A Dogmatic Approach To Social Housing

For today's post, I'm again drawn to the Red Book and the 'problem' of social housing.

Remember, the game here is not to solve anyone's housing problem. It's to get the Labour Party elected to run the country. So it becomes necessary to explain the social housing problem in that light, rather than in a way that might elucidate its root causes and allow us to figure out a solution.  The facts should not be allowed to get in the way of a good story.

Why social housing? Because, as Dr Eoin Clarke explains, Labour's figures show it was deserted by a disproportionately large number of private renters, compared to property owners, in 2010 compared to 1997.  I can't vouch for any causal connection, but let's roll with it.

The primary challenge for the Labour Party is that this slide in support appears to have beeen a problem of its own making. Dr Clarke explains that in his view, "The Right to Buy scheme launched by Margaret Thatcher in 1981 was initially a good thing." And by the time she left office in 1990, the government was building social housing at about the same rate as it was being sold. That continued during the Major government, although both social housing sales and builds decreased steeply. 

Dr Clarke then asserts that the reason for the decline in sales and new builds of social housing was that Thatcher wouldn't let councils keep the sales proceeds - although that doesn't explain why the programme seemed to go okay for its first 9 years so I suspect something else was going on...

But never mind all that. Here's what happened next, according to Dr Clarke: from 1997 to 2010 there was virtually no social housing built at all, social housing sales boomed and the population grew by 4.41 million. House prices "rocketed". Young families had no option but to rent and "their rent payable was often extortionate... That," confirms Dr Clarke "is the legacy of New Labour's handling of housing."

Enough said, one would have thought. Yet against this background, Dr Clarke then asserts:

"Thus, it is fair to conclude that Margaret Thatcher's Right to Buy scheme was, on balance, a disaster for British housing."

"... we don't trust the Tories to build adequate stocks of social homes, because in their last 18 years of power they only built one for every four they sold."

Huh? Where does that come from?

Ironically, a little later, in her later essay on "Understanding the Psychology of the Working Class Right Wing", Rhiannon Lockley has this to say:

"...the key achievement of propaganda is to make the belief being transmitted internalised to the point where its origin is lost and it is accepted as natural and self-discovered by the individual...  The volume and diversity of negative messages about scapegoated groups in the right-wing media today does much to achieve this, and it is also supported by the factual style of reporting whch presents arguments as definite rather than exploratory."

All of which leaves the following questions: Is there a social housing problem? If so, what is it? How big is it? What are its root causes? What improvements could we make to address those causes? What controls could we put in place to show that it doesn't happen again?

But whatever you do, don't ask a dogmatist.

Don't Just Move Your Money: Spread It, Recycle It.

Great to see the MoveYourMoney campaign up and running - certainly a step up from the calls for futile mass withdrawals in 2010. But there are two significant gaps in the message.

Firstly: why should we move our money?

We don't need to 'save'. That's not really an activitiy in itself. And it's only one side of a much bigger story. Where do our deposits go?

As a society, our financial challenge is to get surplus cash from those who have it to creditworthy people and businesses who need it. Quickly and cheaply. At the rate that's right for both parties.

Our financial institutions don't enable this right now. They pay very little to interest to savers. They keep too much of the interest that borrowers pay. They use this 'margin' to cover losses from their own poor investments. 

So we've had to invent direct finance services that cut the cost of connecting savers and borrowers - meaning higher returns on savings and cheaper borrowing costs. As each borrower repays, you can re-lend your money to others. Think of it as financial recycling. The banks still play a role - the operators of these new services recycle the money through segregated business bank accounts - but they don't get to use your money the same way as if you opened your own personal savings account.

But this brings us to the second gap in the MoveYourMoney campaign. We shouldn't move our money to just one place. We need to put our eggs in lots of baskets -  we need to diversify more. There are many other baskets for your eggs than those listed.

Yet we are incentivised by government not to diversify. Most of us only get basic tax breaks (e.g. ISAs) for putting our small amounts of savings in the bank or building society (or in regulated stocks and shares).  This not only discourages us from using more efficient services, but also protects banks and building societies (and managed investment funds) from competition. Worse, it encourages us to put all our eggs in a few baskets, so our holdings of surplus funds are not diversified. We're told this is 'safe' to do because at least some of our money is protected by the Financial Services Compensation Scheme. But such insurance does not ultimately make these baskets 'safe' for all of us as a society. It makes these baskets expensive - because as consumers we all pay for the compensation scheme in the end. And we pay again as taxpayers when the highly concentrated risks in the financial system bring it grinding to a halt.

MoveYourMoney may not yet explain the need to get your money quickly and cheaply to creditworthy people and businesses who need funding. Nor adequately explain the need to diversify. But the government is now aware that the regulations and incentives are wrong. And organisations like MoveYourMoney should be helping us to keep the pressure on government so that these problems are actually addressed.

Further, Faster, Narrower, More Targeted

Raising the personal tax allowance is a great idea. Too many low income earners are paying tax at the same time as receiving benefits - needlessly pouring tax money into the leaky Treasury bucket. But as ever, how to fund the tax break is the £64bn question.

This change brings the opporuntity to begin trimming many public spending programmes to make them more narrowly targeted. As a result, taxpayers will begin to trust the government to cut taxes rather than merely cut public spending.

Currently, there are many cases where the link between the burden of a tax and how the money is spent is unnecessarily indirect. This is no accident. As explained previously by Kristian Niemietz, the proponents of 'tax and spend' deliberately design policy and related spending programmes to favour a proportion of undeserving recipients without appearing to tax them directly. These are usually called 'universal' or 'comprehensive' programmes. This political strategy not only preys on greed amongst the 'sharp-elbowed' middle class, so that they'll welcome the policy behind the spending; but it also preys on their fear that abandoning the policy and cutting spending will not translate into lower middle class taxes. 

On that basis, the government only ever spends more, and either borrows or raises taxes to do so - a vicious circle we need to break.

Eurocratic Mathematics

Click here for the full-screen version

So, they've bailed out Greece again. This time investors took shorter 'haircuts' and the European Central Bank will pass its profits on Greek bonds (yeah, right) to national central banks so that it "may be allocated by Member States to further improving the sustainability of Greece’s public debt." If all goes really well (uhuh), this €130 bn 'lifeline' should mean that Greece will still owe the world 120% of its GDP in 8 years time.

To ensure Greece takes the requisite fiscal pain, it is to be permanently monitored  - the sovereign equivalent of house arrest. But the Greeks won't mind the ankle bracelet, as they've had one before. Five years after the 1893 default:

"foreign pressure led Greece to accept the creation of the International Committee for Greek Debt Management. This committee monitored the country's economic policy as well as the tax collection and management systems of Greece."

In fact, Greece has been in default for about half the time since achieving independence from the Ottomans. It's the country's part-time job. And I'm sure the latest reprieve won't rid Greece of its feeble system of political patronage, either. History is doomed to repeat.

So of course the numbers are all rubbish. This is Eurocratic mathematics, the bunting on the facade of a single Europe.

I'm sure we'll all get used to it - unless, of course, they cut Greece loose...

Image from Demonocracy, hat-tip, ZeroHedge.

Gasp! UK Bank Enables Mobile Money Transfers!

The comments under the Guardian's piece on Barclay's mobile money transfer app tell you everything you need to know about the pace of innovation amongst UK retail banks ;-)

Image from JISC infoNET.