By Mark Smulian
4 May 2010
A European Commission proposal that would have imposed huge fines on public bodies that pay bills late has been defeated after lobbying by local authorities and the NHS.
The proposal would have allowed suppliers to charge public bodies 5% of a contract’s value for late payment in addition to existing interest penalties.
The European Parliament rejected the measures last week, instead settling on interest penalties for delayed payments, equivalent to nine percentage points a day above base rates. The UK rate is already eight points.
Both decisions must be confirmed by the Council of Ministers before they take effect.
An impact assessment by the British government found that the original proposal would have cost the UK public sector some £170m a year.
The Local Government Association said that while 93% of councils and health bodies paid on time, costs could have risen to £600m had the proposed charge encouraged businesses that do not impose penalties for late payment to start doing so.
LGA improvement board chair David Parsons said: ‘This is a victory for common sense.’
He described the proposed 5% penalty as ‘a potential profiteers' charter for companies to extract money from the public sector by submitting badly drawn up or inaccurate invoices’.
Elisabetta Zanon, director of the NHS European Office, said: ‘There is already a system of penalties in place for late payments and we saw the plans to extend and increase it in this way as very unhelpful, placing additional and unnecessary costs on the health service at a time when budgets are already under pressure.’
4 May 2010
A European Commission proposal that would have imposed huge fines on public bodies that pay bills late has been defeated after lobbying by local authorities and the NHS.
The proposal would have allowed suppliers to charge public bodies 5% of a contract’s value for late payment in addition to existing interest penalties.
The European Parliament rejected the measures last week, instead settling on interest penalties for delayed payments, equivalent to nine percentage points a day above base rates. The UK rate is already eight points.
Both decisions must be confirmed by the Council of Ministers before they take effect.
An impact assessment by the British government found that the original proposal would have cost the UK public sector some £170m a year.
The Local Government Association said that while 93% of councils and health bodies paid on time, costs could have risen to £600m had the proposed charge encouraged businesses that do not impose penalties for late payment to start doing so.
LGA improvement board chair David Parsons said: ‘This is a victory for common sense.’
He described the proposed 5% penalty as ‘a potential profiteers' charter for companies to extract money from the public sector by submitting badly drawn up or inaccurate invoices’.
Elisabetta Zanon, director of the NHS European Office, said: ‘There is already a system of penalties in place for late payments and we saw the plans to extend and increase it in this way as very unhelpful, placing additional and unnecessary costs on the health service at a time when budgets are already under pressure.’
