It appears that George Osborne intends to solve one of the most pernicious failures of the UK housing market. Which is that once you have, through whatever temporary circumstances, gained access to housing subsidies then you get them for life. This is of course a nonsense: there’s a huge difference between receiving a helping hand when needed and gaining permanent access to the wallets of the rest of the population. What he’s going to do is:
Measures to force middle-class council house tenants to “pay to stay” in their homes rather than rely on taxpayer hand-outs. Rent subsidies for social housing tenants will be removed from anyone earning more than £30,000 outside London and £40,000 in the capital. They will have to pay full market rents or move out, under the plan.
It has always been absurd that temporary circumstances that lead to being granted subsidised housing then lead to a life tenancy on such subsidised housing.
That we do have a system whereby those who need it gain access to housing they otherwise could not afford is obviously going to be a feature of our society. But the idea that some life event, say, divorce, unemployment, whatever, should then lead to permanent subsidy has been a feature all along. Once you’ve qualified for council or housing association housing and got it, then that’s a permanent tenancy. But circumstances change: and there really never has been any good reason why someone should continue to gain subsidy 20 or 40 years after the just reason for its original grant has faded.
An aside for those who claim that such housing receives no subsidy: opportunity cost. Renting something out at less than market rate is itself a subsidy.
We don’t want though, to insist that people have to move out of such housing if they get a pay rise: that would be much too high a marginal tax rate. But people who are earning above the average wage (and £30k is well above it) why shouldn’t they pay market rent, not be subsidised by everyone else?
An amusing little tale from the third sector as we’re supposed to call these things these days:
The charity she founded, which specialises in therapeutic support for severely abused and traumatised children, is likely to halve in size, making £14m of cuts and sacking hundreds of staff in an attempt to survive a serious financial crisis.
On Thursday night, she said: “Some ugly games are being played. The facts are that the vulnerable children of this country remain largely unprotected. There’s no point in shooting the messenger if the message is uncomfortable. I am being silenced.”
Kids Company predicted that the proposed restructuring, which it said was triggered after the government signalled that it was to end £5m annual funding, will leave thousands of vulnerable youngsters without support.
That’s umm, interesting, isn’t it? A £5 million grant cut leads to a £14 million crisis? We can’t help but feel that there’s a little more, possibly even £9 million more, going on here that just the grant cut.
However, where the plot really seems to get lost is here:
Batmanghelidjh warned that without a regular source of state funding, Kids Company would be reliant on fundraising: “We are doing the most serious work [funded] by cupcake sales and cocktail parties, and I don’t think that is right or sustainable.”
As a result, the charity
Err, yes, that’s what charity means. Over here we have a series of things that both must be done and can only be done by government. It is righteous and just that the populace of the country chip in, perhaps in some portion related to their means, to pay for these things through taxation.
Then there’s another group of things over here. Which some to many of said populace would like to see done. Which require perhaps coordinated and collective action. But which do not require the power of government to achieve. And there’s many ways of organising those things. Corporations do some of them, mutuals others, charities yet another set. But the defining point about these forms of organisation is that they do not have the power of the State to demand, at gunpoint or threat of prison, the money to find them. They must be run in a manner able to persuade people to voluntarily cough up the cash. This is as true of Sainsbury’s trying to sell us a banana or two as it is of Ms. Batmanghelidjh suggesting that we might wish to aid deprived children.
This is one of the defining points of a charity, one of the things that differentiates it from said State. And if you’re running a charity and you’ve not quite grasped this point as yet then perhaps you should be doing something else?
It’s not looking good for the idea that Steve Hilton is well informed, is it?
My meeting with Luiz was arranged by Citizens UK, the brilliant community organisers who have been such a powerful force in campaigning for a living wage. But my real conversion to this cause was brought about years previously by an unlikely protagonist: Polly Toynbee.
Gaining your information from that source is never going to work out well, is it?
And yet he does get close, only to reject the correct solution:
Some might say that the minimum wage was deliberately set so low that it wouldn’t affect business very much. An increase to the living wage would be a completely different proposition. It is to counter this argument that in my book, More Human, I advocate what I describe as “business-friendly living wage” that requires companies to pay a living wage but cuts their employers’ national insurance by roughly the same amount to neutralise the overall impact. But to be honest, this is letting businesses off the hook. There are plenty that could perfectly well afford to pay the living wage. It’s a choice.
The actual answer is to, as we have been saying here for near a decade now, reduce the amount of tax charged to those on low incomes. We will have more on this later in the week but seriously, what is so difficult to understand about the following? If you want the working poor to have more cash then just stop taxing them so damn much.
One bizarre argument that has come up on Twitter and amongst the media recently is that George Osborne, in his ruthless free market zeal, is determined to privatise RBS, selling off some of the government’s stock now, despite this meaning the government will have lost money by rescuing the bank. According to these critics Osborne fails to see the obvious correctness of their arguments and the obvious stupidity of this move because he is blinded by an ideological obsession with privatisation.
This line of attack is nuts. Firstly, you do not make a loss when you realise it; simply turning the equity into cash does not suddenly mean the government has lost out. By analogy: imagine I buy a house for £400,000, but I accidentally drive a bulldozer into half of it, meaning that it is now worth only a quarter of what I paid. When did I get worse off: when I drove the bulldozer into it, or when I sold it? Am I still worth £400,000 until I sell the house for its new value of £100,000?
Secondly, even if you did, there’s little to no reason to expect RBS shares to rise above any other asset in the future; the government could easily lose more than the notional £12bn less its 79% stake is worth than when it was bought. There may well be some market inefficiencies (or perhaps not) but even if there are, no one is seriously going to argue that the government is playing one of the super-sophisticated strategies to exploit those inefficiencies by holding onto a FTSE100 bank that it picked up as part of a bailout.
Thirdly, simply comparing price now to price then is ridiculous: the FTSE as a whole has something like doubled since 2008 and 2009 when RBS was bailed out. If the relevant counterfactual is ‘risky equities investment’ then the government could have made tens of billions of pounds; if the relevant counterfactual is ‘pay down debt’ it could have saved billions of pounds on debt interest. On a more relevant comparison, the state has lost a lot more than £12bn. But it lost that when it invested and when the price fell.
If it’s bad to sell off RBS, that’s because there’s some special reason why RBS will do better for itself and society if owned by the government. This is quite implausible; actually it seems more likely that owning RBS could twist governmental and RBS incentives, distorting the banking market and harming society overall. It is complete nonsense to say that by selling now Osborne is losing money for the Treasury—it’s already gone.