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This is, in principle, a deferment of the tax liability, not a waiving or a removal of it. It is, in principle, precisely what my right hon. Friend the Chancellor announced in the House yesterday afternoon would apply to the increase in business rates that businesses face from the multiplier or the ending of the transitional relief: a deferring but not a removal of that tax liability. Businesses may benefit from up to around £600 million by the deferment announced by my right hon. Friend. It is consistent in principle and practice with his announcement in the pre-Budget report that Her Majesty’s Revenue and Customs would be flexible over the period in which
other business taxes—corporation tax, VAT and payroll taxes—had to be paid. Over 100,000 firms have now taken advantage of that. Almost £1.8 billion has been deferred to help them to manage their cash flow and business pressures during this difficult period.
To summarise, we should expect businesses to pay the tax that is due, but in the current economic circumstances we must and can support businesses, especially where they have this unexpected or significant backdated liability. That is precisely what we are doing. We are doing it to an unprecedented extent by allowing scheduling over eight years for the firms that are affected. Businesses are already taking advantage of that support. The House would be wrong to take that away this afternoon.
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Julia Goldsworthy (Falmouth and Camborne) (LD): It struck me while listening to the previous debate that, although the subject was a serious one, it was entirely appropriate to hold it on April fool's day. Listening to this debate, I fear that it will be groundhog day, because we are hearing a repetition of powerful arguments, but the same response from Ministers that we heard in the other place and in previous Adjournment debates on the issue.
I do not intend to speak for too long because I am aware that other hon. Members wish to raise issues relating to how the measure will impact on their constituencies. The hon. Member for Bromley and Chislehurst (Robert Neill) has been through the chronology and provided some examples of how businesses will be affected. I do not intend to repeat that, but I reiterate that the Liberal Democrats welcome the principle of simplifying the business rate system and moving to a standardised system. We think that there needs to be consistency across different businesses. The previous system was very complicated. It needed to be simplified, but the whole process has been nothing but a complete shambles. To people who are not deeply involved in the intricacies of the matter, the arguments will sound complex. My concern is that the Minister is hiding behind that complexity to defend the indefensible.
Mr. Stewart Jackson: I am sorry that the Minister did not feel compelled to allow me to intervene earlier, but does the hon. Lady agree that the principle and precedent of fiscal correction were established over the 10p tax rate, notwithstanding the liability that businesses have? Indeed, the Minister sidestepped the direct question that my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) put to him. A non-fatal amendment could be tabled to the Local Democracy, Economic Development and Construction Bill or a Finance Bill in the future.
Julia Goldsworthy: There will be opportunities to right this wrong, but it seems that the Minister is unwilling to do so. That is deeply depressing, to be frank. As I said, this is a complex issue, but for the people who are affected it is simple: they face a tax bill for previous years for which they did not know they were liable, so they have not been expecting it. The burden was imposed after the terms and conditions with the operator had been agreed and after payment had been made. For many businesses, the impact is so devastating that they may face insolvency.
The Minister acknowledged that, which makes me wonder. The Minister's response is that these are well-established principles, we cannot waive backdated liabilities, and as all businesses are aware that the scheme can operate in that way they should plan for it. If so, why are we debating regulations now to try to mitigate some of the problems? Why were such measures not included in the original legislation? If the Government accept that this is part and parcel of the scheme, surely they should have made provision for it at the time. Businesses are being hit with this problem, which is impacting on jobs and on the local economy, at the very time when support is needed more than anything else.
The Minister has openly admitted that these problems have predominantly been caused by the failure of the Valuation Office Agency to do its job properly. These proposals today essentially seek to mitigate the impact of those failings. They do not, however, fundamentally right the wrong. Businesses were unwitting victims of the Valuation Office Agency’s complete incompetence.
It is not only the Opposition parties that are attacking the policy. Suggestions to right the wrong were made by the Treasury Committee, which also clearly identified the causes of the problem. It identified low morale in the VOA, which had an impact on service delivery. It also identified poor communications with the businesses affected. While the operators might have been aware that the changes were in the offing, it was a bolt from the blue for many of the businesses affected.
The Treasury Committee stated:
“Port businesses are facing backdated charges because the Valuation Office Agency failed to identify discrepancies in the ratings at the time of the 2005 revaluation. This mistake was compounded by the VOA’s failure to communicate changes promptly and effectively with Port businesses.”
If the VOA had done its job when it should have done it, we would not be having this debate, because the retrospective taxes would not have been imposed. Businesses are upset that they are taking the hit for the failure of the Government agency.
The Treasury Committee was also constructive in its recommendations. It asked the Government to take steps to ensure that payments already made to the port operators were taken into account—a point already made by hon. Members. However, the Minister refuses to accept that that is an issue, even though the Treasury Committee felt that it could be rectified. The Committee also suggested that the Government should
“take steps to mitigate further the difficult position faced by port businesses. Consideration should be given to the proposal to maintain the rateable values of premises in statutory docks and harbours at the levels published in the April 2005 rating lists until the new ratings list is published in April 2010.”
That is exactly what the Liberal Democrats have said. We have said that we will co-operate if primary legislation is required, but the Minister appears to have ruled that out. What consideration was given to that option? Was it explored or was it ruled out without due consideration?
The information that the Department provided to the Treasury Committee was disappointing. On the issue of the contributions that port occupiers had already paid to the port operations, the Minister said again today that as far as the Government are concerned, the information is only ambiguous. However, those people
who have spoken to businesses directly affected say that their understanding is that part of the terms and conditions included covering the business rates that operators were paying.
I wish that the Minister had provided more information on what the Department had done to seek the information. It is clear that some hon. Members have provided the Department with the information, but I wonder whether there is more out there, if the will existed to try to find it.
The Government continually emphasise their inability to waive this tax liability. For example, in the debate secured by the hon. Member for Great Grimsby (Mr. Mitchell), the Minister said:
“We cannot now act as if we do not have the full facts or as if they do not have a liability that is now clearly established in law. Therefore, it is not straightforward or possible simply to undo what has been done, or to hold off until 2010 when the next ratings list comes into effect.”—[ Official Report, 28 January 2009; Vol. 487, c. 124WH.]
The Minister spoke today about valuation and its retrospective nature. The point is that these businesses were not paying business rates, so they did not need to factor in retrospective elements. They were not clear what their liability would be in the future. If they did not know that they would be liable for business rates in the future, how were they supposed to plan for any retrospective liability? They did not have the full facts. They may have them now, but they did not have them at the time for which the Government seek to tax them.
Mr. Brazier: Crucially, those facts were not available to those businesses when many of them negotiated long-term rental contracts. A firm at Immingham told me that it had negotiated a 30-year contract in 2005, on the basis of the old rating agreement.
Julia Goldsworthy: The hon. Gentleman is exactly right. The problem is not that the facts were not available when those long-term decisions were made; the facts did not exist at the time.
As I was preparing for the debate, I was also dealing with some casework related to the tax credits system. The Minister said repeatedly that there is no ability to waive a tax liability for businesses, but as I was dealing with that casework, I wondered whether some principles could apply to both. When people apply for tax credits, it is made very clear to them that they must tell Revenue and Customs if their circumstances change; otherwise they will be liable for the recovery of overpayments. However, the VOA did not tell businesses that their taxation circumstances would change, let alone that they would be judged retrospectively. So, surely, the Government are responsible for the loss of their own income, because they failed to act in a timely way.
The second principle with which tax credits are applied is that, if overpayments are caused by HMRC error, people are not required to pay. The delay in imposing this liability is entirely due to the VOA’s incompetence, so I do not understand why similar principles cannot apply. It is understandable that businesses are completely bewildered. They are expected to deal with a completely appalling process, while Departments proceed as though nothing has happened and everything has gone completely smoothly.
Finally, local authorities have been placed in an invidious position. They have a statutory duty to send out bills and collect revenue, but they have a responsibility to recognise and support their local economies. They play a key role in recognising the importance of ports to the local and national economy. They have a role in promoting the economic well-being of their areas, and many of them feel that these measures will undermine that economic well-being. The statutory instrument aims to make the burden more manageable for those businesses. It is half an apology, but it does not seek to right the wrongs that have resulted from this appalling process.
It is entirely appropriate that we have had another opportunity to debate these measures, particularly on the Floor of the House. Like the hon. Member for Bromley and Chislehurst, I do not want to vote against the regulations, because that would leave ports and businesses in an worse position, but the Government need to introduce proposals to try to right these terrible wrongs.
6.12 pm
Mr. Austin Mitchell (Great Grimsby) (Lab): I shall be brief, but I must express my incredible disappointment with Conservative Opposition’s position. They are
“Willing to wound, and yet afraid to strike”.
They are going around the country encouraging port operators to resist these payments, yet when they need to show the courage of their convictions, they remain silent. Here is a chance to put a spanner in the works; they will not take it.
I must express my disappointment with the Government’s position, which is one of impotence as a system of government. They are impotent, they tell us, to stop the retrospective increase, however unjust and disastrous it will be. They are impotent to do what we should do, which is to call off this exercise and do the assessment in 2010. They are also impotent to get back the money paid to ABP. That money is, in fact, the rateable contributions of the port operators. That is impotence turned into a chorus of castrati.
On the substantive point made by my right hon. Friend the Minister, who has been patient in listening to our arguments but inflexible in responding to them, it might well be a pistol to our own heads to vote to annul the regulations, but the Government have left us no alternative. I want to vote to annul them. I ask him what else we can do. It would force the businesses to pay now, which would be absolutely disastrous, but it would also force the Government to think again. If they are faced with businesses going bankrupt and rising unemployment in the ports, because of their inability to remove the retrospective charge, such action would force them to think again, and I hope that it would force them to take more sensible action than we have seen so far.
6.14 pm
Mr. Robert Syms (Poole) (Con): Ports are vitally important, both for the people who work in them and for the community businesses that feed off them. The port of Poole is successful, but that takes very hard work. As we have heard, the problem with the proposal is that it is retrospective legislation that will undermine the viability of some businesses.
Many businesses felt that they were already making a contribution through the agreements reached with their ports. I visited the port of Poole last Friday, and it is clear that it is being affected by the recession. Fewer passengers are using the ferry, and the number of haulage movements, both from the continent and from our side of the channel, has fallen by between 25 and 30 per cent. Over the next few years, businesses are going to find it very hard to carry this additional burden.
It is a pity that the arguments made by hon. Members of all parties have not been taken on board. I know that the Government are trying to do what they can by spreading the payment over eight years, but I am not sure that that is the solution to a very difficult problem. Ports are very competitive places to do business. Some companies will move, jobs will be lost and the viability of some firms will be threatened. The measure will make nonsense of the tax system, if it kills the golden goose.
I commend my hon. Friend the Member for Bromley and Chislehurst (Robert Neill) for praying against the order, as that has given us an opportunity to discuss these matters. I fear that the problem will recur again and again over the next three or four years, as companies struggle to pay their major liabilities.
As I have said, Poole is a successful port, but that success comes only through hard work. This added burden will have a major impact on businesses both large and small that provide very important services for those who use the port.
Because so many hon. Members want to speak in this debate, I do not intend to say much more than that. I therefore enter my protest against this proposal, on behalf of my constituents and the businesses operating out of Poole. They feel that they are being very hard done by, and I wish that more could be done to assist them in these very difficult times.
6.17 pm
Mrs. Louise Ellman (Liverpool, Riverside) (Lab/Co-op): I have no doubt at all about the extent of the problems being experienced by many businesses in ports as a result of the imposition of large, backdated business rates. Those are bills that businesses could not have anticipated.
The problems are exacerbated by the general economic situation, and my concern is that the proposal will pose a threat to businesses, jobs and regeneration. Certainly, it is easy to see that the port of Liverpool’s spectacular success in recent times has been linked very closely to the regeneration of the city itself. I am extremely disturbed by the fact that the order, together with the economic situation, could threaten that regeneration.
I support the findings of the Treasury Committee, which I believe should be recognised. I am very sorry that the Government do not feel able to implement the recommendations now, even though some recognition should be given to their attempts to do something about the situation. The proposals that we are considering this evening are not sufficient to deal with the problem, and the issue of liabilities on company balance sheets is a matter of very grave concern.
While I believe that the House should recognise that the proposals are intended to assist port businesses, I know that they will not resolve the problem. For that
reason, I ask my right hon. Friend the Minister and his colleagues to continue to give this very important matter their consideration. If it cannot be resolved today, I hope that it can be resolved in the future.
6.19 pm
Mr. Julian Brazier (Canterbury) (Con): The Minister’s speech was extraordinary. He spent the first half telling us, “This is how other businesses up and down the country are handled, and businesses in ports should expect to be handled like every other business.” However, towards the end of his speech he admitted that the arrangement had involved a large transfer from port rating companies, many of whom, he concedes, knew absolutely nothing about the matter, to the port owners, many of whom are in direct competition with their tenants. The Government have their own guidelines on retrospection, and the Minister must know that he has broken them. They were set out in Hansard on 9 October 2008 at column 802W.
I ask the House to envisage a warehouse in a port. Such a warehouse could be in one of at least four different situations, none of which have anything to do with its operations. First, it may be owned by the port owner, in which case it is exempt from the new arrangements. The second possibility—I have seen two warehouses side by side run on different bases—is that it could be owned by an unfortunate tenant who has just been slapped with an enormous, four-year, backdated bill. Thirdly, it could be owned by a tenant in one of the ports—there are a number of them—that the Valuation Office Agency has managed to miss in its exercise. The fourth and final possibility is that the warehouse could be in a port where the owner got in clever lawyers early on, arranged a shared arrangement between more than one tenant, and so was able to avoid the problem. To suggest that the status quo has tidied matters up and brought the arrangements in ports in line with those in the rest of the country is just fantasy.
The truth is that the arrangements are a muddle. They have been condemned by the Treasury Committee and in a non-fatal motion in another place. In the real world, the arrangements are progressively destroying large numbers of small businesses: Thomas Nichols Brown has gone bust in Liverpool; DFDS, a huge Danish shipping company, made 71 people redundant in January; Stanton Grove on the Mersey has a huge bill of more than £2 million; and Brittany Ferries in Plymouth, Poole—the constituency of my hon. Friend the Member for Poole (Mr. Syms)—and Portsmouth faces a bill of £500,000. A whole string of organisations, some of which could afford to pay the bills, have simply said that they will pull out of the UK. To add insult to injury, in contradiction to the original announcement, the Minister’s office has confirmed that if a tenant goes bust and that tenant’s property reverts to the port owner, the port owner will not be faced with an empty property rates bill; the property will revert back to the original arrangement. How fair is that?
There are other people who want to speak, so I shall end with one last example. David Johnson of RMS Group Holdings Ltd—a man who deserves to be praised for the vigorous way in which he has spoken up time and again for his company and for other people like him—says that his company faces a 1,700 per cent. rate increase as well as four years’ backdating. That is no way to run a tax system, and no way to run a country.
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