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Robert Neill:
That is entirely right; my hon. Friend makes a valid point. The situation is compounded by the Government’s current proposals, which left this House only a matter of weeks ago, to add a supplementary business rate, to which I shall return. To deal with my hon. Friend’s point, I would like the power to be given back to local authorities to levy a discount on the business rate under those circumstances. We floated that idea during the passage of the Business Rate
Supplements Bill, but I regret to say that the Government rejected it. Such a power is exactly the sort of local discretion that we ought to restore to the system, so it is regrettable that the opportunity was not taken.
Lorely Burt (Solihull) (LD): I am listening with great interest and sympathy to the hon. Gentleman. However, rather than just giving local authorities the ability to levy a discount, why would he not go the whole hog and restore their ability to levy the local business rate, as suggested by the hon. Member for Aldridge-Brownhills (Mr. Shepherd)? Surely local authorities must know much better both how able local businesses are to withstand the payments and what sort of services they need.
Robert Neill: As many hon. Members will know, my party recently published a policy document called “Control Shift”, in which we put forward a proposal to encourage local authorities to attract new business by giving them a stake in the revenue that new businesses bring—enabling them to keep the increase in council tax from attracting new businesses, without its being lost through equalisation, for a period of six years. That is an important point that we need to consider.
I might add that it is ironic that we should be making that positive proposal to enable local councils when the Government have been slashing the support for business growth that they used to give through the local authorities business growth incentive—LABGI—which has essentially been emasculated for want of financial support from the Treasury. I may return to that point, which shows a clear contrast between the approach taken by the Government and that taken by the Opposition on support for businesses through local authorities.
The overall situation is a double whammy, with a 5 per cent. increase based on outdated methodology and data, and the loss of the transitional relief, as well as those other matters to which we have referred. There is also concern about the impact on particular sectors. It is worth remembering that the retail sector is particularly likely to be hit in the current situation, because at the time of the revaluation data, which go back to April 2008, retail rentals were at a historically high level and the market was rather distorted. Since then, they have fallen back and come closer into line with rentals in other sectors, which is also closer to the position in the previous revaluation, in 2003. Small shops are therefore likely to be suffering particularly badly from the percentage increase.
That is one sector that is being hit, but it is not the only one. There is also the whole question of small businesses, which are always particularly vulnerable to financial pressures. Equally, small businesses are particularly important to the economy, because they are the seedcorn of many others. I have always thought that when Napoleon called us a nation of shopkeepers he paid us a considerable compliment about the strength of entrepreneurialism and individual initiative that enabled this country to beat him at the end of the day. We therefore disregard small business at our great peril. It is particularly troubling, therefore, that so many businesses are in difficultly.
In its current form, the small business rate relief scheme, which was introduced in 2005, involves businesses making an application. That brings us back to an experience that many of us will have had in dealing with
small business: at the end of the day, when people have been working extremely long hours, the more form filling, the more hassle, the more paperwork there is to do, the harder it gets, so the forms and applications are more likely to be shoved to one side as something that will have to be dealt with later. The first matter—of actually getting the money over the counter and through the tills—has to be dealt with first.
Mr. Brian Binley (Northampton, South) (Con): Has my hon. Friend heard the reports that I have regarding the small business rate relief—that many local authorities are simply not taking steps to advise small businesses of their ability to apply? In that respect, they are not helping with the processes small businesses have to go through at this difficult time.
Robert Neill: To be fair to local authorities, I think that the picture varies, but the important point is that at the moment the system creates a burden for the individual businessman or woman and for the local authority. It is a burden for the business person who has to make the application; it is a burden for the local authority if—as, to be fair, many do—they seek to advertise what is available, which entails some costs. I commend certain local authorities—for example, Conservative-controlled Birmingham city council has sent letters to all potentially eligible businesses and dealt with some 6,000 applications; Harrow council, which also happens to be Conservative, is joint sponsoring advice days; and there are many others. The evidence shows a very wide variation in the take-up: the national figure is about 60 per cent., but in some areas in the north-east it goes up to about 80-odd per cent., while in some areas of the north-west, on the other side of the Pennines, it goes down to the mid-20s —a bizarre state of affairs.
The solution could be achieved very easily by adopting the measures proposed by my hon. Friend the Member for Mid-Worcestershire (Peter Luff) in his excellent private Member’s Bill, which was debated in the House just a couple of weeks ago, and making the relief automatic. I know that the Under-Secretary of State for Communities and Local Government, the hon. Member for Tooting (Mr. Khan), who was present on that occasion, made charitable and sympathetic noises in his helpful way, but we have not seen any action. It would not take long for the Government to act, and I sincerely hope that they will. My hon. Friend showed good faith in not pressing his Bill, but we now expect the Government to show some good faith and take his measure swiftly on board.
Mr. David Kidney (Stafford) (Lab): When I last asked a parliamentary question on this subject, the Local Government Association got in touch with me to provide examples of good practice, some of which the hon. Gentleman has just mentioned. Does he think there is a greater role for the LGA to help to ensure that all local authorities do as well as the best in trying to drive up take-up of this relief?
Robert Neill:
I think the LGA is very willing to help and it has encouraged good practice. It also supported my hon. Friend’s Bill, which would have made the relief automatic—it would have taken good practice to its logical conclusion and rolled it out nationwide, while also having the advantage of lifting the burden not only
on businesses but on local authorities, which would not have had to use their current funding to encourage take-up and could have used it to provide other means of business support. Adopting my hon. Friend’s Bill would therefore be a win-win situation, which is why I hope the Government will move swiftly to do so.
John Mann (Bassetlaw) (Lab): In the interim, what advice would the hon. Gentleman give to councils or local authorities of all parties that have failed to act in the way that those he highlighted have done?
Robert Neill: It is never too late to follow good practice, and I hope that all local authorities will. It really is as simple as that.
I have been talking about the small business sector, which suffers particular difficulties, but relief on empty properties is another important issue. The reduction in the relief available has caused difficulties in many sectors. We could understand the concern if it were thought that properties were being deliberately left empty, but that is not the case. The difficulty that the economic downturn creates is that, invariably and inevitably in these economic circumstances, the void period that arises between one letting finishing—sometimes, I regret to say, because the business previously in the premises has ceased trading—and another business taking over is likely to be longer, because there is less demand. To clobber the owners at that stage seems unjust and is, I think, an unforeseen consequence of the Government’s approach. That could be rectified, however.
There is concern about the growth in the number of empty shops on the high street. Again, the LGA has been doing its best. Only two or three weeks ago, it announced an initiative on good practice that can be rolled out to try to encourage other means of at least getting vacant units in use, having something in shop windows and having some activity, rather than the whitewashed windows that we see all too often. Again, that is an area where there has been a failure to support business.
Another sector experiencing difficulty is the ports, which are important. The Minister for Local Government and I have talked about the ports on a number of occasions in recent times, and I am sorry that his eyes look as if they might glaze over, but I make no apology for returning to the subject because the treatment of those businesses is shameful. Also, I make no apology for saying to him that until he and his colleagues wake up and take notice of what is happening in the ports, we will return to these matters again and again.
A thoroughly needless step has been embarked on: a retrospective revaluation of port tax, which is driving firms in the ports out of business and threatening the viability of a key sector of the British economy. This all stems from the inadequacy of a Government agency. I know that the Minister has spoken to operators and businesses in the ports, as have I and a number of hon. Members. The message from the ports sector, which I have received very clearly, is that everybody accepts the need to pay a fair share in rates. There is no problem with rationalisation of the previous system—the cumulo—by which rates were paid.
For those Members who have not followed the issue, I should explain that previously businesses within the 55 registered ports in effect paid their rates via the
operator; some were paid over in total by the operator. A decision was taken that led to their being rated as separate hereditaments—separate rateable units. So far, all well and good, but the incompetence and delay shown by the Valuation Office Agency in drawing up new lists meant that those lists were not available until this year.
As I recall, that is a number of years on from when the lists should have been made available. The consequence has been a massive retrospective increase in the cost of rates, backdated to 2005, when the lists should have been brought into being. The inadequacy and bad management of the VOA meant that firms were not asked to fork out for those changed rates until this year—three years after the event.
Mr. Julian Brazier (Canterbury) (Con): My hon. Friend is making a powerful case. Is he aware that a delegation of shipping and shipping-related companies is going to the Department for Transport tomorrow to tell Ministers there that, because of that and the disgraceful swingeing and unjustified increases in light dues, they are thinking of pulling out of this country altogether? The effect of that would be a huge increase in traffic through Rotterdam, and hence by lorry through Dover, with all sorts of consequences for regional policy, congestion in the south-east and so on.
Robert Neill: I am aware of that as it has been raised by my hon. Friend and a number of Members who sit on the Labour Benches, as well as by Members from all other parties. It is not a purely partisan matter, so it is all the more surprising that we have met with such a stonewalling response from the Department for Communities and Local Government.
It is worth examining these matters in a little more detail, because they clearly show the inadequacy of the Government’s approach. Overall, there will be a very significant increase in the burden that the ports sector will have to bear. Not only is it retrospective, but it follows an increase that was imposed with no impact assessment, no consultation and no assessment of the effect on the wider economy. Moreover, the policy contravenes the Treasury’s own guidance on retrospective taxation. That information does not come from me; all of it was obtained by hon. Members in answers to questions that they had asked the Government. The Government have breached their own rules.
Against that background, it is particularly invidious to use retrospective taxation. There are clear parameters for the use of retrospective taxation: it should be used very rarely, to preserve revenue and other significant interests. As there was never any assessment of the amount of revenue that might be raised, no one knew what there was to preserve. We have had enough stealth taxes from this Government in the past; now we have a backdated stealth tax as well, and that makes their action doubly invidious.
The Humber Docks Rating Group, which has met a number of Members, estimates that some 600 businesses could be affected. Firms are already going under. Three have gone under so far, and, although they are small firms, I believe that between 60 and 100 jobs have been lost. A number of other businesses have reported that they are in difficulty—and this is not just affecting the
small business sector; it is affecting large multinationals as well. At a recent meeting at the House of Commons, DFDS Seaways made it clear through its UK managing director that unless the treatment of the ports sector changed, it would have to reconsider its investment and operations in the United Kingdom.
That underlines the point made by my hon. Friend the Member for Canterbury (Mr. Brazier). This is an area in which the United Kingdom’s competitiveness is at stake. Organisations such as DFDS Seaways will simply relocate their operations in Europe—in Rotterdam—and, as my hon. Friend pointed out, the transhipments will then come by road, which will have bad consequences for the environment. This is the worst example that one could possibly imagine of the Government’s lack of a joined-up policy.
Mr. Mark Field (Cities of London and Westminster) (Con): While I entirely agree with all the concerns that my hon. Friend has expressed about retrospection, may I ask him what our party’s policy would be for the period between 2005 and the present day, given that we obviously want to help the ports as much as we can?
Robert Neill: What we have said is that we should postpone action so that we maintain the 2005 values until 2010. That would give the businesses a breathing space, and would enable the revaluation to be carried out on a proper basis with consultation, an impact assessment and a quantification of the revenue. That would enable the businesses—which know that there will inevitably have to be some uplift in their rates—to plan properly. The key point is that it was impossible for them to plan properly in this instance, because they were given no notice. In a number of cases, particularly at the smaller end of the scale, the amount demanded in back rates exceeded the annual turnover of the business. In order to pay the rates that will fall due in the coming week, businesses will technically be trading insolvent.
Apart from one of the blandest letters that I have ever seen, from the Insolvency Service, the Government have been able to produce no defence. When the hon. Member for Great Grimsby (Mr. Mitchell)—who I am delighted to see is present—initiated a debate in Westminster Hall, the Minister, as ever, put up a stalwart defence of the Government’s position, but I felt he was a bit like General Custer at Little Big Horn. The only difference, apart from the fact that General Custer had long flowing locks, was that the Minister was at least able to walk away at the end of the day. The fact is, however, that he was surrounded, and there was no one to support him because the case was unanswerable.
When I was a barrister, I occasionally had to tell clients that they did not have a case. The Government are in exactly the same position. Their case is roughly the same as that of a defendant when his fingerprints have been identified, there is a DNA sample, he has signed a confession, and the Archbishop of Canterbury was an eye-witness. They have been caught bang to rights, and the sooner they accept that and move in the direction that has been suggested by my hon. Friend the Member for Cities of London and Westminster (Mr. Field), the better. Otherwise, the ports sector in this country is at real risk of being dealt long-term damage.
The Minister for Local Government (John Healey):
I understand why the hon. Gentleman might want to have a dry run of a full debate we will have on this
subject next week, but does he not accept that this is not, as he is trying to say, something new for ports? Does he not accept that although 500 or so businesses in ports are newly listed and liable to pay business rates, three times that number were already paying business rates separately before this period? Will he not also accept that what is new is the unprecedented period of eight years to pay these backdated, legally established tax liabilities, which we are proposing and he is opposing?
Robert Neill: The Minister is game as ever, but he does not address the key points. The issue of the separate rating is not of itself the problem. What is new is the retrospective revaluation element; that is the bit the Government have not been able to address.
John Healey: It is not new; it is an established part of the ratings system—it has been so in this period, and it was in the last period. More firms outside the ports are in the same position, because that is the way the rates system works, and the period we are allowing for payment will also help those businesses, especially in the current economic circumstances. There is nothing special about the position of these ports businesses, except that they are the subject of a review that the Valuation Office Agency has undertaken. It arguably could have done so more quickly, and it has conceded that point.
Robert Neill: I know the Minister has his back to the wall, but, if I may say so, he really is struggling a bit. It is not, I hope, normal practice in the valuation business for changes to be carried out retrospectively without impact assessments and without consultation. If it is, that says a lot about those ultimately responsible for the VOA—and the ultimate responsibility lies, of course, with Ministers.
What is special about the ports sector is that it is particularly vulnerable to this measure, and firms are starting to go out of business. Nothing the Government can say will get them off the hook on this, and I regret that the Minister is, perhaps on orders from above, still digging himself into this position. That follows on from the response of the Department to the House of Lords debate last week, where the Government position was condemned by their lordships, and the next day the Government issued a statement saying, “Nothing has changed, and we carry on as before.” This Government are turning into a modern-day version of the Bourbons, as that is an attitude we could have expected from Marie Antoinette and Louis XVI in Versailles. The only difference is that the Government are saying, “You can have eight years to eat the cake,” but what they do not understand is that the cake will choke the businesses in the interim. That is why this is wrong. The Government have learned nothing and forgotten nothing.
If we add all these things together, we are left with a catalogue of failure. I have referred to supplementary business rates, but there is also the winding down of the local authority business growth incentives—LABGI—scheme. There have been wholly inadequate responses from the Government.
John Mann: Will the hon. Gentleman give way?
Robert Neill: Yes I will, although I think I have been fairly generous.
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