My Lords, this is my first opportunity to welcome the Minister back to her place and to say what a pleasure it is to see her here. We who have experienced time with her have always been impressed by her courtesy and the seriousness with which she takes these deliberations. I am returning to a theme we first discussed during the Small Business, Enterprise and Employment Bill in 2014. As they say, some songs are so good, they may be old but are worth repeating. I hope she will forgive me for coming back to some of the issues we had then, of which,
during her time on the Back Benches, she has been a doughty supporter. I am conscious that there is an awful lot to respond to in this group of varying themes. I look forward to seeing her do so with aplomb.
When I saw the amendments tabled here, I had a moment of undiluted joy when I noticed that Amendment 356A in my name suddenly had the addition of “g” before it. I initially thought that, in the chaos of the last few months, I had been called into government service unbeknown to me and without the benefit of a phone call. Having realised that that was probably not the case, I then thought that I had won the lottery—that, for once, one of my amendments was so good that the Government had finally adopted it and were prepared to champion it. Of course, it is a printing error.
I return to some of the things we talked about before, such as how we can align this Bill with the Prompt Payment Code and the Late Payment of Commercial Debts Regulations, for example. Genuine progress has been made in trying to deal with the curse of late payments, which affects small, medium and even large businesses, to try to improve their payment terms and to make sure that the Government play their part where they can, both as an agency of regulation and a procurer.
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Ministers have been very good in writing to confirm, for example, that intermediate finance companies cannot use the regulations to avoid payment terms on the right dates, which has been very encouraging, and that confidentiality clauses will never cover things such as late payment or payment terms, and that they are for the protection of proper commercial terms as opposed to payment practices. So that has been very encouraging.
In that context we have, in a sense, two distinct groups. Turning to Amendments 353B, 370A and 430A, in my name and that of the noble Lord, Lord Aberdare, whose support I greatly welcome, where there is scope to dispute invoices, we are just trying to find the route to do two things. The first is to make sure that they cannot be gamed or used. We cannot create incentives for contracting authorities to use the dispute process to delay a payment in order to gerrymander the system, or to use it posthumously to try to change those payment terms. These three amendments both proscribe that and provide the opportunity for the Small Business Commissioner to be a form of mediation to make sure that these things can be dealt with in the round. I think they have great strength. Under the Bill as drafted, we expect other authorities to do the job, which really is one that government should address from the top, setting the tone of what needs to be done and how these things can be remedied.
Amendment 356A, in my name, is about streamlining reporting and making sure that there is one place for the reporting of all measures. The Government have previously objected to this, saying that this underlines the market nature of the country, which of course is absolute nonsense—the idea that payment terms do not do that, or even the velocity of cash that can be generated from people paying properly, which are of course great generators of growth. But this area is also targeting contracting authorities. Regulation 113 of
the Public Contracts Regulations 2015 states that public authorities need to publish the percentage of their invoices paid within 30 days, the amount of interest paid to suppliers due to late payments, and the total amount of interest the contracting authority was liable to pay, whether it was paid or not, due to Regulation 113.
I tried for a long time to find out what was happening with this and what the facts were, because this data was not really published anywhere. Noble Lords will have to forgive me because this is not last year’s data. I had to bring a researcher in to do it but in the end, the only way we got even a partial element of the information, which they were obliged to publish in public under the regulations, was when I made some freedom of information requests. We saw that local authorities, NHS trusts and all sorts of contracting authorities in the public sector were doing this, and we found that they did not subscribe to Regulation 113. When, for example, we were looking at the NHS trusts, we challenged the Department of Health and Social Care but it said it had no authority or role to interpret the regulations and therefore to talk to authorities about it. Every department which had a responsibility said that it had no responsibility, and even the Cabinet Office said that only the departments have the responsibility. This is just not acceptable and it is a problem. When you have a regulation that is not enforced, it is terrible.
I will tell your Lordships why it is terrible. When we did the research, we found out what was going on with particular authorities. For example, Hounslow Council said that it paid 91% of payments within the terms, which meant that for 4,900, in reporting year 1 the interest alone liable for payment was £13 million. You only have to do the maths to realise that that is hundreds of millions of pounds in contract value, if that is the interest payment due. How much of that £13 million which should have been payable was actually paid to a small or a medium-sized business? It was £334.83. By the way, that is a fairly impressive amount.
I cannot say that I scanned the full 433 local authorities, but all the ones that we looked at had, on average, in any contracting year, £1 million due in interest charges. The only authority I found that paid was Hounslow. There were 4,900 of a particular value. In Leicester City Council, for example, 21,063 were not paid; zero interest was paid. When we looked at the NHS trusts, we found that the amount they had not paid in years ranged from £1.5 million to £2 million. One paid a very small amount—£62 in interest—but of the hundreds of millions of pounds of interest charges that were due, zero was paid. Zero reporting, zero payment, zero consequence, zero responsibility.
Amendment 356A tries to say, “Can we not have one place for everything—private and public—and, if we have coalesced around the Small Business Commissioner’s office, should we not do it there?” It proposes one place for everyone involved in the payment process to be able to report their data so that it can be seen and be transparent, and put in the hands of people who can do something about it. I would be very grateful for a full answer to that. Obviously, there is a lot going on, so I am sure that I will not get much more than a quick paragraph at the moment, but it is an issue we need to return to.
Finally, I commend the very sensible Amendment 361A, in the name of the noble Lord, Lord Aberdare. It deals with the fact that when a supplier acts against the interests of a subcontractor, the contracting authority should have a responsibility to make sure that the right thing is done. We have made a terrible error in that we have allowed ourselves to have regulations, but we have not made sure that we enforce them and create responsibilities. No responsibility means no accountability, and across all these things, it would be much better if we were much clearer about that from the very beginning. That is why these amendments are so important.