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Empty Properties

Volume 480: debated on Tuesday 14 October 2008

3. What assessment she has made of the effects of changes in empty property business rates on the property market. (226338)

We published an impact assessment of the empty property reforms in May 2007 alongside the primary legislation. On 26 February this year, I laid a further assessment before the House, alongside the regulations.

I thank the Minister for that answer, but he will be aware that since February this year there has been a slump in the economy and that commercial property vacancies have risen. The Secretary of State hinted that she would again consider the policy of empty property business rate relief. Would the Minister care to say whether the Government are now doing that?

I welcome the hon. Gentleman’s interest in this issue, although he has not raised it with me before. As he would expect, we are assessing how the reforms are working, as we do with all taxes. As it happens, my lead official is a constituent of his; I have asked that official to keep a particularly close eye on any developments in Wimbledon.

In my local area the economy has also taken a downturn. Although I welcome the empty business property reliefs as a measure for putting such buildings back into use, at the moment the business community is saddled with empty properties that it cannot develop and sell. Will the Minister consider the matter again urgently?

My hon. Friend is right; the rationale for the change was to encourage more property owners to resell, redevelop or re-let more rapidly and to avoid the situation of the taxpayer funding to the tune of £1.3 billion a year owners whose properties were empty. Clearly, owners’ circumstances and the reasons why properties lie empty vary, but as my hon. Friend would expect, we are looking closely at the issue, with local government and the Valuation Office Agency. We want to see how this is working in practice.

The Minister will know that many of those empty commercial properties are owned by small businesses. Bearing in mind the Chancellor’s remarks about helping small businesses, will the Minister urge the Chancellor to give special relief to small businesses in respect of this matter, to help them over the difficult two or three years to come?

I have had representations and heard arguments from virtually every area, sector and type of organisation that they should be considered a special case. When we introduced the changes to empty property relief we decided not to go down that road. We are watching carefully how the process is working and trying to assess its impact, but it is difficult to do so while disentangling it from the general economic changes. We are looking at the matter closely, and my right hon. Friend the Chancellor and every member of the Government are concerned about the position of small firms at this time, and to see that the Government do all that they can to help them through this difficult period.

Empty property rate relief was introduced in entirely different financial circumstances, so will my hon. Friend not at least consider relaxing the rules during the economic downturn in order to prevent the wholesale demolition of perfectly good industrial premises, particularly the old cotton mills of the north-west of England?

There is not systematic evidence of what my hon. Friend describes as wholesale demolition of empty business properties. Some examples have been thrown up by local councils and the British Property Federation. We are looking at those as part of the general picture on how the changes are working, and will take them into account. As we do so, we will take any necessary decisions. I do not want to raise expectations, but those who followed the legislation will know that there is provision for the Government to reduce the level of the tax, should it be required, and introduce a level of relief. However, we are looking carefully at how the process is working and we will continue to do so with the Valuation Office Agency and with local government.

I congratulate the Minister on his appointment to the Privy Council, which I am sure we all regard as well deserved. That said, perhaps he would like to reflect on the following. He says that representations against the current situation are widespread. His colleague, the Secretary of State, is reported in the Local Government Chronicle as observing that the tax is no longer hitting the right buttons. This initiative was brought in by the Prime Minister when he was Chancellor. Is it not time to recognise that it has created unexpected and perverse incentives? For example, a council such as Swindon would be out of pocket on regeneration sites to the tune of £110,000 if it does not demolish. Does the Minister accept that figures provided by two of the leading property companies show that they are demolishing more already this year than they did in the whole of last year? Does the Secretary of State not need to reflect that the Government mucked up on this one? What is wanted is not a study or an impact assessment but some action.

I thank the hon. Gentleman for his kind remarks—I knew that they could not last, but I appreciate them.

I say to the hon. Gentleman and the property companies that he cited that we would welcome any information or evidence that they wish to submit to us. We are in discussion with the main property companies and associations, just as we are with local government. Because it is still early days, we are assessing how the empty property relief changes may have worked. We are doing so in the context of a changing economy, and we will bear all of that in mind as we continue to do that work.

Thanet has far higher than average unemployment, and I can tell my hon. Friend that this policy, which was devised in different times and for different circumstances, is having a perverse effect in our area. Developers are talking about demolition, and the possibility of speculative build is absolutely zero at present. I would like to add my voice to those calling for general action on this issue, but if my hon. Friend is not able to take action everywhere in the country, could he at least look at some sort of abatement for areas of high unemployment or assisted areas, where we are suffering more than normal?

My hon. Friend will be aware that in assisted areas we introduced 100 per cent. capital allowances for the renovation and reuse of commercial property, and we did so a year ahead of the changes to the empty property relief. We are conscious of the position that slower markets, shall we say, and more disadvantaged areas may be in.

I accept my hon. Friend’s representations, but the liability on empty properties for business rates is not new—it was introduced by the Local Government Act 1966. It is important for the Government to decide how best to target and deploy resources, particularly in circumstances where economic conditions are difficult. These changes meant that we reduced by almost £1 billion the liability to other taxpayers of supporting the owners of empty property to keep such property empty. We have not removed the relief altogether; we have reduced the period, in order to encourage them to resell, re-let or redevelop more rapidly.