Pre-Budget submissions focus on empty property rates and development funding
Ahead of the Budget statement tomorrow, the British Property Federation together with the Local Government Association has called on the Chancellor to make it easier to get development schemes off the ground and to tackle what they describe as the UK’s £200bn infrastructure deficit.
The BPF and LGA want a series of measures to be taken, including the bringing forward and implementation of Tax Increment Financing powers, which enable the cost of building infrastructure to be paid for through the future extra taxes generated by a development.
BPF chief executive Liz Peace said that funding models such as Tax Increment Financing, and partnerships between local authorities and developers, were vital at a time when finance for development was in scarce supply. “But TIF and other government-backed initiatives aimed at stimulating new investment will only make an impact if the government is prepared to give local authorities and their private-sector partners the latitude they need,” she added. “The modest set of measures we and the LGA are proposing in this pre-Budget submission would do much to empower those with the ability to generate wealth and so get growth going in some of the country’s most challenging areas.”
The pre-Budget submission also calls for councils to be able to borrow against income from the Community Infrastructure Levy to fund projects, and for the government to make it easier to pool public-sector capital funding in a broad local area, to enable more co-ordinated infrastructure development.
Other key measures requested include the removal of “barriers to better use of public-sector assets for the purposes of generating infrastructure and economic development funding” and a drive to increase awareness among pension funds of the opportunities for investment in infrastructure.
The BPF has also continued to lobby the Chancellor for an end to empty rates, which it says has risen by more than 400% in total costs since 2006 – and by 900% in the market for industrial property, where empty rates relief had previously been absolute.
The federation, which has relaunched its campaign against what it calls the “Bombsite Britain tax”, says the tax has led to millions of square feet of empty property being demolished. It quotes IPD director Christopher Hedley as saying that in addition to the hardest-hit industrial sector, shopping centre properties appear to have been affected the most within the retail sector.
The BCSC, in its own pre-Budget submission, is also calling on the government to review the impact of its policy on empty rates relief as it is “of the strong view that the relief should be reintroduced”. It says the vacancy rates among available retail property have worsened as a result of empty property rates and have affected the value of retail property as an asset class “and thereby reduces its appeal to investors, who now, instead of investing in existing shopping centres or lending to developers may seek to target their funds elsewhere”.
It warns that the combination of lower rental income and additional taxation made it more likely that retail property landlords would default on their loan agreements with banks – including those in which the government has a significant interest.
The BCSC is also calling on the government to set the Uniform Business Rate multiplier for 2012-2013 in line with the Bank of England’s CPI target of 2%, rather than the RPI of September 2011, which at 5.6% was the highest in 20 years. “As you are well aware,” it adds, “this rate has already fallen to 3.9% as of January 2012”. In fact today it was announced that RPI had declined to 3.7% for February 2012.
The retail body is also proposing the creation of business rate exemption zones “in town and city centres where property owners are committed to regeneration schemes or significant redevelopment”.