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July 28, 2014

Public bodies must soon admit if they’re ‘late payers’

EU reforms will make payment rules more rigorous.

By Joe Curtis

Councils will soon be forced to reveal how quickly they pay contractors as the Government seeks to lift the curtain on SMB transactions.

All examples of late payments must be published under forthcoming EU reforms that will require public bodies to pay suppliers within 30 days, following a House of Commons debate on public procurement.

The debate, held last week, revealed that late payment volumes have risen from £18bn in 2008 to £46.1bn so far this year, according to the Federation of Small Businesses, with the average SMB owed £38,000.

A Select Committee on Communities and Local Government report cited during the debate suggested that while councils have policies in place to pay suppliers on time, those same terms are not passed down to sub-contractors.

Labour MP Mary Glindon said that some large suppliers are not paying SMBs for up to 90 days, and called on the Government to intervene.

Local government minister Kris Hopkins said: "The Government will be introducing a number of other key reforms later this year as part of the transposition of the EU directive on public sector procurement into UK law.

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"Those reforms will include…a legal requirement for all new public sector contracts to include 30-day payment terms for all the contracts in the supply chain, so that smaller businesses are paid on time; and a requirement from next year for all public bodies to publish details of instances of late payment and interest paid as a result of those late payments."

The news comes after a Cabinet Office report revealed that 64% of public sector suppliers’ complaints regarding contract issues were about payment problems, with many not being paid at all.

The 2014 EU Procurement Directives will include a requirement to reveal what interest was paid on late payments. The reforms do not have to be implemented until April 2016, but the Government hopes to enshrine them in UK law before the end of the year.

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