[Mr Jim Hood in the Chair] — Late Payments (SMEs)

Part of the debate – in Westminster Hall at 9:30 am on 14th September 2011.

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Photo of Debbie Abrahams Debbie Abrahams Labour, Oldham East and Saddleworth 9:30 am, 14th September 2011

I totally agree with the hon. Lady. That is one reason why companies are not prepared to come forward. A concerted effort is needed with a range of interventions to address the power imbalance that she has rightly identified.

On the impact on businesses that were refused additional finance, 13% said that they had had to lay off staff, and a worrying 40% said that they were having ongoing financial difficulties. There is growing evidence that late payments to SMEs are hurting our economic recovery. Data from the Office for National Statistics show that SMEs comprise up to 98% of the total number of organisations in the UK economy, providing 59% of all private sector jobs, 45% of all employment, and generating 46% of the UK’s income from the private sector—a massive £1,558 billion. If their growth and survival is being threatened, it is inconceivable that that is not impacting on the country’s economic performance as a whole.

One of the favourite myths that the Government like to spin is that the recession was made in Britain and that the public sector is somehow to blame for our flatlining economy and should be made to pay with cuts in public spending and vital public services. No one is fooled by that, because everyone knows that the recession started on Wall street, that it was the result of private sector debt, led by the banks, and that it affects every major economy in the world. It belittles my constituents to try to portray it is as anything else.

A little reported fact is that in 2009 City of London debt was 245% of gross domestic product, compared with public sector debt of 60%. It is time that this Government stopped blaming the previous Government and the public sector for the country’s economic woes and targeted action where it is needed on those who abuse their wealth and power. I want the Government to take action on those who flout their contractual responsibilities and fail to pay their bills on time, because those people are not above the law or untouchable. As the Federation of Small Businesses has said, this is not just an economic issue, because it is ethically wrong.

With the shadow Minister, I am calling on the Government to back the following action to address late payments. First, they should bring forward the new EU directive on late payment from March 2013. It introduces a minimum fixed amount of compensation for late payment and tightens the time period for payment. Secondly, the Government must ensure that all Departments are better at meeting the five-day payment target and have effective monitoring and reporting procedures in place. Thirdly, the Government must ensure that prompt payment is enforced all the way down the supply chain and not just between contractor and subcontractor.