Labour to woo small firms with debt pledge

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Labour is to target the traditional Tory stronghold of the small business with a proposal to legislate for a statutory right to payment of interest on overdue debts.

The policy is expected to be unveiled at a small business conference in the City of London today organised by the Labour-backed Industry Forum, where Tony Blair is to make the keynote speech.

Ten days ago, the Prime Minister backed away from legislation on late payment and Labour's move appears designed to trump the caution of John Major's Government.

There has been an outcry over the squeeze put on small companies by the failure of both private industry and government departments to pay up on time.

Labour is thought likely to set a minimum threshold based either on the size of the unpaid debt or of the company that is failing to pay up, to exclude from penalties smaller companies that get behind on payment.

Some small business pressure groups believe that a right to interest on late debts could cause more problems than it solves, and a threshold is thought likely to allay some of these fears.

Mr Major's toughest proposal last week was for a round of consultation on whether to publish companies' late payment records in annual reports, to embarrass poor performers into improving their records.

The Prime Minister announced the move at another small business conference, where he took the platform in place of Michael Heseltine, the Deputy Prime Minister - who sparked an uproar earlier this month when he admitted that in his early days as a businessman he had deliberately paid his bills late.

Another Labour proposal for small businesses that is bound to rub salt into Mr Heseltine's wounds is aimed at beefing up his pet project, the national network of Business Links, which he set up as President of the Board of Trade.

Labour not only claims Business Links were its idea in the first place, but is considering using them as a vehicle for injecting new finance into small firms. Plans for a state-backed small business bank have been buried and instead Business Links are likely to be brought into a scheme to encourage private venture capital into small firms.

Under early versions of this plan there would have been a government guarantee for equity investment by City firms, but the current favourite is closer to an insurance scheme - sharing the risks of failure among a pool of specialist investors.

Margaret Beckett, Labour's trade and industry spokeswoman, and Barbara Roche, who shadows on small business, will also address the conference.