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As in many other areas, housing is another example of major concern where a business rate supplements scheme may well have a part to play in well thought out projects to revitalise the economic fortunes of town centres, in particular. Again before Christmas, representatives from our registered social landlord, Aspire Housing in Newcastle, informed me almost lackadaisically, in a meeting about a totally separate matter, that they
did not see the building of new social housing as part of their so-called core business any more. Newcastle alone has a waiting list of 3,000 for social housing. We have regional and sub-regional targets for house building aimed particularly at encouraging town and city-centre living in Newcastle and Stoke-on-Trent. Aspire Housing owns all Newcastle’s former council housing stock. If it does not intend to build social housing beyond schemes already in the works, it is hard to see who will, especially at this point in the economic cycle. Frankly, that is a dereliction of duty that I am pursuing with it vigorously. However, it is another example of a development, coupled with key public site acquisition, which meets a need, which might make town centres more sustainable, and which otherwise would not happen, where a BRS scheme might have a role to play and local businesses may well support it in their own interests.
In that respect, I discussed with my local council the option of a business improvement district—an idea introduced by my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford), the former Minister—that would be backed by regeneration agencies to help to revitalise the town centre. A business rate supplement scheme, as provided for by the Bill, would allow for a further alternative in co-operation with local businesses. It is absolutely inconceivable in places such as Newcastle-under-Lyme and north Staffordshire that anything would be implemented without such co-operation or against the interests of local business.
When I refer to local business, I am talking about the vast majority of local employers and traders, as well as national firms and store chains, which are socially responsible and pay their taxes and business rates. However, in Newcastle and north Staffordshire, as in other areas, there is a small minority of unscrupulous so-called business people who do not. They let other suppliers and creditors suffer, as well as the taxman, local councils and the Government’s business rate pool. I am not talking about entrepreneurs who genuinely set up firms and take risks that do not work out in a free market, or about businesses, of which there will be a growing number in the recession, which find they cannot cover their costs and have to close. I am referring to a small minority of parasites, frankly, who have no intention of paying their dues from the outset and who hide behind limited liability and deliberately play the system to avoid business rates.
I hope, therefore, that any change to the business rates system, such as the provisions of the Bill, will contain measures to address flaws in the current regime. First, breaking the link between local collection and the ability to spend business rates locally gives councils such as mine little financial incentive to pursue serial evaders seriously. After the passage of the Bill, even if councils set up a business rate supplement scheme, they will still be collecting agents for central Government for the vast proportion of business rates and, importantly, they will not suffer financial loss for any lack of rigour in tackling evaders. Secondly, many of the people in question serially go bust and leave little or nothing by way of assets because they do not own the properties from which they trade, or because they have hived them off into separate companies or trusts. Business rates will still be collected from the operators of business premises and not from the owners or landlords—a point that has been made by Members in all parts of the House.
Reforming that process would aid collection from such evaders and I urge the Government to consider addressing the issue in the Bill, or in further reforms to the system. Thirdly, on the detail of a business rate supplement scheme, I and honest traders in my town have serious concerns about how consultation and balloting arrangements in the Bill—or any subsequent regulations—would cater for evaders. Put simply, they do not operate on a level playing field, so why should they have a voice or a vote, and how could such a situation be prevented? Such details need to be discussed.
I shall illustrate those concerns with a specific example from my area, to give them meaning. We in north Staffordshire are by no means alone in suffering from the actions of such people, but there is one particularly shocking case that I have taken the time and trouble to investigate and pursue over the last nine months as the local Member of Parliament. In the past three years, business rates written off by Newcastle-under-Lyme borough council have more than doubled from £195,000 in 2005-06 to nearly £420,000 in 2007-08. That is a substantial amount for any second-tier authority, and had the borough council collected it and been able to spend it locally—or not—the effect on the council tax would have been enormous. The council has lost a serious amount of money. Those figures dwarf the amount of council tax write-offs from ordinary taxpayers. In March 2007, for instance, £252,000 was written off in business rates for the financial year, which was almost 10 times the amount due from council taxpayers that was eventually written off. Sadly, the council, like many throughout the country, tries to keep those figures secret. It should not. The public have a right to know how the system is operating, and it is perfectly possible for councils to be more robust by shaming serial offenders as a discouragement to others tempted to do the same who give towns such as mine a bad name in business.
I come to the worst example that I have found locally. In March last year, the borough cabinet—behind closed doors again—wrote off more than £13,000 owed by a firm running the Albion public house in Newcastle town centre. The Albion is an old pub—coincidentally, my uncle’s mother and father-in-law used to keep it when I was growing up. This was the fourth time in four years that the council wrote off its business rates, and for four different pub operating companies that went into liquidation. The owners and directors of the companies were the same: two local characters called Anthony William James and Peter Andrew Whieldon. Piecing together all their companies’ affairs from Companies House and liquidators’ reports, one finds that the track record of serial insolvencies and non-payment from their numerous pub companies since 2003 runs as follows: more than £47,000 in business rates was written off by Newcastle-under-Lyme borough council, another £57,000 in business rates was owed to Stoke-on-Trent city council, and at least £184,000 in VAT, tax and unpaid national insurance was owed to Her Majesty’s Revenue and Customs. In all, their failed companies have left a trail of £1.3 million in unpaid debts across the Potteries, but they are still in business and, by all accounts, they have never had it so good.
I am not making a political point, but what makes the case particularly shocking is that Peter Whieldon, one of the co-owners, is a local Conservative borough councillor. Until I pursued that track record, he was vice-chairman
of Newcastle-under-Lyme council’s financial audit and risk sub-committee. He is still the treasurer of the local Conservative association. His current companies run at least three pubs in Newcastle, and others in Stoke-on-Trent, which make people’s lives a misery in town on Saturdays by showing live Stoke City matches, accessing dodgy satellite signals aimed at Scandinavia and elsewhere. They are doing a thriving trade, but to add injury to insult, the resulting antisocial behaviour causes some traders who pay their business rates to shut up shop early and lose business. As well as football’s premier league, the police have serious concerns.
On business rates, I want to stress that the present regime provides no incentive financially to a local council that shows no determination—as a matter of good practice or, as in this case, to uphold civic values—to pursue such serial evaders seriously. The council as a collector for the Government suffers no financial loss. The premises in question were not owned by the companies liable to pay the business rates. The freehold of the Albion pub, for instance, is owned by Marston’s. When the companies go bust—surprise, surprise—the landlord, and main drinks supplier, does not appear on the list of creditors. Either the landlord is very prescient, or that is prima facie evidence of preferential treatment of a key creditor and of tolerance of dubious business practices over quite a number of years, which can only detract from a reputable brewery’s standing in the community.
If the business rates regime allowed councils to collect business rates from the actual owners of properties—either generally or in the special circumstances that I have outlined—the opportunity for evasion would be much more limited. I encourage the Government to consider such a reform during the passage of the Bill. Locally, we pursued the council over the affair after receiving many complaints from the public and local businesses. A letter was sent last April, for instance, to the Conservative leader of the council, Simon Tagg, to ask not just why the council always wraps itself in so much secrecy, but what straightforward measures the council had taken to protect itself and the Government’s business rate pool, given the track record, by means such as not allowing rates to build up over a year but instead demanding them up front or in instalments, which is the case for ordinary council tax payers The leader replied that existing legislation does not allow the council to do that. He also wrote:
“The Council’s finance department cannot take account of ‘previous bad history’ when issuing demands because they have to treat each financial year separately.”
That defies common sense and any good business practice, and I would like to hear from the Government whether that advice, no doubt given to the leader by his officials, is correct. If not, I will further pursue the matter locally. If it is correct, I would urge the Government to amend the Bill to give councils common-sense flexibility in how they pursue such cases.
I have written at length several times to the council’s relatively new chief executive, Mark Barrow, who has been in post for about 18 months now. The first time was in April, when I pieced together the track record. I wrote again in June and again at the end of July after receiving no substantive reply. I am afraid that at that point, for the first time as a Member of Parliament, I invoked the Freedom of Information Act, but pretty much to no avail. Apart from general procedural details
about the new standards procedure for local councils, which I knew about by that stage, I received no answer to specific questions and heard no more. I wrote again on 4 December, expressing grave disappointment and again citing the Freedom of Information Act. This time I received a two-line acknowledgment, dated 8 December, from the council’s freedom of information co-ordinator, promising me a response about the business rates within the statutory deadline of 20 working days As of today, 12 January, there is still a resounding silence from my council and its chief executive over the affair.
The point that I wish to make about the reform of the business rates regime is that if such things are happening in my area, they are happening up and down the land to the detriment of government, councils, council tax payers and honest business rate payers. There is some local evidence that the more widely such behaviour becomes known—traders talk to each other all the time—the more others follow suit, either just because they can or because they cannot otherwise compete on a level playing field. Have the Government calculated the total cost of business rate write-offs each year, and have they commissioned any studies to estimate how further reforms such as those I have suggested may help to reduce that amount, to the benefit of everybody across the country?
Councils could either be helped by being able to levy business rates on the owner of a business property, or they could be given specific duties to pursue serial evaders, with financial penalties on councils as an incentive. That would apply particularly to councils such as Newcastle, which has hardly pursued with zeal the affair that I have mentioned or complied with its statutory duties under FOI legislation. If that is the frustrated complaint of the local MP, what chance do ordinary local council tax payers and honest businesses have of ensuring that the business rates system operates fairly?
I shall draw my remarks to a conclusion by discussing openness. A further reform should involve a duty on councils to be transparent about write-offs and the non-collection of business rates in general. In the case that I mentioned, the council’s standards committee has now considered a complaint against Councillor Whieldon, concluded that there is a case to answer and appointed an investigator. However, that has all been done behind closed doors. Nothing has been said in public, and nine months on I have not been contacted. I hope that the review has not been set up to clear the council and to whitewash the procedures that it adopted.
One of the more farcical elements of the case is that the only thing that has been made public is an investigation into how the information came into the possession of a Member of Parliament—a leak inquiry into myself. As part of that investigation, last July the council reviewed its policy of writing off business rates in secret and gagging cabinet members and ordinary councillors from saying anything to anybody, even in the public interest. In a paper to its cabinet, the council surveyed the policies of nine councils in Staffordshire and labelled them—
Mr. Deputy Speaker (Sir Alan Haselhurst):
Order. I have given the hon. Gentleman a fair amount of licence, as this is a Second Reading debate, but on balance it now appears that he has used the term “business rates” to talk about business rates in general, rather than to
speak within the scope of the Bill. There is a certain amount of flexibility on Second Reading, but I think that he has exhausted the possibilities of it.
Paul Farrelly: As I said, I am drawing my remarks to a conclusion.
Mr. Deputy Speaker: Order. Hopefully the hon. Gentleman is now doing so quickly, in view of what I have said.
Paul Farrelly: My point is to suggest further reforms that may be introduced as amendments to the Bill, which reforms the business rates regime, as it passes through the Palace of Westminster.
Mr. Deputy Speaker: Order. Perhaps the hon. Gentleman should hope to get on the Committee in order to do that, but he will still have to do it within the terms of the long title of the Bill.
Paul Farrelly: Indeed, Mr. Deputy Speaker, I shall make such a request of my Whips.
In conclusion, I shall support the Second Reading of the Bill tonight. However, I urge the Government to make the wider reforms that I have mentioned to tackle abuse of the system and to make councils more open about their collection records. Otherwise, council tax payers in Newcastle will gain the impression that ordinary families will be pursued to the limit in hard times, while determined business rate evaders will get off scot-free. Honest businesses and traders in my area do not like what people such as those I have mentioned are up to, and the Government can ensure that our councils are better helped so that they do not get away with it.
6.33 pm
Mr. Brian Binley (Northampton, South) (Con): I follow an interesting speech by the hon. Member for Newcastle-under-Lyme (Paul Farrelly), in which he made remarks about a person whom I know, and knew reasonably well in the past. I was concerned that such remarks should be made, and I seek your guidance at the outset, Madam Deputy Speaker. It seems to me that a person ought to be given the right to put the record straight if they feel that it has not been stated well in the House. I do not know whether it was in this case, but I wonder whether I might appeal to the person concerned to write to me so that I can put the record straight, perhaps on Third Reading. I would be grateful for the opportunity to do so, and I seek your guidance on that point, Madam Deputy Speaker.
Madam Deputy Speaker (Sylvia Heal): Of course, Members are responsible for what they say in the House about either another Member or people outside the House, but clearly that action is open to the hon. Gentleman.
Mr. Binley: I am most grateful for your guidance, Madam Deputy Speaker.
Paul Farrelly: The local councillor was given full opportunity last April to respond to the matters of fact. He not only declined to do so but put the telephone down on me. The matters of fact have been laid in the public domain without the benefit of privilege.
Mr. Binley: I am grateful for that clarification, and I shall take it into account, as I am sure you would expect me to, Madam Deputy Speaker.
I move on to business rate supplements, which are the subject of the debate. We have heard a lot about Crossrail, but I shall leave that issue alone. I spent two and a half years on the whole thing, and I am very doubtful whether it will ever get off the ground. That is another matter altogether, and I have made that point clear in the House on a number of occasions. I have no reason to change my mind, and I do not want to take up valuable time by proceeding through the whole Crossrail debate again.
The Minister for Local Government said that this was not the best of times from a business perspective. That was pretty much an understatement, and I wish to set out the business atmosphere and climate that prevails, because it has a bearing on the debate. Many businesses would tell the House that they are in one of the worst of times, and that they face immense problems. They are burdened by the Government’s activities in recent years, which make it more difficult for them to face those problems.
I shall give a brief resumé of the current business climate. In 2007, some 13,500 companies failed. The Forum of Private Business tells us that in 2009, some 200,000 businesses will fail. That is a pointer to the almost unprecedented economic situation that the businesses of this country have to deal with. KPMG, the well-known accountancy business, has stated that 150,000 companies will become insolvent in 2009, which will be the highest number since records began 50 years ago. Unemployment is at more than 2 million, and is projected to be 3 million by the end of 2009. The interesting figure was released last week that new bank lendings in the third quarter of 2008 were £447 million, compared with £16 billion in the same quarter a year ago.
Those figures are all pointers to an economic climate that is unprecedented in business terms. In Northampton, businesses tell me that turnover is already down by 10 to 20 per cent. For some businesses, particularly restaurants, it is down by 30 to 35 per cent. Most of those are owned by friends from the Bangladeshi community, who run some of the most impressive Indian restaurants in the country. I am happy to pay tribute to them, but tragically they are faced with a 35 per cent. fall-off in turnover. It is as though they had fallen off a cliff.
The Prime Minister now admits that the downturn will be longer and deeper than we thought. That comes after the Chancellor told us in his pre-Budget report that there would be a recovery in the third quarter of 2009. The Chancellor said:
“We are far from through this”
when asked about that projection, which perhaps hints that although he did not quite want to say “I was wrong”, he was not far from saying it. Barry Potter, the director of the International Monetary Fund, said that it was “very optimistic” to forecast that Britain would begin to recover in the third quarter of 2009. It is therefore true to say that we have not done away with bust. We speak against a background of a serious recession, so what do the Government do? They propose that we think about levying extra cost, through an extra tax, on businesses, which are suffering from massive past burdens.
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