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However, the concentrated number of companies in that position as a result of the Valuation Office Agency’s ports review is special. Let me make it clear that the ports review was not a change in the operation of the system or a change in the law. The VOA was doing its
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job and pursuing its legal duty to keep the ratings list up to date and accurate. That is why no impact assessment was undertaken beforehand. The ports review did not even constitute a change in the way in which the business rates system applied to businesses in ports.

My hon. Friends understand, although the hon. Member for Bromley and Chislehurst does not, that prescription was a method—a formula—for setting the rateable value of the ports operators, not the businesses in the ports. Before the ports review, 1,643 businesses in ports were separately listed and separately liable to pay business rates. In other words, three times as many ports-based businesses paid business rates on their account before the ports review than consequently paid them afterwards. In some cases, properties, which have been added and the addition of which is being contested, belong to businesses that already paid separately for other properties, sometimes in the same port.

Robert Neill: Given that it was the right hon. Gentleman’s Government who extended the period of prescription until 2005 to enable the review to take place, has he ever had a proper explanation from the Valuation Office Agency of why it did not commence that review in a timely manner that was commensurate with the duty that he rightly said it has to have an accurate and up-to-date list, which it manifestly did not?

John Healey: There were three flaws in the way that the VOA conducted its ports review. First, it was clear before the Southampton container ports case was settled that a significant number of properties in ports should have been separately listed and paying business rates for some time, but were not doing so. Only after that was the legal position clear. I understand why that happened, but in hindsight it would have been better if the VOA had done some work before then. Secondly, the communication was not good enough, which is a point that the VOA’s chief executive has conceded to Committees of this House. Thirdly—this, too, has been conceded by the VOA—more investigative work should have been done in conducting the ports review.

Things have taken longer than they should have. That is partly why we are in this position now, rather than earlier in the list period. However, none of that changes the principle or the argument that I have just set out to the House, which is that the ports review did not change the way in which the system operates, the policy or the legal basis, and it did not even change the application of the business rates system to businesses based in the ports.

Several hon. Members rose

John Healey: I will give way first to the hon. Member for Canterbury (Mr. Brazier), then to my hon. Friend the Member for Cleethorpes (Shona McIsaac) and finally to the hon. Member for Falmouth and Camborne (Julia Goldsworthy). Then I will conclude my arguments, because I want to make some points that will allow the hon. Member for Bromley and Chislehurst to see why in principle I disagree so fundamentally with what he has proposed.

Mr. Julian Brazier (Canterbury) (Con): The Minister said that there were many examples in previous valuations where businesses outside ports found themselves with large backdated bills. However, the crucial question is:
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how many such businesses have there been and in what other sectors have people who had no idea that they would be eligible for separate rates suddenly been faced with an enormous four-year backdated bill?

John Healey: In every case that I have cited, it may have been the case that the business concerned could not have anticipated or prepared for what happened. In the case of the ports review, however, I simply do not accept that, for all the ports businesses now affected, what happened came completely out of the blue. Some of those businesses have highly paid advisers and some were paying separate business rates on properties that they were already operating. It is not the case that what happened hit those businesses totally unawares. That may have been the case for some, but it cannot be the case for all.

Shona McIsaac (Cleethorpes) (Lab): I thank my right hon. Friend for giving way and for the many, many meetings that he has had with Labour Members. I would be curious to know how many meetings he has had with Opposition Members. For businesses operating in ports, is not the crux of the matter the fact that they believe that they will be paying double? They are not arguing about whether they have that liability; rather, they are arguing about the fact that they have already paid an amount to the operators through the cumulo system to cover business rates. Those businesses feel that it is grossly unfair that they are paying double. All the measures in the regulations we are debating are fine, but they do not address that point.

John Healey: My hon. Friend is absolutely right—unsurprisingly, because she champions her businesses and her constituency very powerfully. There is a strong perceived unfairness about the situation in which those businesses now find themselves, and I understand that. They argue that they have made a contribution to their business rates through their tenancy fees or the cumulo system.

The problem is that it is hard to pin that down, and there is no specific evidence in the contractual tenancy agreements. Where there is, the port operator would have to deal with that directly with the tenant. However, the terms of the tenancy arrangement and the fees that are paid are contractual matters and not, I am afraid, something that I or the Government can step in over. However, I have directly encouraged Associated British Ports and Peel Ports to take a sensible and practical approach to their tenants, because they have no interest in those tenants not being able to continue in business.

Julia Goldsworthy: Is it not the case that the problem for those businesses was not their future liabilities or any objection to the standardisation of the system, but the fact that they did not have the full facts available when they needed them most? That made it very difficult for them to predict the impact of the measure on their business. Is not that the nub of the problem? The measure has been retrospectively applied, and they did not have the information that they needed to prepare themselves.

John Healey: In a way, this is not unique in the way in which the business rates system operates. We do our best but, with the five-yearly revaluation, for example, businesses have to recalibrate their cash-flow forecasts and their business operations to deal with that.

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Mr. Frank Field: My right hon. Friend is promising to take apart the Opposition’s argument, and we shall obviously delight in that, but I would like him to address a point that has come up in a number of debates. The Government have moved their position by saying that people will be able to pay this liability over eight years, but Members on both sides of the House have expressed concern that, if the rate demand is sent out in a single bill—albeit one that is to be paid over eight years—it could result in some companies ceasing to be solvent to continue trading. Does my right hon. Friend have the power to instruct that those bills should not be sent out to a business as a single sum, and that instead, the first bill, for example, could be the first of eight equal parts? In that way, the total amount need not appear on the business’s balance sheet, and possibly tip it into insolvency.

John Healey: These regulations and provisions are already in place, and 67 companies have agreed a schedule of payments that will allow them to spread their backdated liabilities over up to eight years. The insolvency question, for those companies, will involve a combination of having to book the liability—the outcome will, in part, depend on their existing assets and liabilities—and of the judgment that the directors take on their ability to trade through the period and meet the liabilities when they become due. That is the advantage of being able to identify those liabilities and see when they will fall due, and to spread them so that they are due not as one hit—as would happen without these regulations—but in instalments over eight years. That is an unprecedented period; it gives businesses a generous amount of time to pay.

John Howell (Henley) (Con) rose—

John Healey: The hon. Gentleman has been sitting through the debate and he is very keen to intervene. I shall give way to him, then I must make some progress.

John Howell: I thank the Minister for his generosity and characteristic humour in allowing me to intervene on him. Will he explain the differences in the estimates of the total backdated liabilities for, say, 2009-10? In the evidence and options paper, table 1 gives a figure of £112 million, but table 5 gives a figure of £341 million. The difference between the two figures has been brushed away as being due to a difference in assumptions, but we are never told what the assumptions are. Will the Minister now tell us?

John Healey: I am so glad that I gave way to the hon. Gentleman, because I was about to discuss the figures.

I have placed in the Library of the House today a table of the latest figures relating to the impact of the ports review, broken down by port. The figures show the pre-review and post-review rateable values of the ports and of the businesses, and the number of businesses in each port. They also show that the review has had different impacts in different ports, and that it has had a different impact on the port operators and the port occupiers. The overall impact on the cumulative rateable value of ports in England has been to increase the rateable value from £201 million to £211 million.

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Within that cumulative impact, however, there have been two main changes. The first is a reduction in the port operators’ rateable values. The second is an increase in the number of separately assessed properties. As a result, in England, the port operators’ rateable value has been reduced by about £44 million annually, which therefore reduces rates liability. Across England, the rateable value of Associated British Ports alone has reduced from £41 million to £21 million as a result of the ports review. In Hull, the rateable value of the port is now one third of what it was before the review: it was £9 million; it is now £3 million. In Grimsby, that value less than half what it was—down from £1.35 million to £500,000. In Liverpool, it is less than half, too—from £16.5 million to £6.8 million.

Shona McIsaac: What about Immingham?

John Healey: As it happens, the rateable value of the port operator in Immingham has been cut by a third—from £17.9 million to £11 million.

Robert Neill rose—

John Healey: If the hon. Gentleman will allow me to continue, the real impact has been on businesses, with 605 newly assessed properties having a rating assessment backdated to 1 April 2005. It is those newly assessed port occupiers, with properties at a rateable value of about £54 million that face the backdated liability of more than £70 million. Although there are some significant issues, problems and pressures faced by businesses in port when they get this unexpected and significant backdated liability, let me explain that the impact is not universal.

Although some businesses may certainly be struggling, local authorities report that £25 million—in other words, a third of this backdated liability—has already been paid in full. One hundred and forty-six businesses—in other words, one in four of those affected by backdated bills—have already settled in full. A further one in seven of the remainder—the 67 properties and businesses I mentioned earlier—have now entered into the schedule of payments that is giving them real help through what is a tough period for them. That schedule has allowed them to spread the payments and manage the cash-flow consequences in a way that would be stopped dead in its tracks— it would be blocked—if the motion proposed by the Conservatives were to be passed.

Let me turn to the central question of waiving the tax liability, because a number of different solutions have been proposed by the ports lobbyists, but they all add up to the same thing. The intended outcome in each case would be to waive what has now been established—legally established—as a tax liability. Let me tackle that proposal directly. Despite the delays and problems in the ports review, I do not accept the principle that once it has been properly established that a business is legally liable to pay tax, it should simply be waived and the company let off. We do not do that in other circumstances; we do not do it with other business taxes. [Interruption.] The hon. Member for Peterborough (Mr. Jackson) says that the Chancellor announced a waiving of the tax liability yesterday, but the hon. Gentleman completely misses the point. I have a precise argument, and if he bears with me, he will get it.

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Once facts and a tax liability are known, they simply cannot be disregarded. The Government do not do that with any business tax. If the Government accepted the principle of removing a backdated rates liability, it would require primary legislation. In other words, Ministers would have to ask Parliament to give selective advantage to a specific group of businesses. [Interruption.] If the hon. Member for Bromley and Chislehurst will allow me—

Mr. Deputy Speaker (Sir Alan Haselhurst): Order. I am sorry to interrupt the right hon. Gentleman, but it would be helpful if the debate could continue without all the sedentary interruptions that have characterised it so far. They were started, I fear, by the right hon. Member for Birkenhead (Mr. Field), who was a little short of his usual impeccable standard. In the short time we have left, it would be helpful if we heard one voice at a time.

John Healey: Thank you, Mr. Deputy Speaker.

If we were to accept this principle and Parliament gave us those powers, what would that mean? It would turn what some argue at the moment is a perceived and arguable disadvantage of a backdated business rate—I have to say that many more businesses are now and have previously been affected by such backdating—into an actual disadvantage to those who have paid their business rates in those years. In other words, we would create a certain state aid and a certain breach of fair competition and fair taxation principles.

I have to tell the Conservative Front-Bench team that I find it extraordinary that the Leader of the Opposition has fallen for that line, tabled the motion and promised to waive the tax liability. It must be asked whose special interests will be next in line for a tax let-off under the Tories. It must also be asked who will be next to bang on the door of the shadow Chancellor, waving a tax bill and demanding special treatment.

Let me ask the House a question. In supporting this motion, what is the shadow Chancellor saying to the other companies—more than twice as many, including some in the ports—that have been paying their business rate bills when their neighbours and competitors would be let off this tax liability? What does he say to the companies—many times the number—that found themselves in the same position in previous years, but have accepted the system and paid what is legally due to the public purse? To do otherwise undermines the basis of the business rate system. As with other tax systems, everyone is assessed according to rules that are applied consistently and without favour, whether the administration of the system is good, bad or indifferent.

Mr. Austin Mitchell: Will my right hon. Friend give way?

John Healey: I will finish making this point, if I may, but then I will give way to my hon. Friend, because he has been uncharacteristically patient up to now.

The problems caused by the ports review in this concentrated group of companies do not alter the principle that 605 newly listed firms are being taxed and treated on the same basis as other firms both in and outside the ports.

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Mr. Mitchell: As we are throwing out all these rhetorical questions, will the Government answer a question? Why are businesses on the docks being asked to pay rates twice—once through the cumulo, and once through the retrospective assessment?

John Healey: I have already dealt with that point. I have some sympathy with that perception of unfairness, but the argument must be taken up with the port operators with which the companies have the tenancy agreements and to which they pay the cumulo. I have asked about this consistently over the past nine months, and I have seen very little evidence of any contractual confirmation that the business rates are paid explicitly as part of the cumulo. Therein lies something of a problem for my hon. Friend and some of the companies in his constituency.

Mr. Cawsey: I know that my right hon. Friend is aware of a letter sent by Associated British Ports to companies in its ports, saying that it will have to increase the cumulo because of the increase in business rates. Surely that reveals an obvious connection. Surely it shows that the business rate is included in the cumulo.

John Healey: My hon. Friend is right: I have seen the letter, because he made sure that I would see it. I am sure that the companies in his constituency will look at that information very closely, and will consult some of their professional advisers on where it places them in relation to ABP.

I have a copy of the letter from ABP, which, as a result of the 2005 revaluation, told its occupiers

As I said to my hon. Friend the Member for Cleethorpes (Shona McIsaac), that is a matter that they must take up, rightfully and directly, with the port operators.

Mr. Stewart Jackson (Peterborough) (Con) rose—

John Healey: I am coming to the end of my speech. The hon. Member for Bromley and Chislehurst had a fair crack of the whip.

In the current economic circumstances, given the pressure on businesses across the board, what is clear—and we understand it only too well—is that significant and unexpected backdated rates liabilities of this kind will create difficulties for many, although not all, businesses. That is why we have introduced a scheme to help all businesses, including some port occupiers, to meet such unexpected and significant backdated liabilities, and to pay over a period of eight years. That is an unprecedentedly long period.

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