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Why, indeed, is a paragraph on directions needed at all? Financial arrangements will need to be in accordance with Treasury rules, and in all other matters the chief executive reports to the Secretary of State, who sets the agenda and can change it at any time. Directions are a draconian power and should not be used where they are not needed. They are not needed in any way in this schedule, which covers the detailed arrangements for an executive agency's chief executive. Indeed, Schedule 4 does not indicate any likelihood that the chief executive will be able to act independently.

The only thing left is whether there is, somewhere within this arrangement, a need for a back-stop power. I, for one, cannot begin to understand why there ever would be a need for such a power to bring the chief executive into line, because if he or she was not in line I suppose that they would be disappointed-somebody else would be put in their place, and we would only hear about it later. If there is any way in which I could be helped to understand why this paragraph is included in the way that it is, it would be if there were an agency precedent on which Parliament might rely. If so, which agency is it? I beg to move.

Lord De Mauley: My Lords, I thank my noble friend Lord Eccles for his characteristically detailed scrutiny of the Bill. It is quite clear, as he said, that the Secretary of State should not have the power to direct the chief executive of skills funding on every aspect of the day-to-day management and administration of his organisation. We have just been probing the status of the SFA; in Committee in another place, the Minister suggested that by putting duties on the statutory post-holder, we would somehow arrive at a greater separation between him and the Secretary of State. This seems rather unlikely under the current terms of Schedule 4, so I am looking forward to the Minister's response to my noble friend.

Lord Young of Norwood Green: My Lords, Amendment 170 would have the effect of reducing the scope of paragraph 10 of Schedule 4, such that the Secretary of State would be able to direct the chief executive of skills funding regarding only the financial arrangements for the office and staff of the chief executive and not the other management and administrative arrangements. This is an important enabling power which allows the Secretary of State to issue directions to the chief executive of skills funding

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about the financial, management and administrative arrangements of the office of chief executive, should it be necessary to do so.

Guidance will be available to the chief executive to ensure that the arrangements for the Skills Funding Agency in these areas are consistent with current Treasury and Cabinet Office guidelines and with public accountability rules on the financial management and administration of a public body. Issuing such guidance is crucial for the effective and proper handling of the considerable sums of public money which will be routed through the Skills Funding Agency as well as for the efficient and effective management of the organisation as a whole. If the Secretary of State considered that the chief executive or a member of his staff failed to adhere to any such guidance, these powers could be used to direct the chief executive to do so-and, as such, although I do not know if they equate to a back-stop, they are certainly powers of last resort.

This power is not about seeking to control the chief executive. That individual certainly has powers that include reporting to Parliament through an annual report. It is about ensuring, through the power to give directions, that there are high standards of financial probity and administrative arrangements in place.

I turn to a point made by the noble Viscount, Lord Eccles, who asked why it is necessary to have powers to direct the chief executive officer, who is a civil servant. It is because the chief executive officer has his own legal personality under the Act and is personally responsible for exercising his own statutory powers. I hope, with that explanation, that the noble Viscount will feel able to withdraw his amendment.

7.30 pm

Baroness Perry of Southwark: As a former senior civil servant myself, I find this clause to be very unusual. I cannot imagine any occasion on which the chief executive of an agency that is entirely within the Civil Service structure would need directions from a Secretary of State of the kind just described by the Minister. Every senior civil servant knows that they must keep within Treasury rules in terms of finance, so it seems odd to say that the Secretary of State would tell him, because it would be assumed that she or he would do so. As for giving directions, the Secretary of State gives directions to all his or her civil servants because they are there to serve their Ministers. Whether or not they have moved one step away into an agency does not in any sense remove them from the obligation to perform within the rules of the Civil Service, including the Treasury rules, and according to the will and wishes of the Secretary of State.

I find it strange that this has been put into the Bill. I understand the motivation, a noble one, to wish to make the agency as freestanding as possible, but in terms of the Secretary of State directing it on the kind of thing the Minister has described, that is simply unnecessary and, I think, a genuine precedent in legislation.

Viscount Eccles: I will not prolong this short debate except to say that two big clauses, Clauses 116 and 117, deal with directions, so I do not seek to take away the whole panoply of the Secretary of State's ability to give directions to the chief executive. However, I think

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that we are living in never-never land. An extraordinary piece of advice has come the Minister's way if what he has told us is how the department really works. It is not how the world of the public sector-which I have been in on a number of occasions-has ever worked. I do not believe that it works this way now. Meanwhile, I beg leave to withdraw the amendment.

Lord Elton: Perhaps I may-

Viscount Eccles: I have withdrawn the amendment.

The Lord Speaker (Baroness Hayman): I must advise the Committee that I have not yet put the question on withdrawing the amendment, so it is possible for the noble Lord to contribute to the debate.

Lord Elton: In that case, I just want to put into the Minister's mind a disturbing thought. My noble friend said that one could not expect civil servants to do other than what they are told by their Minister, but the advice that he has been given, that a power should go into this Bill to make directions, has come from those civil servants. There may be something afoot in his department that he is not aware of.

Amendment 170 withdrawn.

Amendment 171 had been retabled as Amendment 169ZD.

Schedule 4 agreed.

Clause 80 : Apprenticeship functions

Amendments 172 and 173 not moved.

Clause 80 agreed.

Clause 81 : Apprenticeship training for persons aged 16 to 18 and certain young adults

Amendment 174 not moved.

Amendment 174A had been withdrawn from the Marshalled List.

Amendment 175 not moved.

House resumed. Committee to begin again not before 8.34 pm.

Non-Domestic Rating (Deferred Payments) (England) Regulations 2009

Copy of the Regulation

Motion of Regret

7.33 pm

Moved By Lord Bates

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Lord Bates: My Lords, this is not the first time that the case of backdating taxes on port-side operators has been drawn to the attention of this House and I suspect that it will not be the last. What Her Majesty's Government should know is that we on this side of the House will take every possible opportunity to raise the matter in order to protect vital jobs, because the threat is real. The conduct of the Valuation Office Agency has been shambolic and the culpability of the Government in failing to address this manifest injustice and instead choosing to fight among themselves as to who is to blame rather than to get a grip on the situation before it is too late is lamentable. It is something that people will remember.

On 18 March 2009, my noble friend Lord Attlee moved a Motion of Regret similar to this one in respect of the Non-Domestic Rating (Collection and Enforcement) (Local Lists) (Amendment) (England) Regulations 2009. The House listened to a debate in which deep expertise on the impact of the backdating of this measure was shared. When the opinion of the House was tested, the Motion of Regret was carried by a majority of eight votes.

On 9 June 2009, I moved an amendment to the Business Rate Supplements Bill that would have removed the ability of the Government to levy retrospective tax increases where there was a liability affecting the business rate supplement, the responsibility for which was not in any way due to an error made by business but was actually an error on the part of the Valuation Office Agency. The opinion of this House was again tested and the result was a majority of 60 votes in favour of this principle. The Government would not accept the amendment in another place and used the Parliament Act citing privilege to refuse to allow it to be debated again in this House, even though the principle that we were arguing and fighting for was in fact government policy.

Current rating legislation provides for this in the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2005. It imposes an obligation of responsibility both on the Valuation Office Agency and the ratepayer. If the Valuation Office Agency makes a mistake because of an error or default by a ratepayer, the ratepayer has imposed on it retrospective liability to pay any increase in business rates that it would have paid but for the mistake by the Valuation Office Agency. Equally, if the Valuation Office Agency makes a mistake without an error or default on the part of the ratepayer, the ratepayer does not have imposed on it retrospective liability to pay any increase in business rates that it would have paid but for the assessment undertaken by the Valuation Office Agency. I realise that that is difficult to comprehend at this late hour, but sadly that is what the regulations say.

On the matter of retrospection, the Government's own guidance is set out in Regulation 14(6). The central case of the argument that we are again putting to the Government is that, contrary to the Treasury's own guidelines, no impact assessment was made of the effect of backdating these taxes. Similarly, no consultation was undertaken. As stated in Hansard on 6 October 2008 at col. 351W, no assessment has been made of the effect on the wider economy, a charge that was

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acknowledged by the Government in Hansard on 14 January 2009 at col. 761W. The policy also contravenes the Treasury's own guidance on retrospective taxation as stated in Hansard on 9 October 2008 at col. 802W. I say again: no assessment of the impact of backdating was made, no consultation exercise was undertaken and no assessment was made of the impact on the wider economy. The policy contravenes the Treasury's own guidance. In many ways, these charges show the chaos at the heart of government on this issue.

It may seem that the point is being made on a partisan basis. However, the Home Secretary-no less-Mr Alan Johnson, wrote in July of this year to the Minister responsible, John Denham, Secretary of State for Communities and Local Government, and said the following:

"These businesses are damaged by a Government that on the one hand is looking for ways to help small businesses through the recession whilst at exactly the same time is imposing a completely unfair, retrospective system that will destroy jobs and put these companies out of business ... The VOA has committed an egregious error, failed in its duties and failed to obey the instructions given by Government".

What does the Minister make of Mr Johnson's representations? Has he seen a copy of them? Has Mr Johnson made any further representations in person to the Secretary of State on this issue?

What consideration has been given by HMRC's review team to the mistakes that have occurred in the Valuation Office Agency during this time? Perhaps I may quote some references in support of that question to let Members know how we have come to make that charge.

There was an indication that the Valuation Office Agency acknowledged that it had made a mistake in one in three of the assessments that it had undertaken in respect of the ports. Sixteen hundred port-side operators were affected by the change and it is estimated that one in three of them had had mistakes made. Will the Minister confirm that assessment of the impact of this measure, which was made on the record in another place?

Will the Minister report on the review of the Valuation Office Agency's performance to date? The review looked at two aspects. Responding in another place to a reply that he had received from the Minister, Rosie Winterton, Austin Mitchell quoted the review as saying that 600 hereditaments in England should have been separately assessed. These hereditaments were not occupied by the port operator on 1 April 2005, it was admitted. So a catalogue of errors on the part of the Valuation Office Agency had been occurring.

I was interested to come across a document entitled The Review of the Valuation Office Agency 2009. It is dated 10 June 2009 and runs to some 91 pages. I was slightly disappointed not to be able to find any reference in it to the debacle of the retrospective element of the non-domestic rating. Has the Minister seen a copy of the report? The complacency of an agency that has been responsible for the loss of many jobs and the closure of many viable businesses-let alone the well documented mistakes that it made in evaluating domestic properties-is staggering. The executive summary states:

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"The Agency has made year-on-year improvements in delivering its key targets and has done so despite falling resources-staff levels have been reduced by more than 22 per cent".

It goes on to say that the agency's "world-class vision" was launched around the time of the 2005 framework review. Well, the "world-class vision", which is set out on page 17 of the report, looks slightly hollow in the light of the spectacular errors in respect of the port-side operators.

7.45 pm

Further to that, a review was undertaken by the Treasury Select Committee, which stated:

"We have received clear evidence that firms will be forced to declare themselves insolvent as a result of the demands for retrospective levying of this taxation ... The Government's proposal to extend payment terms for port businesses comes too late for those firms which have already ceased to operate in the face of the huge rates bills presented. It is probable that, even with an eight year period to pay, the backdated and prospectively increased rates bills may make many firms technically insolvent. We recommend that, in recognition of the fact that the Valuation Office Agency is to blame for the situation faced by the port firms, the Government takes 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".

Has the Minister seen a copy of that finding from the Treasury Select Committee? If so, what was his response? Moreover, given the woeful inadequacy of the review of the Valuation Office Agency, will he undertake to follow the desire of this side of the House for an independent review of the conduct of the Valuation Office Agency in respect of this matter?

The Minister will recall my asking him in our debate on the Commons amendments in July of this year whether he would undertake to approach the noble Lord, Lord Mandelson, to see whether he would be prepared to initiate an investigation into what had gone wrong with the Valuation Office Agency. It is clear that the five-yearly review has made no effort to get to the bottom of the errors-errors which it is now demonstrated and accepted have cost the jobs provided by many hundreds of port-side businesses. Will the Minister say whether he feels now is the time to undertake an independent review of the Valuation Office Agency?

Will the Minister comment on that fact that the Treasury rules that apply to all Treasury taxes, which require that impact assessments be made, that advance notice be given and that consultation be carried out, do not apply to the Valuation Office Agency? Will he confirm that that is the case? The retrospectivity and the need to consult, which apply to all other changes in taxation levied by Her Majesty's Treasury, appear not to apply to the Valuation Office Agency, as it is an executive agency. If that is the case, does the Minister believe that the time has now come to correct that anomaly, particularly in the light of these changes? Should not the Valuation Office Agency be brought within the same remit as all other taxation divisions of the Treasury, given that it is an executive agency of it?

This is a technical point, but had that provision in terms of retrospective levying of taxation been in place, we would not be having this debate now, firms

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would not have gone out of business and dockers would not have lost their jobs. It is simply that the Valuation Office Agency has taken advantage of a loophole whereby it seems to be exempt from the Treasury's rule, despite being a Treasury agency. That is a specific issue. If it were the case, it would seem to open the door to a massive legal challenge to the whole validity of this retrospective taxation. Perhaps the Minister will comment on that.

Will the Minister also comment on reports of the level of legal bills that will be felt by this Government in pursuing and defending the Valuation Office Agency judgments in tribunals? There have been many appeals, all of which have to be heard and defended.

Ultimately, we are talking about £200 million, which is a significant sum-of that there is no doubt. However, the ports of this country are responsible for 95 per cent of its trade. I am sure that the Minister would agree that, as such, they are every bit as integral to the viability of and every bit as strategic in their importance to the British economy as the banking system. All Members of this House will know that, when it comes to the banking system and liquidity in banks, the Government cannot wait to get their chequebook out. Billions and billions of pounds have been poured into the banks to keep that important element of our economy liquid and moving, with varying degrees of success. The ports are a vital element of our economy, particularly in times of recession. Surely £200 million is not too great a price to pay in order to save thousands of jobs and thousands of viable businesses.

Will the Minister say what estimate the Government have made for the legal costs of pursuing appeals or defending the Valuation Office Agency, which has already acknowledged that it has made a mistake in one-third of all cases? What bills will the Government ramp up in defending the indefensible through the Tribunals Service?

As regards the impact on UK Trade & Investment, there is no doubt that the decision to apply retrospective taxation-changing the rules of the game after they have been set-has severely damaged the UK's reputation internationally. By all means tell businesses that, with effect from 2010, the rules will change in respect of this or that tax. They can make a judgment, an investment decision, based on that evidence and on that decision. We should remember that companies in the portside operation and the shipping and maritime business are the most mobile of all corporations on the global scene. They can take their trade to Zeebrugge and elsewhere very easily. Therefore, the fact that they should be levied with millions of pounds of backdated taxes is, to them, a breach of trust. Will the Minister put on record what representations Her Majesty's Government have received from overseas foreign direct investors in the UK as to the impact of this retrospective taxation?

Informal dialogue from many sources has led to a question, to which I will come back at a later opportunity. I do not expect the Minister to answer this tonight, but I should be grateful if he would consider writing to me and putting some comments on the record. What representations have been received from foreign direct

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investors, via embassies at home and abroad, concerning this? Is the Minister aware of any evidence presented to him by UK Trade & Investment that major planned foreign direct investment into the UK has been cancelled as a result of the change of rules in retrospectivity of taxation? That is a very specific question. At this stage, I am not making an allegation. I should like the Minister to come back with some comments on the record. In many ways, that is also a game changer in this whole debate. Until now, we have been talking about existing jobs under threat. Month on month, hundreds of jobs are going in businesses which are being forced into closure. However, if the UK's reputation abroad has been tarnished as a result of this, and if planned foreign direct investment, which could create vital jobs in this economy, is now being withheld because of this measure, that needs to be factored into the equation and dealt with and addressed head on.

Finally, various representations were made to the Secretary of State for Communities and Local Government and his then opposite number in the Treasury, Mr Healey, on this matter. The argument, as recounted to me because I was not privy to the meetings, goes something along the lines of, "Listen, it is a dreadful mess. We acknowledge that there was a mistake". In fact, the Government have consistently acknowledged that this is a dreadful mistake, which is one reason why they have introduced the period of eight years to allow the retrospective tax to be levied. I am sure that the Minister will not question that at all.

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