Why council has no control over rent and rates

IN DECLINE ... King Street in South Shields.

IN DECLINE ... King Street in South Shields.

TOWN HALL officials have moved to address the issue of business rates and rents in South Shields town centre following news of Marks & Spencer’s plans to leave King Street.

In the aftermath of the company’s decision, many Gazette readers have questioned whether the local authority could have done more to prevent such a high-profile business pulling out of the borough.

But a council spokesman explained it has no control on either the setting of rents in the street or on rate levels, which are set by central government and merely collected locally by the council.

He said: “Rents are determined by the market between a landlord and a tenant, in very much the same way as house prices. Supply and demand factors are key in setting a level of rents.

“Councils cannot influence rents, other than by creating, as in the case of South Tyneside, the necessary investment to attract retailers, shoppers and visitors.

“The council does not own property on King Street and is therefore not the landlord for tenants in this area, including the current Marks & Spencer store.

“Retail tenants will pay higher rents per sq ft for those shops with the highest pedestrian footfalls and in the busiest parts of the high street, for example in the middle of King Street in South Shields, because they can increase turnover and are more profitable. This can be self-perpetuating because some prominent ‘anchor’ retailers, by their very presence, attract a great number of shoppers and can shift demand and inflate rents for adjoining shops as they move from one part of the high street to another.”

The spokesman said rents will tail off gradually away from the prime central locations and then significantly towards the periphery of the high street and into more secondary locations.

Other factors that can affect rents include the amount of shop front, the shop depth to frontage ratio, overall size and storage and loading facilities.

He added: “Shop rental levels in Newcastle’s Northumberland Street are approximately six times higher than those in King Street because of the factors highlighted above and determined by the market.”

The spokesman accepted that business rates are a “major bone of contention” – but explained that they are set by Government, not the council.

South Tyneside currently gets to keep 50 per cent of the business rates it collects in the borough, with the other 50 per cent going into a central Government pot.

Out of that, a proportion is redistributed to the council to recognise the local authority’s financial needs.

The spokesman added: “Business rates are a tax on occupation, hence the payment of rates on vacant property being a major bone of contention.

“The amount payable is based on the Rateable Value (RV) and the rate in the pound set by central government during each financial year.

“The RV of a property is based on a hypothetical rental value at a given time, assessed by the District Valuer, and usually revalued every five years.

“The last revaluation for rating purposes was carried out in 2008, the next being proposed for 2017 after the Government delayed the 2013 revaluation.

“The council collects these business rates on behalf of government.

“The current rate in the pound is 47.1p which, when multiplied by the RV, will determine the rates payable for the property.

“There is a small discount available for small businesses, and relief given to some charitable organisations.

“The council is a major ratepayer itself, and pays business rates for its offices, schools, day centres and all other buildings it occupies, in exactly the same way as other private sector occupiers.”




Back to the top of the page