Business Payment Practices Act Repeal Bill

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

ASSISTANT SPEAKER (Greg O’Connor): 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 Act Repeal Bill be now read a first time.

The Business Payment Practices Act Repeal Bill repeals the Business Payment Practices Act 2023, associated regulations and amendments in other Acts, and revokes all associated regulations. The Business Payment Practices Act is not yet in force. It comes into force at the end of May. However, the Act is not a solution to the very real problem with late payments and long payment terms by large market players. The Government is repealing this Act because we opposed it when it was debated in Parliament and because we believe it will impose unnecessary compliance costs on 3,000-plus businesses without speeding up payment times.

The reason we are repealing this Act under urgency is that the Ministry of Business, Innovation and Employment (MBIE) is about to commit between $2 million to $3 million to develop an IT system to meet the requirements of the Act. If it was just $2 million to $3 million, that may have been some concern, but many in the industry suggest that the amount that MBIE will have to incur to put in place the system will be at a much higher cost. In addition, there are many thousands of firms also poised to make IT spending to amend their systems to be able to record when invoices are received and when payment occurs. Of course, that is a huge cost when you think about many large companies who have significant enterprise resource planning systems which are not easily modified quickly.

The Act relies on small businesses also using data on an MBIE website. However, many small businesses, particularly when you think about ones in Porirua or West Auckland or in parts of Tauranga, won’t even know who MBIE is. And the thought that they would go and search on an MBIE website—would know where to look on that MBIE website—to find the specific data is something that is not actually a very strong argument. This undermines the utility of the Act as the information disclosed is highly unlikely to be used by small businesses in their decision making as to who they should do business with.

The other aspect with the proposal in the Act was that the businesses, the large businesses, would be required to submit a return every six months, but they would then have four months after that to file their return. In essence, the information could at different periods of time be up to 10 months old when the small-business owner was actually trying to find out what is the current state of payment cycle for the large business. In essence, it’s an out-of-date information system that comes at high cost.

The other thing which we argued strongly with the Government at the time, as they railroaded this through the select committee, was that anyone, any small business, even an individual, and some of the members from across the way, if they so chose, could get on their phone, dial into a website, and go to one of the credit agencies—and there are four, but just to name one, such as Centrix—and they would be able to get that information on payment times in real time, not 10 months’ old, in real time, and actually much more comprehensively, and on the payment cycles of a particular firm for a mere sum of $35. That is one of the main reasons why we want to repeal this legislation.

Small businesses won’t be impacted by this repeal, because the Act hasn’t come into effect yet. However, they will get real benefit from other avenues that I am pursuing, including, firstly, working with the ministry of finance to reinforce the requirement that Government agencies are to pay ordinary creditors within 10 working days. This should have been the start point for the last Government’s response.

💬 Katie Nimon: That’s right; lead from the top.

Start leading from the top—start leading from where Government sits rather than imposing costs on businesses, which is always the approach of the Labour Government when they thought about solutions. However, if the Government wants to show leadership in this process, we need to sort this out, and that’s what we will be doing.

Secondly, we are very keen—and personally, in my responsibility as Minister for small business—to encourage e-invoicing. So we will be asking Government agencies to make sure that they prioritise e-invoicing and faster payments. That means the first emphasis for Government agencies is that they need to be send/receive capable—and I just note that e-invoicing is not doing an invoice and PDF’ing it and then sending it by e-mail. What that means is setting your systems up so you can transfer the data; there is no need to create invoices as such. That’s the second requirement.

The third thing is that we want to incentivise small to medium sized enterprises to also adopt e-invoicing when they are interacting with the Government. And I would remind the House that the Government spends about $51 billion a year on services, and by incentivising businesses and small businesses that adopt e-invoicing—we will achieve this by reducing the payment time by Government agencies down to a five working-day time line, thereby increasing the cash flow of small businesses.

The fourth thing is we will be proactively publishing the Government payment times and making sure the Government adheres to its rules. And the next thing is we’ll be expanding these arrangements to other Crown entities. We need to go through a period of consultation with them, but we do not see or envisage any reasons why they cannot also meet the same requirements.

The sixth element of the reforms is that I have announced, alongside Kirk Hope from Business New Zealand, that we will be working with it on an industry-led voluntary code, similar to the Business Council of Australia’s, to put in place a supplier payment code to make sure large businesses across New Zealand are paying small businesses on a much more timely basis. And finally, through my role as commerce Minister, we will be raising awareness of existing redress options under the Fair Trading Act 1986, which is administered by the Commerce Commission, who do a relatively good job.

I would note that the Australian Government implemented a similar piece of legislation in 2020. There’s been a recent review of that. It’s found to be actually not working and, in some cases, has led to even worse outcomes for small businesses. There’s a number of reasons why that has taken place. First of all, there’s an unrealistic assumption that small businesses can choose their customers based on payment performance information. The complexity and burden of reporting requirements of large businesses, poor quality and utility of reported data, the low awareness and usage of the register, which was my earlier point, and the dashboard by small businesses and other stakeholders and the lack of enforcement and compliance culture of the regulator—which is why we’re going to address it by publishing the results of Government agencies.

There is widespread support for making this change. People regard it as a practical approach to an issue that does need to be addressed. We don’t want small businesses being burdened with slow-paying large companies. That’s why we’re putting in a much more comprehensive package around it. We want to see this go through. We want to make sure that we remove some of the unnecessary regulations. The economy is being strangled by a spaghetti of regulations requirements that are tying businesses in knots. We’re committed to reducing regulation, and repealing this unnecessary Act is a good first start in this. On that basis, I commend the bill to the House.

The question is that the motion be agreed to.

Thank you, Mr Speaker. I rise in opposition to this repeal bill, and I want to talk about why. I have a great deal of time for Mr Bayly as a person—as he knows, we’ve sat on committees together, and I know him well—and I don’t intend to do anything but absolutely speak genuinely to the Government and to the Speaker about what I think about what is going on today.

I was an employment lawyer for 25 years, and I came across this problem quite frequently. And I came across it from people I never really expected to. Often they were quite powerful in their own right—they might be the HR manager at a company—but they were contractors, and they were in situations where they worked for our biggest businesses. And our biggest businesses had a practice which they thought they couldn’t walk away from, because it made sense to them financially, and that was to delay payment. So a business like Fonterra delayed payment to its staff for three months. They were sole traders—three months regularly.

💬 Carl Bates: Staff or suppliers?

Absolutely. Sole traders. Sole traders. So I am talking about people who were contracted into the business, and I am hearing the Government say differently, but that’s not right. Those people I know. I can stand on the experience I had. Those sole traders were in no position to argue with our biggest companies; they were dependent on them. So, basically, our biggest companies, our companies with over $100 million of capital, were the companies that were withholding from these small players, these people who were sometimes their suppliers too, who were often small businesses which were dependent on the only capital they had, which in New Zealand actually turns out to be their house. Usually it’s the equity in their house. They were the people waiting. From our biggest companies, they were waiting for payment, because the big companies were using their money, their hard-earned money, their money that they’d earned three months earlier, just to get the interest on it. They were cynically using that money.

And this emerged as an issue, and it got picked up, and it got picked up by The Spinoff in 2017, by one of the journalists, Cormack, who talked about it. And it got picked up by practitioners like me who saw what was going on and thought it was really unfair. So we got to pick it up, but nothing was being done about it. This obviously had happened in Australia too, and they went after it with a law where they did something quite similar, but they had a threshold of $100 million. We went after it in perhaps what I would say is a softer way than I would have liked. I would have liked to see a prohibition on this kind of clause. The reason for doing it in this way was to collaborate with people to really target those big, big businesses against our small ones.

Our small ones are 97 percent of New Zealand businesses, and those people need a champion in this Government, and they haven’t got one. What they’ve got is a Minister who comes from the experience of being a fund manager, and that is all about financial markets. That’s big business. That’s very, very different from the small businesses I’m talking about. I’m talking about the tradies. I’m talking about the people out there who are our contractors who are basically, often, just trying not to work for the man, right? They’re trying to run these businesses, and those are the people that you will hear me, in these speeches, stick up for, because this was nudge legislation which had already started to change the habits of our big companies because it shamed them. It said it shamed them.

So I’m going to put out some amendments today, and I hope that the Minister will listen to them. They are amendments that are all about doing stuff that gives this more teeth, doing stuff that takes this seriously, because I want to see our small businesses thrive in this country, and we should be targeting those big businesses and holding them to account. Instead, what this legislation does is repeal and then repeal that repeal so we don’t even know it ever existed. We’ve never even put our toe in the water to standing up to big businesses who act in a way that I consider immoral. I consider it a form of theft from our hard-working New Zealand businesses. Thank you.

I just encourage members to keep an eye on the speaking list.

Kia ora. Thank you, Mr Speaker. I thought I was number three, but thank you for the opportunity to talk on the Business Payment Practices Act Repeal Bill. We have become used to the coalition Government’s desire to seek some fabled idyll where the lowly classes know their place. Oliver Twist asked for a second helping of gruel and he was deemed not only impertinent but considered unworthy, a criminal and a sinner. What impertinence our small-business owners have to expect to be paid on time for work completed and product supplied!

The coalition Government seems to want our small-business owners, our innovators, our risk takers, to doff their hats and to scrape and bow to big business. Our small businesses are grappling with challenging economic conditions and this repeal will simply harm them further. Again, like so much that is undemocratic, this repeal is being pushed through under urgency which denies the voices of small businesses to be heard through the select committee process.

What is it that the Minister fears so much from small businesses? What is it that the Minister fears so much from public scrutiny? Does the coalition really think that urgency is required to pass legislation on business payments? What purpose does urgency serve other than to deny small businesses a voice? It seems the Government’s so enamoured with urgency that every little thing is going to proceed through this way.

The Minister claims the Ministry of Business, Innovation and Employment is concerned, but, really, he just loves urgency? doesn’t he. Personally I would like to hear from those small businesses who are the backbone of our economy and are currently facing the harsh realities of high interest rates and soaring inflation that is being fuelled by this Government. Whether it’s plant-based soap or candles or cleaning products or engineering services or intellectual property innovators, our risk takers are the ones that are doing it tough and our small-business owners deserve to be paid on time and in full.

The Business Payments Practices Act was to provide a lifeline in difficult times to alleviate the bullying by big business that we’ve just heard. We need to foster an environment that encourages timely payments, and this is going to leave small businesses with less information, less transparency in a period of economic turmoil. When I ran my own consultancy, I had a good contract with a significant company who did not pay on time, and when that payment was missed it took months for the payment to come through. I had to cover not only overheads but subcontractor costs, and I carried the risk, the stress, the hit on income, despite completing the work.

The examples of small businesses carrying the big boys are so, so many. I know of an energy start-up that won a contract with a big company, and that enabled it to expand. But when the contract payments didn’t come through, the founders of the energy start-up had to forgo their income to cover overheads just to keep the company afloat, to cover wages. Small businesses who have a modest number of clients take on a huge risk when they take on a contract with these irresponsible, bullying big companies, and it becomes a serious problem—like the Dunedin engineering firm having to cover $100,000 of debt from Macraes mines. They struggle, they struggle incredibly, and this Government is arguing that the Business Payments Practices Act imposes compliance costs on New Zealand businesses.

Good businesses are willing and able to honour contracts and be active and responsive. A good business will pay attention to their obligations each and every day. This is not hurting good businesses. The Business Payments Practices Act was designed to rectify a power imbalance between large corps, and small and medium enterprises, to help those who want to do better; to do a culture change. And there’s a staggering cost to our economy and our small businesses due to late payments. Research from the Institute of Economic Research has shed light on the problem and suggests it’s $456 million annually—annually. National has talked big about getting Aotearoa back on track—

ASSISTANT SPEAKER (Greg O’Connor): The member’s time has come to an end.

Thank you, Mr Speaker. I rise to speak in support of this bill. I’m proud to be in a party where the majority of our MPs have actually worked in small business. We actually do represent small business on this side of the House because we’ve been there. We understand what it’s like and we know what the challenges they face are, day to day.

This bill that we’re putting in place does repeal some unnecessary compliance costs—and in a relationship we don’t actually need to be interfering in. We’re very supportive of small business, but this is not the way to do it, and it’s also not the way to impose additional costs on other businesses. We are very supportive of this bill, and it’s good to get the Act repealed before it comes into force and all of these reporting requirements are put in place.

💬 Darleen Tana: Cheap debt-servicing for big business.

I’m hearing a lot of interjections from across the House. We support all business, and, as I’ve already stated, we actually have worked in small business, so we actually know all of the pressures that they face.

💬 Hon Members: So have we.

Great! So you’ll know that this is totally unnecessary and, yet again, it’s having the Government interfere in the relationship between enterprises working together. I commend this bill to the House.

Thank you. I rise on behalf of New Zealand First in support of repealing this previous Act that was put in.

Now, one of the things that businesses need is data. They need data in real time in order to make good decisions on how to run the business. So whether it’s a small business or a big business, data is vital.

Now, if there is a six-month reporting period and then another four months after that, that is 10 months; whereas now there is information available. If you want to pay the fee, it is a minor fee to pay. But good business owners don’t make decisions based on 10 months of lapsed data. So this is why New Zealand First commends this bill to the House.

If anyone needed more proof that this Government has corporations in its pocket, they should look no further than this bill, the Business Payment Practices Act Repeal Bill. The legislation this bill is repealing was designed to help ensure that small businesses are paid on time when supplying goods and services to large firms. It did this by establishing a disclosure regime to create transparency around businesses’ payment practices across the economy.

Let’s take, for example, the supermarket duopoly. The Commerce Commission concluded in 2020 that major supermarkets made a profit of $430 million, but now they can delay payment to those who are providing the goods and services to those particular organisations, without them being paid over a four-month period. Nobody wants to pay another extra small fee to go and see whether those big businesses pay that money or not, because they haven’t even been paid for the goods and services that they’ve provided for those particular companies. Apparently, expecting wealthy corporations to pay their suppliers on time is too big an ask for this Government. They’ve taken away whatever negotiating power small businesses have, as a matter of urgency.

This bill is just another example of who this Government represents and who they are willing to sacrifice. Over 97 percent of all businesses in Aotearoa are small businesses. We have always known that this Government represents the 3 percent. We are currently seeing the largest transfer of wealth in a generation, from ordinary people to banks, landlords, and corporations. The richest 10 percent now control 50 percent of the country’s wealth. The poorest half owns a mere 2 percent. On top of that, average people of Aotearoa are paying 20.2 percent in tax while the wealthy are only paying 9.4 percent. Our tax system is doing exactly what it was designed to do—take from the poor and give to the rich. Before anyone accuses me of getting off track, this is all connected to the Government’s economic agenda that inspired this bill. This is part of an economic agenda that values the profits of the tobacco industry over Māori lives. So far, their approach to poverty and wealth inequity has been to give $3 billion in tax cuts to their wealthy mates while passing legislation under urgency to make workers, beneficiaries, Māori, and now small business pay for those tax cuts.

Most Māori businesses are small business. Repealing the business practice legislation will mean that if a local fruit grower enters a contract to supply a large company like New World, New World has all the negotiating power in that arrangement—New World, which is currently seeing record profits with record food prices will be allowed to put off paying invoices upward to 120 days. That’s four months. That’s a long time for a small business to go without payment, and it’s long enough to put them out of business. They don’t have the luxury or the entitlement of a thousand dollars for a living allowance that calculates up to 52K a year.

In fact, extending payment terms is a tactic that big companies have used since 2008, after the global financial crisis, which led to a lot of small businesses failing. Making business payments for firms earning over $33 million per year transparent and publicly available was such a small change that made all the difference for small, family-run businesses. Requiring big businesses to publicly report on their own payment practices, particularly late payment, not only helped small businesses make decisions on who to do business with but encouraged larger firms to do better at the risk of their reputation. It was a small step to empower small businesses and bring some balance to their negotiations. It was a small step to prevent big businesses from exploiting and ripping people off, so of course this Government is repealing the legislation. We will not be supporting this bill.

Thank you, Mr Speaker. Actually, this debate so far underlines what some people are not approaching as a debate. If they had listened to the speech from the Minister Andrew Bayly—clearly the Green member Scott Willis had not heard that or had chosen not to listen. The Minister pointed out that there will be a bill, which I predict will be called the “Bayly Bill”, which will actually address a lot of the issues that they raised, in a much more comprehensive way, in a much more cost-effective way, and bring all of the stories of woe that were brought before us under control.

No one is suggesting that we don’t enforce people paying their bills on time. That is exactly what the Minister said he was going to do, and for those newer members, just have a listen to the people that are speaking before you. Helen White did actually do that, and I give her credit for that. We have different views, but at least debate. That’s what this is; it’s a debate. I commend this bill to the House.

Thank you, Mr Speaker. In the spirit of debate, I’d just like to ask the Government what they are afraid of when it comes to transparency on business payment practices.

I’m disappointed, actually, because Mr Bayly and I sat on the Economic Development, Science and Innovation Committee when this went through, and we worked quite closely together to make some changes to the original bill that I thought had satisfied the issues that he had raised. One of them was around the $33 million cap; I think, originally, it was around $10 million. There were a few other things that we worked on together. So it’s really disappointing today to see that he wants to sweep this out.

I take heart in the fact that there is apparently going to be a new bill. It sounds like there might be a plan. We haven’t seen a lot of plans from this new Government. But if there is a plan and if it truly does put public payments—in particular, Government payments—and shed some light on them, then I really look forward to that because I think that leading from the front is a great example and a great thing to do.

But Mr Bayly mentioned that the Australian equivalent, the payment times reporting scheme, had some deep flaws in it and a report was done and it showed that this didn’t work and that was a reason to go ahead with the New Zealand repeal. But, actually, that report did not say to repeal the system; it suggested some fundamental improvements that could make it work. What it really said was “Let’s make sure that the legislation is pinned firmly on reputational risk.” This is all about sending a signal to big business.

I know, having worked as a small-business owner who employed up to 25 contractors at some points in time, the importance of cash flow. I also know, having worked in a large multinational organisation—the British Council—that it makes sense for big business to extend payment terms as long as possible because the incremental amount of interest that they get on holding on to those payments when they are aggregated upwards can amount to millions of dollars of profit for them. Now, I’m not saying that that is an evil or despicable thing to do; it is the signal that the market sends, and it is allowed to do that within the rules. The Government might call that entitlement, actually, but it’s not the right thing to do. What this intervention would do is simply tweak that to make sure that there were reasonable payment terms. I know, when I worked for the British Council, I worked really hard and it was quite difficult to get payment terms of seven days over the line for our contractors, rather than the month or so that it took. I do know there were some times when it took four to five months for contractors to get paid. As a small-business owner, I also understand the impact of that on cash flow. Cash flow is king; not just cash. So it’s really, really important to have things in place that send a signal to the big players that they have reputational risk if they do not conform to a scheme and if they have sloppy payment practices.

The other thing the Australian report said was to make the register more accessible to users: so simplify the register, make it more easily available. I’m sure that’s something that the Ministry of Business, Innovation and Employment (MBIE) had noted and is probably work on right now. It also sought to improve or streamline the quality of the data. These are valuable lessons learnt from our Australian counterparts that could mean a really good bespoke system for New Zealand.

Finally, it wanted to improve the power of the regulator. I’m sure Mr Bayly won’t have any issue with that. We sat together on select committee—on a couple of select committees, actually, including the Finance and Expenditure Committee and the Economic Development, Science and Innovation Committee. There was a lot of work around the Commerce Commission. My sense—and I don’t want to speak for the Minister—was that he would like to see regulators have considerable powers so that we can get rid of some of these market-dominant situations that we find ourselves in with supermarkets, and so on. So I don’t see why the Minister wouldn’t want to look at these really valuable lessons learnt from Australia; see that we have already sunk some costs into what could be a really good, workable scheme; that it will provide a signal to the market and be a tweak to the market that will make it a more level playing field; and not undo all the good work that not only MBIE has done around creating these regulations that would have come into force but also the work that we did together on the select committee.

We had the mitigation of increasing the cap from $10 million in revenue to $33 million. We made sure that the data that would be available would not be commercially sensitive. We made sure that there would be no prescriptive time frames for business, so we weren’t telling them what the time frames had to be; merely saying that they had to follow the rules that they set out for themselves. We just really had something that I thought was good, and it’s such a shame that we’re going to repeal that under urgency and come up with something that we haven’t seen what the plan is.

I’d like to speak in support of this bill, and I’d just like to allude to the member that has just spoken, Ingrid Leary, who said that this Government has no plans that she’s seen. Well, in the first 100 days, we’ve got 49 actions, and our plans are very much focused on getting this economy back on track. And that’s being aspirational for business—driving productivity, creating jobs and opportunities, not strangling business with six years of red tape, regulation, compliance, and cost. This is not the way to get this economy ahead. As my colleague has already pointed out, we’re all about innovation and using innovative ways for small business—that’s e-invoicing. On that side of the House, they’d know nothing about innovation, productivity, aspiration for business, and that is why I commend this bill to the House.

Thank you, Mr Speaker, and thank you for the opportunity to speak against the repeal of the Business Payment Practices Act 2023. Aotearoa New Zealand is a nation of small businesses. Many of us in this House, on both sides, will have worked and maybe even owned our own small businesses. Many of the people we are elected to represent will own or work in small businesses.

Now, the Ministry of Business, Innovation and Employment tells us—and other members of this House have been good enough to point this out—that there are more than half a million small businesses in New Zealand. That’s classed as a business with fewer than 20 employees—so that’s 97 percent of the businesses in New Zealand. So, in its simplest form, this is a bill that makes sure 3 percent of businesses provide information to make it easier for the other 97 percent to do business and, importantly, to stay in business. It sounds good to me.

Another thing we know for sure is that late payments cripple cash flow and that that can and does kill small business. So, members, you don’t have to take my word for it, because in the heart of our electorate of Christchurch East is Kai Connoisseurs, proudly at home amongst the local businesses of Aranui, in Hampshire Street. It’s a real small business, and I can recommend Frybread Frydays. If you’re ever down there, get on in—the best fry bread in the east—and don’t even get me started on their dumplings. We are so lucky to have this small business in Aranui.

Now, owner Sachiko Shimamoto recently shared her experience of the impacts of being made to wait for payment, and I will share some of her words here: “A little snippet of my journey in business titled: You’re late. I sat and stared at the screen in disbelief. It was Monday the 22nd January and they still hadn’t paid. I clicked into gmail and typed the first few letters of their name and found the last email I’d sent. 15 was the number in the little circle that counted how many times we’d communicated back and forth; but that wasn’t all. Right under that was the three other threads of comms regarding that particular event. Deep breath, it’s ok they’re probably still on holiday. I clicked into the banking app to cross check the payments again, nope definitely not there. My heart began to pound as frustration tickled my eyeballs and made my hands sweat. The same hands that picked out the yummiest grapes, that buttered the bread just right and rostered the staff that came to help chop, dice and slice all the kai they happily consumed; all those months ago. The worst part is, they are not the only ones. Over the years others have done the same. Currently, 3 is the number of ghosts I’m chasing. Ouch, the pounding turned to aching as I clicked back into xero and began to process the pay run. Carrying these debts is heavy. … Could I of spent more time communicating our terms and conditions, should I of asked for payment prior, should I of spent so much time accommodating their multiple requests, changes and enquiries … Running a business is hard. Being an employer is hard. Paying for kai, staff, rent and the rest; is hard; and spending my time asking to be paid, over and over for mahi we’ve already done well that’s ho-hard! …This is a letter to organisations and corporates using small local business to provide services that support your kaupapa then, forget to support them back. Please prioritise paying your bills. … Signed: A tired, hard working solo Māmā, business owner, employer and hoha human who’s had about enough of asking politely for what we are owed.”

If those words don’t have an impact, I suggest members should check out the full post on Facebook and see the photo of an exhausted business owner sitting on the floor of her kitchen, waiting to be paid.

Small businesses need the support of legislation like this. As members of Parliament, as representatives of our communities, I want to be able to walk in and enjoy Frybread Fryday at Kai Connoisseurs, knowing I’ve done all in this House to help businesses like this. They need to know that they can do business and be paid so that they can pay their people and their bills so that they can stay in business, and this repeal makes that harder.

I rise to support the repeal of the Business Payment Practices Act, because businesses in New Zealand are desperate to move forward in this very challenging economy, and they’re desperate to move forward with the modern world. What they don’t need is excessive regulation in their areas that will just ask them to do additional administrative work and disclosures. What businesses don’t need is for the Government to tell them to keep disclosing. What businesses need is smarter and more modern processes, so people can actually go on and pay faster. This will benefit the entire economy. So, therefore, I commend this bill to the House.

The bill is set down for second reading immediately.

Second Reading