Enterprise Bill [Lords]

Lucy Frazer Excerpts

Tuesday 2nd February 2016 Commons Chamber

[Richard Graham (Gloucester) (Con)]

rose—

[Lucy Frazer (South East Cambridgeshire) (Con)]

rose—

[Ms Eagle]

Let me just get on with this section, and then I will be happy to give way.

The Opposition will be working hard to secure assurances on amendments on some of the issues I have mentioned as the Bill goes through the Commons. I commend the hard work of Labour colleagues in the Lords, who successfully won some welcome concessions and clarifications as the Bill went through the other place.

--- Later in debate ---

[Lucy Frazer]

The hon. Lady suggested that these provisions are minor. I am surprised that she does so in circumstances where R3, the body that represents insolvency practitioners, says that some of its members feel that late payments contribute to 25% to 50% of small company insolvencies. Does she think that the difference between solvency and insolvency is a minor issue for many of our small companies?

[Ms Eagle]

No, I do not, but I think the hon. and learned Lady should read the Government’s own impact assessment. The provision on the small business commissioner that the Bill proposes is so minor that the Government’s own impact assessment says that they will be able to deal with only 500 cases a year, and yet we know that late payment is a huge issue. I am not saying that the issue of late payments is trivial; I am saying that in dealing with it, the Government’s response is far too limited and very disappointing.

[Ms Eagle]

I could not agree more with my hon. Friend’s words.

Part 1—clauses 1 to 13—deals with the small business commissioner, so let me come on to the Opposition’s view on this. In the previous Parliament, Labour argued for the establishment of a small business administration that would be specifically tailored to focus on the very specific needs of small businesses.

[Lucy Frazer]

Will the hon. Lady give way?

[Ms Eagle]

No, because I have given way to the hon. and learned Lady.

This Bill contains a much more modest aim in seeking to establish a small business commissioner to assist in late payment disputes and signpost advice services for small businesses. The Opposition will support this, but we are disappointed by its small scale and its very limited remit. Indeed, the small business commissioner’s budget is to be a modest £1.3 million a year, and only because of an Opposition amendment accepted in the Lords will the commissioner be independent and able to appoint their own staff. Moreover, the Government intended to allow the role to be abolished by ministerial order without parliamentary scrutiny—a situation that was changed by another Lords amendment. We support the idea of a small business commissioner, but it remains to be seen whether such a modest proposal can really counter the huge imbalances of market power that exist, especially between huge companies and their much smaller suppliers. I certainly wish the new commissioner, whoever they are to be, well in the work ahead, not least because figures showing that the amount owed to small and medium-sized enterprises in outstanding invoices has increased by more than 70% in two years and that almost a third of small businesses are expecting things to get worse this year.

[Lucy Frazer]

Will the hon. Lady give way?

--- Later in debate ---

[Lucy Frazer (South East Cambridgeshire) (Con)]

Small businesses are critical to our economy and make up 99% of businesses nationally, and the Bill is designed to assist them. I want to focus on the resolution of disputes and debt collection, and I refer to my entry in the Register of Members’ Financial Interests. As a barrister who specialises in business law, and insolvency in particular, I have seen at first hand the impact that uncollected debts can have on a company.

Sometimes the inability to collect debts can have a significant impact on a small company. The most obvious consequence is simply the customer’s failure to pay, which means that their supplier is out of pocket. We know from BACS that an average small business has overdue payments of almost £32,000. However, it is not just the lack of cash flow, it is also the cost of collecting debts, and we know that £10 billion is spent per year in trying to recover overdue payments. It is not just the expense; it is also about management time, and in the end many small businesses simply give up. Indeed, the consequences can be even greater than that—sometimes they mean a lack of survival. R3, the trade body for the insolvency profession, has said that late payment by customers for goods and services is often cited as a cause of insolvency.

[Andrew Bridgen (North West Leicestershire) (Con)]

My hon. Friend is giving a great speech with her experience in insolvency. Does she agree that companies do not go bankrupt because they run out of profit; they go bankrupt because they run out of money, and late payment is part of that?

[Lucy Frazer]

That is absolutely right. Often, the cause is cash-flow insolvency, which is a test of insolvency, as well as the balance sheet.

The measures to introduce a small business commissioner to give free advice and information, and to operate a complaints scheme, are a welcome step in the right direction. Indeed, a similar scheme set up in Victoria Australia has had considerable success. The hon. Member for Wallasey (Ms Eagle) suggested that the Bill does not go far enough, but in 2014-15, with 704 mediation sessions, the Victoria scheme had an 80% success rate.

As my hon. Friends the Members for Huntingdon (Mr Djanogly) and for South Ribble (Seema Kennedy) mentioned, we must ensure the success of this scheme, and to do that, we must ensure that the small business commissioner has good identity, good awareness, and is effective.

We need to ensure that the person appointed has the gravitas to command the respect of businesses big and small. We need to ensure there is public awareness of the role. There are already a number of mechanisms to resolve disputes—there is already a free small claims mediation telephone service—but such schemes are successful only if the public know about them and so can use them. Finally, the small business commissioner will have to take full advantage of his or her powers to ensure speed, efficiency and an effective service.

The measures set out in the Bill are extremely welcome. The Government do not create jobs; businesses—often small businesses—do. It is our job to create the right environment for them to thrive in. This is a significant part of that process.