Ways and Means

I beg to move,"That provision may be made for and in connection with the liability of owners of unoccupied hereditaments to a non-domestic rate." This motion precedes a Bill being introduced to the House that will take forward recommendations made by Kate Barker and Sir Michael Lyons that the Government bring the rating of empty commercial property into the 21st century. As my right hon. Friend the Chancellor announced on Budget day, this reform has environmental, social and economic merits. Any Member who supports the continued regeneration of urban areas, the use of brownfield sites for developments to meet both our housing and commercial property needs, and the abolition of distortions in the tax system that artificially hold rents up and apply unwarranted costs to business, will want to join me in supporting the motion. Perhaps it is worth setting out why Kate Barker and Sir Michael Lyons both considered reform of the rating of empty property to be important. Currently, a commercial property is subject to full business rates when it is occupied but is given relief when it is empty. Different types of property get more or less relief when they are empty. Shops and offices have full relief for three months after they fall empty and then 50 per cent. relief ad infinitum. On the other hand, industrial property enjoys complete relief for as long as the premises are empty. This distinction between the relief given to different types of property—which is, in fact, a very large form of state aid—has its history in the depressions of the 1970s and 1980s, when demand for industrial premises was low and demand from alternative users for such land was also low. Two important things have changed since that distinction was drawn into the legislation. First, after a decade of sustained growth the demand for, and price of, land has increased dramatically, placing a burden on both households and businesses needing to access property. Efficient land use, and in particular the use of brownfield land to protect greenfield sites, has become a key priority for the Government. Tax relief for empty property—currently worth more than £1.3 billion—needs to be considered in this light. Secondly, and as a direct result of this increased pressure on land, the Government asked Kate Barker to consider the incentives for efficient land use in her assessment of planning and land use. As part of her analysis, Barker found that the current empty property reliefs are not aligned with risks—there is little difference between the risks of different types of property falling empty. On that basis, the different tax treatments afforded to different types of property do not reflect real conditions in the market and are therefore creating a distortion. On those grounds alone there is reason enough for Barker to propose reform, but the data become more startling when we look at where the tax relief is going. Sunderland, Redcar and Alnwick were each listed in the top 10 authorities with the lowest proportion of their commercial property stock claiming relief, while the City, Manchester and Birmingham are all in the top 10 authorities with property claiming relief. Clearly, land is not in such over-supply in those parts of the country that we should be offering tax relief to property that is not in use—and in doing so shift the burden of taxation on to other taxpayers.