Charitable Registration

Debate between Stephen Metcalfe and Fiona Bruce

Tuesday 13th November 2012 Westminster Hall

[Fiona Bruce]

I thank my hon. Friend for raising that point. I have read the debate that he mentions, and I give credit to him, because he raised these concerns and he was given assurances, but those concerns are now coming to pass. The implications that he highlights go to the heart of religious freedom in this country—that is how far this issue goes.

The concerns highlighted today are shared by a great number of other Members, who were unable to attend, because they have other commitments, but they have asked me to put on record the fact that they support my concerns. They are my hon. Friends the Member for Salisbury (John Glen), for Enfield, Southgate (Mr Burrowes), who is now here, for Mole Valley (Sir Paul Beresford), for South Northamptonshire (Andrea Leadsom), for Macclesfield (David Rutley), for North Swindon (Justin Tomlinson) and for Sittingbourne and Sheppey (Gordon Henderson), the hon. Member for Glenrothes (Lindsay Roy), my hon. Friends the Members for Crawley (Henry Smith) and for Waveney (Peter Aldous), my right hon. Friend the Member for Chesham and Amersham (Mrs Gillan), my hon. Friends the Members for Fylde (Mark Menzies), for Wellingborough (Mr Bone), for Loughborough (Nicky Morgan) and for Lincoln (Karl MᶜCartney), the hon. Member for Strangford (Jim Shannon) and my hon. Friend the Member for Reading East (Mr Wilson). If I have read out the name of anyone who is here, I apologise.

In closing, may I reiterate what I said at the outset: I am not an expert in this field, and I have had to research and come to understand it?

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

Will my hon. Friend give way?

[Fiona Bruce]

Why break the habit of a debate?

[Stephen Metcalfe]

I am incredibly grateful to my hon. Friend. Does she agree that the Charity Commission should have spent a little less time going down the legal route and a little more time talking to people in the community? I have had the privilege of working with the Brethren for more than 20 years in a professional capacity—my family’s firm used to do a lot of their printing—and a lot of the things described as public benefit are real and genuine. If the Charity Commission had got out and talked to people who engage with the Brethren, but who are not part of the Brethren, it would have found that the public benefit spills well into the wider community, as I have seen. Surely, public benefit can be what is set by example, as well as what is practised in a religious sense.

[Fiona Bruce]

I thank my hon. Friend for that. On that point, I shall rest our case.

Prompt Payment Code

Debate between Stephen Metcalfe and Fiona Bruce

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.