John Healey
MP for Rawmarsh and Conisbrough · Labour · United Kingdom
“Mr Spock, I think some would say, Mr Speaker! My hon. Friend is right. Despite global conflicts, trade tensions and rising threats in the world, which are pushing up inflation, bearing down on growth and pushing up borrowing costs, the UK economy is demonstrating huge resilience.”
“The Prime Minister and I have been clear that we must cut the costs of welfare. On levels of taxation, we had a period of Conservative Government, with low growth and high debt. They crashed the economy with the mini-Budget, and we had levels of taxation that were putting pressure on business, adding to the cost of living.”
“The hon. Lady is talking to the person who led the work to establish a defence and security partnership with the European Union and bilateral agreements with other countries, on which we now build both our economic strength and our national security strength. On the question of the Budget, I ask the hon.”
“Since day one in the job, the Prime Minister and I have been in lockstep in our determination to meet Britain’s fiscal rules. This is the bedrock on which we build good growth and help give a bit of breathing space to families and businesses.”
“May I start by paying tribute to my predecessor, my right hon. Friend the Member for Leeds West and Pudsey (Rachel Reeves)? I am proud to have been a member of a Government with the first female Chancellor in 700 years.”
“My hon. Friend speaks up very strongly for his local area. He is right about the importance of pubs, social clubs and live venues, and about the importance of the 20% cut that we announced in July. These are the things that make the places where we live the places that we also love.”
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“Some have argued that now is the wrong time to produce the sort of local democratic moves that we have produced in this Bill, but it is precisely at times such as this that these measures are needed. It is now more important than ever to get people more involved in their communities, their local authorities and the other agencies that provide services in their area. People simply will not understand the opposition of the Opposition to these modest and measured steps. Nor will they understand their plans to abolish regional development agencies, regional planning, and regional government offices—in fact, anything that happens to have the prefix “regional” attached to its name. I have to say to the hon.”
“He shared some serious reflections about people often not knowing who does what in a council or what is the distinction between a councillor and an MP. The Bill will help to deal with that problem. In response to the hon. Member for Mid-Worcestershire (Peter Luff), I hope that his Front Benchers heard his defence of RDAs and the valuable role that they play. His Select Committee’s report was very good, and I recommend it to the House, particularly as an endorsement of strong support for a level of governance between central Government and local authorities. I will endeavour to get him a response before we start the Committee proceedings on the Bill.”
“No, I am saying that councils do not have specific powers to do that. If the right hon. Gentleman consults the record, he will see that that is exactly what I said. My right hon. Friend the Member for Streatham (Keith Hill) is most generous in his blandishments, and he is very good at them. I will have further discussions with the County Councils Network, and meet it if he wishes me to do so, but I cannot promise to change the view that I have taken because there is a very strong case for not making the change that he is looking for. My hon. Friend the Member for Luton, North (Kelvin Hopkins) is a lifelong committee man, not only on local authorities, with their five or six-hour sittings, as he explained to us, but at the TUC when he worked there.”
“The first piece of advice is that the council should manage what it has got over this three-year settlement well. It should manage it efficiently and do more to tighten its belt, as everybody expects councils to do at the moment. Secondly, the hon. Gentleman’s council, like many others, will be interested in two areas of work that we have under way at the moment, working closely with local government. The first involves considering the future basis for deciding grants from central Government to local government, while the second involves improving the collection of population and migration statistics. Local government has a big role to play in that and can make a valuable contribution to that work. I hope that the hon. Gentleman will encourage his council to do just that.”
“I and my hon. Friends on the Treasury Bench share our puzzlement with the hon. Gentleman’s question. None of us recognises the scheme he is talking about, but I am happy to meet him if he wants to lay out the detail. I think he may have the name of the scheme and the funding wrong, but I am happy to explore that with him.”
“That is at stake in the prayer that the hon. Member for Bromley and Chislehurst (Robert Neill) and his leader have tabled. The debate has largely been about ports, but port businesses are not in a unique position. I therefore also want everyone to understand that the regulations that I tabled and the provision that the Government have made apply equally to businesses throughout England in all sectors and all areas, and not only to the ports-based businesses, which find themselves in the position of having significant and unexpected backdated business rates liabilities, incurred as a result of the Valuation Office Agency’s separately listing them and assessing them for the first time in this rating list period.”
“I understand the concerns that have been raised and the pressure on the cash flows and margins of businesses that are affected by a backdated liability for business rates dating back to 2005. I also understand that some argue that we should go further than an unprecedented eight-year period in which to pay those backdated liabilities, but I want everyone to understand that voting down the regulations, which I laid before the House on 10 February, would leave the position of those businesses exactly as it was before we took action. In plain terms, let me give a warning: supporting the prayer that the Conservatives have tabled would mean that companies were legally liable to pay all the backdated business rates from now. It would also mean that councils were legally required to pursue and enforce those debts.”
“Friends understand, although the hon. Member for Bromley and Chislehurst does not, that prescription was a method—a formula—for setting the rateable value of the ports operators, not the businesses in the ports. Before the ports review, 1,643 businesses in ports were separately listed and separately liable to pay business rates. In other words, three times as many ports-based businesses paid business rates on their account before the ports review than consequently paid them afterwards. In some cases, properties, which have been added and the addition of which is being contested, belong to businesses that already paid separately for other properties, sometimes in the same port.”
“In 2004-05 alone, in the previous ratings list period, more than 1,500 properties were put on the list for the first time, with significant backdated liabilities in precisely the same way as the ports, about which the hon. Member for Bromley and Chislehurst and my hon. Friends are rightly concerned. However, the concentrated number of companies in that position as a result of the Valuation Office Agency’s ports review is special. Let me make it clear that the ports review was not a change in the operation of the system or a change in the law. The VOA was doing its job and pursuing its legal duty to keep the ratings list up to date and accurate. That is why no impact assessment was undertaken beforehand. The ports review did not even constitute a change in the way in which the business rates system applied to businesses in ports. My hon.”
“I shall explain shortly why I believe that the ports businesses are in not a unique, but a special position. There are some unacceptable pressures, created not least by the ports review, but I want to tackle the argument that Conservative Members and the ports lobby make that, somehow, the tax liabilities, which were legally established, should be waived. That is important. In the last financial year up to only 31 October, at least 800 companies, including some of the businesses in ports, were eligible for the payments scheme. That scope will be removed from them all if the regulations do not remain in place. Backdating ratings assessments is not new, but an established feature of the business rates system. It operated the list that we are considering not only from 2005 onwards, but from 2000 onwards and before that.”
“That is partly why we are in this position now, rather than earlier in the list period. However, none of that changes the principle or the argument that I have just set out to the House, which is that the ports review did not change the way in which the system operates, the policy or the legal basis, and it did not even change the application of the business rates system to businesses based in the ports.”
“There were three flaws in the way that the VOA conducted its ports review. First, it was clear before the Southampton container ports case was settled that a significant number of properties in ports should have been separately listed and paying business rates for some time, but were not doing so. Only after that was the legal position clear. I understand why that happened, but in hindsight it would have been better if the VOA had done some work before then. Secondly, the communication was not good enough, which is a point that the VOA’s chief executive has conceded to Committees of this House. Thirdly—this, too, has been conceded by the VOA—more investigative work should have been done in conducting the ports review. Things have taken longer than they should have.”
“I will give way first to the hon. Member for Canterbury (Mr. Brazier), then to my hon. Friend the Member for Cleethorpes (Shona McIsaac) and finally to the hon. Member for Falmouth and Camborne (Julia Goldsworthy). Then I will conclude my arguments, because I want to make some points that will allow the hon. Member for Bromley and Chislehurst to see why in principle I disagree so fundamentally with what he has proposed.”
“In every case that I have cited, it may have been the case that the business concerned could not have anticipated or prepared for what happened. In the case of the ports review, however, I simply do not accept that, for all the ports businesses now affected, what happened came completely out of the blue. Some of those businesses have highly paid advisers and some were paying separate business rates on properties that they were already operating. It is not the case that what happened hit those businesses totally unawares. That may have been the case for some, but it cannot be the case for all.”
“However, I have directly encouraged Associated British Ports and Peel Ports to take a sensible and practical approach to their tenants, because they have no interest in those tenants not being able to continue in business.”
“My hon. Friend is absolutely right—unsurprisingly, because she champions her businesses and her constituency very powerfully. There is a strong perceived unfairness about the situation in which those businesses now find themselves, and I understand that. They argue that they have made a contribution to their business rates through their tenancy fees or the cumulo system. The problem is that it is hard to pin that down, and there is no specific evidence in the contractual tenancy agreements. Where there is, the port operator would have to deal with that directly with the tenant. However, the terms of the tenancy arrangement and the fees that are paid are contractual matters and not, I am afraid, something that I or the Government can step in over.”
“In a way, this is not unique in the way in which the business rates system operates. We do our best but, with the five-yearly revaluation, for example, businesses have to recalibrate their cash-flow forecasts and their business operations to deal with that.”
“These regulations and provisions are already in place, and 67 companies have agreed a schedule of payments that will allow them to spread their backdated liabilities over up to eight years. The insolvency question, for those companies, will involve a combination of having to book the liability—the outcome will, in part, depend on their existing assets and liabilities—and of the judgment that the directors take on their ability to trade through the period and meet the liabilities when they become due. That is the advantage of being able to identify those liabilities and see when they will fall due, and to spread them so that they are due not as one hit—as would happen without these regulations—but in instalments over eight years. That is an unprecedented period; it gives businesses a generous amount of time to pay.”
“The hon. Gentleman has been sitting through the debate and he is very keen to intervene. I shall give way to him, then I must make some progress.”
“The second is an increase in the number of separately assessed properties. As a result, in England, the port operators’ rateable value has been reduced by about £44 million annually, which therefore reduces rates liability. Across England, the rateable value of Associated British Ports alone has reduced from £41 million to £21 million as a result of the ports review. In Hull, the rateable value of the port is now one third of what it was before the review: it was £9 million; it is now £3 million. In Grimsby, that value less than half what it was—down from £1.35 million to £500,000. In Liverpool, it is less than half, too—from £16.5 million to £6.8 million.”
“I am so glad that I gave way to the hon. Gentleman, because I was about to discuss the figures. I have placed in the Library of the House today a table of the latest figures relating to the impact of the ports review, broken down by port. The figures show the pre-review and post-review rateable values of the ports and of the businesses, and the number of businesses in each port. They also show that the review has had different impacts in different ports, and that it has had a different impact on the port operators and the port occupiers. The overall impact on the cumulative rateable value of ports in England has been to increase the rateable value from £201 million to £211 million. Within that cumulative impact, however, there have been two main changes. The first is a reduction in the port operators’ rateable values.”
“The Government do not do that with any business tax. If the Government accepted the principle of removing a backdated rates liability, it would require primary legislation. In other words, Ministers would have to ask Parliament to give selective advantage to a specific group of businesses. [Interruption.] If the hon. Member for Bromley and Chislehurst will allow me—”
“The intended outcome in each case would be to waive what has now been established—legally established—as a tax liability. Let me tackle that proposal directly. Despite the delays and problems in the ports review, I do not accept the principle that once it has been properly established that a business is legally liable to pay tax, it should simply be waived and the company let off. We do not do that in other circumstances; we do not do it with other business taxes. [Interruption.] The hon. Member for Peterborough (Mr. Jackson) says that the Chancellor announced a waiving of the tax liability yesterday, but the hon. Gentleman completely misses the point. I have a precise argument, and if he bears with me, he will get it. Once facts and a tax liability are known, they simply cannot be disregarded.”
“One hundred and forty-six businesses—in other words, one in four of those affected by backdated bills—have already settled in full. A further one in seven of the remainder—the 67 properties and businesses I mentioned earlier—have now entered into the schedule of payments that is giving them real help through what is a tough period for them. That schedule has allowed them to spread the payments and manage the cash-flow consequences in a way that would be stopped dead in its tracks— it would be blocked—if the motion proposed by the Conservatives were to be passed. Let me turn to the central question of waiving the tax liability, because a number of different solutions have been proposed by the ports lobbyists, but they all add up to the same thing.”
“If the hon. Gentleman will allow me to continue, the real impact has been on businesses, with 605 newly assessed properties having a rating assessment backdated to 1 April 2005. It is those newly assessed port occupiers, with properties at a rateable value of about £54 million that face the backdated liability of more than £70 million. Although there are some significant issues, problems and pressures faced by businesses in port when they get this unexpected and significant backdated liability, let me explain that the impact is not universal. Although some businesses may certainly be struggling, local authorities report that £25 million—in other words, a third of this backdated liability—has already been paid in full.”
“As with other tax systems, everyone is assessed according to rules that are applied consistently and without favour, whether the administration of the system is good, bad or indifferent.”
“It must also be asked who will be next to bang on the door of the shadow Chancellor, waving a tax bill and demanding special treatment. Let me ask the House a question. In supporting this motion, what is the shadow Chancellor saying to the other companies—more than twice as many, including some in the ports—that have been paying their business rate bills when their neighbours and competitors would be let off this tax liability? What does he say to the companies—many times the number—that found themselves in the same position in previous years, but have accepted the system and paid what is legally due to the public purse? To do otherwise undermines the basis of the business rate system.”
“Thank you, Mr. Deputy Speaker. If we were to accept this principle and Parliament gave us those powers, what would that mean? It would turn what some argue at the moment is a perceived and arguable disadvantage of a backdated business rate—I have to say that many more businesses are now and have previously been affected by such backdating—into an actual disadvantage to those who have paid their business rates in those years. In other words, we would create a certain state aid and a certain breach of fair competition and fair taxation principles. I have to tell the Conservative Front-Bench team that I find it extraordinary that the Leader of the Opposition has fallen for that line, tabled the motion and promised to waive the tax liability. It must be asked whose special interests will be next in line for a tax let-off under the Tories.”
“I will finish making this point, if I may, but then I will give way to my hon. Friend, because he has been uncharacteristically patient up to now. The problems caused by the ports review in this concentrated group of companies do not alter the principle that 605 newly listed firms are being taxed and treated on the same basis as other firms both in and outside the ports.”
“I have already dealt with that point. I have some sympathy with that perception of unfairness, but the argument must be taken up with the port operators with which the companies have the tenancy agreements and to which they pay the cumulo. I have asked about this consistently over the past nine months, and I have seen very little evidence of any contractual confirmation that the business rates are paid explicitly as part of the cumulo. Therein lies something of a problem for my hon. Friend and some of the companies in his constituency.”
“My hon. Friend is right: I have seen the letter, because he made sure that I would see it. I am sure that the companies in his constituency will look at that information very closely, and will consult some of their professional advisers on where it places them in relation to ABP. I have a copy of the letter from ABP, which, as a result of the 2005 revaluation, told its occupiers “it will inevitably mean that… some of the increase will… be passed on to our customers”. As I said to my hon. Friend the Member for Cleethorpes (Shona McIsaac), that is a matter that they must take up, rightfully and directly, with the port operators.”
“To summarise, we should expect businesses to pay the tax that is due, but in the current economic circumstances we must and can support businesses, especially where they have this unexpected or significant backdated liability. That is precisely what we are doing. We are doing it to an unprecedented extent by allowing scheduling over eight years for the firms that are affected. Businesses are already taking advantage of that support. The House would be wrong to take that away this afternoon.”
“Friend the Chancellor announced in the House yesterday afternoon would apply to the increase in business rates that businesses face from the multiplier or the ending of the transitional relief: a deferring but not a removal of that tax liability. Businesses may benefit from up to around £600 million by the deferment announced by my right hon. Friend. It is consistent in principle and practice with his announcement in the pre-Budget report that Her Majesty’s Revenue and Customs would be flexible over the period in which other business taxes—corporation tax, VAT and payroll taxes—had to be paid. Over 100,000 firms have now taken advantage of that. Almost £1.8 billion has been deferred to help them to manage their cash flow and business pressures during this difficult period.”
“I am coming to the end of my speech. The hon. Member for Bromley and Chislehurst had a fair crack of the whip. In the current economic circumstances, given the pressure on businesses across the board, what is clear—and we understand it only too well—is that significant and unexpected backdated rates liabilities of this kind will create difficulties for many, although not all, businesses. That is why we have introduced a scheme to help all businesses, including some port occupiers, to meet such unexpected and significant backdated liabilities, and to pay over a period of eight years. That is an unprecedentedly long period. This is, in principle, a deferment of the tax liability, not a waiving or a removal of it. It is, in principle, precisely what my right hon.”
“It is entirely consistent with what we have been prepared to do on other business taxes because, as we have said, we are prepared to take action where we can to help businesses manage their way through this difficult recession. That includes the businesses in the ports hit by these significant and unexpected backdated business rate tax bills. Question put. The House proceeded to a Division.”
“That is why we have been prepared to give this help in order to help them manage their way through. The impact of the ports review, as I have said, has not been universal. Despite the individual cases that Members cited, a third of the backdated liabilities in tax have already been paid in full. One in four of the businesses affected in the same way have settled their bills. A significant number of the remainder are taking advantage of the payment scheme that we have put in place, which the Conservative motion would remove at a stroke. That scheme gives a flexibility to pay. It defers the liability and does not remove it.”
“Cawsey) that we have acted, and have done so in an unprecedented way. We are prepared to defer the backdated liabilities for an unprecedented period of eight years to allow payments to be spread. If my hon. Friend feels that we are going around the same course and we are hearing the same arguments, that is the case. We are doing that because, to put it bluntly, we have heard the arguments and listened carefully to them, but we have not accepted them. We have not accepted that the port businesses are in a unique position—he is obviously as concerned about their position as we are—or that they are a unique case. We have accepted that they have problems and that they are under pressure, particularly when the economic downturn is putting pressure on all businesses.”
“With the leave of the House, I want to respond in brief to some points. I fear that by being blunt I might also disappoint. May I say to my hon. Friend the Member for Cleethorpes (Shona McIsaac) that it is not the case that Ministers have somehow passed responsibility from post to post. At each stage, I have accepted responsibility for the position that we are in. I have accepted responsibility for the measures that we have proposed to take. I have not ducked the arguments—whether that was in meetings with businesses in Hull, when I gave evidence to the Select Committee on the Treasury, in meetings with my hon. Friend or in debates in this House. I have had more discussions on this matter than on any other subject in recent months. Let me tell my hon. Friend the Member for Brigg and Goole (Mr.”
“It would be a serious mistake for any local authority to assume that the principles I have announced today for this year are in any way a guide to the approach or the levels I may set in future years. I commend the statement to the House.”
“Nevertheless, council tax payers will not be pleased to see that 86 authorities have set band D increases of more than 4.5 per cent., especially during this period of economic pressure all round, while 39 of these authorities have set rises of between 4.9 per cent and 5 per cent. Some suggest that that is because such authorities believe the Government have in place some standing 5 per cent cap. That is not the case. The Government have always been clear that our purpose when setting capping principles is to protect council tax payers from excessive increases. In the current economic climate, keeping council tax under control is more important than ever. So I put all authorities on notice for next year.”
“The capping principles I have announced today are expressed in terms of band D council tax. That is because the band D amount that authorities are required to determine is set out by the legislation. However, the average household pays around £240 less than the band D amount and the increase for average council tax next year is 2.6 per cent, the lowest increase ever since the council tax was first introduced by the Conservatives in 1993. I would like to end by looking ahead. Central Government funding increases, the concerted efficiency effort of many authorities and our commitment to tough capping action have resulted in some of the lowest council tax increases ever seen.”
“Friend the Minister for Security, Counter-Terrorism, Crime and Policing will meet them personally to hear their case in person. After that, when we have considered any case made by the authorities, we can proceed either to designate—or cap—the authority for 2009-10, either at the level proposed today or at another level, or to nominate an authority, which means either capping the authority for next year, 2010-11, or setting a notional budget requirement for 2009-10 as the baseline for any future capping decisions. Confirming a cap for this year would require the authority to re-bill residents for a lower council tax, with the cost falling on the capped authority. All authorities set their budget requirements and council tax in the full knowledge that excessive increases could lead to re-billing, so they can have no complaints about this.”
“and its council tax precept by 7.07 per cent. compared with the notional levels set last year. I am disappointed that Surrey has set an excessive increase for a second successive year. This is the first time under current legislation that we have had to take action against an authority more than once. Let me make it clear to the House that I am not announcing a cap on the council tax of Derbyshire and Surrey police authorities. I am starting a process that could lead to that. The authorities have a right under the legislation to challenge the proposed cap and to seek to justify their decisions. We will consider carefully all the representations the authorities may make before reaching any final decisions. Today I am writing to the chairs of the two police authorities confirming that I and my hon.”
“The requirement puts a greater onus on authorities to control their budget and council tax the following year, as they are measured against the lower baseline. Of the eight authorities against which we took capping action in 2008-09, four were set notional budget requirements. They were Bedfordshire, Norfolk and Surrey police authorities and Portsmouth city council. This year, two authorities have exceeded the principles I have announced. They are the police authorities of Derbyshire and Surrey. All other councils, police authorities and fire and rescue authorities have set increases within the limits I am confirming today. Derbyshire police authority has increased its budget requirement by 4.99 per cent. and its council tax precept by 8.68 per cent. Surrey police authority has increased its budget requirement by 4.82 per cent.”
“for 2009-10 or a band D council tax increase of more than 5 per cent. For an authority that was set a notional budget requirement following capping action in 2008-09, these principles operate by reference to that notional budget requirement and a related notional amount of council tax calculated for that year. The principles are described in more detail in a report that I am placing in the Library of the House. I realise—especially as I look around the Chamber—that not all Members will be familiar with the concept of a notional budget requirement. Put simply, it is one of our capping options. It involves the Government’s setting figures for an authority against which their future increases are compared—last year, those figures were equal to the caps that would otherwise have been imposed in year in 2008-09.”
“Thirdly, although I know local government does not like it, council tax capping helps concentrate the minds of councils. I have consistently said that we will take tough action when it is necessary to protect council tax payers against excessive increases—I said so to the House in November in my statement on the provisional local government finance settlement. I therefore want to set out for the House the action that we are now taking. Our capping principles relate both to an authority’s council tax and to its budget requirement, which, broadly speaking, is the spending financed through the formula grant and council tax. I can confirm that our capping principles are that authorities’ 2009-10 requirements are excessive if they set a budget requirement increase of more than 4 per cent.”
“With permission, Mr Speaker, I should like to make a statement on council tax in England and the capping action that the Government propose to take for 2009-10. Today, the Department has released figures showing that the average band D council tax increase in England next year will be 3 per cent., the lowest increase for 15 years. The average council tax rise for all households will be 2.6 per cent., the lowest ever since the council tax was introduced. There are three reasons for that. First, Government funding for local services is rising by 4.2 per cent. in 2009-10—an extra £3 billion and the 12th successive annual increase above inflation for local government since 1997. Secondly, local authorities are taking seriously their responsibility to residents to tighten their belts and operate more efficiently.”
“We expect parish councils to set their budgets prudently and to take residents’ views into account and to respond to them. However, if it is necessary to take further steps or powers to deal with parish and town council precepts that become excessive for local council tax payers, we will do just that.”
“cut in real terms in the last four years of the previous Conservative Government. I did not want to make this debate political, but the hon. Gentleman asked me to say what the position really is. I can tell him that the council tax for the average home is £204 lower in Labour areas than in Tory areas, and £134 lower than in Liberal areas. The rise this year in Labour areas is lower than in both Tory and Liberal areas. The hon. Gentleman asked about the grant distribution and pensioner take-up of council tax benefit. Both matters were debated last month when this House examined and approved the local government finance settlement. Finally, it is true that we do not have the legislative powers to take action against excessive rises in parish council precepts.”
“I shall try to respond to the wide range of questions posed by the hon. Gentleman, but he can hardly say that the council tax is a stealth tax. Each year, the council tax settlement is debated and approved in this House, and the Minister in charge makes a statement, as I have done today. One of the difficulties is that the council tax is one of the most visible taxes, given the bills that residents receive. At the outset, the hon. Gentleman asked me to make the case for the level of local government funding. Next year, there will be a 4.2 per cent. increase in the total Government grant to local authorities, which means that, for the 12th year in succession, local councils will get an above-inflation annual increase from this Government. The direct comparison is that they suffered a 7 per cent.”