Empty Property Rates (SMEs)

Debate between Julian Sturdy and Guto Bebb

Wednesday 11th January 2012 Westminster Hall

[Julian Sturdy]

I entirely agree with my hon. Friend. The six-month exemption period—indeed, it is only three months for retail premises, which is obviously even shorter—is incredibly burdensome for property owners. He is right that the short exemption period is difficult when marketing these properties and looking for new tenants.

We have to accept that there must be churn within the market. No one will ever say that we will get 100% of such properties filled up. Even in the best of times, we are perhaps talking about filling 80% to 85% of properties, and there must be that effective churn within the market to allow flexibility within businesses.

[Guto Bebb (Aberconwy) (Con)]

I congratulate my hon. Friend on securing this debate. The specific point about churn is crucial. In my constituency, there is a very successful small business park in the town of Conwy and its proprietor feels that he is being penalised, because he tried to develop an incubator unit-style approach. In effect, he is now being penalised because of the churn. He is providing a service to the local business community and allowing people to have easy options to come in and out of the business park, which is vital for new business development, but he is actually being penalised by the system.

[Julian Sturdy]

I entirely agree with my hon. Friend. He is absolutely right that we need the churn within the market to allow new investment and new businesses to start up. As I said in my initial remarks, there are unforeseen consequences to this measure and it seems to be a barrier to investment and regeneration within certain areas.

As I have already said, the British Property Federation has expressed such sentiments, and it is not alone in doing so. Ahead of the Budget last year, the TaxPayers Alliance urged the Chancellor to scrap this tax altogether. In addition, ahead of the pre-Budget report last year, almost 50 regional chief executives of the British Chambers of Commerce signed a letter to the Chancellor that highlighted the perverse consequences of the policy.

Sadly, nothing has happened and according to Government replies to my written questions on this matter, there are no plans in the short term to review the situation. Consequently, I want to focus the rest of my speech on three main points. If they are taken further, I firmly believe that the Minister will urge the Government to review their position sooner rather than later.

First, I have already outlined my concerns about the impact of empty property rates on small businesses in rural areas. In addition, I briefly want to discuss my fears about the specific impact that this tax has across the whole of the north of England. As a Member of Parliament for the north, I have always been interested in the economic north-south divide. My first question at Prime Minister’s questions was to ask the Prime Minister specifically about that gap. After all, it is statistically the case that the economic divide between the north and south of England actually increased during Labour’s rule.

On many fronts, the coalition should be commended for its introduction of the regional growth fund and local enterprise partnerships, which are specifically aimed at addressing regional imbalances. However, such positive measures run the risk of being undermined if negative policies, such as empty property rates, are allowed to strangle many SMEs in the north.

Recently, Horncastle Group—a property developer based in Yorkshire—wrote to me about that issue. Its chairman, Mr Andrew Horncastle, has been lobbying against this regressive taxation for years. Discussing the issue with me, Mr Horncastle said:

“This empty rates property tax is a tax on failure, and as such it discriminates between the prosperous south and hits weaker regions, particularly in the north. It is a short-sighted, ill-thought through socialist-style tax grab, and it does not sit in any proper growth strategy.”

Frankly, I could not agree more with those comments. Those areas that are directly outside new enterprise zones will be hit further by this form of regressive taxation. At a time when we are genuinely attempting to rebuild and rebalance our northern economies, it seems somewhat foolish that we are continuing to operate such negative rates on empty properties.

Secondly, I fear that empty property rates carry with them unintended consequences. A number of Members have already touched on this issue. In 2009, the Royal Institution of Chartered Surveyors showed that empty property rates are the key driver behind decisions to demolish empty properties and they act as a barrier to investment in new property. Likewise, with an increased work load—owing to the higher vacancy rates—the cost of administering this tax within local authorities has already started to mount. Demolitions, higher administrative costs, additional financial demands on small businesses and a stagnating commercial property and flexible space sector are the consequences of this regressive policy.

My third point relates to the very simple principle of fairness. My right hon. Friend, the Prime Minister, has himself talked passionately and genuinely about “enemies of enterprise” that act as unnecessary hurdles for entrepreneurs and SMEs. The empty property tax is a perfect example of an enemy of enterprise. For a country targeting a private sector-led recovery, it is not right that such rates are imposed upon the very small businesses whose success we are counting upon. Indeed, it is not only not right; it is not fair. I believe passionately that no Conservative would view the policy as being desirable or fair.

Actions speak louder than words, and if we admit that something is wrong but fail to reform it, we are badly letting down all those who are affected by it. I also firmly believe that any cost of tackling empty property rates would be far outweighed by the investment in premises, jobs and training that would follow in a rejuvenated market.