In April 2009, the European Commission put forward proposals to strengthen EU rules aimed at combatting late payments in commercial transactions. The proposed revision is set against the background of the current economic climate and the aim is to help companies (especially small and medium sized enterprises) by tackling a culture of late payments particularly within the public sector.
The proposal includes measures to shorten payment periods by public authorities, notably through provisions limiting payment periods to 30 days unless duly justified and the introduction of a fixed flat rate late payment fee of 5% of the amount invoiced, in addition to statutory interest and recovery fees.
The NHS European Office consulted widely on these proposals and produced a summary of the responses we received, which formed the basis of our work to inform EU decision-makers of the potential impact on the NHS.
The European Parliament's Internal Market and Consumer Protection (IMCO) Committee took account of the concerns we raised in their vote on the proposals, and their report includes changes to the text which we supported.
In particular, the Committee voted against the proposed 5% fixed rate late payment fee, which was seen by most to be an arbitrary and disproportionate penalty which could have un-intended consequences. An amendment was also passed giving public hospitals a longer payment period, ensuring a more level playing field between the public and private healthcare providers.
Next steps
The proposal will be voted on by the full Parliament in the autumn and the text will need to be agreed with business ministers from the EU countries, so there may be further changes before it could become law. The NHS European Office will continue to share NHS views with EU decision-makers as the legislative process continues.
Further background
Senior European Policy Manager, Tracy Cook, delivered a presentation on both the EU Remedies Directive and the revision to EU rules on Late Payments in Commercial Transactions at a recent meeting of the Primary Care Trust Network's group of Finance Directors.
Prompt Payment Code
In December 2008, the
Department for Business, Innovation and Skills (BIS), together with the
Institute of Credit Management, launched a
prompt payment code to tackle the issue of late payments to help businesses. By signing the code, an organisation commits to paying suppliers on time and according to their agreed terms, to give clear guidance to suppliers and encourage good practice through the supply chains. Signing the code does not add any additional burdens to an organisation’s payment policies but sends a signal that it will pay its suppliers in accordance with agreed terms. Many NHS organisations have signed up to the code and others are encouraged to do the same.