Empty Property Rates (SMEs)

Gavin Williamson Excerpts

Wednesday 11th January 2012 Westminster Hall

[Julian Sturdy (York Outer) (Con)]

It is a privilege to be granted time to hold this debate here today and to serve under your chairmanship, Mr Davies. As all Members present know, the rating of empty properties is a contentious and sensitive issue.

Let me start by outlining the situation of a couple of farmers in my constituency who have lived and worked on their land for decades. After the previous Government strongly encouraged them to diversify their land, they decided to develop a couple of small business premises to rent out to local entrepreneurs and small and medium-sized enterprises. They undertook substantial developments and put tenants in place. The future looked bright until the financial crisis broke and the recession hit. As a result of the subsequent turmoil in the financial market, many of my constituents’ tenants were forced to downsize and move out. In some unfortunate cases, their tenants’ small businesses collapsed, as bank lending sadly dried up. The limited three or six-month exemption from empty property rates has now expired, with the threshold returning to its original £2,600 level. As a result, my constituents now face bills totalling thousands of pounds.

Like all rational and sensible politicians, I have a great deal of sympathy for my constituents. In a letter to me, they said:

“We have worked hard all our lives to get what we have today... the price we are paying now is the price of progress and it is like a lump of concrete around our necks.”

One of my core principles in life is that every person has the absolute right to aspire and achieve without unfair burdens being placed on their shoulders.

In the current economic climate, our inherited policy of rating empty properties is unfair. We seriously run the risk of driving small business men and women into the ground, particularly in rural areas, where a number of small retail and commercial properties have been developed on diversified land. The owners are not wealthy property tycoons and often possess only limited experience of property management. It is wrong to believe that every property owner can take the hit of tax on empty properties; many simply cannot. To lay the blame for such a situation at the door of the coalition Government is entirely foolish and short-sighted.

[Gavin Williamson (South Staffordshire) (Con)]

I congratulate my hon. Friend on securing this debate. I must declare an interest as outlined in the Register of Members’ Financial Interests. Does my hon. Friend agree that the previous Government introduced this scheme with the good intention of ensuring that all redundant properties were redeveloped? However, it has been an incredibly blunt instrument, and with the economic downturn, it has effectively caused chaos for many small investors. We need to consider a more subtle approach to encourage the regeneration of areas.

[Julian Sturdy]

As my hon. Friend has said, the scheme is a blunt instrument that has had unforeseen consequences. It is also a barrier to investment and regeneration, which particularly affects the north, but I will go on to that point later in my speech.

The previous Labour Government reformed the empty non-domestic property rate relief in 2007 in an alleged attempt to encourage more commercial properties to be brought back into use throughout the supposedly never-ending boom years. The Rating (Empty Properties) Act 2007 increased rates on empty properties from 50% to 100% of their occupied rate. It also removed the exemption for storage and industrial premises, which was recommended by Kate Barker and Sir Michael Lyons in their independent review ahead of the 2007 Budget. As one would expect, the plans were controversial at the time. It was said that the 2007 Act would lead to constructive vandalism. However, the vast majority of property owners would not deliberately hold back empty properties from the marketplace. If I had been an MP at the time, I would have said that such properties were most often empty as a result of the poor planning system or a simple lack of demand for commercial properties within specific locations.

Appreciating that the new policy introduced unnecessary burdens on businesses in recessionary times, the pre-Budget report of November 2008 outlined a temporary increase to the threshold for exemption from such rates to £15,000 and then later to £18,000 for a two-year period. That provided much-needed relief for many affected individuals and was greatly appreciated. The Business Centre Association estimates that that measure saved its members about £10 million. However, the problem has returned. On 1 April 2011, the empty property threshold returned to £2,600, which is a remarkable and dramatic drop from the temporary £18,000 figure.

As a loyal supporter of the coalition, I appreciate that the Government cannot afford to tackle every issue and reduce the vast deficit simultaneously. Furthermore, I understand that some issues must take priority over others. I accept that the reckless economic legacy of the previous Government has largely tied our hands. Thankfully, though, this Government are intent on spending only what they can afford, and long may that approach continue.

The previous Government are responsible not only for the creation of the empty property tax rates, which they designed and implemented, but for the inflexibility of the coalition’s fiscal options. Having to spend £120 million a day to pay off our country’s debt interest payments hinders the present Government’s ability to reform as broadly as they might otherwise do. None the less, empty property rates should be higher on the Minister’s list of priorities.

Property owners in rural villages across the country are beginning to be hurt by this policy. They now feel let down by successive Governments. Such sentiments have been summed up well by Liz Peace, chief executive of the British Property Federation, who said:

“If the Government is pinning its hopes on a private-sector led recovery, then this is a damaging and retrograde step. Empty rates are a tax on hardship at the worst possible time. The majority of the properties affected by this announcement will be in areas which are already economically disadvantaged, and so this will be a further blow.”