Below is the text of the speech made by Kelly Tolhurst, the Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy, in the House of Commons on 19 June 2019.
With permission, I wish to make a statement about the Government response to the “Creating a responsible payment culture” call for evidence, which I have published today.
The Government are committed to supporting small and medium-sized enterprises to start well and grow, including through a network of 38 growth hubs throughout England that provide advice, guidance and support. As part of our industrial strategy, we have an action plan to unlock more than £20 billion of investment in innovative and high-potential businesses. Where we see practices that unfairly constrain SMEs’ finance choices, we are prepared to act. For example, we recently removed a barrier that was preventing some SMEs from using invoice finance because of prohibitive contract terms imposed by their customers. The new measure is expected to provide a long-term boost to the UK economy worth almost £1 billion.
Last year, we launched a call for evidence asking for views on how to create a responsible payment culture for small business. Although a number of measures are already in place to tackle late payment—from the prompt payment code to the ability to charge interest on late payments and the increased transparency through the payment practices reporting duty—the call for evidence told us that there is more to do to improve the payment landscape. That is why I am announcing today that I will now take further and firmer action to tackle the scourge of late payments while maintaining a holistic approach to cultural change by using all the avenues available to us in this space.
I will shortly launch a consultation to seek views on strengthening the small business commissioner’s ability to assist and advocate for small business in the area of late payments through the provision of powers to compel the disclosure of information. I will also seek views on the merit of the commissioner’s potentially being able to issue penalties for poor payment practices. In respect of large businesses that have poor or unfair payment practices, we want to seek views on whether the commissioner should be able to apply sanctions, such as binding payment plans or financial penalties.
I am also announcing today that responsibility for the voluntary prompt payment code is to move to the small business commissioner and be reformed. This will unify prompt payment measures with the commissioner’s other responsibilities and address weaknesses in the operation of the current code. We have seen the impact of the strengthening of the code since our announcement in October: earlier in the year, we saw the removal from the code of five businesses and the suspension of 12 others. The next compliance round is currently under way.
I will take a tough compliance approach to large companies that do not comply with the payment practices reporting duty. The legislation allows for the prosecution of those who do not comply. I will use this enforcement power against those who do not comply, where necessary. We are already writing to the businesses that we have assessed as being within scope to remind them of their duty.
The Government will launch a business basics fund competition, with funding of up to £1 million, which will encourage small and medium-sized enterprises to utilise payment technology. We have recognised that tech adoption has had a positive impact on the productivity of small businesses. This competition is coupled with the small business commissioner’s strategy to deliver advice, signpost and provide a clear pathway for small businesses when they feel that they need support.
I also intend to establish a ministerial-led group to bring together key Government Departments to act on improving prompt payment across both the public and private sectors. We are working with UK Financial Investments and the financial sector to review the role that supply chain finance plays in fair and prompt payments, including the potential for an industry-led standard for good practice in supply chain finance. This review will report back to the Business Secretary by the end of the year.
We also want to bring greater transparency to how supply-chain finance is reported in company accounts and assessed in audits. Working with the Financial Reporting Council, we want to develop guidance and build that into its sampling of companies’ accounts. Supply-chain finance can provide an affordable finance option for SMEs, but they need to be assured that the terms are fair.
Our modern industrial strategy aims to make Britain the best place in which to start and grow a business, and removing barriers to growth is key to that aim. The response to the call for evidence and the package of measures that I am announcing today will ensure that we will continue to tackle the issue of late payments. I offer great thanks to the Federation of Small Businesses and its Fair Pay campaign, which has campaigned so hard for movement from the Government. I also thank the hundreds of businesses that have taken part and engaged comprehensively with the Department in assessing the call for evidence.
Finally, I thank the Business, Energy and Industrial Strategy Committee for its significant work on this issue and the work that it will continue to do. I am sure that it will hold us to account on the improvements that we are announcing today. I will place a copy of the Government’s response in the Libraries of both Houses today. I commend the statement to this House.