Queen's Speech — Debate (3rd Day)

Part of the debate – in the House of Lords at 6:06 pm on 8th December 2008.

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Photo of Lord Borrie Lord Borrie Labour 6:06 pm, 8th December 2008

My Lords, on 22 October my noble friend the Secretary of State, who we are delighted to see leading this debate, made a Statement stressing the importance of small and medium-sized enterprises to the UK economy. The noble Lord, Lord Bilimoria, must have been pleased with it because, among other things, the Secretary of State stressed the need for small enterprises to receive prompt payment of moneys due to them. The Secretary of State indicated today, as well as on 22 October, that central government has a good record. It now aims to pay its suppliers as soon as possible, at the very latest within 10 days. The Government have indicated to other public bodies, such as local government and the National Health Service, that they should follow their lead.

However, too many private sector companies and too many big companies unfortunately make their suppliers wait for their money. Sometimes they even boast about it, or they used to. Some are imposing new terms and conditions on owners of small businesses. Last month, Tesco doubled the time it would deign to take to pay some suppliers from 30 to 60 days. The Federation of Small Businesses has sent me a letter from Alliance Boots, which owns the chain of chemists, providing for payments 75 days from the end of the month of invoice and for the application of a settlement discount—jolly nice that you are going to get a settlement, you see—of 2.5 per cent of the invoice value. As the FSB national chairman, Mr John Wright, said:

"Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous ... it is shocking that large companies think it is acceptable to use them as an unofficial source of credit".

Legislation was introduced—I remember it but not very well and not very clearly 10 years later—in the first year of the Labour Government, and it became the Late Payment of Commercial Debts (Interest) Act 1998, which enabled small businesses to charge interest of 8 per cent above the base rate on debts due from large businesses. It was well intentioned—it was meant to deter large companies from delaying unduly the payment of their debts—but many small businesses are pretty naturally afraid of using the legislation in case they lose important and valuable contracts. My question to Ministers is this: what about a role for public officials to enforce this legislation—trading standards officers, perhaps, who could act on behalf of several suppliers who are reluctant individually to sue and who are creditors of a major business that is delaying unduly the payment of its debts?

A relatively unknown provision of the Companies Act is a requirement that businesses specify their payment times in their annual reports to Companies House. Apparently, about 4,000 companies do that. Another 6,000 do not. The latter are acting illegally. Is it not someone's responsibility to enforce it, and should it not be enforced?

If, as the Government say, small and medium-sized enterprises are vital to the UK economy, it is certainly vital that they are given ample scope to compete in the marketplace against established businesses. Established businesses must not be allowed to squeeze small businesses out of a market through cartels or other restrictive practices to prevent or distort competition. I was delighted when the Enterprise Act 2002 strengthened the law against anti-competitive mergers, takeovers and other restrictive practices. In the light of Her Majesty's Government's decision to override the view of the Office of Fair Trading that competition would be substantially reduced in the banking world through the recent takeover of HBOS by Lloyds TSB, I would certainly welcome reassurance that the promotion of competition is still a key part of government policy towards business. I know that my noble friend Lady Kingsmill agrees with me on that point.

At a time of recession, there is always a risk that Governments, or larger bodies such as the European Community, may jettison competition, free trade and the long-term public interest in favour of protectionism and promoting the interests of so-called national champions—a phrase that I am happy to say I have not heard much lately, but one never knows; it might re-emerge. In a downturn, it is more than ever vital that a strong competition regime that is strongly supported by government—whether it is a national regime or a regime at the level of Brussels—protects consumers and legitimate business, because competition helps to advance enterprise and innovation, to break down barriers to entry and to raise productivity. Businesses that disregard their legal obligations, to the detriment of consumers, must not be allowed to use their difficult economic circumstances, as they would argue, as an excuse.