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Tuesday, August 26, 2008 3:12 PM

White Elephants Rampage UK

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Previously we discussed the Growing Herd Of White Elephants in the US. Today, let's take a look at white elephants in the UK.

Preemptive White Elephant Demolition

The Telegraph is reporting Buildings razed turning British cities into 'bombsites'.

Hundreds of buildings are being razed as a result of an empty property tax, turning British cities into "bombsites", a government regeneration chief said.

The levy on empty shops, offices and warehouses, which was introduced in April, is aimed at landlords who left buildings deliberately empty as they waited for rents to rise. It intended to reduce rents, raise property supply and earn the Treasury almost £1 billion in tax.
That tax policy decision in the UK is a prime example of bureaucratic idiocy at its finest. The Guardian offers more details as proof. Please consider Property tax leaves cities 'looking like broken teeth'
One of the government's most senior advisers on the regeneration of cities has warned that a tax imposed on empty commercial buildings is threatening to derail efforts to breathe new life into some of the most blighted parts of Britain.

John Nicholls, who chairs a group representing the government-funded urban regeneration companies (URCs), said yesterday that owners are demolishing empty buildings to avoid paying the tax introduced in the most recent budget, leaving parts of the country "resembling bomb sites". Regeneration projects had been rendered unworkable, threatening jobs and new homes, he said. Some developers are simply leaving sites unfinished rather than risk liability for the tax.

"There is a lot of pre-emptive demolition going on. This is already having a visual impact - cities are beginning to look like broken teeth."

The measure has been fiercely opposed by business lobby groups including the Confederation of British Industry, the British Chambers of Commerce and the British Retail Consortium - the latest in a series of clashes between business and Labour since Gordon Brown became prime minister and Alistair Darling took over as chancellor.

Before the changes, vacant offices and shops received rate relief of 50% and industrial units gained full relief. Now all unused commercial property has to pay full business rates after a three-month period of grace for commercial premises and six months for industrial property and warehouses, adding about £1.3bn a year to government coffers.

Swindon council has joined the campaign to get the tax repealed. It is demolishing a 14-acre former factory at the cost of £430,000 rather than continue to pay £110,000 a year in tax on that one site alone.

"We are spending public money demolishing buildings to avoid this ill-thought out stealth tax," said Nick Martin, lead member for finance at Swindon council. "Swindon, like many other towns across the country, could suffer if regeneration projects are shelved as a result of this."

Salmon Developments, a property company in London's West End, said it had implemented a policy of demolishing all of the older buildings in its portfolio that it had failed to let after three months.
Idiotic tax policy is such that it makes more sense to demolish perfectly usable sites (leaving "bomb-sites" in their wake) rather than owners holding properties hoping to find renters. It also precipitates builders leaving sites 3/4 finished rather than completing them. The tax hike that was supposed to bring in extra money will end up having the exact opposite effect. It's a lose-lose situation as most government mandated solutions are.

Mike "Mish" Shedlock
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