In moving Amendment 15, I wish to speak also to Amendments 17, 42, 43 and 45.
This is a fabulous measure on which I hope we will reach agreement. We have discussed these interesting issues before. I hope the Minister will note that we have designed these amendments specifically with the Small Business Commissioner in mind and seek to give him a very strong role. This series of amendments
deals with late payment and addresses some of the issues involved. Currently, we have a very narrowly defined role in dealing with this as a priority.
We are looking for a way to address what we believe is a major deficiency in the Bill by continuing with our attempt to increase the capacity of the Small Business Commissioner through introducing compulsion in that regard, and to address the velocity of cash in the economy by persuading the Government to take up a fabulous, transformational aspiration. I am extremely positive and hopeful about all these amendments. I only hope that my great positivity and the enormous support and adulation for these measures that I and many other noble Lords have talked about will enjoy the full weight of the Minister’s attention and that we will not be disturbed by any Divisions that may take place. But who knows? My hopes in that regard may well be dashed.
There is a fear that the way in which late payments are described means that the Small Business Commissioner’s role will be like that of Alice in Wonderland—namely, that it will shrink enormously and get smaller and smaller to go through a very small door. The reason for that is because there is a variety of payment mechanisms that fall outside the definition of late payments. The sorts of practices that can be conducted between large businesses especially, but not exclusively, are very problematic. They cause massive cash flow problems, which are an abuse of contract terms. Their net effect are forms of late payment but they are about late payment terms, meaning that one company massively disadvantages another, particularly when it comes to whose cash flow is being exploited.
In relation to this we went through a number of particular cases during the course of the Small Business, Enterprise and Employment Act, and were encouraged by some of the Minister’s responses. Some work has been done on this and I hope that we have started a process that addresses it. It is very important to understand that if a company says the payment terms are 90 days, take it or leave it, then late payments sometimes do not apply until 91 days. That is an unacceptable form of a payment term that abuses another company.
A variety of mechanisms are established in which they say, “We’ll pay you X and then there will be charges which we could vary, so we’ll pay you X minus marketing costs, warehousing costs, or other sorts of costs”. Invariably, that goes to forms of discounting which reduce the payment terms, but many of them will have a retrospective impact. There is no necessary correlation between those payment terms and any form of marketing activity, warehousing costs or proportionality to them. These are massively extensive business practices, but many have terms allowing people to vary the overall payment on the basis of saying that their marketing costs were higher, or their building, warehousing or other sorts of costs were significantly higher. We have seen some of the most appalling abuses, and cases arise from time to time illustrating that. These terms are becoming ever more present and they are unacceptable.
There are also issues in which the dispute resolution process is defined by contract not on the basis of timing but on the basis of process. A late payment
cannot be defined until the process has been gone through. Let us say there is a random company that deals only by email and it does not respond, and there is no human being to contact. The company will drag it out for as long as is humanly possible, but that still cannot be defined as a late payment. We could even have disputes when the goods are received. There can be significant disputes but the timescale by which these things are resolved means that, in effect, it is a late payment with people using other people’s cash.
Our amendments would work in tandem with the unfair terms in the earlier Amendment 14. Ours would take out exclusions from the scheme because these are areas when the sorts of issues that have been excluded from the role of the Small Business Commissioner can be used to ensure that they do not fall within it. Some Members of the Committee will know that I like the occasional flutter and I would be happy to wager a considerable bet—it is not a particularly hard prediction—that if you give businesses the opportunity and an out clause by which they can avoid having to deal with late payments through the Small Business Commissioner, they will take it. It is inevitable. It is important to capture the right things.
Amendment 41 also addresses the issue of retrospective discounting. Company A supplies Company B, and Company B then insists on a retrospective discounting clause. It decides that it is not making enough profit at the end of the year and causes a retrospective discount to try to make up its numbers to the massive detriment of Company A. Those sorts of practices are just wrong and we should get rid of them, because they are inappropriate.
Amendments 42 and 43 are very similar in nature. Rather than relying on people’s good intentions, there is nothing like a duty to pay to increase people’s adoption of a culture. Here we are looking at duties to pay for the private sector and, indeed, the public sector. That is just an extension and a tidying up of some of the Bill’s provisions to give it more force by giving people a duty to pay and a duty to report on whether they have paid, what they owe and when they paid it. That should be reported to the Small Business Commissioner who, happily, has a lovely address for them to report it to. There, we have used the Government’s proposal to good effect to provide a duty to pay. It is not discretionary; there is a duty to pay; you do not have a choice.
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Finally, Amendment 45 covers the traditional notion of what a company’s payment terms should be. At the moment there is the notion of a payment term where interest is due at 60 days. We suggest that the Government aspire massively to create a world-leading position and adopt 30 days. Obviously, we would not want to do that tomorrow, we would want some transitionary arrangements to ensure that such a scheme was adopted over a period, but nothing could do more to emphasise our ability to be a world-leading entity than to take a position such as that. The intention behind the Bill is very clear: the promotion of enterprise and economic growth. It would be massively enhanced by a much faster trajectory of cash flowing around the economy.
Rather than small businesses having problems with late payment, as they do in so many cases, if they were able to employ only one extra person—which is pretty much the scale of most small businesses—what a wonderful position that would be in promoting growth. It will come if we can get a grip of late payments.
This package of amendments is something that the Government could easily and comfortably adopt into their measures. It would not expand the role in the way that they are concerned about but would certainly enhance the powers and companies’ ability to feel comfortable and feel certain that they should be doing the right thing. I beg to move.