Rating and Valuation (S.I., 2009, No. 204)

My right hon. Friend goes absolutely to the point, as he invariably does on these matters. The regulations fly in complete contradiction to the Government's policy, and one of the reasons why this debate is particularly timely is that it would enable the Government to do the same for the ports as they did for business rates increases yesterday, when the Chancellor said that he recognised that a 5 per cent. increase was unsustainable, and had to back off from that. Some ports are suffering from a 200 or 300 per cent. increase. If 5 per cent. was too much and had to be abandoned, the regulations should be abandoned, too, and we are giving the Minister the opportunity to recant, even at this late stage. I shall make a couple of points before I move on, because I know that other hon. Members want to speak. The Government had clear warning in advance about the issue of the liability being booked. In February, the Insolvency Service wrote to the Minister and said:"““The debt, like any other, would need to…be booked immediately. Depending on the company's overall financial strength, it may not have the assets to cover this additional liability.””" That is a modest statement; that is the least of it. The letter continues:"““In such circumstances, the company would be balance sheet insolvent.””" Legally, if the company had a reasonable prospect of paying, it could continue to trade, but that balance-sheet insolvency, as anyone with even the most modest involvement with practical business would know, increases its cost of borrowing. It would make it much harder for the company to raise finance, and if it does, it would be more expensive to do so. That is a significant indirect burden, alongside the liability itself. It also makes a company far less robust if it experiences further commercial difficulties or reverses during the recession. It makes the likelihood of that company going under far greater. The Select Committee on Treasury, which reviewed the matter in considerable detail, concluded that there was not just a likelihood but a probability that businesses will become insolvent in that regard, and it thought that there was a strong case—““clear evidence”” was the phrase used—that it would lead to the circumstances we described.