The British Property Federation (BPF) has urged the Chancellor to use the Budget to boost the housing market and reform a business rate regime that favours internet retailers over the high street while sucking over a £1bn out of UK businesses in empty rates.

Additionally it has also urged Osborne to think twice before springing ill-considered surprises on the industry, like Budget 2012's 15% SDLT rate that led to months of uncertainty before being later clarified.

With housing starts in 2012 plunging 11 per cent to below 100,000, and research revealing the Government’s tax on empty properties is draining more than £1bn a year from business, the Federation believes the Chancellor should help kick start an economic recovery by:

•extending the relief from empty rates to allow businesses to bring vacant shops, offices and factories back in to use;

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•moving away from the RPI related business rates increase towards an increase based on the two per cent inflation target, or the CPI measure of inflation;

•changing the rules to allow direct institutional investment in the space above shops for conversion into flats to help breathe life into high streets;

•clarifying rules governing when a residential portfolio is compatible with the REIT rules.

The Federation believes the majority of the changes would be tax neutral and taken together could provide much needed impetus to the house building and retail industries.

Liz Peace, chief executive of the British Property Federation, said: "The Chancellor clearly has a weak hand from which to play, but house building is a proven way of getting some movement into the economy both in the short and long term, and the industry is one of the few that can make inroads into youth unemployment.

"The business rates regime clearly needs addressing. Why should the tax system exaggerate the existing cost base and flexibility advantages of an internet retailer over a high street retailer? Particularly given the urgent importance of encouraging investment on the ground in the built environment and UK jobs.

"Additionally empty rates are draining more than £1bn a year from those holding unproductive property – money that could be saved to support jobs or re-invested to bring these properties back into use."

(CD)