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Commercial Payments Bill [HL]

That was a hint to rise. I will speak to my Amendment 52, but I must first apologise to the Committee that I was unable to speak at Second Reading, my scrutiny hours having been occupied in the passage of another Bill, which also accounts for why this was rather a last-minute—almost literally—amendment, so there was no pre-discussion with anybody, but I would have liked to give it some airing.

I wholeheartedly support the core intention of the Bill, and I will make no secret of the fact that I would have preferred an immediate 45-day limit rather than 60 days. But scanning through the Bill and the amendments once I was released to have the time to do so, it seemed to me that there is a blind spot in that there were no rules to ensure that small businesses could receive stage payments, leaving them at risk of being forced to rely on end-of-contract invoicing. In some instances, way-stage payments may be agreed, but many businesses feel that they cannot take the risk to bid for a contract in the first place. Others are exploited and put dangerously at risk of non-payment in contractor insolvencies, the very issues that the Bill seeks to resolve, so there is a huge loophole.

In the Government’s own consultation phase last year, small business federations and independent suppliers explicitly warned against an invoice-centric blind spot. Yet here we are, with it unsolved. We do not need to look far for a solution. Stage payments have been a standard procedure in construction for 30 years, so why not follow that precedent? If it works for construction, why not for the wider economy?

My amendment proposes a simple entitlement: for contracts exceeding 45 days, small undertakings—which I have defined as having up to 50 employees—must have the right to invoice at intervals of no more than 45 days. If you do the sums on this, under my amendment a small firm must fund its own costs for 45 days before

invoicing, but then it still has to wait up to 60 days for payment. That is 105 days, or three and a half months, before a single penny arrives, during which all the salaries and business costs have to be paid. That is still an enormous burden. But without this amendment, that gap is effectively uncapped.

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If we really want to support the small businesses that are the backbone of the economy, we must stop asking them to act as the interest-free bank for big business. If large contractors employed their own staff, they would not be able to delay paying those salaries for months on end, so why should they be allowed, effectively, to do that to their suppliers? I do not claim my amendment is perfect. In reality, I am being generous to large undertakings. The ultimate standard should be the monthly invoicing cycle we see in Section 109 of the construction Act 1996. My proposal is a modest, pragmatic bridge towards that standard—noble Lords might note my 45 days is half way between the 60 days and the standard of the construction Act. It would close a loophole that would otherwise render the 60-day cap toothless in many circumstances.