Devolution and Super-Councils

As Scotland looks set to receive an ‘unprecedented’ collection of powers from Westminster, it is time too for the English regions to benefit from devolution. The lack of what Hayek would call ‘perfect information’ is a weakness intrinsic to a centralised states – surely local councils have a greater understanding of problems that face their local areas than Whitehall? As one of the most centralised states in the world, the UK is ripe for devolution in a variety of policy areas.

One such example is taxation. Rather than simply being bankrolled by central government, local authorities should be able to raise their own revenue. This would encourage greater fiscal responsibility from councils, as they would have to justify spending to their electorate, discouraging the waste that has been all too characteristic of local government.

Another possible area of devolution is healthcare: councils should be free to innovate in response to local problems. The savings that this would result in would contribute to the £22 billion of efficiencies in the NHS that Simon Stevens, the Chief Executive of NHS England, has highlighted as necessary by 2020-21. Furthermore, patient satisfaction will improve: the Institute of Economic Affairs has pointed to Switzerland’s decentralised healthcare system, which provides a responsive service with high life expectancy and patient approval ratings.

Having greater powers would also give councils more clout when they bid for major infrastructure projects. London has reaped the fruits of much central government support, with the Greater London Authority securing £4.7 billion from the Department of Transport to fund Crossrail. If all councils had the same bidding powers, government spending would more effectively match the infrastructure needs of the local area – instead of grandiose projects such as HS2, more Crossrails could be built, creating the ‘Northern Powerhouse’ that George Osborne strives for.

How will this devolution create a freer UK? Firstly, councils being forced to raise their own money deters excessive spending, lest councillors be punished by the local electorate who are paying for it. Secondly, healthcare efficiencies mean a smaller burden on the taxpayer to pay for the NHS, while the patient will likely be more satisfied with a service suited for local needs. Finally, this devolution will result in more focussed, efficient infrastructure spending. In short, ‘super-councils’ can reduce the burden on the taxpayer, and create the conditions for a flourishing free market.

Alan Petri is runner-up in the Under-18 category of the ASI’s ‘Young Writer on Liberty’ competition 2015.

It’s important to work out what parking meters are for

Before abolishing parking meters and charging for parking it’s important to work out why we did this in the first place. It’s an example of Chesterton’s Fence: before you remove the obstacle you need to work out why it was placed there in the first place. Only then can you work out whether the reason is now obsolete, to that the fence is defunct. And the original point of parking meters wasn’t to charge people for parking, nor to ration spaces by price, not at all:

Shoppers in small-town high streets should be allowed to park free, a minister has indicated, as figures show that councils are raising more money than ever from motorists.
Marcus Jones, who was made high streets minister in David Cameron’s post-election reshuffle, suggested that small town centres could become “parking meter-free zones” in an effort to save shops from closure.
The Government is growing increasingly concerned that punitive parking costs and fines are deterring shoppers from using their local high streets.

The original reason for parking meters was to increase the number of people using the area.

If parking is entirely free then some goodly number of people will use it all day and possibly every day. This takes up those scarce parking spaces. So, if you want to increase the number of people that pass through an area you want people to have free parking but only for some limited period of time. Then they will move on and others will be able to use the space to visit the area.

Thus, if your intention is to increase the human traffic through an area like a local High Street the answer is not to have free parking at all. It’s to have free parking for some limited period of time. On the order of free for an hour, no return within an hour, those sorts of restrictions, rather than “park here all day for free”. All of the parking meters and ticket machines needed are already in place. Just program them to issue the first hour’s ticket for free.

How Jeb Bush could get his 4% growth (for a few years, at least)

US presidential hopeful Jeb Bush says that, with the right policy reforms, the US can achieve 4% annual growth. As economic historian (and Adam Smith Institute Fellow) Anton Howes has pointed out, historically it’s very hard to sustain growth above 2% except when you’re catching up, either after a recession or as a poor country converging on rich ones.

For the US, 4% growth would mean catching up to the pre-2008 trend for a few years, and then reverting to normal. Glenn Hubbard and Kevin Warsh, two economists who are likely to advise Bush on economic issues during the campaign, suggest that investment-focused tax cuts and pro-competition deregulations might help the US to recover back to the pre-2008 trend. Well, maybe.

One thing they did not mention was liberalising planning (or urban zoning, in American English). But that could deliver a big boost to GDP. An NBER working paper by Chang-Tai Hsieh and Enrico Moretti released earlier this year argued that:

…worker productivity is increasingly different across cities. We calculate that this increased wage dispersion lowered aggregate U.S. GDP by 13.5%. Most of the loss was likely caused by increased constraints to housing supply in high productivity cities like New York, San Francisco and San Jose. Lowering regulatory constraints in these cities to the level of the median city would expand their work force and increase U.S. GDP by 9.5%.

Basically, making it easier for people to move around makes it easier to put people into the jobs where they’re most productive, and constraints on housing supplies make it much harder for people to move around.

Deregulating planning, then, could massively boost US GDP – even bringing constraints in the most productive cities down to the average level would increase it by nearly 10 percent. Spread over a few years, and combined with the standard 2% we’d expect from the US economy normally, that’s about one Presidential term’s worth of 4% growth.

This is really just a moot point – the President doesn’t have much say over local zoning laws. But who knows? This might be one time where the Presidential bully pulpit comes in handy.

Mostly, this is instructive for those of us in other cities where supply constraints make it difficult for people to move in. How much richer Britain might be if it was a little easier to build houses in the places people want to live – and work.

Yes, let’s blow up the planning system

Today Marina Hyde suggests that instead of spending £7.1 billion to do up the Palace of Westminster we could just hire an arsonist for rather less. Amusing although we think there might be a trick being missed there: shouldn’t we be running a competition to see who would pay most for the privilege?

But on to other things that we might burn down, blow up. Here’s something about “affordable housing“:

Coming at the problem from these different starting points, both reports make an estimate the gap between what genuinely affordable homes would cost to build and how much of the cost could be financed from rents. They both conclude that this gap is about £59,000 per house (on average, with considerable variation between London and the rest of England). This is the amount that would need to be provided by a combination of government grant, free or low-cost land from local authorities, contributions from developers and – potentially – cheaper debt through government guarantees.

That’s the cost to us of the planning system. Or at least one incomplete but roughly accurate method of measuring it. The value of an asset really should be the net present value of all future income from it and that’s roughly what they’re estimating there. And yet the land to build a house upon costs around £1,000. It’s the planning permission that allows you to build a house upon that land which is the thing that is in short supply. And that’s where the £58,000 is. The scarcity value of the planning permission.

Given that planning permission is something that is manufactured very simply within the bureaucracy it is therefore not beyond the wit of man to make more of it. Or we might observe that the last time the free market did provide the housing needs of the nation was the 1930s. Before the imposition of the Town and Country Planning Acts which led to this artificial shortage of planning permissions. Thus the solution to our housing woes is really very simple indeed.

Burn down the planning permission system.

We’d happily pay for the privilege of applying the burning brand: but who is willing to outbid us?

To explain the price of English housing once again

Absolutely everything you need to know about the absurd cost of English housing is contained in these few paragraphs:

A farmer has rejected a £275million offer for his land from housing developers wanting to build a new town.

Robert Worsley said he would be ‘doing a massive disfavour’ to the community where he has lived all his life if he ‘took the money and ran’.

The 48-year-old father of two has run 550-acre farm for the last 15 years.

He was approached by agents for housebuilder Mayfield more than two years ago. Other landowners on adjoining sites in Twineham, near Haywards Heath, West Sussex, are also believed to have been offered large sums.

The multi-million pound potential offer is 100 times the farm’s current value, even though it covers only one-seventh of the proposed 10,000-home development.

It’s Mr. Worsley’s land, he can do as he wishes with it.

But there’s the reason that English housing is so expensive. Land that may potentially be built upon is worth 100 times that same land that cannot potentially be built upon. That is, the chitty that is issued to allow building upon a piece of land is at least 99% of the cost of the land plus chitty. It is therefore the planning system that makes housing so expensive.

Thus, as we’ve pointed out ad nauseam, the answer is to issue more chittys so as to bring down the cost of them. There’s no mystery here, no problem. If something is expensive because it is in artificially short supply then the answer is to increase the supply of it.

Perhaps we might suggest abolishing the Town and Country Planning Acts?