EMPTY OFFICE BUILDINGS (Hansard, 21 December 1973)

§ The Secretary of State for the Environment (Mr. Geoffrey Rippon)
I will, with permission, Mr. Speaker, make a statement about empty office buildings.
My predecessor announced on 26th June last year that he was considering measures including, if necessary, appropriate legislation to deal with the problem of large office buildings built several years ago which still remained empty at a time when office accommodation was in great demand.
I now propose, in the context of my right hon. Friend the Chancellor of the Exchequer's recent tax proposals, to take powers in the Housing and Planning Bill to be introduced early in the new year, to enable the Secretary of State to take compulsory powers of management when such buildings have been substantially empty for two years or more.
I will also be tabling amendments to the Local Government Bill enabling local authorities to impose a penal surcharge over and above full rating on empty commercial properties rising at the rate of an extra 100 per cent. for every year the buildings remain unoccupied.

§ Mr. Shore
I thank the Minister for that statement. I must begin by pointing out to the Minister that the reason I am at the Dispatch Box is that my right hon. Friends were given no advance notice of the statement, otherwise they would have been here to interrogate the Minister as closely as the statement deserves. However, I shall content myself by putting two questions and an observation to the Minister.
On the principle that one does not shoot Santa Claus, I suppose that I had better give a cautious welcome to this announcement. However, I invite the Minister's agreement to the statement that in this 1764 case, as his statement makes clear, there has been a shocking and scandalous delay in the time that has elapsed between the time his predecessor announced on 26th June 1972 that urgent action would be taken and today, towards the end of December 1973.
May I ask the Minister whether he will press forward the legislative measures which will be required to give substance to the proposed course of action announced in the statement? Am I right in believing that if measures are to be made effective the two Bills involved will have to be effective during the next year and that the Bill which is currently in Committee will need amendment?

§ Mr. Rippon
I understand the difficulty in which the right hon. Gentleman found himself. I apologise for any inconvenience caused. As the House will appreciate, it is the normal practice for notice of statements to be given on the morning that the statement is to be made. At this time that raised peculiar difficulties, and I apologise for that. However, it was felt that as the statement is of some importance it was right that it should be made to the House.
The details will have to be brought forward in the Housing and Planning Bill which will, I trust, be introduced at the end of next month. That will deal with the authority that is required to give the Secretary of State the powers of compulsory management. The amendments to the Local Government Bill which will deal with the rating surcharge will be laid before the House as soon as possible. The Bill is now at Report stage.
These measures have to be considered in the context as I say, of the Chancellor of the Exchequer's recent tax proposals. I have long taken the view that the right way of dealing with the situation which has arisen in recent years is by way of taxation. I have also hesitated to get the Government into a situation in which they may take over and manage property at public expense while maintaining the capital value intact.
Regarding the delay, my right hon. Friend, now the Secretary of State for Trade and Industry, when he made his statement, said that he would consider what action was required if the situation was not remedied within a few months. 1765 It is correct that quite a number of months have passed. On the other hand, the fact that so much notice has been given justifies the element of retrospection which will be in the legislation. The legislation will apply to premises which have been substantially empty for two years or more. The legislation will be pushed forward with, I am sure, the cooperation of Opposition right hon. and hon. Members.

§ Mr. Bottomley
Though I welcome the Minister's statement, will he give an assurance that there will be no change in the Government's policy of encouraging industry, banks and other organisations to send their offices from London and the South-East to places such as Teesside?

§ Mr. Rippon
I have considerable sympathy with what the right hon. Gentleman says. I think that more will emerge on that front when the Hardman proposals are finally implemented.

§ Mr. Dell
Can the right hon. and learned Gentleman give us further details or have the proposals been brought forward so quickly that he has not yet worked out the details? What does he mean when he says that management may be at public expense? What will be the responsibilities of the management on such matters as return on capital? Will it be the original capital or capital as increased by inflation scarcity? The House should have a great many more details than the right hon. and learned Gentleman has given.

§ Mr. Rippon
The House will need many more details. First, the legislation will be laid before the House and then amendments may be made to it. It might be helpful if I make it clear—that is why I have said that this action is to be taken in the context of the Chancellor's measures—that provision will be made to ensure that the letting of office premises which are managed by the Secretary of State under the proposals will constitute a possible charge to capital gains tax under the proposals announced by my right hon. Friend on Monday, 17th December. When the Secretary of State takes powers of compulsory management the costs of that management will no doubt fall in 1766 an appropriate way upon the owners of the building who is responsible for it being substantially empty.

§ Mr. Douglas
Will the right hon. and learned Gentleman confirm that this provision does not apply to Scotland and that the Secretary of State for Scotland will be making an announcement on the Scottish position? Does the right hon. and learned Gentleman recognise that the situation in Scotland is different from that pertaining to the London area? As the Secretary of State has indicated, Scotland is anxiously awaiting decisions relating to the Hardman Committee report. Will the Minister try to explain to the House a little further exactly what he means by "take over"? Is that an extension of public ownership by the Government and control by the Secretary of State's office? Is this provision an indication of the paucity of the Chancellor's tax penalties on this area of entrepreneurship ?

§ Mr. Rippon
Scotland's position does not, I am sure, affect either the Hardman proposals or present legislation. The powers will apply to England and Wales. They will apply to office premises which have been substantially empty for two years or more. This is a measure to deal with a particular mischief which has caused a good deal of public concern in recent years. I will not go further than that.

§ Mr. Bishop
Will the right hon. and learned Gentleman tell us what he means by "substantially empty"? Does that apply to a block such as Centre Point which has been partly let and is partly vacant? Will those premises be affected? Does the Minister consider that two years or more is rather a long time to wait? Some hon. Members may have thought that one year was ample time for letting unless there were reasons to the contrary.
Will the right hon. and learned Gentleman say on what basis the penal surcharge will be levied? Will it depend on the value which has materialised since the building was built and has been unlet? Does the Minister recognise that millions of people will wonder why the Government have not moved on this measure at the same speed as they have moved on the industrial front against trade unionists and other people?

§ Mr. Rippon
The justification of the two years or more is the retrospective effect of the provisions. In other words, those who have offices which have been substantially unlet for a long time have been on notice that the Government would consider bringing forward suitable measures.
It would be wrong to try to indicate how a general measure might apply in certain circumstances. I will not be drawn along that line. As my right hon. Friend the Chancellor of the Exchequer said in his statement on Monday, the proposed new charge on first lettings, for example, does not apply to residential development. If residential development associated with offices had been let on or before 17th December and the office premises had not been let, that would not prevent a charge being made on the first letting of the office accommodation. That is the sort of matter which will be made clear when the details of the legislation are brought forward.
The penal surcharge follows the discussion which has taken place in Committee on the Local Government Bill. It was felt that there might be circumstances in which 100 per cent. rating would be inadequate. A penal surcharge might be justified when premises have been substantially empty and when the owner has not taken all reasonable steps to secure a letting. The surcharge and the rating will be on the rateable value as assessed in the usual way. Rateable values have regard to the value of the premises and the value of any letting which may be assessed.

§ Mr. Alexander W. Lyon
Does the proposal mean that the Government will take over the management of these properties and then return the profit to the owner and preserve intact the capital value of the building? The owner will lose only 30 per cent. in capital gains tax and he will avoid all the burdens of administering the property. The owner will take 70 per cent. of the profit and 70 per cent. of the inflated capital gains for the 10 or more years that some of the buildings have been empty.

§ Mr. Rippon
It is not necessarily 30 per cent., but that will be considered in the context of the detailed provisions which will be made in the Finance Bill 1974 on the lines which my right hon. 1768 Friend indicated on Monday. As I said earlier the management and the maintenance of the capital value of the building while the management powers are exercised is one of the matters which has exercised my mind. That is why I think it is much more reasonable that the powers should be taken in the context of the Chancellor's proposals. But for my right hon. Friend's proposals, it might be argued that the sort of criticism which the hon. Gentleman has just made would be justified.

§ Mr. Robert Taylor
I give a warm welcome to my right hon. and learned Friend's proposals. They seem to deal in a satisfactory way with a problem which has perplexed both sides of the House for a long time. Will the penal surcharge definitely not be retrospective? If the penal surcharge were placed retrospectively on existing empty office blocks that would introduce an unfair element.

§ Mr. Rippon
The penal surcharge will not be retrospective.

§ Mr. Shore
The right hon. and learned Gentleman will realise from preceding questions and answers that he has raised as many new questions as the questions which he managed to answer. Will he assure the House that it is his intention to use these compulsory powers against such national scandals as Centre Point, which has been empty and appreciating in value for so long? In that context, will he assure us that if he takes compulsory powers of management, as we hope he will, he will not feel himself circumscribed and find it necessary to continue to operate the properties on the basis of their existing use? Will he be prepared to use them to meet the needs of the areas in which they are situated?

§ Mr. Rippon
Obviously there will be detailed questions which will arise when the detailed proposals are put before the House. It would be better to leave the matter there.