Kingston Council has struck a new deal with the Rose Theatre that will see the venue’s rent slashed by £115,000 a year and a £1.7m loan written off.

A new arrangement will cut the theatre’s rent to £35,000 from £150,000.

Jan 2014: Kingston's Rose Theatre reports £204,000 annual loss as key productions flop

The council has also written off a debt of just under £1.7m – the outstanding balance of a £1.8m interest-free loan, which the Rose was paying back in yearly instalments of £18,000 over a 100-year period.

In a report due to be heard by councillors next week, officers said rent was “much too high” considering the nature of the building and the fact it could not be sold or assigned to another party.

In addition, the Kingston Theatre Trust, which runs the Rose, will receive £147,000 from the council in annual instalments until 2019.

In return, the Rose’s annual £500,000 funding from the council has been cut to £265,000 a year, and will cover the costs of free school tickets and council-run and community events.

There had been fears the Rose would see its council support scrapped in the wake of the Conservatives’ victory in last year’s local elections.

Council leader Kevin Davis suggested after his election in May that the Rose would have to make money if it were to survive.

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But the report notes that closing the Rose would initially cost £514,000, and £296,000 for every year the building remained empty, for costs including security, business rates and maintenance.

Councillor David Glasspool, lead member for arts, leisure and heritage, said: “These new simplified arrangements clarify the relationship between the Rose and the council and should assist the Rose in securing external funding and making financial plans for its long-term future.”

Rose Theatre chief executive Robert O’Dowd said: “These changes are important for the Rose and the new agreement is welcome.

“Removing the historic debt and equipment lease frees the trust of that debt on the balance sheet and so will help us to attract independent philanthropists and funders who, together with the borough and Kingston University, are equally essential to the future of the Rose.”

Liberal Democrat leader Councillor Liz Green welcomed the agreement, but added: “We need to look at how many schools want to take up these tickets and how much running community events in the theatre costs.

“If that goes over the £265,000 set aside then we might run into problems.”

The deal comes after the theatre’s latest accounts showed a loss of more than £50,000 last year - still a significant improvement on the year before, when it posted a deficit of £204,000.  

The theatre also generated more than £3.5m from performances, compared to just over £3m in 2013.  

Ticket sales were up almost £450,000 with the Christmas performance The Snow Gorilla performing particularly well. 

The theatre spent £1.3m putting on productions last year compared to £960,000 in 2013. 

Total expenditure at the Rose was £3.6m in 2014 up from £3.2m in 2013.