My Lords, with the leave of the House, I shall now repeat a Statement made in the other place by my honourable friend the Minister for Small Business, Consumers and Corporate Responsibility, about the Government response to Creating a Responsible Payment Culture: a Call for Evidence in Tackling Late Payment, which was published today. The Statement is as follows:
“Mr Deputy Speaker, the Government are committed to supporting small and medium-sized enterprises—so-called SMEs—to start well and grow, including through our network of 38 growth hubs across England, providing advice, guidance and support. As part of our industrial strategy, I have an action plan to unlock more than £20 billion of investment in innovative and high-potential businesses. Where I see practices that unfairly constrain SMEs’ finance choices, we are prepared to act. For example, we recently removed a barrier that was preventing some SMEs using invoice finance because of prohibitive contract terms imposed by their customers. This new measure is expected to provide a long-term boost to the UK economy worth almost £1 billion.
Last year, we launched a call for evidence, asking for views on how to create a responsible payment culture for small business. While there are a number of measures already in place to tackle late payment, from the Prompt Payment Code and the ability to charge interest on late payments to increased transparency through the payment practices reporting duty, the call for evidence told us that there is more to do to improve the payment landscape. This is why I have announced today that I will now take further and firmer action to tackle the scourge of late payments, while maintaining a holistic approach to cultural change by using all of the avenues available to us in this space. I will shortly be launching a consultation seeking views on strengthening the Small Business Commissioner’s ability to assist and advocate for small business in the area of late payments, through the provision of powers to compel the disclosure of information, and seeking views on the merit of the commissioner potentially issuing penalties for poor payment practices. When finding that large businesses had poor or unfair payment practices, we want to seek views for the Small Businesses Commissioner’s ability to apply sanctions such as binding payment plans or financial penalties. I am also announcing that responsibility for the voluntary Prompt Payment Code is to move to the commissioner and be reformed: this will unify prompt payment measures with the commissioner and address weaknesses within the current code’s operation.
However, we have seen the impact of the strengthening of the code since our announcement in October, where earlier on in the year we saw five businesses being removed from the code, with 12 being suspended, and the next round of compliance is currently under way. I will take a tough compliance approach to large companies that do not comply with the payment practices reporting duty. The legislation allows for the prosecution of those who do not comply and I will use this enforcement power against those who do not comply where necessary. I can inform the House that we are already writing to those businesses which we have assessed to be within scope to remind them of their duty.
The Government will launch a business basics fund competition with funding of up to £1 million, which will encourage SMEs to utilise payment technology. We have recognised that tech adoption has had a positive impact on the productivity of small businesses. With this competition, coupled with the Small Business Commissioner’s strategy to deliver advice and information, it will provide a clear pathway for small businesses when they feel they need support. I also intend to establish a ministerially led group to bring together key government departments to act on improving prompt payment across both the public and private sectors. We are working with UK Financial Investments and the finance sector to review the role supply chain finance plays in fair and prompt payment, including the potential for an industry-led standard for good practice in supply chain finance. That review will report back to the Business Secretary by the end of the year.
We also want to bring greater transparency to how supply chain finance is reported in company accounts and assessed in audits by working with the Financial Reporting Council to develop guidance and build it into its sampling of companies’ accounts. Supply chain finance can provide an affordable finance option for SMEs but they need to be assured that the terms are fair. Our modern industrial strategy aims to make Britain the best place to start and grow a business; removing barriers to growth is key to that. The response to the call for evidence and the package of measures I am announcing today will tackle the continuing issue of late payments to ensure that this happens.
I want to put on record my great thanks to the organisations that campaigned so hard for movement from government—such as the FSB and its Fair Pay campaign—and to the hundreds of businesses that took part and engaged comprehensively with the department to assess the call for evidence.
Finally, I would like to thank the BEIS Select Committee for its significant work on this issue and the work that it continues to do, as I am sure that it will hold us to account on the improvements we are announcing today. I would therefore like to place a copy of the Government’s response in the Libraries of the House today”.
My Lords, that concludes the Statement.