‘Call for Evidence’ a Sign the Government Still Hasn’t Got a Handle on Late Payments

It feels like we have been here before somehow. Lots of well-meaning words, a tough-sounding stance… and then what? Rinse and repeat.

The latest announcement from the government on the subject of late payment culture has come in the form of a “call for evidence” from Small Business Minister Kelly Tolhurst specifically on how to end the abuse of SMEs by large corporate clients.

The government details two specific areas up for consultation - namely, how to make company boards take more responsibility for ensuring payment terms are met and how technology can be used to improve practices. One of the ideas floated is to make large businesses appoint a non-executive director with a specific remit for payments. Another is to hand trade bodies powers to highlight best and worst payment practices, presumably armed with data sourced from accounting software.

This all came hot on the heels of an announcement by Business Secretary Greg Clark that government departments were to themselves set an example on prompt payments with a target of resolving 90% of disputed invoices within five working days. Clark also revealed that the government’s Small Business Commissioner, Paul Uppal, would now sit on the Prompt Payment Code’s Compliance Board. The Prompt Payment Code is the voluntary set of best practice guidelines on payment practices originally introduced in 2008.

Still waiting on enforcement

None of this is unwelcome. Far from it. It is great to hear government ministers talking about the country’s 5.7 million SMEs as the ‘backbone of the economy’ and stating that the elimination of late payment culture is part of the country’s industrial strategy going forward.

But, at the risk of repeating ourselves - we’ve been here before. The evidence that late payment culture badly compromises the ability of SMEs to fulfil their economic potential has been readily available for years. The real questions have to be why we are still only talking about eliminating it.

The Prompt Payment Code has been around for 10 years but has failed to do its job. For evidence of the fact that many large organisations pay little more than lip service to it, you need look no further than the fact that disgraced construction giant Carillion signed up to its 60 day maximum payment pledge - and then infamously forced 120 day terms on hard-up contractors as it squandered millions in taxpayers’ money.

It is good news that the government has finally woken up to the idea of having a representative of small business interests on the code’s Compliance Board. It is good news that the government wants to set a good example by getting its own house in order on payments to SMEs and independent contractors. It is good that the government is talking tough about eliminating late payments to small businesses.

But until we stop talking about voluntary codes of practice and see a commitment to enforce payment regulations through law, there is no guarantee that small businesses will ever be adequately protected from the worst excesses of late payment culture. And so we will keep retreading the same old ground.

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