The Small Firms Association (SFA) says the health authority is flouting the European Late Payments Directive, which recommends a 30-day limit for public authorities to settle their bills (EurActiv 09/04/09). The HSE is also under fire for ignoring national commitments made by the Irish government.
"It is appalling that the HSE, in its terms and conditions, has set out a payment period of 45 days, in direct contravention to commitments given by [Irish Prime Minister] Brian Cowen that all central government departments will pay their bills within 15 days and all other state bodies and local authorities will pay within 30 days," said Patricia Callan, director of the SFA.
She said late payments have become an increasingly critical issue for Irish SMEs with companies now waiting an average of 75 days for payment, according to a survey released this week (15 February).
"Late payments are causing major problems for firms, imposing unnecessary administrative burdens and in this current climate when cash is the lifeblood of small firms, late payments can result in insolvency," she said. 64% of Irish businesses indicate that late payment impacts on their cash flow, with 48% of companies in the last three months having experienced an extension of credit terms taken by clients. "The result is that the cost of doing business will increase, as many companies will have to resort to debt finance, such as overdrafts, to facilitate their cashflow requirements. And that is if they can actually get it, with 22% of respondents reporting a decrease in working capital availability from the banks over the past three months, and 14% reporting an increase in the cost," said Callan. She added that while the Late Payments Directive allows for interest penalties to be applied to overdue payments, this is rarely included in the terms of contracts. Companies are also allowed to agree to waive the 30-day payment period – a clause Callan says public bodies are exploiting.
Cashflow crisis for SMEs
The late payments problem is part of the wider cashflow crisis facing businesses across Europe. In Ireland, the government is putting pressure on banks – the biggest of which are now part-owned by the state – to lend to SMEs.
Dublin is also set to introduce a scheme for buying up toxic loans from banks in the hope that they will lend more readily to the real economy. A new body, the National Asset Management Agency (NAMA), will begin operating next month.
However, the International Monetary Fund (IMF) has told the Irish government that the scheme will not guarantee an increase in lending to business.
The NAMA plan must also be cleared by the European Commission which is currently considering an objection by Irish Senator Eugene Regan, who says new body violates state aid rules.
Regan, a former Commission official and competition lawyer, told EurActiv he believes Brussels should impose strict conditions on the government's proposal.
