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Mr. Mitchell: There is a vital principle for those of us who represent ports: businesses should not wantonly be pushed into insolvency or shedding labour by something that does not need to be done in the first place.
Sarah McCarthy-Fry: I can only reiterate that the amendments that we are debating will have no effect on the current position in the ports. I am sure that there will be ample opportunity on other occasions to discuss and debate that further.
Having explained why we cannot agree to the amendments, I must remind hon. Members that the Speaker has designated the amendments involving privilege. If hon. Members vote to overturn amendments 11 and 12, the reason for the disagreement must, in accordance with the House’s practice, involve privilege. That is in no way intended to criticise the quality of debate on those matters in the other place. I have commended that, and do so again now.
I hope that I have tackled the issues that were raised and demonstrated why I disagree with the amendments on principle. I hope that the House will reject amendments 11 and 12.
Robert Neill: I have some sympathy for the Under-Secretary—up to a point. The only reason for having any sympathy for her is that she did not start the ludicrous matter, and she is the umpteenth Minister to walk into it. However, I regret to say that those who drafted her response and produced one of the most mealy-mouthed, legalistic and technocratic excuses I have ever heard in the Chamber served her ill. The Government are shamed by their attitude. I was not surprised that the Government Whip was anxious to ensure that the debate was kept carefully away from the constituency issue that a Labour Back Bencher tried to raise. The Government are worried because they have been crucified in every debate on the matter. They have no answer, and the Under-Secretary is stuck in that position.
There is a matter of principle and the issue is important because, as the Under-Secretary said, the normal business rating system must apply to business rate supplements. I do not disagree with that—it is perfectly logical. My noble Friend Lord Bates tabled the amendment because the safeguards against potential injustice in the normal business rating system are shown not always to work adequately. The ports issue is therefore germane, and there was a full debate on it in the other place. It is an example of how injustice can occur in the current circumstances and of the inadequate remedies that exist to resolve it. We therefore thought that it was right to make provision in primary legislation to ensure that such injustice is not imported into the regime under Bill. That is an important principle.
The amendment that Lord Bates tabled would ensure that there is no retrospection when the BRS payer has committed no fault. That is a key issue, which should apply across the board. An injustice has been done to taxpayers in the ports through no fault of theirs, but through the incompetence of the Valuation Office Agency in not updating the list in a timely manner, not giving proper notice, not ensuring proper consultation and not providing an impact assessment. The Bill could permit an injustice to happen in the BRS model, too. The amendment was tabled to try to prevent that.
Mr. Cawsey: I am grateful to the hon. Gentleman for his support on the matter. If we were to try to summarise the Government’s position, does he agree that they seem to be saying that they cannot change the overall system just because there are problems in the ports, so they will reject the amendment and treat other people equally unfairly at some point in future?
Robert Neill: I am afraid that the hon. Gentleman puts the case very well. I wish that we had a specific legislative peg on which to hang the issue of ports. Given that we cannot do that, we can at least ensure that no such injustice is done elsewhere. In theory, there could be a BRS scheme in the port areas—on Humberside or in Liverpool—and I would not want the same injustice to occur.
Mr. Frank Field (Birkenhead) (Lab): I apologise for missing the opening speeches. As I understand it, the hon. Gentleman is going to support Lords amendment 11. I commend him for that, because on this issue we have had huge difficulties in getting the official Opposition off the fence. For them to do so must now show that there is something of value at stake.
Robert Neill: I know that the right hon. Gentleman is in a difficult situation, as candidates for anything sometimes are, but with every respect to him, he will know perfectly well—I mean this in a good-natured way—that we did not vote against a previous measure because it would have removed a measure of protection. Those of us who genuinely feel that the Government have been led into error now have an opportunity to agree on some common ground. I stress that the problem did not start as the fault of a Minister; it started with the incompetence of the Valuation Office Agency. Frankly, it is the people in the VOA who should ultimately be held to account, but I am afraid that it might be too late by the time someone is in a position to do so.
Mr. Julian Brazier (Canterbury) (Con): My hon. Friend is making his speech in his usual highly articulate way, but he is being too kind to the Government, although not to the Minister. The problem is certainly not her fault: she is new. Is it not the case that, having paid a rebate to the port employers, the Department’s Treasury colleagues are now saying, “You cannot let these port rating people”—the unfortunate small businesses in ports, many of which are competing with their landlords—“off the hook”?
Robert Neill:
My hon. Friend is absolutely right. That is why it is so important to entrench the proposal, to prevent further injustice in future. Frankly, the Government are being duplicitous in the way that the system is being organised. People are being squeezed, and we have had a Pontius Pilate-like attitude from successive Ministers, who come along, wring their hands and say, “This is all very sad, but that’s the normal system and there’s really nothing we can do about it. We’d like to, but I’m sorry, we can’t help.” At the same time, businesses are already going under and jobs are being lost. However, nobody in the Department seems to grasp the fact that the proposed remedy of the eight-year payment period, which in theory could, I suppose, be imported if injustice occurred in respect of the BRS, does not get round the problem that the debt has to be booked in the first year,
which means that companies become balance-sheet insolvent by a substantial sum. That affects their ability to raise finance and the cost of finance, and puts them in genuine difficultly.
Mr. Frank Field: The hon. Gentleman is being unfair to Pontius Pilate. Pilate wanted to release Jesus, but we have seen no signs from those on the Treasury Bench that they wish to release our constituents from an unfair tax.
Robert Neill: The right hon. Gentleman is characteristically perceptive and well informed, and he is right. I am sorry if I am being less combative than I sometimes am—I thought that I was being reasonably vigorous—but we regard Lords amendment 11 as so important because of a desire to prevent a great injustice and because the feeling is so strong. The Government’s deafness is such that it makes those on the Guardian Council in Tehran look like flexible and open-minded people. People are shouting and hollering to try to bring an injustice to the Government’s attention, and the Government just say, “Sorry, nothing to do with us.” At the end of the day, that is just unfair.
That is why it is right that Lords amendment 11 should be maintained. It is also why the amendment was passed in the other place not by a small margin, but by a majority of 60. In terms of votes in the other place, that is a very significant margin indeed. It is interesting that the record of proceedings and votes in the other place shows that a number of Labour peers who supported other aspects of the Bill felt unable to vote in the Lobby against Lords amendment 11. They knew that justice was on the side of the amendment. I wish that that message would get through to the Government down here.
Mr. Brazier: I am grateful to my hon. Friend for giving way, particularly now that he is getting into his stride and is in his normal, more combative form. We must put on record the sheer unfairness of the situation. If one of the tenants goes bust, as some already have, the port owners, many of whom are in direct competition with their tenants, do not then have to pick up an empty property rates bill. It is unbelievable.
4.15 pm
Robert Neill: It is a most perverse situation. Ministers in the Department for Communities and Local Government do not seem to be able to grasp the fact that landlords can also be competitors, and that that creates a perverse incentive. The Minister referred to this as basic rating finance under the normal system. Well, if this is the normal system, it is wrong, and we need to ensure that it is not rolled out into other areas as an extension of the rating system. My hon. Friend is right, as he always is on these matters.
It cannot be right that people who might be subject to a BRS should be liable to the same injustice that has been identified in relation to a number of firms in Humberside. An example is Freshney Cargo Services Ltd, which has had a 1,700 per cent. increase in its rateable value. It is now going to have to pay bills backdated a number of years that are significantly more than its annual turnover, never mind its profits. It is really going to struggle.
This is happening to honest, reputable firms that would pay a BRS honestly if the situation arose, and that pay their rates honestly. They have not misled anyone, and they are not responsible for any fault or concealment, yet they are being penalised. The kind of redress that they are being given—which might be offered under a BRS scheme, I suppose—is wholly inadequate, because it leaves them potentially balance sheet insolvent and with real burdens placed on them. These firms are important. The one that I have mentioned employs about 40 staff directly, and has about 100 people dependent on it.
It is ironic that the Bill is being presented as a means of improving economic regeneration and business activity. It is also ironic that responsibility for the Bill lies not only with the Under-Secretary of State for Communities and Local Government, the hon. Member for Portsmouth, North (Sarah McCarthy-Fry) but with the Minister for Regional Economic Development and Co-ordination whose double-hatted job involves her working not only in the Department for Communities and Local Government but in the Department for Business, Innovation and Skills. It is extraordinary that a lady who is responsible for economic development should be presiding over a Bill that will shut down businesses. As we do not seem to be getting much response from her boss in the Department for Communities and Local Government, I would have hoped that her other boss, in the Department for Business, Innovation and Skills, might have come up with an alternative solution. This is simply not joined-up government. It is ironic that that same Minister is presiding over a measure that is going to put firms out of business. That just does not make sense, and to refuse to listen to the very reasoned debate in their lordships’ House potentially extends the anomaly and injustice elsewhere.
With respect, the suggestion that the amendment would set a dangerous precedent is wrong. A fair point has been made about the unique cumulo system in relation to ports rating. There is no danger of unscrambling the whole system. To include the risk of further injustice in the business rates system is just wrong.
Lest people think that this is a fanciful situation, let me tell the House that if all local authorities were to implement BRS schemes, it would raise considerable sums of money. However, great damage is being done by backdating purely in relation to ports. In the port of Hull alone, the sector is being clobbered by a bill for something like £25 million. In Liverpool, the figure is £22 million; in Immingham, it is £19 million; and in Cardiff, it is £1.6 million. No wonder those areas feel that the Government are letting them down. I feel sorry for the Labour Back Benchers who have tried to raise this issue and been thoroughly brushed off by their own Ministers. That is pretty shabby treatment.
Mr. Brazier: May I stress again that people do not have to come to British ports? There is nothing to prevent them from unloading their containers in Rotterdam or in any other continental port and putting them straight on to a lorry that will come in through Dover or the channel tunnel. That is what will happen.
Robert Neill: My hon. Friend takes a particular interest in transport matters, and he is absolutely right.
The Bill comes at a time when ports are already under pressure from the fall in freight rates. Businesses are therefore already being heavily squeezed. Business in the ports on what are sometimes called the near sea routes is particularly threatened because major concerns such as DFDS Seaways have indicated that, unless there is a change to these measures, they will reconsider their significant investment in the UK. That would be a massive blow to economies, including to the partnership between local authorities and business in areas that are trying to regenerate. It is entirely plausible that operations would be moved to Rotterdam or Antwerp and the goods simply brought in by road thereafter. The transhipments would happen elsewhere. That would ironically benefit local authorities and businesses in continental Europe and significantly damage businesses and the local authorities that work with them in our port towns.
That is why this issue is so important and why we make no apology for returning to it again and again. It is also, I suspect, why the amendment was so closely and well argued in the other place and carried by such a large majority. I thus genuinely appeal to the Minister at this late stage in the game to rip up her departmental brief, stand back and look at the issue as a matter of fairness and justice. Compared with the sums of money pumped out into some sectors, scrapping the unfair retrospective element would be nothing at all and it would help to create the degree of certainty that was mentioned in our debate on earlier amendments. The Minister should do that to provide a proper basis for the partnership working between local authorities and business that she identified as central to the Bill.
Let me end on a final irony. A number of local authorities want to be sympathetic and have tried to hold back from collecting the business rate that they are obliged to collect, but they are now being pressured by the same Government to start enforcement and start collecting. I know that some deals are being done, but that is a drop in the ocean, as the vast majority of people are going to be hit with liabilities that they cannot reasonably meet. That will positively harm the exact premise of the Bill—local authorities and businesses working together to regenerate their areas. I ask the Minister, who is up to now untarnished by this whole unhappy saga, not to listen to the official line, but to apply basic common sense and justice and support the Lords amendment. She should go to the Chancellor, who may have the strength of flexibility and independence, and ask for justice to be done.
Mr. Austin Mitchell: I support Lords amendments 11 and 12. It is unusual to find myself in such agreement with the hon. Member for Bromley and Chislehurst (Robert Neill), but he put the case very powerfully and effectively and I support it. Unless we sustain these amendments by voting against the Government—it gives me no pleasure to do so—we will expose the Humberside ports and those in Liverpool and elsewhere to a very serious and messy situation in which firms will go bankrupt, people will be laid off, and jobs and businesses will be lost. I am not prepared to support the Government in their proposals to carry that through.
Lords amendment 11 is designed to rectify the disastrous situation caused by the retrospective rate demands issued to port operators—I emphasise that this applies to port operators, not port owners, who received a rebate on
their business rates. It was the port operators who became eligible for separate assessment for business rates in 2005. The Valuation Office Agency tells us that that has been done. It went around to make the assessments, but it talked to the owners, not the operators. It did not give any notice; there was no consultation, which there should be have been, on raising the business rates. The assessment was based on what owners told the valuation agency about liability for business rates.
Separate assessment was the principle that came in for port operators in 2005, and the valuation agency told us that it had been done. Suddenly, however, thanks to a case in Southampton—it was settled out of court to avoid a definitive verdict against the agency—it was necessary to look at the assessments all over again. Many of these businesses were not assessed until 2008 for an assessment that should have been made in 2005. Whose fault was that? It was manifestly the fault of Government and the Valuation Office Agency. Perhaps the agency was understaffed because the Gershon economies had required it to shed labour, but in any event this was the fault of the agency rather than of the port operators, who have already paid business rates through what is known as the cumulo rental system. The business rate was part of the rent paid to the port owner, which is Associated British Ports in the case of the Humberside ports.
What the port operators are being asked to do is pay rates twice. Not only is it a sacred principle that everyone must pay business rates; in the case of the ports, everyone must pay business rates twice. It is inconceivable that such a principle should be imposed, and that it should be defended by the Minister. Indeed, a succession of Ministers have presented us with this ludicrous line of defence.
The whole thing was handled very clumsily and ineptly by the Valuation Office Agency. Assessments were rushed in at the last minute in 2008. Many of those assessments are now being reviewed through the so-called fast-track procedure, which takes several weeks. We do not know how many are being reviewed, but although—as the hon. Member for Bromley and Chislehurst pointed out—local authorities are now being pressurised into demanding the rates, they cannot be levied until the fast-track assessments have been completed.
I do not object to individual year-by-year assessments of these businesses. What I do object to, strenuously, is the retrospective demand for three and a half years of business rates, dating back to 2005. How will that be possible? The businesses have already charged their customers—a process that often involves intense haggling. They cannot go back to their customers and say “We are sorry, but we will have to increase the charges.”
Mr. Frank Field: May I issue a plea to my hon. Friend to stop pulling his punches? Is not the position even worse? Operators who have created and maintained jobs in our constituencies believe that they have paid their rates through their charges. It is not just a case of retrospection. A poll tax is being levied retrospectively on operators who have already paid what was expected of them.
Mr. Mitchell: I was under the impression that I had just said that, but it is indeed true. The operators have been asked to pay business rates twice, and there is no justification for that.
If the Minister does not abandon her opposition to the Lords amendment and say “My God, Grimsby, you are right; I never thought of that,” I should like her to tell us how the port operators are to be compensated for the money that they paid in business rates for the period between 2005 and 2008. What will happen to that money? The owner, ABP, has received a full rebate for the money that was paid by the operators, which is ludicrous, and it now says that it will not give the money to the operators because it is ABP’s money and it must run businesses itself.
The operators are being threatened with retrospective business rate bills which they cannot pay because they cannot increase their charges retrospectively, and asking them to do so would be bad business practice. The Government, recognising guiltily that they have made a mess of things, are exceptionally allowing the operators to pay over a period of eight years, but that will be of no great benefit, because the debt must go on the balance sheets, and if the balance sheets suggest insolvency, the businesses will be operating while insolvent. As the hon. Member for Bromley and Chislehurst pointed out, if insolvency threatens, investment will fail. DFDS has already announced its intention of cutting investment.
The ports will change. Will the cars still come in through Grimsby—the great car port of the western world—or go out from Grimsby, for that matter, or will the operators change the way they do things and bring them in by other means? That is quite possible. We will certainly have the shedding of jobs and the closure of businesses. Freshney Cargo Services has been much cited in recent debates, and was cited again today—this time accurately, I was glad to note. That firm’s very existence is threatened.
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