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Drop the Pilot

 

You may have seen the government’s latest pointless distraction in the form of the Portas pilot towns, http://www.bbc.co.uk/news/uk-18212669  In essence, various towns bid for the princely sum of one hundred grand to rejuvenate their town centre in some way.  Now as ever, when the government is chucking around free money, there are plenty of people saying yes please, but this latest idea is nonsense on stilts.

 

First, the whole basis for this is deeply flawed.  Portas in her initial report didn’t worry too much about the crushing levels of uniform business rates shops are forced to pay for the privilege of opening for business.  A small outlet in a mall in sunny Basingstoke will cost you £50 grand a year rates.  That’s not a misprint.  Tony Soprano can only envy the government in this regard.  Really, if you want to ‘rejuvenate the high street’ abolish UBR, you would be surprised how effective this could be.

 

Second, why does anyone want to force people back into town centres.  Shoppers that have money to spend seem to prefer out of town centres, supermarkets or any number of alternatives, people have voted with their feet, why is this even an objective of policy. 

 

Last and least are the idiotic uses to which this money is to be put.  Wolverhampton seem to think (and presumably the government agree as they have been awarded the cash) that a town crier (sic) is what will have people coming back to town in droves; Nelson like the idea of a youth café.  Yep, encourage young people without much disposable income to hang around, that’s bound to bring back the oldies; Dartford town council seem to think they know more about running shops than actual shopkeepers whilst Liskeard seem to think the answer lies with guerrilla gardening whatever that maybe. 

 

Everything that is wrong with government is here.  Forced appropriation of the cash in the first place, then giving a tiny amount back and giving it not to the businesses themselves but to the ever-wise local councils.  Then there is council rent-seeking and more localised versions of the same as guerrilla gardeners compete with town criers for government largesse.

 

Joan Armatrading had it right. 

 

 

33 Comments

  1. Richard Allan says:

    If you abolish Business Rates then rents will go up by exactly the same amount to compensate. The report is here (PDF):

    http://www.hmrc.gov.uk/research/report42.pdf

  2. Does the source of the report suggest anything to you?

    The government saying UBR does no harm, hmm…. Rents go up and down with the market* whereas rates only go up and are unresponsive and destructive to business in hard times especially those on turnover rents.

    Also with various capital investment, landlords try to achieve a target yield (more is nicer but there is a floor beneath which they won’t go), so if UBR was abolished, empty properties would become cheaper and more attractive, would landlords merely increase rent to maintain an empty unit? Clearly not.

    Thus the town centre is rejuvenated.

    (* Yes I know about upward only rent clauses and long leases but these things are negotiable whereas UBR is coercively extracted)

  3. John says:

    So if there were no rates and the amount tenants were willing to pay was still below the floor, then would the property remain empty?

  4. Adam Smith Fan says:

    Enterprise Zones (which abolished the predecessor to UBR) were set up during the 1980s in various parts of the UK. They had little or no effect because rents went up in them just as Richard Allan suggested and that report described. And I don’t need a report to tell me. I remember Just Fine.

    Abolishing the UBR in an area is fundamentally the same as upping the tax on all the landowners outside the area and giving the proceeds as a free handout to the landowners inside the area. So if anyone put your idea into practice it would be excellent news for commercial landlords in the town centre and bad news for commercial landlords outside it. As for businesses, it would only benefit those who owned their own premises. Any business that rented would be neither up nor down.

  5. Adam Smith Fan says:

    Second point. As you say landlords try to achieve a target yield – say 5% of capital value per annum for the sake of argument. In an area where UBR is also 5% of capital value p.a., the tenant is paying 10% of capital value p.a. when you add the rent and UBR together. If the property is worth £100,000 that means that the tenant could afford to pay £10,000 p.a.

    Now say you abolish the UBR that means that the tenant can now afford to pay more rent. In fact he can now pay afford to pay 10% of capital value in rent. And the landlord isn’t going to turn that down if he can manage to get his hands on it. So he raises the rent to £10,000 p.a. but that potential for £10,000 rents makes empty properties more desirable to other landlords who are prepared to pay a larger price for an empty property so that they can jump on the gravy train too. In fact because of that 5% p.a. target yield the price that they are prepared to pay will be anything up to £200,000 for a piece of property that used to go for £100,000. So property inside this particular area will almost double in price as a result of abolishing UBR.

    That’s business unfriendly, since it makes it more difficult for businesses to buy their premises. Looking on the bright side areas outside the area where UBR has been abolished will benefit, since the increase in UBR needed to compensate for loss of revenue inside the area means that the rents will have to drop and therefore the price of commercial property will drop. So new businesses who decide to set up outside the town centre will benefit from lower property prices whereas new businesses who decide to move into the town centre will suffer from higher property prices.

  6. RAB says:

    This smacks of sheer gimmickry to me. iDave is a PR man and managerial CEO, not a man with ideas and principles. Right now he is stumbling from one crisis to another and dodgy appointment he’s made to another.

    A couple of million between 14 towns to regenerate the high street? Piss in the ocean!

    The playground in our local park had a makeover last year by the Council. There was sod all wrong with it as it was. Cost? £150,000!

    I see Bedminster in Bristol is to be one of the beneficiaries of this Govt largesse. There is bugger all wrong with Bedminster. I was there the other week buying a pair of walkng boots. It’s got a huge Asda, lots of great shops restaurants and cafes and a great library. Yet what is this clown of a High Steet guru of a woman going to give them money for? Street Art and Theatre! If there is one thing that Bristol definately does not lack, it’s street art and bloody theatre!

    I did a post on the People’s Supermarket in Stokes Croft closing down last week. If graffiti and street art was gold-dust Stokes Croft would be worth a Trillion pounds, but it remains the utter shithole it has been for 40 years, and all commercial enterprise has now moved out, rather than in.

  7. The entire thrust of the Portas report is that ‘something must be done’ (to be fair that is what she was told to think) and that the answer lies in the hands of the state. Apparently every town now has to have a market. Every town now has to has some sort of retailer group, led of course by the Council. It is cobblers, and I would still say that even as the servant of the state that I was for many years (I’m a lapsed planner).

    Town centres have many roles, very few of them to do with shopping. If those roles are no longer appropriate fine, find a new one. There are some things that are still done better face to face or in groups. Let them happen in Town Centres not in some ‘Business Park’ or Leisure Park’. That means leaving things alone. If Town Centre rents fall to the point where cafes and galleries and things like that are the main use, so what? In the 1930s through to the 50s, a village of 2000 people might well have had anything up to a dozen shops and other local businesses. They don’t now, our needs change and the response of those meeting those needs must change too.

    Portas makes her living from the likes of M&S, not Mr and Mrs Singh and her report is entirely about making Town Centres fit for big business – not users. Never mind the pilot, throw away the damn report.

  8. Stonyground says:

    Guerilla Gardening, in its original form is actually pretty cool. It started because people who were willing to volunteer to brighten up their local area by planting flowers would find obstacles being put in their way by anyone in a position of power. The solution was to just go ahead and do it without asking permission. In some cases a community garden has been built on a piece of wasteland before the authorities knew anything about it. When they do find out, their first instinct seems to be to have the place destroyed. Of course they then have to cave in before a huge public backlash. The thing about Guerilla gardening though, is that it is done by volunteers, without official interference, that is the whole point.

    Incidentally, nothing would prevent me from visiting a particular shopping area more than an effing town crier.

  9. AC1 says:

    SAoT,
    Ricardo’s Law of Rent is as basically sound science as you can get in economics. Rent + Rates = Constant (at an instant). Reduce one, and the other will increase.

    Better to tax rates (rather than sales, income, investments and saving) as rent acts as a privately collected tax.

  10. Ricardo’s law assumes flexibility in rates, there is none. It also fails to account for turnover rents, (ie more turnover, more rent), also a lot of people are on five year tenancies, so is it credible to go to the landlord and say “sorry mate, my UBR is up ten grand, so that’s coming off the rent, okay?” Clearly not.

    Also, if a potential investor knows the government is plundering some of his rental income, he maybe put off from investing or creating new stock, this artificially reduces supply of units and thus drives rent upwards which hurts town centres.

    Finally, smaller units are often the first to fall vacant. If someone has a crack at one of these as owner not tenant (when capital value is decreased), then the UBR is always an additional tax.

  11. Paul Marks says:

    The idea that cutting property taxes is pointless because rents will go up, is like saying that cutting income tax is pointless because wages will be cut.

    It astonishes me that people fall for such obvious propaganda.

    In reality competition will continue – “if you increase my rent – I will open my shop someone else”.

    Of course commercial rents may go up a bit – if prosperity increases (not very likely at the moment)

    But the idea that for every 1000 Pound cut in property tax, rents will go up by 1000 Pounds (or anything close to a 1000 Pounds) is bullshit.

  12. It isn’t propaganda Paul – It happened in the Enterprise zones EXACTLY as Adam Smith Fan described.

  13. NickM says:

    Paul is correct. Now where do I buy a pack of fags or a bottle of milk? Or a Newspaper or Midget Gems (and he stocks pukka Lions ones, not that dismal shite from Maynards). Why from Sayeed on the corner? Now I could get a lower price driving into Stockport but that would make no sense. I like having a local store. He is an institution in this village and this is not silly. It is practical. For simple needs Sayeed does the business. Now obviously for more complex stuff there is the bright lights of Manchester. Now I can’t buy a vibrating dildo from Sayeed but I can buy 20 Mayfair, a coke and a Telegraph and most mornings that does the trick. We have a parade of local shops for local people. They are used by the lokes like me. They do well by being convenient. Imagine a village without shops! I grew-up in a dormitory town. Never again. Jesus wept! The entire populace of Ryton (30,000+) would commute into Newcastle or Gateshead. Every morning. I love having a local store. It’s great and it carries on because of convenience and nothing to do with Ricardo whoever he was. It does though mean this parish has fuck off rents. But nothing compared to the rest of Cheshire. Dear God in his Heaven no! If you want an amusement look in an estate agent’s window in Alderley Edge. 12,000 a month. Mind you do get two indoor pools and a home cinema for that. That is the clever thing. One pool has a bar and the other is for the kids.

    Oh, and we have a railway station that Dr Beeching forgot about and it is half an hour to either Manchester Piccadilly or Buxton. I call that a result. He closed every other overground station I ever lived nearby. Hell, we have the 199 bus that goes direct to the airport! Last time I use that bugger I ended-up in Istanbul. Obviously whilst there was the bus there was also the Airbus A319. I am a sad soul. I have flown on every variant of the A320 family I can think of. I have been on an A300 and indeed on an A330. Not an A340 or A380. I have been on a DC-8, DC-9, DC-10, and MD-11, and on Boeing 737, 747, 757, 767, a MD-80 and three types of Embraers. If my luck holds I shall take my wife to Duxford and get on the De Haviland Dragon Rapide. I have never been on anything other than with turbine power.

  14. Okay final word from me on this one as we seem to have become a bit side tracked. UBR is inflexible and does not respond to changing economic conditions the way rents do. UBR does not have a direct relationship with turnover rents (very bad in depressed conditions, terminal for some businesses) and it is always an additional tax on owner-occupiers. All other things being equal rents would rise in a UBR free world though not in the straight line Ricardo imagined. Also, there is a floor beneath which the rent & UBR cost cannot go because UBR is inflexible. So if I want to rent a shop in some northern dump I may well be able to negotiate a great deal with the landlord, (couple of years rent free etc) but I can never do that with the council, it’s very ~ fuck you, pay me.

    However, it also depresses investment which is an unseen consequence, here’s how.

    Say I am an investor looking to build a new mall or generally tart-up/rejuvenate the area where several freeholds are for sale. I assume I can develop say ten units at a rent of say £10k a year, so my rental roll is £100K. I capitalise that at a yield of say 10 to reflect secondary shops and modest covenant strength. So my capital value is £1M. So if the costs of the refurbishment or redevelopment were say £650K I might think that despite the upfront nature of the costs, my cashflow looks okay and I go ahead and develop the scheme.

    However, the government wants its cut via UBR which is say one third of the rents. Without repeating the maths, my capital value now drops to £667K, only £17K ahead of capital costs, at which point I decline to proceed.

    Thus the unseen but destructive costs of UBR are to distort investment in new stock (reducing supply pushing up costs) and the refurbishment of old stock and thus town criers and the rest of the nonsense.

  15. …and, when the Gateshead Enterprise Zone was set up, the rents went up by almost the same amount. The Council didn’t lose out because central government made up the loss of revenue, which meant that major Tory donor, John Hall, who built the MetroCentre in the EZ, got a big boost in revenue courtesy of the tax payer.

  16. Paul Marks says:

    Ian – the idea that cutting taxes will do no good because “rents will go up” is drivil.

    Any increase in rents (if there is one) will be much smaller than the cut in taxes.

    By the way “Enterprise Zones” (and so on) are side show.

    I am talking about CUTTING TAXES.

    I repeat – you might as well say “cutting income tax is no good – because wages will just be cut to compensate”.

  17. NickM says:

    Ian (not that one) B,
    The MetroCentre – lordy! I used to work there.

  18. Tim Newman says:

    The MetroCentre is (or at least was in 2001) the best shopping centre in the world IMO. Why? Because it actually had shops which you’d not find in the high street, I remember a specialist musical instrument shop selling Steinway pianos, and a shop selling nothing much more than Airfix models, and stuff like that. The Trafford Centre wasn’t too bad, but couldn’t hold a candle to MetroCentre. And in the years afterwards I went to Dubai Mall, Mall of the Emirates, that big one by the harbour in Singapore, the one under the Petronas Towers in KL, and a whole load of others, they’re all exactly the same: top fashion brands on the ground floor, mid-range fashions on the first floor with an HMV or something thrown in, and a food court on the third floor. There’s nothing in any of these you couldn’t find in a city centre the world over. Unless it’s since gone downhill, MetroCentre wins hands down for me.

  19. MrsNick says:

    I can’t stand it. I used to clean the car parks. Now the lads and lasses of Dunston used to shag in the car parks – yeah class! But they used protection at least. I know. I had to pick up used condoms for 4.75 an hour. And the fucking thing is sinking because it was built on a mine spoil heap. As a cleaner – and you know what we used to do – we’d have a fag and tab it on the floor so when the supervisor came around on his quad bike we’d have a job on. The super was a form of git beyond measure. You know how Insitu Cleaning selected supers? They chose the biggest skivers because they knew where we’d be skiving because they’d skived there before. Put it this way. Next to were the cinema used to be there was a Chiquitos “Mexican” restaurant and every Friday the super would get supremely arseholed on Tequila and puke in the car park he’d spent the rest of the week cleaning. There is a moral there but I’m screwed if I know it. I guess it encouraged my studies because I pretty much decided that ordering others to clean your own vomit from a car park in Gateshead for minimum wage was not a future I wanted. Christ he used to boast about it. I fucking hate the MetroCentre. If I’m in the NE I’ll shop in Newcastle which is like a proper city with proper shops. I did once see Gazza in the MetroCentre. It was just after Italia ’90 and he was buying some sausages for his mam. Bless. That was before he hit the bottle hard and was escorted out of the Gateshead Hilton for wearing two electronic parrots (one each shoulder) and he’d taught them the fowlest lingo. He thought this hilarious. The staff and guests didn’t agree.

    But the nadir of the MetroCentre was this. They put on shows for kiddies. These sometimes involve the MetroGnomes (geddit?) but on one occasion they had Postman Pat and some scallywags chinned him. My Mum saw this epic example of Geordie Cultural Criticism. The poor sod was wearing a ginormous fibre-glass head so couldn’t fight back when he was set upon. And the chitlins wailed, “They killed Pat!”. The south bank of the Tyne has it’s moments. It has nothing on Sunderland mind or God help us Hartlepool. Those fuckers actually erected a statue to celebrate the fact that during the Napoleonic Wars they hung a monkey because they thought it a Frenchman. What had happened was this: a French ship was wrecked off the NE coast and the only survivor was the ship’s monkey washed-up ashore clinging to a plank. Clearly a sailor had tailored a natty little French uniform for the critter with a little hat and all and because the Hartlepuddlians could not understand it’s chatter (and had never seen a monkey, or a Frenchman) came to the obvious conclusion of inbred cretins that the monkey was a Frenchman and did their patriotic duty. To quote my Gran who was from County Durham and had a very dim view of Hartlepool, “It was neither fair nor right, like the darkie’s left tit”.

  20. NickM says:

    That is Nick, not MrsNick. She’s not from Gateshead. I am. I apologise for using the wife’s computer.

  21. Paul – how you manage to get from the statements by me and Adam Smith Fan that if UBR is selectively removed ie IN SOME LOCATIONS only – as happened with the EZ – rents will go up to by much the same amount to the idea that this is the same as saying taxes should not be cut is beyond me. Perhaps you might try reading the comments before you respond to them.

  22. Thornavis says:

    When I was at a further education college several geological epochs ago our history lecturer recounted the monkey tale with relish, according to him the best way to start a fight on a Saturday night in Hartlepool was to stick your head round a pub door and enquire, “Oo ‘ung the moonki then ?” ( apologies for the less than faithful transliteration of the accent but I am a bloody southerner )

  23. Mrs Nick (or Nick I am unclear)

    The less charitable view is that the Hartlepool folk hung, not a monkey, but a powder monkey. These were children used to carry powder to the guns.

    For me it is more likely that a kid washed up, spoke French and was killed by a furious mob which later felt guilty about offing the youngster and made up the ludicrous cover story.

  24. Thornavis says:

    SAoT
    Or maybe the whole thing’s just a good story, how would the good burgers of Hartlepool have recognised a powder monkey from any random washed up kid ? Especially if he was talking French.

  25. NickM says:

    Thornavis,
    Clearly you are from dahn sarf. I can’t do a Hartlepool accent. I can only do Geordie when fighting drunk and ripped to the tits on stuff. But then that is Geordies for you. We are but warriors for the working day… But when we start and the Viking blood gets going there all Hell follows with it. As to the deranged cunts that call Hartlepool home. Well fuck ‘em! i have been to worse towns – I have been to Siloth, Cumbria and that was something fucking else. My mother-in-law insisted. She said we got to go to Siloth because it is bloody awful. And it was. Sense of humour, my mother in law. I didn’t see the funny side at the time. I thought I was going to be anally raped by the condemned bandstand. I tried to use a Visa debit card and it was looked at. I had to say I put this card in your machine and enter a 4-digit number and this pays for goods and services. But that is unpossible! What the fuck was I expected to do – turn-up with gold? Siloth is like the 1950s without Elvis. I was there on a bank holiday and quite literally all the pubs had signs on the door saying “We don’t serve food, now fuck off!” Seriously. We did find eventually a chippy that did customer service like the Soviets did gynaecology. Siloth is bloody awful. We was delighted to get back to Keswick. My mother in law was proven correct in her assessment but only in a pyhrric manner.

  26. MarbellaBoy says:

    “Ricardo’s Law of Rent is as basically sound science as you can get in economics. Rent + Rates = Constant (at an instant). Reduce one, and the other will increase.”

    This may well be true in a static commercial property market, but we’ve hardly had that these last few years. The whole reason for this initiative is that the high street is on it’s arse due to businesses going under. Look at any high street in any small town and there is a proliferation of charity and vacent shops. If the Constant mentioned above is reduced due to the laws of supply and demand, and rates remain constant, then in order to fill a vacent shop, the landord must reduce Rent in order to meet the new, lowered Constant. A realistic value for ‘Constant’ may well require a negative rent in order to pay the Rates. Not a winning proposition for any landlord. Something’s got to give, either maintenance, or in extremis, foreclosure. Councils have to choose, either lower or better still eliminate rates, or watch the slow relentless death of the high street. A couple of hundred grand for any given hugh street will likely be pissed away on street theatre or some such nonsense and is frankly pissing against the wind.

    A few years moretorium on high street rates paid for by ditching a few useless non-jobs in the council would likely do the trick.

    Yeah, I know.

  27. “how would the good burgers of Hartlepool have recognised a powder monkey from any random washed up kid ? Especially if he was talking French”

    Er, by virtue of the fact he was talking French?

  28. Thornavis says:

    SAoT
    It’s far too late in the evening and a silly thing to be debating but there you are, I still don’t get it. Let’s go through the scenario, garcon A is washed up on the beach in God forsaken Hartlepool, he’s talking Froggy so the locals top him out of a sense of patriotic duty, so far so good, the authorities or whoever enquire what happened and are told that they thought he was a monkey, er no, they mistook powder monkey for monkey, all a big mistake. Why though would they hang a monkey, isn’t the whole point of the story that they didn’t know what a French person looked like so they hung a simian in error reversing it so that they mistake a boy for a monkey doesn’t make sense and surely even the Hartlepoolians aren’t so thick as to mistake a boy for a monkey anyway ? Not only that but how does the fact that he was talking French identify him as a powder monkey ? ” Je suis un monkay de poudre “. I don’t think so.

  29. Sam Duncan says:

    “A few years moretorium on high street rates paid for by ditching a few useless non-jobs in the council would likely do the trick.”

    Exactly. That’s the point. Maybe rents would go up to “compensate” a reduction in rates. I’m inclined to think there’s probably something to that argument. But so what if they do? There’s more to the pernicious effect of tax/rates than the simple loss of raw cash to the people that pay it. I’d rather the money went to landlords than to councils. To put it in very simple terms, they’re more likely to use it for improving their buildings than, oh, I don’t know… declaring futile boycotts of friendly nations, lobbying themselves, subsidising unpopular artists, persecuting motorists, or something similarly worthwhile.

  30. NickM says:

    No, they did hang a monkey the depraved bastards. They tortured it first to get it to speak French which obviously it couldn’t being a monkey. What does concern me is they conidered it a Froggy spy because it was in a French uniform. Now, what is the last thing a spy wears…. The military uniform of a hostile power springs to mind. A deeply regretable incident all round but they are proud of it. We had George Stephenson and they hung a poor bloody monkey. Not only that but check this out. Yes, not only did they have H’Angus the Monkey as Hartlepool FC’s mascot they elected him mayor.

    “Mr Drummond is well-known in the town for his frolics as mascot for Hartlepool United Football Club, nicknamed the Monkey Hangers by their rivals.

    He has been thrown out of two away games, once when he simulated sex with a woman steward in Scunthorpe in 2000 and a year ago for his antics with an inflatable doll at Blackpool.”

    It doesn’t get much lower does it? Well apart from hanging a monkey. Fucking an inflatable doll whilst away to the tangerines. Dear sweet Jesus of Nazareth there are things scuttling across abysmal plains under the Pacific on raggedy claws higher than that. That is utter scumbaggery of the very first water.

  31. Tim Newman says:

    Or maybe the whole thing’s just a good story, how would the good burgers of Hartlepool have recognised a powder monkey from any random washed up kid ?

    Sharing a compound as I do with hundreds of French brats, I’m not sure how they could differentiate between a French kid and a monkey. I’d condemn them for hanging a monkey, but not if they thought it was a French kid, especially if it had a back-pack and a really fucking annoying high-pitched voice.

  32. Talwin says:

    NickM. Re sad souls and aeroplanes. My late father was born in Poland before coming to the UK in WWII. Shortly after things opened up a bit in Poland we went back a time or two, from Manchester, using the unlovely Ilyushin IL18 and Tupolev TU134A.

    Not too long ago, I flew from Warsaw to Kracow in a more modern ATR42. There weren’t too many on board, so plenty of empty seats. As I left the plane, the female flight attendant, was asleep in the empty, front right hand passenger seat (I guess seat 1D) where she had gone for landing. I swear she was pissed. True story.

  33. Adam Smith Fan says:

    And right on cue, prices for town centre commercial property in one of the Pilot towns (Liskeard) start rising. See this story for details. Not exactly the way to make town centres more affordable for new small businesses.

    This is exactly what Richard Allan, ian b, and I were talking about above. I can’t blame the property owner concerned. I would do exactly the same in his/her position because it’s the commonsense thing to do. But it just goes to prove the point that throwing money at this particular problem in order to solve it is like throwing petrol on a fire to put it out. If the council really wants to improve the town centre they need to ensure that empty shops get taxed at the same rate as full ones.

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