Late Payments (SMEs)

Debate between Baroness Burt of Solihull and Debbie Abrahams

Wednesday 14th September 2011 Westminster Hall

[Debbie Abrahams]

I thank my right hon. Friend for making that vital point. Yes, the previous Labour Government did a lot about that, but monitoring and reporting of the five-day target is needed. That is one of my action requests for the Government.

[Lorely Burt (Solihull) (LD)]

I do not wish to prolong the point, or your patience, Mr Hood, but under the Late Payment of Commercial Debts (Interest) Act 1998, which was introduced by the previous Government, small companies may charge interest if the time for payment of a debt is exceeded. The problem is that as soon as a company rattles the chain of a larger company, it risks losing business. There is always a fine balance between the power of big companies and the lesser power of smaller companies.

[Debbie Abrahams]

I totally agree with the hon. Lady. That is one reason why companies are not prepared to come forward. A concerted effort is needed with a range of interventions to address the power imbalance that she has rightly identified.

On the impact on businesses that were refused additional finance, 13% said that they had had to lay off staff, and a worrying 40% said that they were having ongoing financial difficulties. There is growing evidence that late payments to SMEs are hurting our economic recovery. Data from the Office for National Statistics show that SMEs comprise up to 98% of the total number of organisations in the UK economy, providing 59% of all private sector jobs, 45% of all employment, and generating 46% of the UK’s income from the private sector—a massive £1,558 billion. If their growth and survival is being threatened, it is inconceivable that that is not impacting on the country’s economic performance as a whole.

One of the favourite myths that the Government like to spin is that the recession was made in Britain and that the public sector is somehow to blame for our flatlining economy and should be made to pay with cuts in public spending and vital public services. No one is fooled by that, because everyone knows that the recession started on Wall street, that it was the result of private sector debt, led by the banks, and that it affects every major economy in the world. It belittles my constituents to try to portray it is as anything else.

A little reported fact is that in 2009 City of London debt was 245% of gross domestic product, compared with public sector debt of 60%. It is time that this Government stopped blaming the previous Government and the public sector for the country’s economic woes and targeted action where it is needed on those who abuse their wealth and power. I want the Government to take action on those who flout their contractual responsibilities and fail to pay their bills on time, because those people are not above the law or untouchable. As the Federation of Small Businesses has said, this is not just an economic issue, because it is ethically wrong.

With the shadow Minister, I am calling on the Government to back the following action to address late payments. First, they should bring forward the new EU directive on late payment from March 2013. It introduces a minimum fixed amount of compensation for late payment and tightens the time period for payment. Secondly, the Government must ensure that all Departments are better at meeting the five-day payment target and have effective monitoring and reporting procedures in place. Thirdly, the Government must ensure that prompt payment is enforced all the way down the supply chain and not just between contractor and subcontractor.

Opportunities for the Next Generation

Debate between Baroness Burt of Solihull and Debbie Abrahams

Tuesday 13th September 2011 Commons Chamber

[Lorely Burt (Solihull) (LD)]

I am speaking not just as a member of this coalition Government but, like the hon. Member for West Bromwich West (Mr Bailey), as a west midlands MP. In the west midlands, we have a youth unemployment rate of 9.6%, which is 2% higher than the UK average. There is nothing I would like more than to see young people given the opportunities that they need, but this is not a new problem. Youth unemployment in the west midlands has been running at about 2% higher than the national average since mid-2008, but is this motion the right way to deal with it?

I would say that the Opposition have failed because, once again, they have not faced up to the realities of the situation. The Government are taking the tough action needed to reduce the deficit—a deficit left to us by the Labour party. It is in that context that we have to view the motion before us.

[Debbie Abrahams]

Will the hon. Lady give way?

[Lorely Burt]

I have a six-minute limit, I am sorry.

--- Later in debate ---

[Lorely Burt]

In that case, I will give way.

[Debbie Abrahams]

Is the hon. Lady aware that debts in the City of London in 2009 stood at 245% of gross domestic product in comparison with a public sector debt of 60%. Is it not about time that the Government acknowledged that point and made sure that they targeted their action where it belongs?

[Lorely Burt]

I do not think that debt is a good thing. As has been mentioned, we are spending £120 million a day paying off our debts, which means that the money cannot be used for all the things that hon. Members would like to spend it on.

It is well known that Labour’s plans for the economy would have cut £7 for every £8 that the Government are cutting.