The Lib Dem manifesto vow to make the Prompt Payment Code enforceable is all well and good. What we need is political action

Another election, another raft of promises by the leading parties both to the public at large and to businesses, including the smallest hardest-working ones like contractors.

One promise that has grabbed our attention is the reference to the Prompt Payment Code (PPC) in the Liberal Democrats’ manifesto., writes Adam Home, managing director of contractor debt recovery specialists Safe Collections.

We recently wrote about the PPC and how, as the cornerstone of government policy to tackle late payments, it has comprehensively failed in the 16 years since it was introduced.

Why? Because the PPC is only a voluntary scheme that in effect tells big businesses they can choose whether to treat suppliers fairly when it comes to paying invoices. So of course, many choose not to.

What is the Prompt Payment Code manifesto pledge by the Liberal Democrats?

In their manifesto, ‘For a Fair Deal,’ the Lib Dems write that they will:

"Tackle the late payments crisis by requiring all government agencies and contractors and companies with more than 250 employees to sign up to the Prompt Payment Code, making it enforceable."

You never get much in the way of detail in political manifestos. And the wording is no doubt intentionally vague to give parties wriggle room when they subsequently fail to deliver on their pledges in government.

But what the pledge’s wording indicates is that a Sir Ed Davey-led government would:

• make the PPC mandatory for businesses that fall into the categories mentioned, and
• back it up with enforcement.

Here’s the best bit about the Lib Dems PPC manifesto pledge

Let’s start with the positives.

It’s heartening that at least one major political party deems an issue that costs UK SMEs more than half a billion pounds a year worthy of including in an election manifesto. You’d think, with 4.25 million voters working as contractors or otherwise self-employed, and another 16 million-plus employed by SMEs, that the Conservatives and Labour might have followed suit.

And that’s where enthusiasm and positivity starts to wane, unfortunately.

What about the PPC today?

The PPC was dreamt up and introduced by a Labour government in 2008, and it has been sustained with only minor tinkering by the Conservatives ever since.

We’ve written previously about the ineffectiveness of Tory ‘reforms’ to the PPC, including putting it under the remit of the Small Business Commissioner which the party created when it was in office.

To this day, the PPC remains a voluntary code. Contractors and businesses are still left battling to manage cashflow largely on their own, with thousands of pounds worth of unpaid invoices outstanding.

But let’s just imagine for a moment that the new government, whoever that may be, wakes up on July 5th 2024 and all of a sudden sees the light. ‘Late payments!’ they say with new-found vision. ‘They’re helping force businesses under in eye-watering numbers each year (50,000 to be exact).’ ‘They’re hamstringing the economy. Why are we putting up with it? It’s time for action!’

So would the Lib Dem pledge of making the PPC enforceable be the answer?

The part about ‘requiring’ businesses to sign up for the PPC - that sounds like more fiddling around the edges. Sixteen years on since it was introduced, there has to be a recognition that the PPC is not the solution, mandatory or not. The late payment crisis has gone far beyond requiring a ‘code of conduct’ to fix it. It needs firm, statutory rules.

On that front, the mention by the Lib Dems of “making it enforceable” is more encouraging.

But the key question is how. The suggestion of an ‘enforceable’ code is predictably (and depressingly) vague and non-committal. Nice words, yes. But the long-suffering contractor and SME owners of this country need actions, not words.

How to fix late payment culture in the UK, once and for all

What kinds of actions? There’s plenty to be done. Starting with legislating to cap payment terms for ALL invoices, preferably at 30 days, to provide suppliers with consistency and predictability.

Then strengthening and clarifying the penalty costs that suppliers can charge for late payment so they become an effective and widely understood deterrent. Followed by fixing the broken and under-funded civil court system that allows creditors to claim what they are owed when payment is not forthcoming!

Late payment culture will not transform into a prompt payment culture because businesses suddenly see it as the right thing to do. Change will only come when paying late hurts businesses -- financially

Final thought

So sadly, despite the nice-sounding intentions of the Lib Dems, it looks like another election cycle will end without our politicians showing the mettle to banish the scourge of late payment by not picking up the only tool for the job: penalties.