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If the amendment’s intention is to make something a little more palatable for the other place, it should be resisted. Term limits do not make sense in the British political system. We are actually saying that we will limit and restrict the ability of Londoners to choose whom they want to be their Mayor. We are singling out this one office, of all other elected offices in this country, and saying that term limits should apply to it. In trying to make things more palatable for the other place, the amendment seems to be an attempt simply to gild what is already an extremely unpalatable pill.
Baroness Andrews: My Lords, it is salutary for my noble friend to realise that when he misses a stage in our proceedings, all sorts of things go wrong. I hope that he will be faithful and stick with the Bill until the end. I am sorry to disappoint the noble Baroness. We heard another eloquent speech from my noble friend Lord Graham of Edmonton, who was forensic in setting out the arguments on the amendment debated last week and the one before us today.
We resist the amendment. The principle is clear; it is fundamental. Londoners should be free to decide who should be their Mayor. There should be no limit on the number of terms of office a Mayor can serve. That principle was supported by the Conservative spokesman in the other place and reiterated in an Early Day Motion. The Government stand by their principles.
Last week, the Conservatives and Liberal Democrats joined forces to disqualify anyone who has been Mayor twice from standing again for that office. We were told that if he held office for more than two terms, he might become disparaging of and disconnected from the electorate. We were assured that term limits were about the position, not the person. I warned your Lordships, more in sorrow than in anger, that no matter what the avowed intention of those who tabled the amendment—and I pay tribute to their integrity—it would be seen as nothing more than a back-door way of stopping Ken Livingstone from standing again for a third term and of denying Londoners the right to choose for themselves who should be their Mayor. So it turned out. Noble Lords did not listen to my warnings; they have only to read the Evening Standard of 21 June to see that argument displayed in full colour.
As the noble Baroness, Lady Hamwee, anticipated, the Government will certainly come back to this issue when the Bill returns to the other place. As my noble friend Lord Harris said, Amendment No. 94 is an attempt to redeem the situation but without conceding that to interfere in the democratic process is wrong in principle. This amendment, like its flawed predecessor, would allow the Secretary of State to commence provisions on the two-term limit at different times in the case of the current Mayor and other persons and graciously allow the current Mayor to stand for a third term in next year’s mayoral
26 Jun 2007 : Column 573
There are no convincing arguments in favour of term limits in British politics. It represents a break with our democratic tradition sufficient for the honourable Member for Surrey Heath, Michael Gove, to say:
“I hope I have made it clear that we do not believe in term limits in principle or for the Mayor of London”.—[Official Report, Commons Greater London Authority Bill Public Bill Committee, 18/1/07; col. 331.]
I could not agree more. The amendment is wholly unacceptable to the Government and I ask the noble Baroness to withdraw it.
Baroness Hamwee: My Lords, I really tried not to rehearse the arguments that we had last week. My noble friend Lord Tope and I referred to the predecessor to this amendment. I thought that I had made it clear at the start of this debate that this is not an afterthought; it is drafted in the same terms as Amendment No. 93, which was withdrawn. It is simply changed with regard to the reference to the section. The amendment which my noble friend and I tabled, which was debated with that of the noble Baroness, was termed slightly differently. The only difference is the italicised words in brackets.
This is not a matter of palatability or redemption. It is a matter of completeness—the completeness of the argument which my noble friend and I made last week. It is not necessary or desirable for me to respond to the points of principle on the original amendment. I see this as consequential to an amendment which this House has agreed. To end tonight with a flourish, even if it will lead my colleagues into the jaws of defeat, I wish to test the opinion of the House.
7.46 pm
On Question, Whether the said amendment (No. 94) shall be agreed to?
Their Lordships divided: Contents, 72; Not-Contents, 101.
Addington, L.
Arran, E.
Avebury, L.
Barker, B.
Bradshaw, L.
Brooke of Sutton Mandeville, L.
Brookeborough, V.
Carlile of Berriew, L.
Carnegy of Lour, B.
Chidgey, L.
Craigavon, V.
Crickhowell, L.
Crisp, L.
De Mauley, L.
Dholakia, L.
Dixon-Smith, L.
Fearn, L.
Fookes, B.
Freeman, L.
Goodlad, L.
Hamilton of Epsom, L.
Hamwee, B.
Hanham, B.
Harris of Richmond, B.
Howe, E.
Hunt of Wirral, L.
Jopling, L.
Kimball, L.
Kingsland, L.
Kirkwood of Kirkhope, L.
Lee of Trafford, L.
Liverpool, E.
Luke, L.
McColl of Dulwich, L.
Mackie of Benshie, L.
McNally, L.
Maddock, B.
26 Jun 2007 : Column 574
Miller of Chilthorne Domer, B.
Montrose, D.
Morris of Bolton, B.
Naseby, L.
Neuberger, B.
Newby, L.
Noakes, B.
Northesk, E.
Norton of Louth, L.
Oakeshott of Seagrove Bay, L.
O'Cathain, B.
Onslow, E.
Rennard, L.
Roberts of Llandudno, L.
Rodgers of Quarry Bank, L.
Roper, L.
Scott of Needham Market, B.
Seccombe, B.
Sharp of Guildford, B.
Shutt of Greetland, L. [Teller]
Smith of Clifton, L.
Steel of Aikwood, L.
Steinberg, L.
Stewartby, L.
Teverson, L. [Teller]
Thomas of Walliswood, B.
Thomas of Winchester, B.
Tope, L.
Tordoff, L.
Tyler, L.
Waddington, L.
Wakeham, L.
Wallace of Saltaire, L.
Walpole, L.
Adonis, L.
Alli, L.
Amos, B. [Lord President.]
Anderson of Swansea, L.
Andrews, B.
Archer of Sandwell, L.
Ashton of Upholland, B.
Bach, L.
Barnett, L.
Bassam of Brighton, L.
Berkeley, L.
Bradley, L.
Bragg, L.
Brooke of Alverthorpe, L.
Brookman, L.
Campbell-Savours, L.
Carter of Coles, L.
Chandos, V.
Clark of Windermere, L.
Clarke of Hampstead, L.
Clinton-Davis, L.
Corbett of Castle Vale, L.
Crawley, B.
David, B.
Davidson of Glen Clova, L.
Davies of Coity, L.
Davies of Oldham, L.
Donoughue, L.
Dubs, L.
Evans of Temple Guiting, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Ford, B.
Freyberg, L.
Gale, B.
Gibson of Market Rasen, B.
Gilbert, L.
Goldsmith, L.
Gordon of Strathblane, L.
Goudie, B.
Gould of Brookwood, L.
Gould of Potternewton, B.
Graham of Edmonton, L.
Grantchester, L.
Grocott, L. [Teller]
Harris of Haringey, L.
Hart of Chilton, L.
Haworth, L.
Hilton of Eggardon, B.
Howells of St. Davids, B.
Howie of Troon, L.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Janner of Braunstone, L.
Jones, L.
Jones of Whitchurch, B.
Judd, L.
King of West Bromwich, L.
Kinnock, L.
Kirkhill, L.
Lea of Crondall, L.
Leitch, L.
Lofthouse of Pontefract, L.
Macaulay of Bragar, L.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
Massey of Darwen, B.
Maxton, L.
Morgan of Drefelin, B. [Teller]
Morris of Handsworth, L.
Patel of Blackburn, L.
Pendry, L.
Pitkeathley, B.
Prosser, B.
Quin, B.
Ramsay of Cartvale, B.
Rendell of Babergh, B.
Rooker, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Scotland of Asthal, B.
Sewel, L.
Simon, V.
Slim, V.
Smith of Leigh, L.
Soley, L.
Stone of Blackheath, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Taylor of Bolton, B.
Temple-Morris, L.
Thornton, B.
Triesman, L.
Warner, L.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
Whitaker, B.
Wilkins, B.
Williamson of Horton, L.
Young of Norwood Green, L.
Resolved in the negative, and amendment disagreed to accordingly.
26 Jun 2007 : Column 575
Rating (Empty Properties) Bill
7.56 pm
Lord Davies of Oldham: My Lords, I beg to move that this Bill be now read a second time.
This is in essence a Bill about the efficient use of property. It is widely recognised that we live in a time of extreme demand on property, be that commercial or residential, where land is scarce and prices are at a premium, and where the balance between development and the protection of our much valued green space is an increasingly delicate one to strike.
A decade of low interest rates and sustained economic growth has created record levels of demand for land and property, creating high prices that place a burden on the competitiveness of the UK. The efficient use of property is therefore a matter of prime importance. Yet, at the same time, the rating system offers tax reliefs of 50 per cent for empty commercial buildings, and 100 per cent for empty industrial buildings, to lie idle at a cost of £1.3 billion per annum. It cannot be right for owners to continue to be subsidised to keep property empty at the expense of taxpayers elsewhere, at a time when UK office rents are among the highest in the world—routinely 30 per cent higher than our competitors in the EU—and where Manchester, for example, is one of the costliest locations in the world.
That is why my right honourable friend the Chancellor of the Exchequer announced in his Budget Report of 21 March the Government's intention to reform empty property relief, as part of a package of measures to encourage more efficient use of land and property.
The Government's decision to reform follows the recommendations of two independent experts, Kate Barker and Sir Michael Lyons, who in their recent reviews advised that the rating of empty commercial property should reflect today’s social and economic realities. In her review of land use planning, Kate Barker recommended that the Government make better use of fiscal incentives—in particular by reforming empty property relief—to encourage more efficient use of urban land. Sir Michael Lyons examined the case for reform as part of his consideration of how local government should be funded. Having consulted widely with industry, local authorities, planners and regeneration bodies, he too recommended the reform of empty property relief, to help to ensure that developed land is put to its most efficient use, given the impact that economic change and rapid housing growth have had on the value of land and property.
The Government agree that the time is right for reform, which is why we have this Bill. It might be helpful to the House if I spent a few moments clarifying its main components. It is a short but none the less important Bill that seeks to amend the Local Government Finance Act 1988 by increasing the empty property rate from 50 per cent to 100 per cent of the basic occupied business rate, to incentivise owners to reuse, re-let or redevelop their properties. This is to encourage owners to bring their vacant
26 Jun 2007 : Column 576
The Bill provides a new zero rate for empty properties owned by charities or community amateur sports clubs, as announced by the Chancellor, as an economic boost to the voluntary and community sector. It provides a new power to reduce the empty property rate from the new level of 100 per cent of the basic occupied rate back to a minimum of 50 per cent of the occupied rate, which will ensure that the Government have the flexibility to adapt the unoccupied rate to reflect the prevailing market conditions. It also introduces a new power to make provision to tackle rate avoidance tactics by disregarding changes to the state of property in circumstances that we shall define by regulations. If, for example, an owner removed a roof from a property, for rating purposes it could be valued as if the roof had not been removed.
Properties will continue to enjoy a three-month rate-free period on becoming empty, or six months for industrial properties. Three months is the period already established in legislation and we do not propose to change it. Barker demonstrated in her report that there is no inherently greater risk of different types of property falling empty, so it is right that there should be convergence in the tax treatment of all forms of property. We are therefore bringing the treatment of industrial property towards that for office and retail property, allowing it a six-month period with no rates. Exemptions from empty property rates are set out in secondary legislation and, although our intention is largely to maintain the details of the current regime wherever we can, and it makes sense to do so, we will consult on any proposed changes to that legislation over the summer, including how the new power to tackle rate avoidance will work.
We recognise that the vast majority of property owners do not deliberately vandalise their properties in an attempt to avoid rates. However, stakeholders have informed us that this may be a temptation to a small minority of owners, which may prove even more alluring given the increased liability for rates proposed by this Bill. This is why the Bill provides a new power to make regulations to deal with any benefits that might flow from such deliberate acts of vandalism.
I believe that noble Lords will see that this legislation is good for business. It will invigorate commercial life by creating better access to commercial property at more reasonable rents and increase our business competitiveness. Indeed, the Federation of Small Businesses pressed the Government to reduce the business rate relief on empty commercial property, precisely to ensure the better use of commercial premises. We believe that by enhancing the supply of properties on the market, these reforms are good news for small businesses. It is important, however, that the measures in this Bill are seen as one component of, and in the context of, a wider package of measures which the Government are introducing to support business and property owners. We have, for example, introduced measures to
26 Jun 2007 : Column 577
The business premises renovation allowance introduced on 11 April this year—a full year ahead of the changes we are proposing through this Bill—is a new 100 per cent capital allowance for the renovation of empty commercial property in our assisted areas. We expect it to better target the needs of these areas to provide quality commercial property that is fit for the 21st century business user, which is one reason why we have already published a forecast yield from reforming empty property rates. Alongside this we have published a consultation on reforms to land remediation relief, proposing that we extend the relief to long-term derelict land to improve economic incentives to bring derelict land back into use. We are also considering the tax treatment of lump-sum payments made by businesses when surrendering onerous leases to see whether current policy results in the retention of premises that would otherwise be released to the market.
I remind the House that local authorities already have discretion to provide hardship relief from empty property rates to respond to the realities of the commercial world by assisting owners facing particular difficulties in re-letting their property. That provision will not change.
The House will see that we are seeking to kick-start and revitalise commercial life across the country, in rural and urban locations, areas of decline and areas of growth. Sir Peter Hall, Professor of Regeneration and Planning at University College, London, has given strong support for these reforms, saying that they will make owners more willing to let units for less than top whack—meaning greater variety in our shopping centres and streets, livening up Clone Town Britain. Sir Peter goes on to say that the effect on empty factories and warehouses could be more dramatic. Owners will be more likely to sell to developers. And, given the weak or non-existent demand for industrial buildings, that will see demolition to make way for residential development, answering the call for a big increase in housing starts—on brownfield, urban sites too. The House will be aware of the progress that we need to make on making land available for housing.
I draw the House’s attention to the support of John Gummer, who is experienced in these matters as a former Secretary of State responsible for business tax, and who last week said in another place that,
- “we have been too lax in the past. Given our serious housing problems, we need to ensure that all the buildings we have are properly used, because the alternative is to build yet more in unsuitable places”.—[Official Report, Commons, 14/7/07; col. 908.]
The benefits of this Bill have far-reaching and important consequences for business and our communities. It signals a step change in the use of valuable property. At a time when the scarcity of land and buildings is a well recognised problem, here is a Bill that incentivises us to maximise our existing assets and to harness those assets for the benefit of our economy and wider society. I commend the Bill to the House.
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Moved, That the Bill be now read a second time.—(Lord Davies of Oldham.)
8.07 pm
The Earl of Liverpool: My Lords, I thank the Minister for setting out the mechanics of the Bill and explaining how the Government have concluded that it has merit. Unfortunately, I cannot agree with him on that. However, before going further I should declare an interest as chairman of a property development company with interests in commercial property. Nevertheless, I trust that noble Lords will accept that what I shall say about this Bill is based not on self-interest but on experience gained over a number of years.
The Lyons report, which has been prayed in aid by the Minister, never argued for the introduction of this measure in isolation. Indeed Sir Michael explicitly said that any change should occur in 2010 and only after extensive consultation. If this Bill is enacted it will come into effect next year, which allows an unreasonably short time for action to be taken by responsible landlords. The main thrust of the argument in the Lyons report for introducing this legislation is to influence commercial rents and capital values. The Lyons report says that,
- “the effect across the economy would probably be a fall in future rents that would benefit property occupiers. This might be accompanied by a fall in capital values, which would have no impact on current owner occupiers (assuming that they wanted to continue using the same or more property in the future) and a positive benefit for future purchasers”.
Noble Lords should note the use of the words “probably” and “might”. However, I fear that this is an incorrect summation of what would happen and actually illogical.
In most cases empty buildings are unoccupied not because the rents asked by the landlord are too high—quoting rents are governed by market conditions—but because there is no demand for the type of space in question. Unless market conditions are very strong, such as in London offices at the moment, landlords do not hold out for higher rents, but look to get the building producing income at the market level of rent.
As for Sir Michael Lyons’s dismissive regard for the fall in capital values, I beseech your Lordships to spare a thought for the many millions of people in this country who have at least some exposure to property as an investment class in their pension funds. I am sure that the Government do not wish to strike another blow against pensions, but that is what they will surely do if this Bill is passed.
How many property owners have long-term strategies for leaving buildings empty when they could find tenants or change the use? In my experience, buildings are left empty only due to market conditions or planning policy restricting a change of use.
It is surprising, to say the least, that this Government, who support the twin ideals of sustainability and regeneration, are pressing ahead with this Bill. I regret having to say it, but there is a real risk that it will prompt the decommissioning of very useable buildings.
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Apparently, the Federation of Small Businesses supported the measure, which seems to have given the Government the green light to proceed. No mention is made of the fact, however, that the British Property Federation, the British Retail Consortium and the Royal Institution of Chartered Surveyors are all deeply concerned about the effects of this legislation.
I fear that this £1 billion tax grab, for that is what it really is, will slow regeneration, as landlords become less willing to take risks on unestablished locations. I can only hope that the secondary legislation that will follow in the wake of the Bill will address the concerns that I and many others have.
8.12 pm
Lord Newby: My Lords, the Government give two principal justifications for this measure: first, it will improve, they say, the competitiveness of UK business by leading to a reduction in rates; secondly, it will lead to greater efficiency in the use of land and the existing property stock and, among other things, to speedier redevelopment of already developed land, in line with Kate Barker’s recommendations. A further justification, which is not used by the Government, is that it raises quite a lot of money—almost £1 billion. My comments will deal with these points of substance and then move on to procedure.
The only consequence of the Bill of which the Government can be certain is the increase in revenue—in the short term at least, that will certainly happen—but the extent to which the other professed benefits of the Bill will be realised is much more problematic if it is implemented as proposed.
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