Sajid Javid set out his priorities for supporting Britain's small businesses last week. Here’s a summary of what he said:
Over the next 5 years, we’ll build on the success of ‘One in, two out’ to put a strict brake on new regulations. For the first time, the actions of regulators will be counted towards achieving the overall £10 billion in cuts.
This will be the first time in modern history that government has successively reduced red tape and continued with reductions in the next parliament.
And business will be our partner…giving us the evidence we need to roll back the state. One crucial aspect of this roll back will be the extension of the rule that is known as Primary Authority.
Primary Authority allows a business to get advice on regulation from a single local council. This advice must then be respected by all other local councils, thus reducing the time and cost to businesses of having to obey multiple masters. When Primary Authority came in, the purpose was to help larger firms trading nationwide. But it was so successful that we opened it to small business in 2013. Today, more than two-thirds of the businesses taking advantage of Primary Authority are small businesses.
It frees them from inconsistent and confusing red tape. It reduces their operational costs, and allows them to focus on expansion.
Thanks to Primary Authority, cheese makers don’t have to display their cheddar on wooden boards in one place and on steel platters in another. Yet only a tiny fraction of small businesses that could benefit are actually doing so. Accordingly, we’re going to simplify Primary Authority itself.
And we’re going to extend its reach. There’s one more area I wish to cover this morning. It’s a subject that’s exercised me for some time.
There’s a situation familiar to small business owners up and down the country. A letter turns up from a larger customer changing payment terms, or charging them to remain a supplier, and in some cases even deducting that charge on the spot against payment owed.
This pattern of behaviour is an outrage. It’s bullying – pure and simple. In 2008, late payment alone cost British business £19 billion. This year, that’s set to exceed £40 billion. The average amount owed to a small business is more than £30,000. You know as well as I what figures like that can do to the cash flow of small businesses. It’s enough to force a company into insolvency.
We’ve not been blind to these issues.
During the last Parliament, we introduced legislation requiring the UK’s largest companies to report on their payment practices. That’s going to shine a light on poor performance when it comes into effect next April. Recent U-turns show that public scrutiny can make big firms mend their ways. We also strengthened the Prompt Payment Code to introduce a maximum 60 day payment term and promote 30 days as the norm.
Government has rightly been leading by example. We pay our suppliers within 30 days. We’ve brought in measures requiring all public sector contracts to pay out within 30 days, all the way down the supply chain.
Now, we’re going to widen the powers for representative bodies to act on behalf of their members to challenge grossly unfair payment terms. There’ll be a consultation on this later this year. And we will fulfil the manifesto pledge to set up a Small Business Conciliation Service to help small businesses settle their problems with large corporations.
The purpose is to avoid expensive legal costs and maintain business relationships by reaching mutually satisfactory agreements.
This model has worked in Australia. We will explore it, and other models, and find what works best here in the UK.