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Port Business Rates

– in Westminster Hall at 10:59 am on 17th March 2010.

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Photo of Ian Cawsey Ian Cawsey Labour, Brigg and Goole 10:59 am, 17th March 2010

It is a delight to speak under your chairmanship, Mr. Benton. I am grateful for the opportunity to have this short debate on port business rates, but appalled by the fact that it is still necessary to do so. To outline the position quickly, Parliament decided in 2003 that all companies operating at our ports would pay business rates in the same way as other businesses. Previously, some of them had paid an unspecified amount, in lieu of rates, in the fees to their landlords, such as Associated British Ports in Goole. That change was to begin in 2005. That in itself was not particularly controversial, and as I have often said, none of the affected companies that I have spoken to have ever said that they are not willing to pay their taxes in the same way as others. However, none of them, and I would guess none of us, foresaw what was to come.

The Valuation Office Agency failed to assess the companies before 2005, and by the time that the liabilities were beginning to appear, it was 2008 and not only were rate bills due but there was backdating to 2005. During that period, of course, the companies had continued to pay, via their fees to their landlords, and it is accepted by all that there is no legal recourse for the recovery of that money. Indeed, Associated British Ports made it clear in a meeting with me that it had no intention of making any repayments, as its own overall liability had been increased, even if that was not true specifically at Goole.

Companies had to pay rates for a second time for years for which the accounts had been signed off, and there was a new liability to be paid as well. In addition, there was huge concern that the rateable values were wrong and the figures were much too high. That was raised with the Government at the time by several hon. Members who represent ports. I am delighted that my hon. Friend Shona McIsaac is present for the debate, along with David Davis-whom I regard as a friend on these occasions and who continues to share an interest in this matter and, indeed, in the port of Goole, which borders his constituency. Many of us made the point at that time that we were deeply concerned about where the situation was heading.

The Government offered some assistance. Their response was to announce that the historic debt could be paid, interest-free, over an eight-year period and that there would be a fast-track appeal process, through the Valuation Office Agency, when there was doubt whether the rateable value was correct. There is much more I could say about that, but this is a relatively short debate. I want only to say that that offer was not as helpful as it sounds.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

I do not want to delay the hon. Gentleman, who has fought very hard on the issue, but may I ask whether he agrees that the Select Committee on the Treasury was right in its comment on the Government's response? It said:

"We are not impressed by the Government's decision to wash its hands of problems which arise, in part, from its own insensitive handling of port rate revaluation. We recommend that the Government urgently reviews the impact of the revaluation on port occupiers, and publishes its findings."

Photo of Ian Cawsey Ian Cawsey Labour, Brigg and Goole

I agree entirely with the Select Committee. One of the heartening things about the campaign is the fact that it has attracted support from all the main political parties and that cross-party groups, such as the Select Committee, have been firm in advocating that the Government should do more. The fast-track appeal is one relevant instance. In a famous episode of "Yes Minister", Sir Humphrey was trying to explain to the Minister that things should always be given a title that was the exact opposite of what was going to happen; so if something was intended to suppress information, it should be called "Freedom of Information". I can only think that that logic was applied to the fast-track appeal. "Fast" is not the word that springs to mind to describe what some of my local companies have gone through. That case has been made over and again; fast-tracking has not happened.

The eight-year spread does not take away the fact that the debt is held on the books, leaving some companies at least technically insolvent. I realise that Her Majesty's Revenue and Customs has said that it is content if companies can show that they can pay over the period in question, whatever the technical status of their books; but companies still need access to finance to be able to operate, and we are already in a world where that is more difficult. Technical insolvency is not a status that helps. It makes things very difficult.

This is in one respect nothing to do with the situation in question, but it shows how difficult things have been for local companies. There is a system of transitional relief to help in dealing with sudden changes in rates liabilities. To put that into context for Goole, companies tell me that under the old system the rateable value of Goole docks was £298,000. According to the Valuation Office Agency, the valuation was set at £3.1 million in 2008, yet because of the arbitrary high values attached to the individual companies in the 2005 rating list, there was in effect no transitional relief.

All that has been put to Ministers privately and on the record, and as the right hon. Member for Haltemprice and Howden has said, the Treasury Committee added its weight to the concerns that I and other right hon. and hon. Members have raised. We continue to be told that, on top of the measures already taken by the Government, colleagues in the Government continue to monitor the position and to discuss what more can be done. However, in the absence of further action, the clock continues to move on. Councils are required to collect the business rates. Indeed, the financial consequences for council taxpayers if they do not do so are onerous. The figures are quite large, certainly in the case of East Riding of Yorkshire council, so with some reluctance councils have begun the process of making collections.

The result in my constituency is that Scotline has ceased to trade-I fear that this may just be the first such case-because it was presented with a bill of just over £700,000 for current and backdated rates, with £200,000 owed now. The company has a turnover of just £800,000. Of course it has known about the situation, and in January 2009-not January 2010-it took its case to the Valuation Office Agency, requesting the fast-track appeal that the Government had offered. To back up its case, it pointed out that it had been charged for a large warehouse that it did not own and for a common wharf to which it merely had access, as do many other companies on the port. Despite its pleas no reassessment was forthcoming. Eventually, the council issued a summons. The company went into liquidation on 25 February, and 10 people lost their jobs.

If the story ended there, that would be bad enough. However, in this world of "You couldn't make it up", what happened next is almost more unbelievable. Last week, the company received a letter saying that the fast-track reassessment was complete and its liability was not £700,000 but £114,500. That fast-track reassessment took 14 months and arrived days after the company folded.

Photo of Shona McIsaac Shona McIsaac Labour, Cleethorpes

I congratulate my hon. Friend on securing the debate, which I think is the second that we have had in Westminster Hall on this subject. Given what he has just revealed about what Scotline's liability should have been, does he think that there is a case for investigating the Valuation Office Agency?

Photo of Ian Cawsey Ian Cawsey Labour, Brigg and Goole

The Treasury Committee made the point well that the Valuation Office Agency, which is a Government agency, has let down the ports and the companies badly. Even at this late stage, it has a duty to ensure that everyone is asked to pay on the basis of a fair rateable value that is comparable to others. It should be borne in mind that some companies in the ports have always paid business rates in the normal way, and it is important that all the companies should have a level playing field. My experience is that a number of companies have been given rateable values that are completely out of kilter with the businesses that they run and the properties that they use. Paying is putting them into immediate difficulties, but they face the further long-term unfairness of continuing to be unfairly rated compared with some of their competitors.

Scotline's chief executive, Peter Millat, said in a press statement issued after the company went into liquidation that if the revaluation had been more timely the company would not have folded and no jobs would have been lost. It is truly unbelievable that the agency should have taken so long when so much was at stake and that, despite many warnings about the declining position, the Government should have allowed it to happen on their watch. The problem affects not only Scotline; other companies are hanging on, waiting for something to happen or for sensible revaluations to reduce their liabilities.

I spoke earlier about East Riding of Yorkshire council, but I am aware also of the efforts that have been made by Hull city council and North East Lincolnshire council, which cover all the Humber ports-although I realise that the problem affects not only them. They have held off as long as possible and have tried to do the best that they can to support the industries in their areas, but they, too, are now under pressure. To put this into context, we should consider how much it is costing the UK economy. I was grateful to receive a briefing before the debate from the Federation of Small Businesses. It estimates that those companies are being chased for more than £33 million and that 150,000 jobs in UK ports are in jeopardy as a result.

I turn to what we might hope and expect my hon. Friend the Minister to do. In some respects, I feel sorry for her, as it all happened before she took over her present brief. However, as a colleague once said to me, "That's why you get a car." She comes from the Department for Communities and Local Government, which has offered the limited assistance that we have so far secured. I guess that she shares my despair at the way the agency has acted and how the promise of a fast-track procedure simply raises a laugh whenever it is mentioned locally.

I have had private and public meetings about this, but we should be candid about it: DCLG would like to do more but cannot persuade the Treasury. I mean no offence to my hon. Friend the Minister, but I took the matter up directly with the Chancellor last week. I explained to him the difficulties that we were having and my belief-I do not think that I am wrong-that that is where the block is to be found. It is fair to say that my right hon. Friend was unaware of the reality of what had happened to Scotline, and especially about the cut in liability made after it went out of business. He offered to speak to his officials, and I sincerely hope that that will enable the Government to move matters forward. Too many jobs are at risk to do nothing.

My personal view is that retrospective rates should be cancelled; as companies cannot get their money back from their landlords, they will be paying twice. The agency should be made to finish all revaluations as an immediate priority, and councils should impose no financial penalties in respect of non-collection during this period, which should have a short but fixed time scale. If companies still have outstanding liabilities, there needs to be a deal to ensure that they cannot be placed in a position where they could go out of business through no fault of their own.

The problem has attracted strong support from all parties. I note from today's Grimsby Telegraph that Lord Bates, Opposition spokesman for the DCLG in the other place, has issued a statement saying that the Conservative party is in favour of a moratorium. Although that does not cancel the retrospection, it nevertheless offers a breathing space while rational decisions are made. At the very least, it would be a sensible start. The Government should respond in a similar way, content in the knowledge that other political parties would support them. The Government need to act as soon as possible. The clock is ticking; companies are folding; jobs are going. The Minister and her colleagues need to deliver. The problem is caused by their actions and their agency, and they need to resolve it.

Photo of Barbara Follett Barbara Follett Minister of State (the East of England), Regional Affairs, Parliamentary Under-Secretary of State (the East of England), Department for Communities and Local Government 11:14 am, 17th March 2010

It is a pleasure, Mr. Benton, to serve under your chairmanship. It is also a pleasure to respond to my hon. Friend Mr. Cawsey on a subject that is difficult because of the consequences of its complexity.

I congratulate my hon. Friend on giving such an extremely clear outline of what has happened. The situation arose from changes of ownership in the ports about 40 years ago. Previously, the port authorities paid the business rates of the businesses that operated within the ports. The situation has changed over the years, and that transition is the crux of the problem.

It became clear that some properties that should have been separately rated had not been separately rated. It became equally clear that some properties were still paying what they considered to be their business rates to the port authority, but that some were not. The result was a loss not only to the Treasury but to the other businesses that had to make up the shortfall, because not all the business rates liability was being collected.

It became obvious in 2006 that the problem existed in the country's 55 ports. The Government undertook a review. The delay that my hon. Friend mentioned was not only caused by the fact that the mills of government grind exceeding slow, as he will know from watching "Yes, Minister". The review started in 2006 and took approximately two years, ending in 2008. The result was that ratepayers in 725 properties became liable for backdated bills.

Backdated bills are a feature of the business rate system, which is 100 years old. Every year, individual companies are found, for one reason or another, not to have paid all their liability, and they have to pay back that money. This is the first time that we have had a sector-specific review, and it obviously led to a great deal of hardship. I very much regret what has happened to Scotline in my hon. Friend's constituency. This is not a time to lose jobs, and I regret what has occurred.

One reason why the problem arose is that the system is so ancient. There is no requirement for potential ratepayers or the port authorities to inform the Valuation Office Agency that a separate hereditament may exist-I may have mispronounced that word, Mr. Benton. For example, if my hon. Friend decided to rent out his office in Parliament to my hon. Friend Shona McIsaac, it would become liable for business rates-if he were allowed to do so; I am using it as an example. However, there is no obligation on either of my hon. Friends to inform the Valuation Office Agency. It can therefore take quite a long time for the agency to find out where those separate heredi-

Photo of Barbara Follett Barbara Follett Minister of State (the East of England), Regional Affairs, Parliamentary Under-Secretary of State (the East of England), Department for Communities and Local Government

I thank David Davis-it can be difficult to find out where they exist. As a result, although there is no guilty party there is a lack of transparency in the system. On top of that, if the Valuation Office Agency discovered that my hon. Friend had rented his office to my hon. Friend the Member for Cleethorpes it would have a legal duty to investigate it and to charge.

Some companies continued to pay their fees to landlords, as my hon. Friend mentioned, and some are finding it difficult to get those fees back. The problem for Government is that the matter is not something in which we can interfere; it is between the port authorities and their businesses. In fact, some companies have had to pay rates twice, which does not seem in the least fair.

My Department announced that historical debt could be paid interest-free over an eight-year period, as my hon. Friend mentioned, and that there would be a fast-track appeal process via the Valuation Office Agency. However, once again, between the Government view and the business view of what constitutes fast track, there is a huge gulf-

Photo of Barbara Follett Barbara Follett Minister of State (the East of England), Regional Affairs, Parliamentary Under-Secretary of State (the East of England), Department for Communities and Local Government

Yes, and my hon. Friend illustrated that gulf marvellously well.

We now have a situation in which a company such as Scotline has ceased to trade because of the time taken by the Valuation Office Agency to arrive at the correct liability. I have heard the details of the situation in my hon. Friend's constituency and I have talked in huge detail about other specialist areas of valuation, such as the vexed question of petrol stations. I shall not go into that in any detail because you might be in danger of falling asleep, Mr. Benton. However, the question is vexed and keeps the owners of petrol stations and this Minister awake at night. Another specialist area is that of telecoms, with the differential ways in which BT and the fibre-optic providers are measured. That case has gone as far as the European courts and the Court of Appeal in this country.

I have spoken to Treasury Ministers because, owing to the way Government responsibilities are split, the Valuation Office Agency falls under the Treasury, whereas the structure for collection, which is local authorities-billing authorities-falls under my Department. I am in discussion with Treasury Ministers about what we can do to make the fast-track process truly fast track, and the system more responsive to the needs of business. I shall keep my hon. Friend informed of progress. I am taking the issue up as a matter of urgency-I am speaking to a Treasury Minister tomorrow-because I am aware of the cliff we are all facing.

Photo of David Davis David Davis Conservative, Haltemprice and Howden

Like Mr. Cawsey, I am incredibly sympathetic to the Minister's position. She is caught in a "Yes, Minister" time warp, with fast track being measured in geological time-

Photo of David Davis David Davis Conservative, Haltemprice and Howden

Indeed.

In the middle of all the complexity-the legal history and the antiquity of the system-the simple fact is that there are two injustices. One injustice is that the Government make a mistake and individuals or companies pay. The other injustice is that we are in effect subjecting our corporate citizens and their employees to double taxation. Both injustices are clear-whatever the reason, whoever the blame lands on, I do not care. I do care that constituents of virtually all the MPs in the Chamber are suffering. In the current economic circumstance, the only thing that can help is that whatever form such help takes, whether moratorium, cancellation or whatever, it has to be incredibly quick-not quick in geological time, but quick as in the next few weeks.

Photo of Barbara Follett Barbara Follett Minister of State (the East of England), Regional Affairs, Parliamentary Under-Secretary of State (the East of England), Department for Communities and Local Government

I take the right hon. Gentleman's point. As someone who came into this place at the ancient age of 54, with a business background, I found the geological time that is occasionally also Government time difficult to deal with.

None of what I have said diminishes the impact of backdated rates, combined with the current economic climate, on port-based ratepayers. We understand and sympathise with their plight, which is partly why we introduced the schedule of payments scheme and went in for an unprecedented eight years. The scheme is providing help, but there are still instances, as with Scotline, when that help comes too late or is not sufficient.

The fundamental issue is that we cannot selectively let some businesses off a legally established tax, actively disadvantaging companies that have paid it. Members present understand that, so we have to find a way through.

In conclusion, the Government and this Minister are as concerned as Members about the impact of backdated rates liability.

Photo of Ian Cawsey Ian Cawsey Labour, Brigg and Goole

My hon. Friend is reaching the end of her comments. We welcome her sympathy, but it is important to have something tangible as well.

What companies need to know at this point in time is when the revaluations will be complete. Companies are trying to make arrangements to keep their businesses going while the revaluations happen. Scotline has been a shock through the entire system, because the company went and then the revaluation came. Every affected business I know fears that for itself. If the Minister can do no more today-I understand that conversations are still ongoing, not least the ones with the Chancellor that I alluded to-will she, please, at least give us an assurance that she will get back to us with some indication of when those decisions will be made and complete, so that the companies will know what their liabilities are and that they are fairly set?

Photo of Barbara Follett Barbara Follett Minister of State (the East of England), Regional Affairs, Parliamentary Under-Secretary of State (the East of England), Department for Communities and Local Government

My hon. Friend has been a Minister himself and understands the constraints under which we sometimes operate. However, I give the Chamber my assurance that we shall do everything in my power and the Secretary of State's power. I am glad that my hon. Friend has prayed in aid our right hon. Friend the Chancellor of the Exchequer, because that will be most useful. I shall report back to concerned Members about progress. We intend to move forward as swiftly as possible, because as we all know there is only an extremely short period in which to operate.

I commend my hon. Friend Mr. Mitchell, who is in the Chamber today, for the work he has done on the issue. He has certainly kept my correspondence section extremely busy.

Sitting suspended.