London tax penalties 'harm North businesses'
Oct 21 2008 by Ben Guy, The Journal
NORTH East firms are being put at risk by crippling tax rises amid an economic downturn, say businesspeople.
The North East Chamber of Commerce (NECC) said companies and developments were being stifled by rates on empty property which have added tens of thousands to tax bills after being introduced earlier this year by ministers.
Firms face having to cut investment or jobs or go into administration because of huge rises in tax bills, according to a briefing being sent to MPs by the NECC.
It said: “The feedback NECC has received from members so far is unanimous – the danger posed to businesses and livelihoods in the North East by empty property rates is very serious and already unfolding.
“And it will make any recovery from the economic downturn more difficult to achieve.”
NECC head of policy Ross Smith said ministers hoped the measure would encourage more properties on to the market, but it had led to an increase in demolitions by desperate companies.
“We want to see it either cut back or removed completely as soon as possible,” he said.
The NECC has also revealed one developer in the Tyne Bridge area has incurred additional annual costs of £500,000 on a major office scheme because of the tax.
And another company cancelled two big developments last year and expects to slash two other schemes by half. Sunderland South MP Chris Mullin has directly warned ministers in Parliament about the “potentially devastating” impact of the new tax.
The Labour MP has highlighted how companies in the region could suffer, with tax bills rising by huge amounts – including print company WH Forster.
Last night, the company managing director Malcolm Gray said it wanted to “consolidate” sites in Sunderland and Gateshead to a location in Washington.
He said this was important to cut costs and maintain the company – which has 95 staff – amid the economic downturn and it hoped to expand in the future.
It rents the Gateshead base, but has been unable to lease or sell its Sunderland site and its Washington location is standing empty.
The firm’s property rates bill now stands at about £230,000 – money Mr Gray says could have gone into new machinery.
He said: “It was a tax presumably designed for wealthy areas in London to stop people sitting on property and leaving them empty while accumulating in value.
“But it is ill-conceived because there are plenty of other places in the country where it is badly hitting industry. It is just stopping development.”
Speaking in the Commons, Local Government Minister John Healey has said the Government is assessing how the reforms are working.
He said the measures were designed to end an effective taxpayer annual subsidy of £1.3bn to owners of empty property.
He added the Government could lower the tax and introduce relief, but stressed he did not want to raise expectations.