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

Part of the debate – in Westminster Hall at 9:52 am on 14th September 2011.

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Photo of Fiona O'Donnell Fiona O'Donnell Labour, East Lothian 9:52 am, 14th September 2011

It is a pleasure to serve once again under your chairmanship, Mr Hood, our having served on the Health and Social Care (Re-Committed) Bill. I know that we can look forward to a firm but fair hand in proceedings today.

I join Members in congratulating my hon. Friend Debbie Abrahams on securing this debate. The issue is of concern not only for my constituents but for us all, so I am pleased to see Members from all nations of the United Kingdom present to participate in this discussion.

I thank the shadow Minister, my hon. Friend Mr Umunna, for the work he has already undertaken in his new post in reaching out to businesses across the UK. I apologise for the fact that so far I have not provided him with information from my constituency, but work is ongoing. I am working with my political partner, the MSP, Iain Gray, to assess the challenges facing businesses in East Lothian. Although that is good for joint working, it is not so good for meeting deadlines.

This issue is vital, especially in my constituency, because the hope for economic recovery, for growth, for more money to go into the economy and, importantly, for more jobs lies with the public sector and SMEs. The issue is relevant to my local employers when they are considering taking on new staff.

The one bill that employers must meet every week or every month is that for wages. We have seen evidence of slippage in Whitehall Departments achieving the five-day target. The impact of a Department being a couple of days shy in meeting the target might be viewed as small, but, bearing in mind the fact that private companies may not have signed up to the target, many companies were assured by the good practice set under the previous Labour Government because they knew that money would be in their accounts. That security meant that they could meet their wages bill.

Labour’s opponents criticised its manifesto and plans to increase national insurance tax, saying that it would inhibit growth in jobs, but confidence in the economy and in their cash flow is far more important for SMEs considering taking on new staff. If youth unemployment in my constituency is to be targeted, with an increase in the number of apprenticeships for young people and those retraining and reskilling, it is vital that the Government support the health and stability of SMEs.

My hon. Friend the Member for Oldham East and Saddleworth spoke of the danger of a contagion, and in this respect I can draw on my experience of working in the private sector. As a company’s cash flow starts to become restricted, it must start to decide which bills to pay, and when. The health of the small business sector is under threat because many companies are now having to make such decisions.

SMEs face a resource issue. We did not have the capacity vigorously to chase late payments or to send threatening legal letters, which meant that larger companies and the public sector, aware of our dependence on them, could feel secure in not making payments on time.