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It's time the public sector paid on time

David Price

Prompt payment is set to be the biggest point of contention between government and the construction industry this year.

We already know that firms who are persistent late payers could be barred from public sector contracts from the autumn.

Yes, the weasel word ‘could’ has been used, which the more cynically minded might translate as ‘won’t’. But it shows, in theory at least, that the government is open to the idea that contractors might need a nudge to pay suppliers faster.

The person to do that nudging could be the small business commissioner (SBC), an independent public body set up by the government in December 2017.

Headed up by former Conservative MP Paul Uppal, it is designed to investigate payment disputes and mediate a resolution.

This week Mr Uppal will unveil a traffic light system to identify the best and worst payers, and he has previously called for more power to penalise offenders.

Right now the SBC doesn’t cover the construction industry as other payment dispute systems for the sector are already in place.

But last December a business select committee inquiry into payment practices singled out construction as being especially poor at paying on time and its key recommendation was to extend the SBC’s remit to cover the industry.

It is not just the handful of MPs on the business select committee, who took evidence at the Carillion inquiry last year, who want the government to intervene on prompt payment.

A survey of 100 MPs by the Association of Accounting Technicians revealed today that almost one in four favour a radical change in the government’s approach to payment issues.

Around 73 per cent either agree or strongly agree that the prompt payment code should be mandatory for all firms with more than 250 employees, that standard terms should be halved from 60 to 30 days, and that persistent late payers should face financial penalties.

On top of all this we also have findings from a government consultation into late payment by the minister for small business due out in the next few months.

Taking these developments together the direction of travel is clear – the government is gearing up for a more interventionist approach to improve payment practices.

Before it gets started though, it would be good if they got their own house in order.

In 2015 the government committed all departments to paying 80 per cent of undisputed invoices in five days and the remainder within 30 days.

CN’s analysis of the Cabinet Office payment data today shows this key department hasn’t come close to hitting this target since the first half of 2017.

And what’s more, the proportion of invoices meeting the target has been heading down.

When I speak to tier ones about prompt payment they invariably raise the point that payment doesn’t start with them, it starts with the client. And if the government, the largest client, isn’t paying on time, then there’s little hope of payments flowing down the chain in a timely fashion.

This is not to excuse poor payment by contractors, but a call for the government to do as Ray O’Rourke put it last year and “play its part” and settle its accounts promptly.

Whatever future announcements they then make on prompt payment will come with more weight if they are leading by example.

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