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The Government have admitted that this was a mistake. In fact, John Healey acknowledged that during a debate in another place, when he said that it was a regrettable mistake. As evidence of regret over the nature of the mistake, the Government introduced a small concession, whereby payment of the backdated bill could be spread over eight years. They felt that that would be sufficient to deal with the problem.
However, that is certainly not the case. Many businesses face huge increases in their bills. I wish to mention a couple of the businesses that have come to my attention
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The impact of this has led to many people losing their jobs. Victoria Ayling has done an outstanding job in drawing attention to this injustice, highlighting a number of cases in the Grimsby area. She recalled an instance where a father had just been made redundant as a result of this tax and his son had to take a forced reduction in his number of hours. She pointed to the impact on companies such as Conoco and DFDS. It has a huge impact on the car industry. I know from my own experience of visiting the CAT depot at Teesport that it has a huge impact, as CAT occupies a large space of land for allowing landing vehicles into this country.
This was debated in this House when my noble friend Lord Attlee ably proposed a Motion on it. In that debate we heard from a number of highly experienced and knowledgeable people about the impact on businesses. I will give some of the examples that were mentioned. In the port of Hull, the effect of this backdating amounts to £25 million. In Liverpool, it amounts to £22 million. In Immingham it is £19 million; in Goole it is £6.5 million; and in Grimsby it is £4.8 million. The Minister lamented yesterday as to why his party was failing so poorly compared to the Conservative Party in Wales. Here might be one of the answers. In Cardiff, the bill for this additional tax has increased by £1.6 million.
This is a spectacular own goal when the Government are trying to introduce measures to save jobs. Here is a very simple measure. It does not cost the £50 billion to bail out the banks; it only costs £124 million to correct something that had nothing to do with the businesses themselves. It was not their fault; it was the fault of the Valuation Office Agency, which has contravened at least five of the commitments that the Government gave about retrospection. This amendment, by guaranteeing that such a series of events could not recur in the context of the Business Rate Supplements Bill, further raises the pressure on the Government to step forward and address this serious injustice. I beg to move.
Lord Tope: My Lords, as the noble Lord, Lord Bates, said, this issue has been debated at least twice in this House, albeit not in relation to this Bill. He has again made the case very well and very clearly. The Government, not the businesses, are responsible for the mess. It is quite wrong that the businesses should be penalised for mistakes that the Government and their agency have made. It is especially wrong and regrettable that they should be penalised in the current financial climate.
The Government have to find a way of resolving this issue. They have so far said that they will allow back-payments to be spread over eight years but, as has been made clear, that is a very limited concession—if it is a concession at all—and has still left unresolved issues in respect of companies’ balance sheets and liabilities.
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I am not sure that these amendments are the full solution to the problem—I do not think that they are intended to be—but they are part of the solution. For those reasons, we shall certainly give our support should the noble Lord wish to seek the opinion of the House on the amendment. I hope that that will add to the pressure on the Government to resolve the mess that they have got themselves into but from which the ports, a vital industry, are suffering.
4.30 pm
Lord Williamson of Horton: My Lords, I support the amendment. It comprises a single sentence in plain English, which is quite a change from some of the discussion on the Bill. It is quite evident that it is desirable to put it into the Bill because of the history referred to by the noble Lords, Lord Bates and Lord Tope. I was present in the discussion when the noble Earl, Lord Attlee, raised this point before and I was extremely unhappy about the way in which the businesses in the ports were treated; I thought that it was quite wrong, but that our ability to correct it was also very limited. A minor correction was made by deferment of some of the charge, that is true, but, in my view, that was not good enough. The advantage of the amendment is that it makes quite explicit in the Bill that we are not going to have retrospective liability imposed on a ratepayer when there is no error or default on his part. That seems to me self-evident. You might think that it is so self-evident that it should not be put in the Bill, but I would like to see it in the Bill. I will certainly vote for the amendment if we are invited to do so.
Earl Attlee: My Lords, I am grateful to my noble friend Lord Bates for moving his amendment. He referred to the debate that I initiated on this issue when we considered the non-domestic rating legislation. What he forgot to mention was that the House agreed with me and approved my Motion of regret. The amendment is sensible and equitable. It ensures that the costs of errors in the collection of business rates are borne by those responsible for the errors and not by the innocent parties. It promotes the efficient and timely collection of business rates, which is critical to the maintenance of public finances both now and in the future. I urge the Minister to agree to my noble friend’s amendment and, if necessary, to support it in the Division Lobby.
Lord Brooke of Sutton Mandeville: My Lords, I declare an interest, somewhat improbably as someone who has never worked within the City of London, as an honorary fellow of the Securities and Investment Institute. I am going to take the liberty of quoting briefly from its most recent quarterly Investment Management Review, in an article entitled “Devastation in Shipping”. It states:
“The scale of the drop is manifest in two separate statistics. The Baltic Dry Index, the index of shipping costs for dry bulk commodities (iron ore, coal, graphite and grains), fell to a 22-year low of 663 on 22 December, a 95% drop from its all-time high of 11,793 in May. The cost of chartering a Cape-size ship fell from $235,000 a day at the peak of the market to just $2,300 a day in early December ... Since December, there has been a bounce, as China has re-entered the market in a limited way. By early February, the Baltic Dry Index had doubled from its December low, to 1498, and the cost of hiring a Cape-size ship had multiplied
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Those two paragraphs are an index of the scale of the problem that is facing ports at the present time.
I, too, have had representations such as my noble friend, Lord Bates, reflected in his intervention. I shall not delay your Lordships’ House with the details at such a time, after my noble friend’s eloquence, but for the businesses that have written to think that it is worth while raising these issues with me, who has no background in this matter, is an index of their seriousness. If, despite all this, the Government regard this matter as a storm in a teacup, as was implied by the Minister in Committee, we are, of course, all aware that Lord Sugar, as he not yet is, is riding to the aid of SMEs and I hope that we can be confident, on issues like this, that, if the sugar gets into the teacup, it will be—to coin the phrase—shaken and not simply stirred. I support my noble friend’s amendment.
Earl Cathcart: My Lords, I congratulate my noble friend on moving this amendment and on the arguments that he put. He mentioned that the Government think that they have solved the problem by deferring the rates and allowing them to be paid over an eight-year period. However, as the noble Lord, Lord Tope, suggested, while that might help cash flow in the short term, it does not solve the problem, which is that the total of this huge tax liability must, by law, be booked immediately in the accounts of the businesses as a deferred liability and their auditors will need to be satisfied that this deferred liability is matched by sufficient assets, otherwise they must declare the business technically insolvent. What banks in their right minds will lend money to a company that is technically insolvent? This just compounds the problems for these wretched businesses round the ports. Even the Government’s own Insolvency Service is warning Ministers that this could push many firms into insolvency.
Lord Davies of Oldham: My Lords, this is an important pair of amendments and I want in my response to distinguish between two features of the debate. I shall come on to the question of the ports in a moment, but let us consider first the issue of principle. The amendments would prevent BRS from being levied retrospectively as a result of a change in the rating list. I am all too conscious that, if there is one word that threatens to dog Ministers in this noble House, it is “retrospection”. I had the blissful experience of defending the concept during the banking legislation and the scars will stay with me for a considerable time, although the House was persuaded of the justifiable nature of retrospection in that legislation.
However, I do not have the same inhibition with this Bill—very far from it. I understand why the amendments have been prompted by the difficulties in the ports, which I shall come on to. However, BRS builds on the non-domestic rating system. In particular, liability to BRS and the level of liability in respect of any given property will be based on the rating list entry for that property. Rating lists, as the whole House will be aware, can be changed by valuation
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There is the possibility of backdated increases in rateable value causing higher BRS bills than businesses were anticipating, but we are faced with the practicalities involved in ascertaining the need for changes to a rating list and then establishing what change is required. Backdating is an essential part of the normal functioning of the system. Let us disabuse ourselves of the idea that there is anything exceptional about what the Bill proposes with regard to BRS.
In introducing his amendments, the noble Lord, Lord Bates, has given an instance. It does not clarify the issue, though; rather, it clouds it. Not that I am saying that he does not have the right to introduce the concerns of the ports, nor am I going to resile from the fact that my noble friend confessed to an element of fault that had occurred with regard to that position.
The port issue does not, however, affect the principle. It is only right that businesses will be asked to pay the BRS that is due on their property and to pay at the correct level, otherwise we are going to have businesses occupying properties of the same rateable value being liable for different bills. It would be unfair to those businesses that have been paying the correct supplement if others were paying a smaller bill due simply to an inaccuracy on the rating list and because they were not asked to pay the correct supplement. It is also worth reiterating that BRS bills, like rates bills, will go down as a result of a change to the rating list in certain circumstances. This is a normal function of the system.
With regard to the ports, the Chancellor announced in the Pre-Budget Report that the Government will legislate to give businesses more time to pay in certain circumstances because we recognise the problems that port businesses face. Legislation has been passed so that businesses facing such bills in those circumstances will not be required to pay their backdated liability within the financial year at present but will be able to do so in equal interest-free instalments over eight years.
I heard what the noble Earl, Lord Cathcart, said about the problems for businesses faced by this bill. However, if a business that had arrived at this position because of backdating had ensured, operating under legislation constructed to make this possible, that the liability should obtain over eight years, it would be a very odd judgment by a bank or by anyone else doing business with it that it was not a viable business because of this particular feature.
Although the review of ports, and the subsequent separate assessment of a number of new properties within ports, highlighted the issue of the impact of backdated liability, the legislative changes implemented will apply to all ratepayers occupying properties that meet the criteria, including those in ports that meet
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To conclude, the provisions in the Bill are entirely consistent with the national business rate system. They ensure that the liability to business rate supplements is fair to all. We had a particular problem with the ports, which the Government have addressed. That issue is not relevant to the principle obtaining on our business rating system in this country. This Bill is fully consistent with the ratings system that we operate. Accordingly, I hope that the noble Lord will feel able to withdraw his amendment.
4.45 pm
Lord Bates: My Lords, I certainly will not be withdrawing the amendment, as I want to test the opinion of the House. Before doing so, I will respond to some of the points made by the Minister.
First, the Minister says that this is entirely consistent with other business taxation. It is not. The businesses being impacted and blighted by the levying of this backdated tax were not liable. It was not the case that they had the incorrect rating or had somehow made the wrong declaration themselves. They were not liable at all for this taxation. It has been introduced this year and backdated to 2005. That is an entirely different thing. Of course there needs to be the backdating element, but it needs to be kept where the fault is with the business itself.
Consider for a moment the implication of what the Minister is saying. It removes all pressure from the Valuation Office Agency to take responsibility for its actions. It can go on in the clear knowledge that it does not have to keep an up-to-date list or advise people in a timely way. It can go on ad infinitum and backdate measures at any level that it requires.
Secondly, on the impact on real businesses and real jobs, trading conditions will come and go. They have been referred to in this debate. This is not something that is the result of trading conditions; it is the result of an acknowledged mistake, an error by the Valuation Office Agency and the Government, which is costing people in this country their jobs and causing businesses to close at a time of recession. It is a spectacular own goal on the part of the Government. One would have hoped that they would respond more favourably to it.
Lord Davies of Oldham: My Lords, of course I accept the point that the noble Lord is making. My noble friend apologised in Committee for the mistake that gave rise to this situation. The Government are making reparation. Yet we are discussing a Bill about the business rate supplement; this is an amendment to that Bill. I maintain that the Bill follows the normal pattern of business rate levies in this country and I fail to understand why one instance—a mistake that produced detrimental consequences to which the Government have responded—should jeopardise the arrangements in this Bill when the Bill follows the pattern of business rates across the country.
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Lord Bates: My Lords, I am sorry that the Minister is so agitated about people pointing out the harsh facts of what government mistakes are costing in jobs and businesses in this country. This matter was debated and referred to in this House. The result was that the Motion put forward by my noble friend Lord Attlee was supported by 77 votes to 69. Despite all the evidence, the Government continued to make no response. Despite all the apologies, to which the Minister has added liberally today, there has been no acknowledgement that there need to be reparations that say to valuation officers that they cannot backdate in this instance, that they made a mistake, that they must put it right and that they must not take it out on hard-pressed businesses and hard-working families around this country. The Minister has not convinced me at all. In fact, he has reinforced my view on this matter. I want to press the amendment and test the view of this House.
4.50 pm
Contents 184; Not-Contents 124.
Addington, L.
Alderdice, L.
Alton of Liverpool, L.
Anelay of St Johns, B. [Teller]
Armstrong of Ilminster, L.
Arran, E.
Astor of Hever, L.
Attlee, E.
Avebury, L.
Baker of Dorking, L.
Barker, B.
Bates, L.
Berkeley, L.
Best, L.
Bonham-Carter of Yarnbury, B.
Bowness, L.
Bradshaw, L.
Bridges, L.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Burnett, L.
Buscombe, B.
Caithness, E.
Cameron of Dillington, L.
Campbell of Surbiton, B.
Cathcart, E.
Chidgey, L.
Cobbold, L.
Colville of Culross, V.
Colwyn, L.
Cope of Berkeley, L.
Cotter, L.
Craig of Radley, L.
Craigavon, V.
Crickhowell, L.
Cumberlege, B.
De Mauley, L.
Deech, B.
Dholakia, L.
Dixon-Smith, L.
D'Souza, B.
Dundee, E.
Durham, Bp.
Dykes, L.
Eccles, V.
Eccles of Moulton, B.
Eden of Winton, L.
Elles, B.
Elliott of Morpeth, L.
Elton, L.
Falkland, V.
Falkner of Margravine, B.
Ferrers, E.
Finlay of Llandaff, B.
Fookes, B.
Fowler, L.
Freeman, L.
Garden of Frognal, B.
Gardner of Parkes, B.
Geddes, L.
Glasgow, E.
Glentoran, L.
Greaves, L.
Greengross, B.
Hannay of Chiswick, L.
Hanningfield, L.
Harris of Richmond, B.
Hayhoe, L.
Higgins, L.
Hooson, L.
Howarth of Breckland, B.
Howe, E.
Howe of Aberavon, L.
Howe of Idlicote, B.
Howell of Guildford, L.
Hunt of Wirral, L.
Hurd of Westwell, L.
Inglewood, L.
James of Blackheath, L.
Jenkin of Roding, L.
Jones of Birmingham, L.
Jopling, L.
King of Bridgwater, L.
Kingsland, L.
Kirkwood of Kirkhope, L.
Knight of Collingtree, B.
Laird, L.
Lang of Monkton, L.
9 Jun 2009 : Column 557
Lester of Herne Hill, L.
Lewis of Newnham, L.
Lindsay, E.
Linklater of Butterstone, B.
Listowel, E.
Liverpool, E.
Livsey of Talgarth, L.
Lucas, L.
Luke, L.
McAlpine of West Green, L.
Maclennan of Rogart, L.
McNally, L.
Maddock, B.
Maginnis of Drumglass, L.
Mar, C.
Mar and Kellie, E.
Marlesford, L.
Masham of Ilton, B.
Mayhew of Twysden, L.
Methuen, L.
Miller of Chilthorne Domer, B.
Miller of Hendon, B.
Monson, L.
Morris of Bolton, B.
Murphy, B.
Neville-Jones, B.
Nicholson of Winterbourne, B.
Noakes, B.
Norton of Louth, L.
O'Cathain, B.
O'Neill of Bengarve, B.
Onslow, E.
Paisley of St George's, B.
Palmer, L.
Pannick, L.
Park of Monmouth, B.
Patel, L.
Pearson of Rannoch, L.
Plumb, L.
Rawlings, B.
Redesdale, L.
Renton of Mount Harry, L.
Roberts of Conwy, L.
Roberts of Llandudno, L.
Rogan, L.
Ryder of Wensum, L.
St. John of Bletso, L.
Saltoun of Abernethy, Ly.
Sanderson of Bowden, L.
Sandwich, E.
Scott of Needham Market, B.
Seccombe, B.
Selsdon, L.
Sharp of Guildford, B.
Sharples, B.
Sheikh, L.
Shephard of Northwold, B.
Shrewsbury, E.
Shutt of Greetland, L.
Skelmersdale, L.
Smith of Clifton, L.
Soulsby of Swaffham Prior, L.
Stair, E.
Steel of Aikwood, L.
Stern, B.
Stevens of Ludgate, L.
Stewartby, L.
Stoddart of Swindon, L.
Strathclyde, L.
Taylor of Holbeach, L.
Tenby, V.
Teverson, L.
Thomas of Gresford, L.
Thomas of Winchester, B.
Tombs, L.
Tonge, B.
Tope, L. [Teller]
Tordoff, L.
Trefgarne, L.
Trimble, L.
Tugendhat, L.
Tyler, L.
Ullswater, V.
Verma, B.
Vinson, L.
Waddington, L.
Wakeham, L.
Wallace of Saltaire, L.
Walmsley, B.
Walpole, L.
Warsi, B.
Wilcox, B.
Williams of Crosby, B.
Williamson of Horton, L.
Woolf, L.
Acton, L.
Adonis, L.
Ahmed, L.
Anderson of Swansea, L.
Archer of Sandwell, L.
Bach, L.
Barnett, L.
Bassam of Brighton, L. [Teller]
Bew, L.
Bhattacharyya, L.
Billingham, B.
Bilston, L.
Blood, B.
Borrie, L.
Bradley, L.
Brennan, L.
Brett, L.
Brooke of Alverthorpe, L.
Brookman, L.
Brooks of Tremorfa, L.
Campbell-Savours, L.
Christopher, L.
Clark of Windermere, L.
Clinton-Davis, L.
Cohen of Pimlico, B.
Corbett of Castle Vale, L.
Crawley, B.
Darzi of Denham, L.
Davidson of Glen Clova, L.
Davies of Coity, L.
Davies of Oldham, L.
Desai, L.
Donoughue, L.
Dubs, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Evans of Watford, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Filkin, L.
Foster of Bishop Auckland, L.
Gale, B.
Gibson of Market Rasen, B.
Golding, B.
Gordon of Strathblane, L.
Goudie, B.
Gould of Potternewton, B.
Graham of Edmonton, L.
Griffiths of Burry Port, L.
Harris of Haringey, L.
Harrison, L.
9 Jun 2009 : Column 558
Haskel, L.
Haskins, L.
Haworth, L.
Hollis of Heigham, B.
Howarth of Newport, L.
Howells of St. Davids, B.
Howie of Troon, L.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Irvine of Lairg, L.
Jay of Paddington, B.
Jones, L.
King of West Bromwich, L.
Lea of Crondall, L.
Leitch, L.
Levy, L.
Lipsey, L.
Lofthouse of Pontefract, L.
Macdonald of Tradeston, L.
McIntosh of Hudnall, B.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Massey of Darwen, B.
Maxton, L.
Meacher, B.
Mitchell, L.
Moonie, L.
Morgan of Drefelin, B.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Moser, L.
Patel of Blackburn, L.
Patel of Bradford, L.
Pendry, L.
Pitkeathley, B.
Ponsonby of Shulbrede, L.
Prosser, B.
Puttnam, L.
Quin, B.
Radice, L.
Ramsay of Cartvale, B.
Rendell of Babergh, B.
Richard, L.
Rooker, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Sawyer, L.
Sewel, L.
Sheldon, L.
Simon, V.
Smith of Gilmorehill, B.
Smith of Leigh, L.
Soley, L.
Symons of Vernham Dean, B.
Taylor of Bolton, B.
Temple-Morris, L.
Thornton, B.
Tunnicliffe, L. [Teller]
Turner of Camden, B.
Uddin, B.
Vadera, B.
Wall of New Barnet, B.
Warner, L.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
West of Spithead, L.
Whitaker, B.
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