The government is planning “urgent” changes to its procurement policies in a bid to tackle late payment, following the demise of Carillion.
That was the assurance from business secretary Greg Clark, as he appeared before the MPs leading the inquiry into the contractor’s collapse yesterday.
Clark was grilled on the issue of late payment during the session, during which work and pensions secretary Esther McVey also updated MPs on proposals on a recently published white paper, detailing how the government plans to increase protections for defined benefit pension schemes following revelations that there is a £900m shortfall in Carillion’s schemes.
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Conservative MP Antoinette Sandbach asked Clark what faith suppliers could have in the Department for Business, Energy and Industrial Strategy’s Prompt Payment Code (PPC), given that Carillion had been a member but had payment terms of 120 days and had arguably been “propped up by those terms”.
Clark responded that it was “obvious” that Carillion’s terms had been too long but pointed out that in the current financial year, companies have to report on their payment policies and payment practices, which they hadn’t been obliged to do before.
He said: “I think we have begun to see on other areas such as on gender pay the exposure of some of this information having quite an arresting effect.
“I agree with you that it is not adequate and one of the outcomes of the discussions especially with small businesses of our taskforce in recent weeks is to look at how we can strengthen those requirements.
“We need to make proposals as to how to do that and what we have talked about in the taskforce is how we can do precisely that.”
Continuing the questioning on payment terms, Labour MP Rachel Reeves highlighted evidence from the Federation of Small Businesses to the inquiry that Carillion were “notorious” for being late payers.
She asked: “As well as tightening up the Prompt Payment Code, are you also looking at how you tighten up government procurement to make sure where the money actually goes?”
Clark responded: “I completely agree. The practise has not been good enough and where the government has the greatest influence it should use that influence for good.”
Asked about a timescale for making changes, Clark added: “I don’t have a specific timetable but you have my assurance that this is a priority and it needs to be urgent.
“We are getting on with it.”
And he pointed out that the chancellor Philip Hammond had already made a pledge to crack down on late payment in his spring statement last week, addressing an issue that Clark described as “fundamental to the economy”.
