Government and Mandelson are accused of being ‘detached from reality’ over tax

The British Property Federation (BPF), is leading the lobbying campaign against the stealth tax, saying empty rates were like making the unemployed pay income tax because vacant properties earn no income and to add insult to injury Business Secretary Lord Mandelson has caused uproar after claiming that the ‘bombsite Britain’ tax on empty commercial property was somehow ‘good news for tenants’.

Small businesses and trade bodies have erupted in anger at his comments, saying Mandelson is ‘detached from reality’, while a host more MPs have come out in support of the British Property Federation’s national campaign. Mandelson said: “I don’t think now is the time to bring back the business rate relief on empty properties, as I believe this can benefit small businesses. Landlords are more likely to bring down rental prices if they are looking to find new tenants quickly, which is good news for tenants.”

John Beswick, a village post office owner in rural Lincolnshire, said: “Mandelson is detached from reality. If businesses fail, the last thing they need is to have a rates problem too. Where there’s no demand, there’s simply no demand and even reducing rents as he suggests won’t change that. It’s doing massive damage, particularly to post offices closed under the network change scheme. The government is closing people’s post offices and leaving with them huge empty rates bills when they cannot sell or re-let the space.”

The cut in empty business rate relief for offices, shops and warehouses was made by Gordon Brown last year and came in from April 2008 to raise £1.3bn. Since April, landlords have been flattening buildings to avoid ruin, giving it the name ‘bombsite Britain tax’. Businesses tied to leases, unable to demolish buildings they don’t own, have had to lay off people or saddle themselves with more debt to pay the tax.

Conveniently, Brown’s own constituency isn’t affected, as the legislation does not apply in Scotland. Liz Peace, chief executive of the British Property Federation, said: “This is the equivalent of the property poll tax. It’s worrying that people running the country have such fundamental misunderstandings of how business works. You can’t tax something earning no money and expect that to conjure up tenants when demand is falling through the floor. We call on more MPs to sign to Early Day Motion to scrap empty rates.”

John Wright, national chairman of the Federation of Small Businesses, said: “There is currently no way out for those tied to a lease or who own a building they cannot let. It is unfair that, at a time when they need the most help, businesses are being hit with a tax on properties that earn no income.” Chris Mullin, MP for Sunderland South, said: “I hope the government moves swiftly; otherwise we shall have a disaster on our hands. I am aware of several companies in Sunderland who may be forced out of business unless common sense prevails. It will also deal a blow to regeneration efforts in the North East since no one is going to develop new business premises on a speculative basis.”

Before the rate relief was removed, empty retail and office space received full relief for three months and 50 percent thereafter, while industrial space (warehouses and factories) received full relief permanently. Since April 1, 2008, retail and office space pay full rates after three months’ grace. Industrial space is now charged full rates after six months’ grace.

The BPF has been campaigning for this relief to be reintroduced, a position supported by the likes of the CBI, RICS, the British Retail Consortium (BRC), British Chamber of Commerce and over 120 MPs from an arrangement of parties.