Rating (Empty Properties) Act 2007

I wish to draw the Government's attention to the no doubt unintended consequences of the Rating (Empty Properties) Act 2007, which came into force in April this year, and put a number of companies in Sunderland out of business. There is no reason to suppose that its impact will be confined to Sunderland, and indeed, if the British Chambers of Commerce is to be believed, the impact on jobs and business is likely to be widespread. The fact that the economy now appears to be in downturn will only make matters worse. The measure was drawn up by two extremely clever people—Kate Barker and Sir Michael Lyons—at the Treasury's behest. No disrespect to the Minister, but it is a pity that no Treasury Minister is here to account for the consequences—so often the Treasury is omnipresent, and yet absent. The aim was laudable: to give businesses an incentive to maximise the use of their premises and perhaps to lower rents by forcing on to the market properties otherwise being kept idle. That presumed that there would be takers for properties thus forced on to the market, but Sir Michael, Miss Barker and their masters at the Treasury appear to have overlooked the possibility that in areas such as the one that I represent, where a huge swathe of traditional industry has disappeared, there is little or no market for some of the vast industrial premises currently lying idle. Those responsible cannot say that they were not warned. In response to the Government's consultation last autumn, One NorthEast, the regional development agency, described the reforms as a ““very blunt instrument”” that would"““adversely affect what is a fragile regional property market””." Also in response to the consultation, the North East chamber of commerce disagreed with the premise that commercial properties deliberately left unoccupied represented a significant barrier to growth in the north-east. It spoke of the ““serious impact”” that the reforms were likely to have if applied across the board. Nevertheless, the Government chose, with minor adjustments, to go ahead, and the consequences are plain for all to see. Pallion Engineering is a company based in the old Pallion shipyard in Sunderland, and faced an overnight increase in business rate from £55,000 to £277,000. It employs 10 people and rents space to a number of other companies that, between them, employ up to 200 people on a vast site that once employed several thousand. Obviously, an increase in rate demand of the type that I just described will put the company out of business, at a time when it had hopes of attracting subcontracts for the recently commissioned warships. The only impact will be the loss of up to 200 jobs and revenue of up to £55,000 a year, and the odds are that the site will be derelict for many years. Is that what the Government intended? WH Forster, a print company, offers another example from Sunderland. It employs about 100 people at sites in Sunderland and Gateshead and is faced with an increase in rates from less than £10,000 to £105,000 on premises that it owns in Washington, which it is unable to sell, and which is only about one-third tenanted. It is also trying to sell its existing premises with a view to consolidating on to one site. It has been on the market for three years, but so far there have been no takers. The only impact of this penal increase in rates will be to threaten the survival of a business that has been built up over 50 years. My attention has also been drawn to SST Engineering, which is a small fabrication business set up only last year that employs just seven people, but with the strong prospect of expansion. It is exactly the sort of business that we should be seeking to encourage. Currently, it uses only one of the three bays on the premises that it rents on the Sunderland enterprise park. When it was set up, it was given to understand that it faced a business rate bill of about £16,000 a year, but now it has been told that it is likely to be about three times that amount. The impact will be ruinous. I first drew this situation to Ministers' attention in mid-April. Not unnaturally, I wrote to the Treasury, but the response came from the Minister here, who advised that local authorities had discretion to delay the imposition of the new rates for up to six months, to spread the cost over 12 months, instead of 10, and to offer 100 per cent. relief in cases of particular hardship. I went back to my local authority, which said that that was not so, and that the most that it was permitted to offer under the constraints of European law was 10 per cent. relief, which in the cases of the companies to which I just referred would make no practical difference. I wrote again to the Minister, on 16 May, and in the hope of generating an air of urgency I copied the letter to the Prime Minister's parliamentary private secretary and to the Minister for the North East, my right hon. Friend the Member for Newcastle upon Tyne, East and Wallsend (Mr. Brown). One month later, I received a reply from the Minister for Local Government, my hon. Friend the Member for Wentworth (John Healey). It was apparent from his reply that the Government are in denial. The threefold increase faced by the small engineering company, to which I referred earlier, was described as a"““private contractual matter between landlord and tenant””." There was a paragraph of nonsense about how unhappy businesses have a right to appeal and a reference to section 49 of Local Government Act 1988, which permits relief in exceptional circumstances and which, I am advised by my local authority, is of no relevance in the cases that I have mentioned. Finally, it was suggested that the bill could be spread over 12 months, instead of 10, to"““relieve any cash flow difficulties””." At that point, it became apparent that I would have to raise the matter publicly if we were to stand any chance of breaking through the wall of complacency that I have so far encountered. I have since discussed the matter with the Secretary of State for Communities and Local Government, my right hon. Friend the Member for Salford (Hazel Blears), who showed every sign of grasping the seriousness of this situation. Incidentally, I would be surprised if the consequences that I have outlined are confined to Sunderland and the north-east. Only this morning, my attention was drawn to the case of a warehouse business in north London facing insolvency as a result of this legislation. According to the British Property Federation, it will also have an adverse impact on regeneration schemes, because no one will build speculatively if they face the added risk of being taxed on an empty building. The way forward is clear: one way or another, local authorities must be given the discretion to apply common sense and relieve rates on unused and underused property. If disaster is to be averted, that will need to be done quickly, because the bills have already been sent out and the court orders for non-payment are already being applied for. I understand that the Government had the foresight to give themselves a reserve power to permit local authorities to relieve 50 per cent. of the new charge in the event of an economic downturn, which undoubtedly would help were it to be called upon. However, in some of the cases that I have mentioned, it will not be sufficient. The Government will want to consider giving local authorities the discretion to remit the whole charge if there is a strong case for doing so. That is what I hope the Minister will say today. What I am hoping to hear from him is that the Government have finally grasped the nettle and will take action before people start turning up in our surgeries, accusing us of putting them out of work.