The chancellor’s claims to help relieve the burden on empty properties are today revealed as empty spin.
Small firms across the country are outraged over government plans to plough on with taxing empty shops, offices and warehouses, offering an exemption that will help virtually no one.
The chancellor claimed that 70 per cent of properties would be helped by an empty property rates (EPR) holiday for properties with an estimated value of less than £250,000. But this figures includes cash machines, advertising hoardings and other things no one would regard as ‘properties’.
This spin gives a very misleading impression of the real saving, and covers up the fact that small firms will continue to go to the wall because of the government’s ill thought out tax policy.
The small print of his report also shows the cost of this tax cut to be just £185m which is just 20 per cent of the £1bn the government hopes to raise through EPR.
Retailers, factory owners and small office developers will continue to pay as their properties are valued well above this level. Regeneration chiefs are also furious that this short sighted approach will reap long term damage to the economy by undermining investment.
But even those firms that do benefit may go bust before the yearlong EPR holiday comes in next April.
The exemption will apply for properties with a rateable value of less than £15,000 and follows a long running campaign led by the British Property Federation. Firms who pay rent below £20,000 a year will be spared but a typical high street shop or office in any part of the country would still have to pay.
Reports of demolitions have led the media to brand EPR the ‘bombsite Britain’ tax. An average sized industrial property would have a rateable value of at least £40,000, meaning that many properties will continue to be demolished. Areas like the North East, where Labour chief whip Nick Brown called for relief, will continue to be stung.
Over 125 MPs have backed Commons motions against EPR and the chancellor’s move will undermine the positions of many Labour backbenchers representing hardpressed areas.
Although many have little sympathy with larger developers, these are the firms who provide flexible space for small business and who invest in regenerating deprived areas. Towns like Bristol, Bradford and Birmingham have thrived from recent regeneration projects. The government’s public funded regeneration chiefs have dismissed yesterday’s announcement.
The BPF is urging those affected to sign a No 10 petition and warns that the ‘bombsite Britain’ effect of buildings being demolished will only get worse. It is urging those affected to join 5,000 others who have signed this petition:
Liz Peace, chief executive of the British Property Federation, said:
“Rate relief for signs and ATMs will be of little solace to struggling businesses. You can’t set up an office on an advertising hoarding after all. This is spin to help Labour keep votes, rather than help businesses keep going. It will do nothing to avert demolitions, nothing to save jobs and nothing to encourage the kind of investment we need in our communities if we are to come through recession. Only the smallest properties will be saved in what can only be described as a very cynical and short term response to a massive, long term burden on business.
“Giving back just £185m of the EPR take means very little and will mean that firms across the country continue to be driven under. This will put a lot of pressure on the many Labour MPs who have fought this tax. The BPF hopes that they will all stand firm in representing the needs of their constituents.”
A banking industry spokesperson said:
“Will this help? Not in the slightest. In theory the government’s figures include the sites of ATM machines. The vast majority of properties in the £15,000 threshold aren’t going to be the kind of retailers or businesses who need help. The chancellor hasn’t addressed the problems of empty rates, firms will continue to be put under by this and it won’t help to prevent demolitions one iota.”
Eric Pickles MP, Shadow Secretary of State for Communities & Local Government, said:
“At a time when local firms are trying to weather the storm of an economic downturn, the last thing they need is hikes in business rates. The gloss in the Pre Budget has not even lasted a day. Just like the 10p tax con, these rates hikes on empty property and British ports are a legacy of Gordon Brown’s bungling.
“The Government’s incompetent handling of business rates threatens to undermine confidence in the economy and damage British competitiveness.”
Linda Riordan, Labour MP for Halifax, said:
“I welcome the change but would have liked it to have been extended beyond this bare minimum. The majority of those who are affected by this across Halifax and the rest of the country will have properties with a much higher rateable value than £15,000. I would like to urge the chancellor to look again at this as we desperately need to offer real help to firms hit by the downturn.”
For more info see www.bpf.org.uk or contact the BPF press office on 020 7802 0113 or 07968 124545 for broadcast. You can view TV interviews at http://uk.youtube.com/user/bpf0000
QUOTES FROM THE REGIONS
Nigel Taylor, a landlord with a spread of property of flats, houses, shops and industrial units, said:
“It deeply depresses me to see our elected representatives who are supposedly intelligent people laughing and joking as if the whole situation is one big game. It makes my blood boil to see Darling calmly announce that his adjustment to the empty rates scandal addresses 70% of sufferers whilst in reality he keeps 80% of the monetary benefit that is peddling a lie to the electorate in order to look good to the general public. Brown has yet again succeeded in conning the public in broad daylight.”
“To keep empty rates in place on the majority of property and nearly all industrial is short termist. It’s ill thought out; lacks sensible joined up thinking and whilst it may, in a crude way via hardship, lead to lower commercial rents in the short term, in time it will lead to higher rents owing to the shortage of commercial property.”
Rob Loades, chairman and managing director of Loades Plc in Coventry, which specialises in developing, trading and leasing commercial premises, said:
“It is extremely disappointing. This move may help some small businesses but for those who are looking to build and expand it is a bitter blow. The token gesture for small buildings is a diversion with an appearance of action, but the industry needs the complete scrapping of void rates to encourage building development. It is very disappointing that they have missed the opportunity to encourage bigger developers at this difficult time, and our only hope now is the Conservatives. The campaign for full relief to be reinstated must continue.”
Carl Griffin, director of Folkes Holdings in Birmingham, said:
“It’s an insult. It’s not going to help regeneration, its not going to stop demolitions. It is pointless, short sighted, and idiotic and shows that the government fundamentally does not grasp the situation. We are on the good ship Titanic with Captain Brown and first mate Darling and the iceberg is looming. Basically politicians are at best well meaning amateurs, at worst incompetent fools, unfortunately we’ve got the worst.”
Martin Guest, managing director of the Birmingham office of CB Richard Ellis:
“Although the Chancellor claims the concession will impact on 70 per cent of all empty properties, in reality it affects only smaller landlords.
“What this means is that major developments are still affected by the tax. This is a major blow for regeneration and investment prospects in Birmingham and the West Midlands.
“The levy has been dubbed “Bombsite Britain” tax because many businesses have chosen to demolish empty buildings rather than pay up. The size of the concession means that many property owners will be forced to continue with this strategy, bringing more demolition and less regeneration.”
Tom Rabbett, a property owner from Manchester, said:
“It’s ludicrous, it’s thievery. They’re not helping anyone. All they’re doing is drawing funds wherever possible. They don’t care where it’s from or the problems it creates for regular people. What happens when people can’t afford to pay and the property’s still there? When they start charging rates on buildings it takes away the competition for the big boys. All the smaller guys have to demolish their buildings or sell them on very cheaply, and cheaper rents will be lost. In my case, my property is my pension fund and I’m trying to sell it at a reduced rate. But in the current market that’s very difficult. No one else has to pay tax on their pension fund, but I am, and that’s wrong. The money they’ve taken off should be given back.”
David Cownie, director of CB Richard Ellis in Manchester said:
“The government’s attempts at easing the difficulties of the property industry have fallen well short of the level of relief the property sector was hoping for. This concession will do nothing to stimulate regeneration, development or the investment sector.
“The Government are claiming that this will impact 70% of empty properties, but their own statistics indicate that it will only really hand back around 18% of the estimated £1bn that the Rating Empty Properties Act 2007 was expected to raise.
“This change will do little to ease the burden on struggling landlords; many will find this change adds further to the complexity of the business rates system.”
Malcolm Gray, managing director of WH Fosters Printers Ltd, Sunderland, said:
“It is very, very, disappointing that Darling hasn’t repealed the act. It would have been the perfect opportunity to help struggling businesses but he has chosen not to rectify his initial error. This will basically cost jobs; we will be making redundancies this week.”
Tom Stokes, managing director of Evans Easyspace in Leeds, said:
“We welcome the change to help firms as a short tern measure, but it hasn’t helped mainstream property and it hasn’t helped regeneration because it’s only a short term measure. We need a proper review of the system that will demonstrate the devastation this has done and enable the government to come up with a sensible solution rather than the ill thought out one which has been imposed since April.”
John Nicholls, chief executive of the publicly funded Leicester Regeneration and chairman of the country’s 19 urban regeneration companies, said:
“This may help some of the smallest businesses but it doesn’t address our concerns about regeneration. EPR adds to the cost and risk of development in regeneration areas. The scale of property where we’re concerned about demolition is well above that threshold. I think there is a risk that properties will continue to be razed in avoidance of the tax."
Martyn Matthews, of Duchy Estates in Cornwall, said:
“The raising of the threshold on empty rates for a year as of April really doesn’t address the problem. Many property owners will be bankrupt from rates before next April and the situation isn’t going to dramatically change over the course of a year. The chancellor has not gone far enough.”
Peter Roberts, the owner of an empty night club in Bristol said:
“From the beginning this tax has been unwise and unfair, and today that situation remains. My property is 22,000 sq ft with a rates bill of £20,000 which is a weight around my neck. I have tried to rent the property for no cost at all but there is no demand. I have tried selling the property but there are no buyers. Foolish comments like Mandelson’s and weak action like Darling’s are not realistic and it is very disappointing. No one wants to keep property unused. I just don’t understand the logic behind this, £400 a week in rates is a real burden to me. This isn’t just big businesses but individuals. If something is not done in the coming months I face serious financial problems. It is not a happy situation. It is totally unfair, unjust, and illogical.”
John Varley, director for Clinton Devon Estates in Devon, said:
“This is a pathetic and cynical response to a very real problem for the property sector. The government has tried to fob off those providing premises to smaller businesses with a one year break. It will do nothing to encourage the speculative investment and risk taking required by property owners in all sectors to get the economy moving again. Our attitude to rural development and property investment has not been changed one bit by this gesture.”
Ian Allen, a self storage consultant from Fleet, Hampshire, said:
“It’s a bit like sticking your finger in a damn after it’s cracked and filled with water. It’s a little too little and a lot too late. Around 80 per cent of rates come from 20 per cent of the firms, so this will help a very slim majority. Larger firms are just as much victims of the downturn as every one else and although they may have more assets, they do not have greater cash flow than smaller companies. Development is being halted because firms can’t afford to service the extra debt due to this tax.”
Carol Borowski, a property owner in Lewes East Sussex, said:
“This is no help at all. Basically by 2010 if predictions are right we will still be in recession and still be having difficulties with financing small businesses, so we will still be in the same situation and who are you going to go to for a loan, you can’t go to the banks? They have taken the smallest amount of action they could.
"Once again it is short termist. All I can think to describe it as is 'paltry'. It was an insane policy from the beginning, I don’t know who is advising them but whoever it is they are clearly not on this planet
Mick German, director of MPG Properties, an industrial landlord from Thanet, Kent, said:
“This is simply not of any benefit to people with larger industrial buildings. Basically it is bad legislation that they have tried to whitewash, and it will do no good whatsoever for people like myself with large industrial units. It is certainly not going to encourage me back into purchasing or building. It is just a little bit of action far too late. It is ridiculous and I am flabbergasted at what they have done.”
Bhavin Shah, who runs Dynasty, a fashion wholesaler in Borehamwood, Hertfordshire, said:
“It doesn’t help us, the bigger businesses who are suffering, the big employers who are struggling to keep people in jobs. It is appalling. The decisions made yesterday were very poor. It is unbelievable that Darling thought this would help; it goes to show how out of touch the government is. I can’t believe that the government does not see how this tax on ungenerated revenue will have a hugely negative effect on the sustainability of many businesses. When roofs start to come off to avoid rates it will have a detrimental effect on the environment as a whole, and this is what is going to increasingly happen. We have to make the best of a bad situation but it doesn’t help when you have a government that doesn’t understand or care.”
Neville Thompson, senior director of CB Richard Ellis in Southampton said:
“The Government’s attempts at easing the difficulties of the property industry have fallen well short of the level of relief the property sector and businesses need.
“Whilst this will provide a modicum of breathing space for a few small businesses and very small scale developers, the reality is that this concession will do nothing to stimulate regeneration, development or the investment sector. It is far short of the status quo before he took away empty property rates relief around a year ago, in the then booming market, to widespread criticism.
“This change will do little to ease the burden on struggling landlords either; many will find this change adds further to the complexity of the business rates system.”
NOTES FOR EDITORS
From this April, business rate relief for empty commercial property was scrapped. Before April, offices and shops received 50 per cent relief after three months grace, while industrial property was permanently exempt. The change was expected to raise around £950m
The chancellor said yesterday that the holiday for properties with a rateable value below £15,000 (meaning they’re worth around £250,000) would benefit 70% of the empty properties in England and Wales. However, the government doesn’t know what proportion of empty properties has a rateable value of less than £15,000.
Officials have indicated that the 70% figure represents the proportion of all properties on the entire rating list which have a rateable value of less than £15,000. That includes advertising hoardings (which most people wouldn’t think of as “properties” at all) and ATMs (which are not often empty). The result is that the Chancellor’s 70% figure gives a skewed impression of the typical value of empty property.
Unlike the 70% figure, the Government’s estimate of the cost of this measure was not trumpeted by the Chancellor in his speech. That estimate is £185m – a mere 20% of the anticipated £900m revenue from EPR for the year 200910.
The number of businesses – small or otherwise – that will benefit from this relief will be much smaller than the Chancellor suggested.
The Local Government Finance Act 1988 makes it clear that advertising hoardings are subject to rates.
C Present Law
The effect of s 42(1)1, s 64(4)(e), s 64(2), and s 64(11)2 of the 1988 Act taken together is that a right to display advertisements constitutes a hereditament which must be entered in the appropriate local rating list3if the right is reserved or let out separately from the occupation of the land where it is situated or, if the land is not occupied, separately from the ownership of the land4. Once such a right is entered in the list, the effect of s 43(1)5 and s 65(8)6 of the 1988 Act together taken is that the person entitled to the right is liable to be rated whether or not he exercises the right.