My Lords, I think the phrase in a situation like that is “follow that”; that was an impressive performance by the chair.
In moving Amendment 174, I will speak to Amendment 317 in this rather interesting little group. The amendments I propose relate to the Prompt Payment Code. Amendment 174 aims to ensure that suppliers are signatories to the code and of good standing; and to ensure their exclusion in government procurement if they are not of good standing, not signatories to the code or have been subject to an investigation and not done the right thing having been found wanting.
I suggest these amendments for three reasons. First, the Prompt Payment Code offers a public and obvious ease of reference for any public authority or anyone involved in public procurement, even just checking the process. The real value of what the Government have done in increasing its resourcing and housing it with the Small Business Commissioner is that it makes it much easier to use it as a reference point. Making sure that you have something clear, public, available and transparent is of great use.
Secondly, it is worth acknowledging that the Government have taken steps to try to encourage a more effective Prompt Payment Code by creating a series of initiatives that came into force this year to encourage much stronger compliance with good payment terms. We do not talk just about late payments, of course, because there has been a greater imposition of long payment terms; the Prompt Payment Code has reduced those. Also, it starts to help clarify the problems that are now being felt by many where either an agreed contract is delayed or payments are reduced post hoc, with only one side making that conclusion using the asymmetries of power.
Those initiatives on the Prompt Payment Code have been welcome. In September 2019, the Government made an announcement about the importance of how people pay for government contracts, including how they must pay within the right payment terms and on the right timescale. It is useful that all these initiatives are brought together quite nicely—as I say, they are publicly available—through the code so that we have one reference point.
However, it is important to start introducing these measures together because all of them constantly need strengthening. The Government’s attempt to use their new code to make sure that suppliers cascade the money to all the people who are due has faced difficulties because master contracts are now used so that the main supplier to the Government can say that it discharged its duty easily while all the other payments are held up by people who pay the next layer. Those dates have then been massively extended, as we have seen.
Indeed, it is not as if the Prompt Payment Code is immune to certain problems. For that reason, it is important that the Government show their full commitment to it and use it most effectively to encourage those are not doing the right thing on payment terms.
The members of the Prompt Payment Code pay better but the difference between them and those who are not members is widening, although the code has a huge advantage. It is also clear that what was hoped—that the code would be some sort of cultural change or even encourage people to do more of the right thing—is not happening. We are starting to see that the Prompt Payment Code is something that companies find easy to evade. The idea of naming and shaming does not seem to have much significance.
I say this because we have seen a series of substantial, prodigious suppliers to government walk out on the Prompt Payment Code. They include some of Britain’s biggest companies. Tesco left because the code’s definition of a small business did not correspond to how it viewed a small supplier. Recently, in only the past few months, two of the top five Britain-based listed companies—that is, two of our largest companies by market capitalisation—have left the code: Unilever and Diageo. The culture of compliance is not there. We must reinforce the mechanisms that we use to ensure that, across the chain, prompt payment and good payment terms are properly enforced.
We now know the costs of this. We have always talked about the costs and consequences, about the number of businesses that are at stress, but we also now know the benefits. The recent report from the Centre for Economics and Business Research—Cebr—said that, if invoices were paid as they were presented, small businesses would increase their turnover by £40 billion to £60 billion. That shows, as always, the importance of the velocity of cash.
If the Government can play an enhanced role in making sure that payment terms are done properly across any procurement in the public sector, and can encourage the private sector in all of its transactions to do the right thing, this will be extremely useful. Bringing the Prompt Payment Code into the canon of law for public procurement will be a very important and useful step in that regard.
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