Scottish government accused of ‘failing to pay bills on time’

New figures produced by Scottish Labour show that more than a fifth of undisputed invoices are paid late.

The revelation will prove embarrassing to Scottish ministers who have introduced new measures to tackle the problem of companies failing to settle bills on time.

Insolvency and restructuring trade body R3 says late payment for goods or services was a primary or major cause of 23 per cent of insolvencies in the last 12 months.

A survey by the Federation of Small Businesses revealed that 2,000 businesses a year are going to the wall because too many clients don’t pay on time or, in some cases, at all.

In an answer to a parliamentary question, SNP Finance Secretary Derek Mackay has now admitted that more than a fifth of undisputed invoices were not paid on time by the Scottish Government and the bodies which share its finance system.

Labour says this could have a major knock-on effect for firms that need the cash flow to keep trading.

The SNP government’s Business Pledge scheme, designed to encourage the private sector towards ethical business practices, includes a “prompt payment” criteria.

Labour Economy spokesperson Jackie Baillie said: “This is a bit embarrassing for the SNP government, but it could have a real knock-on effect for small and medium enterprises on government contracts which need the cash flow to keep trading.

“The SNP government should set a new target to have 100% of undisputed bills paid within five working days.

“This would set good practice for business and make sure organisations on government contracts are getting their payments on time.”

Scottish businessman Ken Lewandowski has been leading a campaign to persuade governments at Westminster and Holyrood to introduce legislation.

It led to the Scottish government creating Project Bank Accounts for public sector contracts.

They were designed to stop main contractors being paid by the government but holding back payments to sub-contractors. The money instead goes into the PBA and everyone is paid at the same time.

The UK government has recently introduced new guidelines, but Mr Lewandowski said they will be ineffective.

Speaking about the guidelines Lewandowski said: “You can have guidelines and prompt payment codes and calls to name and shame, none of them will achieve anything.”

He even doubted that legislation would solve the problem.

“What happens in practice is that the main contractors just bully the sub-contractors. They tell them that if they go to court they’ll get no further work from them, or they threaten to drag legal action out over two or three years.”

He accused many big companies of using small firms as an overdraft facility, hanging on to thousands of pounds, sometimes for several months.

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