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10.3 pm

Dr. Roberta Blackman-Woods (City of Durham) (Lab): I rise to present a petition on behalf of E. A. Smith and a further 85 constituents. It is a petition of small Northern Rock shareholders and supporters in Durham and they are asking the Government to reconsider the terms of reference given to the valuer so he can reflect the true value of Northern Rock shares when deciding compensation levels.

The petition states:


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Port of Liverpool (Business Rates)

Motion made, and Question proposed, That this House do now adjourn .—( Ms Diana R. Johnson.)

10.3 pm

Mrs. Louise Ellman (Liverpool, Riverside) (Lab/Co-op): I am pleased to have the opportunity to hold today’s Adjournment debate. I seek to persuade the Government to take urgent action to prevent closures, redundancies and loss of investment in companies in the port of Liverpool, which could threaten the city’s regeneration. I know that a similar situation exists in other statutory ports in England and Wales.

Mr. Frank Field (Birkenhead) (Lab): I congratulate my hon. Friend on securing this debate. Might she allow me to register the fact that this matter affects not just Liverpool and Birkenhead, but ports in other parts of the country?

Mrs. Ellman: Yes, it also affects ports such as Hull and Grimsby. The problems arise because of mistakes made by the Government’s Valuation Office Agency, part of HM Revenue and Customs. The mistakes are particularly significant because of the current unprecedented economic crisis.

I thank Mersey Maritime and the Mersey Dock Rating Group for drawing my attention to this important issue. The problems relate to failings by the VOA in carrying out the change from prescriptive to conventional rating for businesses in the 55 statutory ports, and in its ports review; there was no effective communication with businesses.

The changes, to be implemented from 1 April 2005, required the VOA to conduct detailed assessments of hereditaments in every port, and they involved significant redistribution of rates from port operators to companies. That resulted in some companies being rated for the first time. It was not until September 2008—three and a half years later—that the VOA started to instruct local authorities to issue vastly increased backdated rates bills. The bills were backdated over three and a half years, and the demands could not have been anticipated or budgeted for by the companies concerned. Where rates had previously been paid to port operators with the rent, it meant double billing. No impact assessment of the change was made.

Mr. Julian Brazier (Canterbury) (Con): The hon. Lady has been a vigorous campaigner in this area. Will she confirm that the really shameful aspect is that the companies had not been warned while they were negotiating their rents that the change in rates was to take place?

Mrs. Ellman: Indeed, there was a lack of communication with the businesses concerned.

The situation contrasts with that in Scotland, where proper consultation was followed by a self-financing transitional scheme. The success of the port of Liverpool is a key part of Liverpool’s regeneration. The port is the No. 1 gateway for UK-USA business and it handles 32.5 per cent. of container trade to the USA. The Merseyside maritime sector has 1,000 companies, employing 26,000 people and generating £2.6 billion in economic output. Local authorities are being asked to levy large
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and often disputed bills for 2008-09, together with the massive backdated accounts. The result could be business closures, redundancies and loss of investment.

Distribution companies can switch their operations to other ports, using road or rail to complete their journeys. The annual rateable value of the relevant part of the port of Liverpool was about £16 million before the new system; that will now rise to £16.75 million. There were 43 hereditaments—units of rateable occupation in the port—before the revaluation, but afterwards the figure rose to 127. The real problem has arisen because £10 million of that £16.7 million of rateable value has been redistributed to a group of 70 companies who had no knowledge of what was happening and therefore could not plan for it, and the bill has been backdated over three and half years.

Shona McIsaac (Cleethorpes) (Lab): My hon. Friend rightly points out that 70 firms in her area are affected by these changes. Is she aware of the estimate that some 700 companies nationally are being affected by these changes? Does she feel that, given the gravity of the situation, it is shocking that not one Opposition Front Bencher is here to listen to these concerns?

Mr. Speaker: Order. That is out of order. This is an Adjournment debate, and only those who are interested in the business are required to attend; no requirement is made of any Opposition Front Bencher.

Mrs. Ellman: I am concentrating on the port of Liverpool, but I am aware that this is a national issue.

Mr. Brazier: On a point of order, Mr. Speaker. I apologise to the hon. Lady for interrupting, but I must point out that I am the Conservative spokesman on shipping.

Mr. Speaker: Well, there we are then.

Mrs. Ellman: Faced with the situation that I have described, two stevedoring companies in Liverpool have already closed, with the loss of 27 jobs. A major company faces a 400 per cent. rates increase, with a demand for £2.6 million-worth of backdated liability. One company has received a final demand for £500,000 for 2008-09 and, six weeks after lodging an unanswered appeal, is considering its future. That is the tip of the iceberg. Liverpool’s regeneration is threatened. Members of Parliament from Liverpool and other ports have lobbied Ministers, including my right hon. Friend the Minister for Local Government and the Prime Minister. I am pleased to see in the Chamber this evening many of the MPs who have made representations to Ministers. The Treasury Committee has also considered the issue. Recently, port businesses from all over the country lobbied MPs at a well-attended House of Commons reception.

The Government have responded, but their proposal to spread the backdated element over eight years under still unspecified conditions does not resolve the problem. Companies must show how they can meet their liabilities, and anticipating eight years ahead is made particularly problematic by the economic downturn. Companies could not have known about the nature and size of their bills, so could not have incorporated them into their business plans. They cannot do so retrospectively, and it is therefore wrong for the Government to seek retrospective payment from companies that have no way of recouping the cost.

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Mr. Austin Mitchell (Great Grimsby) (Lab): Although I will not comment on the absence of anybody from the Opposition Front Bench, I remind my hon. Friend that she is surrounded by the intellectual flower and beauty of Humberside en masse. The principle is the same. It is iniquitous, wrong, unfair and unreasonable to demand three and a half years’ back payments from companies that were not billed for those rates until 2008. They are being asked to pay them right back to 2005. I hope that my right hon. Friend the Minister will devote some attention to that. Is it moral, fair or reasonable to charge those back payments?

Mrs. Ellman: I support my hon. Friend’s comments, and I look forward to the Minister’s response in due course.

Mr. Ian Cawsey (Brigg and Goole) (Lab): Does my hon. Friend agree that another issue needs to be taken into account? Not only are the bills retrospective, but most of the companies think that they have already paid, because they were paying a fee to the port operator—Associated British Ports, or ABP, in Goole’s case and across the Humber ports. Much of the Government’s case on the subject of giving time and revaluing was based on the fact that those companies should seek recompense from ABP and the other port operators. That is simply not going to happen, so the Government’s case is flawed and needs to be reviewed as quickly as possible.

Mrs. Ellman: I support those comments, too. Indeed, it is not justice for companies to be double-billed and asked to pay twice. That is one of the key elements of the problem.

I support the call for the Government to prescribe the rateable value of premises in the ports concerned at the values set out in the rating list published on 1 April 2005, and to maintain those values until 1 April 2010—the next rating review period. That would address the problem of the backdated bills and the huge unanticipated increases, and would also give an opportunity for proper consultation. It would be ironic if the Government, who are doing so much to support businesses in these unprecedented international circumstances, played a part in risking jobs and investment in the ports through the failings of their agency.

As my hon. Friend the Member for Cleethorpes (Shona McIsaac) said, it is estimated that nationally nearly 700 businesses and 30,000 jobs could be affected. I call on my right hon. Friend the Minister to take urgent action. I recognise what he has done, but for the reasons that I have set out, it does not go far enough. I advocate that further action is a matter of business survival, and a question of justice.

10.14 pm

The Minister for Local Government (John Healey): I congratulate my hon. Friend the Member for Liverpool, Riverside (Mrs. Ellman) on securing the debate and on expressing concerns on behalf of businesses in her constituency in the port of Liverpool. As is shown by the interest of my hon. Friends behind her on the Labour Benches, concerns are clearly felt in some other ports among businesses that operate successfully and, particularly over the past decade, have been part of a strong renaissance in our shipping trade and ports industries.

19 Jan 2009 : Column 598

My hon. Friend raised a number of important points and, in a fair and balanced way, reflected the concerns of port businesses, from which I, too, have heard directly. She and colleagues have raised the matter directly with me and with Treasury Ministers. As she said, they have also raised it with my right hon. Friend the Prime Minister.

The impact of the review of rating in ports has not necessarily been uniform and has certainly not caused universal problems, even if it has been generally unwelcome—as any fresh tax liability always is. Some companies certainly believe that the impact could be severe; equally, however, other companies are settling not just their new bills but their backdated bills, in full. I have had reports from some local authorities that companies are beginning to discuss a negotiated schedule of payments, taking advantage of the announcement that my right hon. Friend the Chancellor made in the pre-Budget report in November.

Since that announcement almost two months ago, a relatively small number of companies has taken advantage of the special fast-track system that the Valuation Office Agency put in place to deal with inquiries or appeals. Across England and Wales, the VOA has had only 150 inquiries from port businesses since the PBR and only 65 appeals have been lodged. When the number of port businesses affected in the way my hon. Friend explained is 564 in England alone, I have to say that although there are grounds for serious concerns—I shall come to the way in which the Government are trying to help deal with them—the system is not necessarily causing universal problems for all businesses in all ports that have been put on the ratings list for the first time.

Mr. Cawsey: Will my right hon. Friend give way?

John Healey: I shall give way only once, because I owe our hon. Friend the Member for Liverpool, Riverside the courtesy of as full a reply as I can give her.

Mr. Cawsey: Our hon. Friend the Member for Liverpool, Riverside was very generous in giving our right hon. Friend the Minister additional time to reply.

On my right hon. Friend’s point about fast-track appeals to the VOA, at least one company in my constituency—RMS, a big company in Goole which operates out of other Humber ports, too—tried to take that route but found the VOA completely unhelpful, so much so that I intervened on the company’s behalf and received a letter from the VOA that could have been written in Swahili from all I could understand. I now have to chair a meeting between the VOA and the companies to try to get things back on course. Surely, the Minister cannot have confidence that the fast-track system is resolving the problem in any way, shape or form.

John Healey: I am not saying that it has resolved the problem, but it is an important part of trying to deal with the problems that may be experienced by particular companies. My hon. Friend has been one of the strongest advocates of port companies, not just in his own constituency. If he has particular problems with the VOA not carrying out the undertaking on the fast-track system that it gave me and I gave the House, I should like the details and I will certainly take the matter up for him and any companies experiencing such problems.

19 Jan 2009 : Column 599

We are dealing with two separate problems, and in trying to explain them to my hon. Friend the Member for Liverpool, Riverside, I hope to be able to explain why the sort of solution that she seeks will be difficult, if not impossible, to put in place. The first issue is the move away from the prescribed rating system for statutory port operators. My hon. Friend said that the VOA had made mistakes in undertaking that move. I do not entirely accept that, although it is fair to say that the VOA took too long to prepare the assessment for the new valuation list.

The prescribed rating system for large statutory docks and harbours until 31 March 2005 was a method whereby the valuation was determined by reference to a formula set by the Secretary of State, drawing on the income and expenditure of the port operators. In other words, it was not based on the way in which rateable value was established for all other businesses with the valuation list, which is based on the rents that could be charged for those properties. The Government’s decision to end that prescription formed part of a long-term policy to apply conventional valuation across all businesses and industry sectors and to do so fairly and consistently. We first consulted on that in December 2000. We consulted again on a White Paper in December 2001, and we introduced legislation in the Local Government Act 2003. In other words, the move away from the proscribed formula system was a long time in coming.

There are 55 ports and container terminals in England and Wales, each of which is run by a designated port operator who has responsibility for business rates, except where any part falls to be separately rated. The need for separate rating will depend on the facts of the case, but the key issue is whether the occupier of that separate part or premises within the port precincts is in paramount control.

I have been told that, as my hon. Friend has argued this evening in the Chamber, a simple solution to the problems caused by the review of rating in the ports would be to return to prescription. I am afraid that that is not the case. The reason is that, even if we were to return to prescription, the properties that are now separately identified as liable for business rates would none the less continue to be separately rated, because that is what the business rates legislation requires. The formula could and only ever did apply to the valuation of the port’s operator, not to the businesses that she rightly and understandably is concerned about tonight.

The second issue—this is where the difficulties have been created—was the VOA’s review of ports. That began when it became clear that some properties in Southampton port should have been separately rated but were included instead in the port operator’s assessment under the formula for the 2005 rating list. In other words, the review was separate from the move away from prescription and pursued by the VOA, as part of its statutory duty to maintain an accurate and up-to-date valuation list. It was challenged at the time in court. So it was only in May 2006—once the Southampton case was settled the month before, thus confirming the status of some of those port tenants and the VOA’s approach to valuing them—that the VOA started its review of the 55 major ports in England and Wales.

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