Green belt is the reason for rabbit hutch UK

A Cambridge University study has claimed millions of people are living in homes that are too small for them, and the poorest are being hardest hit, what the academics call ‘rabbit hutch’ Britain.

The academics at Cambridge should know. It is one of those towns, forty miles from Central London, that is booming as a result of London’s suffocating ‘green belt’. London house prices have been soaring, and people who work in the capital have been forced to find homes further and further away. They blame foreign property buyers, or even the government’s Help to Buy schemes, for the surge in prices. But that is only part of the story. The fact is that London, like many other cities in the UK, is not building enough houses. To meet the demand, the UK would have to build around 260,000 houses each year. Last year, it built just 110,000. And, like the national debt, that deficit has been stoking up housing pressure for at least the last thirty years.

It is near-impossible to build houses to meet that demand hangover. The green belts, announced in the Town and County Planning Act of 1947 and introduced in the early 1950s, were supposed to be slim areas of woodland and farmland surrounding our cities. The idea was to stop ‘urban sprawl’ and to give city dwellers some nice countryside nearby that they could enjoy. The farmland, however, has become industrial farmland, more like the prairies of the MidWest rather than the bucolic idyll of Olde England, and quite inaccessible to the public. Meanwhile this so-called ‘green’ belt has been extended further and further as people living in it or near it campaign to stop development near them – which, if successful, means that their home rises in value because of the huge unfulfilled demand. So 73% of Surrey, near London, is now green belt, and the few houses their command huge premium values, as do those in the other Home Counties. In the cities themselves, space has become so valuable that homes have indeed become rabbit hutches.

As Paul Cheshire, Professor of Economic Geography at the London School of Economics (and a recent speaker at the Adam Smith Institute) points out, greenbelts are a form of discriminatory zoning. They deliver no real benefit to a poor child in Haringey, five miles away from the green belt. But they do deliver benefit to the stockbroker-belt residents, keeping the urban unwashed and their housing out of their backyard.

The Adam Smith Institute has suggested that 800,000 new homes could be built around the capital by shaving just half a mile off each boundary of the London green belt. Politically, of course, that is difficult. Every homeowner in London, and particularly those around the green belt, have an interest in keeping the supply restricted. Cheshire has another suggestion. Because of the green belt restrictions, if you can get planning permission on a piece of land, its value soars. Cheshire would simply say that when that premium reaches a certain level, it is obvious that the market is telling you something. And where the premium is highest, that is where we should release land for new building.

Liberalism day

Today is Liberalism Day. It’s the day when we snatch the word ‘liberalism’ back from the American left, who on most economic matters at least are anything but liberal.

Genuine ‘liberalism’ developed in the seventeenth and eighteenth centuries, under the guidance of philosophers like John Locke and Adam Smith, and flourished in the nineteenth century, guided by yet other philosophers like John Stuart Mill, not to mention a clutch of enlightened politicians.

The early liberals – the Old Liberals or Classical Liberals as they are called – thought that economic activity in free competitive markets was an important part of freedom in general. The key feature of liberalism is the presumption of liberty: there may well be good reasons for curbing people’s freedom in various cases, but the onus is on those advocating the curb to justify it.

If only our politicians today would begin with such a presumption – instead of presuming that they have the solution to everything.

Retrospective taxation and the rule of law

The UK is considering legislation to prevent people creating multiple trusts in order to pass wealth on to their family free of tax. Setting up a tax-exempt trust as a way of avoiding inheritance tax is very common – particularly when the tax is levied at 40%, and now that rising house values are taking so many families into the tax.

New HM Revenue & Customs rules will make it no longer possible to set up several trusts, each with its own tax-free allowance of up to £325,000. The new rules will come into force in 2015. But in order to prevent a rush of people creating new trusts, the reforms will apply retrospectively to all trusts established since June 6.

Well, there you go again. It is quickly becoming obvious that the rule of law does not apply to UK taxation any more. Already, schemes under which people arrange their affairs in ‘tax efficient’ ways that are perfectly in line with the UK’s (absurdly long and complex) tax code, are being struck down by HMRC, simply because they are arrangements designed to reduce a person’s tax bill. And now, it seems, HMRC can now make up new rules and make them apply to actions that take place even before the rules are put in place.

This is a mediaeval attitude to justice, redolent of the age of Morton’s Fork. That was the ingenious design of John Morton, Archbishop of Canterbury in the 15th century, who argued that a man living modestly must have plenty of money saved and could therefore be taxed, while a man living extravagantly was so obviously rich that he could easily afford to be taxed.

Retrospective legislation is not confined to tax law. A 2013 House of Commons Standard Note, Number SN/PC/06454, lists many examples, all since 1996 – covering tax on caravans, compensation for mesothelioma, British activities in Antarctica and wireless licence fees. Retrospective liability for war crimes was introduced in 1991. The Conservative minister Nick Herbert used emergency legislation to reverse a High Court ruling on detention. And the Conservative Health Secretary Jeremy Hunt in 2012 retrospectively validated the authority of clinicians to detain people under the Mental Health Act.

Most of these measures were done for good reasons (rather than to raise money, as the tax changes have been). That does not make them any less of an affront to justice. You cannot be guilty of something that was not a crime at the time. The detention of a person by an unauthorised official does not become legitimate by backdating that authorisation. Unless the law is known and certain, there can be no justice. I predict, not a rush of new family trusts being formed, but a rush of tax advisers petitioning the High Court on this very point.

Will more govt spending on childcare really help?

The UK government is expected to make childcare free of charge. Parents with young children in the UK spend on average a third of their household income on childcare, compared to just 13% in other countries, according to OECD figures, and 25% of parents in severe poverty in the UK have given up work, and 33% have turned down a job, because of high childcare costs.

However, UK already spends more of its GDP on government support to families than any OECD country except Denmark and France. State-funded childcare in the UK starts at three, or two for lower-income families, but it is limited to 15 hours per week. Some 10% of government support for families goes towards maternity and paternity leave, compared to 17% in Denmark. Around 26% goes on day care, compared to 49% in Denmark. Another big concession is tax credits, which Denmark does not use.

In Denmark, 97% of children aged three to five, and 92% aged one to two are in day care. While around 55% attend centres, the rest are looked after by registered childminders in private homes. Generous parental leave, flexible working hours and the absence of long-hours culture all help families with young children to be able to manage. But childcare is not free. In Denmark, families pay up to 25% of the cost of day care, with those on low incomes or single parents paying less (for the poorest, nothing), with discounts for siblings, and with the government funding the difference.

There is a case for subsidising childcare, if it makes parents able to take a job, rather than depending on state benefits. A paying job is the best welfare programme for families yet devised. But such support should go to the parents who need it, rather than in subsidies for the childcare industry. In our 1995 Pre-Schools for All, we proposed that poorer families would be given vouchers to cover the full cost of a pre-school place, with families on basic and higher-rate taxes receiving proportionately less. “Because the pre-schools provide integrated education and care,” wrote our author David Soskin, “access to them would give many parents the choice of going out to work, reducing dependency on benefits.” The government heeded this advice, but unfortunately, experiment with childcare vouchers became a bureaucratic nightmare – which it need not have done.

There are of course other possible models. In our 1989 report Mind the Children, we argued that employers should be able to provide childcare facilities or vouchers without employees having to pay extra tax on the benefit. We have also argued that the restrictions on home-based childcare are too onerous, raising the cost to unaffordable levels, and discouraging informal arrangements between parents.

If we are to make childcare available to all, instead of trapping poorer families on benefit dependency, then we need to address the costs of regulation and taxation, and to employ market principles and competition rather than dash towards indiscriminate subsidy or become swamped in bureaucratic red tape. Not an easy task for any government.

Fracking, property rights and compensation

A new Infrastructure and Competitiveness Bill, to be announced to Parliament in the Queen’s Speech on Wednesday, will change the UK’s trespass law to allow shale gas exploration firms to drill beneath private property without needing the owners’ permission.

This move will greatly advance fracking in the UK, where there are large shale gas reserves. It will bring major economic benefits, not to mention increased energy security, at a time when the country’s North Sea oil production is tapering off. But there are issues about it, which need to be addressed.

People feel strongly about their property rights, and do not like the idea that people can ‘mine’ underneath it, even if it is a mile or more underneath it. Others are not over-bothered, but maintain that if people are going to drill under their property, they should be compensated. And some people are concerned about what might go wrong, in terms of the geological stability of their land or the pollution of local water supplies. While research suggests that these latter concerns are almost entirely unfounded, drilling under people’s property remains something of concern for them, for a variety of reasons.

The government has tried to address the issue by saying that prospecting firms must make ‘community payments’ by way of compensation, though critics have complained that the amounts being mooted are rather small. But a more important question is whether such collective payments really meet the public concerns at all. If they simply go into the coffers of local governments, to be spent by local politicians on whatever pet social-engineering scheme they favour, property owners will not regard that as any compensation at all.

If public disquiet is not to hamper the UK’s fracking initiatives, compensation should do directly to those whose property is affected. And it must be large enough to convince the majority of them to accept the process. Sending a cheque directly to every home in a village is not such an onerous task. But it is the one thing that would make people accept – and even welcome – fracking under their property, the only practical measure that shows at least some respect for their property rights.