Property rates ‘strangling small businesses’, says MP

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FORCING small firms to pay business rates on empty properties risks hitting the north hardest and undermining efforts to rebalance the economy, an MP has warned.

York Outer MP Julian Sturdy said he agreed with a Yorkshire developer that the policy – introduced by Labour but continued by the coalition – was “a short-sighted, ill-thought through socialist-style tax grab”.

Penalising property owners who cannot rent out commercial buildings because of the state of the economy was a “recipe for economic stagnation”, he told Ministers.

“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,” said Mr Sturdy.

“However, such positive measures run the risk of being undermined if negative policies, such as empty property rates, are allowed to strangle many small and medium enterprises in the north.”

Until 2008, businesses enjoyed either 50 per cent or 100 per cent relief from business rates on empty buildings, but that was abolished by Labour in an attempt to encourage companies to get property back into use.

However, because of the recession, empty properties with a rateable value of less than £18,000 were exempt from rates for up to six months until last April. That threshold has now been cut to £2,600, saving about £400m.

The move has hit businesses unable to rent out buildings because of the state of the economy, such as farmers who converted outbuildings into small business premises in an attempt to diversify but who have seen their tenants downsize and move out.

In a Westminster debate, Mr Sturdy quoted the chairman of East Yorkshire-based developer Horncastle Group who told him: “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.”

Mr Sturdy said he “could not agree more with those comments” and called for a “fundamental review” of policy.

Local Government Minister Andrew Stunell acknowledged small businesses will play an important role in building a sustainable economy but said the Government has little choice.

He said: “The Government fully understand and appreciate that ratepayers would like us to undo the previous Government’s so-called reforms, or to continue with the temporary measures, but our ability to take action needs to be balanced against the very high costs involved.

“We are, however, also providing targeted support on business rates, and there is an overriding need to reduce public expenditure and support the economy generally by reducing the deficit.”