Finance Committee, 13 Jan 2004

Meeting date: Tuesday, January 13, 2004

Official Report 214KB pdf

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Executive Payments to Business

The second agenda item gives members an opportunity to put questions to the Deputy Minister for Finance and Public Services on the Executive's payment of invoices. I thank the minister for offering to take questions on the matter and I invite members to put their questions to him.

I am grateful that, at my request, the matter is on the agenda. It relates to a press story that emerged during the recess following publication on the web of the document "Core Departments' Resource Accounts", paragraph 48 of which revealed that nearly one third of bills due were not paid on time by the Executive—that is, within 30 days—despite assurances from civil servants. According to an article in The Herald by Tom Gordon, civil servants assured MSPs 18 months ago that bills were being paid on time.

I understand that around four fifths of bills are now being paid on time, but that leaves a large number unpaid, which I am sure is unacceptable to the minister. Setting aside computer difficulties—I hope that the minister can confirm that those difficulties have been fully resolved—does he feel that the problem is ingrained? Does he also agree that the problem of late payment is endemic in a number of areas of the public sector?

I spoke to a gentleman yesterday who gave me a specific example of that and confirmed that I could mention his name. He is Mr Michael Dewar of Dewar Associates Ltd. He operates in Glasgow as a civil and structural engineer and has had business with housing associations. He asked me not to name the associations but told me that it is routine for them to take nine months to pay him. He has examples of a mass of bills that are outstanding over a long period.

Will the minister get a grip of the public sector and extinguish the desperate culture of late payment? I note that Nigel Griffiths, the Parliamentary Under-Secretary of State for Small Business and Enterprise at United Kingdom level, has condemned that culture as entirely unacceptable and yet, five years into devolution, it still exists under the Labour-Liberal Executive.

That was a bit of a political take on the issue. We are talking about a serious issue for small businesses and we need to deal with it properly. The Scottish Executive's accounts for 2002-03 show that only 68.5 per cent of payments were made within 30 days. As the committee knows, a target was set by the prompt payment guidelines, and the Executive's performance was not good enough—it was lower than we had expected. Mr Ewing is quite right: apparently, I am told, the delays in payment were because of a computer. However, as I do not think that it cuts much ice with businessmen and women for computers to be blamed, I am not going to do that.

I am glad to say that this year's performance has improved steadily. From April to December, an average of 81 per cent of payments was made within 30 days. In December, the figure was more than 87 per cent. In the coming months, we hope to achieve in excess of 90 per cent, which, if I can put it this way, is the historical standard. We are never going to achieve the payment of all bills on time—I hope that Mr Ewing will accept that. As with any walk of life or any business environment, there will always be disputes. To use a phrase such as "all bills paid on time" is not to be in the real world.

Ministers are very focused on ensuring that the prompt payment guidelines are met. We expect and insist on a steady improvement in performance towards a level with which I hope the committee will feel comfortable. Indeed, Mr Kerr, has written today to business organisations across Scotland about the figures in order to ensure that all of them are aware of the work that is going on to achieve the target and the level of performance that all of us expect.

I will pursue the housing association issue. I am slightly ahead of Mr Kerr. I have written to a number of business organisations, some of whom have given me many other examples. There are various techniques for non-payment. For example, one housing association told Mr Dewar that he could not get paid until the next financial year because there was no money in the kitty. Another client—a translator—was asked after 30 days for bank details, which meant that payment was not made for another 30 days. Why were bank details not requested at the outset?

I mention those two examples because they illustrate the sort of techniques that should have been stamped out. A concerted attempt needs to be made to tell every single public sector body that deals with business to get its house in order and to stop using those cheap techniques. If that does not happen, we will find ourselves having a similar discussion on the issue next year.

The narrow issue of housing associations is not one for the minister.

If Mr Ewing has specific evidence, he should bring it to me or to the department. We would be happy to look at the evidence and take up the points that he has made. He should not generalise on the basis of two telephone calls. Mr Ewing is shaking his head—

It is more than two.

If it is more than two, let us have the evidence. Mr Ewing has not presented evidence on the subject to Mr Kerr or me. If he does, we will look at it actively. I am not going to start to generalise off the top of my head on the basis of the two telephone calls that he described today.

The same report highlights on page 25 that there was "slippage" in the e-procurement project and in the invest to modernise project, which is now on-stream. I had a quick look at the e-procurement Scotland website this morning before I came to the meeting. I note that £65 million of Executive expenditure could go through the e-procurement model. What efficiencies do you anticipate will result from the website in relation to the ease of relationship between the Executive and some of its suppliers and the efficiency of billings? Will you be in a position to return to the committee with the efficiencies that have been made through the ease of using the website?

Mr Purvis is better informed than I am. I have not looked at that website this morning, for which members will have to forgive me. We shall certainly write to the committee about that.

My understanding of the e-procurement system is that it allows for much faster payment, within three or four days, which I hope is at the level that the committee would expect. The system ensures that suppliers receive early payment; the Executive then receives a discount because of that early payment, so there is obvious merit in the system. However, we will be happy to write to Mr Purvis about efficiencies.

I am rather disturbed that we could ever reach the situation in which, despite its being a role model for the whole community, the Executive does not pay its accounts within 30 days. I appreciate that some invoices that are presented will have to be queried, but all the rest should be paid within a 30-day period. The damage that the Executive is doing to many small businesses is unforgivable. In fact, I suggest that Mr Scott's department should submit to the Finance Committee a monthly report on the progress that it is making in bringing down the number of unpaid invoices.

We would be happy to give regular reports. I will not commit myself to a monthly one, because I do not know the work that would be entailed, and I hope that Mr Swinburne accepts that.

A percentage would do.

I would be happy to submit regular reports or to write regularly to the committee on the matter. There are also, dare I say it, many other parliamentary mechanisms for keeping an eye on the Executive on this issue, as with every other issue.

I hope that Mr Swinburne will substantiate what he has said about small businesses. Apart from the general principle of driving forward hard on prompt payment, we are always prepared to consider any practical examples and specific representations, and we will do that if Mr Swinburne would care to bring them to our attention.

I am not sure that I would particularly welcome regular letters, but a mechanism by which we could identify progress would be helpful.

I know that the minister was anxious not to blame the computer, although John Elvidge did so in his response of 2 January.

Did he?

There is an issue to do with high-tech systems. Can you tell us how long that computer system has been in place? The current problems come on the back of the problems with the Scottish Qualifications Authority three years ago and the problems with the United Kingdom Passport Service—I distinctly recall getting my passport just two days before going on holiday. There have also been computer problems at the Inland Revenue. Why is it that the public sector has so many problems with new technology? You say that you are hoping to get the proportion of payments made on time up to 91 per cent, but before you got the new computer, the figure was 98 per cent. I have major concerns about the way in which new technology is introduced in the public sector. Do we have the expertise to advise us properly on what we should be purchasing? Is Government, in Scotland or in the UK, examining the problem?

Given that Dr Murray has already used Mr Elvidge's name, I am happy to criticise the computer fully and with free abandon. I take her point about the public sector and computers. I remember how, as a councillor in a local authority, I would rip my hair out in despair as we spent ever more tens of millions of pounds on systems that did not appear to deliver what we needed.

My understanding of SEAS—the Scottish Executive accounting system—is that it came into operation from new year 2002, and I am told that there were some teething problems with it. That was demonstrably the case, but those problems have been ironed out and that is why performance is rapidly improving. As a general point, we hope that we can do better.

I am probably the only person present who was a member of the previous Finance Committee. I distinctly remember one of the sessions that we had in 2002, when we were offered various assurances by officers about how the new system would be effectively managed and implemented. It might be useful to go back to what was said at that time and to review what has happened. I would certainly be happy to receive a letter from you on that subject, Mr Scott.

Indeed.

As there are no further questions, I thank the minister for attending today's meeting. It has been a rigorous but, I hope, fruitful session. I hope that we shall have a continuing dialogue on relocations.