Revealed: Northampton empty businesses cost taxpayer more than £18m over the last five years

Empty business units in Northampton cost the taxpayer more than £18 million over the last five years, according to research revealed today (Thursday, January 16).

Thursday, 16th January 2020, 12:05 am
Updated Thursday, 16th January 2020, 10:39 am
Empty shops in Northampton have cost the taxpayer more than 18 million over the last five years, according to new research

On average per year, Northampton Borough Council lost out just over £3.68 million in business rate relief for unused non-domestic properties like shops, warehouses and pubs from 2014/15 to 2018/19.

The local authority £482 million in business rates over that period, an average of £96.4 million per year, the BBC Local News Partnership data shows.

The percentage of income lost to the national relief scheme in Northampton decreased steadily from 2014/15 to 2017/18 before going up again in the last financial year.

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A council spokesman said: “Like all billing authorities across the country, we are required to award business rates relief on empty properties in accordance with the law.

"We inspect any business which claims this relief to ensure it fulfils the criteria, therefore minimising loss to the taxpayer.”

In 2018/19, 3.16 per cent of rates income was lost to empty units with just over £3 million spent on the empty business relief and a total potential income of £118 million.

Looking ahead to 2019/20, the research suggests 1.29 per cent of Northampton business rates will be lost to empty units with £1.28 million expected to be lost.

Northampton Borough Council is set to receive business rates from 6,580 units, with 539 empty units subject to the relief.

Kevin Muldoon-Smith, an expert in property tax, said: “Business rates, along with council tax, will be very critical to the stability of local authority finances going forward because of central government grants being reduced.

“Unfortunately, we have this perverse situation where local government needs tax to go up and the business community are lobbying very hard for it to go down.

“But if you look at the property market, the relationship between business and bricks and mortar is changing.

"There’s a good chance that pool of income will start to reduce – at the very least it will be different.”

Under law, empty business premises cannot be taxed under the business rates system for at least three months - after this time, most property owners must pay full business rates.

Not all the potential income lost through empty rates relief would be retained by the local authority.

Under current legislation, around half of business rates collected is retained by the LA and the rest is returned to the Government for redistribution.

An HM Treasury spokesperson said: “Empty property relief strikes a balance between incentivising property owners to put vacant properties to use, while not penalising those who lose a tenant at short notice.

“Whilst the rate of business rates collection varies between individual authorities, the local government finance system has been designed so that business rates income is redistributed across the country according to the needs of local areas.

“We will announce further details of the business rates review in due course.”

As retailers lobby for the burden of business rates to be lightened, councils are becoming increasingly dependent on business rates income as grants from central government are scaled back.

Whitehall has promised councils 75 per cent retention of any growth in business rates but there have been concerns rates retention could create disparities between areas.

The Local Government Association has estimated an £8 billion funding gap by 2025 and economists have warned that without additional support, councils’ public services will be ‘eroded’.

Meanwhile the British Retail Consortium reported 2019 was the worst year for the retail industry in a quarter of a century.

Dominic Curran, from the group, said: “It has been a challenging year for many retailers, as many shops struggle to adapt to rising cost pressures and changing consumer habits.

“High among the concerns for retail firms is business rates – a tax which disproportionately harms retailers, driving shop closures and job losses, leaving empty shopfronts and harming local communities.

“It is essential that the Government makes good on its pledge to reform this broken tax system.”

Editor's note: A previous version of this article said empty business units in Northampton cost the taxpayer more than £103 million in potential income over the last five years. The article also stated the total potential income from 2014/15 to 2018/19 would have been £585 million had the businesses been filled. These have been removed as the figures are caused by more factors than just empty businesses, such as unpaid bills and other reliefs.