Ways and Means

If I may pre-empt the Chancellor and beg the House’s indulgence, I would like to congratulate the Economic Secretary on his inevitable promotion in approximately seven weeks’ time. It is a pleasure to follow my hon. Friend the Member for St. Albans (Anne Main) and, indeed, my hon. Friend the Member for Salisbury (Robert Key). They were perhaps far too polite to state the obvious and place this particular proposal in context by observing that it is one of 111 stealth taxes that the Government have imposed over the past 10 years. It represents the big clunking fist approach to commercial property, and we are no doubt going to see a lot more of it over the next few years. This proposal has all the characteristics of the stealth taxes that we have learned to know and love. It is a consummate stealth tax because it is typical of the sleight-of-hand taxes that we have become used to over the past 10 years. It is sneaky. It has been announced only in the last few months, but its effects will not come into force until April 2008. Of course, it does not appear in the Finance Bill, but has been brought before the House through a Ways and Means resolution. It is also ill considered and damaging, and, as my hon. Friend the Member for Salisbury eloquently explained, it will have unintended consequences. It is indeed, as my hon. Friend the Member for St. Albans said, a straightforward tax grab, netting the Treasury £1.85 billion over the next two years. The proposal is, of course, dressed up in euphemistic language, when it is described as modernising empty property relief. That is rather like the Prime Minister saying that Labour’s local government election results were a springboard for a general election victory, when we all know that it was more like a belly-flop. We can see a dichotomy in the Government’s treatment of private and commercial property. This is a Government who have entrenched the principle of holding capital by way of property—forgive me if I sound rather like the right hon. Member for Oldham, West and Royton (Mr. Meacher), who is the Minister’s parliamentary neighbour—when foreign nationals who are non-domiciled in this country own huge portfolios of property, which are left empty while people are left homeless and more people than ever before in the past 10 years are on waiting lists or in bed-and-breakfast accommodation. There are 6,000 of those people in my own constituency. At the same time, the Government seek to penalise and disadvantage British business people with this particular tax grab. As I said when I intervened on my hon. Friend the Member for Surrey Heath (Michael Gove), this has been a £50 billion tax grab over the past 10 years, and there has been no corresponding offsetting tax reduction, as expounded by the Treasury. Indeed, small businesses took a significant hit in tax increases in the Budget. The proposal will have the effect of pushing up existing business rents and adding to inflationary pressures. It will distort the commercial property market by driving up service charges as well as rents, as a result of businesses quite properly attempting to recover empty rates. The Royal Institution of Chartered Surveyors describes the proposal as"““purely a revenue raising exercise with no thought of the potential consequences””." The measure will also inevitably lead to a rise in on-costs in respect of rating appeals and valuation tribunal cases. That will incur significant costs across the economy. A further consequence will be a policy of deliberately damaging buildings, as my hon. Friend the Member for St. Albans pointed out. Of course, we would not condone that, but we have to accept that it happens. It will be an unintended consequence of this tax policy. The policy demonstrates a fundamental ignorance of the fluctuations and cycles of the commercial property market. No business wants to keep a commercial property empty, but the mechanisms and vagaries of supply and demand mean that it is an inevitable feature of the market that, owing to commercial considerations or to reasons such as time lag, some properties will sometimes be empty. The policy will do nothing to encourage local regeneration. I know that that is a subject dear to the heart of the Minister for Local Government. It was interesting that the Economic Secretary skipped past my direct question about the consultation to ascertain whether regional development agencies and urban regeneration companies wholly supported the proposals. The corollary of this policy is that entrepreneurs will take far fewer risks when investing in difficult areas—areas that find it difficult to attract niche entrepreneurs—which will affect the creation of jobs, businesses and, obviously, the tax take for the Treasury. In 2005, the business rates revaluation penalised small, medium and large business by tightening the grounds for appeal and decreasing the reduction in rate bills for firms whose rateable value had fallen. That was another typical sleight-of-hand policy. The Government are ignoring the underlying factors relating to the fact that some commercial premises are sometimes empty for longer than is desirable. This can happen, for example, as a result of restrictive alienation clauses preventing sub-letting or assignment. I do not think that the Minister mentioned that, although I might have missed it.