Hammond’s late payment plan won’t cut it, experts warn

Applause for Philip Hammond’s anti-late payment package at Spring Statement 2019 to help out-of-pocket contractors is being drowned out by support for more edgy alternatives.

The chancellor’s plan for firms to make a non-executive director responsible for paying suppliers promptly was initially hailed by the FSB as a potential “end to late payments.”

Mr Hammond’s accompanying vow to force audit committees at these big firms to publish payment practices in their annual reports seemed to justify the overly positive reaction.

'Late payment isn't going to end'

But the proposal -- to be consulted on – is unlikely to make much difference, warns Brian Palmer, policy expert at the Association of Taxation Technicians. He told ContractorUK:

“The audit committee reporting proposal announced at the Spring Statement isn’t going to end the late payments scourge that leads to almost a quarter of all business insolvencies.”

He added: “Large companies are already legally obliged to publish pay data in the public register, and simply tightening reporting requirements by getting them to report it elsewhere doesn’t lead to better practice.”

'Holding pattern'

Contractor body IPSE is another that recognises that the government’s good intentions do not translate into tangible actions to improve the pay conditions small suppliers contend with.

“The government is making a concerted effort to address the scourge of late payment, [but] it does appear to be locked in a holding pattern of consultations on this [issue]”, it said.

The terms for supplying a big firm are often 120-days but even then, according to the ATT, money will not necessarily hit the supplier’s account after their wait -- of almost four-months.

'Flouted'

“There is a culture of organisations disputing fees in full or in part, during or after the period, which can increase further the time it takes to get paid,” the association said.

Revised in 2015, the Prompt Payment Code was supposed to tackle this problem, but the government last year admitted that even though it is voluntary, the code is still “flouted.”

It is also not properly policed, or as Mr Palmer described it, there is “little appetite for kicking [signatories] out of the code or otherwise punishing them” for not abiding by it.

'Promptly'

Under the code, organisations cannot change payment terms retrospectively; must notify suppliers “promptly” of any delay to payment, and must pay within a maximum of 60 days.

To tackle late payment more effectively, Mr Palmer says, the government should halve the maximum payment term to 30 days, and mandate the code for all employers with over 250 staff.

He added that more than seven in 10 MPs have signalled that they would back such changes to the code, as do all of the MPs who sit on the Business, Energy & Industrial Select Committee.

Other recommendations last month from the committee, which extend to the more aggressive fining of outfits if they pay suppliers late, are being endorsed by IPSE.

'Persistent'

And the ATT agrees that financial sanctions must be inserted into both the Prompt Payment Code and the arsenal of the Small Business Commissioner.

“[The code should be] supported by a clear, simple financial penalty regime for persistent late payers, enforced by the Small Business Commissioner,” Mr Palmer said yesterday.

“The BEIS Committee backed these changes in a recent report on small business productivity, and therefore we can be hopeful of such changes being announced in the coming months, following the current consultation.”

'If it helps'

The CBI, the employers’ organisation, is among those who will watch for such developments on late payment with interest, as it too sounds unsure if the chancellor’s plan is going to cut it.

“Prompt payment practices are good for businesses throughout the supply chain, so if [audit committee] reporting encourages better behaviour from firms that should be welcomed,” it said.