The number of businesses receiving late payments from the Cabinet Office (CO) has nearly tripled in the last two years, despite the department imposing tough new rules on its own contractors who pay suppliers late.
Minister of State for the CO David Lidington was today forced to reveal a 198.7 per cent increase in the number of firms the department failed to pay on time between April-June 2016 and April-June 2018, from 76 to 227.
The figures classify a late payment as one which took more than 30 days.
Answering a written question from shadow Cabinet Office minister Jon Trickett, Lidington blamed the increase on a switch to a new computer platform – a so called shared service platform – in May 2017.
Lidington said the number of suppliers paid had increased from 491 to 900 over the same period. But this less-than 100 per cent increase in suppliers paid does not account for 198.7 increase in firms hit by late payment.
Last week, it emerged the department had missed its own targets on late payments, but today’s statistics reveal the number of real-world businesses affected by this.
The switch “presented a number of operational issues” which led to the increase, he said.
The collapse of public sector outsourcing giant Carillion, which owed around £2bn to 30,000 suppliers, subcontractors and other short-term creditors when it failed in January, has thrust the issue of late payment into the spotlight.
It has seen Whitehall ramping up its own rhetoric on the issue, threatening to prevent serial late payers in the government’s supply chain from winning public contracts altogether from Autumn.
CO minister Oliver Dowden announced the tough new measures late last year, saying it was “vital” that smaller companies providing public services like supporting prisons and delivering road infrastructure projects are paid on time.
“From next year, if government contractors are late with supplier payments, they could stop winning public contracts altogether – until they clean up their act,” he said.
Labour's Trickett said: "The Government has failed to get a grip on late payments, despite repeatedly announcing their intentions to reform procurement. Loud words have disguised little action, and it is businesses that are paying the price."
The statistics come at the same time as the Federation of Small Businesses (FSB) urging the government to introduce tougher penalties for public sector outsourcers that pay their suppliers late.
The FSB said Whitehall should strengthen the Prompt Payment Code, a voluntary system of rules governing payment terms.
FSB chairman Mike Cherry said Carillion “used its dominant position to squeeze smaller firms with late payments and unreasonable payment terms in an attempt to shore up its own precarious position”.
“These practices did not save them and their failure has resulted in very real human consequences,” he added.