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The pain on the high street

An editorial in the Guardian today refers to the failure of major retail chains and the increasing number of empty shops on Britain’s high streets.

The retailers referred to were all part of the froth economy and it was inevitable that they would fail when the going got hard. Some, perhaps most, had failed to keep up with changing tastes. However, the fiscal incentive is to keep vacant premises empty. In the absence of proper LVT as the Campaign advocates, what is needed is legislation to ensure that

  1. 100% rates are payable on vacant business premises
  2. Constructive demolition (ie to reduce rates liablility) is treated as tax evasion and rates  continue to be payable at the old valuation.
  3. Upwards only rent revision clauses are null and void.

This would force rents down to market-clearing levels and ensure that landlords brought vacant premises into use at realistic current market rents. But none of this is going to happen. On the contrary, government thinking is in precisely the opposite direction. This will prolong the recession. Real rents will eventually fall, but this will be due to inflation, which appears to be the policy of both the Conservative/LibDem government and the Labour opposition. Thus, rather than take steps to remove the present dysfunctionality in the property market, the favoured strategy is to punish the thrifty and prudent by destroying the value of their savings.