Business Payment Practices Bill

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

💬 DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.

Thank you, Mr Speaker. I move, That the Business Payment Practices Bill be now read a third time.

Timely payments for goods and services delivered is crucial for the financial health of any business, and especially for New Zealand’s small businesses. But since taking on the small-business portfolio, I’ve heard from so many small-business owners that the long-payment terms that some large firms impose are hurting their cash flow, increasing their stress, and also stopping their business growth.

Larger firms are often in a position to take it or leave it in terms of payment. This puts them at an advantage, at the expense of some of their smaller suppliers, and that’s not fair. When this happens, these small suppliers often feel unable to ask for more reasonable terms for fear of losing that income. The perception of a power imbalance is often too great for small-business owners to risk upsetting their large customer. If a small business relies on a large payer for a lot of their revenue, they will indeed be anxious to not rock the boat, as their livelihood may well be at stake. Poor payment practices by some large firms are preventing significant segments of our business community from realising their full potential. The effects can run throughout supply chains and have consequences for the far broader economy through, for example, a high cost of capital or unnecessary insolvencies, and we know that in New Zealand, the vast majority of our business activity—98 percent of our businesses—are small businesses.

In its report in 2019, the Small Business Council reported that 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 with our current tools and that, in fact, a new approach was needed. The bill being debated here today and receiving its third reading will deliver that change. It will provide transparency so that people can see for themselves whether large firms are offering good payment terms or not. Small businesses will have better information to inform their decision making when engaging new customers. Large businesses who care about their reputation will want to ensure that their payment practices stand up to public scrutiny.

The bill requires entities with more than $33 million in revenue and $10 million in third-party expenditure to disclose information about their payment practices twice a year. The Government needs to lead by example, so the bill will apply to Government entities just as much as the private sector. Disclosed information will include information related to payment times and reporting entities’ payment terms. This information will be publicly available on a searchable register administered by the Ministry of Business, Innovation and Employment (MBIE). The register will be free for users and easy to access. This bill provides for the appointment of a registrar who will be responsible for establishing and maintaining the register and its associated compliance, and also its enforcement function.

The bill also provides for infringement penalties and criminal offences for contraventions of its obligations. The bill’s penalties would, of course, only apply to the most wilful and problematic offending. The primary compliance lever will be reporting entities’ desire to enhance their reputations as good business operators who offer fair payment terms. Reporting entities that offer good payment terms will want to make this known, and the transparency this regime requires will enable them to do exactly that. Favourable comparisons will be made against reporting entities that don’t offer good payment terms. They will now need to defend this approach in the face of full public scrutiny.

The Economic Development, Science and Innovation Committee carefully considered the bill and recommended some really good changes to make this bill more effective, and I’ll briefly go over some of those changes. I’d also like to thank members from both sides of the House for their work on the bill.

The changes include having more clarity in what counts as payment information and also more specificity around which entities the new transparency regime will apply to, measures to minimise compliance cost, and a range of technical improvements. The select committee made two other changes to help ensure implementation runs smoothly. The first was to provide a six-month transitional period before reporting entities must start collecting information. The second was that initially, only reporting entities with $100 million of annual revenue will need to report. Many of these companies will already be doing the same reporting requirements by the Australian requirements, so they will be well placed to extend this transparency to their New Zealand operations.

Parliament then made more changes to the bill at its committee of the whole House stage. These changes have no effect on the intent or the broad parameters, but none the less they will help ensure that it operates effectively, is clear, and is internally consistent. Those changes include inserting a provision in the bill that allows regulations to define “invoice”, making it clear what fields public users of the register must be able to be searched upon, making it clear that companies must be able to report separately on invoices in dispute only if and when they are required to report on late invoices, making sure that the use of the term “working days” was consistent when talking about appeal and review periods throughout the bill, and enabling the regulations to specify the kinds of transactions that need to be reported back on.

The most notable change at the committee of the whole House stage was that to increase the bill’s transitional period from six to 10 months. The bill’s regulations won’t be gazetted immediately after the bill passes, and it is the regulations that spell out exactly what information must be disclosed. Adding more time to the bill’s transitional period ensures that the reporting entities don’t lose some of that transitional period while they wait for those regulations to be finalised.

MBIE officials are developing draft regulations now, and to this end they have consulted widely with stakeholders and subject matter experts in New Zealand and in Australia, where a similar regime now operates. I am confident that the regulations will achieve the right balance of ensuring useful information is made available to small businesses and the wider public while minimising compliance cost for reporting entities and enabling the smoothest possible implementation.

This bill has been long talked about, and small businesses are eager to see this enacted. I’m proud and pleased to commend this bill to the House.

The question is that the motion be agreed to.

Thank you, Madam Speaker. Well, to the long list of bills passed by this Government that I’ve described as a well-meaning waste of time, we can add the Business Payment Practices Bill. We’ve had Rachel Boyack’s Plain Language Bill, Duncan Webb’s directors’ duties bill. I can think of a few others but the list is getting long and I don’t know how we’re going to deal with the repeal of all of this. I think once we get to Government we’re going to have to have some kind of omnibus bill, the “Well-meaning Waste of Time Repeal Bill” or some such.

💬 Chris Penk: “Back on Track Bill”.

The “Back on Track Bill”—I like that. But repeal it we will, because however well-meaning the Minister is, she has just burdened business with more compliance cost for little or no benefit. Why do I say that? Well, the purpose of the bill makes it clear: the bill isn’t to improve payment practices; it’s to create transparency. Now, the collection, collation, and reporting of this data will in and of itself not change behaviour. And there’s something about the Kiwi psyche I found when I was advising small business many, many years ago—one of the things that we taught small businesses was good credit practice, good credit management practice, credit control. There’s something about New Zealanders that makes them reluctant to ask for the money that’s due them, to actually pick up the phone and say, “Guess what! That invoice is late, is there a reason why you haven’t paid?” And anyone who’s worked in an accounting office knows that the squeaky wheel gets the oil.

And indeed, when we look at the case for change, the Ministry of Business, Innovation and Employment (MBIE) couldn’t make it. We actually have pretty good payment practices in this country, particularly if you remove Crown entities from the equation. When you remove disputed payments from the equation, bills are paid pretty well on time. Now, there are always ratbags and rogues in business as there are in society. Might they be quivering in their boots tonight when this bill is passed? I doubt it. I doubt it very much because, as I say, it is a well-meaning waste of time. And how do we know this? It’s because other jurisdictions have actually tried and failed—by a legislative vehicle—to improve payment practices. The committee heard of the efforts by the Australian and United Kingdom Governments to do just that, in 2017 and 2020 respectively, and there was no discernible improvement in payment terms. In fact, in certain sectors in Australia they’re reporting worse payment terms. There we go: the Government gets involved and it gets worse, not better. Where have we heard that before? And, indeed, MBIE didn’t even know the scale of the problem. Now we may, if the right data is collected and reported in the right way, have some kind of transparency on that. But as I say, rogue payers are not going to be quivering in their shoes tonight.

We also believe that the threshold for compliance with this regime is too low: $33 million is not a lot of money. We’ve got it in other jurisdictions much, much higher than that. And so small business is really facing another example of more compliance costs. I say small businesses, I think in turnover that would probably make them medium businesses, but it certainly doesn’t make them large. They are faced with more compliance costs being imposed on them for very little benefit. But as I say, hope is coming. It’s only a few short months away before a Government that understands business, that understands that every time Government writes a law there is a cost attached and it’s an external cost not on the Crown alone but on the businesses, who have to pay twice because they pay for their own compliance costs and then they pay for the registrar through their taxes. Already overburdened with regulation, this is an unnecessary addition to that. So we will continue to oppose it and then repeal it.

Thank you, Madam Speaker. It’s been a real privilege to be able to chair the Economic Development, Science and Innovation Committee during the process of this bill. I have thoroughly enjoyed the conversations we’ve had in teasing out some of the real details that the Minister has covered in her speech—the ones about the payment threshold, the conversations around which payments that we need to be excluding, and the kinds of businesses that we want to capture. And I’m very comfortable in the place that we’ve landed, which is to make sure that those businesses we capture—with over $33 million with a payment threshold of $10 million. It’s actually something that really captures the businesses who have already a very well-established accounting department within their companies who will already know their own business payment practices, also relating to the stats on late and overdue payments and also around the payment terms that smaller businesses, when they become their suppliers and engage with them, want to know. And also society, including us, including media, will be able to actually have an overview in transparency so that we can all make sure that New Zealand truly becomes the best place in the world for small and medium businesses.

I started my very own business at 21 years old as a sole practitioner doing events management and, when we became the supplier to big events companies, we made sure that we had to pay our other staffers as well. Those were all university students, and that was hard being the small player, the small fish in the pond. And so by having gone through that, we know now who to engage with and where we need to be careful, and it doesn’t waste my own time in trying to get to those phone calls that the Hon Michael Woodhouse has just mentioned. This is efficiency for the whole economy. That’s why I commend this bill to the House.

Well, the Business Payment Practices Bill is a bill, as the Hon Michael Woodhouse has very clearly stated, that is destined to end up on the cutting room floor, on the scrap heap. It is a great shame, isn’t it, when one thinks about all of the opportunities that we have in this House to deal with some of the most significant issues that our country faces, that the Government of the day decides to pass a piece of legislation under urgency—under urgency, of course—which is going to result in pretty much not much happening.

That is the reality of the Business Payment Practices Bill, a bill which has already been tried and tested in overseas jurisdictions. We heard earlier the fact that this, in a similar bill as this bill, has already been implemented in both Australia and the United Kingdom, in 2017 and in 2020. And what was the outcome? What were the learnings that we can derive from that experience? Well, quite simply, we can derive the learnings from those two jurisdictions that the implementation of legislation such as this makes absolutely no difference.

And for those that are watching at home at 5.35 p.m., getting ready to watch the news tonight, reflecting on—

💬 Hon David Bennett: They’ll be watching The Chase.

—is my Government dealing with—ha, ha!—my number one issue around cost of living, or crime, or other factors? No. Rest assured, your Government is dealing with issues and matters that aren’t going to make any impact. So that is a shame.

The other aspect of this bill is that when officials inputted and provided advice, and I acknowledge the select committee who did a valiant job in trying to, you know—

💬 Hon David Bennett: They’re in the paper.

—improve—ha, ha!—a bill that was destined to failure, make it better. For some of the members, I’m sure they did try hard, but it hasn’t made much difference. The Ministry of Business, Innovation and Employment (MBIE) actually said that—quite a simple question is: how big is the problem we’re trying to fix? How big is this issue? A pretty reasonable question, isn’t it? Well, you know what? You know what? The—the—officials—

💬 Hon Willie Jackson: Can you get to the point?

Thank you, the Hon Willie Jackson, for helping me on that. The officials from MBIE said to us that they cannot measure or see or are able to quantify the scale of the problem that actually needs to be fixed. And not only are we standing here this evening passing a bill under urgency that’s going to make absolutely no impact but the officials, who do a really great job in many circumstances, said to the Government, “By the way, we can’t even quantify the problem you’re trying to fix.” So with those two elements alone, you would probably think “Well, maybe let’s not bother doing this.” But, no, there is more to come.

The other aspect of the bill is in regards to the $33 million threshold which triggers this bill coming into play. And we’ve heard from the Hon Michael Woodhouse in regards to the fact that the similar Australia legislation is set at $100 million. I was just doing again a bit of a packet exercise on the $33 million, under current inflation rates at 6 percent today. They’re saying inflation’s dropping—

💬 Hon David Bennett: Tumbled—tumbleweed.

—tumbled down like a tumbleweed. What a load of bollocks—what a load of bollocks, isn’t it? I mean, 6 percent. Wow! Hurray! You know, that’s double where we should be. But anyway, the point I’m making, is that $33 million, with a bit of inflation, that’s $35 million in one year, right? So that’s the scale of the inflationary impact. That $33 million—what is that? It’s about $650 grand a week, give or take—you know, about 90 bucks—90 grand a day, if you’re doing a seven-day business.

💬 Hon David Bennett: They’re only four days—four days over that side.

A four-day week—anyway, that’s the scale. Aussies, even though the bill didn’t work in Australia, they still at least set the threshold at A$100 million. But anyway—we’ve pushed back on that, tried to be constructive, but, consistently with the Government, that hasn’t been listened to.

The other aspect of the bill which has been highlighted in the committee of the whole House today was the reality that, actually, if you really want to get to the heart—and the Minister used the words “This bill needs to deal with the big fish.” The “big fish” were the words that the Minister used. The big fish! Let’s get out there—let’s get out there—you know, whatever we’re going to do, and let’s deal with those big fish. Well, the big fish are the departments that report to these Ministers, all right? They are the big fish, you know, and if you think about—let’s think about the police, OK, the New Zealand Police department, and maybe the Minister has a little bit of experience with that department. I don’t know—maybe; maybe not. Half a billion dollars in 2022 was their operating expenditure budget, all right? So I’m not talking about staffing. Staffing’s $1.5 billion for the police, but half a billion bucks spent on suppliers and they’d be big and small, no doubt, but there’ll be a lot of small ones, you know, providing those torches or batons or what other—what’s that, sorry?

💬 Hon David Bennett: Repairs of cars from potholes.

Repairs of cars that are getting—

💬 Glen Bennett: Who’s giving the speech?

It’s always useful for the Hon David Bennett to contribute into this with the wealth of knowledge. I appreciate that. But the guts is half a billion bucks of spend, and the only thing that these Ministers need to do to get them sorted is to send an expectation to their Government departments to pay on time. They can write a little letter on the laptops—yeah—and go “Dear, Department A. Please ensure that you pay your bills on time. Kind regards, Minister ABC.” Just do that. I mean, I’ll tell you what. Instead of spending $5 million to $10 million of taxpayer money, which is how much this bill is going to cost in terms of MBIE system costs, the Ministers could write a little letter to every Government department and say, “You know what? Just pay your bills on time.” And that in itself would deal with the big fish that the Minister refers to that are the ones that need to get themselves in order.

We know that the Government departments are the slowest payers and they are the ones that could easily—this could be solved with literally printing a letter. I’m quite happy to draft the letter for the Ministers myself, if that would help, because that is all they need to do to set the expectations. But they’re not going to do that. They’re going to pass a bill like this under urgency, a complete waste of time, and it’s not going to work.

The other aspect that—and it’s good to see we’ve got a little bit more time, because we can go on for a little bit more. But the other aspect is in regards to the IT programme, right? So we talked about the fact that the MBIE officials—the question was: how much is this all going to cost? How much is this all going to cost the taxpayer? And the costs coming back, in regards to trying to do all of the compliance. We talked about all the information-gathering powers, right, and the changes to the Income Tax Act as well, which I think was another revelation by the Hon Michael Woodhouse. Always an eye for detail, but he picked up that and I don’t think the Government wanted to talk about that little bit of more information-gathering powers. But I’m surprised I didn’t read it in the New Zealand Herald in the letters to the editor from the Hon David Parker this morning. Did everyone see that?

💬 Hon Members: No.

The Minister is writing to the Herald to do letters to the editor now as a way in which he communicates. But I didn’t see it in his contribution to the Herald in the letters to the editor this morning about the fact that there’s more changes in this bill relating to the Income Tax Act, but maybe that might be coming tomorrow—

💬 Hon David Bennett: They’re still holding it.

—because there’s only a certain word count you’re allowed in the letters to the editor, the Hon David Bennett. But anyway, five to 10 million bucks, $5 million to $10 million of taxpayer money coming out of the pockets of hard-working Kiwis is going to be splashed up against the wall on this completely hopeless and useless bill. And that is just another example of wastage of taxpayer money by this Government.

💬 Hon Gerry Brownlee: It’s a very well-plastered wall full of splashes.

And, you know, as the Hon Gerry Brownlee is noting, you can get a lot down your way for 10 million bucks and it would be a lot better purpose than this bill in our communities out there, by letting that money go to those that need it most.

So I think I’ve traversed the bill adequately. I think it’s pretty clear that National will be strongly opposing this bill. A complete waste of time. It’s on the list. It’s on the long list of urgent bills that will be repealed in round about 100 days. So there is hope. But we will not be supporting this bill.

Kia ora, Madam Speaker. I’d like to thank the Hon David Bennett for that 10-minute speech that he just gave! It was reflective and thoughtful; I appreciated all those quips and moments. I don’t think the Hon David Bennett sat on the committee, but obviously he has a lot of information to share with us in this House, and I appreciated that speech, very thoughtful—almost like an autocue machine running in the background. What’s the voice version of that in the back of your ear?

But in all seriousness, I want to say that, as has been mentioned, small and medium enterprises (SMEs) make up 97 percent—almost 550,000 companies and businesses throughout Aotearoa New Zealand. And when companies are slow payers, this creates stress, this creates uncertainty, and when small businesses can be on a financial knife-edge, like some of those small and medium businesses are, that is make or break time, not only for them as a business but also the stress and the mental health and those type of things that are challenged there.

So I was on the committee. I support this piece of legislation, and I’m glad that we as Government are making true on announcements we’ve made and what we’re going to do. We’ve heard some barbs across the floor this afternoon around what we are or aren’t doing, but when I reflect on SMEs here, I think that what we’ve been doing for new business grows funds and supports small and medium sized enterprises to grow, putting money into that. We fully funded the Regional Strategies Partnership Fund, unleashing the regional economy and meeting what opportunities we have. I experienced that in my own electorate of New Plymouth. We’ve put money into the tourism industry programme that supports SMEs; also into the Industry Transformation Plans, which is working with industries, with workers, and with iwi, ensuring that our SMEs are fit for purpose, are supported, are not only—can I mention also the investment in our gaming and tech sector. We’re doing so much, and therefore, I commend this bill to the House.

Debate interrupted.