Select Committee on Welsh Affairs Minutes of Evidence

Further response from Corus to questions asked during the evidence session, 26 March 2001

Q 100 Please give the old and new business rates and the extent of the rebate.

  We would refer you to the answer given to the Trade & Industry Committee in response to this issue and which is reproduced here for ease of reference:

  "There are three major points:

(1)  Five-yearly rate reviews, appeals and the timescale to complete.

  The setting of rateable values, the appeal process and the timescales involved have had a detrimental effect on Corus' competitive position over the last 11 years. This is demonstrated by the following sequence of events:

    —  In 1990 the rateable value was assessed at £100 million for Corus' four integrated works (Port Talbot, Llanwern, Scunthorpe and Teesside).

    —  Corus has subsequently appealed and it is likely that a reduction will be agreed which will re-assess the four sites at £73 million.

    —  The appeal with respect to Llanwern was agreed in February 2000, Teesside in January 2001, Port Talbot is anticipated in March 2001. Scunthorpe is agreed.

    —  The process has taken 11 years and has had a significant cash flow impact on the business.

    —  Following the 1995 revaluation, Corus has again exercised its right to appeal. It is believed that this will result in further repayments covering the period 1995-2000.

    —  The 1995 appeal cannot be completed until all elements of the 1990 appeal have been finally settled.

    —  The 2000 revaluation is under appeal and is as yet unresolved.

  Corus would like to see the following:

    —  A more realistic initial assessment.

    —  An accelerated appeal process.

(2)  Inconsistent implementation of the 2000 rates revaluation across England and Wales

  Following Corus' 2000 assessment, the different approaches in the level of uniform business rate and the transistional arrangements for England and Wales have adversely affected the competitiveness of Corus' Welsh operations compared with those in England.

  In the case of Wales, the rates payable following the 2000 assessment were increased in full immediately, whereas in England there has been a phased approach.

(3)  International comparisons

  Comparing Corus' UK and Netherlands operations, there is a wide differential between them in property taxation. For example, Port Talbot and Llanwern together currently pay circa £15 million pa in rates whilst in IJmuiden, which has the capability to produce a comparable volume, the property tax burden is circa £1.5 million.

  Whilst recognising that the true comparison should show the total business burden, the UK system impacts on the fixed operating costs and cash flow and hence has a much more distortive impact on investment decisions and international competitiveness".

Q 130 Details regarding the profitability or not of Bryngwn

  Profits or losses are calculated at business level and not at plant level. The policy is to shed unprofitable business and load the lowest cost plants with the remaining business. Unfortunately, as a result, Bryngwyn has to close in order to maximise future profits and thereby help to secure the future employment of those that remain.

Q 187 What formal submissions did Corus give the Government on areas where they could reduce costs

  Corus and the Government are bound by the ECSC Treaty and its accompanying Steel Aid Code. This prohibits payment of aid in any form other than for certain specific and carefully prescribed activities (notably, R&D and environment).

  Competence for state aid regulation rests with the DTI, who have to ensure any aid offered is notified to the European Commission and approved by them before payment is made.

  Corus has held a large number of meetings with Government in London and with the National Assembly of Wales to discuss options that would be permitted within the Steel Aid Code, but so far none of these have resulted in anything material.

  Rates reductions have been the subject of lengthy discussions (see the answer to Q 100). but are not a matter of state aid since Corus has only been seeking its entitlement under UK rating law.

  Any other options that might have been suggested (in the press, for example) in relation to reducing Corus' employment costs, wage subsidies, etc are illegal and have not been discussed.

26 March 2001

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