Charlie Elphicke: Big businesses should pay small businesses on time

Charlie Elphicke is the Member of Parliament for Dover and Deal. Follow Charlie on Twitter.

Late payment is a big issue for small businesses. It costs jobs. It drives companies under. It harms growth. My last article looked at steps the Government is taking to get the public sector paying on time. In this article I am focussing on what more can be done to get the private sector, especially big businesses, paying on time. It’s a good move for the Government to ask big businesses to sign up to a voluntary code, yet further action should be taken.

For example, and as I argue in detail below: reform the Late Payment of Commercial Debts Regulations, tighten up the Prompt Payment Code so signatories must pay within 60 days and, more radically, set up a “Bank of Prompt Payment” to chase big businesses for late payments without repercussions on small businesses.

Small businesses need to maintain cash flow in order to stay afloat. They lack the cash reserves which big businesses have. So it’s a real concern when large businesses fail to pay smaller businesses on time. In the most recent Federation of Small Businesses (FSB) survey, 57% of small businesses reported late payments from other businesses. This was almost double the previous survey which showed 34% of small businesses suffering late payments from other businesses.  More importantly, the figure was 60% when it came to big businesses.

The Government, as suggested by the FSB, is encouraging big businesses to sign up to the Prompt Payment Code. It is using the threat of naming and shaming to encourage businesses to join, and it has had real success with this campaign. Over 75% of the FTSE 100 have signed up to the code, and the number of FTSE 350 companies signed up has tripled.

Yet the Prompt Payment Code is no silver bullet - especially as signatories only have to pay within the time period set out in the contract. This has led to stories of big businesses which are Prompt Payment Code signatories, including long payment periods in their contracts. One company is said to have introduced 120 day payment terms in their contracts. That’s four months. Firms are able to access payments earlier than this, but are subject to a fee. Such moves may be within the letter of the Code, yet are clearly against its spirit and are totally unacceptable.

Charlie Elphicke MP: The state should pay small businesses on time

Charlie Elphicke is the Member of Parliament for Dover and Deal. Follow Charlie on Twitter.

Late payment to small businesses costs jobs. It stunts economic growth. Late payment by government is particularly unacceptable. Recent figures show that unaccountable quangos are the worst offenders. The Government was right to launch Prompt Payment Day. Yet more could be done: the “Prompt Payment Code” made compulsory for all public organisations, “Project Bank Accounts” rolled out across Government, budget cuts for late payers, while Government contractors that pay small business suppliers late should be fired.

Cash flow is one of the biggest problems which are faced almost exclusively by small businesses. Large multinationals have the cash reserves to take a hit when someone pays them late. For the small business it can be deadly. According to the Federation of Small Business (FSB), more than 70% of small businesses have experienced late payment in the last twelve months. This is unacceptable. Small businesses simply don’t have the money to go after late payments in the courts. Small wonder, then, that two thirds of small businesses have had to write off invoices, with 20 per cent reporting that they have lost more than £5,000 in the process.

It is therefore very welcome that the Department for Business, Innovation and Skills has launched Prompt Payment Day. This is designed to encourage organisations to pay their supplier on time. Businesses are also being encouraged to sign up to the “Prompt Payment Code”, a voluntary code whereby they agree to pay their suppliers on time. Many public sector organisations have signed up.

However, the reality hasn’t quite lived up to the ideal. In the most recent FSB Annual Survey, 24 per cent of respondents indicated that they had experienced late payment from the Ministry of Defence, 32 per cent with Central Government, 37 per cent with the NHS and 32 per cent with EU Institutions. Worst of all, 39 per cent of respondents reported that they had late payments from Government Agencies and Quangos.

Charlie Elphicke MP: One week on, what are the lessons from the local elections?

Charlie Elphicke is the Member of Parliament for Dover & Deal. Follow Charlie on Twitter.

Last week the White Cliffs of Dover remained blue.  They did not go red. They did not go purple. The Conservatives beat off Labour and came first in the popular vote.

Why? Because we were clear what the election was about. We didn’t talk about the things we would like to do. We set out what we had done. The port Labour wanted to flog off to the French or whoever saved and forever England. The hospital Labour decimated about to be replaced with a brand new hospital. The Council Tax Labour had spent years jacking up frozen. Action to boost jobs and money with a regional growth fund and moving forward regeneration projects that stalled under the last failing Labour Government. The election choice was clear. A Conservative Party able to point to real achievements against Labour’s past failures and lack of new ideas. People don’t believe what you say, they believe what you do. And being able to point to a strong record of action made a real difference in a difficult set of mid term polls.

It’s the same nationally as it is locally. We should time and again point to Conservative achievements in office in contrast to Labour’s past failures and lack of ideas. A record of concrete action we can show that we have done in Government:

• Economy: Growth of 0.3% last quarter showing the economy is healing, record low interest rates, the deficit down by a third and 1.25m new private sector jobs
• Cost of living: A tax cut of £600 for 24 million people, with 2.2 million out of tax altogether, while Council Tax has been frozen for 3 years and the longest fuel duty freeze in 20 years with pump prices 13p lower than under Labour’s tax plans and energy companies are being made to put customers on the lowest tariff
• Immigration: Has been cut by a third. In addition, tough action has been taken on sham marriages and to sort out the organisation of our border security. New measures being brought in to tackle benefits and health tourism from EU states and elsewhere – much of which is work in progress with stronger results likely to be seen over the next year that we will be able to point to as concrete achievements.
• Welfare reform: Universal credit is action to make work pay and unleash the potential that is in every one of us, benefits are capped at the average earnings level of £26,000 while the Youth Contract has been set up to tackle youth unemployment.

Charlie Elphicke MP: Balls is a deficit denier who has learned nothing and forgotten nothing

Charlie Elphicke is the Member of Parliament for Dover and Deal. Follow Charlie on Twitter.

As soon as some money wafts by Ed Balls can be relied on to grab it and misspend it. The 4G auction episode shows how hopelessly addicted to spending they still are. £4Bn? Nevermind the deficit and £1trillion of debt, let’s spend the lot!

Labour say they would use the money for youth unemployment and social housing. Yet their record on youth unemployment in the last Parliament was dismal. At the time of the 2005 General Election, youth unemployment was 613,000 – it rose 52% to 929,000 by the end of the Parliament. A fact they would rather you forgot when they lecture the Government on a rise of less than 10% under the Coalition.

Charlie Elphicke MP: David Cameron stands strong on Europe

Charlie Elphicke is the Member of Parliament for Dover and a member of the Public Administration Select Committee.

Most Conservative MPs, myself included, are exasperated by the European Union. Meanwhile people across Britain tell pollsters they want some sort of referendum to express a deep felt disgust with the whole thing. There is annoyance that the EU costs a fortune and continually makes laws that hamper our country’s future success. To cap it all they’ve made a complete pigs ear of the Euro and threaten to plunge us all back into recession.

Ahead of the EU Summit, David Cameron made it clear that his priorities were to support the survival of the Euro and protect the City of London. By sticking to his guns and refusing to give in last night he has shown real strength. Some say we should allow the Euro to fail – maybe even help it along – and that the repatriation of things like the social chapter is a greater priority than our financial services industry.

The Government’s first priority was and is to avoid the Euro falling apart. This is the right thing to do. The bottom line is that about half of our international trade is with the EU. We have more trade with Ireland than with the BRIC countries put together. If the Euro were to fall apart there would be serious economic dislocation. Commentators warn this would lead to a severe recession on the continent. Rather than the stronger economic growth expected at the back end of 2012, the UK would instead likely suffer a recession on a similar scale to 2008/9. A big downturn at a time when we are still economically weakened from the most recent recession is not a gamble any sensible Government would take. The Government is therefore right to do its best to help hold the Euro together. It may not be possible, but the Prime Minister has certainly done all he can.

Charlie Elphicke MP: Labour would saddle you with £8,000 more debt

Charlie Elphicke is MP for Dover and a member of the Public Administration Select Committee.

Labour like to say the Coalition is going “too far too fast” on cutting the deficit. What they mean is they would like to saddle you with £8,000 more debt than the Coalition. Yesterday, Ed Balls was at it again, denying on Sky’s Murnaghan show that Labour would borrow £100Bn more than the Coalition over the course of this Parliament. In fact, the extra borrowing under Labour’s plans to the end of 2014/15 would be £96Bn.

It may be £100Bn extra borrowing this Parliament. But the numbers are even larger when you look at how much extra borrowing Labour would saddle us all with by the time the structural deficit is eliminated. The Coalition plan is for structural budget balance by the end of 2015/16. Under Labour’s plans, budget balance would not be achieved until the end of 2017/18. The difference in the extra borrowing by the time a balanced budget is achieved? Getting on for £200Bn. That’s equivalent to £8,000 of extra debt per household – a new car or a new kitchen. So when Labour says “too far too fast”, the answer is “no to Labour’s £8,000 debt bombshell”.

Charlie Elphicke MP: We have a right to know how our money is spent

Charlie Elphicke is MP for Dover and a member of the Public Administration Select Committee.

It’s sort of a rule in politics that the more boring something sounds, the more likely it is to be interesting. So is proving to be the case with my investigation of the “Government Procurement Card”. Behind the sort of name that sends you to sleep lies a credit card system that allows civil servants to incur work expenses.

While people in the private sector have to spend an age demonstrating to their bosses why their expense receipts should be signed off, civil servants can just pop it on the Government credit card. Even better the detailed audit trails have, until now, largely remained hidden and, being small amounts, are generally not subject to the new £500 expenditure transparency rules which are about to be implemented.

Yet these expenses are subject to Parliamentary questions and I have obtained detailed reports on what civil servants have been expensing. The National Audit Office, the Government spending watchdogs, have enjoyed fine dining at posh London restaurants and luxury foreign hotels – along with the odd bit of shopping at Sainsburys and Argos. While over at the Ordnance Survey it's more caviar, designer sunglasses, hotel chocolat, the usual luxury hotel stays on the public ticket along with, yes, doing a bit of shopping down at the local Tescos. Officials at the OFT have enjoyed the hospitality of Hooters while at the Department of Health taxpayer's money has gone on nights out at gay nightclubs and finger puppets.

Charlie Elphicke MP: Where will jobs and growth come from?

13.6m people work in Small and medium sized enterprises (SMEs) – 6 out of 10 private sector workers. Big business accounts for 9.2m jobs - 4 out of 10 of UK private sector workers. The graph shows the jobs splits between SMEs and big business since 1994:

It is noteworthy that SMEs have been the UK job creators, responsible for 1 million more jobs since 2001. Meanwhile, big business employment has fallen by 1 million over the same period.

Will that continue to be the case? One guide is to look at the job vacancies table in the ONS' Labour Market Survey (although it should be noted that this does not include start up one man bands and many SMEs fill jobs informally).  The trend is that big business vacancies have been falling in recent times. In late 2008, big business vacancies were 361,000 while small business vacancies were 197,000. The latest figures are small business vacancies at 189,000, while big business is down to 279,000. So it looks as though smaller businesses are still set to be the job creaters.

Government policy on jobs should focus on where the jobs are being created in our economy.  We need to look at where the jobs are, not the size of the business. It is important to ensure that businesses in a position to grow are incentivised and encouraged to steam ahead, enjoy success and create the jobs and money that will drive our economy out of Labour’s recession.

This is why the Government is right to have allocated funds for 50,000 apprenticeships focussed on SMEs and to have axed Labour’s Future Jobs Fund. The Future Jobs Fund only applied where 30 or more jobs were being created or more jobs were being created (i.e. big business or public sector only) and cost £7,500 of public money per job. The “jobs” created are basically make work fake jobs in the public sector. The Coalition’s policy on the other hand costs £3,000 per apprenticeship, means real skills are learned on the job and is highly targeted on new jobs in growing parts of the wealth creating private sector.

Charlie Elphicke MP: Does small business really matter?

Discussion of a “growth agenda” for the UK has seen dividing lines drawn between backers of big business and supporters of small enterprise. We are told some Government departments want to cosy up to the big boys, while others are said to be lining up behind the small enterprises. Who is right?

Small business - SMEs - are businesses with less than 250 employees. Delving into the figures published by the Department for Business shows that SMEs account for 6 out of 10 private sector workers. 13.6m people work for SMEs, while 9.2m work for big businesses. The graph below shows the trend. Since 1994 SMEs have become increasingly important in the employment arena, while big business employment numbers, having risen up to 2001-2002, have since fallen back towards 9m:

What about the money? Big business may account for only 4 out of 10 private sector jobs, but is responsible for just over half of private sector turnover. In the turnover stakes, SMEs and big business have been pretty much tied over the last decade and a half:

What then are the implications when it comes to planning the future growth of the UK economy? First, SMEs really matter. They account for most of the UK’s private sector jobs. They are responsible for half of the UK’s private sector turnover.  And it can be seen from the jobs graph that SMEs have so far shown resilience in the face of the downturn. When it comes to increasing the structural growth rate of the UK, SMEs have a central role to play.

Charlie Elphicke: How Labour has made the very poorest in society even poorer

Charlie Elphicke is PPC for Dover, a regular contributor to the CentreRight blog and a research fellow at the Centre for Policy Studies. Here he summarises his new paper, A House Divided, which is published today and is available to dowload at the CPS website.

Do you remember those heady days back in 1997 when the country was swept with a new hope following the Labour landslide?  Even I, a tribal Tory, wanted to believe in the same way Americans wanted to believe in Obama.  The nation believed that things were going to be different. That change would bring about a better future. That we would, in the words of the 1997 Labour Manifesto “build a Britain we all feel part of” and “tackle the division and inequality in our society.”

Yet hope was drunk.  Nowhere more so than for the poorest in our society. Twelve years on, the gap between the richest and the poorest in our land has increased as my paper published today with the Centre for Policy Studies explores. The rich are richer and the poor are poorer.

The 5 million poorest households are paying more in tax and receiving less in benefits than when Labour came to power, a difference that adds up to £1,300 per annum. And when you have an income of just £4,651 a year that’s a serious amount of money: the effective tax rate for the poorest is actually higher than that for the richest.

Budget Day: Our panel members give their verdict

This morning we posted the Budget hopes of ConservativeHome's expert panel of political figures and commentators in their respective areas of interest or expertise. Did Alistair Darling deliver what they hoped for? Their responses will be posted during the course of the afternoon.

5pm

Jill Kirby, Director of the Centre for Policy Studies, on The Family

This Budget was an insult to our intelligence - who would believe the Chancellor's growth forecasts? But it was also an insult to families.

Darling refused point blank to accept the failure of the tax credit scheme, claiming it was helping families through the recession. So, you might be living through the worst downturn in peacetime, but if your hours are cut as a result then (provided you can face entangling yourself with all the bureaucracy and form-filling whenever your circumstances change) you might get a bit more working tax credit.

And the Chancellor's answer to child poverty? Child tax credit will go up by (wait for it) nearly 40 pence a week from 2010. Wow. Using that old Brown trick, Darling announced that the credit would "increase by £20"- failing to add that he meant £20 A YEAR - so the casual listener might think he meant £20 a week. A cheap trick.

Conservative Home's expert panel previews the Budget

In advance of today's Budget, ConservativeHome assembled an expert panel of political figures and commentators to outline what they hope to see from today's Budget in their area of interest or expertise. Their thoughts are below and once Alistair Darling has delivered the Budget, we will post their reactions here on Platform later this afternoon.

Andrew Lilico, Managing Director of Europe Economics, on Growth

The Budget should be realistic about the growth situation - planning against a recession at least as bad as the early 1980s and a material fall in the sustainable growth rate of the economy (to perhaps just 2-2.25%), cutting our spending cloth accordingly.  The Government should admit that on a recession that bad its previous plans would take spending above 50% of GDP, and that this is unacceptable. 

To keep down the growth of spending as a proportion of GDP, it should immediately announce a £50bn reduction in growth in spending between 2008-9 to 2010-11 (e.g., by freezing the cash budget of most departments), with a commitment to seek further reductions of up to £50bn, if necessary, for later years.

In addition, the annual inflation targeting regime should be replaced with a target of average inflation at 3% annually between now and 2015 - with the inflation measure changed to include housing costs.

Charles Elphicke: Uh-oh, we’re in trouble - the recession’s come along and burst Brown’s bubble

Charlie Elphicke is PPC for Dover & Deal, Kent, a contributor to CentreRight.com and a research fellow at the Centre for Policy Studies.  This Platform summarises Charlie’s latest paper for the Centre for Policy Studies, which is available at the CPS website.

Today I have published a paper with the Centre for Policy Studies that sets out how the Labour Government has wrecked our country’s finances. How Labour have wrecked our personal finances.  And how they have left us all seriously exposed to the coming recession. David Cameron often tells us that we’re all in it together.  Indeed we are. It’s extremely deep and very, very Brown.

Public Debt

Speaking on 28th October 2008, Gordon Brown said:

“Britain is in fact better positioned to deal with these problems because we have low national debt."

Oh really? As we stand on the precipice, about to tumble into a deep recession, after the bank bailout, public debt will stand at 50% of our country’s total annual output, or GDP. The last time it was this high, was 1977-78.  There is nothing low about our national debt. The Government spent and borrowed recklessly during the growth years, leaving nothing aside to cover the lean years. And the public debt situation is going to get worse yet as the economy deteriorates. Much worse.

Contrast with the last recession in the 1990s. Back then, public debt was 26% at the start of the recession, eventually peaking to 43%. Back then, there was room for tax cuts and public spending increases to cushion the impact.  This time the cupboard is bare. The UK public finances are in a big mess. So the room for the debt funded tax cuts which are a normal feature of managing recessions looks very limited.  As a result the recession is likely to be harder and longer than necessary.

Charles Elphicke: Tackle worklessness, reduce immigration

Charlie Elphicke, the candidate for Dover and a research fellow of the Centre for Policy Studies, argues that the challenge of worklessness is being shirked by importing migrant labour.

How many workless people are there in the UK? This question has been under the spotlight recently. Across the country as a whole there are nearly 8 million workless people of working age - and experts tell us that 5 million of this number could work but do not. Yet the Government has ducked this challenge and gone for masses of migrant workers instead.

Tackling worklessness could mean that immigration will fall sharply as there won’t be the same call for people from abroad to do the work that needs to be done. It could help to realise the hopes, chances and opportunities that currently pass the army of workless people by. At the moment, those hopes are too often dashed.

These lost chances and opportunities have been rising in recent years. Take Dover, where I am the Conservative Parliamentary candidate. Official figures from the ONS tell us that Dover’s working age workless has soared from 10,000 five years ago to 13,000 today (they call it "economic inactivity"). That’s a massive rise. Meanwhile the number of people in work has remained steady at 39,000.

Charles Elphicke: Moving Britain to Go

Charlie Elphicke is a research fellow of the Centre for Policy Studies and Deputy Chairman of the Cities of London and Westminster Conservative Association. In a follow-up to a recent article, he outlines how he thinks the Conservatives should make up for Brown's economic mistakes.

My last article looked at Gordon Brown’s dismal record as he translates from Sherriff of Nottingham to King of Inequality.  Under Brown’s Treasury, the wealth gap is as great as ever, the poorest are proportionately paying more in tax and getting less in benefits than under the Conservatives, social mobility has fallen and the country as a whole has not had a real pay rise since 2001.  Not good.

So what are we going to do about it?  In the game Monopoly, there is this wonderful Chance card that moves you past Jail, past Super Tax, past that dreadful hotel on Mayfair and straight to Go.  What could a Conservative Government do to move Britain to Go - making our country rich, vibrant and exciting?