Small Business, Enterprise and Employment Bill

Debate between Ben Gummer and Gordon Banks

Tuesday 18th November 2014 Commons Chamber

[Ben Gummer]

I remember thinking it was illegal the first time it happened to me. It involved a business based on a trading estate in the east midlands, not far from where I was based. I went there one day to try to get some money out of someone who had bought something from me, and was refused the cash. When I went back two days later, everything was exactly the same apart from the name plate over the trader’s shop window and the fact that the filing cabinets had been thrown away because they contained all the creditors’ records. There was a brand-new sign but it was an old business.

The provision on the late payment of commercial debts is part of a package of measures that will transform the ability of small businesses to carry out their business.

[Gordon Banks]

The hon. Gentleman says that this Bill will transform the experience of small businesses. Surely he has to admit, coming from a small business background, as I have, that the only way the late payments situation can be transformed is by forcing people to make payments on time, and that can happen only with financial detriment to the payer.

[Ben Gummer]

I disagree with the hon. Gentleman, although I understand his point. In the end, having thought about this at considerable length, because it is something that has taxed me, I came down on the side of the Minister, because transparency is the best way of ensuring exactly what he intends to achieve. If we start mandating people on payment terms, we end up with perverse consequences as regards the payment terms themselves, and a race to the bottom as regards their length. One supermarket famously gave terms of a minimum of 90 days. We cannot change that by legislation, because, in the nature of things, payment terms must sometimes be short and sometimes be long. Mandating would force, or encourage, companies to extend their payment terms. That is the first problem.

The second problem, as the hon. Gentleman knows perfectly well, having been in business, is that there are many times when someone’s invoice is disputed. The problems in the construction industry caused by the winding-up orders and appeals to the commercial courts—the county courts—that are often used as an excuse to try to avoid payment would be compounded all the more by the mandating of payments. We would end up in an unholy mess that would not be good for small businesses, for honest large businesses, or for customers who did not want to pay a bill but felt forced to do so because of terms such as he proposes.

[Gordon Banks]

I think the hon. Gentleman misunderstands the objective, which is not to get the extra forced payment, but to make sure that the original payment is made on time so that the debtor does not have to pay that forced payment.

[Ben Gummer]

I understand what the hon. Gentleman is driving at, but much as I would love there to be a mandatory payment term in a theoretical world, I just do not think that it would work in practice. As I have tried to indicate, I think it would result in perverse consequences that would be worse for small business than if we go down the Minister’s route of transparency and openness with regard to the terms offered by businesses.