COUNCILS are failing to help cash-strapped businesses during the credit crunch because they are not making payments fast enough.

The Government gave a commitment last year in its pre-Budget report that its departments, along with the NHS, would pay firms within ten days and has urged councils to follow suit.

However, it is not a mandatory obligation for councils and the majority fail to pay within the target.

The issue was recently raised in Parliament by Stockton South MP Dari Taylor, following a survey by the Civil Engineering Contractors Association.

The association used Freedom of Information legislation to ask every council in the North-East how speedily they paid businesses.

Of those that responded, only 27 per cent said they were paying within ten days.

A total of 38 per cent said they paid “promptly”, committing to pay as soon an invoice had been processed, but could not give a guarantee that would be within ten days.

The remainder said that they paid within 28 to 30 days, which they described as standard.

Ms Taylor said: “They (local councils) have the money and they should be paying contractors within ten days. It is critical at this point in the economy.”

The MP said she had received information about smaller companies in her area being warned of increased bank charges should they go overdrawn.

She said: “Big companies have usually got enough finance to lean on, so they can manage. With smaller companies, if they aren’t paid promptly we will see some going to the wall and an increase in unemployment.”

Ross Smith, head of policy at the North-East Chamber of Commerce, said: “We once again urge those that haven’t yet made this change to step up and support their regional business community.

“The Government has told Whitehall departments they have to do this, but it will have a much bigger impact on North-East businesses if local authorities follow suit.”

Replying to Ms Taylor in the House of Commons, Economic and Business Minister Ian Pearson said he believed there were about a third of local councils across the country paying within ten days.

He said: “There is clearly room for improvement and we want to encourage local government to ensure that it pays as promptly as it can to support local and regional companies that supply goods and services to it.”

A spokeswoman for the region’s largest local council, Durham County Council, which has just become a unitary authority, said it was working towards meeting the Government target.

She said: “We are certainly paying them in 30 days and, in some cases, earlier than that.”