Prompt Payment Code

Stephen Metcalfe Excerpts

Thursday 8th November 2012 Commons Chamber

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

I beg to move,

That this House has considered the matter of stimulating growth through better use of the Prompt Payment Code.

Thank you, Mr Deputy Speaker, for allowing me to open this debate. I also thank the Backbench Business Committee for seeing the importance of the issue and allowing us to put our concerns on the record. Let me express my gratitude to my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) and the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) for their support in the debate, as well as to the Federation of Small Businesses, the British Chambers of Commerce and the Forum of Private Business for their assistance in preparing for it. I also express my gratitude to the many others who wanted an input but did not want to put their name to the motion for fear that there might be prejudice as regards future business.

Let me digress briefly. Had I not been fortunate enough to obtain the debate, I would have been in Basildon, so I want to pass on my unreserved apologies to Councillor Mo Larkin, mayor of Basildon, who is this afternoon receiving a British Empire medal from the Duke of Gloucester for her good works in the community, and to the Royal Anglian Regiment, who today marched through the town as part of their homecoming celebrations. I am sure that the whole House will join me in paying tribute to them and all other serving personnel who take such great personal risks so that we can enjoy freedoms at home.

Today, I want to draw the House’s attention to the issue of late payments in the public sector and the associated supply chain. It is a problem crippling small and medium-sized enterprises up and down the country and its implications for our economy should not be underestimated. Last year, the amount of money owed to SMEs beyond agreed payment terms reached an all-time high of £33.6 billion. It does not look like it is getting any smaller, either. Only today, I received an e-mail from BACS informing me that that figure has gone up by £2 billion in the last six months.

Some 94% of businesses surveyed by the British Chamber of Commerce have experienced late payment, with 34% stating that they had been paid late by a public sector body. A similar survey conducted by the Federation of Small Businesses found that 70% of businesses believe late payment to be on the increase and a third admitted paying their suppliers late because their clients had withheld payments. The statistics show that late payment is on the up and a recently conducted survey showed that between 2009 and 2011 late payment increased across the board in the public and private sector. Late payment by local authorities went up by 8% to 33%. In schools and universities, there was an increase of 9% to 31%. Similarly, Government agencies and quangos saw a 9% rise from 2009 to 39%. The statistics speak for themselves.

Some say that the main problem lies with big business, not Government. Although big businesses are undoubtedly the worst offenders, the Government clearly have a role as a lead buyer of goods and services. The culture of late payment seems to have become an accepted norm and it has done so at the expense of our small and medium-sized enterprises.

[Fiona Bruce (Congleton) (Con)]

As someone who has run a small business for 25 years, I commend my hon. Friend for initiating the debate. With regard to public sector contracts, does he agree that one of the problems is that small businesses are so glad if they obtain a contract with the public sector that what I might call the balance of power is so weighted against them that they dare not insist on any payment terms at all and will accept whatever they are given? Is it not a matter of honour that the public sector should lead the way and pay promptly?

[Stephen Metcalfe]

I could not agree more. Even when there are agreed terms between a supplier and a contractor, those can be changed at the drop of a hat. Businesses are afraid of causing too much trouble because they want to see that repeat business coming back time and again, so we must do something about that. There is an ethical element to it, as well as a business element. The statistics show that. They are shocking and the problem is worsening.

This should be a wake-up call for us all, the Government included, not because the Government are not playing their part, but because we must not forget that behind every statistic and every number are people—people struggling to make ends meet, people desperately trying to keep their businesses afloat, and people losing their livelihoods. I know that this Government want to help people such as Matthew, who is a member of the Federation of Small Businesses. He is finance director for a small company that builds specialist equipment for public works. He entered into a contract with an agreed 60-days term, he invested a large sum of money to prepare for the work, and two days into the contract he received a letter stating that those terms had been changed to 100 days and that he had no right of appeal. As a result, he had to lay off three of his workers, he had to dip in and extend his overdraft, and he is currently owed £200,000.

This case study is not an isolated example. It powerfully demonstrates the devastating impact that late payments can have on small and medium-sized enterprises. Late payment costs business dearly and is an unmoving barrier to growth. Indeed, aside from access to finance, and/or the collapse of its market, late payment and non-payment of invoices is likely to have the biggest impact on a business’s viability and ability to grow. As the numbers show, the problem is not simply going to disappear. It requires concerted action, which must be led by the Government.

Let me be clear. I am not suggesting that we need new legislation. I am sure we all agree that we have enough rules and regulations, some better than others. Rather, as the title of the debate suggests, I am advocating better use and more effective implementation of the prompt payment code as a means of both assisting our SMEs and stimulating growth in our country. The prompt payment code is about encouraging and promoting best practice between organisations and their suppliers. Any organisation can sign up to the code, and those that do so undertake to pay suppliers on time within the terms agreed at the outset of the contract, give clear guidance to suppliers on payment procedures and, to encourage good practice, request that lead suppliers promote the adoption of the code throughout the supply chain.

The principles of the prompt payment code should be applauded. My concern is that its implementation and application are often found wanting. The evidence tells us that it is not enough to encourage a culture of prompt payment. The uptake of the code among large organisations is poor and contractors further down the supply chain are under no obligation to pass on the favourable terms that they receive. In a world in which cash flow is king, it is not sufficient merely to encourage best practice. We need a system in which the reality matches the rhetoric.

The current arrangements also make whistleblowing extremely difficult for small and medium-sized enterprises, particularly in small or narrow supply chains. The mystery shopper arrangement, whereby businesses can report incidents of late payment, is not appropriate for those in particularly narrow chains. If there are only three businesses in a supply chain, it becomes all too easy for the main contractor to identify the whistleblower. The risk of losing business as a result is one that many SMEs cannot afford to take. Many members of the Federation of Small Businesses have attested to that.

Even when SMEs do confront contractors, the result is not always positive, as my hon. Friend the Member for Congleton (Fiona Bruce) pointed out. I was shocked to read about another FSB member who challenged a business that paid him 58 days late, which resulted in him incurring £3,500 in bank charges. He was told by the company that basically he should be grateful for the work. I think that we all agree that that is unacceptable.

I am not suggesting that the PCC is redundant. Indeed, central Government have demonstrated that, when adhered to, it can be very effective at the first-tier level. Having made a staunch commitment to the principle of the PCC, central Government now make between 98% and 99% of all payments to primary contractors on time. But we must not stop there. Promptly paying top-tier contractors is all well and good, but if they are not obliged to pass on those terms to suppliers, and those suppliers are not obliged to pass them on to their suppliers, the benefit of prompt payment can be entirely lost. We need a system in which the favourable terms offered by Whitehall cascade right down the supply chain to the smaller SMEs or individual contractors. We must facilitate the creation of a system that drills all the way down to the bottom of the supply chain.

Unfortunately, late payment is not confined to public sector contractors; the problem also arises in the plethora of public sector organisations outside Westminster. The House might be surprised to learn that not all local authorities and public bodies are signed up to the prompt payment code. Countless examples of late payment, or even non-payment, have been identified in the public sector, and I am sorry to say that the NHS is a particularly bad example. Since 2009, the incidence of late payment in the NHS has increased by at least 8%. I am sure we all agree that that is completely unacceptable.

[Mrs Eleanor Laing (Epping Forest) (Con)]

I congratulate my hon. Friend on bringing the debate before the House; it will be very popular with small businesses in my constituency, which he knows extremely well. Does he agree that, although it is sometimes difficult to put pressure on commercial organisations to adhere to the prompt payment code, it is absolutely unacceptable for any organisation in receipt of taxpayers’ money, either in the first instance or further down the supply chain, not to adhere to it? The Government already have the power to take action, not by statute or new rules and regulations, but through their buying power as a commercial organisation, and they should do so now.

[Stephen Metcalfe]

I could not agree more. One of the key things we can do, at virtually no cost to the Government, is ensure that all public sector bodies in receipt of public funds sign up to the code.

Late payments are stifling the ambitions of small and medium-sized companies. Those companies are increasingly becoming embroiled in a vicious cycle of late payment. They are paid late, then they pay their suppliers late, and they in turn pay their suppliers late. Billions of pounds are being withheld from our economy by some of the organisations that have the deepest pockets, as has been mentioned. Why are they withholding payments? I do not know. Whatever the reason—malice, poor practice or inefficiency—it must change.

[Anne Marie Morris (Newton Abbot) (Con)]

I am sure that my hon. Friend is aware that the Late Payment of Commercial Debts (Interest) Act 1998 provides for statutory interest on unpaid invoices and an administration charge. That could be used against larger companies that do not pay their debts. If it became more public that there was not only outstanding debt, but an additional sum, particularly if it was noted in the auditor’s report, that would give shareholders power to disavow those companies that are not playing properly and fairly.

[Stephen Metcalfe]

My hon. Friend is entirely right. The danger always is that because small and medium-sized businesses, which rely on these large organisations for their very lifeblood, do not want to end up in discussions about charging them interest and administration fees, they bite their lip and put up with it. That is why it falls to us and to the Government to make sure that such bodies in receipt of public funds pass the money on through their obligations, not through the businesses that are affected by trying to threaten them with interest or administration charges.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

It is important that I declare an interest in that I am not only a member of the FSB but have shareholdings in a business that I set up before I came here; people can read about that in the Register of Members’ Financial Interests. There are two key issues: first, companies can set up special vehicles that make sure that they will not be affected by such provisions; and secondly, people sometimes get scared about losing the contract and the money in the first place.

[Stephen Metcalfe]

Absolutely; that is key. Small businesses are often fragile at best. They live hand to mouth. They do not, in the main, have huge cash reserves. They rely on the payments that are coming in to be able to pay their staff, pay their suppliers, and pay their bills. They are not big businesses’ banks, but that is how they are being used at the moment. The money is kept in the coffers of larger organisations, and that stifles the growth of the small end of our economy.

[Mr Robin Walker (Worcester) (Con)]

Given the disproportionate impact of small businesses on employment and on giving people a chance to work, does my hon. Friend agree that it is vital that we free up that cash to flow through to the small businesses that can create many more jobs in all our constituencies?

[Stephen Metcalfe]

Of course. Small businesses are the lifeblood of this country. One of my favourite statistics is that if every small business employed one extra person, we would have an employment surplus of about 1.5 million people. We need to encourage these businesses and help them to grow, especially where there is a problem accessing reasonable-cost finance, whether that be through overdraft or loan. This money is rightfully theirs, and it could flow back to them to stimulate growth.

We must tackle this problem, and, as I said, we do not need new legislation in order to do so; indeed, it would probably hinder the process. Through better use and implementation of the prompt payment code, we can help to stimulate growth and end the tyranny of late payment. I would like to make some suggestions to the Minister. They come out of discussions with the FSB and other organisations. First, it is imperative that all public sector organisations in receipt of public funds sign up to the prompt payment code. Secondly, there should be a named person within the Department for Business, Innovation and Skills who is responsible and accountable for late payment in the supply chain of all public sector contracts, and their name should be published in all public contracts.

Thirdly, all private sector companies used by the public sector should, without exception, sign up to the prompt payment code, if not in its entirety, then at least when engaged in public sector works. This should form part of all contracts and become accepted practice, and it should be part of any pre-qualification questionnaire. There should be a commitment that any favourable terms received would be passed down the supply chain, and all tender documents must contain a commitment to pay on the same terms throughout the supply chain.

Fourthly, in addition to the above, every public sector primary contractor must have a contract reporting officer enabling small businesses further down the supply chain to report any instance of late payment with a degree of anonymity. The officer must ensure that Government payment terms are adhered to, right down to the end of the supply chain.

Finally, as my hon. Friend the Member for Newton Abbot (Anne Marie Morris) suggested, adherence to the code must be demonstrated through reporting. All companies used by the public sector and all public sector organisations should be required to publish their payment performance, and this should be monitored periodically by their auditing body.

I believe that these proposals are both risk free and relatively cost free for the Government. In this fragile, post-recession period, they are vital if we are serious about stimulating growth. The SMEs at the bottom of the supply chain and, indeed, some of the larger businesses near the top are being strangled by late payment in public sector contracts. Addressing that issue would unleash a wave of opportunity and support SMEs that are flagging under the burden of late payment.

[Henry Smith (Crawley) (Con)]

I am very pleased to say that one of my local authorities, West Sussex county council, introduced a prompt payment code voluntarily some years ago. It realised that supporting local small enterprises in particular is good for the local economy, which, of course, benefits through business rates.

[Stephen Metcalfe]

My hon. Friend is entirely right. My concern is based on my experiences. One of my councils, Thurrock, has a 97% target to pay within agreed terms but, unfortunately, a recent cabinet report demonstrated that only four out of five invoices are being paid on time. It assures me that things are getting better, but that demonstrates the challenge. It is great to have a target, but we have to make sure that it happens, because it is the companies’ money—it belongs to them. If we want them to thrive in our local communities and the supply chain, we have to play our part and release the billions of pounds that are locked up back into the economy.

[Anne Marie Morris]

My hon. Friend’s suggestions are welcome and well received, but may I trouble him to consider some additional help with regard to situations involving private sector companies only? Much of what he is talking about involves relationships with public sector bodies, which makes life easier.

If my hon. Friend agrees, as he has suggested, that reporting is a way forward, does he also agree that, on the requirements for audited accounts, the payment arrangement and any outstanding debt should be published not in the board’s report, but in the auditor’s report, which would carry an awful lot more weight?

[Stephen Metcalfe]

That is an excellent suggestion and one that should certainly be explored. I am sure that we are all conscious of burdening business with yet more regulation but, because of the impact that late payment has on SMEs, that would be well worth exploring.

[Toby Perkins (Chesterfield) (Lab)]

I congratulate the hon. Gentleman on securing this debate. He has made a number of sensible points, but it is interesting that his focus seems to be on contracts involving public money, as though people have a responsibility to pay on time only if public money is involved somewhere along the chain. The FSB has identified that 77% of businesses say that the private sector is the main problem, so does he agree that his suggestions for reporting should apply right across business, not just if there is public money involved?

[Stephen Metcalfe]

I entirely agree—the hon. Gentleman makes a very good point. I am focusing on the public sector because we have most control over it. I did say earlier that the private sector is the worst offender and that we need to address that as well. Following this debate, I hope we will come up with some suggestions in that regard.

I want to focus my final remarks on the public sector. As I have said, the Government have set the tone and provided a model of best practice, but we cannot stop there. This is not just a commercial problem, but an ethical problem. We have to remember that much of the money that is outstanding to our small and medium-sized enterprises is our money. It is collected from us as taxpayers and it is spent on our behalf, so it is only right to expect any organisation to pass on that money as quickly as possible.

I believe that my proposals are entirely necessary and that they would go some way to addressing the problem. I hope that suggestions will be made this afternoon on how we might address other parts of the problem and I look forward to hearing the ideas and experiences of other hon. Members. At the end of the debate, I hope that the Minister will be able to give us some positive news and say that he will pass on some of our suggestions to the Chancellor in advance of his autumn statement. Ultimately, there are billions of pounds locked up in our economy that are owed and could be paid across to stimulate some real growth.

[Several hon. Members]

rose—

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[Toby Perkins (Chesterfield) (Lab)]

It is a tremendous pleasure to respond to this welcome, timely and constructive Back-Bench debate on behalf of Her Majesty’s Opposition. I congratulate the hon. Members for South Basildon and East Thurrock (Stephen Metcalfe) and for South Northamptonshire (Andrea Leadsom) on securing the debate. I also join others in recognising the contribution of my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams). She has pursued this issue tirelessly through her “Be Fair, Pay on Time” campaign, for which she has rightly been nominated for a “Grassroot Diplomat” award by the Federation of Small Businesses. She was too modest to mention that, but I wanted to put on record the gratitude of the whole House for the work that she has done.

I welcome the Government’s announcement of the potential naming and shaming in the new year of FTSE 100 and FTSE 250 firms that do not sign up to the prompt payment code, in an attempt—for which Labour had called—to change the culture on late payment. I am pleased that Members’ collective efforts have finally forced the Government to act. When researching the Twitter feed of the hon. Member for South Basildon and East Thurrock—it is @SMetcalfeMP, in case anyone is interested; the hon. Gentleman appears to have last taken to the Twittersphere almost exactly a year ago, to inform the world—

[Stephen Metcalfe]

May I intervene to reassure the House that that is not my Twitter feed? It is a fake, which is why there are only six tweets on it. It was never me in the first place.

[Toby Perkins]

They say that impersonation is the sincerest form of flattery. I hope that the hon. Gentleman is flattered that people have taken the time to fake a Twitter account for him, if that is indeed what happened. The person who claimed to be him was proud to be the hon. Member for South Basildon and East Thurrock. In any event, I hope that at the end of the debate someone will be able to announce to the Twittersphere that the Government have listened to the voice of tens of thousands of small businesses, and to business organisations such as the Institute of Credit Management, the Institute of Chartered Accountants in England and Wales and BACS which have been calling for leadership from the Government.

While the contribution to Twitter of the hon. Member for South Basildon and East Thurrock may be a matter of some dispute, his contribution to the debate was consistently constructive, and I agree with much of what he said. I agree with him that late payment is on the increase—although welcome steps were taken in an attempt to reduce it, the Government’s efforts have fallen back in recent years—and I agree with him about the circular effect whereby companies that receive payment late become late payers themselves. It becomes a culture. Businesses see it as part of the overall negotiation with their suppliers: not only do they negotiate on how much they will pay and for how much they will sell, but they try to extend the time that they have in which to pay and bring forward the time at which they will be paid. It is a completely unconstructive way of operating. I agree with the hon. Gentleman on that issue, therefore.

In pursuing this theme, the hon. Gentleman is very much in tune with my right hon. Friend the Member for Doncaster North (Edward Miliband), who has said that if we are to be one nation, we must have more responsibility at the top and at the bottom. I am delighted that my right hon. Friend has expressed his determination to address the unfair—and, frankly, anti-business—relationship between some big businesses and small firms, and his determination that a one-nation Labour Government will not simply walk by on the other side of the road when confronted by such issues.

This debate has provided stark examples of the sorts of unfairness to which my right hon. Friend has been referring. My hon. Friend the Member for Oldham East and Saddleworth focused on the fact that, as the Federation of Small Businesses has revealed, the private sector is the biggest culprit in this regard. She also referred to her letter to the FTSE 100 companies. The fact that she got 14 FTSE 100 businesses to sign up to the code shows that Members of Parliament can influence business practices without always having to legislate. She has taken direct action and it has changed the way 14 of our FTSE 100 businesses operate.

The hon. Member for South Northamptonshire said the Government need to make more effort to ensure that Government organisations pay on time. That point could go across the agenda. She also rightly said that this is not just a legislative but a cultural issue. She also spoke about stipulating fair terms, as did my hon. Friend the Member for Caerphilly (Wayne David) in respect of those which might apply when the new EU late payment directive comes into force. My hon. Friend mentioned the Government’s lack of urgency in the implementation of that directive, and after hearing about the record of one of our major supermarkets, he referred to the possibility of consumers using the performance of major businesses as a factor in deciding where to shop.

My hon. Friend the Member for Stockton North (Alex Cunningham) rightly said that big firms need to play their part in putting the country on a stable economic footing, not only through their contribution to the economy, but in their relationship with their suppliers. The Government have a role to play in bringing big firms to book and in ensuring that fair terms are agreed in the first place and subsequently adhered to.

The latest BACS research shows that more than 1 million small and medium-sized enterprises are currently being affected by late payment. Britain’s small businesses spend a total of 110 million hours every year chasing late payments, at a cost of £683 million.

The FSB has also been very vocal about this issue. A recent FSB study found that 73% of small businesses had experienced late payment for the supply of goods and services in the past year. Some 77% of its members say private sector organisations are the most likely to make late payments, and two thirds of members report having written off invoices in the previous 12 months, a fifth of which have been for more than £5,000, which is a significant sum for a small business to have to write off.

Mid-size firms can usually employ credit control staff whose daily task is to try to extract from businesses payments that have already been agreed. I remember once, as a fledgling salesperson, having to go down to my company’s credit control office to inquire whether a customer of mine might be able to come off “stop” because they wanted to make a purchase. For me as a young man, that was a terrifying ordeal, because those credit control ladies take no prisoners. I had a tough job persuading Sheila and Gladys in particular that, although the nationwide banks might be a bit slow, they did have the wherewithal to honour our £5,000 invoice. The benefit of history might suggest that Sheila and Gladys were nearer to the truth than I was, but when I had my own business a few years later I soon understood why it took a certain type of person to be a credit controller. I rued the fact that I did not have a Sheila at my side to do the chasing.

The truth is that for small firms the end of the sale is often the beginning of the problems, which is why this debate is so important. The average small firm is spending 13 working days chasing money owed. This time is not being spent on developing sales or marketing strategies, buying more efficiently, training staff, taking on apprentices or developing new product lines; it is simply being spent pursuing money that they are owed for goods or services they have provided. This is not just about the weighted activity that small firms could be doing if they were not chasing money, because some late repayments mean the difference between life and death for firms which, although successful, simply run out of cash. Department for Business, Innovation and Skills figures tell us that 4,000 businesses failed in 2008 simply as a result of late payments. Those businesses were successful in their own right, but were brought down by a lack of cash flow because of not being paid.

The previous Labour Government worked with the Institute of Directors, the British Chambers of Commerce and the Institute of Credit Management to set up the prompt payment code in 2008. Is it transparent, but it is under-publicised. It is certainly not a silver bullet, but it is one of the weapons in the Government’s portfolio. To put the environment in context, there are 4.5 million small businesses in the UK and just under 6,500 large firms. All of us know that small and medium-sized enterprises are very much the lifeblood of the British economy, through their contribution to our tax revenues and to growth, so when we see an issue that is so desperately holding back our small businesses, it is only natural that this House should want to act.

In 2009, Labour’s last full year in office, there were 683 new signatories to the PPC, whereas, as has been said, in the first full year of this Government there were just 89. Even now, less than one fifth of all large firms are signed up, so the Government would be right to push for culture change, which is of course a part of the solution. The fact is that under this Government the situation has got worse. Intrum, Europe’s leading credit management services provider, says that in the past two years the UK’s payment index score has been progressively getting worse; in 2010, British and German performance was pretty much neck and neck, but in the past two years Britain’s score worsened, going from 150 to 161, whereas the Germans’ score went down to 147. German businesses have a known advantage: German small firms now know they will get paid earlier, giving them a clear commercial advantage over British firms.

In this period, too little progress has been made. Progress has been faltering on the PPC and, as has been said, on the EU late payment directive, a key weapon in Government’s armoury, we have seen U-turns and obfuscation. In September 2011, the previous but one Minister, the right hon. Member for Sutton and Cheam (Paul Burstow), said in answer to Labour calls for action that he would transpose these rules into UK law early. He then performed what many hon. Members will feel was a deeply unhelpful U-turn and wrote to MPs to clarify his earlier statement, saying that this would happen at some point by March 2013. Since then, we have had it confirmed that it will not happen a single day early and, as my hon. Friend the Member for Caerphilly said, some are sceptical about whether it will be properly in place by the date when it should be. The directive should now be in place by March 2013—the latest possible date. That sends a negative message from the Government about the importance they place on this issue, about which hon. Members have spoken so powerfully in this debate.

The supply chain finance scheme potentially reinforces the problem; it could positively institutionalise late payment as an acceptable business practice. Under the scheme, a bank is notified by a large company that an invoice has been approved for payment. The bank is then able to offer a 100% immediate advance to the supplier at lower than normal interest rates—but none the less, with interest—knowing that the invoice will ultimately be paid by the large company. That could exacerbate the problem, because large companies could further extend their payment terms as a result, potentially affecting suppliers outside the agreement and exacerbating an existing culture of slow and late payment.

It is not just Labour saying that. Janet Barton, a freelance credit controller and specialist in helping businesses manage their cash flow, has said:

“I have no idea why the Prime Minister thinks this is such a good idea. The large companies get to hold on to their money.”

Phillip King, chief executive of the Institute of Credit Management, said that his preference would simply be for people to pay on time.

One-nation Labour believes that everyone should play by the rules. It is unfair that local family firms should be threatened because large companies effectively use SMEs’ money to bankroll themselves. In government, we passed the Late Payment of Commercial Debts (Interest) Act 1998, which enables firms to charge interest and obtain compensation on overdue payments from customers. We set targets in the March 2010 Budget, tightening rules on late payment by the public sector and setting Departments the goal of paying 80% of undisputed invoices within five days and requiring them to do so within 10 days.

We realise that the problem cannot be resolved by legislation alone and that is why we set up the prompt payment code to make a moral case for large businesses to pay their suppliers on time and in a fair and responsible way. We worked alongside business bodies such as the Institute of Directors, the British Chambers of Commerce and the Institute of Credit Management to launch the code and to get 650 companies signed up. The code does not lay down specific tight deadlines on when payments must be made or place undue burdens on businesses. For large businesses with huge cash flows, it is not an onerous measure to sign up to. That is why we entirely support the spirit of the motion.

One nation Labour’s approach would be about much more. We have a small business taskforce that is informed by people throughout the business environment who consider how all Labour’s policies impact on small businesses. We want to see more transparency to encourage prompt payment, including in reporting requirements such as payment performance and through policies in firms’ annual reports and accounts. We will encourage Labour MPs to champion the prompt payment code on behalf of SMEs in their constituencies and to try to ensure that as many companies as possible in their constituencies are signed up. We are calling on Ministers to ensure that prompt payment is better enforced down the supply chains of all those firms that win Government contracts. Government contractors who repeatedly pay slowly or late should be stripped of public sector contracts.

We recognise that legislation alone is not the answer to the problem and we need the Government to demonstrate real leadership, making it clear to big businesses that late payment is not acceptable. We do not feel that Ministers have done enough to sign firms up to the prompt payment code.

A push on the prompt payment code is overdue but it is just the tip of the iceberg. The Government ultimately must decide whose side they are on. Will they send a one-nation message that they will support British firms in accessing their own money or will the collective voices of those small firms have to harry them along every small step on the way? The time for action is now.

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[Stephen Metcalfe]

I thank all hon. Members for their contributions to the debate, which has been very interesting and enlightening. It is rewarding to see such support for addressing this problem from Members on both sides of the House.

I congratulate the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) on her valuable campaign. I very much wanted to quote a lot of her statistics in my opening remarks, but felt that that would be stealing her thunder. I wanted to allow her to talk about that aspect. It is shocking that so many large companies have not signed up, and we must encourage them to do more. She was right to point out that it is an attitudinal problem that we somehow have to break. I am conscious that I spent a lot of time talking about the public sector, but of course the public sector is a large buyer from the private sector, and that is where the problems start.

My hon. Friend the Member for South Northamptonshire (Andrea Leadsom) made some excellent points and highlighted particular cases in her constituency that well demonstrate the problems we are facing. The hon. Member for Stockton North (Alex Cunningham) stressed that small businesses should not be acting as the banks for big business, thereby payrolling them.

The hon. Member for Caerphilly (Wayne David) talked about legislation that he would like to be implemented soon. The problem with legislation is that, regardless of whether it is on the statute book, if suppliers are too afraid to utilise it, then it will not necessarily solve the problem. Suppliers will be afraid of rocking the boat, biting the hand that feeds them, or whichever metaphor one wants to use. Instead, therefore, we need to change the culture. The hon. Member for Chesterfield (Toby Perkins) talked about one nation. In fact, this is about one notion, “Pay up and pay now”, because that is what will release the funds into our economy.

I thank the Minister for his very constructive remarks. I hope that he will look back at the debate to see whether there is anything further we can do. I was pleased to hear that he agrees that the public sector should pay—that is always a good start. He said that payment terms have got better and that people are now paying 1.3 days earlier, but it is also the case that the amount owed has increased above the agreed terms. The problem with the mystery shopper system, as I have heard from some people who did not wish to be named, is that in very short or narrow supply chains it is very easy to identify who phoned in and made the complaint.

Whether in the public or the private sector, people need to change the culture; they need to pay their invoices and pay up, because that will release billions of pounds into the economy and deliver what we want. Change the culture, release the funds, let us drive some growth. I thank everyone very much for their constructive comments.

Question put and agreed to.

Resolved,

That this House has considered the matter of stimulating growth through better use of the Prompt Payment Code.