To ask Her Majesty’s Government what plans they have to extend the powers of the Small Business Commissioner to deal with late payments for small businesses and freelancers by (1) allowing the Commissioner to deal with complaints against companies with fewer than 50 employees, and (2) requiring the chief executive officers and chairs of offending companies to respond to the Commissioner.
My Lords, we have consulted on extending the scope and powers of the Small Business Commissioner, including extending their scope to deal with complaints against a small business by a small business, and the power for the commissioner to compel information from a business in relation to a complaint. We are working through the impact of any changes with the new commissioner to better understand the resourcing implications of each option and the likely impact on businesses.
My Lords, three-quarters of self-employed people suffer from late payments; many of them do not get paid at all and the situation is getting worse. It adversely affects their business and a lot of their valuable time is taken up with chasing unpaid invoices. Why, on such an urgent issue, when the consultation finished last December, have the Government still not come forward with proposals? When will proposals be forthcoming?
The noble Lord makes a good point, and I very much sympathise with his concern. However, we received a lot of replies to the consultation and are currently working through the options. He will be aware that any proposals in this area will require primary legislation and have resourcing implications for the Small Business Commissioner, so we are currently working through all the options.
Lord Flight (Con)
My Lords, the tidying up of late payment problems without hurting trade still needs to be addressed by both larger and smaller companies. What does the noble Viscount envisage the Small Business Commissioner needing to help to deal with the problem of requiring senior company officers to explain their position to them? How does he envisage that those arrangements will improve the situation?
I apologise to my noble friend, but I did not quite catch all of his question. This is a serious problem. The Small Business Commissioner is newly appointed, and she is still getting to grips with her role. To be fair to the previous commissioner, since December 2017, the commissioner has recovered more than £7.8 million owed to small businesses. A lot is happening in this area, but I totally accept that we need to do more.
My Lords, will the Minister please say whether, in the trade agreements on which the Government are embarked, there will be some provision so that overseas companies pay their UK customers promptly?
These things are all extremely important. I do not know whether there are any specific provisions in trade agreements on prompt payment, but I shall certainly have a look and write to the noble Lord about it.
My Lords, does the Minister agree that the key problem for many freelancers, including creative professionals, is that they are caught between what sometimes feels like an ingrained culture of late payment and not being able to challenge for fear of losing work? Ultimately, we need a system that automatically penalises late payers without the aggrieved party having to raise its hand.
The noble Earl makes a good point. I remind him that UK legislation already establishes a 60-day maximum payment term for contracts for the supply of goods and services between businesses, although those terms can be varied if they are not grossly unfair to the supplier. We also have the prompt payment code. We have received more than 50,000 reports from businesses that they are abiding by the prompt payment code, but there is always more to do on this.
Lord Cunningham of Felling (Lab)
My Lords, I have been in Parliament for a long time—perhaps people would say for too long. For all that time, late payment has been a problem under Governments of both major parties and the coalition Government. Why is it such an elusive problem? Why is it so difficult to find a solution to what is damaging to small and medium-sized businesses?
I would never say that the noble Lord has been in Parliament too long. We need more representatives from the north-east in Parliament, for as long as possible—says he in a self-congratulatory way. The noble Lord is right. It is a difficult and complicated problem which Governments of all persuasions have grappled with. It is different in different industries, with different suppliers for small businesses and large businesses, but there was a commitment in the Conservative manifesto to crack down on late payment. That is why we launched the consultation. We are currently working through the responses. We will need primary legislation to implement it. The noble Lord will know, from his time in government, how tricky it is to work through those problems.
Can my noble friend ask his department to look at what happens in other countries, to see which countries do better than we do and what lessons we can learn?
My Lords, the Small Business Commissioner’s role is limited in relation to construction companies. For example, she can deal with complaints from small construction firms about payment disputes only with larger firms which are signatories to the prompt payment code. Why then can she not deal with the same complaints when the bigger firm is not a code signatory? Will the Minister look at extending the commissioner’s role to provide full support to small construction businesses?