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


Examination of Witnesses (Question Numbers 291-299)

RT HON STEPHEN TIMMS MP AND RT HON JOHN HEALEY MP

29 OCTOBER 2008

  Q291 Chairman: Mr Healey, can we welcome you back to the Sub-Committee. Perhaps you thought you had escaped!

  John Healey: Thank you. I am delighted to be here, Mr Fallon.

  Q292  Chairman: Could you formally introduce yourself and your colleague, please.

  John Healey: I am John Healey. I am the Minister for Local Government. I guess you could say I am the prime client Minister in Parliament of the VOA and with me obviously is Stephen Timms.

  Mr Timms: Financial Secretary at the Treasury to which HMRC reports and to which the Valuation Office Agency reports.

  Q293  Chairman: Indeed. Perhaps we could start with you, Mr Timms. Two weeks ago the Valuation Office could not answer us when we asked what the total revenue increase would be for the Treasury from these revaluations.

  Mr Timms: I think figures were given by the Valuation Office Agency about the aggregate increase in rateable value. I understand those figures were updated immediately before the meeting. In broad terms, I think the revenue impact is 50 pence in the pound, so we have the updated figures now for the aggregate rateable value rise. From memory, the new total is about £230 million, that is an increase of £16 million on the figure previously. That £16 million increase in aggregate rateable value corresponds roughly to an £8 million increase in revenue.

  Q294  Chairman The Agency told us rateable values would rise from £181 million to £200 million, which is an increase of £19 million. You are now saying they are going up to £230 million.

  Mr Timms: A note has just been sent in on this and I now have it in front of me. The aggregate rateable values for assessments in these ports before the review, which was initiated in May 2006, totalled £195 million in England and £32 million in Wales. After the review those figures become £211 million in England and £32.5 million, so a tiny increase, in the case of Wales.

  Q295  Chairman: The total increase in rateable values is £16 million and the total increase in revenue for the Treasury is only £8 million, is that right?

  Mr Timms: I believe that is correct.

  Q296  Chairman: Are you aware that Beverley Hughes, who was then the Minister taking through the Order in the year 2000 on the draft Docks and Harbours (Rateable Values) (England) Order which postponed the first attempt of revaluation, said: "Although the bills of individual companies will go up or down, the overall effect across the country on tax-take is neutral"?

  Mr Timms: I have not seen the transcript of that particular debate. It is certainly true from the figures I have given that the overall impact on revenue is a fairly small one compared with the very significant impact on some individual businesses, but it is clearly not zero.

  John Healey: Chairman, I think the aggregate figures cover two important things below that. The aggregate rateable value for both port operators and port occupiers may have risen by around £16½ million, which are the latest figures but, in fact, for port operators the rateable value is £42 million down, for businesses that occupy the ports, it is £56 million up. Although overall there may be relatively little change, as perhaps Beverley Hughes might have indicated before and Mr Timms has, nevertheless the distribution of the changes in rateable value are significantly different between port operators and port occupiers. The second thing is that across the 51 statutory ports where the listings have now been completed and notified, again it shows some very significant differences. For some ports there has been virtually no change, in places like Barrow, but in a place like Hull the rateable value for the port operator has more than halved. Thirty eight new companies are now being listed as being eligible to pay business rates separately for the first time, even though those are companies that have existed and operated in many cases in the ports for some time. The rateable value for them has clearly gone up with the additional problem given the timing of a backdated liability to pay the rates off the back of those listings and ratings.

  Q297  Chairman: Which we will come to. Freshney Cargo Ltd, for example, on the Humber wrote to us after the previous session two weeks ago saying the rates on the four ports on the Humber had gone up by approximately £11 million, which would mean for the other 51 ports the increase would only be £8 million. Somehow the Sub-Committee feels we are not getting the right figures here. You are saying there is a commensurate reduction for the port operators.

  John Healey: I am not saying it is commensurate. There are three things happening here if I may say so. First of all, the rateable value of some port operators has changed significantly, Hull, Liverpool and Immingham being cases in point, Barrow in contrast not being a case in point, with the new listing following the review the VOA has conducted. The second thing that has happened is that by looking in more detail at what actually happens in the ports, the VOA have been able to identify a number of companies, many of which have operated in the ports for some time, that should have been listed separately and paying business rates separately but were not and they have now been listed for the first time. In Hull's case, there is an extra 38 companies and in Liverpool's case it is an extra 89 companies. That is why the third thing is happening here, which is the rateable value of the businesses occupying the ports, the port occupiers, in some of these ports has gone up significantly. In Hull the rateable value has gone up for the port businesses/occupiers by over £11 million; in Liverpool it is a similar amount.

  Q298  Chairman: It is the occupiers who are now facing the prospect of going out of business. Are you really going to stand idly by and watch that happen?

  John Healey: The problem in the perceived unfairness is two-fold here. First of all, for these pre-existing businesses which have now been listed and therefore face a business rates bill of their own for the first time, they are having this confirmed for them and the amount confirmed midway through 2008, three and a half years into the current listings period and yet their liability dates under legislation from 1 April 2005. That is the first perceived unfairness. The second perceived unfairness, and some have argued this as occupiers of businesses, is they feel they have either paid their business rates or in some senses paid a contribution to their business rates as part of the fee that they pay to the port's operator. Where they see their port operator in-line for a significant rebate because their rateable value has gone down, they are facing a business rates bill on the other hand of their own for the first time, even though for a good number what we can say now, with the hindsight the Valuation Office Agency offered you two weeks ago, is that many of these businesses should have been listed separately well before 2005 and paying business rates themselves separately before 2005.

  Q299  Chairman: Having imposed this extra charge on the 55 statutory ports, are you going to go on and impose a similar reassessment on the 60-odd commercial ports?

  John Healey: Can I make two points. In a sense, this is the VOA doing its job. Their job is to make sure they have full and comprehensive listings of those businesses which should be eligible for business rates in a way that we did not for these statutory ports in 2005 and arguably did not in the previous period as well. There are four ports for this work which have still not been completed and they are Plymouth, Poole, Ramsgate and Milford Haven.



 
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