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Rates of change1

Fundraising | Robert Ashton | 10 Jul 2012

Fact: charity shops enjoy an unfair advantage on the high street.  And that's not good for anybody's business, says Robert Ashton.

At the same time as the UK government is giving 12 Portas Pilot towns £100,000 each to regenerate the high street, local authorities are quietly stuffing the businesses already there.

You see, just as private landlords know that times are tough and have reduced commercial rents, business rates are based on a historic rateable value. As we all know, there are lots of empty shops out there and one of the key recommendations of the Portas Review was that “local authorities should use their new discretionary powers to give business rate concessions to new local businesses”.

Recognising that times are tough, Osborne extended small business rate relief in the last Budget. This means that small businesses occupying premises with a rateable value of less than £12,000 effectively pay no rates until April 2013. For many it’s a lifesaver, freeing up cash to invest in building the business in today’s tough marketplace.

But local authorities don’t seem to see it the same way. My friend Victor Ling and his wife Yvonne recently took over a photography business. It’s on Gorleston High Street in Norfolk. It’s one of the region’s most deprived wards, with high unemployment, poor health and few jobs. But Victor is ambitious and networks well. His business will succeed and bring benefits to his neighbours as he attracts new customers to the high street.

Victor took on an empty shop in a prime location on a crossroads, opposite a bus stop. He negotiated a lease of £8,000pa, a significant reduction on the asking price. The landlord recognised that Victor would be a punctual payer and be there for the duration. This was not a business likely to fail. In fact it’s exactly the kind of business Britain’s high streets need.

So what about business rates? Well the rateable value is £15,000 and while the landlord could see the merit in reducing his rent, the rateable value remains unchanged. Victor has to pay full business rates with no rebate. The charity shops around him enjoy 80 per cent rate relief, irrespective of the size of their premises. Rightly he feels more than a little aggrieved; it’s a £6,000 annual cost.

To be honest, I don’t know exactly where to point the finger of blame. Is it the HMRC Valuation Office for failing to reduce rateable value in line with falling rents? Or perhaps it’s Great Yarmouth Borough Council who have it within their gift to make concessions to brave entrepreneurs willing to invest in the high street.

It’s no good government throwing a few grants at high streets like missionaries throw beads if the rate of change in local authorities is too slow.