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28 Jan 2009 : Column 109WH—continued
“BMW are extremely concerned about the prospect of increased costs as a result of the change in the way business rates are to be assessed at statutory ports in England and Wales. In the event this
should happen, BMW would be forced to re-examine its decision to handle their UK distribution from the ports of Immingham and Southampton and instead move the operations back to the port of exit on the Continent, as a number of our competitors already do. This would be regrettable but necessary as BMW cannot afford to lose competitiveness in what is a very challenging market.”
Other DFDS Tor Line customers, such as Corus, Arcelor Mittal, Stora Enso, Volvo, General Motors and Honda, have raised similar concerns, and DFDS simply cannot meet an almost £10 million demand for backdated rates, which it believed it had already paid, because it had a commercial agreement with ABP, the port owner. I want the Minister to understand that those people had commercial agreements; they felt that they had paid when they paid their rent and rates to ABP.
Gwyn Prosser: Does my hon. Friend agree that if we had followed the example of Scotland and gone through a proper consultation period prior to these radical changes, they would not have taken place? If any consultation had listened to the evidence that my hon. Friend and others have given in the debate, there is no way that the changes would have gone ahead. The situation rings out as being unjust and unfair.
Shona McIsaac: I thank my hon. Friend for that intervention, and he is quite right. I have not come across one firm in my constituency operating out of the ports that knew that the measure was going to be introduced. I am sure that other Members would say the same. It was like a bombshell: at the end of 2008, someone said, “Hey! You’re going to have pay this, going back to 2005.” The Valuation Office Agency has tried to backdate the demands, but the firms cannot backdate what they have charged their customers in the past.
Liverpool chamber of commerce and industry, and Hull and Humber chamber of commerce, industry and shipping, have come up with three ideas as a solution to the problem, and others will probably articulate the same points. They say that the Government should
“withdraw the requirement for backdated rates from 1st April 2005 prepayment element of the rates bills; allow operators across the region and country to work with the VOA to assess businesses fairly and transparently, and implement the review on 1st April 2010—the next rating review date; and provide transitional support to affected businesses.”
If we needed any more evidence of the unjustness and unfairness of what is happening, we have the Treasury Committee report, which came out last week. It says what we have been saying all along. For example, it states:
“We note that Port Occupiers are facing bills for backdated business rates which do not take account of payments they have already made to Port Operators towards rates. We recommend that the Government take steps to ensure that the financial liabilities faced by Port Occupiers take such payments into account.”
On backdating, it recommends that we start again in 2010.
This is an unholy mess. I am sorry that people are losing their jobs. Whether they worked in a steelworks or in a shop, all such losses are a tragedy for the families, but when there is a solution, it hurts even more. We could have done something about the 70 job losses that DFDS Tor Line has announced by saying,
“We aren’t going to impose these changes until 2010.” I am sorry that we missed the opportunity to save those jobs at the port of Immingham.
3.6 pm
Mr. Julian Brazier (Canterbury) (Con): What a pleasure it is to serve under your chairmanship, Mr. Atkinson—I think, for the first time. I join others in congratulating the redoubtable hon. Member for Great Grimsby (Mr. Mitchell) both on the campaign that he has led and on securing today’s debate. It is a pleasure, too, to speak after the hon. Member for Cleethorpes (Shona McIsaac) and, indeed, after my hon. Friend the Member for Preseli Pembrokeshire (Mr. Crabb), who added so much to the strong and overwhelming case that had already been made.
“Chaotic” is the word that springs to mind when we consider the issue in general and in detail. If it was not for the fact that people’s jobs and working lives were on the line, it would be almost a comedy of errors. If a programme of “Yes Minister” had been prepared on this theme, people would have said that it was pretty unlikely. Government agencies are operating unchecked, a Minister has admitted that she knew nothing of what the VOA was doing about the matter while it was going on, and current Ministers are unable to agree on the facts.
In the 19 January Adjournment debate, which has been referred to several times, the Minister who is with us today said that
“the rateable value of some port operators has been reduced significantly, particularly in some places. In Liverpool, the rateable value for the port operator has been reduced to less than half of the previous rateable value; in Grimsby it has been reduced to almost a third, in Hull to around a third, and in Goole to less than a quarter of the previous rateable value. Across England and Wales, the port operators’ rateable value has been reduced by a total of £44 million.”
He argued that any financial liability for sorting out the problem must lie with port owners rather than with the Government, saying that
“in my view, port companies that legitimately believe that they have contributed towards rates by means of payments made through the cumulo or through fees to the port operator should take the matter up with the operator... I have not seen any hard evidence that the arrangement is that rates are part of the fees.”
“it is a private contractual matter that the port businesses must take up with operators.”—[Official Report, 19 January 2009; Vol. 486, c. 600-601.]
That assumption rests on the notion that both parties had advance warning of the changes via the VOA and should have made appropriate arrangements. Yesterday, during Transport questions, however, the Under-Secretary of State for Transport, the hon. Member for Poplar and Canning Town (Jim Fitzpatrick), who has responsibility for shipping, said:
“I am advised that UK Major Ports and the British Ports Association refute the suggestion that money has gone to them and that they are in some way obliged to pay the money back to businesses in ports. They say categorically that that is not the case, and they have demonstrated that in discussions I have had with them.”
We thus have a direct contradiction between the Minister before us, who tells us that most of the money that was stripped arbitrarily from the tenants—about four fifths,
if I remember the figures rightly—is going back to port operators, and his hon. Friend in the Department for Transport, who not only denies it and says that the operators deny it, but says that they have demonstrated it to him in meetings.
John Healey: Will the hon. Gentleman not accept that the extract that he has read from a speech made by my hon. Friend the Under-Secretary in the main Chamber yesterday clearly underlines the fact that my hon. Friend was setting out the position put to him by the British Ports Association? He was setting out the BPA’s position, not the Government’s assessment of it. I can tell the hon. Gentleman that the rateable value of port operators across the country as a result of the ports review has been reduced by £44 million.
Mr. Brazier: There are two points to be made about that intervention. First, I shall correct the mistake that the Minister has just made when he told us—the record will confirm it—that the Under-Secretary was setting out the view of the British Ports Association, not the Government’s. Let us be clear about what he said, because I shall read the text from Hansard again:
“UK Major Ports and the British Ports Association refute the suggestion that the money has gone to them and that they are in some way obliged to pay the money back to businesses in ports. They say categorically that that is not the case, and they have demonstrated that in discussions I have had with them.” —[Official Report, 27 January 2009; Vol. 487, c. 150.]
The Under-Secretary was making it clear that he shares their view.
The second and more important point is that both Ministers cannot be right. I am not in a position to judge which of them is right, but it is extraordinary that two Ministers are still unable to agree on the matter after the many months that the crisis has been running. However, irrespective of who is right, the key question is, were the various port tenants all warned when this exercise began in 2004, when the first wheels started to turn? In fact, the exercise started late, as the Minister explained—it did not actually start until 2006. Whatever arguments one might have about the current arrangements, if the tenants were not warned, there can be no moral case whatever for collecting back-tax from them, as all three Members who have spoken made clear. If the Government cannot show evidence that the Valuation Office Agency approached the businesses and told them that the exercise was going on, the Government must understand that those businesses were paying rent on the basis that they believed that their landlords were responsible for rates.
The Minister must know that when a business decides whether to take on premises, one of the factors in the rent negotiations is who is paying the rates—it has to be. Unless the Minister can show the House evidence that the Valuation Office Agency explained the exercise to the businesses—he was unable to do so last week—he has no moral case whatever.
I conclude by making a few general points, because I am conscious that a lot more hon. Members want to speak. Regardless of what the real facts are—I am not sure, for the reasons that I have mentioned, that Ministers fully understand them—the situation is dire. We have had a string of examples already, so I will not repeat them.
Ports businesses suggest that some 700 businesses are affected and the Minister himself admitted that an extra 564 properties in England are affected. The worst affected areas appear to be Mersey and Humber, although other examples have been raised today. I am interested to see the hon. Member for Dover (Gwyn Prosser) in the Chamber. So far I have had no complaints from Whitstable in my constituency, but I am waiting for the letter.
I remind hon. and right hon. Members that freight rates—the rates enjoyed by the customers of ports—are at their lowest in real terms in living memory. I am told that the situation is so bad that ships travelling at the moment are simply being reimbursed for fuel so that companies can keep their vessels on the move. In some areas the freight rates have dropped by more than 95 per cent.
Against the background of the Government’s seeming to be happy to shell out vast sums to the banks, despite the fact that they are not lending, and to shovel out vast sums to the automotive industry, how can they possibly justify such a grossly unfair impost on businesses that are not asking for subsidies, although they are in a desperate trading position? All these businesses are asking for is fair treatment.
3.15 pm
Derek Wyatt (Sittingbourne and Sheppey) (Lab): I thank my hon. Friend the Member for Great Grimsby (Mr. Mitchell) and hon. Members from all parties. We are representing our communities and our constituents who are faced with serious problems.
The port of Sheerness is probably the fourth—sometimes the fifth—largest in Britain. It is the main importer of cars and is the biggest importer of Cape fruits from South Africa. When running businesses, as some Members have done, people look forward and break the year up into four quarters and try to reach the figures that they have ascertained. In the next year, 2009-10, it will be hard for anybody to guess whether they will reach their figures, but they will try, because that is what being in business means.
The one thing that people do not do is look back to quarters one, two, three and four of 2008, 2007, 2006 or 2005. Why? Because the accounts for those years have been audited and tax paid on them to Customs so, as far as the business is concerned, they are done, sealed and finished—that is it. The Government should not then undo the law of the land and say, “I am awfully sorry, but although those accounts have been professionally audited and taxed officially and the tax has been paid, we have made a bit of a mistake. P.S. You owe us hundreds of thousands of pounds.” That should not be done.
I understand that the Minister is in a difficult spot. He is a reasonable man, whom I have met on many occasions in his different portfolios, and he is well respected in the House. This is not his issue, but he has to carry the can today. How can anyone possibly say that the system is fair, decent, practical and honest? If it is for UK plc, what on earth is the sense of it? The system is an appalling mistake and we have to ask the Minister to redress it.
What sort of Government have made such a decision? In due course, I shall press the Minister with the Freedom of Information Act 2000, but he could save me the trouble by putting into the public domain the correspondence, e-mails and telephone calls between his Department and the Treasury, the Secretary of State for Transport and the Secretary of State for Business, Enterprise and Regulatory Reform. I cannot believe that either of those Secretaries of State could possibly have agreed and signed off such a system. I hope that in his summation the Minister will not tell me that they have. That would make the situation even scarier, because the Government do not understand what they have done.
Will the Minister tell me what I should tell some of the people from Sheerness dock, whom I saw last Friday? For instance, listen to Mr. Sampson’s case. He imports vehicles and is very good at it. In 1998 and 1999, we said we wanted added value. Mr. Sampson adds value to the cars he imports, putting in different stereos, satnavs and different colours of leather, and so on. He is exactly where we want people to be. His rates are £4,438, but now he has to pay £57,715.97. Please tell me what I should say. If the Minister does not change the situation, those people will be in the receiver’s yard within three months.
Kleerfreight is a small family business employing five people. Things are tight and it is hard running a small business, so what has Kleerfreight just been asked for? The sum of £11,270, which it cannot afford. The owner tells me, rather nicely:
“Someone somewhere is accountable for such gross negligence”.
Please tell me that there is a principle and value behind the system. We do not understand it.
Mark Holmwood, the managing director of Seatrade, says that his business is now faced with a rates assessment of nearly £20,000. The business will not be able to pay that sum—there is no question about it.
Worse still is the case of the big companies. Peugeot Citroen and Volkswagen in my constituency will now have to pay back £3 million and £2.8 million each if the measure goes through. As a consequence, that will threaten the future of the dock, because as they say,
“in our case...our UK and Paris offices started to make significant changes on our receipt of this demand in our UK supply chain”.
“storage capacity and staff in Sheerness, this continues and we have conversely increased storage and facilities in Europe”
“50 jobs have gone so far more are anticipated, revenue to the port and investment by us will be down by a number of millions this year and active consideration is being given to whether we remain in Sheerness.”
There is an unintentional consequence of the system, which is that we are now giving other ports in Europe a quick opportunity to take the market away from us in the worst trading conditions since 1929. I cannot believe that the Government really want to do that. It is simply beyond the wit of man to understand how that could have been the intention. I also received a letter from John Dowding, of Overland Freight Forwarders, saying exactly the same as the others I have mentioned.
The Minister understands our anger, but we do not make business; we do not get up in the morning and serve our communities in that way. However, the people
who do have tried to make their businesses work. The measure is not just an own goal; it is 10 own goals. I urge the Minister to consider the total impact of the system on UK plc.
3.20 pm
Mr. Ian Cawsey (Brigg and Goole) (Lab): I, too, congratulate my hon. Friend the Member for Great Grimsby (Mr. Mitchell) on securing the debate, although I will not thank him for his timing, because today is the 21st birthday of my eldest daughter, Hannah. I managed to get up to north Lincolnshire for the birthday and get back just in time to attend the debate, thanks to National Express, I think.
This is a timely debate, however. Many people outside the House may be surprised to learn that a lot of companies at ports around the country were not paying business rates, but the situation is much more complicated than that. Anyway, as has been said, the businesses are complaining not about that decision, but about the implementation and the retrospection. That has been caused by a long period of procrastination by the Valuation Office Agency; it has taken so long to get figures to the companies. I do not think that anybody in the Chamber expects those figures to be right when there has been a revaluation, but in the meantime those bills are held against those companies—hon. Members have described the implications of that.
The Government have acknowledged that there is a problem. That is why they have already offered a potential solution. The solution of extending the time to pay, fast-track revaluation and an opportunity to open a dialogue with port owners such as Associated British Ports, which covers Goole in my constituency, is all right as far as it goes, but it could work only if the moneys that were collected previously by ABP through the cumulo and then handed over to the Government in business rates were likely to flow back to the companies. We now know that that will not happen.
I know that this is not true for every other port, but certainly in Goole it is true to say that ABP has had a lot of money back. However, that money will not be passed on to the companies that operate off the port of Goole. I have met representatives of ABP and they are quite up front about that. First, they do not have to pass the money on and, secondly, to be fair to them, they make the point that their own liability over all their operations across the country has gone up as well. They may have gained in Goole, but they have lost in other places and they will not pass the money on.
The basis of the original offer from the Government is being undermined by the fact that the companies that operate in Goole and at other ports across the Humber region and in other parts of the country will not get any money back. I cannot add to what my hon. Friend the Member for Sittingbourne and Sheppey (Derek Wyatt) said about retrospection and how businesses operate, except to say that I agree with every word he said.
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