Commercial Property

Gavin Williamson Excerpts

Wednesday 17th November 2010 Westminster Hall

[Mark Pawsey (Rugby) (Con)]

Before making my remarks, I first declare an interest as set out in the Register of Members’ Financial Interests.

I want to draw attention to the position faced by a constituent of mine, Mr Peter Summers, who visited my surgery a few weeks ago. For many years, Mr Summers operated a business supplying tyres from an industrial unit he had purchased. At 67, he sold his business but retained the premises, and invested in a personal pension fund. He spent some money refurbishing the building, and let it in 2005 at an annual rental of £35,000. In 2008, the tenant occupying the building went into liquidation and vacated the premises, leaving Mr Summers with some arrears and reinstatement costs of some £3,500, but since then he has been unable to find a new tenant.

In respect of the liability to business rates, Mr Summers enjoyed a period of transition for the first six months, from April 2008 to September 2008, but since then he has incurred a significant sum in business rates. In the six-month period from 30 September 2008 to 1 April 2009, he paid £8,628. For 2009-10, he paid full-year rates of £18,066, and for the current year he has paid £16,071. Over that period of two and a half years, during which he has received no services, his total expenditure has been £42,776. At a time when Mr Summers might have expected to contribute £35,000 a year to his pension fund, he has paid net outgoings of £18,000 a year, a difference of £53,000 per annum.

People such as Mr Summers recognise, in holding commercial property as an investment, that by virtue of the economic cycle, which can go up and down, there will be times when such a property may be vacant and there will be no income. Most investors in property must live with that fact. Mr Summers is prepared to live with it, but it strikes me as unfair that in addition to the loss of rental income, he must now bear a further loss in paying business rates when he cannot meet the sum from his income. He is effectively paying for services he is not receiving. He now faces the prospect of selling his industrial unit in a distressed market where prices have been forced down. The downward pressure has been caused partly by other investors’ concern that if they buy the property, they will be liable for the vacant business rate. Mr Summers came to see me to ask for my support in lobbying the Minister to rectify the position, which I believe is inherently unfair. I advised him that I was happy to do so.

The situation arose in consequence of a change to empty property rate relief that took effect in April 2008. For decades until then, the Government had helped struggling businesses through empty property rate relief. Shops and offices received an allowance of 100% relief initially and 50% thereafter, and owners of empty factories and warehouses received a 100% permanent exemption. The Government’s intention in reducing empty property rate relief was to provide incentives to bring vacant premises into use by encouraging rents downward. The change was intended to encourage property owners to re-let, redevelop or sell empty non-domestic buildings and improve competitiveness for all businesses, including small and medium-sized enterprises, in terms of property costs.

[Gavin Williamson (South Staffordshire) (Con)]

I declare an interest as outlined in the Register of Members’ Financial Interests. Has my hon. Friend found, as I have, that the changes, combined with the difficult market conditions, mean that speculative development of office or manufacturing property has stopped? Many small manufacturing businesses are concerned about expanding or taking on extra premises, because if the market weakens, they might end up paying rates on empty properties.

[Mark Pawsey]

I thank my hon. Friend for that contribution. I will make that point later in my remarks.

On the Government’s original intentions, they recognised some difficulty with the proposals, and the position was changed slightly in the November 2008 Budget report to exempt from business rates commercial and industrial properties with a rateable value of less than £15,000. Regrettably, that is below the value of Mr Summers’s property.