Small Business Commissioner

Lord Henley Excerpts

Monday 22nd January 2018 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, the noble Baroness, Lady Maddock, accused me of having been giving optimistic answers at the Dispatch Box for the past 20 years. I assure her that it has been for only the past eight years; before that, I was a natural pessimist along with the best of them. I suppose that at least I can be grateful that the noble Baroness got my sex right, unlike my poor noble friend Lady Rock, who became Lord Rock briefly, but I am sure she understands that mistakes can be made.

Like other noble Lords, I thank the noble Lord, Lord Mendelsohn, for introducing this debate. It has been very useful, even if, as my noble friend Lord Cope made clear, it is somewhat early days yet to judge how effective the Small Business Commissioner is likely to be. The noble Lord, Lord Mendelsohn, made three points: first, that we should remain committed to dealing with the problem of late payments for small businesses; secondly, that we should consider additional opportunities; and thirdly, that we be sympathetic to what the Small Business Commissioner learns and be ready to act. I hope I have got the noble Lord right on that. Those will certainly be, in effect, our guiding principles in these matters.

The noble Lord mentioned earlier legislation. He mentioned 8% plus the base rate and the Prompt Payment Code and asked whether we had any data, particularly on how effective that earlier legislation was, and whether we want to learn from the Australian experience. Australia is another country, but there will certainly be lessons to learn from its experience, and it would be arrogant in the extreme to say that we are not going to learn them. We will certainly want to look at them. Whether I can provide him with any further data on how the earlier legislation worked is another matter, but I will have a look at it, see what there is and what we can make available.

The noble Lord also mentioned, as did other noble Lords, what we have learned about Carillion’s payment practices. It is too early for me to comment on it, but 120 days seems excessive, and we understand that other companies are operating the same system, although the noble Baroness, Lady Maddock, said that she has already noticed signs that there is some improvement in that sector. There are things that we want to learn on that.

I ought to add a little about the Government’s performance in this sector because it is very important. We all understand that the Small Businesses Commissioner will not be dealing with public sector payments, but we have regulations to make it clear that the public sector must abide by fairly strict rules. The Public Contract Regulations 2015 introduced a requirement for public sector buyers to publish data annually on their performance against paying undisputed invoices in 30 days. As most noble Lords will know, central government has gone further. In March 2015, we restated the long-standing policy of paying 80% of undisputed valid invoices within five days and the remainder within 30 days, and I assure noble Lords that the Government are reaching that target. In the 2016-17 financial year, my department, BEIS, paid 99.4% of undisputed invoices within 30 days. I do not know what happened to the 0.6%, but if the noble Lord would like me to make further inquiries I will be more than happy to do so.

Although the debate is specifically about the Small Business Commissioner and his role, which I will get on to in the small amount of time that I have available, I want to make it clear that removing all barriers to growth is a key part of creating the dynamic market economy which is at the heart of the Government’s ambitious, modern industrial strategy, which we debated in this House only a couple of weeks ago. Our industrial strategy aims to make Britain the best place to start and grow a business, and sets out our long-term plan to boost the productivity and earning power of people throughout the United Kingdom. I can assure my noble friend Lady Rock and all other noble Lords that small and medium-sized businesses have a key role to play in this. As we all know, they account for 99.9% of all private sector businesses and 60% of all private sector employment in the United Kingdom. I want to give that assurance to the House, particularly to the noble Baroness, Lady Maddock, who talked about the problems of access to finance as well as late payment. We wish to see them supported and I refer her to the speech by my noble friend Lady Rock, in particular my noble friend’s comments on various matters in the Budget designed to help those small businesses.

We recognise the importance of providing SMEs, which are the backbone of our economy, with an environment in which they can thrive, thus enabling them to grow and create jobs. Tackling the late-payment culture and driving a change in payment practices are vital for this to happen. Whatever the size of the late-payment debt that is facing small and medium-sized businesses—we have seen figures quoted from £14 billion up to £44 billion—it is completely unacceptable. That is why we have taken the steps we have to tackle this, in both the public and private sector, and why we will want to learn further from what happens and how the Small Business Commissioner gets on.

I start by giving a short update on the work that the Small Business Commissioner has completed in his office in the month or so since it was set up. Since last month’s debate on the Small Business Commissioner (Scope and Scheme) Regulations 2017, which I think the noble Lord, Lord Mendelsohn, remembers from just before Christmas, significant progress has been made. The House will be aware that we launched the Small Business Commissioner on 20 December, upholding a commitment to launch the service by the end of 2017. That followed the appointment of Paul Uppal to the role in October last year—again, I am very grateful for the fact that that appointment was welcomed by the noble Lord, Lord Mendelsohn, as echoed by other noble Lords in the course of the debate today and repeated by the noble Lord himself. Mr Uppal will play an important role in supporting small businesses to resolve their payment disputes with larger businesses, providing advice and helping to bring about a culture change in payment practices and how businesses deal with each other.

The commissioner has begun an extensive programme of stakeholder engagement. He has met a number of interested parties to discuss the role of the office in the future, including the Federation of Small Businesses, the Association of Independent Professionals and the Self-Employed, and the Forum of Private Business, to name but a few. Mr Uppal has also met the former Minister for Small Business, my honourable friend Margot James, who since the reshuffle has moved on to other things, and plans are being made for him to meet with her successor, my colleague Mr Andrew Griffiths. As the noble Lord, Lord Mendelsohn, said, he met Mr Uppal last November, and I believe he plans to go again to Birmingham in the near future.

The commissioner has been talking to individual small businesses about their difficulties in working with larger partners, building up evidence of poor practice and making sure that small businesses understand the role of the commissioner. His office is undertaking communications and marketing activities to ensure that small businesses are aware of its service. This includes several interviews and briefings with trade bodies, sector specialist publications and the national press.

The commissioner also provides general advice and information to business through a website, signposting businesses to existing support and dispute-resolution services. The website has been specifically developed so that it is fit for purpose, and it provides an information service that small businesses told us they need. I am told that the website has already attracted something in the region of 1,200 hits since its launch in mid-December. The commissioner also handles complaints about payment issues between small business suppliers and their larger customers.

The Small Business Commissioner is just one of the steps being taken by the Government to tackle late payment. The noble Lord, Lord Mendelsohn, mentioned the Prompt Payment Code, which provides the gold standard of payment practices and continues to play a role in turning round the culture of late payment. We will continue to promote and support it. In April last year we introduced a statutory duty on the UK’s largest businesses to report on their payment practices, policies and performance to increase transparency and provide small business suppliers with better information about those that they intend to trade with. To date, over 300 reports have been received.

Looking wider, we want to do all that we can to support SMEs where we can. My noble friend Lord Popat asked about earlier debates and asked what has happened since then. I can give him the assurance that we have published our White Paper on the industrial strategy, in which we set out how the Government will support small businesses in gaining access to international markets. He mentioned driving up exports and taking advantage of the opportunities of Brexit as part of our industrial strategy.

In the time available, I cannot deal with all the other questions that noble Lords have asked, but I hope I will be able to write to them and deal with the more detailed questions. In particular, I shall see if there are answers to some of the detailed questions from the noble Lord, Lord Mendelsohn. However, I can give an assurance that we remain committed to supporting all SMEs in continuing to grow and thrive, and to taking action to tackle the issue of late payments.

House adjourned at 9.32 pm.