Duty to be Accurate – by Philip King FCICM
2nd February 2018
In my last blog, I had a bit of a rant about the glib, and incorrect, use of insolvency terminology in relation to Carillion being placed into Compulsory Liquidation.
There was a debate in the House of Lords on 22 January in response to a question from Lord Mendelsohn asking what progress had been made in establishing the role of the Small Business Commissioner and what further action was being taken by government to support SMEs, including tackling the issue of late payments. If I was frustrated by the media’s recent misuse of insolvency terminology, my frustration was as nothing when compared to my irritation when reading the Hansard transcription of this debate.
Lord Mendelsohn talked about measures in place to try to encourage payment, some of them long standing, such as the Late Payment of Commercial Debts (Interest) Act 1998, amended and supplemented by the Late Payment of Commercial Debts Regulations 2002, and he asked for the Minister’s observations on companies’ duty to report under the Prompt Payment Code. I don’t want to appear a pedant, and I presume a researcher is more to blame than the noble Lord, but he seemed to overlook the Late Payment of Commercial Debts Regulations 2013 when he mentioned the 2002 regulations. Further, there is no ‘duty to report’ under the Prompt Payment Code; I assume he was referring to The Reporting on Payment Practices and Performance Regulations 2017 that were made to exercise the requirements of the Small Business, Enterprise and Employment Act 2015.
We are treated to an array of late payment statistics that range from the sublime to the ridiculous, and there is wide confusion about the measures aiming to deal with it. I’ve challenged a number of journalists and broadcasters in recent days about inadequate research leading to misinformation in their reporting, in particular about the Prompt Payment Code, but surely we’re entitled to expect accuracy in Parliamentary debates.
Just for the record, this diagram sets out the current government late payment measures, and I believe it’s accurate.
Currently, there is no requirement for signatories to the Prompt Payment Code to report, and the Code is a voluntary commitment by signatories to behave responsibly towards suppliers by paying them promptly. If a signatory fails to live up to the commitment, their signatory status can be challenged and the Chartered Institute of Credit Management will intervene, talk to both parties, assist in obtaining immediate payment of the outstanding invoices and identify what action is necessary to ensure prompt payment for the future. If the challenge cannot be successfully resolved in this way, the signatory can be removed from the Code.
The liquidation of Carillion has brought the subject of late payment to the fore but it’s worth noting that, sadly, no supplier nor business organisation had challenged the company’s behaviour since June 2016. Small businesses can be nervous about raising their head above the parapet, although there’s evidence to suggest they don’t need to be, but the same can’t be said for business organisations and it’s surprising, and to be regretted, that they remain silent. I have no idea what might have happened if Carillion had been the subject of a challenge but, if one had been raised and the company had been removed from the Code, some small businesses might have thought twice about becoming a supplier. Sometimes silence isn’t golden.