Dáil debates

Wednesday, 12 May 2010

Other Questions.

Departmental Payments

3:00 pm

Photo of Joanna TuffyJoanna Tuffy (Dublin Mid West, Labour)
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Question 46: To ask the Minister for Enterprise; Trade and Innovation his views on the fact that a number of Government Departments are falling short of meeting the targets set by him that suppliers would be paid within 15 days of the receipt of an invoice; the steps he will take to ensure greater compliance with the target set; and if he will make a statement on the matter. [19181/10]

Photo of Conor LenihanConor Lenihan (Minister of State, Department of Education and Science; Minister of State, Department of Communications, Energy and Natural Resources; Minister of State, Department of Enterprise, Trade and Employment; Dublin South West, Fianna Fail)
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In accordance with the Government's decision of 19 May 2009, all Departments are required to pay their business suppliers within 15 days of receipt of a valid invoice. Departments are also required to report quarterly to the Department of Enterprise, Trade and Innovation on their performance in meeting the target.

The first returns by Departments covered 15 June 2009 to 30 September 2009 and were published on 30 December 2009. The second set of returns for the last quarter of 2009 were published on 5 March 2010. The third set of returns for the first quarter of 2010 are available from today on my Department's website under the small and medium-sized enterprises publications link.

The ongoing publication of these composite returns by the Department provides clarity on the performance of individual Departments in meeting the terms of the Government decision. While there is some variation between the performance of individual Departments and fluctuations across the three quarters, overall performance has been positive.

In the first quarter of 2010, the returns show that in value terms, Departments paid 96.7% of invoices within 15 days compared with 97.9% for fourth quarter figures and 97.8% for the third quarter; ten Departments paid in excess of 90% of invoices by value within 15 days; four Departments paid in excess of 80% of invoices by value within 15 days; and one Department paid 79% of their invoices by value within 15 days.

Departments are playing their respective parts in assisting the cash flow of their suppliers, many of which are small and medium-sized enterprises, SMEs. The new procedures and processes introduced are having an impact in assisting the cashflow of SMEs in the current difficult economic environment, a welcome development.

It is the responsibility of each Department to meet its obligations under the terms of the Government decision. Any businesses that experience difficulties in receiving payment on foot of valid invoices within 15 days should contact the contracting Department to resolve their difficulties. It is incumbent on those Departments whose performance is lagging behind to improve their payments profile over the coming quarters.

The Minister has already indicated his intention to bring forward proposals to shortening public sector payment periods in areas beyond central Departments.

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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I thank the Minister of State for his useful reply. Cash is king in sustaining businesses and many profitable ventures have gone under because of a lack of cashflow. Has any Department which has not stepped up to the plate, a lagger, been subject to late interest penalties under the European Communities (Late Payment in Commercial Transactions) Regulations 2002? Under the regulations, interest charged on any outstanding amount for goods or services is 7% above the European Central Bank interest rate. Has any Department had to pay this interest charge? If not, then why is it not complying with EU regulations?

Will the 15-day average for payments extend to semi-State and departmental agencies such as the Health Service Executive? Many of them are not the fastest out of the traps when it comes to paying for goods and services.

Photo of Conor LenihanConor Lenihan (Minister of State, Department of Education and Science; Minister of State, Department of Communications, Energy and Natural Resources; Minister of State, Department of Enterprise, Trade and Employment; Dublin South West, Fianna Fail)
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I am not aware of any Department having been punished for late payments. Broadly speaking, the record is quite good. The Minister is determined to extend it to other public service bodies, including local authorities and the HSE. Local authorities report a 30-day average for payments while the HSE stands at a 45-day average. It has already agreed to reduce this to a 30-day limit.

The issue for the Minister is to decide whether this 30-day average should be shortened. The best option in the meantime is to achieve an average somewhere between what is required of central government and the current 30-day average.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
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When does the Minister expect Departments to be in compliance with the 15-day payment requirement? Will some continue to default into the foreseeable future?

Photo of Conor LenihanConor Lenihan (Minister of State, Department of Education and Science; Minister of State, Department of Communications, Energy and Natural Resources; Minister of State, Department of Enterprise, Trade and Employment; Dublin South West, Fianna Fail)
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With payments within the required time as high as 97% in some Departments, and the lowest at 79%, it is fair to say Departments are in compliance.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
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Is 79% of payments acceptable?

Photo of Conor LenihanConor Lenihan (Minister of State, Department of Education and Science; Minister of State, Department of Communications, Energy and Natural Resources; Minister of State, Department of Enterprise, Trade and Employment; Dublin South West, Fianna Fail)
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That is just one Department. I would be pleased to share the league table with the Deputy so he can examine it. If the average is 80%, then some Departments should pull their socks up and get their act together. However, the record is positive and is even acknowledged to be so by Deputy Willie Penrose. The object is to widen the 15-day requirement to the wider public service in which 30-day and 45-day averages seem to be the order of the day.

It is, however, easy to bash public service organisations. According to the Irish Small and Medium Enterprises Association the average time it takes a private sector business to pay its bills is 90 days. In fairness to the public sector, it is performing and paying its bills on time.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
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I would like to see the Minister's league tables.

Photo of Conor LenihanConor Lenihan (Minister of State, Department of Education and Science; Minister of State, Department of Communications, Energy and Natural Resources; Minister of State, Department of Enterprise, Trade and Employment; Dublin South West, Fianna Fail)
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If the average is 80%, then some Departments should pull their socks up and get their act together. However, the record is positive and is even acknowledged to be so by Deputy Willie Penrose. The object is to widen the 15-day requirement to the wider public service in which 30-day and 45-day averages seem to be the order of the day.

It is, however, easy to bash public service organisations. According to ISME, the average time it takes a private sector business to pay its bills is 90 days. In fairness to the public sector, it is performing and paying its bills on time.

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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The majority of businesses would be happy enough when bills are paid within a month, the standard terms of credit. The key issue is extending the 30-day average to other public service bodies, a development I advocate. Will the Minister consider requiring public service bodies to pay interest, say 1% a week, on late payments?

Photo of Conor LenihanConor Lenihan (Minister of State, Department of Education and Science; Minister of State, Department of Communications, Energy and Natural Resources; Minister of State, Department of Enterprise, Trade and Employment; Dublin South West, Fianna Fail)
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I agree with Deputy Leo Varadkar that there should be some element of sanction for agencies who go adrift of the payment average. This will be considered when extending the legislation.

Photo of Willie PenroseWillie Penrose (Longford-Westmeath, Labour)
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There is no choice in the matter. Under the 2002 commercial transaction regulations, a Department is required to pay an interest rate of 7% above the ECB rate, which means 8%, on any late payments it incurs. That is the penalty that should be imposed on Departments and semi-State agencies which go beyond the 30-day requirement.

Photo of Brendan HowlinBrendan Howlin (Wexford, Labour)
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That was an answer rather than a question.

Photo of Conor LenihanConor Lenihan (Minister of State, Department of Education and Science; Minister of State, Department of Communications, Energy and Natural Resources; Minister of State, Department of Enterprise, Trade and Employment; Dublin South West, Fianna Fail)
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I thank Deputy Willie Penrose for clarifying the matter. I am sure Deputy Varadkar will absorb it.

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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I do not believe it is law but just a draft directive.