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House of Assembly - Fifty-Second Parliament, Second Session (52-2)
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LATE PAYMENT OF GOVERNMENT DEBTS (INTEREST) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 19 June 2013.)

The Hon. I.F. EVANS (Davenport) (15:45): I rise on behalf of Her Majesty's Loyal Opposition to place on record our support of the government's Late Payment of Government Debts (Interest) Bill 2013. The reason we are supporting this bill is that some months before the government announced this particular measure, the Liberal Party had announced this principle as policy. So, every day in question time the government ministers stand up and say the Liberal Party has not put out any policies, and yet they have introduced this legislation on the back of a Liberal Party policy.

We are pleased that the government is playing catch-up. We are pleased that, after 12 long years of having an atrocious payment record to small business out of its departments, it is finally getting around to paying within terms. We are pleased that the government has decided that, if it cannot get itself organised enough within its departments to pay on time, then small business would ultimately receive some form of interest payment. This is an idea that has been adopted federally by the commonwealth government under both colours; the scheme works well there.

What the bill does is say, in simple terms, that if the government does not pay its bills for goods and services on time, then ultimately the provider of the goods or services, if they are a small business (which is, from memory, a turnover of $5 million), then they can get interest paid on the outstanding debt at a rate set by the bill, unless of course it is subject to some form of formal dispute or there are contractor terms that set the terms of trade at a different rate than 30 days or less. That is the simple purpose of this bill.

The opposition consulted with the Law Society, and the Law Society came back with some comments on the bill. For the sake of the minister's interest, I will go through some of the points made by the Law Society. The Law Society raised the point that the government is using an overly complex method of introducing this bill. I mentioned earlier that the commonwealth has this principle, and it has been in place for many years. The commonwealth's definition of small business provides:

...small business means an enterprise that employs less than the full time equivalent of 20 persons on the day that the written contract under which payment is to be made is entered into ('full time equivalent' is defined by the Australian Bureau of Statistics). If the enterprise is an 'associated entity' as defined in section 50AAA of the Corporations Act 2001, this test is applied to the group of associated entities as a whole.

The government has taken a different definition of small business. This state government has defined small business as:

...a business carried on by a qualifying person or a qualifying body where the annual turnover of the business does not exceed $5 million (or if a greater amount is prescribed—the prescribed amount) in the financial year immediately preceding the financial year in which the relevant qualifying day occurs;

The Law Society makes the point: why are we setting up a law with two definitions? These businesses are going to trade with both state and commonwealth governments, and the reality is that they could be eligible under one law and not eligible under the other law, even though they could have outstanding amounts owed by the government. The Law Society raised that issue, saying, 'Wouldn't it make more sense to simply adopt the commonwealth legislation definition and, therefore, the businesses know they are on one set of rules which makes it easier for everyone?'

It also raised that the definition in the state government's bill is in some ways narrower than the federal finance department's definition. It argues there are a number of small businesses that would have fewer than 20 employees that may have an annual turnover of more than $5 million. This could possibly lead to a situation where a business is a small business for the purposes of a commonwealth contract but not considered a small business for a state contract.

It also raises the issue that it believes the definition would exclude small businesses that may have not had any annual turnover in the previous financial year. If you are a start-up business and you have had no turnover in the previous financial year, the Law Society believes this bill excludes you from the operation of the bill. In your first year of operation, the Law Society says this particular bill would exclude you.

The requirement to cross-reference the definition with a number of other defined terms in the state bill (for example, 'qualifying person', 'qualifying body' and 'qualifying day') also adds, in the Law Society's view, an extra layer of complexity to the definition which could possibly be simplified with some fine tuning and drafting.

The opposition will not propose any amendments to the bill. The government obviously would have consulted all the business groups in regard to the bill and I will ask the minister to confirm which groups were consulted in the preparation of the bill. Suffice to say that we are absolutely delighted that the government has adopted the same policy principle as the Liberal Party, some months later. I draw it to the attention of the house because, when ministers stand up in question time in the future and say the opposition has released no policy or has no policy, I will be taking a point of order and drawing the house's attention to this very bill.

The Hon. P.F. Conlon: We'll have to say in future that you have got one policy.

The Hon. I.F. EVANS: The member for Elder, please. The member for Elder well knows that there is a dispute within the house between the government and the opposition about which South Road policy is of greater value to the state, so there is a second policy where the government is in error. I just make the point. Small business will welcome this. It really should not have had to come to this, in my view. The state government should have been organised enough, and the department should have been organised enough, to simply pay their bills on time.

This government has spent hundreds of millions of dollars on setting up Shared Services, designed to get the accounts paid on time, and now we find, having spent all the money on Shared Services, we ultimately have to bring in legislation to make sure the bills are paid on time. Of course, businesses should be paid on time. The government should be a model citizen and pay its bills on time. We welcome the legislation, we welcome the government copying our policy, and we look forward to its speedy passage through both houses.

Mr GOLDSWORTHY (Kavel) (15:54): I am pleased to make some comments in relation to this piece of legislation, being the Late Payment of Government Debts (Interest) Bill 2013, and I obviously speak in support of the position the member for Davenport has enunciated on behalf of the opposition.

The member for Davenport, I think, covered all the pertinent aspects of the bill and made some very good points. Actually, this is pretty much a copycat version of the opposition's policy released some months ago, with a little bit of tweaking, a few changes at the edges, but basically it is quite a similar policy to that which we released some months ago. The member for Davenport makes the quite relevant point that we are seeing the government play catch-up in relation to this particular issue.

In relation to Shared Services, that has proven to be a failed model, I think, in this state. We have seen evidence that it has not worked efficiently in Western Australia. My understanding is that they have dismantled Shared Services in that state and gone back to the previous manner in which they managed their business. All the evidence points to Shared Services not in any way, shape or form realising the benefits, if you like, that were highlighted by the government at the time, and really with some quite significant and bad outcomes.

There are a couple of examples I would like to highlight. Whilst we do not come into this place to talk about particular issues relating to our own individual operation as a member, in my own office we have had some issues with bills being paid in a timely manner, to the extent that I had a piece of equipment that I use to access information and as a communication tool and the availability of that equipment was cut off. That service was cut off by Telstra because the bill had not been paid. For me to recommence the availability of those services I had to pay the bill myself. That was not necessarily a major issue, it was not a huge amount of money, it just goes to the point that there are some serious flaws in the way the government goes about paying its bills.

Also, the local newsagent that delivers newspapers to the electorate office. They are good people. It is a small business. They are struggling under the current economic climate that the state government has been responsible for. They have made comments to us that some of the accounts have gone 60 to 90 days before they have been paid. Whilst our bill with the local newsagent is not necessarily enormous, it is still a debt that that small business should not be expected to carry, in view of the fact that the government cannot get its act together, as the member for Davenport pointed out, and pay its bills in a timely manner.

I recall, under the previous Liberal government, that each minister had the responsibility of a reporting structure to them where they would oversee the payment of bills their office had the responsibility for. There was a schedule provided to each minister every month showing what bills had been paid and what bills were still outstanding. Any bills, from memory, that were 30 days outstanding, there had to be a damn good reason why they were not being paid on time. That just goes to show, I think, how focused the Liberal Party (a Liberal government) is on supporting small business.

I am not sure what system this government has in place to oversee the payment of accounts, invoices, bills that come its way. I would be pleased if the minister would shed some light on that issue because there is not a lot of evidence that there is any system in place for the oversight of payment of bills in a timely manner, particularly with the state that we find Shared Services in and the way it operates.

We also had the example of the mechanic business in the Mid North. The owner of that business publicly came out and made a statement that his business failed as a consequence of the government not settling its accounts in a timely manner. Obviously he was not able to extend his overdraft at the bank, or whatever the situation may have been in relation to that, for his business's financial arrangements. That person came out publicly stated that his business had failed as a direct consequence—

The Hon. M.F. O'Brien: He's a bloody fool!

Mr GOLDSWORTHY: Wow! That is an interesting interjection from the minister, and I hope Hansard has picked that up, because it is quite unbecoming of a minister to use that language in the house; but the minister is responsible for his own actions.

The Hon. M.F. O'Brien interjecting:

Mr GOLDSWORTHY: Don't get upset, minister; you have got the chance to have right of reply, to close the debate, and you can put your position and that of the government. I am just highlighting the fact that that person made public statements that his business failed as a consequence of the government not paying its bills on time. As the member for Davenport stated, we are, on the side of the house, happy to support the legislation. As has already been stated, it is pretty much a copycat of our policy, apart from a little bit of adjustment on the edges. I understand the interest will be calculated on the RBA cash rate plus penalty interest of 5 per cent.

I presume, doing some calculations, that that will be around the overdraft rate that a business may be charged by their trading bank. If businesses have to carry this debt, as a consequence of the government not paying their bills in a timely manner, it would mean that if the business had an overdraft arrangement that debt would form part of the overdraft debt. I would hope that the interest that the government is pitching is equivalent to commercial overdraft rates. As I said, the member for Davenport, our lead speaker and the shadow treasurer, has indicated that the opposition is prepared to support the legislation in an unamended form.

Mr PEDERICK (Hammond) (16:03): I rise, too, to support the Late Payment of Government Debts (Interest) Bill 2013. It is amazing that we have come to this, where the government has to virtually copy opposition policy; but, not only that, we also have a bill in this place where the government has to make sure that it might do something about the debt that it has to small business. It is very commendable in some ways that there is a commitment to the interest on this debt, but why do we get in debt, Mr Speaker?

That is a very, very good question. We have got here because of the total incompetence of the Labor government, we have got here because it is a government that does not understand how a small business works. Sadly, what has happened in the preceding years of this government is that businesses have suffered due to their bills not being paid and, in fact, some of them are going out of business due to their bills not being paid in a timely manner.

Sadly, you see in the corporate world that some people think, as this government has thought, that they can get away with stringing people out to 60, 90 or 120 days, and it is just wrong. It is just wrong in the world of any business to string any business out for anymore than the appropriate 30 days, which are standard trading terms, but too often we see that happen.

What we have seen with this government is the Shared Services debacle. This was supposed to save millions of dollars for the state, but Shared Services is costing the state tens and tens of millions of dollars more than what was originally budgeted. It has been a complete mess. It has taken people away from regional jobs throughout this state—jobs throughout my electorate from Murray Bridge and other areas.

Those jobs have gone because, oh yes, we are going to put all this into a central block in Adelaide, and life will be merry. Well, life has been far from merry with Shared Services. In fact, the place should just be rocketed and got rid of. We should just get rid of it.

The Hon. M.F. O'Brien interjecting:

Mr PEDERICK: You will get your response, minister—that's fine—but it is an absolute disaster that you have presided over. I must say that, over time, as the member for Kavel indicated, we have had equipment in our own offices to operate for our own needs either threatened to be shut down because bills have not been paid, or ones that have been shut down so members of parliament cannot even make sure that their work is carried out effectively. It is just ridiculous.

It got to the stage, actually, in my office where I got sick of not just what was happening internally with the payments but the small businesses, like the newspaper vendor, coming to me and saying, 'Our bills are not getting paid.' I said, 'Enough is enough; we will send copies of the bills straight through to the minister's office,' which we did and I am sure he received them. I just had to make the point about what was happening and the abuse we were getting from people who deserved to have their bills paid.

I know the minister suggested, 'With some of your internal accounts, you could pay them and then we will pay you back.' I said, 'I don't think I am going down that path.' Certainly, as an opposition member, I am not stumping up the government's debt, especially when we see it burgeoning out to $13.75 billion by the year 2016.

It is just ridiculous that it has got to this because, in the whole machinery of government, we cannot get enough people together to actually pay the bills on time. I ask the question: what do we have a bureaucracy for? What the heck do we have a bureaucracy for? It is supposedly to run the functions of government and everything around it but, no, it is a complete disaster—an absolutely abject disaster—that we have got to this stage where the government have even had to come forward, pretty well copy our policy proposal and say, 'We will pay for interest on bills that are over 30 days overdue.'

As I said, that is one measure. I note the Small Business Commissioner will become involved if there are disputes but, if people are still hung out to dry for over 30 days, it is not just the interest they are wearing: they are also wearing the principal, so that comes at a huge cost to suppliers to government. Certainly, I note that we are agreeing to the bill. I think it is disgraceful that we have got to this stage, but I certainly support it because we, on this side of the house, understand the support that small business needs in this state.

The Hon. M.F. O'BRIEN (Napier—Minister for Finance, Minister for Police, Minister for Correctional Services, Minister for Emergency Services, Minister for Road Safety) (16:09): Just picking up on a few of the comments made by opposition speakers, probably the first that ought to be addressed is who is following whom? I did a quick google, and I can be corrected but the Liberal Party website indicates that the opposition leader indicated agreement, if you like, or an initiative of the opposition being a bill similar to this on 22 February 2013.

The government received the so-called McCann report on June 2012. It went to cabinet and was endorsed by cabinet on 8 October 2012. One of those recommendations was the Late Payment of Government Debts (Interest) Bill. On my calculation, the cabinet decision is probably five to six months in advance of the opposition arriving at the similar policy position, so you have actually followed us on this matter.

The Hon. I.F. Evans: What was the date?

The Hon. M.F. O'BRIEN: It was 22 February 2013 when you made the policy statement; 8 October 2012 was when cabinet received the so-called McCann report, the payment of accounts review undertaken by the Office of Public Employment and Review and largely authored by the Commissioner for Public Employment, Mr Warren McCann.

The member for Kavel, and also the member for Hammond, raised what was a tangential issue in relation to what happens. I am not really sure if I follow whether the member for Hammond was talking about the situation prior to or the position that is still in place prior to the issuing of purchase cards. We, the government, and I, the minister, became aware that there were issues with the late payment of accounts, and I do not resile from the fact that there was an issue. People were having their mobile telephones discontinued—

The Hon. I.F. Evans: Newspapers?

The Hon. M.F. O'BRIEN: Newspapers. I think Australia Post were giving us a hard time, as well. I am going to accept the responsibility, but in part the issue was the slow processing within electorate offices, but then it went into a bureaucratic—

Mr Pederick interjecting:

The Hon. M.F. O'BRIEN: No, I said that I accept responsibility. Then it flowed into a bureaucratic maze and, after weeks and weeks and weeks, finally arrived in Shared Services; in fact, Shared Services were not the culprits. It was the way the whole structure had been set up for a series of approvals.

So, I organised for application forms and an explanation to be sent to all electorate offices to give them the option—it was not compulsory—of taking on a purchase card, and with that application there was a series of fields that could be filled out that covered, among other things, telecommunication charges and newsagent accounts. The EOs now (those who have taken on board the purchase card option) actually have the opportunity to pay those accounts on the day they arrive in the EO. So, as far as I am concerned, there is really no excuse for any EO not to be able to pay the bulk of day-to-day accounts in a timely manner.

In relation to the recommendations of the McCann report—and I asked that this work be done—when I became the minister, I was aware that Business SA in particular over a number of years had been raising the problems being experienced particularly by small business with the slowness of payment by government. I come from a small business background myself, and the bane of my existence was the end-of-month telephone calls I had to make to slow payers to get money into my bank account to pay for all my outgoings.

Without any disrespect to public servants, unless you have run a business and are aware of the fact that, come month's end, you have a whole series of invoices to pay yourself and that on an ongoing weekly or fortnightly basis you have to cover the payroll bill, it is a little difficult to understand why businesses are crying out for prompt payment. I was of the strong view, and I still am, that it is a cultural issue, and that is one of the reasons that we have introduced this particular piece of legislation—to bring about in a highly effective manner a change in the cultural mindset of the public sector.

As a result of the recommendations of the McCann review, we also introduced automatic escalation. What I discovered, and what Warren McCann discovered, was that invoices were going to a particular public servant, the public servant was then going on leave and the invoice was sitting there for three or four weeks while the public servant was on leave.

To overcome that issue, Shared Services went into each agency and mapped out the chain of command for the payment of invoices so that, if an invoice is sent by Shared Services into the agency and not responded to within a matter of a day or two, it automatically escalates by way of an email to the next person in the chain of command, ultimately reaching the desk of the chief executive officer for payment. So, there is no ability for agencies to hide now under the excuse of people being on leave because ultimately, if there is no response through the chain of command, it ends up with the CE having to give approval for payment of the invoice.

We also requested a change in the direction of invoices. Rather than going to the agency in the first instance, invoices go to Shared Services, where they are now scanned electronically and then transmitted back to the agency to be approved and reconciled with the purchase order. We believed that that would overcome the problem of invoices lying around the place because people really did not understand the importance of getting the invoices processed and back to Shared Services in a timely manner.

We also made a decision that, rather than allowing invoices to queue for payment by the bank on 30 days, as soon as the invoice was approved—and that might be a matter of two days, as opposed to 30 days—they would be paid when approved. So, we have sped up the process of payment: we no longer hold back invoices for payment until they reach the mandatory 30 days. As a result of that, the most recent report I received for the non-health sector indicates that we pay 98 per cent of invoices within 30 days.

I think that is a remarkable result and can be attributed largely to the work of Warren McCann and to the strong endorsement from all of the chief executives and cabinet that we wanted to get this right. We have also instituted an arrangement whereby CEs and ministers receive a monthly report which outlines the performance of their agency in respect of the timeliness of payments. So, there is no getting away from the fact that CEs and ministers are ultimately responsible for ensuring that invoices are paid within 30 days.

Additionally, and I think importantly, we set up the My Invoice website. Small business can go onto the website and determine where their invoice is in the overall scheme of things and get an indication of the timeliness of payment. They will be able to determine whether the invoice has been received, whether the invoice has been reconciled with the purchase order, whether the invoice has been approved—and it would be approved on the basis of the quality of good or service being as ordered, and other matters. Ultimately, the website gives an indication as to when payment can be expected. I believe that the hit rate on that website is now running at thousands per month, which is an indication that small business see this as a highly beneficial tool to assist them in the management of their cash flow.

This government is very much aware of the size of the overall government entity in the South Australian economy. We are the largest employer and we are the largest purchaser of goods and services and it is incumbent upon us to actually outdo the private sector in the payment of invoices. As I said, a range of around 98 to 99 per cent for non-health is far in excess of what is occurring in the private sector. I cannot give the exact figures that we have received from Dun and Bradstreet, but I think they are around the upper 70 per cent. So the private sector is in the upper 70 per cent and we are 98 to 99 per cent.

So that is the suite of reforms that we have introduced and the outcomes that we have achieved and I am very pleased that we have been able to achieve this suite of reforms. They have been so effective in driving significant improvement in the performance of the public sector. In relation to the bill, I am pleased that the opposition is endorsing the bill without any amendment. I think it will serve the public sector well for the next decade or two. It sets a clear set of cultural norms that we want to see cemented into the public sector culture, and I appreciate the support of the opposition in respect to this bill.

Bill read a second time.

Third Reading

The Hon. M.F. O'BRIEN (Napier—Minister for Finance, Minister for Police, Minister for Correctional Services, Minister for Emergency Services, Minister for Road Safety) (16:21): I move:

That this bill be now read a third time.

Bill read a third time and passed.

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