New Clause 11 - Director's Report (Statement of Payment Practice)

Part of Companies (Audit, Investigations and Community Enterprise) Bill [Lords] – in a Public Bill Committee at 11:00 am on 16 September 2004.

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Photo of Jacqui Smith Jacqui Smith Minister of State (Industry and the Regions and Deputy Minister for Women), Department of Trade and Industry 11:00, 16 September 2004

I have considerable sympathy with the hon. Gentleman's point that late payment can cause small businesses severe difficulties. That, of course, is why the Government have introduced a package of measures to assist small businesses, including the 1998 Act, which gave suppliers the right to claim interest for late payment and set a credit period of 30 days where no other credit period has been agreed. We strengthened the Act through the Late Payment of Commercial Debts Regulations 2002, which enable every business to claim a fixed sum of compensation for the cost of chasing bad payers, as well as giving them the right to claim interest.

In addition, we established the better payment practice group in conjunction with the small business community, including the Federation of Small Businesses, to promote the commercial and ethical benefits of paying promptly and to make credit management tools and techniques freely available.

Those Government actions have helped to improve the situation. In 1997, published data from the Grant Thornton European business survey showed that the average time taken in the UK to settle accounts was 49 days. By 2002, that had fallen to 41 days, compared with a European average of 50. So, we are doing better on this than our European competitors.

On Second Reading, the hon. Gentleman mentioned the performance league table of the Federation of Small Businesses. This Government's commitment to tackle late payment encouraged the federation to compile and publish a league table to show the average payment times of Britain's plcs and their larger private subsidiaries. As set out in schedule 7 to the Companies Act, directors are required to disclosed the average time taken to pay trade creditors. That information is then collected by the Federation of Small Businesses and published annually in a league

table. I welcome those tables; they are an important measure. They contribute to the change in payment practice by showing small businesses how quickly they can expect to be paid when dealing with large customers.

Although I am sympathetic to the problems of collating the data in a meaningful way, as set out by the hon. Gentleman, I am not convinced that the solution is to introduce further regulation and increase the burden on companies, not least because the power that new clause 11 would give the Secretary of State is effectively already available under section 257 of the Companies Act 1985.