“Croissance”. It’s the word on President Francois Hollande’s lips and no, it is not a reference to our favourite French pastry. It is in fact the French word for growth. Growth, the elusive goal of Governments across Europe and closer to home, is the key to reinvigorating a successful Scottish property market.
Political leaders may be saying what businesses want to hear about pursuing economic growth but there is little evidence here in the UK at least of those words being translated into action. While the US economy is now significantly larger than it was before the downturn, the UK economy remains more than 4 per cent smaller and has now of course dipped back in to recession for a second time. Worryingly, the OECD forecast economic growth this year of 2.4 per cent for the United States under President Obama whilst we are projected to continue to bump along the bottom with growth at 0.5 per cent.
Here in Scotland, the Finance Minister John Swinney also likes to talk of pursuing growth, but the actions of the SNP Government reflect a different set of priorities. The construction industry is still reeling from a massive cut to the housing budget of more than £100 million and a new tax on large supermarkets has been introduced without any consultation. Now, another new tax on empty properties is in the process of being introduced also without consultation and despite evidence to suggest that it will not achieve its stated objective.
What is that objective? Well according to the Unoccupied Properties Bill, it will “provide incentives to bring vacant commercial premises back into use”, a laudable goal indeed but it is difficult to imagine exactly why property owners would need such an incentive in the current economic climate. Four years ago, at a time of higher occupancy rates and with commercial property worth 25 per cent more, there may have been some substance in that argument but in today’s market it looks simply like a cash grab.
The evidence suggests that this new tax will do nothing to stimulate demand and it is certainly difficult to see how it would help town centres like Paisley where one in four shop units already lie empty. It could, in fact, simply have the effect of penalising already struggling businesses. It is interesting to note that the Scottish Government itself does not seem to believe the measure will reduce the number of empty properties in that they do not forecast a parallel decline in income from the levy.
It is also a form of circular taxation in that much of the proposed revenue raised will be from local authorities and other public sector bodies which own vacant property. So Glasgow City Council has estimated its own rates bill could increase by as much as £1 million and in answer to a Parliamentary Question I raised, even the Minister conceded the cost could be £1.8 million from local authorities alone.
The Scottish commercial property sector, like the wider economy, needs to see specific measures designed to restore business and consumer confidence, bringing forward infrastructure and other capital investment and putting further pressure on the banks to lend or at the very least not to withdraw existing credit. We do need incentives to help revitalise our high streets and to help bring empty properties back into productive use, but it is simply not good enough to introduce punitive measures without even consulting those directly affected. The Finance Committee is to be congratulated for highlighting the incompetence and lack of rigour behind these proposals and I hope that the SNP will listen to the evidence presented on the efficacy of this proposed new tax and respond appropriately to our Parliamentary Committees rather than rely on its Parliamentary majority to enforce its will.
The property industry in Scotland has enough difficulties without Government making the situation worse. This new tax on businesses is not going to generate growth in the economy and the Scottish Government needs to realise that its actions speak louder than its words.