People are asking me what I think of the Labour Party manifesto as we currently know it.
I have already praised the corporation tax policy.
I have suggested that the tax avoidance policies miss the big issues but hit some other targets.
I think plans to change tax rates are moved in the right direction, but do not go far enough on capital gains, for example.
But let me explore more broadly. The moves on education are wise. Business has demanded it. And should help pay for it.
The NHS needs all the funding it can get.
Tackling privatisations that have failed to deliver in promises is logical, and popular.
Building houses is essential
So too is protecting employees if inequality is to be reduced and people are literally going to be able to afford to live.
Being open minded on Brexit just makes sense. Which means immigration has to be addressed, but cautiously.
I could go on. My point is that there's little in here that doesn't make sense and is needed. It's also wholly affordable: most of this will simply pay for itself due to straightforward multiplier effects when there is so much capacity to do more in this country.
But the point is, what makes this left wing rather than sensible management of an economy where so much that needs to be done is currently left undone?
I hope the National Investment Bank is to come.
And that is because most of all there is nothing here to realign the economy permanently for the benefit of most people in this country.
There is no idea equivalent to the NHS.
Or the minimum wage.
Or comprehensive education.
Right now there is nothing yet to say what could identify a Labour government if we were to get one as a great transformational administration.
Maybe that's to come.
I can just hope it will. Because we need that transformation.
I'd love it if it was a transformation of economic thinking made real in savings, investment, innovation and funding that transforms public perception of the role of government.
Is that too much to hope for? I don't think so.
But the Big Bang has to come then.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Asset based welfare policies need to be reexamined as these are designed to reduce inequality. Welfare policies based on income are incapable of making inroads into inequality.
I would that there needs to be a more radical approach to one and rid the country of one of the underlying diseases that wrecks lives, hope, destroys communities and creates permanent social division and wealth concentration anf that is, of course:
HOUSING
It is a hot potato because after 40 years of totally uncontrolled bubbling, foreign investment in housing as asset, housing as a main generator of GDP, housing as personal pension plan, housing as rop-off buy-to-let landlordism, housing as a destroyer of real social values, hosuing as a generator of unearned increment for 39% of Tory M.P’s and 22% of Labour, it is now difficult to deal with without complex measures to counteract public resistance to those affected by negative equity and the knock-on effect to banking and businesses connected with the fictionalisation of housing.
housing itself is the sign of how fundamentally bankrupt our economy has come. Housing is the generator of massive private debt which many think will blow up the economy soon (it already has done in a way). It needs imaginative solutions.
House building itself is, of course, vitally important but we need more than that; house building itself might not bring prices down far enough to a level that is reasonable and can breathe life back into an economy with a necrophiliac financial sector abusing the need for a roof over your head.
Politicians have shirked this for over a century. The building of houses will be transforming but might not bring the prices down to the 25% level of disposable income traditionally considered the upper limit for a sane economy. So what is needed is effective credit control of banks which existed until the 70’s before it was unwisely loosened. The loosening of credit controls in 1971 brought the first mini-bubble immediately then successive waves have got us to where we are with the biggest wave under Labour whose non-watch witnessed a 370% increase in mortgage lending as boom-bust cycles were thought to have been eliminated in a laughable bust of hubris. Without the reintroduction of credit controls the prices will NOT go down sufficiently and people will still struggle. The prescription I favour would be:
1) The house building itself.
2) Introduce credit controls
3) Introduce rigorous restrictions so that there is no buy-to-let, only purchase by the residents and social lets.
4) As house-prices gradually fall a tapered ‘bail-out’ for those most adversely affected and likely to loose the most which will, in effect mean the most recent buyers as opposed to those who have experience ‘unearned increments’ over years of sitting on property. This will be the most complex area to work out.
5) The introduction of Land Value Tax so that this nonsense cannot happen again and that the financial system cannot again make easy money on the basis of piggy-bank housing.
Of course this is only ‘top-of-the-head’ thinking and many complex details need to be thought through. But let’s be clear: The housing crisis has destroyed the real economy, it savages hope for the future and has turned the country into an island of rapacious rentierism with buzzards picking at the fetid corpse of the housing market.
Houses are places to live in FROM where we do things of social value. Housing has been the main road to serfdom. Labour has not spelled this out enough and I fear that it will not do enough to bring this nonsense to an end. The building ALONE won’t fully solve it without further policy back-up.
Agree.
For me the big idea should be labour reinventing and massively investing in Social Housing. They need to get away from the idea of Council housing being some how dirty/undesirable.
Ideas:
i) Non-market mortgage / Right to buy revisited
Allow people to buy and own a social housing property at significantly below market rate. The ‘ownership’ comes with a clause that you can only sell the property back to the housing association, at below market rate – thus maintaining it as a genuinely affordable home forever. Give priority to people on average and lower incomes.
ii) Allow housing associations / local authorities to issue bonds and start massive house building programs. Give them funding too. Massive investment by the Government in housing is affordable, because it is contrasted against what people would instead be paying for market housing. This is a key point for anyone trotting out the affordability argument.
iii) Don’t proactively try to crash the housing market/ massively reduce prices, just give people alternatives. The rest will take care of itself.
I like those ideas, a lot
When I was at the point of wanting to buy a property, back in the late 70’s, I was perplexed that there was no building society of any significance in the city where I lived.
On thinking about this I remembered that my parents bought their property with funding from the local authority at a very competitive rate. I surmise that the LA was able obtain funding cheaply because it was effectively government-backed and the terms of the loan were not speculative i.e. a significant deposit was required and the maximum loan to annual income ratio was low. This effectively meant loans were cheaper from the LA than the building societies or other financial institutions.
LA loans for house purchasing seemed to disappear, not sure when (I suspect in the early Thatcher years), but I cannot think of a better investment an LA could make then to provide cheaper loans to it constituents for house purchasing or building. Let’s hope the new ‘Metro Mayors’ try to re-institute this practice.
It would be good
Page 86:
Labour government will give local government extra funding next year.
We will initiate a review into reforming council tax and business rates and consider new options, such as a land value tax, to ensure local government has sustainable funding for the long term.
Page 60
We will keep the Land Registry in public hands, where it belongs, and make ownership of land more transparent.
I hope so too! We know the Earth isn’t flat, but in an economic sense, the voters think it is. So how to get them to vote for sensible economic policies without offending them without their thinking that their tax bills aren’t going to have to rise to “pay for” them.
If the economy is functioning correctly with everyone in work, who wants a job, then we’ll obviously all be better off for it. But there’s always the question of how these things can be paid for. You asked that yourself in a recent posting.
I think we should avoid the word ‘debt’. I think liability or obligation might be preferable words but I don’t think there is an ideal word in the language. Maybe we need to think of one?
The fact is that assets and liabilities have to be equal and opposite in an accountancy sense. Everything needs to sum to zero. So the government has to assume an obligation to hold the negative numbers so that the rest of us can enjoy positive numbers.
I’ve tried out that argument on a few of my friends and they seem to go along with it.
You’re saying government made money is private wealth
“You’re saying government made money is private wealth”
If the Gov ran a balanced budget one year and taxed an amount equal to what it spent, then there could be no aggregate savings that year – so it follows that, if it ran a deficit, then the money it hadn’t yet collected in taxes would (being still held by the non-government sector) equal private wealth….so, yes.
Is that a bad thing? No.
Agreed
I’d just make the point that wealth isn’t the same as money. Wealth includes the factories, the farms, the transport system etc. Gold bullion even!
If we add in the real things then everything doesn’t sum to zero.
They definitely don’t
But remember government debt is a private asset
Or the asset of an overseas government.
I thought there was talk of a National Education Service. We could call railways and buses a National Transport Service.
We also need a National sustainable energy service to address climate change.
I would agree with the other commenters and add housing (which needs to be taxed for distributional reasons).
Basically the ingredients, security, knowledge, and energy that allow everyone to be economically active.
Simon
Interesting.
Since when has being in debt been an asset? Because that’s what all these houses are until the mortgage is paid. Never lose sight of the fact that housing is both an asset and a liability.
The reason why there is so much financial pressure on home ownership is because they spend so much money doing houses up that have been badly looked after by the previous owner as the distorted market inflates prices even for poorly maintained homes.
What is needed here is a new model for surveying and valuing homes for sale that takes into account investment/lack of investment in the valuation as part of the valuation. Caveat emptor should be consigned to the dustbin of history in my view. I cannot think of any other market for everyday people that gives the buyer so little protection from ‘faulty goods’ as our housing market.
Negative equity? Does this actually exist? Or is it created by the financial sector to make us feel bad? Even if you had lost money on a house would you seriously get minus x amount of pounds for it upon sale? Of course not. You would still have liquidity to spend from the transaction in most if not all cases – just not as much. The concept of negative equity once again puts the asset value before use value.
The bigger problem with our economy is the decline in wages and other earned income. People are augmenting poor pay and pensions with rent income because they have to. A review of wages and pensions might retard the growth in landlordism.
We must also curb other financial bullshit where the value of your home is used to extend your credit potential. Stuff like equity release and using your home as security against other lending should be stopped and if not more heavily regulated.
The answer? I think social housing/state funded housing rented accommodation is the answer with the option to buy in all cases and the money being ploughed back into redevelopment.
We also need to look once again at the mortgage based securities market too.
As long as housing is treated as a derivative by the financial markets I see very little changing. We need to get back to housing’s use value – that is for sure.
A lot of creative thinking is needed on this issue -the main parties haven’t done this and even Labour hasn’t done it as fully as I would like ( though I haven’t read the details yet).
On a humorous note I cam across this Limerick:
A capricious economist planned
to live without access to land
He nearly succeeded,
But found that he needed
food, water and somewhere to stand!
Very good
Excellent and it should be used for education!
PSR,
If you buy a house with a 100% loan then you have your liability of the loan plus the asset of the house. So, assuming you didn’t pay too much and excluding estate agents fees and other additional costs, your net worth is the same as it was before you bought the house. But now you have somewhere to live!
After a time you’d hope your house would be worth more. On the other hand you’d have paid interest on the loan plus repayments. You’d need to calculate, then, if you’d done better than renting.
But the way the housing market has always been means that you’d end up with a net asset long before you’d paid off your loan.
That probably won’t happen for ever though! There may be a reckoning in the not too distant future. You’ll know what negative equity really means then.
[…] Hat tip: Simon Cohen […]
Not a mention of leasehold tenure, a scam that blights the lives of millions of people. See http://www.leaseholdknowledge.com.
Abolished everywhere that inherited it from English common law but retained in England & Wales.
I agree: this is a rent that has to be abolished