Nick Brown, the Chief Whip, called yesterday for the North East to be exempted from the Government’s controversial tax on empty commercial buildings. However, Mr Brown, who is also Minister for the North East, said that the tax was appropriate for London and the South East.

The Empty Property Rates (EPR) tax was introduced on April 1 and forces businesses to pay rates on empty buildings, even if they have just been completed. It is estimated that the tax will cost the commercial property industry £2 billion this year.

There have been reports that companies, including Asda and Segro, the property developer, have demolished buildings to gain exemption from the tax. The British Property Federation, which represents landlords, estimates that five million sq ft of commercial property has been demolished since April. The CBI said that one in five companies was considering demolitions.

Mr Brown, MP for Newcastle upon Tyne East and Wallsend, told a local newspaper that the tax was “destructive” and hinted that exemption for the North East could be coming.

He said: “Although it [EPR] may be appropriate in London and the South East, there are different circumstances in the North East, and I do think the Government could look at granting relief in the old industrial areas like we have here. We are in a position where people are pulling buildings down, which is a destructive consequence of this, and the way to avert it is to grant relief. It is highly unlikely we will grant wholesale relief, but something could be done in the old industrial areas.”

Businesses, including retailers and large property owners, have been arguing vehemently against the tax since April. The downturn in the economy has increased the opposition to the tax. The Welsh Assembly and the Mayor of London have called for the Government to scrap the tax. More than 120 MPs have signed a Commons motion against EPR.

Liz Peace, chief executive of the British Property Federation, said: “Large developers being hit by empty rates bills will have a fundamental effect on regeneration, which is vital for new business and new jobs. The Government’s shortsighted tax policy is causing chaos.”

Peter Clarke, executive officer at British Land, said: “The arguments for abolishing EPR relief were never convincing, but in the current economic environment the absence of the relief is hampering investment and regeneration across the property industry and the occupational market. If the Government really believes in using taxes to stimulate the economy, it should start by reinstating EPR relief.”

The property tax has also hit many pensioners who had invested in single buildings to provide them with an annuity in retirement. Tom Rabbett, 63, from Middleton, near Manchester, put his pension into a property. Now, because he cannot find a tenant, he is having to pay tax on his pension. “If it applies to one, it should apply to all,” Mr Rabbett said. “Why should they get relief in Newcastle? I imagine there’s far more people that have done the same thing using their pension to encourage growth in their own industry.”