FPB fear 30-day payment will undermine public sector target

A business lobby group fears that proposed new European legislation mandating a 30-day payment target could undermine UK public sector targets to guarantee disbursement in only 10.
 
Amendments to the European Union’s Late Payments Directive, which were agreed to this week between the European Parliament and Council, are now only waiting for the Parliament to formally approve them.
 
In future, if payment takes place after 30 days, both public and private sector organisations will have to pay a surcharge of 8% on the money owing as well as fixed compensation of E40 (or about £27) to cover the creditor’s recovery costs.
 
If they have ‘special justification’, the payment deadline can be extended to 60 days, however. But public healthcare providers may be afforded the maximum of two months because in mainland Europe, bodies such as hospitals are ‘largely funded through reimbursements under social security systems,’ a European Parliament statement said.
 
Because the UK introduced its own non-mandatory 10-day payment target for public authorities in 2008, however, there are fears that the exemption could undermine commitment to the goal.
 
Phil Orford, chief executive of the Forum for Private Business (FPB), warned: “Although it is not widespread across the public sector, abandoning the UK’s domestic 10-day payment target would be a significant step backwards in tackling the culture of poor payment.”
 
Central government departments were in the main meeting the pledge, although the picture was more mixed elsewhere. But it was important for the public sector to set an example for private companies to follow, he added.
 
A Freedom of Information Act request by the FPB indicated that 44% of invoices made out to English councils were now being paid within 10 days, although the figure dropped to only 31% for NHS Trusts.
 
But the Forum was pleased with a European Commission proposal to scrap a deal allowing debtors and creditors to agree payment terms outside of the scope of the new legislation.
 
Members had pointed out that there was rarely scope for small businesses to effectively negotiate terms with larger customers so the move would to all intents and purposes have “amounted to an opt-out clause for many big businesses”, Orford said.