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Local authorities set to face millions in late payment penalties

Local Authorities warned to be ready for changes to procurement legislation or face millions of pounds in late payment penalties.

Senior member of the House of Commons Communities and Local Government Select Committee warns Local Authorities to be ready for changes to procurement legislation or face millions of pounds in late payment penalties.

Mary Glindon MP, who instigated a debate in Parliament in July on the problem facing SMEs’ suffering from Councils delaying the settling of their invoices, has written to the new Chair of the Local Government Association, Councillor David Sparks OBE, alerting him to the likely impact.

In her letter, using research from the House of Commons Library, Mrs Glindon has highlighted the forthcoming changes to European and United Kingdom legislation which will compel Councils to make payments to their suppliers within 30 days or face fines of between £40 and £100 for EACH invoice.

Under the new proposals, all public authorities will be required to publish their payment performance in detail and also calculate and apply the financial penalties inherent within the late payment of commercial debts act – regardless of whether they have paid these amounts or not.

This will allow for more scrutiny from local businesses leaders who are paid late by local authorities.

Estimates from financial experts Oxygen Finance show that a typical upper tier Authority could be faced with a new and visible annual liability of between £300,000 and £750,000 unless they can comply with the changes.

Most recently Brighton and Hove Council were forced to admit that they had waited for as long as five years to pay a local contractor, and that they paid 5,437 invoices late in 2013/14 – under the new rules this could mean fines of up to £5.4m.

Mary Glindon, MP for North Tyneside, said: “There is a ticking time bomb facing our Councils. The situation is similar to that of ‘equal pay for equal value’ legislation whereby those Councils who were not ahead of the game faced serious financial costs.

“Councils need to prepare now for the forthcoming changes which, in any event, are vital for local businesses in their areas and will help boost economic growth by addressing the cash-flow crisis.”

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