My Lords, I recognise that late payment has been one of the most stubborn problems affecting small businesses over many decades. It is quite a few decades since I was Small Firms Minister in Margaret Thatcher’s Government, but the problem goes back a long time before that. I congratulate the Government on having found a new method of trying to deal with it, which has been incorporated in these clauses. In principle, that is much to be admired and supported.
I am much in favour of Amendment 5, tabled by my noble friend Lord Flight. Like him, I was much impressed by the Grant Thornton list of companies, which gives very important support to something that we all know—that small and medium-sized firms such as those in this list vary hugely. When you compare the turnover, the balance sheet and the number of employees of the different companies, the huge variety is astonishing. Like my noble friend, I cannot believe that the Government really want to impose this new element of bureaucracy on these companies, some of which have very small numbers of employees. One of them had two employees, and many of them—littered about—have fewer than 10, although they often have very large turnovers and large amounts on their balance sheets. We can imagine what sort of companies they are without following them up. Therefore, I support Amendment 5.
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As for the other amendments, I have a more mixed view. Inserting the word “performance” as in Amendment 4 is, in principle, a good idea. The Bill says that large companies have to report on the company’s “practices and policies”, but it is actually the performance that matters, whether or not those practices or policies are being followed through. Of course, the difficulty comes when you try to get to the definition of “performance”—and that difficulty is illustrated by Amendment 6, and so on. One of the points on that, which has just been referred to, is the question of invoices that get queried.
We all know that when a business gets into trouble one thing that it does is to pay people later. To start with, if it can get away with it, it pays the taxman
later—and then it goes on to try to pay its various suppliers later and improve its cash flow in that way. It is a sensible thing to do, if you can possibly do it, and that applies to large companies as much as to small ones. When a large company’s market power is very great in comparison with that of its smaller suppliers, that is where the whole trouble of late payment, which we talk about endlessly, arises in its most acute form.
Subsection (1)(a) of the proposed new clause in Amendment 10 suggests that the Secretary of State should impose,
“a limit on the number of days after receipt of a supplier’s invoice a company can seek to challenge that invoice”.
I see the point that noble Lords are trying to make with this, but they do not say how many days after—and, in any reasonable arrangement, it would vary hugely according to the nature of the business. With some transactions, you can tell at once if the invoice is fair, and that a correct price has been agreed, while with other goods delivered or services rendered you may not know for quite a long time after the invoice comes in whether the goods are satisfactory and come up to standard. To prevent people from complaining about an invoice after a certain number of days, even if it is a long number of days, is a difficult thing to do in some cases. But subsection (1)(a) of the proposed new clause in Amendment 10 is necessary to support the proposal in paragraph (a) in Amendment 6, which says that you have to register a formal query,
“within a period as may be prescribed”.
The two tie up together, and that is a great difficulty.
This really illustrates the wider point, which one runs across all the time in dealing with small business policy: half the time, when one seeks to improve the situation of small businesses, one does so by increasing the amount of regulation. In this case it increases the amount of regulation on large companies, whether or not the definition in Amendment 5 is agreed to. One is seeking to improve the regulatory situation for them but, unless a small firm that is in trouble knows about the regulation and can look at it, it will not be able to take advantage of it. That is one problem of small business policy that occurs on many occasions. On the whole, I am leery about agreeing to complicate the regulations, not only from the point of view of the large companies and particularly the medium-sized companies—the subject of Amendment 5—but also from the point of view of the smallest companies.