Michael Dugher MP, Labour’s Shadow Cabinet Office Minister has written to Cabinet Office Minister Francis Maude urging action to enforce targets for payment of business invoices across the public and private sectors. Labour also wants to see targets incentivised, for example through procurement, and current targets for payment made shorter so businesses get their bills paid sooner.
Labour will consult with business on these measures but wants to see the Government take action now.
Labour is also demanding transparency on why Government has reportedly incurred interest charges due to late payments and in particular whether SMEs have been paid late or taxpayers’ money has been wasted.
Letter from Michael Dugher to Francis Maude:
I agreed with you when you said in July 2011 that “prompt payment is crucial to smaller companies”. Labour supports prompt payment of invoices to businesses across both the Government and private sector.
It is concerning, therefore, that there are reports that Government Departments have failed to meet their payment targets, resulting in interest charges, and continuing evidence which shows payments continue to be paid late in both public and private sectors. It is essential that there is clarity as to how any charges to Government Departments were incurred and assurances given that no SMEs were paid late and no taxpayers’ money was wasted.
Late payment or waste would dismay all who want to see government set an example to businesses to deliver prompt payment.
This raises a wider issue over payment to SMEs. You will be aware that the Prompt Payment Code has come under attack from senior figures in business, leading the Prime Minister to acknowledge last month that “more needs to be done”. Labour agrees and we are concerned that figures from the Federation of Small Business show that 73% of small businesses have experienced late payment for their goods and services.
Labour will now consult on how a culture of rapid payment among large businesses and across government can be made a reality. We will examine how statutory late payment targets can be enforced in both public and private sectors, including examining options for tougher sanctions; how prompt payment can be incentivised, including looking at a role for procurement policy; and how late payment legislation could be amended to bring down the statutory timeframe for payment as a longer-term aim in both public and private sectors.
British businesses are suffering from the cost of living crisis and it is essential that Government takes a lead in supporting those who are the lifeblood of our economy. As Ed Miliband has said, our ambition at the next election is for Labour to be the champion of small business. That is why we have advocated a cut to business rates and now want to go further with concrete action to end late payment and bring down targets. I urge you to introduce measures to enforce and incentivise current targets so they become the norm and to examine how they can be built upon with more ambitious targets that will benefit business.
Best wishes.
Michael Dugher
Shadow Minister for the Cabinet Office
Ends
Notes
1. The Financial Times are reporting that some Government Departments have incurred interest payments due to late payments:
http://www.ft.com/cms/s/0/7932c558-4093-11e3-8775-00144feabdc0.html
2. Research by the FSB shows that in 2011 73% of businesses were paid late http://www.fsb.org.uk/News.aspx?loc=pressroom&rec=7169
3. BACS have found that small businesses wait an average 41 days longer than agreed in payment terms. 48% of this I’d due to large companies 20% is government.
http://www.bacs.co.uk/bacs/press/pressreleases/2011/pages/latepaymentsatalltimehighassmeswaitlongertogetpaid02-11-11.aspx
4. David Cameron has admitted more needs to be done to ensure suppliers are paid on time:
“I am clear that more needs to be done. It’s not right that suppliers are not getting paid on time for the work they do and the services they provide and I know that late payment can have devastating effects on our small and medium-sized businesses.”
David Cameron, BBC News, 14 October 2013
http://www.bbc.co.uk/news/business-24517594
5. Francis Maude has previously promised to increase support to ensure SMEs are paid on time, by government and business:
“Prompt payment is crucial to smaller companies.”
Francis Maude, 19th July 2011
https://www.gov.uk/government/news/big-business-urged-to-pass-on-prompt-payments-to-smes
6. The Prompt Payment Code has come under criticism from business:
http://www.bbc.co.uk/news/24497762
7. Proposals for change have been made in Labour’s Small Business Taskforce:
These include requiring larger companies to have their payment practices independently audited and set out in their annual accounts; using local government procurement to tackle late payment; requiring all prime contractors to pass down payment terms to sub-contractors which are no worse than those they agree with government.
http://www.labouremail.org.uk/files/uploads/b6e7fa23-1132-0364-1560-7898854ed07b.pdf