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Brown's empty rates 'compounding recession' say Tories

The Conservatives are backing a final call from the British Property Federation, CBI, British Retail Consortium and British Chamber of Commerce for the scrapping of Gordon Brown’s empty property rates tax which is forcing firms to cut jobs and demolish buildings.

New figures obtained by the BPF show that Regional Development Agencies and a host of health and education bodies are wasting millions of pounds of public money paying empty rates (see notes).

Big brands like Woolworths, Zavvi and JJB closing stores has left landlords with thousands of empty shops, while smaller firms wishing to cut back on their space in an attempt to survive or preserve jobs, have been prevented from doing this by having to pay full business rates on empty space.

While owners can demolish buildings, those who simply hold the lease cannot. No one wants firms to needlessly be propped up, but empty rates is liking making the unemployed pay income tax, as something earning no income is being taxed.

ASDA’s Jonathan Refoy, said: “We are doing everything we can to help people through the recession but empty rates are making this much more difficult. Instead of investing in regeneration and jobs, we have to pay this unfair tax on vacant properties that we cannot let or redevelop in the current market. This tax is an anti-regeneration measure.”

Caroline Spelman, 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 are even higher business rates. The combination of empty property rates, the end of transitional relief and an inflation-busting 5% rise in the multiplier, have had a toxic effect on local economies.

“Gordon Brown’s taxes are compounding the misery of the downturn and hindering the regeneration that would help lead the country out of his recession.”

BPF chief executive Liz Peace, said: “We urge the chancellor to reinstate empty rates relief at least while we’re in recession. We’re not asking for a tax handout, but we simply must ensure that we don’t force businesses under and that more jobs aren’t needlessly lost because of a tax policy thought up during a property boom.”

“Pressing on with empty rates will cost the government a lot more in the long term than it will raise in the short term. Firms demolishing property, laying off staff or closing down is bad news and empty rates will draw out the downturn for many. Taxing something making no money is like making the unemployed pay income tax.”

Redundancies are becoming more common as companies look for the funds to finance the tax while 15 per cent of shops are estimated to be empty over the next few months.

Max Allen is a pensioner from Chatham in Kent with three empty units he bought ten years ago to fund his retirement. He said: "There is simply no way to get tenants in. It isn't a case of even lowering rents, there is just no demand. Because of this recession, I cannot sell my properties and because of empty rates, I now face bankruptcy."

Vic James, who ran a local DIY store in Halifax, said: "There is simply no way out. I've worked hard all my life and now I face the double misery of my firm going under and having to pay a huge rates bill for a shop I can't use."

The scandal over post office closures has also meant that many rural shops owners face ruin. Seven Welsh branches in the Vale of Clwyd and the Dee Valley were given notice to shut in October last year, as part of a round of closures across the country. They all now face empty rates bills.

Vanessa Williams, subpostmaster at the Henlland branch, said: "It's appalling, absolutely disgusting. For the post offices that have had to close, and then to pay rates on an empty property, especially at this time, is not very good. These post offices didn't have a choice to close. It's not fair at all, but I must stress that it is not the Post Office who are asking for these rates."

CBI deputy director general John Cridland, said: “Extra taxes on empty buildings are damaging business. The emptyrates.com website forces government to confront this fact.
Reintroducing the previous reliefs would help business deal with the recession. Rates on empty property have forced companies to cut staff, and can make the difference between surviving the downturn and going to the wall.”

Under the new rules introduced in April last year – according to Gordon Brown to stimulate swifter lettings – buildings no longer qualify for half rates after the first three months of being unoccupied, or six months for factories and warehouses. Now, full rates are payable, and are proving too much for some businesses to bear.

The tax was introduced to stop speculative buying up of properties, but with property values falling 40 per cent, there can be no argument of this happening.

Demolition of buildings has been seen – about 15 million sq ft of space is thought to have been scrapped nationally in the past 12 months. Redundancies are becoming more common as companies look for the funds to finance the tax while 15 per cent of shops are estimated to be empty by Christmas.

Among the many critics of EPR are businesses, commercial property agents, developers, builders, the Conservative Party, which condemned the change as “immoral” – even Nick Brown, the Government’s Chief Whip and Minister for the North-East, has waded into the row, speaking of the “destructive” effect he has seen in the region as a result of the rates.

Although Chancellor Alistair Darling attempted to broker a way forward, offering 12-month relief on properties with a rateable value of up to £15,000 in November’s Pre-Budget Report (PBR), his efforts were dismissed as being “woefully inadequate”.

Regional MPs including Alan Milburn, John Cummings, Chris Mullin and Phil Wilson have urged Mr Darling to look again at the issue.

While the government responded by saying the exemption would benefit 70 per cent of properties, the British Property Federation unpicked the spin to reveal that statistic included cash points, public toilets and car parking spaces. Statistics revealed that to qualify for the exemption, offices must be of between 1,000sq ft and 1,500sq ft of space, and industrial units of between 5,000sq ft and 7,000sq ft, figures which account for significantly less than the 70 per cent figure. In London, it is around 30 per cent.

The reality remains that thousands of businesses are being lumbered with costs they can barely afford to pay, but are left with little choice but to do so.

Stephen Robertson, director general of the British Retail Consortium, said: “The irony is a third of what the chancellor gains in extra business rates will be lost to him as a reduced retail sector delivers lower amounts of other taxes and the benefits bill rises.

"Alistair Darling must use his Budget to announce an immediate freeze on all new business rate burdens and the reinstatement of empty property rates relief."

Notes to editors

1. Regional Development Agencies – empty rates bills 2008-09
Budgeted business rates on empty properties in 2008-09
RDA £000
Advantage West Midlands 35
East of England Development Agency 109
East Midlands Development Agency 24
London Development Agency 164
North West Development Agency 83
One North East 191
South East Engand Development Agency (1)309
South West England Development Agency 146
Yorkshire Forward (2)1,020

EMPTY RATES COSTS FOR GOVERNMENT BUILDINGS (selection of figures obtained through parliamentary questions)

Defra, the Department for Environment Food and Rural Affairs - £1,285,135.10.

One large building in Central London accounts for £736,769.95 with two sites at an estimated cost of vacant business rates on these sites is £19,320.

Ofsted, the Office for Standards in Education - £200,000 on three sites

Dukes Court, Woking 84,546.00
Louisa House, Birmingham 80,700.00
Apex Court, Bristol 30,954.00

ONS, the Office for National Statistics - £620,165

Land Registry - £14,900

National Probation Directorate - £170,000

HM Courts Service - £349,570.

HM Revenue & Customs – £200,970 (would be much higher, but the rest of the costs are paid by PFI contractors)

Health and Social Care Information Centre £8,085

NHS Connecting for Health £15,000

NHS Estates £90,000

For more info see www.emptyrates.com or www.bpf.org.uk

For more information and all PR and media queries, please contact Andrew Teacher, Head of Media, on 020 7802 0113 or 07968 12 45 45 or ateacher@bpf.org.uk.