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Rating and Valuation (S.I., 2009, No. 204)

Business of the House – in the House of Commons at 5:11 pm on 1st April 2009.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party 5:11 pm, 1st April 2009

I beg to move,

That the Non-Domestic Rating (Collection and Enforcement) (Local Lists) (Amendment) (England) Regulations 2009 (S.I., 2009, No. 204) dated 5 February 2009, a copy of which was laid before this House on 10 February, be revoked.

It is a pleasure to return yet again to the issue of the effect of certain changes in port rating. Before the Minister looks up in despair, I should say that I return to it without apology. This debate gives us an opportunity to look not only at the issue set out in the regulations, but at what has given rise to the regulations. The regulations attempt to provide a measure of relief to port businesses that, on any objective measure, have been subject to gross injustice and unfair treatment. This debate gives us the opportunity to address that issue once again.

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Photo of Frank Field Frank Field Labour, Birkenhead

Some of us on this side of the House have to make up our minds about what to do, so it would be helpful to know at the beginning how the Opposition are going to vote on the motion.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

If the right hon. Gentleman is patient and listens to me, he will be enlightened in due course. It will help him if I put everything into context; that will lead him to where we are going to be.

How has this regulation come about? It is an attempt by the Government to pick up some of the mistakes of the Valuation Office Agency, for which the Department for Communities and Local Government does not have direct responsibility, but which is the responsibility of the Treasury. Those mistakes were made at a time when, ironically, the Prime Minister was Chancellor of the Exchequer. I do not know whether that had anything to do with the Treasury's having taken its eye off the VAO, but that is the simple chronology of the matter.

What has arisen is this: after the 55 registered ports were denationalised—for good reasons—it was initially decided that they should be rated under a system different from that relating to other businesses in the UK. Rates were raised through a system of prescription by the Secretary of State. The payments generally took place through a system known as the cumulo, in which the port businesses—the warehousemen, the stevedores, the crane operators, the importers of vehicles, the engineers and so on—paid their rents and rates to the port owner. In due course, the rate element was paid to the local authority, which had a duty to collect. The rates were then paid to the Treasury, as they were national non-domestic rates.

It was a reasonable enough proposition back in 2003 for the Government to decide to move to normal rating practice for the businesses in the ports and to move away from the cumulo. We could have debated the matter separately, but it is not the main issue. To achieve that change, the VOA was tasked with drawing up an up-to-date rating list, and that is where the catalogue of errors starts. The prescription system had in fact been extended to 2005. The VOA has a statutory duty to maintain accurate rating lists and that was due to come into force on 1 April 2006. Of course, today is a particularly important day for us to be discussing the issue of rating because it is the quarter day—many people are filing and so the rate bills are dropping on their doormats.

The practical effect of the VOA was, frankly, woefully negligent and inadequate. It did not start the preparatory work until after the due date in 2006. It managed somehow to inform the owners and operators of the ports but not generally the businesses that they would be rated separately and that, in effect, they were to be rated as separate hereditaments and rating units rather than under the cumulo system. So, although many of the big boys—the operators—knew of the change, the small and medium-sized businesses did not. They were not kept adequately informed. The VOA accepts that, in what I suspect is almost as mealy mouthed an apology as when Pontius Pilate said in another place that he might have got it wrong. In a limited fashion, the agency accepts that there was inadequate communication, which puts it mildly. There was no communication at all and there was gross negligence on the part of the VOA.

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Photo of Robert Syms Robert Syms Conservative, Poole

This does not only affect large companies. Some quite small companies in the ports, such as those providing catering services and so on, are having their viability threatened by something that has come as a great surprise to them.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

My hon. Friend is absolutely right. As the businesses were given no notification, they were not able to plan for the increase in rates in the way that they ordinarily would. In the course of last year, those businesses were suddenly told—two years after the event—not only that they would be subject to a significant increase in rates, but that those increases in rates would be backdated to 2005. That is why businesses in ports across the country are experiencing enormous increases in their rates, in both real terms and cash terms.

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Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government

Does the hon. Gentleman agree that is was a double insult to those businesses when they found out not only that they were landed with a rates bill that they had not expected, but that it would be retrospectively applied? It was a double insult and not just a bolt out of the blue.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

The hon. Lady is absolutely right. I know that we make common cause on this issue. A number of Labour Members have raised exactly the same point.

A number of parliamentary answers have disclosed that the way in which the Government subsequently handled the issue does them no credit. The initial fault lay with the VOA, but the Government have failed to do anything to rectify it. We have a retrospective increase in taxation about which there was no communication, no consultation, no impact assessment, no assessment of the likely revenue to be raised and no assessment of the impact on the wider economy. There was no quantifying of the revenue or the economic impact, which was a clear breach of the Treasury's guidelines on the imposition of retrospective taxation. This is not just a complete foul-up in practical terms; it is thoroughly wrong in principle— [ Interruption. ] I am glad to see that Mr. Field is following me so far.

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Photo of Frank Field Frank Field Labour, Birkenhead

How are you going to vote?

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

I see that the right hon. Gentleman, who likes to hear a tale unfold, is following me closely. I am sure that he is getting the drift.

We are now finding that businesses are being hit by massive and unsustainable bills. It is worth giving a few examples. TTS Shipping Ltd. is a small firm, but well organised—a viable company under any normal circumstances. It pays its way; it is important to stress that in this context. It pays corporation tax, national insurance contributions and PAYE of £425,000 to £860,000 a year. These are not fly-by-night people—they are honest businesses paying their way and doing their bit. In 2007, TTS found that it had a retained profit of £40,000. It has now been saddled with a backdated liability for rates of more than £1 million, which it will not be able to pay—it is as simple as that.

This regulation affects big people too; I am always interested in treating the big and the small equally, as hon. Members will appreciate. DFDS Tor Line, one of the major multinationals operating in the UK, has a backdated rates demand of £9.9 million. Even for a major operation, that is a lot of money. Its increase in annual liability is £3 million. Its managing director has written to indicate that, as a result, his main board is considering relocating the business outside the UK. That is very significant. The major international players, particularly on the Baltic and North sea routes, have the option, when transporting cars and other goods, to offload in Amsterdam or Rotterdam and then bring the goods on via road instead of shipping them in direct, so that British competitiveness in the ports is damaged.

My final example is Freshney Cargo Services. Its bill has gone from £48,000 to more than £850,000—massively more than its best-year-ever profit. Its retrospective liability is £24 million, for which it could never possibly plan. There is no way that these business can meet the unintended consequences of this foul-up by the VOA.

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Photo of Ian Cawsey Ian Cawsey Labour, Brigg and Goole

The hon. Gentleman has said a lot about the retrospective element that is being applied to these companies. Does he accept, and want to place on the record, the fact that none of those companies is saying that they do not accept that they must pay business rates and will not do so in future—that this is entirely about retrospection, and we cannot tell them to go back three years when they cannot go back to their customers and ask for the money?

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

The hon. Gentleman is absolutely right; he makes a powerful point. I know that he has taken an interest in this issue, and I hope to heavens that the Minister listens to him. It is not reasonable for companies to have to expect to go back in that way.

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Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby

The hon. Gentleman got the figure on backdated payments for Freshney Cargo Services wrong: it is not £24 million, but £3.2 million. The managing director, Mr. Andy Dixon, has asked me to ask the hon. Gentleman whether the Conservatives are going to vote against the measure.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

We will try terribly hard to put the hon. Gentleman out of his misery. He is right—I left out the decimal point. I thought that it was £2.4 million, but it has gone up; now it is even more. [Hon. Members: "How are you going to vote?"] The more hon. Members want to ask questions that I am not going to answer yet, the longer this will go on. How they exercise themselves is entirely a matter for them.

The genuinely serious question that arises is how to deal with this creation, which is certainly not the fault of the businesses that were unable to plan for it. This has been debated time and again. Mr. Mitchell secured a Westminster Hall debate, which was well attended and where the case against the Government was comprehensively put. We prayed against the motion to enable us to have a debate in the Commons. The matter was recently debated in the other place, where—owing to its procedure—a non-fatal motion of regret was passed by their lordships, giving them the opportunity to ventilate the inadequacy of the Government's response to the situation. Their response—I am sure that the Minister will explain it to us patiently, as he has before—is to enable the liability to be spread over eight years. That is all well and good, but it does not solve the basic problem that still arises: the liability is still there and businesses will still have to pay a massive amount that they can ill afford. Moreover, because the liability accrues in one year, it will have to be carried on to their books as a liability in the first year, even though the payment is spread over a longer period.

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Photo of Tim Loughton Tim Loughton Shadow Minister (Children)

My hon. Friend makes a powerful point, and many of us who have harbours and ports in our constituencies have heard it first hand. Is the timing of the measure not doubly insensitive? The port in my constituency has many businesses importing timber and building materials for the building industry, which has been particularly hard hit. Those businesses are being asked to take a hit at a bad time in the economic cycle, when their balance sheets are pretty shot to ribbons, and it will push them absolutely over the edge in some cases.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

My hon. Friend is absolutely right. Businesses are caught in an impossible dilemma. They cannot pay with the resources that they have, and with freight rates at an all-time low, their only recourse is to attempt to pass on costs elsewhere, which affects the other businesses that are in turn dependent on them. It is economic nonsense to embark on this course in the current economic situation.

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Photo of John Redwood John Redwood Conservative, Wokingham

Does my hon. Friend agree that this is an issue for the Minister, who now has the opportunity to move on the policy? Since the policy was ham-fistedly put together, the Government have converted to the view that they must do whatever it takes to sustain business through the recession. The regulations are quite incompatible with that policy.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

My right hon. Friend goes absolutely to the point, as he invariably does on these matters. The regulations fly in complete contradiction to the Government's policy, and one of the reasons why this debate is particularly timely is that it would enable the Government to do the same for the ports as they did for business rates increases yesterday, when the Chancellor said that he recognised that a 5 per cent. increase was unsustainable, and had to back off from that. Some ports are suffering from a 200 or 300 per cent. increase. If 5 per cent. was too much and had to be abandoned, the regulations should be abandoned, too, and we are giving the Minister the opportunity to recant, even at this late stage.

I shall make a couple of points before I move on, because I know that other hon. Members want to speak. The Government had clear warning in advance about the issue of the liability being booked. In February, the Insolvency Service wrote to the Minister and said:

"The debt, like any other, would need to...be booked immediately. Depending on the company's overall financial strength, it may not have the assets to cover this additional liability."

That is a modest statement; that is the least of it. The letter continues:

"In such circumstances, the company would be balance sheet insolvent."

Legally, if the company had a reasonable prospect of paying, it could continue to trade, but that balance-sheet insolvency, as anyone with even the most modest involvement with practical business would know, increases its cost of borrowing. It would make it much harder for the company to raise finance, and if it does, it would be more expensive to do so. That is a significant indirect burden, alongside the liability itself. It also makes a company far less robust if it experiences further commercial difficulties or reverses during the recession. It makes the likelihood of that company going under far greater.

The Select Committee on Treasury, which reviewed the matter in considerable detail, concluded that there was not just a likelihood but a probability that businesses will become insolvent in that regard, and it thought that there was a strong case—"clear evidence" was the phrase used—that it would lead to the circumstances we described.

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Photo of Derek Twigg Derek Twigg Labour, Halton

I am sure that the hon. Gentleman is trying to build up to a crescendo, but we have waited patiently for the answer to a simple question. Given that he has already said on record that the Opposition are opposed in principle to the Government's position on matters that I have raised with the Minister, will he be voting against the regulations? And what is his party's policy?

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

The hon. Gentleman has to hang on for only a little bit longer, because we are nearly there. I will tell him exactly what we propose because the Treasury Committee suggested a simple way forward. It said that we should retain the current valuations until the next revaluation in 2010. That would be a sensible way forward because it would enable the revaluation process, which businesses accept should take place, and which they accept will increase some liability for them, to be done with proper consultation and assessments so that they could plan their cash flow and future business plans. That would be the sensible, rational, joined-up way to do it, and we as a party have urged the Government to do that. The debate gives them an opportunity to do so, even though we do not oppose the eight-year payment period of itself. [Interruption.] I must say that I am surprised that hon. Members are surprised about that—all they had to do was read the speech of my noble Friend Earl Attlee in the other place. It is in Hansard—he made it clear that we are not opposed in principle to the eight-year period. However, for the reasons that I hope I have set out as clearly as I can, that period is not adequate to relieve the dilemma in which businesses have been placed, first by the failures of the Valuation Office Agency, and secondly by the inadequacy of the Government's response.

This is the last chance for the Government to announce in this House that they will do the same thing for port businesses that they have done before for others. We will not vote against the regulations, but we have vented clearly our views about them as we regard them as very important. That would scarcely be a surprise to the Minister if he had read what we said in the House of Lords. I suspect that he might have done, actually, but we wanted him to be able to listen to the argument unfold in a chronological fashion.

The debate will also give the many Members of all parties who are concerned about the impact of the regulations in their constituencies the chance to tell the Minister directly what is happening. I am afraid that many people, businesses and Members feel that they are meeting a blank wall when talking to the Government.

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Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby

In other words, the hon. Gentleman is telling us that we must wait for businesses on the docks to go insolvent and for jobs to be lost before the Opposition have the guts to do anything.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

With respect, I do not think that the Opposition can answer for the inadequacies of the response of the hon. Gentleman's party's Government. I know that he is ashamed of them, but there is no need for him to try to park the blame elsewhere—as he well knows, it lies entirely on the Treasury Bench. I remind him what the Opposition pledged to do in the Westminster Hall debate. We did not just urge the Government to adopt the Treasury Committee's all-party recommendation, and advocate that as a policy. As the Minister well knows, we also indicated that if primary rather than secondary legislation were required for that purpose, as the Government contend, we would do everything necessary to facilitate the passage of that legislation. I happen to know that the Liberal Democrats take the same view, because they expressed it.

At this moment, the Local Democracy, Economic Development and Construction Bill is before the other House. It touches on the powers of local authorities to assist businesses in their area. We have asked why on earth the Government do not table an amendment to that Bill. There is also a Finance Bill coming up in which they will have the opportunity to deal with rating measures. As the hon. Member for Great Grimsby knows, it is not for us to control that. We have given the Government the best possible evidence that, if they wish to go down that route, we will do everything to assist them to assist businesses. With respect to him, I cannot say fairer than that. We are giving Ministers every possible opportunity, but I cannot make them see the reality of the situation. If they fail to do that, and if businesses go under, it will not be the hon. Gentleman's fault, because he has raised the issue, but it will certainly not be the fault of Conservative Members, because we, too, have consistently raised it. It is the Government who will have failed and sold short the businesses in the docks.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government) 5:33 pm, 1st April 2009

I understand the concerns that have been raised and the pressure on the cash flows and margins of businesses that are affected by a backdated liability for business rates dating back to 2005. I also understand that some argue that we should go further than an unprecedented eight-year period in which to pay those backdated liabilities, but I want everyone to understand that voting down the regulations, which I laid before the House on 10 February, would leave the position of those businesses exactly as it was before we took action. In plain terms, let me give a warning: supporting the prayer that the Conservatives have tabled would mean that companies were legally liable to pay all the backdated business rates from now. It would also mean that councils were legally required to pursue and enforce those debts. That is at stake in the prayer that Robert Neill and his leader have tabled.

The debate has largely been about ports, but port businesses are not in a unique position. I therefore also want everyone to understand that the regulations that I tabled and the provision that the Government have made apply equally to businesses throughout England in all sectors and all areas, and not only to the ports-based businesses, which find themselves in the position of having significant and unexpected backdated business rates liabilities, incurred as a result of the Valuation Office Agency's separately listing them and assessing them for the first time in this rating list period.

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Photo of Louise Ellman Louise Ellman Chair, Transport Committee

Does my right hon. Friend accept that the ports businesses are in an unacceptable position, which has been brought about by the action or inaction of the Valuation Office Agency, and that, although the Government's proposals are necessary, they are not sufficient?

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I shall explain shortly why I believe that the ports businesses are in not a unique, but a special position. There are some unacceptable pressures, created not least by the ports review, but I want to tackle the argument that Conservative Members and the ports lobby make that, somehow, the tax liabilities, which were legally established, should be waived. That is important. In the last financial year up to only 31 October, at least 800 companies, including some of the businesses in ports, were eligible for the payments scheme. That scope will be removed from them all if the regulations do not remain in place.

Backdating ratings assessments is not new, but an established feature of the business rates system. It operated the list that we are considering not only from 2005 onwards, but from 2000 onwards and before that. In 2004-05 alone, in the previous ratings list period, more than 1,500 properties were put on the list for the first time, with significant backdated liabilities in precisely the same way as the ports, about which the hon. Member for Bromley and Chislehurst and my hon. Friends are rightly concerned.

However, the concentrated number of companies in that position as a result of the Valuation Office Agency's ports review is special. Let me make it clear that the ports review was not a change in the operation of the system or a change in the law. The VOA was doing its job and pursuing its legal duty to keep the ratings list up to date and accurate. That is why no impact assessment was undertaken beforehand. The ports review did not even constitute a change in the way in which the business rates system applied to businesses in ports.

My hon. Friends understand, although the hon. Member for Bromley and Chislehurst does not, that prescription was a method—a formula—for setting the rateable value of the ports operators, not the businesses in the ports. Before the ports review, 1,643 businesses in ports were separately listed and separately liable to pay business rates. In other words, three times as many ports-based businesses paid business rates on their account before the ports review than consequently paid them afterwards. In some cases, properties, which have been added and the addition of which is being contested, belong to businesses that already paid separately for other properties, sometimes in the same port.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

Given that it was the right hon. Gentleman's Government who extended the period of prescription until 2005 to enable the review to take place, has he ever had a proper explanation from the Valuation Office Agency of why it did not commence that review in a timely manner that was commensurate with the duty that he rightly said it has to have an accurate and up-to-date list, which it manifestly did not?

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

There were three flaws in the way that the VOA conducted its ports review. First, it was clear before the Southampton container ports case was settled that a significant number of properties in ports should have been separately listed and paying business rates for some time, but were not doing so. Only after that was the legal position clear. I understand why that happened, but in hindsight it would have been better if the VOA had done some work before then. Secondly, the communication was not good enough, which is a point that the VOA's chief executive has conceded to Committees of this House. Thirdly—this, too, has been conceded by the VOA—more investigative work should have been done in conducting the ports review.

Things have taken longer than they should have. That is partly why we are in this position now, rather than earlier in the list period. However, none of that changes the principle or the argument that I have just set out to the House, which is that the ports review did not change the way in which the system operates, the policy or the legal basis, and it did not even change the application of the business rates system to businesses based in the ports.

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Several hon. Members:

rose —

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I will give way first to Mr. Brazier, then to my hon. Friend Shona McIsaac and finally to Julia Goldsworthy. Then I will conclude my arguments, because I want to make some points that will allow the hon. Member for Bromley and Chislehurst to see why in principle I disagree so fundamentally with what he has proposed.

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Photo of Julian Brazier Julian Brazier Shadow Minister (Transport)

The Minister said that there were many examples in previous valuations where businesses outside ports found themselves with large backdated bills. However, the crucial question is: how many such businesses have there been and in what other sectors have people who had no idea that they would be eligible for separate rates suddenly been faced with an enormous four-year backdated bill?

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

In every case that I have cited, it may have been the case that the business concerned could not have anticipated or prepared for what happened. In the case of the ports review, however, I simply do not accept that, for all the ports businesses now affected, what happened came completely out of the blue. Some of those businesses have highly paid advisers and some were paying separate business rates on properties that they were already operating. It is not the case that what happened hit those businesses totally unawares. That may have been the case for some, but it cannot be the case for all.

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Photo of Shona McIsaac Shona McIsaac Labour, Cleethorpes

I thank my right hon. Friend for giving way and for the many, many meetings that he has had with Labour Members. I would be curious to know how many meetings he has had with Opposition Members. For businesses operating in ports, is not the crux of the matter the fact that they believe that they will be paying double? They are not arguing about whether they have that liability; rather, they are arguing about the fact that they have already paid an amount to the operators through the cumulo system to cover business rates. Those businesses feel that it is grossly unfair that they are paying double. All the measures in the regulations we are debating are fine, but they do not address that point.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

My hon. Friend is absolutely right—unsurprisingly, because she champions her businesses and her constituency very powerfully. There is a strong perceived unfairness about the situation in which those businesses now find themselves, and I understand that. They argue that they have made a contribution to their business rates through their tenancy fees or the cumulo system.

The problem is that it is hard to pin that down, and there is no specific evidence in the contractual tenancy agreements. Where there is, the port operator would have to deal with that directly with the tenant. However, the terms of the tenancy arrangement and the fees that are paid are contractual matters and not, I am afraid, something that I or the Government can step in over. However, I have directly encouraged Associated British Ports and Peel Ports to take a sensible and practical approach to their tenants, because they have no interest in those tenants not being able to continue in business.

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Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government

Is it not the case that the problem for those businesses was not their future liabilities or any objection to the standardisation of the system, but the fact that they did not have the full facts available when they needed them most? That made it very difficult for them to predict the impact of the measure on their business. Is not that the nub of the problem? The measure has been retrospectively applied, and they did not have the information that they needed to prepare themselves.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

In a way, this is not unique in the way in which the business rates system operates. We do our best but, with the five-yearly revaluation, for example, businesses have to recalibrate their cash-flow forecasts and their business operations to deal with that.

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Photo of Frank Field Frank Field Labour, Birkenhead

My right hon. Friend is promising to take apart the Opposition's argument, and we shall obviously delight in that, but I would like him to address a point that has come up in a number of debates. The Government have moved their position by saying that people will be able to pay this liability over eight years, but Members on both sides of the House have expressed concern that, if the rate demand is sent out in a single bill—albeit one that is to be paid over eight years—it could result in some companies ceasing to be solvent to continue trading. Does my right hon. Friend have the power to instruct that those bills should not be sent out to a business as a single sum, and that instead, the first bill, for example, could be the first of eight equal parts? In that way, the total amount need not appear on the business's balance sheet, and possibly tip it into insolvency.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

These regulations and provisions are already in place, and 67 companies have agreed a schedule of payments that will allow them to spread their backdated liabilities over up to eight years. The insolvency question, for those companies, will involve a combination of having to book the liability—the outcome will, in part, depend on their existing assets and liabilities—and of the judgment that the directors take on their ability to trade through the period and meet the liabilities when they become due. That is the advantage of being able to identify those liabilities and see when they will fall due, and to spread them so that they are due not as one hit—as would happen without these regulations—but in instalments over eight years. That is an unprecedented period; it gives businesses a generous amount of time to pay.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

The hon. Gentleman has been sitting through the debate and he is very keen to intervene. I shall give way to him, then I must make some progress.

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Photo of John Howell John Howell Conservative, Henley

I thank the Minister for his generosity and characteristic humour in allowing me to intervene on him. Will he explain the differences in the estimates of the total backdated liabilities for, say, 2009-10? In the evidence and options paper, table 1 gives a figure of £112 million, but table 5 gives a figure of £341 million. The difference between the two figures has been brushed away as being due to a difference in assumptions, but we are never told what the assumptions are. Will the Minister now tell us?

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I am so glad that I gave way to the hon. Gentleman, because I was about to discuss the figures.

I have placed in the Library of the House today a table of the latest figures relating to the impact of the ports review, broken down by port. The figures show the pre-review and post-review rateable values of the ports and of the businesses, and the number of businesses in each port. They also show that the review has had different impacts in different ports, and that it has had a different impact on the port operators and the port occupiers. The overall impact on the cumulative rateable value of ports in England has been to increase the rateable value from £201 million to £211 million.

Within that cumulative impact, however, there have been two main changes. The first is a reduction in the port operators' rateable values. The second is an increase in the number of separately assessed properties. As a result, in England, the port operators' rateable value has been reduced by about £44 million annually, which therefore reduces rates liability. Across England, the rateable value of Associated British Ports alone has reduced from £41 million to £21 million as a result of the ports review. In Hull, the rateable value of the port is now one third of what it was before the review: it was £9 million; it is now £3 million. In Grimsby, that value less than half what it was—down from £1.35 million to £500,000. In Liverpool, it is less than half, too—from £16.5 million to £6.8 million.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

As it happens, the rateable value of the port operator in Immingham has been cut by a third—from £17.9 million to £11 million.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

If the hon. Gentleman will allow me to continue, the real impact has been on businesses, with 605 newly assessed properties having a rating assessment backdated to 1 April 2005. It is those newly assessed port occupiers, with properties at a rateable value of about £54 million that face the backdated liability of more than £70 million. Although there are some significant issues, problems and pressures faced by businesses in port when they get this unexpected and significant backdated liability, let me explain that the impact is not universal.

Although some businesses may certainly be struggling, local authorities report that £25 million—in other words, a third of this backdated liability—has already been paid in full. One hundred and forty-six businesses—in other words, one in four of those affected by backdated bills—have already settled in full. A further one in seven of the remainder—the 67 properties and businesses I mentioned earlier—have now entered into the schedule of payments that is giving them real help through what is a tough period for them. That schedule has allowed them to spread the payments and manage the cash-flow consequences in a way that would be stopped dead in its tracks— it would be blocked—if the motion proposed by the Conservatives were to be passed.

Let me turn to the central question of waiving the tax liability, because a number of different solutions have been proposed by the ports lobbyists, but they all add up to the same thing. The intended outcome in each case would be to waive what has now been established—legally established—as a tax liability. Let me tackle that proposal directly. Despite the delays and problems in the ports review, I do not accept the principle that once it has been properly established that a business is legally liable to pay tax, it should simply be waived and the company let off. We do not do that in other circumstances; we do not do it with other business taxes. [Interruption.] Mr. Jackson says that the Chancellor announced a waiving of the tax liability yesterday, but the hon. Gentleman completely misses the point. I have a precise argument, and if he bears with me, he will get it.

Once facts and a tax liability are known, they simply cannot be disregarded. The Government do not do that with any business tax. If the Government accepted the principle of removing a backdated rates liability, it would require primary legislation. In other words, Ministers would have to ask Parliament to give selective advantage to a specific group of businesses. [Interruption.] If the hon. Member for Bromley and Chislehurst will allow me—

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Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. I am sorry to interrupt the right hon. Gentleman, but it would be helpful if the debate could continue without all the sedentary interruptions that have characterised it so far. They were started, I fear, by Mr. Field, who was a little short of his usual impeccable standard. In the short time we have left, it would be helpful if we heard one voice at a time.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

Thank you, Mr. Deputy Speaker.

If we were to accept this principle and Parliament gave us those powers, what would that mean? It would turn what some argue at the moment is a perceived and arguable disadvantage of a backdated business rate—I have to say that many more businesses are now and have previously been affected by such backdating—into an actual disadvantage to those who have paid their business rates in those years. In other words, we would create a certain state aid and a certain breach of fair competition and fair taxation principles.

I have to tell the Conservative Front-Bench team that I find it extraordinary that the Leader of the Opposition has fallen for that line, tabled the motion and promised to waive the tax liability. It must be asked whose special interests will be next in line for a tax let-off under the Tories. It must also be asked who will be next to bang on the door of the shadow Chancellor, waving a tax bill and demanding special treatment.

Let me ask the House a question. In supporting this motion, what is the shadow Chancellor saying to the other companies—more than twice as many, including some in the ports—that have been paying their business rate bills when their neighbours and competitors would be let off this tax liability? What does he say to the companies—many times the number—that found themselves in the same position in previous years, but have accepted the system and paid what is legally due to the public purse? To do otherwise undermines the basis of the business rate system. As with other tax systems, everyone is assessed according to rules that are applied consistently and without favour, whether the administration of the system is good, bad or indifferent.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I will finish making this point, if I may, but then I will give way to my hon. Friend, because he has been uncharacteristically patient up to now.

The problems caused by the ports review in this concentrated group of companies do not alter the principle that 605 newly listed firms are being taxed and treated on the same basis as other firms both in and outside the ports.

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Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby

As we are throwing out all these rhetorical questions, will the Government answer a question? Why are businesses on the docks being asked to pay rates twice—once through the cumulo, and once through the retrospective assessment?

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I have already dealt with that point. I have some sympathy with that perception of unfairness, but the argument must be taken up with the port operators with which the companies have the tenancy agreements and to which they pay the cumulo. I have asked about this consistently over the past nine months, and I have seen very little evidence of any contractual confirmation that the business rates are paid explicitly as part of the cumulo. Therein lies something of a problem for my hon. Friend and some of the companies in his constituency.

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Photo of Ian Cawsey Ian Cawsey Labour, Brigg and Goole

I know that my right hon. Friend is aware of a letter sent by Associated British Ports to companies in its ports, saying that it will have to increase the cumulo because of the increase in business rates. Surely that reveals an obvious connection. Surely it shows that the business rate is included in the cumulo.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

My hon. Friend is right: I have seen the letter, because he made sure that I would see it. I am sure that the companies in his constituency will look at that information very closely, and will consult some of their professional advisers on where it places them in relation to ABP.

I have a copy of the letter from ABP, which, as a result of the 2005 revaluation, told its occupiers

"it will inevitably mean that... some of the increase will... be passed on to our customers".

As I said to my hon. Friend Shona McIsaac, that is a matter that they must take up, rightfully and directly, with the port operators.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I am coming to the end of my speech. The hon. Member for Bromley and Chislehurst had a fair crack of the whip.

In the current economic circumstances, given the pressure on businesses across the board, what is clear—and we understand it only too well—is that significant and unexpected backdated rates liabilities of this kind will create difficulties for many, although not all, businesses. That is why we have introduced a scheme to help all businesses, including some port occupiers, to meet such unexpected and significant backdated liabilities, and to pay over a period of eight years. That is an unprecedentedly long period.

This is, in principle, a deferment of the tax liability, not a waiving or a removal of it. It is, in principle, precisely what my right hon. Friend the Chancellor announced in the House yesterday afternoon would apply to the increase in business rates that businesses face from the multiplier or the ending of the transitional relief: a deferring but not a removal of that tax liability. Businesses may benefit from up to around £600 million by the deferment announced by my right hon. Friend. It is consistent in principle and practice with his announcement in the pre-Budget report that Her Majesty's Revenue and Customs would be flexible over the period in which other business taxes—corporation tax, VAT and payroll taxes—had to be paid. Over 100,000 firms have now taken advantage of that. Almost £1.8 billion has been deferred to help them to manage their cash flow and business pressures during this difficult period.

To summarise, we should expect businesses to pay the tax that is due, but in the current economic circumstances we must and can support businesses, especially where they have this unexpected or significant backdated liability. That is precisely what we are doing. We are doing it to an unprecedented extent by allowing scheduling over eight years for the firms that are affected. Businesses are already taking advantage of that support. The House would be wrong to take that away this afternoon.

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Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government 6:00 pm, 1st April 2009

It struck me while listening to the previous debate that, although the subject was a serious one, it was entirely appropriate to hold it on April fool's day. Listening to this debate, I fear that it will be groundhog day, because we are hearing a repetition of powerful arguments, but the same response from Ministers that we heard in the other place and in previous Adjournment debates on the issue.

I do not intend to speak for too long because I am aware that other hon. Members wish to raise issues relating to how the measure will impact on their constituencies. Robert Neill has been through the chronology and provided some examples of how businesses will be affected. I do not intend to repeat that, but I reiterate that the Liberal Democrats welcome the principle of simplifying the business rate system and moving to a standardised system. We think that there needs to be consistency across different businesses. The previous system was very complicated. It needed to be simplified, but the whole process has been nothing but a complete shambles. To people who are not deeply involved in the intricacies of the matter, the arguments will sound complex. My concern is that the Minister is hiding behind that complexity to defend the indefensible.

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Photo of Stewart Jackson Stewart Jackson Shadow Minister (Communities and Local Government)

I am sorry that the Minister did not feel compelled to allow me to intervene earlier, but does the hon. Lady agree that the principle and precedent of fiscal correction were established over the 10p tax rate, notwithstanding the liability that businesses have? Indeed, the Minister sidestepped the direct question that my hon. Friend Robert Neill put to him. A non-fatal amendment could be tabled to the Local Democracy, Economic Development and Construction Bill or a Finance Bill in the future.

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Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government

There will be opportunities to right this wrong, but it seems that the Minister is unwilling to do so. That is deeply depressing, to be frank. As I said, this is a complex issue, but for the people who are affected it is simple: they face a tax bill for previous years for which they did not know they were liable, so they have not been expecting it. The burden was imposed after the terms and conditions with the operator had been agreed and after payment had been made. For many businesses, the impact is so devastating that they may face insolvency.

The Minister acknowledged that, which makes me wonder. The Minister's response is that these are well-established principles, we cannot waive backdated liabilities, and as all businesses are aware that the scheme can operate in that way they should plan for it. If so, why are we debating regulations now to try to mitigate some of the problems? Why were such measures not included in the original legislation? If the Government accept that this is part and parcel of the scheme, surely they should have made provision for it at the time. Businesses are being hit with this problem, which is impacting on jobs and on the local economy, at the very time when support is needed more than anything else.

The Minister has openly admitted that these problems have predominantly been caused by the failure of the Valuation Office Agency to do its job properly. These proposals today essentially seek to mitigate the impact of those failings. They do not, however, fundamentally right the wrong. Businesses were unwitting victims of the Valuation Office Agency's complete incompetence.

It is not only the Opposition parties that are attacking the policy. Suggestions to right the wrong were made by the Treasury Committee, which also clearly identified the causes of the problem. It identified low morale in the VOA, which had an impact on service delivery. It also identified poor communications with the businesses affected. While the operators might have been aware that the changes were in the offing, it was a bolt from the blue for many of the businesses affected.

The Treasury Committee stated:

"Port businesses are facing backdated charges because the Valuation Office Agency failed to identify discrepancies in the ratings at the time of the 2005 revaluation. This mistake was compounded by the VOA's failure to communicate changes promptly and effectively with Port businesses."

If the VOA had done its job when it should have done it, we would not be having this debate, because the retrospective taxes would not have been imposed. Businesses are upset that they are taking the hit for the failure of the Government agency.

The Treasury Committee was also constructive in its recommendations. It asked the Government to take steps to ensure that payments already made to the port operators were taken into account—a point already made by hon. Members. However, the Minister refuses to accept that that is an issue, even though the Treasury Committee felt that it could be rectified. The Committee also suggested that the Government should

"take steps to mitigate further the difficult position faced by port businesses. Consideration should be given to the proposal to maintain the rateable values of premises in statutory docks and harbours at the levels published in the April 2005 rating lists until the new ratings list is published in April 2010."

That is exactly what the Liberal Democrats have said. We have said that we will co-operate if primary legislation is required, but the Minister appears to have ruled that out. What consideration was given to that option? Was it explored or was it ruled out without due consideration?

The information that the Department provided to the Treasury Committee was disappointing. On the issue of the contributions that port occupiers had already paid to the port operations, the Minister said again today that as far as the Government are concerned, the information is only ambiguous. However, those people who have spoken to businesses directly affected say that their understanding is that part of the terms and conditions included covering the business rates that operators were paying.

I wish that the Minister had provided more information on what the Department had done to seek the information. It is clear that some hon. Members have provided the Department with the information, but I wonder whether there is more out there, if the will existed to try to find it.

The Government continually emphasise their inability to waive this tax liability. For example, in the debate secured by Mr. Mitchell, the Minister said:

"We cannot now act as if we do not have the full facts or as if they do not have a liability that is now clearly established in law. Therefore, it is not straightforward or possible simply to undo what has been done, or to hold off until 2010 when the next ratings list comes into effect."—[ Hansard, 28 January 2009; Vol. 487, c. 124WH.]

The Minister spoke today about valuation and its retrospective nature. The point is that these businesses were not paying business rates, so they did not need to factor in retrospective elements. They were not clear what their liability would be in the future. If they did not know that they would be liable for business rates in the future, how were they supposed to plan for any retrospective liability? They did not have the full facts. They may have them now, but they did not have them at the time for which the Government seek to tax them.

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Photo of Julian Brazier Julian Brazier Shadow Minister (Transport)

Crucially, those facts were not available to those businesses when many of them negotiated long-term rental contracts. A firm at Immingham told me that it had negotiated a 30-year contract in 2005, on the basis of the old rating agreement.

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Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government

The hon. Gentleman is exactly right. The problem is not that the facts were not available when those long-term decisions were made; the facts did not exist at the time.

As I was preparing for the debate, I was also dealing with some casework related to the tax credits system. The Minister said repeatedly that there is no ability to waive a tax liability for businesses, but as I was dealing with that casework, I wondered whether some principles could apply to both. When people apply for tax credits, it is made very clear to them that they must tell Revenue and Customs if their circumstances change; otherwise they will be liable for the recovery of overpayments. However, the VOA did not tell businesses that their taxation circumstances would change, let alone that they would be judged retrospectively. So, surely, the Government are responsible for the loss of their own income, because they failed to act in a timely way.

The second principle with which tax credits are applied is that, if overpayments are caused by HMRC error, people are not required to pay. The delay in imposing this liability is entirely due to the VOA's incompetence, so I do not understand why similar principles cannot apply. It is understandable that businesses are completely bewildered. They are expected to deal with a completely appalling process, while Departments proceed as though nothing has happened and everything has gone completely smoothly.

Finally, local authorities have been placed in an invidious position. They have a statutory duty to send out bills and collect revenue, but they have a responsibility to recognise and support their local economies. They play a key role in recognising the importance of ports to the local and national economy. They have a role in promoting the economic well-being of their areas, and many of them feel that these measures will undermine that economic well-being. The statutory instrument aims to make the burden more manageable for those businesses. It is half an apology, but it does not seek to right the wrongs that have resulted from this appalling process.

It is entirely appropriate that we have had another opportunity to debate these measures, particularly on the Floor of the House. Like the hon. Member for Bromley and Chislehurst, I do not want to vote against the regulations, because that would leave ports and businesses in an worse position, but the Government need to introduce proposals to try to right these terrible wrongs.

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Photo of Austin Mitchell Austin Mitchell Labour, Great Grimsby 6:12 pm, 1st April 2009

I shall be brief, but I must express my incredible disappointment with Conservative Opposition's position. They are

"Willing to wound, and yet afraid to strike".

They are going around the country encouraging port operators to resist these payments, yet when they need to show the courage of their convictions, they remain silent. Here is a chance to put a spanner in the works; they will not take it.

I must express my disappointment with the Government's position, which is one of impotence as a system of government. They are impotent, they tell us, to stop the retrospective increase, however unjust and disastrous it will be. They are impotent to do what we should do, which is to call off this exercise and do the assessment in 2010. They are also impotent to get back the money paid to ABP. That money is, in fact, the rateable contributions of the port operators. That is impotence turned into a chorus of castrati.

On the substantive point made by my right hon. Friend the Minister, who has been patient in listening to our arguments but inflexible in responding to them, it might well be a pistol to our own heads to vote to annul the regulations, but the Government have left us no alternative. I want to vote to annul them. I ask him what else we can do. It would force the businesses to pay now, which would be absolutely disastrous, but it would also force the Government to think again. If they are faced with businesses going bankrupt and rising unemployment in the ports, because of their inability to remove the retrospective charge, such action would force them to think again, and I hope that it would force them to take more sensible action than we have seen so far.

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Photo of Robert Syms Robert Syms Conservative, Poole 6:14 pm, 1st April 2009

Ports are vitally important, both for the people who work in them and for the community businesses that feed off them. The port of Poole is successful, but that takes very hard work. As we have heard, the problem with the proposal is that it is retrospective legislation that will undermine the viability of some businesses.

Many businesses felt that they were already making a contribution through the agreements reached with their ports. I visited the port of Poole last Friday, and it is clear that it is being affected by the recession. Fewer passengers are using the ferry, and the number of haulage movements, both from the continent and from our side of the channel, has fallen by between 25 and 30 per cent. Over the next few years, businesses are going to find it very hard to carry this additional burden.

It is a pity that the arguments made by hon. Members of all parties have not been taken on board. I know that the Government are trying to do what they can by spreading the payment over eight years, but I am not sure that that is the solution to a very difficult problem. Ports are very competitive places to do business. Some companies will move, jobs will be lost and the viability of some firms will be threatened. The measure will make nonsense of the tax system, if it kills the golden goose.

I commend my hon. Friend Robert Neill for praying against the order, as that has given us an opportunity to discuss these matters. I fear that the problem will recur again and again over the next three or four years, as companies struggle to pay their major liabilities.

As I have said, Poole is a successful port, but that success comes only through hard work. This added burden will have a major impact on businesses both large and small that provide very important services for those who use the port.

Because so many hon. Members want to speak in this debate, I do not intend to say much more than that. I therefore enter my protest against this proposal, on behalf of my constituents and the businesses operating out of Poole. They feel that they are being very hard done by, and I wish that more could be done to assist them in these very difficult times.

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Photo of Louise Ellman Louise Ellman Chair, Transport Committee 6:17 pm, 1st April 2009

I have no doubt at all about the extent of the problems being experienced by many businesses in ports as a result of the imposition of large, backdated business rates. Those are bills that businesses could not have anticipated.

The problems are exacerbated by the general economic situation, and my concern is that the proposal will pose a threat to businesses, jobs and regeneration. Certainly, it is easy to see that the port of Liverpool's spectacular success in recent times has been linked very closely to the regeneration of the city itself. I am extremely disturbed by the fact that the order, together with the economic situation, could threaten that regeneration.

I support the findings of the Treasury Committee, which I believe should be recognised. I am very sorry that the Government do not feel able to implement the recommendations now, even though some recognition should be given to their attempts to do something about the situation. The proposals that we are considering this evening are not sufficient to deal with the problem, and the issue of liabilities on company balance sheets is a matter of very grave concern.

While I believe that the House should recognise that the proposals are intended to assist port businesses, I know that they will not resolve the problem. For that reason, I ask my right hon. Friend the Minister and his colleagues to continue to give this very important matter their consideration. If it cannot be resolved today, I hope that it can be resolved in the future.

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Photo of Julian Brazier Julian Brazier Shadow Minister (Transport) 6:19 pm, 1st April 2009

The Minister's speech was extraordinary. He spent the first half telling us, "This is how other businesses up and down the country are handled, and businesses in ports should expect to be handled like every other business." However, towards the end of his speech he admitted that the arrangement had involved a large transfer from port rating companies, many of whom, he concedes, knew absolutely nothing about the matter, to the port owners, many of whom are in direct competition with their tenants. The Government have their own guidelines on retrospection, and the Minister must know that he has broken them. They were set out in Hansard on 9 October 2008 at column 802W.

I ask the House to envisage a warehouse in a port. Such a warehouse could be in one of at least four different situations, none of which have anything to do with its operations. First, it may be owned by the port owner, in which case it is exempt from the new arrangements. The second possibility—I have seen two warehouses side by side run on different bases—is that it could be owned by an unfortunate tenant who has just been slapped with an enormous, four-year, backdated bill. Thirdly, it could be owned by a tenant in one of the ports—there are a number of them—that the Valuation Office Agency has managed to miss in its exercise. The fourth and final possibility is that the warehouse could be in a port where the owner got in clever lawyers early on, arranged a shared arrangement between more than one tenant, and so was able to avoid the problem. To suggest that the status quo has tidied matters up and brought the arrangements in ports in line with those in the rest of the country is just fantasy.

The truth is that the arrangements are a muddle. They have been condemned by the Treasury Committee and in a non-fatal motion in another place. In the real world, the arrangements are progressively destroying large numbers of small businesses: Thomas Nichols Brown has gone bust in Liverpool; DFDS, a huge Danish shipping company, made 71 people redundant in January; Stanton Grove on the Mersey has a huge bill of more than £2 million; and Brittany Ferries in Plymouth, Poole—the constituency of my hon. Friend Mr. Syms—and Portsmouth faces a bill of £500,000. A whole string of organisations, some of which could afford to pay the bills, have simply said that they will pull out of the UK. To add insult to injury, in contradiction to the original announcement, the Minister's office has confirmed that if a tenant goes bust and that tenant's property reverts to the port owner, the port owner will not be faced with an empty property rates bill; the property will revert back to the original arrangement. How fair is that?

There are other people who want to speak, so I shall end with one last example. David Johnson of RMS Group Holdings Ltd—a man who deserves to be praised for the vigorous way in which he has spoken up time and again for his company and for other people like him—says that his company faces a 1,700 per cent. rate increase as well as four years' backdating. That is no way to run a tax system, and no way to run a country.

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Photo of Ian Cawsey Ian Cawsey Labour, Brigg and Goole 6:23 pm, 1st April 2009

I, too, will be brief, given the hour and the amount of time left in the debate. I want to concentrate on one aspect of the issue. I was profoundly depressed not only by today's debate, but by the amount of time that we have spent going round the same track again and again. The matter was first raised with me last year by Peter Aarinson, who runs Danbrit Shipping in Goole, in my constituency. I rang my right hon. Friend the Minister for Local Government in his constituency the very same day, which is when this all began.

We are all told things by constituents from time to time, and we know that not everything is as it appears when we are first told it. When I was first told about the situation, my reaction was that either there was more to the matter than I was being told, or the situation was so obviously wrong that something would be done to correct it. It did not enter my naive little head last year that months later, it would all be confirmed, and not enough would be done to resolve the situation.

I want to make a point about double taxation, because however we wrap it up, that is at the nub of the argument. The people concerned have been paying business rates to their port operators, and the letter that I intervened about earlier in the debate showed that clearly. One cannot go back to a company later and say, "You've got to pay again, because we've given the money back to the people from whom we took it in the first place."

One or two of us had a meeting this morning with some Treasury officials to discuss the order, which I said is like lobbing a grenade into a whole area of business, running away and waiting to see what happens. Businesses cannot be left in that position. I have met ABP, which is the port operator for my area. It has no intention of giving back any of the money. It says that although it is true that in Goole, my constituency, they have received a lot of money back, the liability of ABP across the country has gone up, so it does not see that it has gained. That may be true in certain ports, such as the one in my constituency, but the money is not going to flow back.

If the Minister and officials think the way to resolve the matter is to say, "It's a private matter which companies will have to sort out themselves", that is not good enough. They should be doing something to bring the parties together and thrash it out. To me, it would be much simpler for the Government to say that the liability will start in 2010, in which case everybody would know where they are. Businesses could take that into account in their business plans and then move on to have successful and progressive businesses for the future.

In his remarks to the House my right hon. Friend the Minister made great play of the fact that he is offering assistance, which we appreciate. He went on to say that that is unprecedented, which we appreciate as well. He then said that there is no other way to deal with taxation. Well, if we are going to do something unprecedented, we might as well do the correct bit of unprecedented work. That means taking away the liability for now, accepting that those businesses have paid and setting their liability for future business years.

I shall finish on this point, as others wish to speak. Just before I came in for the debate, I was in a meeting with other Ministers about another issue. We were discussing copyright term extension, which is an issue for another day—the subject is complex and the legalities are difficult. At the end of that meeting, a Minister said to me, "You know, Ian, it's not just about legality. It's about morality." That could be applied to the present debate. Those businesses have been let down terribly by the system. It is a great source of despair to me that it is my Government who have done that, but they have, and now they are obliged to put it right.

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Photo of John Howell John Howell Conservative, Henley 6:27 pm, 1st April 2009

I shall make three brief points. First, I find it almost unbelievable that the attitude of the Government to the entire issue is that something in which they have had no part has been done to them and that they have no control over the Valuation Office Agency. That cuts no ice with companies in ports. As a spokesman for one of them, Peel Ports, told the Liverpool Daily Post:

"This is a government ratings revaluation which affects all the ports".

My second point is on the impact assessment. I heard what the Minister said about why there was no impact assessment, but under pressure from the Opposition, he has, as the information that he gave us in the course of the debate revealed, brought out some of the points that we would expect to see in an impact assessment. The trouble is that bringing them out in this way does not provide the context to enable us to judge them, so I am still left with questions. How many companies does he estimate will go insolvent as a result of the measure? Does he have an estimate of how many are likely to move out of the UK, which is a real possibility? As the Humber Dock Rating Group spokesman said, making a terrible pun:

"There is a question now among the shipping industry whether they should re-sink their investments in ports in the UK, or whether they should look to move as much of their business as they can off-shore".

Thirdly, the impact on unemployment is relevant. Returning to the intervention that the Minister was kind enough to let me make, I still find it difficult to believe that there is a threefold difference in the estimate of the liabilities between one part of the evidence base and the other. I understand what the Minister has said about what subsequently happened, but at the time the evidence was put together, there was still that wide gap. It was put down to assumptions. Those should have been, and probably were, known, and we should have been told. That all smacks of the Health Committee's criticism that the Government simply rush into these things without proper ideas of success criteria, without any design of policy and without any assessment of the impact.

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Photo of Shona McIsaac Shona McIsaac Labour, Cleethorpes 6:30 pm, 1st April 2009

It is with sadness and regret that I rise to speak in this debate. Like my hon. Friend Mr. Cawsey, for many months I have been devoting an enormous amount of time to trying to find a solution to this issue. We have had a great many meetings with the Minister for Local Government and other Ministers. This morning, we had an eleventh-hour meeting with the Exchequer Secretary to the Treasury. We put our views to her frankly and bluntly, and she said that she would consult colleagues about the ongoing issue to see whether something further could be done after the passing of this motion tonight.

Nobody is denying that allowing the rates to be spread over an eight-year period will help some people. However, that is not the entire solution. I hope that my right hon. Friend the Minister for Local Government will also agree to meet colleagues to see whether anything further can be done. In virtually every meeting that we have had with Ministers, and with the Prime Minister, everybody seems to say that it is another Department's responsibility. When we meet Treasury Ministers, they say, "Sorry—it is the responsibility of the Department for Communities and Local Government,"; when we go to Ministers from that Department, they tell us that we have to go back to the Treasury. I would like all Ministers with responsibility for the issue to get into one room and meet all Members whose constituents are affected.

The crux of the matter is the double payment and the double taxation. Yes, we have heard all about how we got here and about the Valuation Office Agency and, yes, we have this motion tonight. However, nobody has yet come up with a good way forward in respect of the double taxation. The Minister has kept saying that companies in the ports had been paying and that it would not be fair on the companies that had been paying if others were treated differently, but the fact is that the others were paying—they were paying through the money that they were giving the operators. Associated British Ports is the operator at the port of Immingham in my constituency. The companies there firmly believe that they have paid their business rates directly to ABP throughout the entire period. We have seen the letters demonstrating that the money that they paid ABP included business rates.

The contract may not have been beautifully legally put together, but let us face it, we are dealing with dockers, not the be-wigged and be-gowned folk down in Lincoln's Inn. Yes, the agreements can be somewhat rough around the edges, but the companies had the verbal agreements and the letters show that when they were paying that money to ABP, business rates were included. The companies have already paid, and that is why they feel that it is so unfair that they are being asked to pay again.

Why are we fighting in the Chamber tonight? It is because the outcome of this matter will be job losses. I am already seeing them in the port of Immingham and in other companies as well. As has been mentioned tonight, DFDS Tor Line has issued redundancy notices. More will come. I have discussed the issue with many companies; they say that the only way in which they can reduce overheads is to lay people off and put people out of work.

The type of areas that we represent—around Goole, Immingham and Grimsby, for example—are isolated, discrete communities. Any job losses have a disproportionate impact on them, because people do not have a hinterland that enables them to travel to find any other work. This will have a devastating effect on our communities, and for that reason I hope that my right hon. Friend on the Front Bench will see whether something else can be done. It has been suggested tonight—I am in agreement with this—that we should start again in 2010. Yes, that will require primary legislation, but what the hell are we here for if not to legislate?

The Opposition parties have said that they will give any legislation on this subject that is brought forward a fair wind, so I hope that for the sake of jobs in our communities my right hon. Friend the Minister will reconsider this issue.

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Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party 6:35 pm, 1st April 2009

I shall be brief, to give the Minister a little time. This has been a lively and well-informed debate, albeit a short one, and I congratulate all hon. Members who have taken part.

I earnestly hope that the Minister will listen to Shona McIsaac. The whole purpose of this debate is to give the Government time to think again. Mr. Mitchell has not tempted us to press the button for the nuclear option—I understand, rhetorically, why he suggested it, but if I were a business caught up in the middle of the nuclear explosion I would not necessarily want that to be the outcome.

There is an opportunity, which I shall restate for the final time for the Minister. We will do everything that we can to assist any primary legislation that can put right this wrong. If Parliament is not here to legislate, what is it here for? If Parliament is not here to right an injustice, what is it here for?

The Prime Minister, we are informed, knows about this. It will seem remarkably selective if, rather than saving the ports in this country, the Prime Minister decides that he is too busy saving some other global expedition. I do not mean that churlishly. I hope that the Prime Minister really does know about this matter. If he takes on board the points that have been made, he will go to the people who are the real blockage in the Treasury and will ensure that leeway is given so that the Minister can come back with a sensible solution. If that is done, we will do everything to assist. If it is not done, the buck has to stop at the very top.

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Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government) 6:37 pm, 1st April 2009

With the leave of the House, I want to respond in brief to some points. I fear that by being blunt I might also disappoint.

May I say to my hon. Friend Shona McIsaac that it is not the case that Ministers have somehow passed responsibility from post to post. At each stage, I have accepted responsibility for the position that we are in. I have accepted responsibility for the measures that we have proposed to take. I have not ducked the arguments—whether that was in meetings with businesses in Hull, when I gave evidence to the Select Committee on the Treasury, in meetings with my hon. Friend or in debates in this House. I have had more discussions on this matter than on any other subject in recent months.

Let me tell my hon. Friend Mr. Cawsey that we have acted, and have done so in an unprecedented way. We are prepared to defer the backdated liabilities for an unprecedented period of eight years to allow payments to be spread. If my hon. Friend feels that we are going around the same course and we are hearing the same arguments, that is the case. We are doing that because, to put it bluntly, we have heard the arguments and listened carefully to them, but we have not accepted them. We have not accepted that the port businesses are in a unique position—he is obviously as concerned about their position as we are—or that they are a unique case. We have accepted that they have problems and that they are under pressure, particularly when the economic downturn is putting pressure on all businesses. That is why we have been prepared to give this help in order to help them manage their way through.

The impact of the ports review, as I have said, has not been universal. Despite the individual cases that Members cited, a third of the backdated liabilities in tax have already been paid in full. One in four of the businesses affected in the same way have settled their bills. A significant number of the remainder are taking advantage of the payment scheme that we have put in place, which the Conservative motion would remove at a stroke. That scheme gives a flexibility to pay. It defers the liability and does not remove it. It is entirely consistent with what we have been prepared to do on other business taxes because, as we have said, we are prepared to take action where we can to help businesses manage their way through this difficult recession. That includes the businesses in the ports hit by these significant and unexpected backdated business rate tax bills.

Question put.

The House proceeded to a Division.

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The House having divided: Ayes 3, Noes 289.

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Division number 95 Business of the House — Rating and Valuation (S.I., 2009, No. 204)

Aye: 3 MPs

No: 288 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

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Question accordingly negatived.

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Photo of Maria Miller Maria Miller Shadow Minister (Children, Young People and Families)

On a point of order, Mr. Speaker. I am raising a point of order about the response that the Prime Minister gave today about the Christie hospital and its funds that are frozen as a result of the Icelandic banking crisis. The Prime Minister stated that the bank involved was not regulated by the Financial Services Authority, and in making that statement he may have been unintentionally in error. Both the Christie hospital and Naomi House, which is a hospice that provides services to children in my constituency, have funds with Kaupthing, Singer and Friedlander, which is a UK-incorporated subsidiary and therefore authorised and regulated by the FSA in the same way as any other British bank. Both the Christie hospital and Naomi House have many millions of pounds frozen with that bank and they are rightly concerned that the Prime Minister does not have a better grasp of the situation. I hope that you can bring the matter to the attention of the Prime Minister, Mr. Speaker, perhaps through a statement.

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Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons

I cannot bring that to the attention of the Prime Minister, but the hon. Lady has been able to do so by putting the matter on the record.

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Photo of Christopher Chope Christopher Chope Conservative, Christchurch

On a point of order, Mr. Speaker. You will have noticed that the last Division, which was totally under the control of the Government, took 20 minutes. Do you think that that had anything to do with the fact that I wish to speak on motion 7 on the Order Paper?

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