John Healey’s potential £1bn raid on London offices would be an “attack on growth” and deal a huge blow to the City, property firms have warned.
The Chancellor is weighing up an increase to business rates for expensive office blocks and skyscrapers which would raise £1bn for the Treasury but disproportionately hit the capital’s business districts, the Telegraph has reported.
The tax raid threat will raise alarm bells for the City, with bank bosses already fearing Healey could launch an assault on their profits.
The policy would result in “less investment, fewer jobs and lower tax revenues for the whole country,” said the boss of the City Property Association, which represents more than 100 major property developers.
The plans being reviewed by the Chancellor would hike business rates for commercial buildings with a value higher than £500,000.
The Treasury would exclude the high street from the tax hike by exempting larger retail and hospitality premises from the increase in rates.
The measure would affect some 9,000 properties in London and the South East, according to tax firm Ryan, with Canary Wharf and the Square Mile being heavily affected.
Vanessa Hale, chief executive of trade body Real Estate UK, said the government cannot “tax its way to delivering good growth in every postcode” – the key pledge set out by Healey and Andy Burnham ahead of this month’s Budget.
She said: “House builders are already pulling out of the capital and it seems the government doesn’t care if commercial property developers do too. This isn’t a good growth policy – it’s an attack on growth policy and simply masks the failure to get on and fully reform the business rates system properly.”
Office tax would ‘undermine investment’
CPA chair Nikki Dibley said: “Increasing the cost of occupying office space to the very businesses that are the engines of our economy risks weakening the UK’s competitiveness at exactly the moment we should be making it easier, not harder, for them to locate here and grow.
“The result is likely to be less investment, fewer jobs and lower tax revenues for the whole country,” she said.
A London business association said any measure to deter major businesses from setting up their headquarters in the capital would damage the UK’s global reputation.
John Dickie, chief executive of BusinessLDN, said: “London competes globally to attract major businesses and corporate headquarters so hiking taxes on large office buildings risks undermining the UK’s ability to attract international investment.
“Rather than making piecemeal changes, the Government should deliver on its manifesto commitment to replace the business rates system in a way that encourages investment and drives growth.”
A Treasury spokesperson said: “As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”