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John Mann: Well, in that case I suppose I should thank the hon. Gentleman for his generosity. On the LABGI scheme, does he agree it is reprehensible that some local authorities have this money in the coffers and are spending it on things other than what they should? One local authority chose in its budget for the next year to spend the entire amount over the last three years—£815,000—on job evaluation, rather than on assisting local business growth.
Robert Neill: What is most reprehensible is that the Treasury cut the amount of funding available for LABGI by such an enormous amount, but that was not mentioned.
Having now dealt with LABGI, I will move on, if I may, to—
John Mann: Will the hon. Gentleman give way?
Robert Neill: I have been more than generous in giving way to the hon. Gentleman, so I shall not do so again now—he is not going to get away with this again.
Robert Neill: I do not want the hon. Gentleman to get stuck in the position he is currently in, as he might hurt himself. I have given a very clear answer. I am more than happy to encourage all local authorities to work seriously together, and I hope they will, but there is no point in masking where the real responsibility lies here: the Government have emasculated a scheme that could otherwise have worked well, and then sought to ignore what my party were trying to put in its place.
Robert Neill: The hon. Gentleman has had two bites at the cherry, which is more than generous. I do not think I am usually difficult about giving way to hon. Members, but I am not going to have a two-way conversation with him, as that might get boring. [Interruption.]
Mr. Deputy Speaker (Sir Michael Lord): Order. Two-way conversations from sedentary positions are not just boring; they are not allowed in the House. I have half an eye on the clock, and as a lot of hon. Members are seeking to catch my eye, perhaps we could press on with the debate.
Robert Neill: I am happy to do that, Mr. Deputy Speaker. I have deliberately sought to take as many interventions as I can, in an effort to assist hon. Members in this debate.
Against the background that I have outlined, the Government have failed to deliver real assistance to small businesses. As we alluded to in our motion, there has been a smokescreen of measures that have never been delivered on the ground. I know that my hon. Friend the Member for Hertford and Stortford (Mr. Prisk) is going to refer to those in some detail when he winds up. No real action has been taken, there has been no proper loan guarantee scheme, and we have not had the things that would really make a difference to business. The Government have not introduced anything that would provide a real incentive for businesses to come to a local authority area, such as the incentive scheme that we propose; nor have they given local authorities the ability to offer discounts to help businesses in trouble.
Those things would really help business in this difficult time, but the Government ignore all those real actions; instead, there is a smokescreen of spin and a degree of reluctance to acknowledge reality. It does make one think that this Government are now firmly stuck in the bunker—Ministers are moving phantom armies around in Ukraine, while the threat to businesses is knocking on the door of Whitehall. That is the reality: the Government have lost touch on this issue, and business deserves better.
5.6 pm
The Minister for Local Government (John Healey): I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“notes that the Government has recognised the problems that many businesses face and is committed to do all it can to help them through these testing times; recognises the action the Government has taken to give targeted support to businesses including a £20 billion working capital scheme, an aim to pay Government suppliers within 10 days, a cut in the main rate of value added tax to 15 per cent., a deferral in the increase in the small companies’ rate of corporation tax, free business health checks, more than £100 million towards debt advice, the HM Revenue and Customs Time to Pay scheme benefiting 93,000 firms by deferring £1.6 billion in tax, and extension of Empty Property Relief; believes the Government’s commitment to the annual Retail Price Index cap means that there has been no real terms increase in business rates since 1990; welcomes the Small Business Rate Relief scheme benefiting 392,000 businesses by £260 million in 2007-08; recognises that funding of almost £1 billion since 2005-06 has been provided through the Local Authority Business Growth Incentive scheme; further supports fairness in the system that ensures that properties are revalued every five years with transitional relief to phase in significant increases in bills from revaluation; and acknowledges help provided for businesses, including in ports, receiving unexpected and significant backdated rates bills by introducing an unprecedented eight years to pay, as part of a package of measures that ensures through the rates system there is certainly, fairness and appropriate relief for businesses.”.
This is an important and timely debate on business rate taxation. It is also an interesting one, because what we have just heard from the hon. Member for Bromley and Chislehurst (Robert Neill), the Conservative Front-Bench spokesman, is a strong case for a fiscal stimulus and tax support. On that basis, I am glad that he is part of what is now an inter-party international consensus that knows that Government action is needed to slow the global downturn, to speed up the chances of recovery and to regulate better the international financial system for the future. I am glad that he also seems to know that Governments must act to help families and firms through this recession, even if—I have to say this—the shadow Chancellor and his party’s leader do not appreciate that.
As the Prime Minister and the Chancellor have made clear—this is where the real difference between the two sides of this House lies—we will take whatever action is needed to see us through the credit crunch. We will do what it takes, as we have done, to prevent the —[Interruption.]
Mr. Deputy Speaker: Order. May I repeat what I said earlier? If anybody wishes to intervene, it is much better for the structure of the debate and for general order if they intervene from a standing position in the normal way, rather than chunter from a sedentary position.
John Healey: I was trying to take the chuntering from the Opposition Front-Bench team seriously, Mr. Deputy Speaker. I am not sure how they can say that no action has been taken and everything is simply spin, given that we stepped in to prevent the collapse of the banking system. We did so because it is important to savers, pensioners, householders and mortgage payers—all of us—and businesses that we have a banking system in which banks do not go bust and which gets back as quickly as possible to the proper of business of banking: lending to support the British economy, lending to support firms and lending to support families. Similarly, I should mention the help that we have given to try to keep companies in business, people in work and families in their homes, and the action that we are now taking to try to ensure a proper international system of regulation in order to cut the risks of such a meltdown in the global financial system in the future.
Mr. Brazier: What would the Minister say to Ahlmark Shipping (UK) Ltd, which contacted me this morning to say that it had received a backdated rate demand for £750,000? Nobody from the Valuation Office Agency, or indeed anyone else, approached the company about this new system of paying direct rates—it already had a negotiated cumulo contract with its port supplier. The first that the company heard about this was in March 2008. It now faces a bill for the sum that I mentioned and it says that it has no chance of recovering those costs from its customers. It states that this
“will make our company insolvent with job losses inevitable.”
John Healey: If the business is faced with such a business tax demand, it should have been paying business taxes a good deal earlier than 2005. I would also say that businesses in the same port—possibly ones in direct competition with the one that the hon. Gentleman mentions—have been paying business taxes on their own account during that period. Finally, I would say that the Opposition should not vote down the measures that we will seek to put in place next week that will give that firm and others in a similar position eight years to pay the backdated business rates that they are now legally liable to pay.
Mr. Shepherd: The Minister said that the stabilisation of the banks is important, and I am sure that everyone agrees. But we are seeing, especially in the west midlands, rapidly rising unemployment. It is now 2 million and may be 3 million by the end of this year. Despite that, the Government are persisting with increasing the taxes on business and therefore harming the prospects for jobs. That is what the uniform business rate is doing now, and surely the Minister’s argument requires some balance to try to get the equation right.
John Healey: Well, that is another argument from the Opposition for a fiscal stimulus. It also overlooks the fact that we have put in place the VAT cut, and the Office for National Statistics suggests that 70 per cent. of the cut has been passed through into prices. Other independent commentators have said that it is the equivalent of a 1 per cent. interest cut. The hon. Gentleman also overlooks the fact that in the pre-Budget report the Chancellor said that he would not proceed with the increase in the small companies rate that was scheduled.
Robert Neill: Is the Minister really saying that he thinks that the VAT cut has worked? Does he think that many small businesses have found it possible to make the reduction in VAT given the administrative costs? Would it not have been simpler and more direct to have helped them through the rates?
John Healey: It is not what I say: the Office for National Statistics has said that the VAT reduction has been passed through to consumers in some 70 per cent. of prices. The independent Institute for Fiscal Studies says that the VAT cut has had the same effect as a 1 per cent. interest rate cut. Goldman Sachs has said:
“The VAT cut appears to have had a clear positive impact.”
Mr. Shepherd: The problem is clearly focused in small businesses, and many of my hon. Friends are very concerned about that, but it is also much wider on the high street. Some big chains are in marginal trading positions now, and they are big sources of employment. The Government will lose revenue and costs—through social security—will rise. Would it not be better to stabilise matters by retaining the situation as it was before all these proposals started to increase the burden on employment?
John Healey: As the House would expect, we are in close contact with businesses and have detailed discussions with those from all sectors and all parts of the country. I am conscious of the particular pressures in which business rates have played a part. I said earlier that the Prime Minister and Chancellor have made it clear that during this period of unprecedented economic downturn and pressure, we are prepared to take whatever action is needed to try help business and the economy through it.
Charles Hendry (Wealden) (Con): Will the Minister also look into the case of my constituent, Mr. Thompson, who runs one of the many excellent village pubs in my constituency, the Anchor Inn in Hartfield? Even though the rateable value of his pub has gone down this year, the rates payable have gone up from £10,622 to £16,967, an increase of 60 per cent. Will the Minister meet Mr. Thompson and others to explain to them how, in these incredibly difficult times, they are expected to find that sort of money, which represents a £600 a month increase in the amount that they have to pay in business rates?
John Healey: My diary secretary hates it when I come to these debates. I will not meet the hon. Gentleman’s constituent, but I will meet the hon. Gentleman if he wants to run through the details of the case with his constituent beforehand. Having heard only what the hon. Gentleman has outlined, it is difficult for me to comment on that situation. It might be a product of the end of the transitional relief, which has dampened the increases in the business rates that his constituent was liable to pay for the past four years. We legislated for that scheme and put it in place before the 2005 ratings list came into operation, so that his constituent and any other of the 1.7 million businesses in Britain would know—because of that provision and other stable features in the system—their likely rates liability for each of the five years of the ratings list. When one is running a business, advance knowledge of a potentially significant element of overheads does not mean that the liability to pay changes, but that the ability to plan and to try to manage those pressures is improved.
Mr. Brazier: That, of course, is precisely what has not happened in the case of companies such as Ahlmark Shipping and other companies subject to port rating. They were given no notice of any kind. Many renegotiated their rent, sometimes on contracts that ran five or even as many as 30 years ahead, on the basis of the existing cumulo arrangement. Will the Minister at least accept that even if the logic of his argument is correct—I do not accept that it is—recalculating those payments cannot then be a private matter between the port employer and the port tenant? Often, those employers who have benefited, who, in many cases, were warned about the changes when their tenants were not, are competing against their tenants who have warehouses on a different rating.
John Healey: This debate is in danger of foreshadowing a debate that we are likely to have in the Chamber next week. In general terms, I do not accept that the separate listing and liability for business rates for some of those businesses came completely out of the blue for three reasons. First, we made it clear well before 2005 that we intended to end the system of prescription. Secondly, a large number—more than 1,500—of businesses based in ports were already paying business rates on their own account and not through the port operator before the listing period started. Thirdly, although I accept that communication from the Valuation Office Agency could and should have been better and that it should have been distributed more quickly, information about the ports review was disseminated widely across the sector from an early stage in the process.
John Mann: May I say how delighted I am to hear my right hon. Friend reiterate that the Government will do whatever is necessary? Does he agree that it is necessary to ensure that the LABGI—or local authority business growth incentive scheme—money is not spent on other causes? For example, one local authority has chosen to put £815,000—three years’ money—into job evaluation rather than making it available to local businesses through its budget for the next year. Will the Minister do something about that to ensure that that money, which is earmarked for businesses, goes to local businesses?
John Healey: The LABGI scheme—to use a rather ugly and awkward acronym—was a three-year scheme from the outset. The hon. Member for Bromley and Chislehurst misleads the House when he says that the amount for the scheme has been slashed— [ Interruption. ]
Mr. Deputy Speaker: Order. The word “misleads” is not a word that we like to use in the Chamber. Perhaps the Minister would care to withdraw it.
John Healey: Thank you, Mr. Deputy Speaker. I do not wish to accuse the hon. Member for Bromley and Chislehurst of misleading the House, so of course I withdraw that word. However, he is mistaken if he describes it as a scheme that has had its funding from the Treasury slashed. I say that because I was the Treasury Minister responsible for introducing it. I devised and funded it as a three-year scheme: over the three years, almost £1 billion has been made available as a reward to local authorities that played a part in helping businesses in their area to grow.
My hon. Friend the Member for Bassetlaw (John Mann) makes a really important point. The money is a reward and a recognition, yes, but it is also an encouragement and an incentive to local authorities to do more to support their business base, and to bring jobs and long-term prosperity to their local economy. That is the sort of investment and activity that we wish to encourage local authorities to increase, but the Government—and especially my Department—have a principle to which we hold quite strongly. We believe that, where possible, we should allow local authorities to take decisions for themselves about how best to spend their money and about what is best for their area.
John Mann: I thank the Minister for that answer and for giving way again, but does he understand the anger of the very large number of business people in my constituency who have contacted me in the past few days? They have been astonished to find that Bassetlaw council has earmarked the LAGBI money in its budget for next year for job evaluation, and not towards giving local businesses the support that they currently need.
John Healey: I can understand the reaction of business people in Bassetlaw. If what my hon. Friend says about his council’s use of the money is correct, that places it out of step with the mainstream of councils that receive LAGBI money. Most councils see the reason for the money and understand its value, and they have been able to use it to support local jobs and businesses, particularly during this difficult time when the economy is on a downturn and businesses are under new pressure.
We are conscious of the pressures on business at present, and of the pressures that business rates can produce, but I remind the House that rating systems of one type or another have been in place in this country for more than 400 years. The present system is central to providing the revenues that support those local government services—such as education, housing, waste, social services and planning—that benefit us all.
This year, business rates should raise around £20 billion—all of which, I point out to the hon. Member for Wealden (Mr. Hendry), is redistributed to local authorities, rather than going into central coffers or the tax pool.
Mr. Shepherd: Looking around the House, I do not see many hon. Members—if any—who were present when this measure went through. The key word is “uniform”, and the distinction is that this is now a national taxation at the command of central Government. As a result, it does not reflect the two important features of rates that have been key for all their 400 years—less 20 years—of history. That is, that the money was at the disposal of local authorities to compensate for the nature of business in their areas, and that it therefore flowed to those areas around the country—market towns, for example—that encouraged business. This uniform thing merely makes the tax divisive across the country, and thus very different by nature from what preceded it.
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