Press release

GOVERNMENT DEFIANT OVER EMPTY RATES TAX

Date

24th November 2008

Description

The government is pressing ahead with its damaging tax on empty commercial property in defiance of a campaign universally backed by large and small businesses, 125 MPs and Labour’s own chief whip.

The chancellor announced today that he would temporarily increase the threshold for empty property rates relief to exempt those with a rateable value below £15,000. This will only help those who own very small properties such as a lock-up on an industrial estate or a small office above a shop in a low value area.

The change will not help the mainstay of properties in London and the south east, and it will continue to see firms taxed on their hardship throughout the recession.

An average sized industrial property would have a rateable value of at least £40,000, meaning that many firms across the north east, where Labour’s chief whip called for the reinstatement of the relief, will continue to be stung. Nick Brown called for relief for industrial areas who have been hit hardest by the change.

But his constituents will be bitterly disappointed along with the many firms across England and Wales who have empty properties because of the economic downturn.

While small corner shops outside London may be saved by today’s change, the majority of retailers will continue to pay empty rates, as the industry warns that a fifth of shopkeepers could go bust over the next two years.

Meanwhile, larger developers responsible for regenerating and reinvigorating our communities will continue to suffer. Pension funds, with investments in portfolios of commercial property, will also be hit, hurting thousands of savers.

The BPF is warning that the ‘bombsite Britain’ effect of buildings being demolished by those who cannot afford to pay, will only get worse. It is urging those affected to join 5,000 others who have signed this petition:

http://petitions.number10.gov.uk/emptythreat/

Liz Peace, chief executive of the British Property Federation, said: “This change will help only the very smallest property owners. The majority of small firms and all larger companies will continue to be damaged by the government’s ill-thought out taxation. This is a measure designed to help votes, not business.

“The chancellor said that this would help 70 per cent of properties, but buried in the small print is the revelation that this will only give back around £185m of the predicted £1bn hit to business. But the change is neither retrospective nor immediate. The smallest firms will somehow have to struggle on until next April.

“While there are 1.7 million properties liable to pay rates, this could include anything from a single room to a large shop. The regeneration of our deprived areas will continue to suffer and buildings will continue to be demolished.

“Our campaign has been supported by over 125 MPs, as well as large and small firms and a raft of public bodies. We will now step up our campaign to have empty rate relief re-instated and urge anyone affected to sign an online petition on the No 10 website.”

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 cant 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.”

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.”

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."

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.”

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.”

David Frost, director general of the British Chambers of Commerce, said:

“Businesses will wonder why he didn’t just restore empty property rate relief in full, instead of only raising the threshold for a year. Restoring relief in full would have provided the vital stimulus to the hard-hit construction industry.”

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.”

Keith Cooney, head of rating for agents Knight Frank commented:

“Only businesses with a rating assessment of £15,000 and under will qualify which excludes most of the assessments in London and the South East. At present the government already grants substantial relief to small businesses under the Small Business Rate Relief Scheme and so in reality it will have little impact.

"The existing scheme also recognises that London should have a higher qualifying threshold where it is increased from £15,000 to £21,500. We would call upon the government to help small business in London as well and increase the threshold for empty rate relief to £21,500.

“In reality the chancellor has effectively snubbed those most affected by the empty rate tax. These property owners have in many cases being the key drivers for developing and regenerating large parts of the country, bringing jobs and prosperity over the last decade."

Francis Salway, BPF president and chief executive of Land Securities, said:

“It is extremely disappointing. This is a tax on hardship that is bitterly opposed by every area of the business and regeneration community. It shows a failure to understand the realities of the property market and, at a time where government needs to be working with businesses and looking to help encourage regeneration, it sends out the wrong message and hampers the ability of business to help kick start the economy.”

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 Damesick, head of research at property advisers CB Richard Ellis, said:

“Empty rates impose a severe extra strain on many businesses with surplus property in a market facing weakening demand and rising vacancies. The decision to limit empty rates relief to small properties will be a major disappointment that leaves many struggling owners and tenants paying dearly for vacant property.

"The disfiguring blight of empty sites in towns and cities across the country will continue to spread as property owners act to avoid empty rates. Regeneration prospects will remain stifled by the deterrent to development that results from the risk of new properties suffering cost penalties while finding occupiers.”

For more info call the BPF on 020 7802 0113 or email ateacher@bpf.org.uk