Business Payment Practices Bill

I present a legislative statement on the Business Payment Practices Bill.

ASSISTANT SPEAKER (Hon Jacqui Dean): That legislative statement is published under the authority of the House and can be found on the Parliament website.

I move, That the Business Payment Practices Bill be now read a first time. I nominate the Economic Development, Science and Innovation Committee to consider the bill and to report back by 27 April 2023.

ASSISTANT SPEAKER (Hon Jacqui Dean): No. Can I just ask the Minister to—I hope he has got the appropriate words: “At the appropriate time I intend to move”.

At the appropriate time I intend to move that the bill be reported back by 27 April 2023.

The Government’s intention in introducing this bill is to support our efforts in creating a fairer business environment. While many of us will take this for granted, timely payment for goods and services delivered is crucial for the financial health of any business. The average time between a business issuing an invoice and receiving payment for that invoice has been gradually shortening over the last five years. This coincides with widespread adoption of technology solutions like cloud accounting and Government-led efforts to improve payment performance through initiatives like e-invoicing. But this movement, while positive, is marginal and slow. Poor payment practices persist and continue to affect many small New Zealand businesses. Small-business owners in New Zealand continue to report that delays receiving payment are hurting cash flow, increasing stress levels, and inhibiting their business growth. It is abundantly clear that this situation warrants intervention. As the New Zealand economy recovers from the impacts of the COVID-19 pandemic, it is more important than ever to support small-business owners and operators who are the bedrock of our nation’s economy and communities.

Small businesses face challenges enforcing their payment terms, because they have limited bargaining power and limited resources. We know that larger firms can exploit the power imbalance by setting payment terms that advantage themselves at the expense of their smaller suppliers. When this happens, small suppliers often feel unable to ask for more reasonable terms, for fear of damaging relationships. Furthermore, when the bill payer doesn’t meet the terms that they’ve agreed to, the small business affected may not be able to do much about it—again, the perception of power imbalance is often too great for the small-business owner to risk upsetting their large customer. If a small business relies on a large payer for a lot of their revenue, they will be anxious not to rock the proverbial boat as their livelihood may be at stake—well, that may well be the perception they have.

This may be preventing a significant segment of our business ecosystem from realising its full potential and contribution to our economy and to our communities. The effects of poor payment behaviours can run throughout supply chains and have consequences for the broader economy—for example, through a high cost of capital or unnecessary insolvencies. The Government set up the Small Business Council in 2018, and I asked this council to develop a small-business strategy for New Zealand. The Small Business Council reported back the next year, and among all issues facing small businesses, it considered timely payment a top priority. The council said that problems with payment practices are difficult to deal with effectively through our current tools and that a new approach was needed. The bill being debated today will deliver that change.

The purpose of the Business Payment Practices Bill is to establish a disclosure regime that brings transparency to business-to-business payment terms and practices in New Zealand. This will lead to businesses having better information to inform their decision making when engaging new customers. It will also incentivise larger businesses who are increasingly conscious of their reputation to improve their business payment practices. A secondary benefit of the regime is that it will build an evidence base on business-to-business payment practices and enable the Government to assess, over time, whether any further regulatory intervention is needed.

Under the regime, entities with more than $33 million in revenue will be required to disclose information about their payment practices twice a year. The Government needs to lead by example, so the bill will also apply to Government entities that exceed the revenue threshold. Disclosed information will include, for example, late payments made by reporting entities, information related to payment times, and reporting entities’ payment terms and conditions and policies. This information will be submitted to, and stored on, a publicly available and searchable register administered by the Ministry of Business, Innovation and Employment. The register will be free for users to access. Disclosed information will also be published on reporting entities’ websites.

The bill will provide for the appointment of a registrar who will be responsible for establishing and maintaining the register and the associated compliance and enforcement functions. It will also provide for infringements, penalties, and criminal offences for contraventions of its obligations. The more severe penalties would only apply to the most wilful and problematic offending. Education and information is a key lever to achieve compliance, and compliance will be straightforward because the information firms need to disclose is readily available to them anyway.

Important details of the bill will be determined through secondary legislation. The bill’s regulations will, for example, specify the information to be disclosed by reporting entities, prescribe the form of infringement notices and reminder notices, and prescribe the quantum of infringement fees and maximum fines able to be imposed by the court for infringement offences. In addition, the Minister for Small Business may exempt the class of reporting entities from all or any of its obligations under the bill via notice. Lastly, the business payment practices registrar can set disclosure periods and deadlines for reporting entities via notice as well.

I’m conscious that much of the success of the bill will depend on balancing technical aspects, and many reporting entities and users of the business payment practices register will want a say on how the technical detail is determined and how this new regime will operate. I’m pleased, therefore, that they’ll be able to participate in the select committee process of the bill in the coming months, and I commend the bill to the House.

The question is that the motion be agreed to.

Thank you, Madam Speaker. It is a pleasure to be talking on the Business Payment Practices Bill first reading. I’ve got to congratulate the Minister: you read it with some passion, this speech. He didn’t quite make 10 minutes but he did a valiant effort tonight.

Now, I thought it was interesting, the Minister’s talked about how he formed the Small Business Council back in 2018. They came back with a recommendation in 2019. But in 2022—sorry, just let me check: 2019, 2020, 2021, 2022—three years later, he comes out with this bill. What has happened to you, Minister, in the intervening time? Have you not seen that small businesses have been suffering in New Zealand? And why has it taken you three years to come up with this little bill that is not that significant, that was recommended years ago, and that Australia and Britain have already put in place. I just have to ask the Minister why he has been so tardy, or whether he has shown sufficient interest in how small businesses are operating. Of course, small businesses account for 97 percent of all businesses in New Zealand. So I think it is a shame that we have had to wait all this time to go through this little bill. This should have been passed years ago, Minister.

💬 Hon Stuart Nash: A lot of consultation.

No consultation.

💬 Hon Stuart Nash: A lot of consultation.

I can hear my colleagues on this side scoffing at that one.

So if the Minister really had been worried about small businesses, why haven’t we heard more from him as this Government has steadily set about making it harder for small businesses to operate in New Zealand? Only in the weekend, I had someone say to me, “Look, you used to be able to set up and run a company in New Zealand so easily.” Now it is so difficult because that lot over there have, over the last five years, just kept imposing lots more compliance and costs and a whole lot of other stuff on small businesses.

What have they done? Well, I think the most damaging thing they’ve done, actually, is the Credit Contracts and Consumer Finance Act. I think that’s probably done more to ruin the building and construction sector. Rising interest rates—because, gee, we’ve got a Government that loves spending and, of course, it’s just roared through the economy and, of course, business owners are now facing much higher interest rates because that Government doesn’t know how to contain itself.

But where was the Minister about public holidays? Didn’t hear a chirp out of him. Where was the Minister about doubling of sick pay? Didn’t hear a chirp out of him. Where did we hear the Minister about fair pay agreements? Didn’t hear a chirp about him, did we? Because we don’t worry about small businesses in New Zealand, because they only account for 97 percent of our business activity! And then what about the sharp rises in minimum wage? We didn’t hear a chirp about it from the Minister. And what about the immigration bottlenecks; did we hear a chirp about it from the Minister? Not a whisper—not a whisper—but, hey, we’re saved. We’re saved, because we got this bill. And when is it going to come into force? He has asked for a response to get it back into the House in April next year. Now, my reckoning is we’re going to have an election sort of later next year. We go into that period, three months at least, for the election period. Gee, you’ll be lucky to get it through before he goes and starts electioneering, Minister. Why wasn’t this done all those years ago? Anyway, that’s enough about that.

We will, obviously, engage in the process, and we will support it to first reading. But some of the areas that we will want to hear about and we will be asking the officials about is, first of all, the $33 million threshold. Now, I know that relates to the external reporting framework. Interestingly, Australia has a $100 million threshold. So the big question is: why $33 million?

The second one we are concerned about is whether there should be a much more tailored approach—for instance, if a customer has $33 million of revenue but only has one or two customers, do they have to go through all this compliance cost? I think we need to be cognisant of making sure that we get the right outcome out of this. Maybe this is going to be some of the carve-outs that the Minister might have the opportunity to do. But, of course, the Minister didn’t talk about that tonight, so we don’t know where the carve-out might apply in that situation. But we need to make sure that if we’re going to go down this regime that we take it in a practical manner and we do not just end up imposing costs. And I will say that the National Party actually had a proposal of establishing a small-business payment guarantee scheme. So we’re not against it, but we want to make sure that it is tailored to the situation and leads to a better outcome.

The other aspect of this is looking at the other options. And, of course, where the Government and the Minister have gone is for the big king-hit: let’s regulate it, let’s put it through a legislation, big tick, I can look like I’m doing something. Actually, the officials put up three options. The first option was a non-regulatory intervention only, and that meant making sure that Government procurement, in particular—there was a requirement for prompt payments. Those are all good things that should be done, and, unfortunately, this bill doesn’t seem to be talking about that. Just to ask people to report if they are over a certain revenue target does go some way, but it’s not the whole way. Procurement is the major issue, and, of course, that’s not only central government but it’s local government and major companies. So we want to make sure that procurement payment periods are captured as well. We want to make sure that Government supplier arrangements are captured. One of the things about this bill, and I heard the Minister talking about this, saying that the Government entities will be captured in this bill if their revenue exceeds $33 million, if I understood the Minister correctly—and he is nodding to me—my argument, and this is something we will be testing in select committee, is why don’t we make it apply to all Government sector entities? Why not? What’s so special about our Government sector? Government sectors should be leading the fray in terms of prompt payments—

💬 Hon Stuart Nash: And they are.

—and I’m not sure—the Minister says they are. And I know the Government wrote to some of the organisations, large organisations, encouraging them—with inverted commas. But why not to all Government sectors? Why not to everyone? I think that is something we’ll be wanting to make sure, because if there’s anyone who should be showing leadership, it should be all Government departments.

The third option was a legislative maximum payment times for businesses—i.e., a normal payment term to 30 days, and that was another option. But, of course, the Government and the Minister have gone down this route of requiring this disclosure, and this is where we do have a problem to some extent. For instance, the bill requires for an appointment of a registrar—holy Toledo!—we’re about to have a debate about the Ministry of Business, Innovation and Employment (MBIE) managing all the different registers, because they haven’t been able to account for them properly and have been misappropriating money and spending it on other registers, so we’re having to do a legislative fix which we are going to oppose, actually. But here’s another register run by MBIE, good on it.

And, of course, then the company is going to have to keep information for seven years. Why in the dickens do you have to keep information for seven years? This is officials gone mad. That’s when we should have had a Minister saying to officials, “That is a silly recommendation.” And then the fines: $500,000 up to some extreme case, or $50,000 for not filing some records or not doing it on time. Wow! I just think we need to make sure this is tailored and fit for purpose, because I suspect that this is an overreach in some regards. But we do support the principle of making sure that Government departments, and companies in general, pay small businesses promptly and on time. But wow! Let’s get the old sledgehammer out to whack a walnut.

Let me restore some equanimity to the debating chamber. This is an excellent bill and it’s an issue that I have been concerned with for quite some time. Way back in 2018 as a new backbencher, I read a really interesting article on The Spinoff by David Cormack, who runs a small business, and he talked about the difficulties that small businesses face in getting paid. He talked about exactly some of the stuff that the Minister for Small Business and the previous speaker have spoken about, that we all back small businesses and that small businesses are regarded as the backbone of the economy, but he pointed out that we do not treat small businesses well; that we could do better. In particular, he was concerned with payment practices.

Around about that time was when Fonterra had decided it was going to pay its suppliers on a 60-day cycle. In fact, it was going to push up payment of some of its suppliers to a very long period of time. And at around about the same time, Xero had mined its data and had found that only about one in nine invoices were paid on time. So, you know, if you have to wait for 60 days to get paid, but then that gets paid late, it can be worse; even up to 90 or 120 days. What it means is that small businesses have ended up providing the working capital for large businesses, because those large businesses do not pay their bills on time.

That is incredibly rough on a small business. Cash is king. Getting those bills paid and getting the money in is critically important to a small business. But it is so hard for a small business to get paid when even major consulting firms like McKinsey are urged to provide, as one sort of gem of consulting advice, that one way to keep a business going is to push out payment of your small suppliers. So there is a real problem here.

David Cormack in his article gave an analogy. He was surprised, he said, by the number of people who just don’t pay on time and he’d never expected that he’d spend a large part of his time as a small business operator acting as a debt collector. I’m just going to quote him. He says: “Having to make awkward phone-calls to people, coughing between words as I asked for our money to be paid because we have mortgage payments about to go out or my cat needs its teeth pulled at the vet.” Then, this is the analogy; he says: “I don’t walk into a supermarket, fill up my trolley and just walk out the door yelling vague promises of paying at a later date. Being a supplier shouldn’t be any different. And yet it is.”

I contacted David Cormack after I read that article and said, “Hey, let’s talk about this.” So between us, David and I talked through the issues. And at that stage, I put together a member’s bill and even put it into the ballot on setting a disclosure regime for companies around payment times. But around about the same time, I was given word—I talked to the Minister at the time and I found out there was work starting to get under way on this issue already. On the grounds that a piece of work that goes through a ministry is likely much more developed than a member’s bill, I pulled my bill and worked on a different issue.

So it’s taken a while, because now we do have a bill around disclosure terms. And, of course, the reason that it has taken a while is not just the intervening global pandemic but because the Minister in charge of the bill now has undertaken serious consultation in order to get this bill right, has gone through several issues, several rounds of consultation, within the business community to make sure that this strikes the right balance between, say, requiring compulsory payment times versus not doing anything at all.

What we have here is a disclosure regime. It’s a disclosure regime that asks businesses to report how well they are paying their suppliers. Now, the previous speaker, Andrew Bayly, said that he was deeply worried about the compliance costs that this would impose on firms. That is an odd thing to say. It’s a very odd thing. This is data that firms are collecting anyway. It’s information that any firm has at its fingertips anyway.

I spent a summer job one year doing creditors’ reconciliations for a firm in New Plymouth. Just fascinating work, but at least I got paid for it! But that was part of that firm ensuring that it was paying its creditors on time. And so it actually knew how long it was taking to pay each creditor. So in terms of the information that is required to fulfil what this bill sets up, firms already have that information. It is just a matter of reporting it. And it is important information for small businesses.

The previous speaker also had a little bit of a query as to why $33 million was the particular threshold. There’s a simple answer. It’s sitting in the documentation. It aligns with section 45 of the Financial Reporting Act. So it’s just a threshold we commonly use anyway in financial reporting in New Zealand.

So carrying on from there, I want to talk about just one further advantage of this particular bill. Now, there is obviously the advantages that our Minister has already talked about in terms of how it will help small business to understand who they are dealing with and when they are likely to get paid. But this is also important information for investors in large businesses, for the banks, for the shareholders, for the debenture holders, and for the other entities who trade with them.

A common way to understand whether a firm is doing well is whether it is paying its bills on time. If a creditor’s ledger is stretching out and out and out and increasing, that can indicate that a large firm has cash-flow problems or has financing problems. If that large firm cannot pay its invoices on time, it quite rightly raises questions in the minds of shareholders, of lenders, of anyone who has a stake in that firm. So it’s really quite almost a by-product of this excellent bill, we are also going to have better information available to our stock exchange, better information available about the funding of New Zealand firms and businesses, better information available in general to business. And the great thing is that this is information that is already there. It is just not yet publicly available.

So as the previous speaker said, a small bill. Perhaps a small bill, but really all it is doing is requiring firms to provide some extra information so that the entities that deal with them have a better understanding of what’s going on. But a small bill with large and excellent implications for our small businesses. I commend this bill to the House.

Before he goes to have his late dinner, I’d like to congratulate the Minister Stuart Nash for bringing this legislation to the House. It is the best piece of legislation I’ve seen from that Minister in five years, and it’s one of the worst bills that’s ever been brought here, because it’s not going to do a single thing, actually, to help small businesses get paid on time.

We’ve heard from Government member after Government member after Government member that there isn’t a cost to this and all they want to do is measure because measurement is important and it will help them ensure that small businesses are paid quickly. But when we say to them, “Why aren’t you, the Government, measuring outcomes in health and whether people are getting their operations, or in education and whether or not kids are learning properly, or in any part of Government—why aren’t you measuring?” They say, “Because it’s not important.” But when it comes to the private sector, they want to impose a burden and a cost, albeit well-meaning, upon those businesses. And to the last speaker in this debate, Dr Deborah Russell: there is always a cost when you ask a business to do something other than run their business. There are many times when it is justified and it should happen, but this is the Government merely passing the buck and putting an onus upon businesses to do the job that this Government promised five years ago that they were going to do for small businesses in New Zealand.

When we put in questions—written questions—to Ministers, at the moment, more often than not, they say, “It is too much work for our departments, the information is not readily available. We are not going to ask them to do it, because the cost would be too high.” But if you are a business in the private sector, you don’t get to pay for things out of taxes, you don’t get to waste money, you have to be accountable—like this Government wastes money. Then, actually, this Government says it’s OK to burden businesses and make them do the job the Government should be doing themselves.

The Labour Party—in Opposition and then in Government—made a commitment to small businesses that they would fix this issue and speed up payments. And merely asking companies that have a greater than $33 million turnover, including revenue and including GST, to report, to collect information, to publish it themselves every six months, and to hold that information for seven years—and get any part of that wrong, including, I don’t know, only holding it for 6½ years, there would be a fine; in some cases, a substantial fine—tells me that this is a Government that does not understand how businesses work.

Now, Stuart Nash wants to make it easier for smaller businesses and to speed up payments to them. Bring legislation that says companies must do that. Don’t just say, “We’re going to do a little bit of measuring and we’re going to collect a bit of information and we’re going to get those companies to publish that information, and if we find that that they’re not doing this properly, then we will legislate—and we might.”, because that’s not what the commitment was that this Government made to New Zealand small businesses, it’s not the promise that they made, and it is certainly not what they are delivering in this House today.

I think that information and the collection of it and its analysis is important. Actually, good information and good analysis leads to good law and good rules and good regulation. But we don’t see that from this Government. In fact, what we see is excuses when it comes to what they should be doing, and they pass the buck and they burden others—in this case, businesses in New Zealand who have already done it tough. But what you hear in every speech, underlying every speech, from Government members on this legislation is that businesses can pay this, they can afford to, and, actually, they have a responsibility to, when it’s the Government and the members speaking in this debate from the Government that have the responsibility to meet the promise they made to New Zealand small businesses and actually make a change. This legislation, sadly, won’t do that.

When we look at larger companies, there are times when they don’t pay their bills as quickly as they should. They shouldn’t do that. They should pay efficiently and quickly, just as they demand that they should be paid quickly as well. But here’s the problem: this legislation focuses on any business or any enterprise in New Zealand with $33 million worth of revenue, including GST, and it doesn’t go anywhere near a single Government agency or department that may or may not pay on time. How about the Government collects information on that? They don’t need to pass legislation. They have the ability just to inform each of their heads of ministries or departments to report to them individually or collectively on the payment terms and how well they do as a Government. It’s another promise they made before the last election, but there’s no measurement there. And if we asked the Government to do it, if we put in a written question or an Official Information Act request, I give you a guarantee that the Government will say, “It’s too hard to do, it’s too costly, and we won’t instruct our officials to do it.”

So they’ll put cost upon businesses. But to make sure the Public Service is running well, to make sure that they are paying the bills on time, or, I don’t know, to make sure our hospitals are delivering operations or people are seeing their doctors or their specialists in a timely manner, this Government doesn’t believe in measurement. It doesn’t believe in collecting information. It certainly doesn’t believe in league tables. But if you are from a business, then, actually, this Government is coming after you.

What would be a much better use of this House’s time would be something that actually sped up the payment terms for small businesses where there is a problem. For many small businesses who have done everything this Government asked of them during lockdown—they took on debt, they closed their doors, they stayed at home, they paid their workers, they acted on behalf of the Government, doing the Government’s job half of the time—the thanks, here, is: “We’re going to do a little bit of measurement and publish it every six months, and if somebody doesn’t do what we say, we’re going to fine them.” Well, that’s actually not good enough.

I think Stuart Nash probably wanted to bring a much better piece of legislation into this House, and it was either stopped when he got to Cabinet or stopped by the officials, or he, like so many others in this Government—other Ministers—have just given up. And that’s not good enough because it’s not good enough for our business community. It’s not good enough for hard-working New Zealanders. It is certainly not good enough for the people that run small businesses that believed Stuart Nash and his colleagues before the last election, when they said they would fix a problem that they had identified before. And if they didn’t think it was a problem, then they shouldn’t have said so while asking people to vote for them; they should have said, “We’re just going to pass a law that’s going to measure this for five or six years and we might do something about it.”

What this country needs is a Government that can deliver and actually takes action. Press releases of fancy slogans and pieces of legislation that don’t fix the problem are not helping New Zealanders. Sadly, that is one of the many reasons that this Government is struggling in the eyes of New Zealanders. If they turn around and start doing their job properly, who knows what might happen. But, at the moment, there will be people all over the country who are disillusioned by what this Government is doing. And as I look across at some of the members over there, I hope they don’t end up running a small business after the next election, because I said deflation wouldn’t help them be paid any faster.

That was a rather strange speech from a member whose party is supporting this bill in the first reading. A series of ramblings from that side of the House.

I’m delighted to take a call on the Business Payment Practices Bill as a member of the party for small business, Labour. Labour has always been the party that supports small businesses across New Zealand. The National Party, traditionally from the big end of town; Labour, we support small businesses, hard-working Kiwis, and this is another example of that.

We have supported our small businesses through the wage subsidy recently, and the feedback on that was overwhelming. We’ve recently supported businesses through the retail payment surcharge. This is another example, the Business Payment Practices Bill. We have a pretty small market in New Zealand, and it is quite common for power imbalances to emerge within that market. When those power imbalances do emerge, it is incumbent on the Government to address those imbalances.

This is a clear example of a power imbalance between the large businesses and small businesses. The small businesses often contract to the large businesses, and it’s reasonable that those large businesses pay for those contracts, pay for that work in a reasonable period of time. We have heard from other speakers around that power imbalance and the fact that the small businesses, it’s very difficult for them to meet—you know, it’s impossible for them to force a large business to pay. It’s very difficult for them to even ask a large business to pay within a reasonable period of time, because there’s an inherent fear there that if they damage the relationship, then they won’t get further work. So it’s the power imbalance. There’s another aspect around the competition which links in to that.

It’s important that as a Government we continue to foster fair competition within our country, and that’s something we’re doing here. Transparency in aspects around cash flow for small businesses. Look, there’s a lot more I could say, but the Minister for Small Business covered it very well in his speech. I commend this bill to the House.

E te Māngai, tēnā koe. Tēnā koutou e te Whare. Holy Toledo! Quite a range of speeches this evening, including from Andrew Bayly, the National Party’s lead spokesperson on this issue. Jeanette Fitzsimons regularly said that sunlight is the best disinfectant, and from that we can take that it’s transparency and getting into that kind of power imbalance that exists where there’s an asymmetry of information. When we have that transparency and when we deal with that asymmetry of information, we start to see some of the problems that might emerge.

It’s interesting that, despite some of the speeches that we’ve heard that seem as though they are in opposition, all of us are generally in agreement that this is, baseline, a good principle; that it seems as though all of our Parliament agrees on progressing to the select committee stage, where, of course, it’s really important that we’ll pull apart some of the features of this legislation. Interestingly enough—although probably coming from a different perspective—the Greens are really interested in that $33 million threshold; a concern that was shared by the National Party but, again, probably for different reasons, and it is very much the case that, with this kind of data being made publicly available, good practice can be celebrated but, more so than that, bad practice can be identified. That really gets to the core of that issue around the asymmetry of information and that power imbalance, particularly amongst smaller players in the so-called free market, because you don’t have a free market when you have an asymmetry of information; when you’re not quite clear on the reputation or the way in which some of those actors in that market may operate.

As others before me have laid out, this is actually something that is really important to small businesses. It’s important to small businesses in my community of Auckland Central. It is actually something which I’ve experienced in my background before coming to this place—engaged in running a few different small businesses—and it’s the reality for many of my friends, as well, in speaking about their kinds of issues and concerns with getting their invoices paid from some of the bigger players in town. And as, of course, the Minister identified, it’s very much the case that the small-business working group that he’s pulled together again identified this as a key priority.

I found it really fascinating—and I’ll just leave it on this point because I spent some time googling, as, particularly, members of the Opposition were doing their speeches—to hear them say that this is a small bill and it will do nothing and it’s therefore a waste of Parliament’s time whilst they were using up all of the time that they possibly could in their speeches. And, through that wee google, I found that the Parliamentary Library did some estimations of the cost of running this place—of running Parliament—and it was estimated that, during the 2000 to 2014 term, for every minute that Parliament was in operation, it cost approximately $5,500. So, to the next National Party MP that decides to use their full 10 minutes, that’s $50k of taxpayer dollars. Kia ora.

Thank you, Madam Speaker. I rise on behalf of ACT to speak to the first reading of the Business Payment Practices Bill, and I hate to disappoint Chlöe Swarbrick, but we do think it’s a silly bill that shouldn’t go ahead.

We oppose this bill for a number of reasons, but the irony isn’t lost that for the last five years, business owners have been kicked in the teeth with a Minister who’s been missing in action in the support of small business, and this is obviously a virtue-signalling bill to try and show that they actually do care. But I think the Minister underestimates the intelligence of small-business owners, and this token gesture won’t fool them one little bit.

If we look at the policy, the purpose of the bill is to introduce a regime that brings transparency to business payment terms and practices, and to incentivise larger businesses to improve their payment practices, which all sounds great. In 2020, the Hon Stuart Nash said, “When small businesses are paid late, many owners have to resort to personal savings or take out bank overdrafts to cover their business expenses.” He just must have been asleep for the last couple of years, because in the last three years, businesses have had to borrow money, whether it’s off the Government’s small-business loan scheme—which they have to pay back—borrow off friends, downsize their business, not pay themselves, plead with landlords, grovel with the IRD, and be humiliated by banks and patronised by politicians in the Labour Party.

They’ve had to scrape funds together in order to pay for the increases in the minimum wage, the extra sick leave, the statutory holidays—all pushed on to them over the last 2½ years while we’re going through a COVID crisis. The Labour Government even wanted to get employers to pay for parents to go to their school interviews because they didn’t think parents should waste their annual leave on their kids—it seems crazy. To pretend to care after all of this is pretty disingenuous.

The legislation deals with those businesses with a revenue of over $33 million, and they are required to disclose their payment of invoice practices twice a year, including payment practices in relation to late and overdue payments, and practices in relation to the terms that are set for those payments. The bill also provides a Minister with the ability to issue exemptions from the payment practices, and knowing the bias of this Government, I think this is a really scary clause. It also provides for penalties against those businesses that infringe.

The bill provides for the appointment of a registrar to establish and maintain a register. Do we know how many more bureaucrats will be needed to be employed because of this? No doubt, they will just go alongside the plain language police, and they might share the same office.

The justification for this legislation is confusing and the benefits are hard to ascertain. The Australian officials reported that the costs are hard to assess and that the benefits are likely to be hard to quantify. The policy is being implemented as it was in the Government’s manifesto commitment and it wishes to implement an initiative that appears to support small businesses. But do we know what the initial costs involved with establishing a registrar are, and what are the ongoing costs in the form of time, resources dedicated to collating and then disclosing payment practices, etc.? Little wonder the productivity in this country is so poor.

The debate pack for the bill is a whole bunch of press releases—pretty repetitive—from the Minister that are designed to sound caring and are trying to convince business owners that he really does understand what they’ve gone through. He stated in September, “Small businesses account for more than 97 per cent of all businesses in New Zealand. Late and overdue payments have a negative impact, causing unnecessary stress and uncertainty,”—unnecessary stress and uncertainty. The Minister’s actions over the last couple of years have shown loud and clear that he really doesn’t care.

Most small businesses employ up to 20 people—the cafes, the shops, and the mechanics’ bars, just to name a few—and this bill won’t affect that majority. I own a business, and I understand creditors, debtors, cash flow, and all the other things that go with it. None of my debtors have a revenue of over $33 million, and it certainly counts me out.

The bill tries to look as if the Government is tough on business. The supermarkets must be shaking in their boots after being allowed to trade all through COVID. Costco, with a profit of billions, receives accolades from Government Ministers while the small players have struggled to survive, and many haven’t.

The rhetoric sounds good, but the actual substance and actual practical use is, predictably, lacking. In fact, the feedback I’ve had so far is that the Government departments are the main offenders that this legislation may affect. Maybe if they set the example for the large private sector companies, they would naturally follow.

ACT is the party for small businesses. This legislation is a solution looking for a problem. It’s a cynical attempt to pretend to care when you’re thinking up new ways to kick them when they’re down, and we oppose this bill. Thank you.

I found that last speech very, very confusing, but I think I should probably continue with the content that I’ve prepared and then, hopefully, somewhere down the line—maybe one day—I can reconcile with some of the ramblings that we just heard.

This is a bill for small businesses. New Zealand is a nation of small businesses—small businesses that we have defined as those who employ less than 20 employees. They make up 97 percent of all of our firms, 29.3 percent of all employment, and one-quarter of our GDP. So this bill is extremely important.

Actually, I don’t think it’s a coincidence that both me and my colleague Chlöe Swarbrick have once owned or operated a small business or have become a sole trader in our time prior to Government as being some of the youngest members of this House. That is because a lot of these small businesses actually start when the entrepreneur or the business owner themselves are quite young. So we often know that the power imbalance between small businesses and firms actually is disproportional in terms of those who we’re seeking payments from, and the bargaining that we can do is actually very limited—often it’s a take it or leave it situation.

It was really fitting that I was here talking to my colleague; I was trying to think of the phrase that I know the Minister often uses, “Sunlight is the best disinfectant.” As we were coming up with that phrase, I know Chlöe also mentioned that, and that is indeed true—when we bring about transparency into a lot of these regimes, then I think this is where people and businesses start to behave themselves.

It also really confuses me that throughout this debate, those who claim to be parties for small businesses seem to miss the concept of digital accounting or accounting software. Literally in the year 2022, many, many softwares—those that we use: Mind Your Own Business, Xero—they actually just with a press of a couple of buttons, there you go, voila. All of your accounting data can be displayed, can be made transparent. So there’s a lot of effective tools out there. I would encourage all the big firms—actually, I know all the big firms use all of that accounting software.

Finally, talking about big firms, often in our select committees we see a lot of big businesses coming to submit to us because they often have Government or corporate relations teams. But this bill is for small businesses, so can I encourage all the small businesses to come and submit. Come and make your voices heard in the select committee process as well. I commend this bill to the House.

I call on Sam Ooffindell for five minutes.

Thank you, Madam Speaker. It’s good to take my second split call of the day—

💬 Chris Penk: Go the “Ooof”!

Uff-indell, thank you, Penky. Now, we’ve heard a lot of talk around this today, and I must say, I heard Jamie Strange get up a little bit earlier today and comment about how “National is the party for the big end of town” and “Labour is the party for small businesses”, and I internally and outwardly LOL’d, because I wonder how many times Jamie or anyone else on that side of the House has gone around to talk to small businesses. Because if they did, they may be in for a bit of a shock, because I don’t think small businesses think that Labour is their party. When I walk in there and I knock and they see me and they go “Oh, a National Party MP”, they tell me how hard I must work so that we win next year, because they are facing considerable strains at the moment. And a few of these have been eloquently put forth by my colleague who is not in his seat at the moment—that’s occupied by Mr Penk—but the Hon Todd McClay was here earlier and commented on all the cost that’s been put on small businesses.

And we could talk about the Credit Contacts and Consumer Finance Act failures, we could talk about rising interest rates, we could talk about the union bill. There’s the job tax coming up, there’s the additional public holidays, there’s the additional sick leave, there’s the immigration bottlenecks. This has put more than $2.8 billion of additional costs on to small businesses. And we know that small businesses are a significant part of our economy—97 percent of businesses here—and they don’t have the ability to soak up these additional costs such as a very large listed player or a Government may be able to.

So I would encourage the opposition to get out there and talk to small businesses. And they may actually then get a bit of a feel—or a bit of a flavour—for how much they are suffering. We know that they, obviously, had to sit on the sidelines throughout COVID and a lot of them took that on the chin and they did it; they did what the Government asked them to. And I think, in return, it would probably be a good courtesy just to be able to empathise a little bit more with the pain that they are going through.

Now, this bill looks to update the reporting requirements around payments and what is owed, and, look, the intentions of it are pretty good. We have noted that it probably could have come through a few years ago, but, you know, we are where we are today—is it the right way to approach the problem that we’re trying to solve? And I would argue that no, it’s probably not. I mean, if you are looking to help businesses get paid faster, requiring businesses with—they picked out $33 million arbitrarily, to report this information, is that necessarily going to facilitate faster payments? I’m not necessarily sure that it would, and I think there are probably better ways that you could do that. One of my colleagues noted that you could legislate that payments had to be made within X amount of time, and I think if something like that had been put forward, then that would give small businesses the certainty that there is actually something that’s going to come of it, as opposed to this mechanism.

And how much is actually going to be captured here? Are your small mum and dad businesses out there—are they dealing with other small businesses in the business-to-business space that have an annual revenue of over $33 million, which is those businesses that are subject to and caught by this bill? So I’m not sure that it’s necessarily the best means. And I think that there are better ways that we could look around speeding this up. And I thought some legislative—or something a little bit more thoughtful could have reached that goal.

As a party, we are supporting this bill. I’ve provided a fair bit of criticism around it, but we will support it to the next stage. And I hope, in the committee stage, there is the opportunity to help the Government understand the amount of pain and suffering that small businesses have taken on board over the past three years and how tough they’re doing it now. They are now facing rising interest costs, their productivity isn’t going up, they have additional regulations being placed on them, and a lot of them will be suffering a lot of stress with their business loans being linked to their mortgage. And I hope that through that stage—[Time expired]

Thank you, Madam Speaker. I’m happy to rise and take a brief call on the Business Payment Practices Bill, because it’s a bill that will make a difference.

The member who’s just resumed his seat, Sam Uffindell, cited that the threshold for larger businesses is that of a turnover of $33 million a year. This will mean that for 97, or thereabout, percent of businesses in New Zealand—small businesses—for them, it will give them an opportunity to think about the way in which they go about engaging with those larger businesses. This is about transparency. It is an important issue that I’m sure the select committee will hear from submitters—I hope that the select committee does hear from those in small business who understand the various issues that they may have faced and the corrective way in which this bill will address those particular needs. So, with that, I’m delighted to be able to commend this bill to the House.

Kia ora, Madam Speaker. I rise to continue the conversation this evening, obviously, around this piece of legislation, as we keep hearing the numbers of 97 percent of New Zealand businesses are small businesses—of course, the rhetoric that comes that, yes, we are here to ensure that we support them and ensure that they are paid on time.

Now, a slight digression from me, but recently I had a dear friend pass away, and sorting out his affairs—I guess, an example of, often, the big businesses that, you know, get away with things: I remember ringing up to cancel the accounts, which, you know, instantly that service was stopped, within the end of the phone call; that was about six weeks ago, and I’m still waiting for the money to come back through from that large business, that large corporate, in terms of the refund and the money that is owed to his estate. Slightly different to this bill, but it demonstrates the challenge that, often, small players and small businesses play when they’re dealing with the big corporates and the big businesses that have the leverage, have the opportunity, because, you know, as we speak with business, often it is that fear to put your head above the parapet, because, if you do, you might be treated differently and you might not be in their favour.

This legislation very much is around the transparency, as we’ve heard, about shining that light and ensuring—for example, countries like Australia have the Payment Times Reporting Scheme, which, obviously, again, is ensuring that those larger entities are paying on time. In the United Kingdom, again, there’s another business model over there that they have to report at least twice every year.

So this is simple legislation, it is good legislation, and I am glad to be a member of the Economic Development, Science and Innovation Committee, a busy committee with significant and purposeful Ministers that are making changes for our businesses and our small businesses around Aotearoa.

Thank you very much, Madam Speaker. It’s an absolute pleasure to rise on behalf of the National Party as a member of Parliament for North Shore to talk on the Business Payment Practices Bill first reading. As you’ve heard from fellow members of ours on this side of the House, we are supporting this bill through to select committee. The reason for that is quite simple: it is that we do absolutely support the small-business community and the significant number of individuals across this country who do very much hard work for our economy in regards to that sector. The importance, in terms of them being paid on time, becoming more essential because of the cost of living crisis that everyone is suffering at the moment. And that cash-flow aspect is so significant in terms of their overall working capital.

We know that Xero has published data around this indicating that 8 percent of businesses in New Zealand are not paid, or are paid more than a month later than when they are due to be paid, and that’s a significant implication on them—something in the region of around $456 million of late payments. From a working capital point of view, for those that have been part of small business or understand the issue, when you’re relying on that capital to pay your wages, relying on that cash flow to come in to pay your other expenses, it’s really, really important. So anything that we can do to ensure that those businesses are paid more regularly and are paid on time, I think, increases the efficiency in the flow and the productivity of our small-business community.

I think the legislation as it’s framed is targeted at large businesses—large businesses that earn over $33 million of revenue—and ensuring that they have the degree of compliance around making sure that those payments occur. I’m not sure whether the Minister has indicated or not whether the Government departments are captured by this legislation, but that would be a very basic first-principle starting point. Obviously they don’t earn revenue, but I would expect, as a default, automatically, that our Government departments should absolutely be setting an example in terms of leadership around ensuring that bills are paid on time—and, boy, do our Government departments pay a lot of businesses at the moment, a lot of invoices. Because this Government loves to spend; they are addicted to spending. So if they are spending, then at least we want to make sure that those bills are paid on time.

The issues that have been canvassed—and I think it is why National have been very clear that we are supporting this through to select committee: because our expectation of select committee is very much to test this legislation. And, I think, as other members have said, what is the overall problem that we’re trying to fix, or is being tried to be fixed, by this legislation, and is this the right mechanism in terms of a reporting framework that will achieve that outcome? As we’ve heard already, there are other mechanisms that can be utilised in order to achieve and ensure that that 8 percent of payments that aren’t paid on time do occur. I’m hopeful that the select committee process will ensure a robust consideration through feedback from submitters around: are there other alternative models? I’m sure, in this case, that the Minister responsible for this bill will be open to alternative models and alternative options that submitters make in regards to legislation to ensure that we get a sustainable position in regards to moving forward in this regard.

The concerns that I would have in regards to this legislation, and those that have been echoed on this side of the House, relate to the increasing compliance and regulatory burden that reporting frameworks can bring, and do bring, to businesses. And while we acknowledge that these are large businesses and will have, as one of the members mentioned, most probably, access to financial reporting and accounting software that will primarily automate most of this practice, the reality is that processes and systems do bring additional compliance on businesses. When we’re dealing with what we know is 8 percent applying a one-size-fits-all across all businesses across that community, it means that, you know, in effect, 92 percent of businesses in this country are doing the right thing. I think we need to acknowledge that, actually, we are talking about a small minority of businesses that are not. So therefore do we need the sledgehammer to crack the nut or is there another mechanism which is much more efficient and targeted in order to achieve the same outcome? I’m confident that the select committee will consider that as part of their review process and not simply push through regulation and legislation for the sake of it.

The other aspect that is important to note is in regards to the overall challenge and, I think, the way in which the bill potentially will deal with that speed of payment, because the reporting and monitoring processes, as is outlined in the legislation, goes so far but it doesn’t physically ensure that that payment is actually made. And that gets back to the crux of the issue, and I think it’s what infuriates businesses across this country, it’s just that late payment and that element of—probably for that small number of businesses that aren’t paying on time, it’s probably well-known who those businesses are. So, again, you know, is there a mechanism that can be deployed in order to target that small number of firms to ensure that they are making the payment, and, simply by reporting and doing that, you know, will that achieve the outcome? I think as a prior member also noted, and it is—I will reflect on this, is that while we’re standing here and the Government are putting through a piece of legislation which is around putting performance measures and reporting and monitoring in place, we are failing to do this in some of the most critical areas of our Public Service at the moment. The lack of performance measurement and outcomes measurement, I think, is having significant implications, both in terms of economic but also social implications on our communities. And so if we can take maybe some of them—maybe they’ve clicked on; maybe they’ve just thought, “Actually, we do need to do a little bit of this” and maybe this is a turning point for the Government to actually start looking at options in order to drive better performance. And, you know, we can only live in hope that that is the case.

But that’s pretty much all I want to say on the bill. National will be supporting it through to the select committee stage. Always look forward to the select committee providing appropriate due diligence and appropriate consideration to this bill. I’m sure they will, and I’m looking forward to seeing the outcome coming back at second reading. Thank you very much.

Thank you, Madam Speaker, and thank you for the chance just to say a few words tonight on this Business Payment Practices Bill as we consider it at its first reading. To start with, I must agree with my colleague Jamie Strange—very wise man—when he correctly points out that this Government has a long history of supporting small business. We’re certainly very focused—absolutely focused—on it as a priority, as we have been, in particular, over the last couple of years. When we recall the last couple of years, certainly the wage subsidy, the resurgent support payment, the small business cash-flow loan scheme, and the digital boost, even, spring to mind as really obvious and demonstrable examples of how this Government prioritises sustaining small businesses and valuing small businesses and helping small businesses through hard times.

We see this particular bill as yet another example. This new reporting regime is part of that focus. It’s been described tonight as a simple bill, something that’s simple yet meaningful, and I agree with those sentiments.

I think there’s four particular things that are worth noting from the various contributions from this side of the House tonight, the first one being that the register will include information relating to late payments, information relating to the length of time between the receipt of invoices and the full payment. This is information that we’ve heard already exists. It’s information—it’s data—that’s commonly supported by modern software. It’s not a huge imposition on anybody to make this available. What this bill says and proposes is that the information will be disclosed and publicly searchable on a register managed by the Government, as a means by which to increase transparency and accountability.

The second thing is that we’re not making any judgment about when an invoice must be paid. It’s about the firm’s payment practices being transparent, as I said, and being available to anybody who simply wants to consider, therefore, whether that’s someone that they wish to do business with.

Thirdly, businesses certainly won’t be required to publish information that’s in any way sensitive or that, you know, compromises them in any way, shape, or form. In fact, you know, the whole payment regime will absolutely comply with New Zealand privacy laws.

And, lastly, other jurisdictions, as we’ve heard tonight, particularly people that we commonly compare ourselves with—Australia and the UK—have very similar disclosure regimes in place.

As I said, we’re focused on supporting businesses, and, because of that, I commend this bill to the House.

The question is, That the Business Payment Practices Bill be considered by the Economic Development, Science and Innovation Committee.

Motion agreed to.

Bill referred to the Economic Development, Science and Innovation Committee.

Instruction to Economic Development, Science and Innovation Committee