on. Given all the current problems, will the Minister give me an assurance that there will be an investigation into the structure of the industry to make sure that there is enough variety of providers and that businesses can get insurance so that they can trade properly?
Ian Pearson: As my hon. Friend is aware, the trade credit insurance market is dominated by three firms—Euler Hermes, Coface and Atradius. The ECGD used to provide short-term credit insurance, but it has not done so for a number of years since it privatised that operation out to Atradius. He is right to point out that many companies rely on trade credit insurance. Our figures suggest that about 14,000 out of 250,000 companies have trade credit insurance, so it is a significant market, and we need to keep under review whether it is functioning efficiently. We have to consider whether there is more that we can be doing sensibly, as a Government, to help our businesses through these difficult times. What we have here is a Government who are actively looking at providing support—real help to business now rather than a party that wants to do nothing.
Small Business (Payments)
6. Andrew Selous (South-West Bedfordshire) (Con): What steps he is taking to ensure that small businesses are paid promptly. [273165]
The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Ian Pearson): The Government are committed to paying invoices within 10 days. We have supported the Institute of Credit Management’s prompt payment code in partnership with all the leading business representative organisations, and we have launched a series of managing cash flow guides to help small businesses.
Andrew Selous: People running small businesses in my constituency tell me that it is not uncommon for larger companies to decide to pay invoices 60 days after they have processed them. Would the Government be prepared to name and shame companies, or indeed public bodies, that take so long? I am sure that he is well aware that cash flow is vital to small businesses, and failure to act in this area could lead them to fail, thus cruelly adding to the level of unemployment.
Ian Pearson: As a Government, we closely monitor the situation, and we are aware of examples where companies are extending payment terms. Clearly, we want to see prompt payment, and we have been leading the way. It is important that we continue to discuss with the industry what measures might be most effective. The hon. Gentleman suggests one proposal. When we talk to industry, people emphasise the importance of maintaining effective working relationships between customers and suppliers, and that needs to be taken into consideration. He will be aware of our late payment legislation, which is available to be used by small companies if they find that large companies are extending their payment terms or not paying on time.
Mr. Ken Purchase (Wolverhampton, North-East) (Lab/Co-op): The Minister will recall that our Government introduced a scheme whereby small firms could charge interest on late invoices. It has not worked, nor did many people think it would. Does he agree that the most important part of the whole issue is that companies need to know how long it will be before their invoice is paid? Could we not have a scheme whereby the average number of days that companies, particularly large ones, take to pay was writ large and audited in any contract that was entered into so that people could plan properly and knew exactly how long the company they were dealing with took to pay?
Ian Pearson: We have engaged an external research company to monitor payment performance, and the latest data suggest that the average payment beyond agreed terms has extended by three days, or 15 per cent., in the past year. That does not help, because companies need their money. By March 2009, nine out of 10 invoices were being paid within 10 days by central Government Departments. We are making progress as a Government, and we want to encourage more companies to sign up to the prompt payment code. However, my hon. Friend makes an interesting suggestion, and I will go away and reflect on it.
Sir Nicholas Winterton (Macclesfield) (Con): I am sure that the Minister agrees that smaller businesses are the heartbeat of this nation. They can respond quickly and, very often, inexpensively. Sadly, however, as the hon. Member for Wolverhampton, North-East (Mr. Purchase) implied, large business still uses small business as a means of cash flow. Is there no way in which smaller businesses could, because of legislation passed by this House, automatically place an additional cost on businesses that delay paying beyond 30 days? A final small point—how often does the Minister monitor the payment records of national Government and local government, who are both very big purchasers of services?
Ian Pearson: We closely monitor Government payment, which is why I was able to say that in March central Government Departments were paying nine out of 10 invoices within 10 days. There are figures broken down by Department.
On the hon. Gentleman’s wider point, late payment legislation is in place. Often, companies do not use it, because they are concerned that they will damage their working relationship with their customer. Big companies do not always exploit smaller companies in their supply chain. I can point to a number of examples of big companies paying earlier than they normally would because of concerns about the viability of their supply chain. One key thing to recognise is that in many industrial sectors there is an integrated supply chain, and it is in everybody’s interests to have payment certainty. Of course there are some examples of that not happening, and they have been highlighted to a number of hon. Members. We need to consider what more we can do to encourage that payment certainty.
Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD):
When I met representatives of the Federation of Small Businesses in Grantown-on-Spey on Sunday, they said that this is the biggest problem that they face, and that some companies are taking
90 days to pay their bills. Will the Minister ensure not only that Government Departments pay their bills on time but that any big company that has a relationship with central Government is forced to pay its bills quickly to smaller firms or lose its central Government contract?
Ian Pearson: The Government are doing all they can to ensure that invoices are paid on time by central Government Departments, and similarly we have been encouraging local government to pay promptly, because it is a big purchaser. We have supported the prompt payment code, and we want more companies to sign up to it. As the hon. Gentleman rightly says, there are some examples of companies stringing out payments to their creditors. That is not necessarily unusual, and it prompted the late payment legislation that was introduced a number of years ago. It is important to highlight these problems where they occur. I am not sure that further Government legislation would be of practical assistance, but we need to ensure that more companies recognise their responsibilities to their suppliers and pay them on time, helping them to remain viable.
Ms Dari Taylor (Stockton, South) (Lab): In October 2008, the Department for Business, Enterprise and Regulatory Reform made the statement that the Government would build on their commitment to pay firms within 10 working days. The Civil Engineering Contractors Association has surveyed local authorities, and it appears that many, if not the majority, are most certainly not paying within 10 days. What discussions has the Minister had with local authorities? If he has had none, will he take on that responsibility? It is essential for small companies that local authorities pay within 10 days—they have the money.
Ian Pearson: My understanding is that the Department for Communities and Local Government leads on ensuring that more local authorities pay on time within 10 days. I believe that this time last year one in 20 local authorities were paying within 10 days, and that now about a third are doing so. There is clearly room for improvement, and we have wanted to encourage local government to ensure that it pays as promptly as it can to support local and regional companies that supply goods and services to it.
Mr. Mark Prisk (Hertford and Stortford) (Con): Further to the question asked by the hon. Member for Stockton, South (Ms Taylor), prompt payment is crucial for small firms, whether from national or local government. According to independent assessors, Conservative councils have the best record on paying promptly. Why does the Minister think Labour and other councils are failing to meet that standard? Is it intentional or just incompetence?
Ian Pearson: I do not agree that there is any party political difference about prompt payment. As a Government, we are walking the walk and making stringent efforts to ensure that we pay invoices on time. We want that to occur in the wider public sector, in not only local government, but the NHS and other areas. We will continue to do all that we can to ensure that those who contract with the Government get their payments on time, within 10 days.
Topical Questions
T1. [273179] Mr. Andrew Turner (Isle of Wight) (Con): If he will make a statement on his departmental responsibilities.
The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): Our Department is focused totally on working with businesses, and, of course, their employees, through the difficult economic times, as well as—importantly—working with businesses and their employees to prepare for the upturn, when it comes.
Mr. Turner: Recently, Halifax Bank of Scotland prevented a friendly takeover bid for Network Data Ltd, which could have safeguarded jobs at 500 mortgage brokers throughout the UK, including at KISS Financial Services on the Isle of Wight. The taxpayer largely owns HBOS and saving jobs should be a priority. Why did not the bank facilitate the friendly takeover rather than hoarding taxpayers’ money and putting jobs at risk?
The Minister for Trade, Development and Consumer Affairs (Mr. Gareth Thomas): The hon. Gentleman raises a specific case, which I am happy to consider and then write to him. However, as the Chancellor of the Exchequer, the Prime Minister and other Ministers have made clear, we expect players in the financial services community, who have received Government help, to continue to operate commercially, as they have done normally in the private sector. We do not, therefore, interfere in individual commercial decisions. The Government are taking a series of measures to help workers, support businesses and protect home owners. Indeed, one of the great differences between our party and the hon. Gentleman’s is that we offer “Real help now”, while the Conservative party continues to seek to do nothing—indeed, it tries to worsen matters by advocating cuts in public spending.
T2. [273180] Tony Lloyd (Manchester, Central) (Lab): My hon. Friends on the Treasury Bench know that, when the Sunday trading laws were passed, it was decided to protect Easter Sunday, when stores would not open. Part of the reason for that was to protect staff working in those stores so that, at least on that day and Christmas day, they would not be forced to work. B&Q closes its stores on Easter Sunday, but insists on staff working, thus breaking not the letter, but the spirit of the law. Will my right hon. Friend look into the matter?
The Minister for Employment Relations and Postal Affairs (Mr. Pat McFadden): We have no plans to change the Sunday trading laws, but I am happy to discuss my hon. Friend’s point about stores being open and people working. However, we do not plan to change the Sunday trading laws.
Mr. Kenneth Clarke (Rushcliffe) (Con):
The Minister will have noticed that the Leader of the Opposition and I reconfirmed our support for the principle of part-privatisation of Royal Mail and committed ourselves to continuing the supportive and constructive role that our colleagues in the House of Lords played when they considered the Postal Services Bill. Has he noticed that
he has not had the same ringing support from the Prime Minister? Does he believe that it is currently impossible to get any certain position from Downing street? Does that trouble him?
Mr. McFadden: The Prime Minister fully supports and is committed to our plans for Royal Mail. That is clear. We will take the plans forward and not implement the policy, which I think the right hon. and learned Gentleman espoused on the radio the other day, to privatise Royal Mail. We will keep Royal Mail in the public sector, but transform it for the future.
Mr. Clarke: When the Bill arrives, we will have a chance to examine the curious use of the English language, which enables the Minister to keep protesting that he is retaining Royal Mail in public ownership when, as we know, we are considering part-privatisation. I shall repeat my question. The Minister says that the Prime Minister still supports the policy, yet we read daily in briefings that Downing street is considering whether to go on with the Bill and press the policy. Can the Minister get the Prime Minister to say publicly what, as he has just said, he innocently believes to be the Prime Minister’s settled position?
Mr. McFadden: The Prime Minister has said publicly on a number of occasions that he fully backs the policy that we have espoused. It is fair to point out that No. 10 was very quick to say that it was not considering some of the ideas that were floating about in the papers earlier this week.
Andrew Miller (Ellesmere Port and Neston) (Lab): Every Member who supports manufacturing industry will support the statements on the vehicle industry that the Prime Minister made yesterday in response to my hon. Friend the Member for Luton, North (Kelvin Hopkins), which can be found in column 169. The publication of the details of the scrappage scheme is imminent, and other changes are being introduced, so will the Minister assure the House that the Government will keep on the pressure and maximise the support for these successful industries, which deserve the support of the whole House?
Ian Pearson: I welcome what my hon. Friend says. The scrappage scheme will be operational on 18 May. It will provide further support on the demand side to encourage people to buy new automobiles—the industry has welcomed that—and will build on the £2.3 billion automotive assistance package that we announced some months ago. The car industry in the UK is of strategic importance to the UK economy, and he will know the importance of the facility at Ellesmere Port, in his constituency, to the region too. We want to do all that we sensibly can to ensure that discussions continue about the future of General Motors Europe, and we are working closely with the German Administration on these issues. We want to continue to ensure that we deliver for the automotive industry the packages of measures that we have announced.
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