Administration and expenditure of the Chancellor's departments, 2007-08 - Treasury Contents

Examination ofWitnesses (Question Numbers 540-559)


26 NOVEMBER 2008

  Q540 Mr Todd: Finally, there were issues raised when Kitty Ussher was before us in May concerning the linkage between child tax credit payments where that is delayed and the implications for supplementary payments for Child Trust Funds. Kitty agreed the substance of the argument and went away to consider what could be done. Have you an update on that?

  Mr Timms: Yes. I know that Kitty wrote to the Chairman on the 17 July explaining she would be introducing new regulations to change the rules so that children otherwise eligible for the additional payment under the Child Trust Fund do not miss out because a tax credit claim is not made within three months. Those new rules will extend the eligibility window from three months to a minimum of 12 and regulations to achieve that will be laid shortly.

  Q541  Mr Todd: Those are not currently in place.

  Mr Timms: That is correct.

  Q542  Mr Todd: Therefore the circumstance this Committee identified remains true, that some may lose the benefit. The examples given, mental illness, postnatal depression, which might lead to a delay in a claim having a further additional financial consequence, remain true.

  Mr Timms: But the regulations that are to be laid will deal with that and put that right. Once the outstanding payments are made, along with further payments which will be made in lieu of missed investment growth, no family will have suffered a financial loss. The regulations have not been laid yet but they soon will be.

  Q543  Mr Todd: There is no intent to backdate the implication of this regulation?

  Mr Timms: What I am able to reassure the Committee of is that no child or family will have suffered a financial loss once all the regulations have been put in place. The rule change will come into effect for children who become eligible for a Child Trust Fund account from the 2008-09 tax year onwards.

  Q544  Mr Todd: You would agree that this regulation ought to be placed quite urgently.

  Mr Timms: Yes.

  Q545  Mr Todd: It is slightly alarming that a good case was presented to this Committee for change and a welcome announcement of intent quite rapidly followed but the action has not followed as a consequence.

  Mr Timms: It very shortly will do.

  Q546  Mr Todd: The other point raised at that time was the flagging of some of this critical information on the website so people clearly understood how important rapid communication was in some of these instances, not that it would necessarily help some of the customers I just mentioned but nevertheless the clarity of communication is vital. Has that been rectified? I think the example that may have been raised by Mr Ainger who took part in this exchange was that you went to page 8 of the information pack before you encountered the critical piece of information as to how rapidly you should do something.

  Mr Timms: I am not sure what changes have been made to the website. I entirely agree that the website should be clear on this and I will check what changes have been made.

  Q547  Mr Todd: Can you make sure that is done?

  Mr Timms: Yes.

  Chairman: We do need to speed this up. We examined all this in May so it is a little disappointing to hear nothing much has changed.

  Q548  Mr Todd: To be fair, it was accepted.

  Mr Timms: Kitty Ussher wrote to John at the end of July.

  Chairman: This is November.

  Mr Todd: Writing a letter does not change the law or necessarily implement the website change.

  Q549  Chairman: Can you give us an assurance you will personally have a look at this and chase that up?

  Mr Timms: Yes.

  Chairman: We will turn to the Valuation Office Agency and the issue of ports rating. We are obviously grateful for the letter you sent on 24 November and the speed at which you got that reply to us. I have to say we have discussed it collectively and we remain disappointed but Nick Ainger will start with some questions on that.

  Q550  Mr Ainger: Stephen, when you came before us with John Healey we asked for a breakdown of all the changes in the ports. When are we going to get that information?

  Mr Timms: This is the figures for pre-review of rateable value?

  Q551  Nick Ainger: It is the changes because, if you recall, the problem was we were told by the Valuation Office that overall there had only been a 10% increase.

  Mr Timms: That is correct.

  Q552  Nick Ainger: And we had been given information which indicated that there were some huge rises and therefore we asked for a full breakdown.

  Mr Timms: I have the full breakdown in front of me and it says on it "sent to Committee on 5 November" so I would have hoped that would have reached the Committee by now.

  Q553  Nick Ainger: Everyone in the room is shaking their heads.

  Mr Timms: I can only apologise. It certainly was sent and I have a copy here so we can leave that here.[6]

  Q554 Nick Ainger: I am sure we will now get it. Since our exchanges on 29 October we have received a lot more information from individual companies. Can I just take you through some of them so you clearly understand the extent of the problem. I have a letter here from Stena Line that operate out of Fishguard, Holyhead, Fleetwood, and they used to operate out of Harwich. In Fishguard, where they are not only a port user they are the port operator as well, the change has been 227%, which is an increase per annum of £400,000. In Holyhead the percentage increase is 242%, an increase of £1.1 million. In Fleetwood, where they are just a user, their increase is 430%. In Harwich they used to have a berth which they closed in January 2007 and they have been given a bill by the Valuation Office back-dated to April 2005 for £1.8 million for a berth that they have not used since January 2007. What Stena Line say is that this is going to have a significant impact on their business and on their investment plans and there could even be redundancies as a result of it, so that is Stena Line, a major company. We then move on to some smaller operators in Liverpool. I have here a letter from Mr Kirk of Stanton Grove Ltd who tells us that his company faces a back-dated bill of £1.5 million with the increase on-going of some £568,000. He only makes annual profits of £250,000 and does not know how on earth he can afford not only the back-dating but the actual increase that he faces. Finally I have a letter here from Mr Dixon, the Managing Director of Freshney Cargo Services in Grimsby and they are facing a back-dated bill of £3 million and a £750,000 annual increase. Your letter suggests that we can address this problem by giving these companies eight years to pay back the back-dated element, but it is clear from those figures that they will not even be able to afford the actual annual increase never mind about the back-dated increase. Your letter also refers to a fast-track appeals system but as you intend to legislate in order to provide them with this eight-year period, could that legislation not actually look again at this back-dating issue and whether it should actually be applied, bearing in mind that not one of these companies was consulted, despite what the Valuation Office has said? Stena Line make it absolutely clear that they had no consultation whatsoever both as a port user and a port owner. Do you not think that you should look at this again? While you have moved substantially, and I accept that, I do not think it has gone far enough, and I think the Committee would agree with that

  Mr Timms: Let me just comment on some of the figures. I have figures in front of me for a couple of the ports that you mention—and again I apologise that the Committee has not seen that yet—and for Fleetwood before the review the port rateable value was £310,000, the non-port was £324,000, so a total rateable value of £634,000. Post the review the figures are for the port £245,000 and non-port £325,000 so a total of £570,688, which is a reduction in that particular case of the overall rateable value, so I am a little puzzled. I suppose in that case Stena is not the port operator, it is simply the tenant.

  Q555  Nick Ainger: No, it is not the port operator, it is a port user there. Their figures show a 430% increase.

  Mr Timms: Yes. On the question of notification, as you know from our previous exchange, the Valuation Office Agency did write to all the port operators affected as soon as the appeal from Southampton was withdrawn, which was in the early part of 2006. There was some discussion at the Committee last time I appeared with John Healey about letters to port occupiers in Hull and, in that particular case, because the Valuation Office Agency did have some information about the occupiers in Hull, 72 letters were issued between November 2006 and February 2007. What has happened is that it has become clear through this series of events that some occupiers who previously were not being charged rates actually should have been charged those rates for a very long time. That has now been put right. I think the change that has been announced in the PBR is a very significant one. It will allow people to stage payments over eight years instead of having to pay in the current financial year, which would otherwise have been the case, but I do not think I can hold out to the Committee the prospect of negating what clearly is a liability which does need to be paid and indeed should have been raised in previous years as well. My colleague, Jim Fitzpatrick, the Ports Minister, will, as our letter to the Committee said, continue to speak to the port operators because of course in many cases their rateable value has reduced as a result of the changes as the counterpart of the operators' rateable value being raised, and there may be some help that some of the port operators therefore can provide. I think I would need to point out to the Committee that the rates liability does need to be met.

  Q556  Nick Ainger: Again, we have had correspondence from individual companies who had always understood that the rent that they were paying to the port owner did cover an element for rates. They have told us that the port owners are refusing to offer them any compensation for the rates that have been already paid and they do not seem to be negotiating any significant reduction for future payments either, so they are being hit with a double-whammy. They are being hit by the fact they believe that they have already paid a substantial contribution towards their rates between 2005 to date to the port owners and then they are being hit by the Valuation Office saying that they have got to pay their full rates with effect from April 2005. Talks can go on but at the end of the day they want a clear decision in relation to this back-dating element, and if there is no way that the port owners can be made to compensate in some way, then the only way is to look to the Valuation Office for some form of compensation because at the end of the day—and I will quote you again what Stena Line said: "The Valuation Office did not consult with Stena Line either before the new valuation list came into force or before any of the subsequent actions to alter the list." It goes on to say: "This contrasts with the situation in Scotland where a consultation exercise did take place with port operators and we do not appear to have a problem in Scotland." Thus it is clear that there is a lot of evidence that port operators are being asked to pay twice, that they are being faced with very high increases, and that they were not properly consulted at all, and it came as a bombshell to them when they were informed of the new valuations. I think we need to make some progress.

  Mr Timms: I think we have made some progress in the announcements in the PBR. On this point of the port operators' rateable values, those have reduced from £127 million for England and £8.6 million for Wales to £84 million for England and £7.8 million for Wales, so there has been a significant reduction in the port operators' rateable values. In the case of Hull the figure has gone from £9 million for the port operator before the review down to £3.1 million now. I appreciate the position is going to vary considerably between occupiers, but I would hope that the arrangements would have been set out in a licence agreement between the port operators and their occupiers and that on the basis of those agreements the occupiers may perhaps be able to press their landlords for some adjustments. I hear very clearly what you have said about what is actually happening on the ground and I will draw that to the attention of Jim Fitzpatrick for his discussions with the port operators (which are continuing) but I do not think there is very much more that I can offer or that the Valuation Office Agency is likely to be able to offer beyond the very important step that the Chancellor announced this week.

  Q557  Nick Ainger: But you accept that there is an issue of natural justice here as well if the port occupiers/the port users, who are the people that actually generate the wealth in those ports, they are the ones that employ people and do the business there and so on, are faced with these huge rises and their landlords, certainly in certain circumstances, do not appear to be prepared to pass on their reductions to their tenants. As you intend to legislate so that the eight-year period can be addressed without interest being applied, can we not address also the issue of the refusal of individual ports to pass on to their tenants the savings that the Valuation Office has given to them?

  Mr Timms: You are suggesting that we should legislate some new obligation on the port operators?

  Q558  Nick Ainger: Indeed.

  Mr Timms: I do not think the legislative opportunity that allows us to stage these payments over eight years would allow us to make the change that you have suggested. I am perfectly happy to have a look at that, but I would not want to encourage the Committee to think that that is something that could readily be done. I do agree that the port operators do have some responsibility here, and I think all that we can really do is press upon them the importance of them fulfilling those obligations because it is not in their interests that their tenants should needlessly be put out of business, which in some cases may be the consequence. However, I would not want to encourage unduly the Committee to think that there is something in legislation that we could quickly do.

  Q559  Nick Ainger: Can you look at that?

  Mr Timms: I am very happy to have a look at it.[7]

  Chairman: Does any other colleague want to ask about ports? Right, let us turn to the Debt Management Office. Sir Peter Viggers?

6   Following the hearing the Committee Secretariat was able to confirm receipt of the note on 5 November. Back

7   Ev 110 Back

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