Clause 29 — Regulations etc.
Oral Answers to Questions — Prime Minister
3:45 pm

Photo of Sarah McCarthy-Fry

Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

I beg to move, That this House
disagrees with Lords amendment 11.

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Michael Lord (Deputy Speaker)

With this it will be convenient to discuss Lords amendment 12, and Government motion to disagree.

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

As right hon. and hon. Members are aware, Lords amendments 11 and 12 are intended to prevent the BRS from being levied retrospectively as a result of a change in the rating list.

Before I move on to the substance of the amendments and the background to them, I want to emphasise some key points about the Bill and what it provides for. The first BRS cannot be levied until 1 April 2010; nobody can have any liability for a BRS in respect of any day earlier than that; while we know that the Greater London authority intends to levy a BRS for the Crossrail project, as was discussed in the other place, other levying authorities do not have plans to levy a BRS but have welcomed the power to do so in the future; the £50,000 rateable value threshold for liability to a BRS in England will exclude most small businesses; while the Bill builds on the rating system, which I will come to, it does not change anything about the general rating system or have any affect on liability for non-domestic rates, whether before or after 1 April 2010; the BRS will be raised and retained locally, for projects which the levying authority, working in partnership with business, considers will promote the economic development of its area; and no BRS revenues will be coming to central Government, nor can they be used by the levying authority to support existing expenditure, as BRS can only be levied to support new, additional, spending.

The BRS builds on the non-domestic rating system. In particular, liability to BRS and the level of liability in respect of any given property will be based on the rating list entry for that property. Rating lists can be changed by valuation officers to ensure accuracy and, with that, the accuracy of rates liability. Sometimes this can lead to backdated increases in rates liability; sometimes it can lead to backdated decreases and, therefore, refunds. There is the possibility of backdated increases in rateable value causing higher BRS bills than businesses were anticipating, but the practicalities involved in ascertaining the need for changes to a rating list and then establishing what change is required mean that backdating is an essential part of the normal functioning of the system.

Right hon. and hon. Members know that, over recent months, the issue of backdated rates liability has been highlighted by the situation in a number of ports. However, the Bill relates to the BRS, and the amendments would not affect the situation in ports. As was emphasised by Lord Davies in another place, the issue of ports does not affect the principle. It would be unfair to those businesses that have been paying the correct BRS if others were paying a smaller bill simply because an inaccuracy on the rating list meant that they were not asked to pay the correct supplement. It is also worth reiterating that BRS bills, like rates bills, can go down as a result of a change to the rating list in certain circumstances; that is a normal function of the system.

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Austin Mitchell (Great Grimsby, Labour)

This is the same standard argument that has been given to us during our lengthy discussions on the Bill—that there is no possibility of not giving retrospective assessment because everybody else would want it and it would break a fundamental principle. However, regulation 14(6) of the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2005 provides that where reassessment is the responsibility of the Valuation Office Agency, not the result of a mistake or a fiddle on the part of the hereditament owner, there is no need for a retrospective revaluation. If that principle had been adopted under the Bill, as it should have been, we could have avoided all this trouble. What my hon. Friend is saying is wrong in respect of assessments such as those in the ports, which were done as the responsibility of the VOA, not the hereditament owner.

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

I appreciate the point that my hon. Friend is making. However, the special provision in regulation 14(6) does not apply where a property is missed off the list altogether on the day that it is compiled, as there is a difference between a ratepayer paying rates where the rateable value has been incorrectly assessed by the VOA and a ratepayer not paying rates on a property at all.

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Austin Mitchell (Great Grimsby, Labour)

That surely cannot be true, because the principle of individual assessment began in 2005 when, the VOA tells us, it assessed the rateable value of each port operator on the advice that it got from the port owner. There was already a rating, and indeed the operators were paying rates through the cumulo rental system.

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

I have to beg to disagree with my hon. Friend, because the individual properties were not on the list on the relevant date in 2005. That is why regulation 14(6) does not apply.

Backdating rating assessments is not new but an established feature of the business rates system. It operated in the case of the list that we are considering not only from 2005 onwards but from 2000 and before.

4:00 pm
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Shona McIsaac (Cleethorpes, Labour)

I apologise for intervening, but I have to be in Westminster Hall for an Adjournment debate shortly. Does my hon. Friend not appreciate that the crux of the argument, and the reason the move has caused so much anger in certain port areas, is that businesses had already paid their rates to the operators in the cumulo system? The problem is not that they have not paid. It is that they have already paid, and they are being asked to pay double taxation.

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

I thank my hon. Friend for her intervention. We are moving off business rate supplements slightly, but I shall respond to her point. In the cases that we have examined, it is difficult to prove contractually that that has been the case. If she knows of specific instances that she can show us, I invite her to do that so that we can examine them. However, the arrangement is a contractual obligation between the port operator and port businesses. It is difficult to disentangle the figures, and the only example that we have been given is very unclear.

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Michael Lord (Deputy Speaker)

Order. May I say to the hon. Gentleman that we are getting rather sidetracked away from the amendment that we are discussing? We now ought to come back to the amendment that the House is examining.

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

Thank you, Mr. Deputy Speaker.

On Lords amendments 11 and 12, I commend the quality of the debate in the other place. Forceful arguments were made as to why backdated rating list changes should not apply in relation to BRS liability. Lord Bates set out his view that the amendments

"are designed to provide an important guarantee to avoid retrospection in business rate supplements taxation".—[ Hansard, House of Lords, 9 June 2009; Vol. 711, c. 550.]

He felt strongly about that matter. The noble Lords Tope, Williamson and Brooke and Earl Attlee and Earl Cathcart all spoke eloquently and persuasively in his support. However, I reiterate that the Bill relates to the BRS. For the reasons that I have already mentioned, which were set out by Lord Davies in another place, I do not agree with the principle of the guarantee described by Lord Bates.

It is right and fair that the system that applies to rating should apply to the BRS. Maintaining an accurate rating list necessarily involves an element of backdating, as properties must be valued when they are complete or nearly complete to ensure proper valuation. We cannot have a system in which a person avoids paying rates or the BRS for a time, whereas someone else in analogous circumstances cannot, because of the coincidence of when a valuation can be undertaken in practice. That would be unfair and irresponsible, so it is right that changes to rating lists take effect from the date of the event giving rise to the change. The provisions in the Bill were crafted to be entirely consistent with the national business rate system. That ensures that liability to business rate supplements will be fair to all.

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

One more time.

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Austin Mitchell (Great Grimsby, Labour)

I am grateful. My hon. Friend says that it would be unfair if retrospective rates were not levied. To whom would it be unfair? A whole new class of businesses, the port operators, is being brought into the business rate separate assessment system. As my hon. Friend Shona McIsaac has pointed out, they were already paying business rates through the cumulo system, and now they are going to be rateable under a different system. That should have been done in 2005, and the VOA says that it was. Why were the valuations reassessed in 2008 and made retrospective? To whom would not doing so be unfair?

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

I do not want to dwell on the specific issue of ports, and I am sure that there will be opportunities to debate it at other times. We are considering the principle of backdating in the business rating and valuation system, and the dates on which it comes into effect. The principle is that changes to rating lists take effect from the date of the event giving rise to the change. We therefore propose that the House reject Lords amendments 11 and 12 in order to reinstate the right and fair position of consistency with the business rate system generally.

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Austin Mitchell (Great Grimsby, Labour)

There is a vital principle for those of us who represent ports: businesses should not wantonly be pushed into insolvency or shedding labour by something that does not need to be done in the first place.

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

I can only reiterate that the amendments that we are debating will have no effect on the current position in the ports. I am sure that there will be ample opportunity on other occasions to discuss and debate that further.

Having explained why we cannot agree to the amendments, I must remind hon. Members that the Speaker has designated the amendments involving privilege. If hon. Members vote to overturn amendments 11 and 12, the reason for the disagreement must, in accordance with the House's practice, involve privilege. That is in no way intended to criticise the quality of debate on those matters in the other place. I have commended that, and do so again now.

I hope that I have tackled the issues that were raised and demonstrated why I disagree with the amendments on principle. I hope that the House will reject amendments 11 and 12.

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Bob Neill (Shadow Minister, Communities and Local Government; Bromley and Chislehurst, Conservative)

I have some sympathy for the Under-Secretary—up to a point. The only reason for having any sympathy for her is that she did not start the ludicrous matter, and she is the umpteenth Minister to walk into it. However, I regret to say that those who drafted her response and produced one of the most mealy-mouthed, legalistic and technocratic excuses I have ever heard in the Chamber served her ill. The Government are shamed by their attitude. I was not surprised that the Government Whip was anxious to ensure that the debate was kept carefully away from the constituency issue that a Labour Back Bencher tried to raise. The Government are worried because they have been crucified in every debate on the matter. They have no answer, and the Under-Secretary is stuck in that position.

There is a matter of principle and the issue is important because, as the Under-Secretary said, the normal business rating system must apply to business rate supplements. I do not disagree with that—it is perfectly logical. My noble Friend Lord Bates tabled the amendment because the safeguards against potential injustice in the normal business rating system are shown not always to work adequately. The ports issue is therefore germane, and there was a full debate on it in the other place. It is an example of how injustice can occur in the current circumstances and of the inadequate remedies that exist to resolve it. We therefore thought that it was right to make provision in primary legislation to ensure that such injustice is not imported into the regime under Bill. That is an important principle.

The amendment that Lord Bates tabled would ensure that there is no retrospection when the BRS payer has committed no fault. That is a key issue, which should apply across the board. An injustice has been done to taxpayers in the ports through no fault of theirs, but through the incompetence of the Valuation Office Agency in not updating the list in a timely manner, not giving proper notice, not ensuring proper consultation and not providing an impact assessment. The Bill could permit an injustice to happen in the BRS model, too. The amendment was tabled to try to prevent that.

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Ian Cawsey (Brigg and Goole, Labour)

I am grateful to the hon. Gentleman for his support on the matter. If we were to try to summarise the Government's position, does he agree that they seem to be saying that they cannot change the overall system just because there are problems in the ports, so they will reject the amendment and treat other people equally unfairly at some point in future?

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Bob Neill (Shadow Minister, Communities and Local Government; Bromley and Chislehurst, Conservative)

I am afraid that the hon. Gentleman puts the case very well. I wish that we had a specific legislative peg on which to hang the issue of ports. Given that we cannot do that, we can at least ensure that no such injustice is done elsewhere. In theory, there could be a BRS scheme in the port areas—on Humberside or in Liverpool—and I would not want the same injustice to occur.

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Frank Field (Birkenhead, Labour)

I apologise for missing the opening speeches. As I understand it, the hon. Gentleman is going to support Lords amendment 11. I commend him for that, because on this issue we have had huge difficulties in getting the official Opposition off the fence. For them to do so must now show that there is something of value at stake.

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Bob Neill (Shadow Minister, Communities and Local Government; Bromley and Chislehurst, Conservative)

I know that the right hon. Gentleman is in a difficult situation, as candidates for anything sometimes are, but with every respect to him, he will know perfectly well—I mean this in a good-natured way—that we did not vote against a previous measure because it would have removed a measure of protection. Those of us who genuinely feel that the Government have been led into error now have an opportunity to agree on some common ground. I stress that the problem did not start as the fault of a Minister; it started with the incompetence of the Valuation Office Agency. Frankly, it is the people in the VOA who should ultimately be held to account, but I am afraid that it might be too late by the time someone is in a position to do so.

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Julian Brazier (Shadow Minister, Transport; Canterbury, Conservative)

My hon. Friend is making his speech in his usual highly articulate way, but he is being too kind to the Government, although not to the Minister. The problem is certainly not her fault: she is new. Is it not the case that, having paid a rebate to the port employers, the Department's Treasury colleagues are now saying, "You cannot let these port rating people"—the unfortunate small businesses in ports, many of which are competing with their landlords—"off the hook"?

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Bob Neill (Shadow Minister, Communities and Local Government; Bromley and Chislehurst, Conservative)

My hon. Friend is absolutely right. That is why it is so important to entrench the proposal, to prevent further injustice in future. Frankly, the Government are being duplicitous in the way that the system is being organised. People are being squeezed, and we have had a Pontius Pilate-like attitude from successive Ministers, who come along, wring their hands and say, "This is all very sad, but that's the normal system and there's really nothing we can do about it. We'd like to, but I'm sorry, we can't help." At the same time, businesses are already going under and jobs are being lost. However, nobody in the Department seems to grasp the fact that the proposed remedy of the eight-year payment period, which in theory could, I suppose, be imported if injustice occurred in respect of the BRS, does not get round the problem that the debt has to be booked in the first year, which means that companies become balance-sheet insolvent by a substantial sum. That affects their ability to raise finance and the cost of finance, and puts them in genuine difficultly.

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Frank Field (Birkenhead, Labour)

The hon. Gentleman is being unfair to Pontius Pilate. Pilate wanted to release Jesus, but we have seen no signs from those on the Treasury Bench that they wish to release our constituents from an unfair tax.

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Bob Neill (Shadow Minister, Communities and Local Government; Bromley and Chislehurst, Conservative)

The right hon. Gentleman is characteristically perceptive and well informed, and he is right. I am sorry if I am being less combative than I sometimes am—I thought that I was being reasonably vigorous—but we regard Lords amendment 11 as so important because of a desire to prevent a great injustice and because the feeling is so strong. The Government's deafness is such that it makes those on the Guardian Council in Tehran look like flexible and open-minded people. People are shouting and hollering to try to bring an injustice to the Government's attention, and the Government just say, "Sorry, nothing to do with us." At the end of the day, that is just unfair.

That is why it is right that Lords amendment 11 should be maintained. It is also why the amendment was passed in the other place not by a small margin, but by a majority of 60. In terms of votes in the other place, that is a very significant margin indeed. It is interesting that the record of proceedings and votes in the other place shows that a number of Labour peers who supported other aspects of the Bill felt unable to vote in the Lobby against Lords amendment 11. They knew that justice was on the side of the amendment. I wish that that message would get through to the Government down here.

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Julian Brazier (Shadow Minister, Transport; Canterbury, Conservative)

I am grateful to my hon. Friend for giving way, particularly now that he is getting into his stride and is in his normal, more combative form. We must put on record the sheer unfairness of the situation. If one of the tenants goes bust, as some already have, the port owners, many of whom are in direct competition with their tenants, do not then have to pick up an empty property rates bill. It is unbelievable.

4:15 pm
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Bob Neill (Shadow Minister, Communities and Local Government; Bromley and Chislehurst, Conservative)

It is a most perverse situation. Ministers in the Department for Communities and Local Government do not seem to be able to grasp the fact that landlords can also be competitors, and that that creates a perverse incentive. The Minister referred to this as basic rating finance under the normal system. Well, if this is the normal system, it is wrong, and we need to ensure that it is not rolled out into other areas as an extension of the rating system. My hon. Friend is right, as he always is on these matters.

It cannot be right that people who might be subject to a BRS should be liable to the same injustice that has been identified in relation to a number of firms in Humberside. An example is Freshney Cargo Services Ltd, which has had a 1,700 per cent. increase in its rateable value. It is now going to have to pay bills backdated a number of years that are significantly more than its annual turnover, never mind its profits. It is really going to struggle.

This is happening to honest, reputable firms that would pay a BRS honestly if the situation arose, and that pay their rates honestly. They have not misled anyone, and they are not responsible for any fault or concealment, yet they are being penalised. The kind of redress that they are being given—which might be offered under a BRS scheme, I suppose—is wholly inadequate, because it leaves them potentially balance sheet insolvent and with real burdens placed on them. These firms are important. The one that I have mentioned employs about 40 staff directly, and has about 100 people dependent on it.

It is ironic that the Bill is being presented as a means of improving economic regeneration and business activity. It is also ironic that responsibility for the Bill lies not only with the Under-Secretary of State for Communities and Local Government, Sarah McCarthy-Fry but with the Minister for Regional Economic Development and Co-ordination whose double-hatted job involves her working not only in the Department for Communities and Local Government but in the Department for Business, Innovation and Skills. It is extraordinary that a lady who is responsible for economic development should be presiding over a Bill that will shut down businesses. As we do not seem to be getting much response from her boss in the Department for Communities and Local Government, I would have hoped that her other boss, in the Department for Business, Innovation and Skills, might have come up with an alternative solution. This is simply not joined-up government. It is ironic that that same Minister is presiding over a measure that is going to put firms out of business. That just does not make sense, and to refuse to listen to the very reasoned debate in their lordships' House potentially extends the anomaly and injustice elsewhere.

With respect, the suggestion that the amendment would set a dangerous precedent is wrong. A fair point has been made about the unique cumulo system in relation to ports rating. There is no danger of unscrambling the whole system. To include the risk of further injustice in the business rates system is just wrong.

Lest people think that this is a fanciful situation, let me tell the House that if all local authorities were to implement BRS schemes, it would raise considerable sums of money. However, great damage is being done by backdating purely in relation to ports. In the port of Hull alone, the sector is being clobbered by a bill for something like £25 million. In Liverpool, the figure is £22 million; in Immingham, it is £19 million; and in Cardiff, it is £1.6 million. No wonder those areas feel that the Government are letting them down. I feel sorry for the Labour Back Benchers who have tried to raise this issue and been thoroughly brushed off by their own Ministers. That is pretty shabby treatment.

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Julian Brazier (Shadow Minister, Transport; Canterbury, Conservative)

May I stress again that people do not have to come to British ports? There is nothing to prevent them from unloading their containers in Rotterdam or in any other continental port and putting them straight on to a lorry that will come in through Dover or the channel tunnel. That is what will happen.

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Bob Neill (Shadow Minister, Communities and Local Government; Bromley and Chislehurst, Conservative)

My hon. Friend takes a particular interest in transport matters, and he is absolutely right.

The Bill comes at a time when ports are already under pressure from the fall in freight rates. Businesses are therefore already being heavily squeezed. Business in the ports on what are sometimes called the near sea routes is particularly threatened because major concerns such as DFDS Seaways have indicated that, unless there is a change to these measures, they will reconsider their significant investment in the UK. That would be a massive blow to economies, including to the partnership between local authorities and business in areas that are trying to regenerate. It is entirely plausible that operations would be moved to Rotterdam or Antwerp and the goods simply brought in by road thereafter. The transhipments would happen elsewhere. That would ironically benefit local authorities and businesses in continental Europe and significantly damage businesses and the local authorities that work with them in our port towns.

That is why this issue is so important and why we make no apology for returning to it again and again. It is also, I suspect, why the amendment was so closely and well argued in the other place and carried by such a large majority. I thus genuinely appeal to the Minister at this late stage in the game to rip up her departmental brief, stand back and look at the issue as a matter of fairness and justice. Compared with the sums of money pumped out into some sectors, scrapping the unfair retrospective element would be nothing at all and it would help to create the degree of certainty that was mentioned in our debate on earlier amendments. The Minister should do that to provide a proper basis for the partnership working between local authorities and business that she identified as central to the Bill.

Let me end on a final irony. A number of local authorities want to be sympathetic and have tried to hold back from collecting the business rate that they are obliged to collect, but they are now being pressured by the same Government to start enforcement and start collecting. I know that some deals are being done, but that is a drop in the ocean, as the vast majority of people are going to be hit with liabilities that they cannot reasonably meet. That will positively harm the exact premise of the Bill—local authorities and businesses working together to regenerate their areas. I ask the Minister, who is up to now untarnished by this whole unhappy saga, not to listen to the official line, but to apply basic common sense and justice and support the Lords amendment. She should go to the Chancellor, who may have the strength of flexibility and independence, and ask for justice to be done.

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Austin Mitchell (Great Grimsby, Labour)

I support Lords amendments 11 and 12. It is unusual to find myself in such agreement with Robert Neill, but he put the case very powerfully and effectively and I support it. Unless we sustain these amendments by voting against the Government—it gives me no pleasure to do so—we will expose the Humberside ports and those in Liverpool and elsewhere to a very serious and messy situation in which firms will go bankrupt, people will be laid off, and jobs and businesses will be lost. I am not prepared to support the Government in their proposals to carry that through.

Lords amendment 11 is designed to rectify the disastrous situation caused by the retrospective rate demands issued to port operators—I emphasise that this applies to port operators, not port owners, who received a rebate on their business rates. It was the port operators who became eligible for separate assessment for business rates in 2005. The Valuation Office Agency tells us that that has been done. It went around to make the assessments, but it talked to the owners, not the operators. It did not give any notice; there was no consultation, which there should be have been, on raising the business rates. The assessment was based on what owners told the valuation agency about liability for business rates.

Separate assessment was the principle that came in for port operators in 2005, and the valuation agency told us that it had been done. Suddenly, however, thanks to a case in Southampton—it was settled out of court to avoid a definitive verdict against the agency—it was necessary to look at the assessments all over again. Many of these businesses were not assessed until 2008 for an assessment that should have been made in 2005. Whose fault was that? It was manifestly the fault of Government and the Valuation Office Agency. Perhaps the agency was understaffed because the Gershon economies had required it to shed labour, but in any event this was the fault of the agency rather than of the port operators, who have already paid business rates through what is known as the cumulo rental system. The business rate was part of the rent paid to the port owner, which is Associated British Ports in the case of the Humberside ports.

What the port operators are being asked to do is pay rates twice. Not only is it a sacred principle that everyone must pay business rates; in the case of the ports, everyone must pay business rates twice. It is inconceivable that such a principle should be imposed, and that it should be defended by the Minister. Indeed, a succession of Ministers have presented us with this ludicrous line of defence.

The whole thing was handled very clumsily and ineptly by the Valuation Office Agency. Assessments were rushed in at the last minute in 2008. Many of those assessments are now being reviewed through the so-called fast-track procedure, which takes several weeks. We do not know how many are being reviewed, but although—as the hon. Member for Bromley and Chislehurst pointed out—local authorities are now being pressurised into demanding the rates, they cannot be levied until the fast-track assessments have been completed.

I do not object to individual year-by-year assessments of these businesses. What I do object to, strenuously, is the retrospective demand for three and a half years of business rates, dating back to 2005. How will that be possible? The businesses have already charged their customers—a process that often involves intense haggling. They cannot go back to their customers and say "We are sorry, but we will have to increase the charges."

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Frank Field (Birkenhead, Labour)

May I issue a plea to my hon. Friend to stop pulling his punches? Is not the position even worse? Operators who have created and maintained jobs in our constituencies believe that they have paid their rates through their charges. It is not just a case of retrospection. A poll tax is being levied retrospectively on operators who have already paid what was expected of them.

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Austin Mitchell (Great Grimsby, Labour)

I was under the impression that I had just said that, but it is indeed true. The operators have been asked to pay business rates twice, and there is no justification for that.

If the Minister does not abandon her opposition to the Lords amendment and say "My God, Grimsby, you are right; I never thought of that," I should like her to tell us how the port operators are to be compensated for the money that they paid in business rates for the period between 2005 and 2008. What will happen to that money? The owner, ABP, has received a full rebate for the money that was paid by the operators, which is ludicrous, and it now says that it will not give the money to the operators because it is ABP's money and it must run businesses itself.

The operators are being threatened with retrospective business rate bills which they cannot pay because they cannot increase their charges retrospectively, and asking them to do so would be bad business practice. The Government, recognising guiltily that they have made a mess of things, are exceptionally allowing the operators to pay over a period of eight years, but that will be of no great benefit, because the debt must go on the balance sheets, and if the balance sheets suggest insolvency, the businesses will be operating while insolvent. As the hon. Member for Bromley and Chislehurst pointed out, if insolvency threatens, investment will fail. DFDS has already announced its intention of cutting investment.

The ports will change. Will the cars still come in through Grimsby—the great car port of the western world—or go out from Grimsby, for that matter, or will the operators change the way they do things and bring them in by other means? That is quite possible. We will certainly have the shedding of jobs and the closure of businesses. Freshney Cargo Services has been much cited in recent debates, and was cited again today—this time accurately, I was glad to note. That firm's very existence is threatened.

Those of us who oppose this regime have had two Adjournment debates and endless meetings with previous Ministers. We have been very well received and we put our case, but the Ministers were all junior Ministers—we never got to see the Chancellor or the Secretary of State for Communities and Local Government, who are the deciding forces—and they told us, "As junior Ministers, our hands are tied." It is the job of junior Ministers to defend the indefensible, and they have done that very well, but there have been no concessions at all—we are beating our heads against a brick wall. As my hon. Friend Mr. Cawsey pointed out, that is what Ministers get the car for.

Our warnings about the disaster that will come have made no impression at all. It is now going to hit us, but all we have had is a litany of excuses such as that if the retrospective rates demand were waived it would be an inappropriate aid to industry, and it would break a sacred principle of the ratings system in respect of retrospective charges. We have been told that the businesses, many of them small businesses, should have known—by divination or telepathy or some other form of spirit medium—that they would have to pay these charges. A load of rubbish has been told to us. We are in the position of mushrooms, with manure regularly thrown over us by junior Ministers of the Departments concerned. Frankly, I am fed up of being in that position and of talking about a situation that is so serious and of having Ministers take no notice. We had another Minister take no notice today; a new Minister adopted the old skills of taking no notice of the case.

The principle the Lords amendment proposes is a simple one, and it already operates. That principle is that where there is a reassessment that comes at the volition of the valuation agency and not the business, there will not be retrospective charging of that reassessment. That is a good and sensible principle, because what we have here is an inefficient agency with tyrannical powers, including the power to impose a large retrospective payment. It should not be allowed to use those tyrannical powers in defence of its own inefficiency. That is a good principle.

The Minister told us today that the increase is not backdated if the error relates to premises on the list, but is backdated if the error relates to premises that should have been entered on the list. The premises in question should have been entered on the list in 2005, so this is double-talk. They could be exempted from the retrospective payment, and this Lords amendment suggests that they must be. The Government could have done that of their own accord. Why did they not do so, and thereby save us all this trouble? Why did they impose this retrospective assessment that is causing so much trouble in the ports? The Government have the power; they should have used it. For the Minister to tell us, "Well, the premises should have been entered on the list," is no excuse. Why were they not on the list, and what was their legal status? The owners of the premises were paying business rates; they were assessed for business rates separately in 2005, so why cannot this retrospective abolition of the retrospective principle be applied to them, as it should be? What is their situation?

The Minister told us that if we carried the amendment, it would have no effect. It is clearly not a retrospective amendment, but I will not believe it if I am told that if the Government accepted this principle—as they should, because that principle is in the legislation already—they would not retrospectively give way in the port operators' case. They would, of course. They would obviously accept the general principle, and they would have to do justice even though the crime is only three months or so old. It is futile for the Minister to tell us that this measure would have no effect, because it would; even though the legislation is not retrospective, it would allow the abolition of the principle of retrospective demands for rates.

The state of these businesses is shown by some of the correspondence that has been sent to us by one of the lawyers advising us on this issue. He says:

"I was telephoned on Thursday by the accountant of one of the...businesses affected by the failures of the Valuation Office Agency. The accountant wanted to know the effect of the vote in the House of Lords".

The effect of the Lords amendment was, of course, zero; it is not until we ratify it that it becomes effective, so this accountant is hanging on for today's vote, in which we shall compel the Government to accept the Lords amendment. The correspondence continues by saying that the accountant

"was trying to decide whether he was obliged to qualify the company's account with a note that it"—

the dock operator, one of several in such a position—

"was insolvent. He felt that he was obliged to do so but was desperately trying to find a reason not to qualify the accounts".

We are told he did not want to complete the process by reporting the company insolvent. Like all of us, he is waiting for the relief of Mafeking, when the Minister will tell us that she accepts the principle of what we are saying and he can tell that company that it can continue to trade. The Labour party and the Government must accept this principle, because we cannot pursue these port operators in this fashion and produce the kind of devastating effect that this measure will have in the ports. We are not exaggerating: there will be very serious consequences.

I wrote to the Minister—we have never been able to see one of the top Ministers—asking that this Lords amendment be accepted. I also wrote to her asking that we should be provided with accurate information on how many of these port operators have paid, how many are still paying and how many have negotiated entry into the eight-year scheme. I have not received an answer. I do not think that the information is available. Ministers have tried to con us by saying, "A high proportion have paid. If some pay, we can't abandon the charges on the rest." That just ain't true. We are talking about a unique category: port operators, who, under the new arrangements, are assessed for retrospective business rates. We need to know how many of them have paid. I hope that the Minister will tell us, because we can make these decisions only on the basis of that kind of information. I hope that if the Minister does not accept this amendment—I have been watching the flow of notes coming from the hard-faced men and women in the Box—

4:30 pm
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Michael Lord (Deputy Speaker)

Order. The hon. Gentleman is a very experienced Member of the House, so he will know that we do not refer to people who are not in the Chamber in that way.

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Austin Mitchell (Great Grimsby, Labour)

I am sorry, Mr. Deputy Speaker. It was tactless of me to refer to the complexions of those people in the reference that I should not have made—and did not make. The Minister has been receiving notes and I hope that they have changed her mind, because it is important to seize this opportunity to change the Government's mind. If that does not happen, I shall certainly vote for the amendment and, unusually for me, support proposals coming from the House of Lords, which the Government can make retrospectively effective.

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Dan Rogerson (North Cornwall, Liberal Democrat)

Our debate has become a little lively for this time of the afternoon. Interestingly, in many of our discussion we have discussed the potential for things to have an influence on local communities and for business rate supplement projects to be introduced, but we are now talking about the backdating of business rates for ports, which is having an impact on communities and businesses up and down this country.

Robert Neill referred to a certain irony, so I should refer him to remarks made earlier today by Mark Durkan about irony in politics. We have heard references to the New Testament and the Boer war this afternoon, which goes to show that our debates are perhaps at their best when we can respond to real situations in the country. Although the Bill might not resolve the situation, it gives us the opportunity—as the hon. Member for Great Grimsby has just said—to send a clear signal of our intentions, to acknowledge the seriousness of the situation and to admit that it is the responsibility of the Government to put it right.

It must be acknowledged that the problem in Humberside and Merseyside has been caused by a mistake by a Government agency, although the businesses involved will have to pay the price. Even worse, their employees will pay the price if their jobs are lost. In the present economic circumstances, the Prime Minister has instructed, inasmuch as he can or is prepared to, banks that are now part-publicly owned to be as sympathetic as possible to businesses that are in difficulty and to support them as much as possible. HMRC has been instructed to be as flexible as possible in collecting taxes, to ensure that profitable businesses that want to invest in the future, provide employment and contribute to the economy are not put out of business needlessly by short-term demands that could be resolved. However, the Government are pressing ahead with the business rate system, which might make businesses unable to trade any longer. People will lose their jobs and it will affect investment in communities served by those businesses, with consequences for other businesses around the ports, including the construction and other ancillary industries. Although we might not have the opportunity to resolve the problem this afternoon, we can be part of the solution and contribute to addressing the issue.

Any problems that occur in port areas might have long-term consequences, as we have heard. If business is driven from the ports, it will find other routes and, probably, never come back. We need to reflect on just what the Government are asking us to do.

Will the amendment solve the problem? No, but it would give the Government the opportunity to acknowledge not only that the issue needs addressing, but that they have a way of dealing with it. It would also acknowledge that the situation in the ports is the fault not of the businesses but of the Government agency. The Government must admit that and try to do something to resolve the situation.

The Minister said that it would be inconsistent for the collection of business rate supplement to follow a different path from the collection of business rate. I can see what she means, and perhaps the amendment is an inelegant solution. But it will allow the House to vote and to show that many hon. Members feel that this problem needs to be resolved. If we can demonstrate the strength of that feeling, I hope that we can press the Government into action. That has happened in recent weeks with the Gurkhas. The Government said that there were insurmountable problems of precedent that could not be overcome. Members gave their view on that and, to their credit, the Government reacted. I hope that the same will happen this afternoon and we will reject the motion to disagree. If we stick with the amendments made in the other place, we will have a better Bill as a result.

4:45 pm
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Ian Cawsey (Brigg and Goole, Labour)

I shall not detain the House too long, because when we debate this issue I feel increasingly that I am turning into Bill Murray in "Groundhog Day". I simply turn up and say exactly the same thing over and again and get exactly the same response. At the heart of the matter is the fact that we are discussing Lords amendments to the Business Rate Supplements Bill, but a lot of us who represent ports represent companies that think that they are already being charged a business rate supplement. They have paid their rates once through the cumulo system—that is not really disputed, and, indeed, my hon. Friend the Minister said earlier that people should come forward with evidence of that if it exists. In a previous debate, I said to the previous Minister that Associated British Ports sent out a letter to those companies at a time when their business rates had been increased to say that the cumulo was being increased to cover the increase in business rates. If that does not prove that business rates are included in what they pay, I do not know what else can prove the point.

We have got ourselves into a completely unnecessary mess. The other place did this House a service by passing amendment 11. It has ensured that the issue comes back on to the agenda and that all Members can see that there is a solution. That solution might well have been directed at the problems in our ports, but the amendment is a good one in its own right. Even if the Government still feel uneasy about the port situation, what on earth is wrong with or offensive about the amendment? It should be passed and it should be applied to the ports companies. There can be no fairness when good companies are struggling to stay in business because they are being asked to pay, for a second time, business rates backdated to 2005. They can no longer go back to their customers and reclaim the money.

ABP, which is not the only owner of ports in this country but affects the area that I represent in Goole, has made it perfectly clear that the money that the Government have paid back to them will not be passed on. This is retrospection and double taxation. In fairness to ABP, it says that because although it might have got its money back in ports such as Goole its liability across the country has gone up, too. I do not think ABP sees itself as a winner out of this whole sorry tale, either.

I plead with the Minister, who is new to her post and who will have had all sorts of briefings and notes from officials that say, "Resist," "Stick with the line," and "Don't let them grind you down." We all know what happens in these scenarios. However, it needs dealing with because this problem will not go away. I might be wrong, but I think that the most likely thing that will happen today will be that the Government will win the day on the amendment, despite the fact that Members on both sides of the House will vote in favour of their lordships' position. Of course, that will not be the end of it, because the amendment will go back to the other place. I hope that if we end up with that scenario, their lordships will take heart from the fact that there is cross-party consensus that the provision is just wrong and that it needs to be dealt with.

I had the great honour a few years ago, for one year, of being Parliamentary Private Secretary to the much missed Lord Williams when he was Leader of the House of Lords and I know what happens in this scenario. No Government want to lose legislation because of one bit of controversy, so at some point people have to sit down and to start talking about what will ensure that both Houses can reach an agreement. If we are unsuccessful today, I hope that their lordships will see that there is strong support in this House for the amendment and will sit down with representatives of the Government to thrash out a position that can be brought back to both Houses on which we will agree.

This matter will not go away, because it is manifestly and obviously unfair. Companies in ports up and down the nation are struggling in already difficult circumstances because of the failure to grasp this simple matter, which is not of the Government's making. We all accept that the Valuation Office Agency messed it up in the first place, but there is an obvious solution. I refuse to believe that it is beyond the wit of people in this House and the other place to reach a solution together, so for goodness' sake let us get on and do it.

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

With the leave of the House, I shall respond briefly to some of the points raised in the debate, but I shall begin by reiterating a principle. Many hon. Members have spoken about fairness this afternoon, and the principle is that a tax system such as business rates must be equitable to all. Any solution to a perceived injustice must not confer a disadvantage on other taxpayers who have paid and who were billed on time.

Prior to the ports review, some 1,600 separately assessed properties were liable for rates from 1 April 2005. My hon. Friend Mr. Mitchell said that separate assessments were introduced in 2005, but that is not correct. The principle of separate assessment has been a long-standing feature of the rating system, and goes back as far as 1936.

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Bob Neill (Shadow Minister, Communities and Local Government; Bromley and Chislehurst, Conservative)

I appreciate that the Minister is new in her post, but does she accept that, although separate assessment has been a feature of the general rating system, the cumulo system operated in the 55 registered ports until the latest change? The 1,600 separate premises were rated as separate hereditaments only when that change, of which the ports did not have notice, was made.

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

As far as I am aware, and according to the figures that I have, the 1,600 properties were liable for rates from 1 April 2005, and paid rates in 2005-06 and 2007-08. Removing a backdated rates liability would turn a perceived advantage for newly assessed properties into an actual disadvantage for existing properties that have paid their rates liability for previous years.

On the earlier point about empty properties, a landlord who takes over a rateable property that is empty would be liable for rates.

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Frank Field (Birkenhead, Labour)

The Minister has confused the position. We are not asking for an unfair redistribution of the rateable value costs to those who already pay. Employers in our ports want to pay rates, but they do not want to pay rates and have this poll tax imposed as well. If that happens, they simply will not survive.

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

We are talking about two different issues here. One is the principle that separate assessment would be unfair to those who have been paying their rates; the other has to do with the cumulo, which is a contractual agreement between the port operators. We are not unsympathetic to the ports, but the Lords amendments are not the answer to the problem. They would affect the ability to levy a business rate supplement on businesses occupying properties where the rateable value has been altered retrospectively, but they would not impact on the backdated rates liability of some port operators.

I have heard the arguments about sending a message and setting a precedent, but the principle of fairness demands that we look at the system as a whole, including those who have already paid their rates. As I have said, we are not unsympathetic to the ports, and the House overwhelmingly supported the arrangements allowing liability backdated to 2005 to be discharged in instalments. I am pleased to be able to tell the House that that legislation is working well.

I can tell my right hon. Friend Mr. Field that, by 8 May this year, local authorities had reported that 185 properties covered by the ports review had paid £30 million of backdated liabilities in full, and that a further 88 business properties in ports had been granted a schedule of payments. In addition, my predecessor, who is now the Minister for Housing, met two of the port operators—Peel Holdings and Associated British Ports—to discuss the payment of fees and whether that included the payment of rates. Although the Government have facilitated discussions with some port operators about the merits of these issues, we cannot intervene directly between the ports and occupying businesses, as the responsibility for paying rates through tenancy agreements is a private contractual matter between the ports and the occupying businesses. I am happy to meet hon. Members who have ports in their constituency to discuss matters further, but I do not consider the amendments before us to be the way forward.

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Dan Rogerson (North Cornwall, Liberal Democrat)

I echo the comments that other hon. Members have made: the problem is not of the Minister's creation. However, she said that the amendments are not the answer, which implies that there may well be an answer to the problem. Hon. Members in all parts of the House would welcome an idea of what that answer might be, so that they could decide whether they need to send a signal through the amendments. I gave the example earlier of the Gurkhas debate. Some Labour Members chose not to support the motion in the name of my right hon. Friend Mr. Clegg, because they felt that as they had received a promise from the Government the issue would be resolved. I am not clear that we are in such a situation in this case, or that there is a way forward. If there is, it would be good to hear about it.

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

I doubt that I can give a great deal of comfort, because the solutions suggested by hon. Members are not a possible way forward. That is why we gave an unprecedented eight years in which to pay, and came up with the fast-track process. I know that hon. Members have said that the fast-track system is not working as it should, but 40 proposals have been resolved under the fast-track system. Some 195 remain outstanding, and they have been transmitted, as appeals, to the Valuation Tribunal Service. We are assuming that early hearings will follow. Ratepayers have been invited to support early listing dates, but very few have taken up that option. Once the appeal is with the tribunal, there is also an onus on the applicant to speed up the process.

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Bob Neill (Shadow Minister, Communities and Local Government; Bromley and Chislehurst, Conservative)

The Minister is being clear, but will she concede that, according to the figures she has given, only 230-odd properties have come to an arrangement, or are in the process of so doing? There are about 1,600 individual properties concerned. Secondly, on the fast-track process, I have details from RMS Holdings, which has been offered a fast-track hearing between now and September. It is difficult for it to take things up, if that is the best that it is offered under the fast-track proposals. Will she look again at the operation of the fast-track system?

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

I am more than happy to look into the fast-track system. However, the total number of proposals relating to properties in ports since November is 235 and, overall, 540 proposals have been made over the lifetime of the 2005 list. However, I am more than happy to look further at that fast-track system.

To go back to my original point, we are talking about a point of principle to do with the business rate system. It is about fairness. To repeat what I have said, determining liability takes us back to the issue of when the liability started, in 2005 or 2010, as it will do under the BRS system and in future. People who have already paid their business rates in full would be disadvantaged if we changed the system. That is why the decision was made to put in place the deferral system, which allows an unprecedented eight years in which to pay.

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Austin Mitchell (Great Grimsby, Labour)

I fear that what the Minister said was not correct. The principle of the argument that we are urging applies to port operators. The principle of the previous legislation, as set out in regulation 5(3) of statutory instrument No. 2303 of 1989, was that all operational land of a harbour or dock undertaking was to be treated as a separate hereditament, irrespective of whether the property would otherwise form several separate hereditaments, or part of a single, larger hereditament. That principle was confirmed in the legal action that the Valuation Office Agency began against Grimsby Fish Dock Enterprises in 2002. One cannot split a single hereditament in the case of docks, or when the owner controls the access. That is what is happening. There are attempts to split the docks into separate hereditaments, and those are the ones—

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Sarah McCarthy-Fry (Parliamentary Under-Secretary, Department for Communities and Local Government; Portsmouth North, Labour)

My hon. Friend has the measure of me on that. I do not have the details of those regulations.

I go back to the policy that a business should pay its fair amount of rates from the point at which it occupies the property, and that all businesses should be treated in a manner consistent with fair competition. That is the principle on which we disagree with the Lords amendments, but the reason, as I said, is one of financial privilege.

Question put, That this House disagrees with Lords amendment 11.

The House divided: Ayes 258, Noes 227.

Division number 153

See full list of votes (From The Public Whip)

Question accordingly agreed to.

Lords amendment 11 disagreed to.

Lords amendment 12 disagreed to.

Lords amendments 13 and 14 disagreed to.

Amendment (a) made in lieu of amendments 1 to 6, 13 and 14.

Lords amendment 15 agreed to , with Commons privileges waived .

Motion made, and Question put forthwith (Standing Order No. 83H(2)), That a Committee be appointed to draw up Reasons to be assigned to the Lords for disagreeing to their amendments 11 and 12;

That Lyn Brown, Natascha Engel, Sarah McCarthy-Fry, Robert Neill and Dan Rogerson be members of the Committee;

That Sarah McCarthy-Fry be the Chairman of the Committee;

That three be the quorum of the Committee.

That the Committee do withdraw immediately. —( Mr. Blizzard .)

Question agreed to.

Committee to withdraw immediately; reasons to be reported and communicated to the Lords.