CBI attacks Blair over late payment plan

A row broke out yesterday over Labour's plans for statutory payment of interest on overdue debts when Tony Blair was told by the Confederation of British Industry and the Chambers of Commerce that legislation would make the problem worse.

But Stan Mendham, chief executive of the Forum of Private Business, backed Mr Blair's proposal, calling it "courageous stuff," and adding that Mr Blair now had to fight the CBI and "no other government has ever overcome the CBI."

Tony Bonner, chairman of the CBI small and medium enterprises committee, said: "The Labour Party is out of step with business opinion. Most small firms oppose the measure."

Mr Bonner said larger customers would insist on more time to pay and suppliers to small businesses would have no hesitation in charging interest on debts owed by smaller customers. He rejected Mr Blair's proposal for a threshold below which the legislation would not apply.

But Labour retorted that a Lloyds Bank survey last week found 75 per cent of small firms in favour of a statutory right to interest. Chris Greenall, head of policy at the Chambers of Commerce, said: "A statutory right to interest may hurt the very firms it is meant to help."

Ian Lang, President of the Board of Trade, made clear that the Government was unlikely to legislate and said that most small firm representatives opposed the idea.

Confirming his policy in a speech to Labour's Industry Forum in the City , Mr Blair said that there would be a "new and different relationship between my party and the small business sector." As well as statutory interest, Labour would require large companies to publish their payment practices and would make government and state agencies settle bills in 30 days.

Mr Blair promised to beef up Business Links, the network of small business advice centres established by Michael Heseltine when President of the Board of Trade. Mr Blair also said he was thinking of making Business Links responsible for specialist financial advice to small firms. Labour claims to have suggested the concept of the one-stop shop in 1992.