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Prompt Payments

Volume 575: debated on Monday 3 February 2014

We are encouraging our suppliers to accept payment through our new electronic bill paying system, and I am proud to confirm to my hon. Friend that the Ministry of Defence paid 92% of correctly submitted invoices within five working days in the last financial year. We have identified that the majority of the less than 1% of late payments made by the MOD were a result of incorrectly submitted invoices, such as those submitted on order rather than after product delivery. All correctly submitted invoices were paid within 30 days in 2012-13.

Prompt payments are particularly crucial for small businesses that can face severe cash-flow problems without them. Will the Minister assure the House that he is doing all he can to ensure that small businesses are paid on time?

This Department, under this Government, is well aware of the benefits of prompt payment and the importance of cash flow to SMEs. That is why not only are we paying our suppliers on time, we are also encouraging them to pay their subcontractors within 30 days of receipt of a valid invoice.

When this issue was raised in November I inadvertently misled the House and I would like to put the record straight. I informed the House that the Ministry of Defence had incurred a single late-payment penalty on only one invoice out of some 4 million. It has now come to my attention that in fact we paid almost 5 million invoices last year—a penalty payment rate of 0.00002%.

It would be churlish of Labour Members not to acknowledge the good work that MOD officials in particular have been doing, not least because they are protecting a supply chain that often produces extremely specialist products. What discussions is the Minister having with small and medium-sized businesses that may be affected by the reported 20% efficiency savings sought in the support contracts about the way that prime contractors may pass that 20% down the line to protect their own losses? Getting paid on time is one thing, but losing one’s business is another.

I am glad the hon. Lady asked me to comment on that. We are engaged across the supply chain in seeking to extract maximum efficiencies for the taxpayer from MOD procurement. I am engaged in SME conferences with the defence industry right across the country. Indeed, I intend to come to Plymouth in the not-too-distant future, and the hon. Lady may like to join me.