The UK is in danger of losing its prized triple-A credit rating after Chancellor George Osborne revealed that Britain will break a central debt-cutting promise, it was claimed last night.
In the Autumn statement, Mr Osborne said weak growth meant he would be a year late in meeting a self-imposed target of seeing debt fall as a share of Britain’s national income by 2015/16.
Missing that goal is an embarrassment for Mr Osborne, who has staked his reputation on wiping out Britain’s deficit and cutting public debt.
Howard Archer, the chief UK and European economist at IHS Global Insight, said: “There has to be a very real danger that at least one of the credit rating agencies will strip the UK of its AAA rating over the coming weeks or months.
“While this would likely be seen as an embarrassment for the Government given the emphasis it has placed in the past on keeping the UK’s AAA rating we doubt that this would actually have a negative impact for the economy.
“There are so few countries left now with a AAA rating, that to lose it would not be the stigma or threat to market confidence that it would have been, say, a couple of years ago.”
However, there was a guarded welcome from senior figures in Yorkshire’s business community to a measure which aims to provide a shot in the arm for the hard-pressed commercial property sector.
In his Autumn Statement Mr Osborne said that the empty rate tax, which he said had “blighted development in towns and cities” would be suspended for new developers with a “long grace period” being introduced from October 2013.
Robert Brown, a Leeds-based specialist in rating services at Sanderson Weatherall, said yesterday: “This is a welcome move, albeit not before time.
“Empty rates have been thwarting speculative development for many years, particularly in northern cities and towns; indeed they have cast a resentful shadow across the horizon of property development since the recession began.
“It is unfortunate that developers must now wait a further 10 months before the benefits of this relief might be appreciated.
“Development in northern towns and cities has almost ground to a halt having been faced with a hopeless situation where they were expected to pay tax on an empty property which simultaneously failed to generate any revenue.
“While the Government must be applauded for finally removing this unjust barrier to growth, the delayed introduction of this measure will only postpone progress and growth and might, in fact slow down recovery with developers stalling completion to benefit from the relief.
“It is also unknown how this policy decision will complement the local rates retention agenda of the Localism Act, which aims to see local authorities keep some of the revenue generated from rates collected.”
Earlier this year, York Outer MP Julian Sturdy said the policy of forcing small firms to pay business rates on empty properties could hit the North hardest.
Mr Sturdy said the policy, which was introduced by Labour but continued by the coalition, was short-sighted.
Yesterday, Mr Sturdy thanked the Chancellor for the consideration that had been given to a report that he had compiled on empty property rates.
He added: “The move to give new build commercial properties an exemption from empty property rates will be a very welcome boost to the economy and will be much welcomed within the industry, but I also ask the Chancellor to keep the wider issue of empty property rates on existing buildings under review.”
However, Tim Bottrill, a partner at the Sheffield office of Knight Frank, said last night: “The Chancellor has largely ignored the property industry’s calls for reform of empty rates.
“This is despite commissioning a review which was supported by the industry.
“It is difficult to see how it can be justified that existing empty developments must pay full business rates, while new developments are exempt for 18 months.”