Prompt Payment Code

Debate between Robin Walker and Stephen Metcalfe

Thursday 8th November 2012 Commons Chamber

[Mr Robin Walker (Worcester) (Con)]

Given the disproportionate impact of small businesses on employment and on giving people a chance to work, does my hon. Friend agree that it is vital that we free up that cash to flow through to the small businesses that can create many more jobs in all our constituencies?

[Stephen Metcalfe]

Of course. Small businesses are the lifeblood of this country. One of my favourite statistics is that if every small business employed one extra person, we would have an employment surplus of about 1.5 million people. We need to encourage these businesses and help them to grow, especially where there is a problem accessing reasonable-cost finance, whether that be through overdraft or loan. This money is rightfully theirs, and it could flow back to them to stimulate growth.

We must tackle this problem, and, as I said, we do not need new legislation in order to do so; indeed, it would probably hinder the process. Through better use and implementation of the prompt payment code, we can help to stimulate growth and end the tyranny of late payment. I would like to make some suggestions to the Minister. They come out of discussions with the FSB and other organisations. First, it is imperative that all public sector organisations in receipt of public funds sign up to the prompt payment code. Secondly, there should be a named person within the Department for Business, Innovation and Skills who is responsible and accountable for late payment in the supply chain of all public sector contracts, and their name should be published in all public contracts.

Thirdly, all private sector companies used by the public sector should, without exception, sign up to the prompt payment code, if not in its entirety, then at least when engaged in public sector works. This should form part of all contracts and become accepted practice, and it should be part of any pre-qualification questionnaire. There should be a commitment that any favourable terms received would be passed down the supply chain, and all tender documents must contain a commitment to pay on the same terms throughout the supply chain.

Fourthly, in addition to the above, every public sector primary contractor must have a contract reporting officer enabling small businesses further down the supply chain to report any instance of late payment with a degree of anonymity. The officer must ensure that Government payment terms are adhered to, right down to the end of the supply chain.

Finally, as my hon. Friend the Member for Newton Abbot (Anne Marie Morris) suggested, adherence to the code must be demonstrated through reporting. All companies used by the public sector and all public sector organisations should be required to publish their payment performance, and this should be monitored periodically by their auditing body.

I believe that these proposals are both risk free and relatively cost free for the Government. In this fragile, post-recession period, they are vital if we are serious about stimulating growth. The SMEs at the bottom of the supply chain and, indeed, some of the larger businesses near the top are being strangled by late payment in public sector contracts. Addressing that issue would unleash a wave of opportunity and support SMEs that are flagging under the burden of late payment.