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Commercial Payments Bill [HL]

I am sure we do; I will speak to officials and make sure I share that information with all noble Lords.

This represents a significant strengthening of existing law, where payment terms of more than 60 days are often imposed on suppliers. Some smaller businesses argue that 60 days remains too long, while some larger businesses express concerns about the impact of maximum payment terms on working capital and established commercial arrangements. The 60-day period therefore represents a carefully considered balance between those competing concerns.

Amendments 2 and 11 would reduce payment periods either by creating a statutory expectation that the maximum period will be tightened in future or by reducing the cap for non-public authority purchasers to 30 days. Reducing the maximum period to 45 or 30 days may not work effectively across all sectors, particularly those with complex supply chains. Amendments 3 and 5 would move in the opposite direction, extending the maximum period to 35 days for public authorities and 65 days for other purchasers. The Government cannot support these changes either. The Bill’s 30-day period for public authorities is aligned with wider public procurement rules; extending those periods would weaken the Bill’s ambition and delay payments to suppliers, including small businesses.

Amendment 7, in seeking to define payment more clearly by reference to funds being received, could result in purchasers that have done their best to pay on time being punished for issues that are out of their control—for example, when a payment instruction has been made on time by the purchaser but is subsequently delayed by banking processes outside the purchaser’s control. The Government believe that the Bill provides sufficient clarity and improvement of payment practices, taking into account the need for businesses’ flexibility on how payments are made.

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Amendment 7 also seeks to bring advance payments and construction payments within the scope of new Section 2B, which would not be workable in practice. These exclusions are deliberate features of the Bill and are necessary to ensure that the different payment regimes operate effectively. Advance payments are due before the supplier has performed its relevant contractual obligation. It is right, therefore, that they are excluded from the payment terms provision. Once the supplier has performed its obligations, statutory interest may arise if payment is late.

In regard to Amendments 4 and 8, we have not consulted on any requirement that nationalised bodies adopt shorter payment terms of 30 days, and this goes beyond the policy intention of the Bill. Nationalised bodies are not public authorities and will be treated as other companies operating in commercial markets. We are cautious of unintended consequences and do not accept this amendment.

Amendment 25 would create an exemption from statutory interest where a payment was delayed because of a public holiday. Statutory interest is intended to compensate suppliers where payment is late. Creating specific carve-outs for non-working days would weaken that protection and introduce uncertainty.

Amendment 51 would prohibit purchasers forcing suppliers to use a particular payment method different from that specified in the contract. The Government do not consider this amendment necessary. Terms that are not agreed by the parties will likely be unenforceable, and if a purchaser withholds payments unless a supplier agrees to amend its terms, the Small Business Commissioner has the power to adjudicate payment disputes and investigate where a larger business persistently engages in poor payment practices.

Amendment 52 would create a right to instalment or staged payments for small undertakings where the contract duration is expected to exceed 45 days. The Government recognise the importance of cash flow for small businesses. The Bill addresses this by introducing a statutory maximum payment period of 60 days in most commercial contracts while allowing parties the flexibility to agree instalments or staged payments where appropriate. The Government do not consider it necessary to regulate such contractual arrangements in legislation or add further complexity and therefore do not support this amendment. Construction payments are dealt with separately in Clause 2, the new Section 2D payment terms for construction contracts.

Finally, Amendments 42, 43 and 100 concern special administration and insolvency moratoria. Amendment 42 is not required. Where goods and services are supplied

after a purchaser enters special administration, the Bill’s late payment provisions will apply. Special administrators are independent officeholders acting under court supervision and should not be treated as public authorities. Amendment 43 would cut across the established insolvency framework. Providing preferential treatment to one group of suppliers would disadvantage other creditors and undermine the purpose of the existing insolvency regime. Amendment 100 would require information that is not currently collected. Compiling it would create additional costs that would ultimately reduce whatever funds were available for distribution to creditors.

The Government remain committed to ensuring payment is prompt and terms are as short as possible. Alongside the Bill, the Fair Payment Code encourages businesses to move towards 30-day terms, and the Reporting on Payment Practices and Performance Regulations 2017, which were brought in by the previous Government, provide transparency over payment performance. We will continue to monitor the impact of these measures and consider carefully whether further action is required. For that reason, I respectfully ask the noble Lord to withdraw his amendment.