Mandelson announces pledge as part of package to aid small businesses through hard times

The government has pledged that public-sector clients will aim to pay small firms within 10 days, according the Telegraph.

Whitehall, local authorities and NHS trusts will all be required to comply with the short payment term for smaller contractors, business secretary Peter Mandelson has announced.

Mandelson is also expected this week to urge banks to be more lenient with struggling small firms, and hopes to speed the release of £1bn of European Investment Bank funding for small businesses.

According to the Telegraph, Mandelson said: “Our builders, traders and manufacturers need steady cash flow to remain resilient. This is why we in government have agreed to pay our suppliers as soon as possible - and our target is less than 10 days.

“We are looking at other ways the government can help and give the lead.”

Meanwhile, Tory leader David Cameron has called for emergency temporary tax cuts to help small firms through the downturn, including a 1% cut in national insurance for those with four or fewer employees.

Cameron has also proposed giving small firms six months' grace in late payment of VAT bills to help with cash flow.