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.

Throw open our borders and liberalize Immigration policy

Tom won second place in the Adam Smith Institute’s ‘Young Writer on Liberty’ competition. The theme of the competition was ’3 Policy Choices to make the UK a Freer Country’, and the following is one of Tom’s policy suggestions. 

Current immigration policy is scandalous and highly damaging to the economy.  By trying to limit the number of migrants severely, we are missing out on high calibre academics, scientists and engineers.  Perhaps the government could simply increase its target for immigration or ‘auction’ visas.  These changes would be an improvement, but they don’t go nearly far enough.

If we really want an immigration policy that maximises freedom, income and happiness, then the best immigration policy is to not have on at all.  Paradoxical?  I’ll explain.  The UK should operate acompletely free, open-door immigration policy.  If it sounds radical, that’s because it is.  Political rhetoric would have you believe that immigration is wholly bad; they take our jobs, lower our wages and steal from the public purse.  Nothing could be further from the truth.  Firstly, immigrants create jobs as well as filling them, by demanding goods and services.  The pool of jobs is not fixed.  The overall number of jobs in the economy increases due to immigration.  Secondly, migrants don’t lower wages, studies have shown that they increase wages on average.  Lastly, they contribute to, not steal from, the public purse.  The IFS found that while we native Brits only pay 0.8 times as much in tax as we receive from the government, migrants in fact pay in 1.4 times as much.  They are funding our benefits, not the other way around!

So, the political rhetoric on immigration is misleading.  But would a completely open immigration policy really lead to significant economic benefits?  Well, yes.  Emphatically, unequivocally yes!  Professor Lant Pritchett found that just a 3% rise in the developed world’s labour force through migration would lead to benefits larger than those from the elimination of trade barriers.  Think what a completely open door immigration policy could achieve!  Indeed, estimates about the effects of completely open migration suggest global GDP could rise, roughly, by between 70% to 150%!

Of course, migrants benefit society culturally too.  Cuisine, art, music, culture; they are all enhanced by migrants.  I for one would be much poorer culturally if I couldn’t get an Indian takeaway on a Saturday night!

Migrants bring huge economic benefits, and enhance our culture too, making the UK a more interesting place to work, rest and play. Evidently, if we want to make society freer, happier and richer, a completely open immigration policy is the way to go.

The only problem with Lord Saatchi’s new tax proposal is that it’s not adventurous enough

Lord Saatchi has come up with an excellent idea to change and improve the tax system. Let’s do away with corporation and capital gains taxes with regard to small companies. The only problem with the idea is that it’s just not adventurous enough.

In a report to celebrate the 40th anniversary of the think-tank, which was founded by Baroness Thatcher, the CPS calls on the Government to stop imposing corporation tax on firms with fewer than 50 employees. Capital gains tax should also be abolished for all investors in small companies, the report states. Lord Saatchi writes that the policy would show “how the awesome power of taxation can be used to the benefit of everyone”.

He makes the correct and obvious points that small companies are just about the only creators of new jobs in the private sector and that this would do much to increase their creation. The obvious side effect of that being that fuller employment will lead to higher wages: as long as they’re being earned something we all generally regard as being a good thing.

But as we say this isn’t quite adventurous enough. For optimal taxation theory tells us that we shouldn’t be taxing corporations nor the returns to capital at all. For such taxes have higher deadweight costs than the taxation of incomes, which is again higher than taxing consumption which is again worse in its effects than repeated taxation of property. We should thus, in order to have the least lost economic activity from whatever level of taxation we desire to have, abolish corporation and capital gains tax in their entirety and replace the revenue with something like a land value tax.

Yes, it would produce political caterwauling but it would be the most efficient method of gathering tax revenue.

On a related point one way of looking at Piketty’s magnum opus is that it’s an attempt at a refutation of that optimal taxation theory. Everyone does agree (OK, some economists you have to press on the issue but it is agreed to in the end) that the deadweight costs are higher and that thus such capital and corporate taxation is inefficient. And that abolishing them and moving to other revenue sources would make us all richer. But there’s an awful lot of people who just wouldn’t be happy with such a system. So, they’re looking for some other reason, other than efficiency, to insist on retaining such taxes. And inequality seems to be the current one they’re trying out. It’s not an argument that really works though.

How we can create a Capitalist society, and make it popular

Marcus was awarded joint third place in the Adam Smith Institute’s ‘Young Writer on Liberty’ competition. The subject for this competition was ’3 Policy Choices to make the UK a Freer Country’, and the following is one of Marcus’ suggestions. 

The welfare state combines a seemingly improbable dichotomy: that it is both too expensive, and too mean in its provision. Across Europe, the social state began with the creation of state pensions, and in order to break the hold of welfare collectivism, the state pension must be the first area to face radical reform.

Instinctively, even many liberals will be suspicious of the ideas of private provision and unregulated society. The inculcation of collectivism and a suspicion of human nature drives many people to oppose the development of natural remedies to social ills. We imagine all too easily that without the abstract of society to impose solutions on us, the problems of disease, want and idleness will go unabated.  In order to reverse this perception, the market must be seen to work for all people, and at all levels of income. In a liberal society, the refrain must be ‘Everyone a capitalist’. I believe that the prospect of a property owning democracy and a comfortable old age is only possible if private pensions become available for all.

Instead of hand to mouth, pension income would be derived from years of saving and investment. The tax of national insurance would be abolished in favour of routine contributions to a savings scheme for old age. This would be tax free, and could be managed by any number of approved mutuals, trades unions, and investment houses. In the spirit of bleeding heart libertarianism, I would not even be opposed to state supported additional contributions to help those on low incomes; who, for the first time, would have genuine cause to cheer the advances of business.

 If the success of similar schemes in Chile is any indication, then we can suppose this policy not only to reduce the burden on the exchequer and to provide additional funds for investment in new industry, but to even increase the retirement income of pensioners above their previous work income.  This would be true not only for the professional class but for ordinary workers who might be spared the inevitable trap of the endless years of work that is necessitated by collective provision. Cradle to grave socialism has failed; it is time that the inventive cooperation of the many ran welfare, instead of the directives of the political elite.

The Equality Trust is wingeing on again

The Equality Trust has decided to favour us with another whinge about just how appalling we are in our inequality and the treatment of the poor. The release comes in the house magazine for the worriers, The Guardian:

“The public are misled about this country’s tax system. They think households with the highest incomes pay more than those with the lowest, whereas the opposite is the case. Even more concerning is how little our current system matches people’s preferences on tax. There is clearly strong support for a system that places far less burden on low-income households,” he said ahead of the “Unfair and Unclear” report. “We’re calling on all parties seeking to form the government from 2015 to commit to the principle that any changes in tax policy are progressive.” Not a single respondent in the poll knew how much the richest and poorest paid in tax. On average the public underestimates what the poorest 10% pays in tax by 19 percentage points, believing they pay just 24% of their income in taxes, the Equality Trust said. When asked about how to make the tax system fairer, on average, people said the poorest 10% should be taxed just 15% of their income, or 28% percentage points less than they currently are. They believe the richest 10% should be taxed 39%, or 4 percentage points more than now.

Hmm. Those figures at the top are from here. Agreed, it’s quintiles not deciles and total income there means including benefits in kind (health care and education). But those poor households appear to make £5,000 a year by their own effforts and then get to command resources of £15,000 a year. And if your total income, after the influence of the tax and benefits system, is three times your market income then I would describe you as having a tax rate of minus 200%. Meaning that looking just at the nominal tax rate is extremely misleading.

Well done to the Equality Trust there.

But let us take the specific issue they attempt to highlight seriously for a moment. It’s actually what people think the various groups ought to be paying. And at the top end we’re pretty close to what people think “the rich” should be paying. I’d certainly, given how appallingly out of control most state projects (think Olympics for a moment) get, accept a 4% error as being pretty good for government work.

So the Great British Public don’t think that the rich are paying too little. But they do think that the poor are paying too much. At which point we here at the ASI would be delighted to support the plan to create a more progressive taxation system. We could start by lifting the income tax and NI limits to perhaps £12,500 a year. The level of the minimum wage. This would reduce the tax burden on the poor, most certainly. It would also have the handy attribute of converting the minimum wage into the living wage (the difference between the two being only that vast amount of tax we charge to low incomes).

But we would insist on noting that thought that the rich shouldn’t be paying more. It is, rather, that everyone should be paying less. This means that we get to have the most lovely fun deciding which tens of billions of pounds we should be cutting out of government spending in order to make the tax side of the P&L match up with the public’s democratic desire for a reduced tax burden on the poor.

So, remarkable as it may seem, we’re fully behind the Equality Trust on this one. The public are demanding tax cuts and smaller government and what’s not to like about that?