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No one in your Lordships' House can disagree that the unexpected backdated liabilities, combined with the current economic climate, have hit businesses hard in all sectors and areas across England. Yet despite what the Opposition may purport, we in government recognise this and sympathise with their plight, which is why, among other initiatives to help businesses, we are specifically providing assistance to all businesses,
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Lord Greaves: The Minister is going very heavily on the fact that backdated revaluations happen quite frequently in the rating system, which is true. However, is there not a fundamental difference between a backdated revaluation, which results in a higher bill, and the backdated complete change in the system that applied to these businesses? In 2005, it was not that their rating obligation was revalued upwards but that the system changed that resulted in these huge increases, which were backdated for three years. Is there not a difference between those two things?
Lord McKenzie of Luton: This is a fundamental point, which is why I disagree with the noble Lord. There was a change in the basis on which ports were generally assessed for rates, but it was not that which drove these backdated liabilities. The change indicated that there was a need for the valuation office to have more information, because it seemed that there were properties there that, under the old as well as the new system, should have been separately rated. That continues, whether or not we switch from the old to the new basis for ports generally. So it was not affected by that change.
Under the schedule of payments, ratepayers who meet certain criteria and are faced with unexpected significant backdated liabilities can repay the amounts over an unprecedented, interest-free eight years instead of as an immediate lump-sum payment. The scheme is providing real help to affected businesses by reducing the backdated amount to be paid up front by a huge 87 per cent. The Government are just as concerned as others about the impact of backdated rates liability on the trading prospects of businesses, including ports, particularly in the current economic conditions. We have explored and indeed debated at length the possible solutions put to us.
I will now try to deal with the whole raft of questions that were posed to me. If there are any I cannot cover tonight, I will certainly look at the record and write to noble Lords. The noble Lord, Lord Bates, asked why there was no impact assessment of backdating, no consultation and no assessment of economic assessment. There has been no change in rates policy, which is why there was no impact assessment. Backdating rates is an inherent part of the rating system and has been so for some long while.
The noble Lord asked whether we should accept the view of the House of Lords that there should be no principle for business rate supplement for retrospective backdated rates liability. The Government disagreed with the principle, as the purpose of backdating rates is so that all ratepayers pay a fair amount of rates from the date it should be rated and to ensure that there is no avoidance of rates. The noble Lord asked about a letter from Alan Johnson. I have not seen that letter.
The noble Lord had an assault on the VOA. The Government do not accept the blanket assertion that the Valuation Office Agency is to blame for this situation
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It has been suggested that prescription is the answer and that the Secretary of State should prescribe rates at the original 2005 level. First, as I said a moment ago, prescription will not change the person liable for the rates. Properties now separately rated will continue to be billed separately. Secondly, prescription cannot be done retrospectively, so prescribing rates now will not alleviate the backdated rates bill from 2005. Thirdly, the original 2005 level was in some cases zero, but some of the properties were omitted from the rating list. Prescribing rates at zero is effectively removing a liability for taxation and could therefore be construed as state aid. Fourthly, properties are rated on the basis of market rent levels. In order to deliver some benefit to businesses, we would need to prescribe a formula that generated results below the market rental value. However, none of the other 1.7 million properties on the business rating list is valued other than on the basis of market rent and there is no clear rationale for special treatment. In particular, there is no basis on which the low rateable value could be established.
The noble Lord, Lord Bates, asked what representations had been made from investors on the ports issue. I will write to the noble Lord on that matter. He also stated that one in every three valuations was in error and that out of 1,600 properties assessed, 600 were wrong. I suggest that that analysis is incorrect. Some 1,600 properties were identified and assessed on 1 April 2005. The review of ports found an additional 600 properties to be due and added to those 1,600.
I now revert to the point we touched on earlier-that we have received information that the Secretary of State does have powers to waive the retrospective element. As I said a moment ago, yesterday we received the briefing mentioned by the noble Lord, and we will have to look at that matter again and revert if necessary. However, the position as of today is as I have announced: the Government believe that primary legislation is necessary and those powers do not exist.
The noble Lord asked about whether there was time to review the VOA's conduct. A recent framework review of the VOA found that there was a communications issue, as highlighted by the ports review. The review recommended that proactive communications should be reviewed and improved. The DCLG and the VOA are looking to address that recommendation.
The noble Lord, Lord Bates, said that the Government had admitted that the VOA made an error. The Government have not admitted an error. The Government have agreed that the VOA had not communicated the review very well, but not that it was in error in the assessments that were undertaken.
In the exchange that we just had we dealt with the point made by the noble Lord, Lord Greaves, about the new systems introduced in 2005. The noble Lord also asked why we did not wait until the 2010 valuation to introduce these changes, as suggested by the Treasury Select Committee. To delay the findings of the review would effectively remove the liability for taxation, and the statutory framework for business rates gives no discretion to remove a liability to taxation. That is our advice. We believe that it would not be in the interests of fair competition or in line with the principles of taxation for such a liability to be waived.
The noble Earl, Lord Cathcart, referred to potential insolvency issues arising from these arrangements. A few affected businesses have said that, despite the schedule of payments, which represents an exceptional arrangement to spread payments over eight years, they will have to add this liability to their balance sheets and therefore become technically insolvent. As a result, although they may be in a position to continue their business, technically they will have to cease trading. We have taken advice on this matter from experts in the Insolvency Service and the Department for Business, Enterprise and Regulatory Reform, as it then was. Clearly the outcome will depend on the individual circumstances of each business on a case-by-case basis. It will depend on the level of both the existing assets and liabilities when the backdated rates bill was received, and the directors' reasonable expectations of being able to meet their liabilities as they fall due in the future.
Our correspondence with the Inspector General of the Insolvency Service indicated that liabilities would have to be booked immediately. However, he said that when an arrangement has been made to pay by instalments, companies can discount the liability, which will partly mitigate the impact by effectively reducing the amount shown on the balance sheet. He makes the distinction of a company being balance-sheet insolvent-which, of itself, would of course not necessarily cause a company to have to cease to trade-for as long as it was unable to pay its debts as and when they fell due. I think that that point needs to be seen in context.
I have dealt with most of the questions that have been raised. If any noble Lord thinks that I have not, I give them the opportunity of challenging me, but I will review the record and write further if necessary. To conclude, if the Government accepted the principle that the port occupiers should not pay their legally established rates liability, current secondary legislative powers would not be sufficient to achieve this aim. That is our advice. It is not reasonable to confer on any one particular sector an advantage over the others, which is what waiving the backdated liability for businesses in ports would do, were it even possible under the deferred payment scheme regulations, as this Motion of Regret suggests. It is right that businesses should pay the tax that is due, but in the current economic
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We have been around and around this issue. We cannot waive the liability under secondary legislation. We cannot even consider waiving the liability for a single sector. Ultimately, the most effective and immediate help that could be provided is already available via the schedule of payments. Therefore, I respectfully ask the noble Lord not to press his Motion of Regret.
Lord Bates: My Lords, the Minister has made an attempt at a defence, but it goes nowhere near the real defence that was needed regarding the jobs that are being lost and the businesses that are going out of business as we speak as a result of an own goal by the Government and an unbelievable level of intransigence. I would again leave ringing in the ears of Members opposite the words of Mr Johnson-the Home Secretary, and he who would be king-who wrote to the Secretary of State, saying:
"The VOA has committed an egregious error, failed in its duties and failed to obey the instructions given by Government".
Those are the words of the Home Secretary. We very much endorse and support them. I urge my colleagues to support this Motion of Regret. I wish to test the opinion of the House.
Division on Lord Bates's Motion.
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8th Report Delegated Powers Committee
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175A: Clause 81, page 54, line 30, at end insert-
"( ) The Chief Executive must have regard to the provision of appropriate facilities which are suitable to the needs of the young person for whom apprenticeship training is provided."
Lord De Mauley: My Lords, I will be as brief as I can on Amendment 175A, as its intention is pretty clear. The Bill says that the chief executive of skills funding may secure that suitable training should include the provision of facilities that take into account the special needs of the apprentice, if required. This reflects
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To strengthen this, we propose inserting the proviso that the chief executive must have regard to this commitment. We have stopped short of inserting it as a new duty, to take account of the fact that it may not always be possible for employers to provide these suitable facilities. We have no desire to increase the already substantial burden on employers, especially in these very difficult times. However, we feel that it is important for the chief executive to take the provision of appropriate facilities into account when finding a training scheme for these young people, and we look to the Minister for reassurance that this will be the case. Could he perhaps also give us some idea of how the process of securing suitable training with appropriate facilities will be carried out? Will he inform noble Lords what steps the Government will be taking to ensure the suitability of employment? Importantly, how far will employers be expected to fund or adapt to any changes in their workplace initiated by the need to provide appropriate training for these young people? Does the Minister acknowledge the need to ensure a balance between the provision of appropriate apprenticeships for young people with learning difficulties or special educational needs, and the potential burdens on employers to secure them? We would like to hear how this will be managed in a way that is acceptable to all.
I thank the noble Lord, Lord Low, for his ceaseless efforts to make sure that those with learning difficulties or disabilities are fully represented in the Bill. A recent Youth Cohort Study found that 29 per cent of disabled 18 year-olds were not in education, employment or training, compared to 12 per cent of non-disabled 18 year-olds. I do not have the figures for those in the post-19 category. Perhaps the Minister can help us with that.
I hope the Minister will offer the noble Lord, Lord Low, some reassurance regarding his concerns. It is of the utmost importance that those with learning difficulties are included in the entitlements of the Bill. Nevertheless, as I said, I hope that he will also offer some reassurance to employers that in this time of economic difficulty, they will not be overburdened with duties that they may struggle to fulfil. Does the Minister think, for example, that it may be difficult for all small businesses, despite their best intentions, to provide additional learning support for apprentices over 16 in the workplace? How will a balance be achieved between the needs of those in the workplace with learning difficulties and the capacity of employers who may struggle to make all the necessary changes and provisions? I look forward to the Minister's response and beg to move.
Lord Rix: My Lords, Amendment 189 stands in my name. However, after the productive discussions that my colleagues and I had with the Minister and the department during the Recess, I will not be moving the amendment.
Lord Low of Dalston: My Lords, I thank the noble Lord, Lord De Mauley, for his praise of my "ceaseless efforts" even before they have begun. I wish to support
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It is reassuring to learn that the Skills Funding Agency will be subject to public sector duties under equality legislation-particularly the disability equality duty which, it is intended, will be incorporated ultimately into the public sector equality duty to be introduced by the Equality Bill.
Amendment 213 deals with the availability of information in accessible formats. It is reassuring to know that the National Apprenticeship Service is committed to ensuring that its services are accessible to those with learning difficulties and disabilities; that the service's websites are highly rated for accessibility; and that printed materials produced by the National Apprenticeship Service will comply with the Central Office of Information's informability guidelines. I stress the point because it is becoming increasingly the norm to assume that if you put your information on the internet, you have done all that you need to do to make it accessible. I do not minimise the importance of the internet in making information accessible to those with disabilities, and in equipping them with the skills to use it with facility. However, it has to be recognised that the internet poses peculiar challenges for some people with disabilities-I might mention people with visual impairments-so it remains important to ensure that information is available in other accessible formats.
As for the point that printed materials will comply with the COI's informability guidelines, I would be more comforted by that commitment if anyone could lay hands on those guidelines. I remember them being launched some 15 to 20 years ago. I hope that they have not disappeared without trace and that they still exist, perhaps in updated form. If not, I am sure that the RNIB, where I am now a vice-president, could help with its See it Right guidelines. We have a comprehensive and substantial pack.
With regard to Access to Work, which is dealt with in Amendment 214, it is understood that this is an issue for implementation to ensure that the National Apprenticeship Service and Access to Work are working effectively together. I am also reassured that organisations representing disabled learners will be involved. It would be even more reassuring if Ministers would commit to keeping an eye on progress.
Baroness Howe of Idlicote: I support these amendments. The figures that were read out about the number of those with disabilities compared with the rest of the population illustrate how important it is to give special regard to their needs, make certain that all the facilities that they require are available, and above all, that the word "must" enters into the consideration that is given, albeit that it is not a total duty. It is imperative to see that that side of things is carried through.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Lord Young of Norwood Green): First, I thank all those who engaged in a dialogue during the Recess to help us to resolve many of the important issues that have arisen in the debate already.
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