The bedroom tax: where does Labour really stand?

Where does Labour stand on the bedroom tax?  The stance of many – probably most – Labour activists is clear; at a personal level they completely oppose this penalty on those whose social housing has a “spare” bedroom, and for very good reasons.  The implication of the penalty for “under-occupancy” is that social housing is an act of charity by the state (or, to use the rhetoric of the market consensus, the taxpayer) rather than a right; and that it should be viewed as something temporary that does not accomodate the longer-term life changes that affect families.  It is about as far removed from the vision of Aneurin Bevan, who is really the founding father of the idea of social housing as entitlement, as one can imagine.   And of course there is a simple, practical problem: the smaller homes into which people would be expected to downsize to avoid the tax simply don’t exist.

The Labour leadership – most notably in the person of Liam Byrne, Labour’s über-Blairite DWP spokesman, has not appeared ready to make a commitment to end the bedroom tax.  But now Helen Goodman MP, a Shadow Cabinet member, has said unequivocally that Labour will keep the bedroom tax in the case of those offered a smaller home.

It would be easy to criticise Helen Goodman, but one has to assume that she is merely the messenger for national policy.  And if she is correct, then Labour does not oppose the principle of the bedroom tax at all; it is arguing for retention in cases where a smaller home is available.  Now that is at one sense a cop-out; one of the reasons why the term “tax” has stuck to what is in fact a rerating of benefits is that it simply isn’t possible for most people to move, which means that in the scenario described by Helen Goodman very, very few people are likely to pay it.  So Labour’s policy appears to be to suspend the penalty in the case of what one might call “market failure”.  In other words, Labour’s response is part of the warp and weft of the neoliberal consensus.

Moreover, if Ms Goodman’s interpretation is correct, it is clear that this is all of a piece with Labour’s growing hostility to the universality principle that motivated Beveridge.  I’ve blogged before about the dangers of abandoning universality.  But most of all, the most effective way to reduce the levels of housing benefit – a benefit that is all too often a subsidy for greedy landlords – is not to impose a bedroom tax but to build more – much more – social housing, providing jobs and creating secure homes in the face of a private housing market which, in terms of both renting and ownership, has clearly failed.  But this simply appears to be nowhere near the agenda of a Labour Party whose Shadow Chancellor continues to insist that Coalition cuts will not be reversed.

Labour activists – appalled by what the Coalition is doing – surely know that the Labour leadership is part of the problem, not the solution; but appear to be impotent to do anything about it.  Opposition to the bedroom tax in Parliament has largely come from (in Parliamentary terms) the fringe – the Green Party, Plaid Cymru and a handful of Labour malcontents (notably from Scotland, where Labour’s acquiescence in the Westminster consensus is doing Scottish Labour enormous damage).

The issue remains clear.  The bedroom tax is appalling – yet another piece of collective punishment inflicted on the poor and vulnerable by a political system that serves the interests of those who caused the current economic crisis.  And without some pretty fundamental changes, the remedy will not come from any of the main Westminster political parties.

The epic stupidity of Nick Clegg’s house deposit plan

As the Liberal Democrat conference gets under way in Brighton, Nick Clegg used an interview on the BBC to announce a plan to allow parents to borrow against their pension funds to allow their children to get the deposit needed to get them on to the housing ladder.  Clegg claimed that this was the politics of not allowing the big hole in the public finances to re-open after the current struggle to fill it.

It’s an idea that, for that moment of pre-intellectual awareness before the thinking process starts, might have a certain appeal.  A moment’s thought reveals that it is quite possibly among the stupidest ideas to have emerged from a coalition that, time and again, appears to have eschewed evidence-based policy making.

It’s worth reflecting for a moment that two of the salient features of British economic life in 2012 are an ongoing pensions crisis and an ongoing housing crisis.  People are not saving enough for their old age – only about a third of those in work have any form of occupational pension – and we are being told that state provision is not affordable; and the cost of housing has, in recent decades, soared at a rate that far outstrips the increase in income.  In real terms, housing has never been more expensive.

So,  Clegg appears to be advocating that older people, with not long to go until retirement, should effectively gamble their savings in order to provide a subsidy which will in effect boost house prices even further.  If this was not bad enough, in an illustration of how desperately out-of-touch Clegg and his party are, an unnamed (possibly for his own safety) Liberal Democrat source has apparently told the media that £40,000 represents a decent-sized pension pot – enough to buy an annual pension of £2000.

The same Liberal Democrat spokesman has apparently said that the scheme will work because many people take a lump sum out of their pension at retirement, and that’s where the cash could come from.  Perhaps that’s true; but it’s not really an option for many people, especially for those who are retiring now and finding that, thanks to the 2008 crash, their pension funds are rather less than they had thought.  And it is hardly a prudent or responsible attitude at a time when life expectancy is increasing but so are the costs of old age, and when a Government in which Liberal Democrats play at least a minor role is cutting support for the vulnerable and privatising the NHS.  Is it intelligent or prudent policy effectively to strong-arm parents into reducing their pension funds when the financial uncertainties of old age are so great?

Moreover, it will do nothing to tackle the fundamentals of why housing costs are soaring – which are much more deep-rooted than anything that Clegg and his party seem willing to discuss. It does nothing to discourage the dangerous fiction that high house prices are a sign of prosperity; that houses are seen as an asset against which to borrow or secure our old age; or to remove the risk of bubbles from housing markets.  In fact, it encourages the attitudes that have turned the provision of the most basic commodity of life – a roof over one’s head – into a matter of speculation, which in turn have fed the deep instabilities in the housing market.  It makes the fundamentals worse, not better.

And our same hapless and anonymous Liberal Democrat spokesman is apparently claiming that this could help 12,500 households. In other words it’s barely scratching the surface.

This is not rational policy-making. It’s wrong in principle and it doesn’t address the problem in any event. It’s what happens when you ask a spin doctor to come up with a pre-conference soundbite.

Perhaps the most objectionable aspect of this policy is that it is a form of evasion – an admission that there is a housing problem but one that refuses to move beyond the belief that the market can solve it all.  It can’t.  I believe it is impossible to understand Britain’s housing crisis outside the context of the decline in the provision of social housing – and all the main Westminster political parties must take the blame for that.  It is almost blindingly obvious that the state has to take a lead in the provision of good quality, low-cost housing for rent – and a testimony to the way in which neoliberalism has blighted our national politics that not one of Westminster’s neoliberal triumverate of parties is capable of recognising this.

By the same token, the withdrawal of the state from the provision of a decent and secure old age is another policy where ideology has trumped evidence.  The intellectual convolutions of neoliberals determined to deny a role for the state are, as ever, astonishing to behold; but all of a piece with the flight from evidence-based and considered policy-making which is perhaps the single most striking characteristic of this coalition Government.

In other words: it’s stupid, frivolous, irresponsible and unworkable. And curiously typical of the contribution that Clegg and his party have brought to Government.

Cameron and the economics of the family

You can tell the Tory Party is in trouble.  Dreadful economic numbers, NHS reforms in tatters, public sector workers declaring that enough is enough.  So, once again, David Cameron uses Father’s Day, that annual festival for the greetings card industry, to make pronouncements on family issues in a piece in the Sunday Telegraph today.

At one level you have to hand it to the Tories.  In the old days, kicking a few single mothers would have been enough.  Now it’s more sophisticated – now it’s fathers who run away from their responsibilities who are in the firing line and there’s even a reference in Cameron’s piece to heroic single mothers.  Progress of a sort, I guess, but Cameron’s argument still shows overwhelmingly that he doesn’t get it on the family, and what his chosen economic ideology does to them.

Cameron’s article is couched almost entirely in terms of the economic role of fathers, and underlying it is a potent but nonsensical myth – that families can and should be supported by a single male income.  Pernicious, because it involves an economic determinism of gender roles that has no intellectual support, but also mendacious because it ignores how the balance of economic power has shifted against those on average incomes in the neoliberal decades – indeed, how it has shifted from wage-earners to the holders of capital.

My father was a skilled worker earning quite a bit more than the average wage.  Growing up in the 1970s that allowed us to live comfortably, as homeowners in a pleasant suburban semi.  In other words, on one income we had a lifestyle that increasingly now takes two full-time incomes to maintain.  Moreover, we had the expectation of things like a free university education – I was the first member of my family to go to university as a result.  I guess we were pretty normal.  We certainly – apart from the mortgage – never used credit – to this day my father refuses to have a credit card.  It’s quite hard to think that how recent that all is, and how different it is from the economic struggle families face now, balancing their working lives and sinking scarce resources into childcare.  I don’t want the old split of men earning, women at home; I want both parents to be able to make their own choices about how they raise children, without both being forced into full-time employment.

Much of the change is due to housing costs.  The idea that you could buy a family home for a little more than twice the national average wage is laughable now – if Cameron is sincere in looking for factors that have had a serious impact upon family life he might want to consider the house price inflation of the past decades, in which we have become brainwashed into thinking that rising house prices are a symptom of prosperity.  Home ownership was once the bedrock of Tory social ideology, reaching its apogee in what we now know was the disastrous policy of selling off social housing – now, for a whole generation, it is an impossibility, while renting has none of the security that legislation provides to tenants in mainland Europe.  And lifestyles are increasingly funded by the rolling over of credit.  And this is increasingly a cause of economic instability – as David Harvey has convincingly argued, every economic crisis since the 1970s has originated in a credit bubble fuelled by speculative property-price inflation.  Speculation, house price inflation, economic instability and credit-fuelled consumption have meant that economic life has become more and more difficult for people – families – who are earning average or above-average incomes, while wages continue to decline as a proportion of total income.

So Cameron’s vision of father going to work to provide economic security is no more than a piece of nostalgia – the sort of nostalgia that survives in the most economically privileged Cabinet for decades but has no relation to daily life as lived by the vast majority of citizens.  Yes, marital breakdown is an issue and of course there are men who run away from their responsibilities, economic and otherwise – but let’s stop making easy judgements about individuals when the system is stacked so firmly against them.  And New Labour, locked in its free-market mindset, is guilty of exactly the same simplifications.

Most of all, this is about allocating blame for poverty to the poor themselves.  Children and single mothers do not, in Cameron’s view, live in poverty because the economic system has failed them and because the ideology of market economics is stacked so overwhelmingly against them, but because of the actions of feckless individuals.  We are back to the ideological distinction, so important to neoliberalism and the intellectual core of the Big Society, the contrast between the deserving and the undeserving poor.  It was a lie that Beveridge and his successors nailed more than half a century ago, but ideology, the illusion of prosperity, the growth of evangelical religion and the cheap moralism of the media have allowed its return.  It’s as toxic as it ever was and it’s the duty of anyone who believes themselves to be on the left  – are you listening Ed Miliband – to fight it with every weapon they have.

Alarm clock Britain – a wake-up call

Just when you thought Nick Clegg had reached the limits of absurdity, out comes more idiocy. The Guardian today reports that Clegg intends to speak up for what he calls “alarm-clock Britain” – people on low to middle incomes who are anxious about their standard of living. The patronising phrase “alarm clock” Britain is supposed to describe shift workers going to work in the dark – an overtone of Sarkozy’s election phrase about the France that likes to get up early, and surely only a Liberal Democrat wonk would be so lacking in self-awareness as to parrot Sarkozy’s election phrases.

It’s absolute nonsense, of course. The serious political point that Clegg is apparently trying to make is that the Coalition cares about people on middle incomes and he is reported as being concerned that the Lib Dem proposal to raise tax thresholds has been drowned out by noise about cuts.

If that has happened, it is for a very good reason; cuts in services and public sector jobs – will hit those around the average UK household income – about £25,000 – much harder than the tax thresholds will benefit them. Changes in National Insurance contributions will hit those paying the basic rate of tax; the cost of childcare is soaring as nurseries close; VAT and fuel price rises will hit the middle hard. Cuts in front line health and education will mean the end of services like out-of-hours GP surgeries and school breakfast clubs. Millions of middle-income earners work in the public sector, where no job is safe. And proposals to roll back employee rights will reduce the security of low and middle paid workers further.

As so often with Clegg, it’s difficult to know where the ignorance ends and the mendacity starts.

But there’s a longer-term trend here too.

One unintended effect of this may be that an important truth will emerge – that in many ways in the past two decades people on average incomes have got poorer and poorer. Much of that is due to speculation-fuelled increases in house prices and rents, but it also comes from the removal of key public services like free higher education and the fact that essentials like prescriptions and dental care, and public transport, have become hugely more expensive in real terms. Most of all the way in which free-market capitalism has undermined the family – ensuring that in most of Britain it is almost impossible to afford a house without two full-time incomes, in stark contrast to the pre-Thatcher years – will be increasingly apparent.

And it comes the day after the Coalition announces that it will do nothing to rein in the bonuses paid out by banks partly owned by the taxpayer, and bailed out with taxpayers’ money.

It’s the contrast between the ostentatious wealth of the few and the steady impoverishment of the middle that has been a key factor in the rise of the Tea Party movement in America, where claims of economic might mask a growing crisis as millions of middle Americans downshift into poverty. The coalition’s policies mean it will happen here.

Is Clegg prepared to take the consequences?

UK house prices – it could be worse than we think

News from Britain’s largest mortgage lender, HBOS, suggests that house prices in the UK fell 1.7% in July - giving an annual fall of 8.8%.

But there’s some evidence that this underestimates the size of the fall.  Lord Oakeshott, the Liberal Democrats’ Treasury spokesman, has argued that prices of domestic properties at auction have fallen much more steeply – by 18.7% between the second quarter of 2007 and the same quarter of 2008.  Oakeshott argues that this figure has greater immediacy than the more widely published figures, since buyers at auction have to exchange contracts and pay their deposits immediately the sale is made.

If this is true – and events do seem to have indicated the Liberal Democrats, in particular Vince Cable, have read the situation much more accurately than most mainstream politicians – it is a dramatic indication of the sheer irrationality of what was happening in the UK housing market a year or two ago, and the poisonous impact of cheap credit and irresponsible bank lending.  And the question remains – in what sort of society is the price of the most basic commodity of all, a roof over one’s head, left in the hands of an unstable and speculation-driven market?

Bursting the bubble

On a day when the Nationwide Building Society published figures showing that UK house prices fell by 2.5% in May, there has been some reflection in the media on whether this is a good or a bad thing. Larry Elliot’s column in the Guardian was a particularly welcome piece of common-sense; he recognises that the so-called “housing boom” has seen a massive shift in resources from the younger and poorer to the older and richer.

But, nagging away behind all this, there’s a much more fundamental question. Supposing that, in the longer term, there is a fundamental instability in house prices? After all, the story – in Britain at least – has been long term cycles of boom and bust, a market that is apparently incapable of settling into a stable equilibrium. Now there’s quite an interesting issue here of the psychology of the market, and the way in which it has been a vehicle for speculation. As this article by ABN AMRO bank suggests, the UK’s house price trends have been much more volatile than in the US, where the current credit crunch is supposed to have originated; it identifies speculation and willingness (and ability, supported by lax monetary policy) to service debt as important features in the UK, and argues that houses may be overvalued by as much as 50%.

Obsession with property is a peculiarly British condition.  Back in the late 1970′s – another boom-and-bust period – Harold Lever was arguing persuasively that this obsession was damaging the British economy.  But since then we have been increasingly suckered by the view that the market can do no wrong.

We’ve also seen the social and economic divisions it causes – the redistribution of wealth to the already wealthy, the fact that increasingly both parents in a family have to work full-time to pay the mortgage, the vulnerability of people who have to borrow increasingly large multiples of income to buy a house at all.

The question may be whether we are prepared to accept what looks in the long term to be a fundamental instability in the market for the most important commodity of all – indeed to accept regulatory “reforms” and tax regimes which offer incentives to speculate – in the name of cultivating this socially and economically divisive obsession.

An Englishman's home …

It’s abundantly obvious that Britain’s long property boom is coming to an abrupt and painful halt. Articles such as this from today’s Independent strongly suggest that not only are prices already falling, but there is much worse to come.

It’s perhaps time to start asking the question about what these events tell us about markets and prosperity.

Property price equals wealth?

It is almost axiomatic in large swathes of the media that rising property prices are a good thing, a sign of increasing prosperity. I believe this is nonsense – how can a rapid increase in the price of this most basic of commodities, much faster than people’s pay – possibly be a sign of wealth? If any other essential goes up in price in this way, it’s seen as quite the reverse. Now this is partly because we don’t consume houses – but we do buy and sell them, on something called the property ladder, although the fact that the price of the house we might want to buy in future has gone up means that the increase in wealth is more apparent than real. And we can borrow money against them. But it’s also because there are far more people at any one time who own houses than are seeking to buy one. It’s essentially an illusion of the prosperous.

But there is a social pressure too. Unlike our neighbours in Europe, the British are obsessed with home ownership – it’s part of our obsession with class – and people will take increasingly desperate measures – by which I mean borrow increasingly unsustainably, or even dishonestly, to fulfil the dream of home ownership. And this process is of course self-fulfilling – the price goes up, so the amount that one has to borrow goes up, but so too does the value of the security … until it all goes bad.

Credit crunches and blind stupidity

The recent events – blamed increasingly on what has become known as the credit crunch, the domino-like collapse of world liquidity caused by the collapse in the sub-prime market in the United States – seem to me to illustrate some important facts about the way in which what I firmly believe to be the illusions of market economics are maintained. It should have been obvious that the collapse was going to happen. Increasing lending, desperate borrowing by people who cannot afford to repay in an environment – in the United States in particular – in which real incomes remained static or were even falling – can only lead one way. And add to this a financial system which seems totally dependent on faith and optimism, and the speed and severity of the crash become almost inevitable.

In the circumstances the word “credit” is accurate indeed. What we have is a system in which people who have been sold (not least by themselves) as great experts, manipulators of a fundamentally benevolent system – have shown themselves to be about as understanding of reality as a Roman soothsayer inspecting the innards of a sheep. It’s all puff, all desperate blind faith, with no underpinning whatsoever. In most other areas of life, it would be called sheer abject stupidity – but when one calls oneself a banker and wears a pinstripe suit one seems to be able to get away with stupidity more easily than most. (But not more easily than the legions of journalists, TV programme-makers and pundits who have wittered on for the last few years about housing booms). There is a whole industry – an industry built on an edifice of epic stupidity – that has been building all this up as wealth.

Inflation, inflation, inflation

As any economist knows, there is a simple word for what has happened: inflation. And it’s no less inflation for not being included in the official figures. And we know what inflation does; it creates illusions.

The bursting of the bubble is wholly predictable by anyone with the slightest understanding of the basics of economics. The fact of what has happened over the past few years is that the commentariat has taken leave of its collective senses. It has simply praised the workings of the market, without giving a thought to the consequences, and has shown a pitiful inability to engage with reality.