I am grateful for this opportunity to debate a monstrous injustice that is being perpetrated on businesses in ports: the levying of a retrospective rate demand that goes back to 2005. The rating assessments were made and the bills charged in 2008, yet businesses are being asked for retrospective payments going back all that way.
I am concerned primarily with the ports of Humberside, but the issue affects 678 businesses in ports nationally. It will lead to bankruptcies, labour lay-offs and a failure of investment in our ports at a time when they are already going through difficulties because of the state of the general economy. It will be a particular blow to the ports of Humberside, which are my preoccupation and that of the hon. Friends by whose beauty and intelligence I am surrounded. It is not just a mess; it is a disaster.
Adding to the other side of the equation, will my hon. Friend press the Minister on cancelling the retrospective taxes? When we debated them on the Floor of the House of Commons, the Minister said that primary legislation would be necessary and went on to tell us that primary legislation would be used to phase in the retrospective taxation. If there is time for that bit of primary legislation, there is surely time for primary legislation to eliminate this injustice.
My right hon. Friend, who fights the valiant fight for Liverpool, makes an excellent point, and I shall raise it later. That is the way we must go.
Until April 2005, the rateable values of hereditaments in the docks and harbours were prescribed by the Secretary of State, who in fact still has that power. Businesses on the docks paid rates via the port owners: the rental that they paid to the port owners went in part to pay the rates on the dock businesses. That system, the cumulo system, still prevails and rates are still paid to port owners in that way, through the rental. However, it was under threat. The Government proposed to end the prescription rating and charge individual rates on port businesses in all 55 statutory ports.
In 2000, my right hon. Friend the Member for Stretford and Urmston (Beverley Hughes), who was then Under-Secretary of State at the former Department of the Environment, Transport and the Regions, postponed the change to the new system, saying that good progress was being made with new valuations, but that they could not come into effect until 2005. She therefore issued an order prolonging the prescription system until 2005.
At that stage, the Valuation Office Agency was required to do new valuations for the individual ratings of port businesses that were to apply from 2005, but it did not. That was the first of a number of failures by the valuation agency, which have got us into this mess. In fact, it did the opposite. In 2002, when Grimsby Fish Dock Enterprises was set up to provide a landing company for fish coming into Grimsby, the valuation agency first asked it for rates, then accepted on the basis of barristers’ advice that it should pay the rates indirectly through the cumulo system to Associated British Ports, as was happening with all the other businesses.
The valuation agency has a statutory duty to compile and maintain accurate rating lists and to have accurate rating lists to come into force on 1 April 2005, so it was obliged to carry out a revaluation of the ports by 1 April 2005. It did not do so, and the owners of the port businesses were not notified of any change in the system, increase in rates or new rating arrangements from 2005.
The valuation agency woke up to the need to do so only in 2006, when it began to do new assessments. I do not know about Liverpool, but in Humberside those new assessments started in 2007, two years after they should have come into force, and they are still not complete. Four ports have still to be assessed by the valuation agency. That does not bespeak great efficiency or concern on its part.
As a result, at this late stage—since the end of 2008—port businesses in Liverpool, Humberside and other areas have been notified not only of increased rate bills, but of even bigger bills for retrospective rates going back to 2005. For instance, rates for Freshney Cargo Services, which has been persistent in putting its case, increased from £48,000, the normal business rate, to £800,000. Its backdated bill is £2,900,000. In a business that must struggle to increase fees and where importers haggle over every penny increase per tonne, it will have to impose massive increases on business coming through the ports.
The ferry trade is competitive, with very tight margins. P&O in Liverpool and Humberside faces a backdated bill of £6 million. The backdated bill for Rowlinson Timber is £1 million. DFDS Seaways, a Danish shipping organisation, faces a bill of £9.9 million. DFDS says that if it must pay that bill, there will not be any more investment in this country or in the ports of Humberside where it maintains its activities. Grimsby Fish Dock Enterprises now has a rateable assessment of £120,000 and a total back payment of £560,000.
I congratulate the hon. Gentleman on securing this important debate. He is making an articulate and powerful case. Is he aware that the retrospective rates increases will affect not just the larger ports that he mentioned, but smaller ports such as Boston in my constituency? The port occupiers’ rates bill will roughly double and, as he said, be backdated three and a half years, which will have a detrimental impact on the economic sustainability not only of the port operating businesses, but of all the tangential businesses that rely on ports, such as haulage.
That is absolutely correct. I shall deal primarily with the Humberside ports, which are of vital interest to me, but the case extends far wider. The effects are similar in smaller ports; actually, they are likely to be more devastating. The problem is what to do about it. As I understand it—perhaps the Minister will correct me—if the port businesses cannot pay their rate bills and go bust as a consequence of the retrospective rate demands, the business premises will pass to ABP, which will pay lower rates on them than those assessed for the current operators. ABP will be in a powerful competitive situation if it carries on itself the business that used to be carried on in those premises by others.
What do we do about it? I want to make it clear that businesses are not saying that they do not want to pay rates. Ministers accuse them of that from time to time, but they are not saying it. They accept that they will be individually rated and that there will be some increase in rates as a result. They accept their liability to pay rates even though they already pay rates through the cumulo system via ABP. The grievously unfair thing is to be asked to pay retrospectively back to 2005. That is an impossible burden. It is unjust, unfair and unreasonable. I cannot see why the Government insist on it.
These rates are not like domestic rates, where a property can be rated and back rates have to be paid. Property does not move; it cannot get up and move on. Businesses cannot charge extra for services that they have delivered in the past, or increase their charges retrospectively, so they cannot pay retrospective rates that they were not billed for at the time.
The Government clearly feel guilty about this—I can see smiling admissions of guilt written on Ministers’ faces when they speak in debates. If they did not feel guilty, why would they be offering to allow the rates to be paid over eight years without interest? That is an admission of guilt. They will probably go further and will eventually allow businesses to pay in Zimbabwean dollars. They are clearly able to make amends.
My hon. Friend might know that the port of Holyhead, in my constituency, and other Welsh ports have had subsequent increases of some 220 per cent. in the rateable value that they will be paying. There is to be no transitional relief for them, so they will be expected to pay immediately. Does he agree that that will cause anxiety and make them less competitive compared with their European competitors? Moreover, at a time when energy prices have also gone up by 200 per cent., this adds to the burden on Welsh ports and British ports.
My hon. Friend is absolutely right, and I should have made that point myself about the effects that the measure will have.
The concession of paying over eight years is of little relevance if the debt has to be reported in the annual accounts, because if those accounts show that a company’s liabilities are greater than its resources, it will technically be insolvent and will not be able to carry on trading. The eight-year concession is therefore a bit of a failure.
Ministers have told us that the Government cannot scrap the measure, even now, but the Treasury Committee is recommending that they should scrap it. After looking into the matter, the Committee has recommended:
“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”.
Ministers say that they cannot do that, but why not? They say that writing off the retrospective debt would be unfair state aid, but that is one of the feeblest excuses that I have heard. To remedy an injustice is an unfair state aid—that is what they are telling us—but if that is the case, what is the writing off of the retrospective payment between 2000 and 2005? Is that another form of state aid? That is the kind of chop logic being used to justify the measure.
Ministers also say that writing off that debt would be unfair to other ratepayers, but to whom? Who is competing with these dock businesses and is it fair to ask dock businesses to pay rates twice? They are already paying, through the cumulo system, and now they will have to pay retrospectively. Is that fair? Ministers’ arguments are so much gobbledygook. We are at the crunch point, because letters have gone out to all the Humberside ports, I think—certainly to those in north-east Lincolnshire—giving 2 February as the date by which the first instalment of these bills must be paid. If it is not paid by then, the whole sum is due, so the situation is now all or nothing.
That shows that in my hon. Friend’s constituency, as in mine and the constituencies of my hon. Friends, we are at crisis point. A decision has to be made, and that decision must be to write off the retrospective payments, which cannot be paid—I cannot emphasise that point enough. We cannot get blood from a stone. If we are to insist on these retrospective payments, we are going to bankrupt businesses on a large scale.
I pay tribute to my right hon. Friend the Minister, who is the nicest Minister I know. This is the unctuous bit before we come to the counter-punching. He has done an assiduous job in replying to the arguments and been meticulous in hearing constituents, listening to what the problem is and discussing it. I congratulate him on that, but the problem is that he is defending the indefensible. He is defending it very well, but this system is simply indefensible.
I accept that a decision to call the whole thing off is a political decision to take—perhaps one that is above the Minister’s pay grade—but that decision has to be taken, because this system is not going to work. I do not expect him to break down and confess at the end of the debate, however long my speech is, Mr. Atkinson, as that is not the nature of these Adjournment debates. However, I hope that he will go back to the Secretary of State and to the Treasury to say, “We cannot win this, and we are not going to. We cannot do this to these businesses. We cannot get blood from a stone.” It is not a matter of businesses saying that they will not pay; the point is that they cannot pay. This is about our businesses.
Is it not the case that before those businesses go bust, the first casualties will be workers at the ports? In my port of Dover, one company is laying off 60 workers, one shipping company has gone bust and even the Dover harbour board is making people redundant. At a time when the whole industry is going through the squeeze of the credit crunch, here are our own Government, piling on the agony. Is not that wrong?
Absolutely. One hundred precautionary notices have been given by Cobelfret in Immingham, and I understand that three firms in Tilbury have already gone under—have become insolvent—because of this retrospective payment. That is the kind of damage, on an accelerating scale, that we are going to be causing.
The whole argument centres not on the rating assessment, whatever it is—I accept that it is going to be difficult to pay, but that is their due—but on the retrospective payments and the demand for payment of that increased non-domestic rate bill, back to 2005. That is the essence of the problem. I hope that the Minister will recognise that and report back that we are not going to be able to levy that retrospective payment.
I watched my right hon. Friend, who is a very capable Minister, on “Look North” on Monday, when I had the rare privilege of being in Grimsby. He said very eloquently that there was not much that the Government could do about redundancies, and that they were not the Government’s fault, but the redundancies that we are talking about will be caused by the Government. They are not like the redundancies at Corus; they will be caused directly by the Government if they go ahead with retrospective payments.
The consequences of going ahead will be disastrous for the ports, which are already in difficulties because of the recession and are already disadvantaged. I draw hon. Members’ attention to the Centre for Cities report, which tells us that the ports that are most threatened by the coming recession are Liverpool and Hull.
I am grateful to my hon. Friend for giving way, because in a moment I must leave for a meeting. Will he stress to the Government the fact that, appalling as it is to think about the number of people who will be made redundant, the ports are the arteries for our trade, which means that not only our port workers will be made redundant? Others will also be laid off because there will be no raw materials and no exports.
That is exactly right. We need to encourage exports at this time, with the pound at this low, competitive level, but we are destroying the structures in the ports. My port and the ports in the Humberside constituencies of my hon. Friends the Members for Brigg and Goole (Mr. Cawsey) and for Cleethorpes (Shona McIsaac) are the gateway to Europe and to the economic expansion and improvement of the area. They are going to be hit hard and directly by the measure, and they are already in difficulties. We are a disadvantaged area and, as the Centre for Cities report says, we are going to face real problems.
It is time for the Minister to go back to the Secretary of State and to the Treasury to say that there is another way. The Secretary of State has powers to prescribe ratings for the ports, which she retains, as they have never been repealed. She should therefore prescribe the assessment for 2005 as it was at that time—upgraded, of course, for inflation. There would be no loss of revenue to the Government because they are being paid through cumulo via ABP. They should forget the retrospective payments, which cannot be collected without ruinous damage being done to the ports and the companies concerned.
Why not then bring in the new assessments in 2010? That is an eminently sensible option that is open to the Minister. Put the blame where it belongs—on the valuation agency—and bring in the new assessments in 2010. My right hon. Friend said in an Adjournment debate last week that legislation would be needed to do that. Well, he needs legislation to do anything—levying the charges or wiping them.
I must point it out to my right hon. Friend that we are not exactly over-pressured by the legislative programme. We have the shortest Queen’s Speech I have ever known in my long career since Mr. Gladstone wrote the Queen’s Speech in 1893, when I first came into politics. There is not much business to get through; we are ticking over in this place. It is dead easy to pass legislation and we could do so to remove this damaging claim for retrospective payments that will be ruinous for our ports and the businesses in them.
Before I call Mr. Stephen Crabb, may I have an indication of how many hon. Members want to speak? The winding-up speeches must start at about half-past 3, so it would be helpful if hon. Members bore in mind the fact that they should therefore speak for about five or six minutes.
I congratulate the hon. Member for Great Grimsby (Mr. Mitchell) on securing this important debate, which follows on from the 19 January debate on the Floor of the House. He started by talking about a monstrous injustice, and that is exactly what this is. That kind of language is certainly being used in relation to how some of the businesses I have recently been talking to in Milford Haven will be affected by the business rates revaluation.
I will not speak for long, but I would like to make a couple of points about the port of Milford Haven in my constituency. I reiterate the point made by my hon. Friend the Member for Boston and Skegness (Mark Simmonds) about the way in which this is impacting on small and large ports and on large firms and small businesses that are tenants of ports. In response to the hon. Member for Liverpool, Riverside (Mrs. Ellman) last week, the Minister said:
“The impact of the review… has not… caused universal problems”.—[Official Report, 19 January 2009; Vol. 486, c. 598.]
His response smacks of huge complacency. When we consider the range of ports and different parts of the country represented by Members here, I hope that the Minister will recognise the problems facing businesses that are tenants of ports.
I am aware of the number of ports and I have read the background material on this. I would have hoped that the Minister recognised that ports up and down the country and businesses small and large are affected. The impact on the viability of these firms and the jobs that these firms create and sustain is significant.
I should point out to hon. Members that I am a tenant of Milford Haven port authority because my constituency office is based on land owned by the port authority. I pay business rates directly, so the issue has not affected me directly—although a few weeks ago, I was interested to receive a form from the Valuation Office Agency asking me to fill out details of the activity that takes place at my premises. That smacks of the inefficiency of this whole process. Milford Haven is one of the last ports to receive the results of the revaluation, and a complaint that has come across loud and clear is the length of time it has taken.
I am a member of the Treasury Committee and we looked at this issue as part of our review of the work of the VOA. It will not surprise hon. Members to know that there were very strong feelings about this issue among members of the Committee. Those feelings were reflected in the recommendation that the Government should certainly consider maintaining the port ratings at the levels published in 2005 lists.
The size of the businesses in Milford Haven port means that some of the figures are not of the order of some of the sums mentioned by other hon. Members who have large firms that are tenants of their local ports. Nevertheless, the impact is real and significant. At Milford Haven docks, there are a range of micro and small businesses, some of which are very small—one or two person operations. In recent years, the port authorities have made huge efforts to diversify the kind of economic activity happening in and around the port. Alongside the traditional businesses associated with engineering and the remnants of the fishing industry, there are new media companies, bars, cafés, and an art gallery, which has just received a backdated bill for a liability of £19,000.
Is the hon. Gentleman aware that Stena Line operates from Fishguard, and, as a port operator, it is passing this cost on to small businesses? In the port of Holyhead, some businesses that have been identified include engineers who do essential maintenance and leave their equipment in the dock in a small locker. They are being rated for the same time. Also, car hire firms are being charged rent for having a phone for emergency calls. Those are the types of small businesses caught up in this reassessment.
The hon. Gentleman is exactly right. The impact is being felt far and wide among businesses that are close to ports.
As a commercial entity in its own right, Milford docks faces a 30 per cent. increase in business rates. That increase is coming from a separate assessment of four of its tenants who were not charged rates previously. The port authority paid the rates for the whole of the docks and the rental agreements with those four firms took account of that. The rent levels were therefore set accordingly. The new bill that the port authority has received is the same as it was previously, but it will not receive any rebate to offset the extra costs being levied by the new system. In addition, it is not in a position to reduce the rents to those tenants to help them meet the extra costs that they are facing. The burden of this problem affects both the port authority itself and its tenants.
The issue concerns many hon. Members up and down the country. It was not clear from the Minister’s response to the hon. Member for Liverpool, Riverside last week why he cannot take the action that many Members from all parties are calling for to bring a solution to this. At a time when one of his departments—Her Majesty’s Revenue and Customs—is writing off tax liabilities for profligate football clubs, why can he not focus on the action that is being called for and bring an urgent solution to the matter?
I congratulate my neighbour and hon. Friend the Member for Great Grimsby (Mr. Mitchell) on securing the debate. I do not think that any of us here today can underestimate the devastating effect that this issue will have on the businesses operating out of our ports. We have had several meetings with Ministers about the matter—indeed, we have had a meeting with the Prime Minister too—and credit where credit is due, I appreciate the fact that changes have been made. The bills were not imposed immediately and, as has been said, firms will be given eight years in which to pay the backdated rates.
However, I am sorry to say that such changes have not gone far enough to stop the redundancies and prevent firms from closing down. In my part of the country, on the south bank of the Humber, we have seen some dreadful job losses in recent weeks. One of the most recent—at DFDS Tor Line—is directly because of port business rates. DFDS Tor Line is making about 10 per cent. of its work force redundant. It is one of the biggest employers in the port of Immingham in my constituency and employs about 700 workers.
I have received a letter from Jens Skibsted Nielsen, the managing director of DFDS Tor Line. I shall read out some of the things that he has said in that letter because it demonstrates excellently the real problem that companies are facing. He states in the letter that the company faces a £3 million business rate demand for 2009. Associated British Ports, the port owner, with which DFDS Tor Line has a commercial agreement, and through which it believed it had paid its contribution towards the business rate, refuses to discuss matters with DFDS. Indeed, it has in fact received a £5 million rebate from Hull city council—the port owner, that is, not the people who have had the rates imposed upon them. My hon. Friend the Member for Kingston upon Hull, North (Ms Johnson) is in the Chamber, but her position as Whip does not allow her to speak in the debate. However, she has attended all the meetings with Ministers, as have the other Hull MPs.
The letter from DFDS Tor Line goes on to state:
“The lack of consultation with port businesses added to the fact that no notice was given about the effects of the re-valuation post 2005 has left DFDS facing a backdated rates demand of £9.9m. Clearly we are not able to recover this cost from our customers so it becomes a liability going forward to a business that is already loss making.”
Recently, DFDS Tor Line received a letter from one of its customers, BMW, which stated:
“BMW are extremely concerned about the prospect of increased costs as a result of the change in the way business rates are to be assessed at statutory ports in England and Wales. In the event this should happen, BMW would be forced to re-examine its decision to handle their UK distribution from the ports of Immingham and Southampton and instead move the operations back to the port of exit on the Continent, as a number of our competitors already do. This would be regrettable but necessary as BMW cannot afford to lose competitiveness in what is a very challenging market.”
Other DFDS Tor Line customers, such as Corus, Arcelor Mittal, Stora Enso, Volvo, General Motors and Honda, have raised similar concerns, and DFDS simply cannot meet an almost £10 million demand for backdated rates, which it believed it had already paid, because it had a commercial agreement with ABP, the port owner. I want the Minister to understand that those people had commercial agreements; they felt that they had paid when they paid their rent and rates to ABP.
Does my hon. Friend agree that if we had followed the example of Scotland and gone through a proper consultation period prior to these radical changes, they would not have taken place? If any consultation had listened to the evidence that my hon. Friend and others have given in the debate, there is no way that the changes would have gone ahead. The situation rings out as being unjust and unfair.
I thank my hon. Friend for that intervention, and he is quite right. I have not come across one firm in my constituency operating out of the ports that knew that the measure was going to be introduced. I am sure that other Members would say the same. It was like a bombshell: at the end of 2008, someone said, “Hey! You’re going to have pay this, going back to 2005.” The Valuation Office Agency has tried to backdate the demands, but the firms cannot backdate what they have charged their customers in the past.
Liverpool chamber of commerce and industry, and Hull and Humber chamber of commerce, industry and shipping, have come up with three ideas as a solution to the problem, and others will probably articulate the same points. They say that the Government should
“withdraw the requirement for backdated rates from 1st April 2005 prepayment element of the rates bills; allow operators across the region and country to work with the VOA to assess businesses fairly and transparently, and implement the review on 1st April 2010—the next rating review date; and provide transitional support to affected businesses.”
If we needed any more evidence of the unjustness and unfairness of what is happening, we have the Treasury Committee report, which came out last week. It says what we have been saying all along. For example, it states:
“We note that Port Occupiers are facing bills for backdated business rates which do not take account of payments they have already made to Port Operators towards rates. We recommend that the Government take steps to ensure that the financial liabilities faced by Port Occupiers take such payments into account.”
On backdating, it recommends that we start again in 2010.
This is an unholy mess. I am sorry that people are losing their jobs. Whether they worked in a steelworks or in a shop, all such losses are a tragedy for the families, but when there is a solution, it hurts even more. We could have done something about the 70 job losses that DFDS Tor Line has announced by saying, “We aren’t going to impose these changes until 2010.” I am sorry that we missed the opportunity to save those jobs at the port of Immingham.
What a pleasure it is to serve under your chairmanship, Mr. Atkinson—I think, for the first time. I join others in congratulating the redoubtable hon. Member for Great Grimsby (Mr. Mitchell) both on the campaign that he has led and on securing today’s debate. It is a pleasure, too, to speak after the hon. Member for Cleethorpes (Shona McIsaac) and, indeed, after my hon. Friend the Member for Preseli Pembrokeshire (Mr. Crabb), who added so much to the strong and overwhelming case that had already been made.
“Chaotic” is the word that springs to mind when we consider the issue in general and in detail. If it was not for the fact that people’s jobs and working lives were on the line, it would be almost a comedy of errors. If a programme of “Yes Minister” had been prepared on this theme, people would have said that it was pretty unlikely. Government agencies are operating unchecked, a Minister has admitted that she knew nothing of what the VOA was doing about the matter while it was going on, and current Ministers are unable to agree on the facts.
In the 19 January Adjournment debate, which has been referred to several times, the Minister who is with us today said that
“the rateable value of some port operators has been reduced significantly, particularly in some places. In Liverpool, the rateable value for the port operator has been reduced to less than half of the previous rateable value; in Grimsby it has been reduced to almost a third, in Hull to around a third, and in Goole to less than a quarter of the previous rateable value. Across England and Wales, the port operators’ rateable value has been reduced by a total of £44 million.”
He argued that any financial liability for sorting out the problem must lie with port owners rather than with the Government, saying that
“in my view, port companies that legitimately believe that they have contributed towards rates by means of payments made through the cumulo or through fees to the port operator should take the matter up with the operator… I have not seen any hard evidence that the arrangement is that rates are part of the fees.”
He went on to say that
“it is a private contractual matter that the port businesses must take up with operators.”—[Official Report, 19 January 2009; Vol. 486, c. 600-601.]
That assumption rests on the notion that both parties had advance warning of the changes via the VOA and should have made appropriate arrangements. Yesterday, during Transport questions, however, the Under-Secretary of State for Transport, the hon. Member for Poplar and Canning Town (Jim Fitzpatrick), who has responsibility for shipping, said:
“I am advised that UK Major Ports and the British Ports Association refute the suggestion that money has gone to them and that they are in some way obliged to pay the money back to businesses in ports. They say categorically that that is not the case, and they have demonstrated that in discussions I have had with them.”
We thus have a direct contradiction between the Minister before us, who tells us that most of the money that was stripped arbitrarily from the tenants—about four fifths, if I remember the figures rightly—is going back to port operators, and his hon. Friend in the Department for Transport, who not only denies it and says that the operators deny it, but says that they have demonstrated it to him in meetings.
Will the hon. Gentleman not accept that the extract that he has read from a speech made by my hon. Friend the Under-Secretary in the main Chamber yesterday clearly underlines the fact that my hon. Friend was setting out the position put to him by the British Ports Association? He was setting out the BPA’s position, not the Government’s assessment of it. I can tell the hon. Gentleman that the rateable value of port operators across the country as a result of the ports review has been reduced by £44 million.
There are two points to be made about that intervention. First, I shall correct the mistake that the Minister has just made when he told us—the record will confirm it—that the Under-Secretary was setting out the view of the British Ports Association, not the Government’s. Let us be clear about what he said, because I shall read the text from Hansard again:
“UK Major Ports and the British Ports Association refute the suggestion that the money has gone to them and that they are in some way obliged to pay the money back to businesses in ports. They say categorically that that is not the case, and they have demonstrated that in discussions I have had with them.” —[Official Report, 27 January 2009; Vol. 487, c. 150.]
The Under-Secretary was making it clear that he shares their view.
The second and more important point is that both Ministers cannot be right. I am not in a position to judge which of them is right, but it is extraordinary that two Ministers are still unable to agree on the matter after the many months that the crisis has been running. However, irrespective of who is right, the key question is, were the various port tenants all warned when this exercise began in 2004, when the first wheels started to turn? In fact, the exercise started late, as the Minister explained—it did not actually start until 2006. Whatever arguments one might have about the current arrangements, if the tenants were not warned, there can be no moral case whatever for collecting back-tax from them, as all three Members who have spoken made clear. If the Government cannot show evidence that the Valuation Office Agency approached the businesses and told them that the exercise was going on, the Government must understand that those businesses were paying rent on the basis that they believed that their landlords were responsible for rates.
The Minister must know that when a business decides whether to take on premises, one of the factors in the rent negotiations is who is paying the rates—it has to be. Unless the Minister can show the House evidence that the Valuation Office Agency explained the exercise to the businesses—he was unable to do so last week—he has no moral case whatever.
I conclude by making a few general points, because I am conscious that a lot more hon. Members want to speak. Regardless of what the real facts are—I am not sure, for the reasons that I have mentioned, that Ministers fully understand them—the situation is dire. We have had a string of examples already, so I will not repeat them.
Ports businesses suggest that some 700 businesses are affected and the Minister himself admitted that an extra 564 properties in England are affected. The worst affected areas appear to be Mersey and Humber, although other examples have been raised today. I am interested to see the hon. Member for Dover (Gwyn Prosser) in the Chamber. So far I have had no complaints from Whitstable in my constituency, but I am waiting for the letter.
I remind hon. and right hon. Members that freight rates—the rates enjoyed by the customers of ports—are at their lowest in real terms in living memory. I am told that the situation is so bad that ships travelling at the moment are simply being reimbursed for fuel so that companies can keep their vessels on the move. In some areas the freight rates have dropped by more than 95 per cent.
Against the background of the Government’s seeming to be happy to shell out vast sums to the banks, despite the fact that they are not lending, and to shovel out vast sums to the automotive industry, how can they possibly justify such a grossly unfair impost on businesses that are not asking for subsidies, although they are in a desperate trading position? All these businesses are asking for is fair treatment.
I thank my hon. Friend the Member for Great Grimsby (Mr. Mitchell) and hon. Members from all parties. We are representing our communities and our constituents who are faced with serious problems.
The port of Sheerness is probably the fourth—sometimes the fifth—largest in Britain. It is the main importer of cars and is the biggest importer of Cape fruits from South Africa. When running businesses, as some Members have done, people look forward and break the year up into four quarters and try to reach the figures that they have ascertained. In the next year, 2009-10, it will be hard for anybody to guess whether they will reach their figures, but they will try, because that is what being in business means.
The one thing that people do not do is look back to quarters one, two, three and four of 2008, 2007, 2006 or 2005. Why? Because the accounts for those years have been audited and tax paid on them to Customs so, as far as the business is concerned, they are done, sealed and finished—that is it. The Government should not then undo the law of the land and say, “I am awfully sorry, but although those accounts have been professionally audited and taxed officially and the tax has been paid, we have made a bit of a mistake. P.S. You owe us hundreds of thousands of pounds.” That should not be done.
I understand that the Minister is in a difficult spot. He is a reasonable man, whom I have met on many occasions in his different portfolios, and he is well respected in the House. This is not his issue, but he has to carry the can today. How can anyone possibly say that the system is fair, decent, practical and honest? If it is for UK plc, what on earth is the sense of it? The system is an appalling mistake and we have to ask the Minister to redress it.
What sort of Government have made such a decision? In due course, I shall press the Minister with the Freedom of Information Act 2000, but he could save me the trouble by putting into the public domain the correspondence, e-mails and telephone calls between his Department and the Treasury, the Secretary of State for Transport and the Secretary of State for Business, Enterprise and Regulatory Reform. I cannot believe that either of those Secretaries of State could possibly have agreed and signed off such a system. I hope that in his summation the Minister will not tell me that they have. That would make the situation even scarier, because the Government do not understand what they have done.
Will the Minister tell me what I should tell some of the people from Sheerness dock, whom I saw last Friday? For instance, listen to Mr. Sampson’s case. He imports vehicles and is very good at it. In 1998 and 1999, we said we wanted added value. Mr. Sampson adds value to the cars he imports, putting in different stereos, satnavs and different colours of leather, and so on. He is exactly where we want people to be. His rates are £4,438, but now he has to pay £57,715.97. Please tell me what I should say. If the Minister does not change the situation, those people will be in the receiver’s yard within three months.
Kleerfreight is a small family business employing five people. Things are tight and it is hard running a small business, so what has Kleerfreight just been asked for? The sum of £11,270, which it cannot afford. The owner tells me, rather nicely:
“Someone somewhere is accountable for such gross negligence”.
Please tell me that there is a principle and value behind the system. We do not understand it.
Mark Holmwood, the managing director of Seatrade, says that his business is now faced with a rates assessment of nearly £20,000. The business will not be able to pay that sum—there is no question about it.
Worse still is the case of the big companies. Peugeot Citroen and Volkswagen in my constituency will now have to pay back £3 million and £2.8 million each if the measure goes through. As a consequence, that will threaten the future of the dock, because as they say,
“in our case…our UK and Paris offices started to make significant changes on our receipt of this demand in our UK supply chain”.
They have reduced
“storage capacity and staff in Sheerness, this continues and we have conversely increased storage and facilities in Europe”
that cost less, and
“50 jobs have gone so far more are anticipated, revenue to the port and investment by us will be down by a number of millions this year and active consideration is being given to whether we remain in Sheerness.”
There is an unintentional consequence of the system, which is that we are now giving other ports in Europe a quick opportunity to take the market away from us in the worst trading conditions since 1929. I cannot believe that the Government really want to do that. It is simply beyond the wit of man to understand how that could have been the intention. I also received a letter from John Dowding, of Overland Freight Forwarders, saying exactly the same as the others I have mentioned.
The Minister understands our anger, but we do not make business; we do not get up in the morning and serve our communities in that way. However, the people who do have tried to make their businesses work. The measure is not just an own goal; it is 10 own goals. I urge the Minister to consider the total impact of the system on UK plc.
I, too, congratulate my hon. Friend the Member for Great Grimsby (Mr. Mitchell) on securing the debate, although I will not thank him for his timing, because today is the 21st birthday of my eldest daughter, Hannah. I managed to get up to north Lincolnshire for the birthday and get back just in time to attend the debate, thanks to National Express, I think.
This is a timely debate, however. Many people outside the House may be surprised to learn that a lot of companies at ports around the country were not paying business rates, but the situation is much more complicated than that. Anyway, as has been said, the businesses are complaining not about that decision, but about the implementation and the retrospection. That has been caused by a long period of procrastination by the Valuation Office Agency; it has taken so long to get figures to the companies. I do not think that anybody in the Chamber expects those figures to be right when there has been a revaluation, but in the meantime those bills are held against those companies—hon. Members have described the implications of that.
The Government have acknowledged that there is a problem. That is why they have already offered a potential solution. The solution of extending the time to pay, fast-track revaluation and an opportunity to open a dialogue with port owners such as Associated British Ports, which covers Goole in my constituency, is all right as far as it goes, but it could work only if the moneys that were collected previously by ABP through the cumulo and then handed over to the Government in business rates were likely to flow back to the companies. We now know that that will not happen.
I know that this is not true for every other port, but certainly in Goole it is true to say that ABP has had a lot of money back. However, that money will not be passed on to the companies that operate off the port of Goole. I have met representatives of ABP and they are quite up front about that. First, they do not have to pass the money on and, secondly, to be fair to them, they make the point that their own liability over all their operations across the country has gone up as well. They may have gained in Goole, but they have lost in other places and they will not pass the money on.
The basis of the original offer from the Government is being undermined by the fact that the companies that operate in Goole and at other ports across the Humber region and in other parts of the country will not get any money back. I cannot add to what my hon. Friend the Member for Sittingbourne and Sheppey (Derek Wyatt) said about retrospection and how businesses operate, except to say that I agree with every word he said.
I come now to the issue of valuation. I genuinely think that the offer from the Government of a fast-track revaluation was to be welcomed. Whatever happens about retrospection, we have to get the valuation right for the future. The companies have to know what their future liabilities will be, but the offer of a fast-track process, which the Minister made to us previously, has fallen into disrepute already. This all goes back to the cumulo. Until perhaps three or four months ago, when Peter Aarosin of Danbrit Shipping in Goole mentioned it to me, few of us even knew what a cumulo was—I thought it was a new wave band from the 1980s, but there we are. It is a strange system. Nevertheless, that is what it is, the companies have been paying through it and it covers everything.
I received an e-mail from David Johnson, who runs a company called RMS in my constituency. He points out that the cumulo includes stevedoring licensing fees, tolls to use the River Ouse, electricity, security, cranage, berthing and mooring of vessels, third-party cargoes, water, maintenance of quays, ships dues and wharfage, and maritime security through TRANSEC—the transport security and contingencies directorate. However, nobody knows how much is allocated to any one element of the list—through it, there are business rates and rent, but the company just pays a fee.
RMS and many other companies have now taken up the offer of a fast-track appeal and their appeals have been thrown out, dismissed by the VOA. When I took the issue up on behalf of companies in Goole, I received a letter from the VOA:
“The appeals have been deemed invalid by the VOA as the forms submitted… contain no information on the amount paid by the company under its occupancy agreement… without this information, the VOA cannot make a proper assessment of the circumstances of the case and legally the appeal must be declared invalid. If the ratepayer disagrees with this decision, recourse is available to an independent Valuation Tribunal who can decide on the validity of their proposal.”
The valuation tribunal was always open to them, so where is the fast track, the help, the assistance?
I am extremely grateful to the hon. Gentleman for giving way and I am sorry that I was not here from the beginning of the debate. On the point about the fast-track process, I have had a letter from Tim Rix, managing director of JR Rix & Sons Ltd, who has a subsidiary company called Rix Shipping Co. Ltd, which carries on the business of terminal and ship operators at the port of Hull. He hoped that the fast track would offer real hope, but says that if it does not deal with the backdating of the tax and the huge imposition on his business, which threatens its very existence, it would be
“merely ineffective window dressing used by the government and the Valuation Office Agency to appear to be doing something substantive to resolve the problems… when, in fact, they are doing nothing to assist.”
We can all say amen to that. What we have heard shows that the VOA has no idea at all of how the cumulo and the ports system have worked. The idea that people can now unpick the rent from their cumulo, but that if they cannot do so they cannot have a fast-track appeal, is a bit like handing back an omelette to the chef and saying, “Give me the yolk.” They cannot do it because there is just an overall figure. At no point have they been told what their rent is, because it is part of an overall figure, and without the rent they cannot have a fast-track appeal, so even the little bit of help that the Government said they would give is now floundering in the water and it needs ministerial involvement to put it right.
We are hitting ports at a difficult time, as hon. Members have already said. Many of those who operate in Goole and at other ports are based not just in the UK; they are international. They do not have to be here, however. They are looking at future investment and the costs here compared to those in other ports around Europe. They are being hit at a very difficult time through the actions of the Government.
What is being done is contrary to everything else that the Government are trying to do. Everywhere I turn, I see the Government trying to give help to people who may be in danger of losing their jobs and to companies that are in difficulty, yet because of the actions of the VOA and the Government, companies are being affected in the way that hon. Members have described.
I like my right hon. Friend the Minister enormously. I have known him for more years than either of us would care to remember and I accept that he has in effect been dropped in it by the actions of his own agency, but that is how it falls—I think another hon. Member said, “That is why you get a car.” Whether it requires conversation with the Treasury, my right hon. Friend the Prime Minister or whoever, it is time to make things happen. We need to put right an injustice, helping our ports as a result.
I add my congratulations to those offered to the hon. Member for Great Grimsby (Mr. Mitchell), who made a passionate and detailed case. The story that we have heard is almost unbelievable to the uninitiated. There are no ports in Solihull—one could not get farther from the sea in England if one tried. Notwithstanding that, I can completely understand the problems and challenges so clearly outlined by hon. Members.
As I said, this is an almost unbelievable story of backdated demands almost as large as £10 million and of debt having to be reported in annual accounts, which will push a number of companies into insolvency. Whether or not there are eight years of interest-free payments, the repercussions of the backdated amount being suddenly foisted on those companies will be much greater than the Valuation Office Agency could ever have thought possible.
If a number of companies are pushed into liquidation, the upshot will be the Government not receiving the money anyway. The hon. Member for Sittingbourne and Sheppey (Derek Wyatt) told us that many accounts will already be closed off, and that seemingly incompetent organisation seems to be flying in the face of every accounting procedure. I wonder what gives it the right to ride roughshod over such commercial practices.
We heard about the strategic importance of the ports; the hon. Member for Great Grimsby said that they are the gateway to Europe. Our ports are the gateway to the world and vital to our economic prosperity, for exports as well as imports. It seems that the Government are deliberately creating an unfair playing field for United Kingdom ports, particularly when competing with other European ports.
The charges being levied on some firms are higher than last year’s turnover. There have been increases of as much as 1,700 per cent. at a time when the Government say that they are trying to protect jobs. The charges will destroy jobs. DFDS Seaways, based at Immingham, has already announced that 71 jobs will be lost, with half those losses being directly attributable to the rates problem. It is facing a demand for almost £10 million. It has been estimated that as many as 150,000 jobs are threatened.
Several hon. Members spoke of the lack of consultation when the charges were introduced, but it is worse than that as no impact assessment has been made. How can one suddenly levy such charges on organisations without working out what their impact will be?
During a previous debate, the hon. Member for Liverpool, Riverside (Mrs. Ellman) talked about the terrible shock to many companies of seeing bills that were retrospective for the previous three and a half years, especially as they thought that they had already paid. It is a treble whammy. Where is the money that has been paid? The port operator’s fees have been reduced by £44 million, so where has the money gone? I hope that the Minister will produce a definitive answer, at some stage if not today.
We are asking for the new assessments to be brought in during 2010, but we have been told that that would require primary legislation. We have also been told that we have plenty of time, so there is no impediment to the Government enacting those provisions. That would not be a huge burden on the public purse. In fact, it may save money, as otherwise revenue would be lost from companies, and it may save costs, as benefits would need to be paid so that the families of redundant workers could keep going—and that before we start counting the human cost.
The traditional pattern of Westminster Hall debates is that an injustice is raised and the Minister replies but does not commit himself to making changes. Indeed, we heard this afternoon that it might be above the Minister’s pay grade to make such a decision. Sometimes—surely not today—we do not do even get a straight answer. If the Minister cannot commit himself to changing this injustice today, will he commit himself to taking the matter to whichever Minister is at the appropriate pay grade for further reflection?
The Government have the opportunity to show reasonableness and humanity. Yesterday, it was announced that £2.3 billion will be given to automotive manufacturing industry. Let today be the day when the Government exercise the same but much less costly compassion to help to keep our port companies afloat.
I, too, congratulate the hon. Member for Great Grimsby (Mr. Mitchell) on raising this important subject. I also congratulate hon. Members in all parts of the Chamber who have spoken in the debate. I have not been a Member that long, but I cannot think of a Westminster Hall debate in which stronger feelings were more articulately expressed. Frankly, neither can I think of a more damning and comprehensive indictment of the Government’s position.
In some respects, I feel for the Minister; he is a decent man, and I respect him as an opponent. When I was a barrister, I defended some pretty hopeless cases. I am sorry to say that, forensically, defending the Minister is rather like defending someone whose fingerprints have been found at the scene of the crime, where a DNA sample has been recovered and there is a signed confession—and with the Archbishop of Canterbury as an eye-witness. [Laughter.] The case is overwhelming; there is no other word for it. The only advice that I could give clients under such circumstances was, “Own up, and throw yourself on the mercy of the court.” I hope that the Minister finds a means of doing that.
The Minister is being asked to defend the indefensible. What has been set out in today’s debate—it was well referenced with correspondence by all hon. Members and through the Treasury Committee report—is a lamentable litany of failure by the Valuation Office Agency. It has been politely described by some hon. Members. I note that the Treasury Committee report quotes the director of the VOA as saying:
“Perhaps with hindsight we should have done more investigative work”.
In the league of mealy-mouthed statements, that makes Pontius Pilate’s hand-washing an act of generosity and decency.
Far worse, the VOA’s attitude is negligent in the extreme. Why is that? There was no consultation and no advance warning. Furthermore, as the hon. Member for Solihull (Lorely Burt) said, there was no impact assessment on the immediate effect nor on the wider impact on associated businesses and the supply chain, as hon. Members have indicated. Therefore, no assessment was made of the likely revenue that would be raised—another important point.
Because there was no assessment of revenue, the Government’s normal guidelines on dealing with retrospective taxation—namely, that it should be introduced only in limited circumstances and to protect revenue—could not be met in this case. That breached every rule. Subsequently, the VOA has compounded that error. First, as was pointed out, it offered a fast-track solution, which is effectively useless. Secondly, and regrettably, but no doubt with good intentions, the Minister offered a payment period that is useless in practice, for the reasons set out by the hon. Member for Great Grimsby—the liabilities have to be brought into this year’s accounts.
I do not wish to sound sarcastic, but an O-level accountancy student would understand that concept. I despair of the fact that no one at the Department for Communities and Local Government seems able to get that simple message. Because the liabilities would be brought into the current year’s accounts, the firms would be trading insolvent. They cannot legally afford to do that.
Mr. Andrew Finfer, a partner in the solicitors advising the firms, makes the point well:
“It is clearly irrational for the government to make businesses insolvent by demanding huge backdated business rates without warning and as a result of the failures of the Valuation Office Agency. Making a company unable to pay tax in the process of trying to collect tax is not the most sensible method of revenue collection.”
That is a pretty fair way to put it. The Government have got themselves into a perverse situation. As other hon. Members have said, it is the most bizarre contrast with what we are told the Government seek to do to assist business during a recession.
I shall add one more example in this nonsensical situation: a firm called Freshney Cargo used to make an annual payment of just over £48,000 per annum, but is now facing a backdated charge of £2.4 million. Like other hon. Members, I have spoken to other businesses about this matter and it is clear that the backdated demand often exceeds annual turnover, not to mention the profit margin. That is putting people under, and for no good reason, which cannot have been the intention.
Nobody would blame the Minister if he said, even at this late stage, “Well, that wasn’t our intention. There’s been a mess up. Let’s try and put it right.” Ultimately, that is what people look to Parliament and Ministers to do—put right injustices. That is what they are there for.
Ways have been postulated to the Government for setting things right. It has been suggested that we use prescription, which is still provided for on the statute book, as the hon. Member for Great Grimsby pointed out. Is it necessary, therefore, to use primary legislation? If so, the official Opposition will do everything they can to facilitate the passage of any legislation that the Minister introduces in this House or elsewhere. I mean that genuinely. We will do everything we can to help to set this right, and I am sure that that goes for other Opposition parties, too.
I am grateful to the hon. Lady for making that point. This is a genuine offer to the Minister and the Government. In such times, we will do all we can to assist the Government in getting us out of the hole that they have dug.
We cannot underestimate the point about the damage to the competitiveness of port business. I was at a meeting where the UK director of DFDS Tor Line made the point that the hon. Member for Cleethorpes (Shona McIsaac) raised. I do not think that some people in the Department for Communities and Local Government appreciate how likely it is that shipping operations will be transferred to the continent and that goods will then be brought in either by air or by road. That would be economically, environmentally and socially undesirable, but that is the position into which the industry could be forced.
The revenue raised from this measure will be but a drop in the ocean. It is worth reminding ourselves, too, that the Government did not budget for it originally. In a sense, therefore, it is a windfall, precisely because there was no impact assessment or, as Ministers have confirmed in written answers, assessment of the revenue likely to be raised. Nothing was ever budgeted up; it is pure windfall. Forgoing it is not likely to cause any difficulties.
More to the point, however, if a firm goes bust, the money will not be collected anyway. It would be far better to keep firms in business and paying rates. Every business to which I have spoken in this sad affair has said, “Of course, we know that we have to pay rates. We are willing to do that. And we know that they are likely to increase, because there was a review.” They accept all that. However, they are entitled to object to the lack of warning and the backdated, retrospective nature of the measure, which will cripple many of them.
I beseech the Minister to think again. This was not his responsibility to start with, but there comes a stage when the inaction of Ministers makes them as culpable as those who began the mess. I really hope that he will not get himself into that situation and will take the lifeline being offered to him from both sides of the Chamber.
Like everyone else who has spoken, I congratulate my hon. Friend the Member for Great Grimsby (Mr. Mitchell)—he is genuinely a friend, despite our differences—on securing this debate. We have more time for discussion than we did last week at the end of business in the Commons. Wide concerns have been forcibly expressed this afternoon in this very good debate about the serious situation being faced by many businesses. Despite some of the light touch and humour that has been expressed, it is important that we look as closely as we can at the concerns that have been raised.
I am grateful to my hon. Friend for some of his kind comments. I shall try to answer his points as meticulously as I can and not to cover ground covered before. Before that, however, I wish Hannah Cawsey a happy birthday; I hope that my hon. Friend the Member for Brigg and Goole (Mr. Cawsey) gets back in time for the birthday party, otherwise I shall obviously be blamed for something else.
What has been made clear by hon. Members was already clear to me and other Ministers: the outcome of the ports review undertaken by the Valuation Office Agency could create serious financial cash-flow pressures on companies newly listed on the valuation list, particularly at this time of general economic pressure. We will take all possible steps to prevent such businesses from being driven over the edge by the tax that they are now legally liable to pay. We are genuinely concerned about their situation, not least because we are trying, in many other ways, to support businesses and people in work during this difficult period, as has been acknowledged on both sides of the Chamber.
That concern was behind the announcement made by my right hon. Friend the Chancellor, in the pre-Budget report, to put in place arrangements allowing companies to pay their backdated, full-year liabilities over eight months.
I have only just started. I ask my hon. Friend to bear with me and not to dismiss my comments in the way that his murmuring suggests.
The time for payment is unprecedented for rates liabilities and business taxes. If a viable business has difficulty paying a bill for other business taxes, Her Majesty’s Revenue and Customs can spread payments over a number of months, but we have now offered eight years to businesses facing this business rates problem. That is far from normal in the business tax system, let alone the business rates system.
Does the Minister understand that if the money must be paid back over eight years, many businesses will give up on the ports and move, sometimes offshore? I accept that is an unintended consequence. They will not pay the rates, because it will be cheaper to rent outside the area.
Each company will make a different decision in light of the situation. Some might take the step mentioned by my hon. Friend.
I reject completely some of the comments made by the hon. Member for Preseli Pembrokeshire (Mr. Crabb). I accept that serious concerns have been expressed, and that some companies have been clear and vociferous in raising them, but the response to the Chancellor’s announcement has not been uniform. I recognise that the impact on some companies will be severe, but equally some companies are already paying in full their business rates bills and backdated liabilities.
Let me finish my point first. After my hon. Friend’s intervention, I must press on, however. If hon. Members wish to raise further points, I shall be happy to hear from them in another debate or in writing.
First, some businesses are already paying the bills. Secondly, some are talking to their local authority—their billing authority—about setting up a schedule of payments and, thirdly, some are taking advantage of the fast-track system that we have established to deal with any challenges or questions about the system the VOA has put in place. So far, some 70 companies are pursuing that route.
The Minister says that the reaction has not been universal around the country. That is because in some ports the companies are not renting from Associated British Ports and thus have been paying the cumulo over the years. If he and his officials examine the variety of ports around the country, he will find that is why there are such differences.
Let me be clear. I was not talking about different ports, but the businesses within ports—across the country in some places—all of which have been listed separately as liable for paying business rates with a big backdated liability, and some of them are settling them.
Many hon. Members and some commentators have criticised the VOA for backdating the effect of the ports review to the beginning of the list on 1 April 2005, but that is not its decision. The date of the change is governed by legislation. If the property existed before April 2005, by law, the rates must be backdated to the beginning of that list period. In that way, the system tries to ensure that all rateable property pays its fair amount of rates from the point when the property should be rated, and with all businesses being treated equally.
May I say to my hon. Friend the Member for Great Grimsby that although we have discussed port occupiers in this debate, they are not alone in having backdated liabilities as a result of the VOA keeping the ratings list accurate? Some 777 new assessments conducted in a similar way to the ports review were added to the list during the past year, creating liabilities at this point of at least 33 months. In the current financial year, up to the end of October, more than 1,600 new assessments, including most of the port occupiers, were added to the list in the same way. Backdating in such a way is a feature not just of the 2005 ratings list period, but of the 2000 ratings list period. In the last year of that period, more than 3,000 new assessments—new companies—were listed for the first time with backdated liabilities. In other words, it is an established feature of the ratings system and the ratings list period, for this period, the last period and the one before. It is also a situation faced by companies other than the ones we have discussed this afternoon—other than those in ports affected by the ports review. When the Chancellor announced the provision in the pre-Budget report, it was not just for the ports companies, but for all the companies facing pressures from the current economic climate.
If my hon. Friend will let me, I will reach that point. In fact, let me deal with it now. I am anxious to deal with the various arguments about the use of prescription and formula, and waiving the tax liability.
I have confirmed that the rateable value for some port operators has reduced by a total of £44 million as a result of the ports review. That comes at the same time as 577 businesses in ports in England and 80 in Wales are listed as liable for the first time. Many port occupiers say that their contractual arrangements with the port operator contain a fee, either explicit or implicit, to cover the business rates. My hon. Friend the Member for Cleethorpes described that as a commercial agreement in which they pay their business rates through the port operator. If that is the case, clearly they need to take it up as a contractual matter with the port operators.
I have not seen clear evidence of how the contracts work. If hon. Members feel that it would be helpful, the Under-Secretary of State for Transport, my hon. Friend the Member for Poplar and Canning Town (Jim Fitzpatrick), and I will sit down and discuss the matter with the port operators—particularly those who have seen a significant drop in their rateable value as a result of the ports review. It is clearly in the interests of commercial port operators to ensure that their facilities in the port are used. They must have some interest in the health of the businesses that operate within their ports. If they fold, the port operator will be left with empty premises, no fee income and, as owners, a liability to empty property rates.
I turn to the question of waiving the liability. We are urged to set aside the liability to tax. None the less, the companies have now been assessed as liable for business rates, including for the period of back payments. We cannot now act as if we do not have the full facts or as if they do not have a liability that is now clearly established in law. Therefore, it is not straightforward or possible simply to undo what has been done, or to hold off until 2010 when the next ratings list comes into effect.
I am trying to avoid groundhog day, but let me return to prescription. Its only effect would be to alter the rating period for the port operator. Prescription and use of the formula allows that to be done. It is true that the Secretary of State still has the power to prescribe rules for establishing rateable values. In theory, she could use such powers to do so for individual businesses at ports, but it would not help them that much for three reasons: they would still be rated separately from the port—as they should be—and, in some instances, were before 1 April; the power is not retrospective; and, finally, they would still be faced with three years backdated liability immediately on top of the liability for this year.
On the question of backdated liabilities, the approach to business rates is no different from other business taxes. Ministers simply do not have the discretion or the power to waive or set aside tax liabilities when they have been legally established. Therefore, when a company is assessed as liable for corporation tax or national insurance payroll taxes, it is legally liable to pay by the set statutory date. That date can be nine months after the company’s end-of-accounting year. When there is difficulty, HMRC has the scope to negotiate a payment schedule, but it is a matter of months, and not years as we propose for the port companies payments scheme.
I will be quite blunt. In effect, my hon. Friend the Member for Great Grimsby is asking me to turn a blind eye to tax that port companies are legally liable to pay. Companies in other sectors are in a similar position—brought on to the rating list separately some time after the start. Although they may have to compete head to head with businesses based inside and outside ports, they have been paying business rates and carrying overheads over the period—in some cases, before. We do not do that with other taxes when companies are liable to pay them.
We do not have the power to waive tax liabilities, so these companies are asking us to change primary legislation to do so. In effect, they are asking Parliament to turn a blind eye to the tax that the companies are legally liable to pay. Even if the Government accepted that such a case should be put to Parliament, persuading Parliament to give such powers to Ministers sets a serious tax precedent. I say to the hon. Members for Bromley and Chislehurst (Robert Neill) and for Solihull (Lorely Burt) that I hope they have cleared their lines on the scheme because we do not do it for other business taxes. I regret to have to say to my hon. Friend the Member for Great Grimsby that it is therefore not something that we can do with business rates. None the less, we will do what we can to help both with the schedule of payments and the fast-track system that the VOA has put in place.
If there are other steps that hon. Members think we can take, particularly in relation to the port companies and the port operators, my hon. Friend the Under-Secretary of State for Transport and I are prepared to consider them, but the problem is not faced uniquely by the port operators even though the ports review has created that serious problem.