Ms. Moore misses her own argument

Suzanne Moore gets up on that traditional high horse at The Guardian to decry the Help to Work programme. This may or may not, it is true, be quite as spiffing as those proposing it wish to claim. But the point for us to look at here is that Ms. Moore, and many like her, know the reason it is being deployed yet choose to ignore that very reason.

This is called Help to Work. Doublespeak. For it doesn't help and it won't work. Jobcentres are not geared up to cope with such numbers, and many leading charities such as Oxfam are boycotting mandatory work placements because they think the key word in voluntary work is, er, voluntary. If it isn't, we are basically talking about community service, which you would get for being found guilty of an offence

The government's own research indicates that unpaid work placements are not increasing the chances of claimants finding work. But, yet again, this policy is not about finance (it will actually cost money if travel fares to jobcentres are paid); it is an ideological assault that seeks to undermine the very idea of unemployment benefit.

Yeah, yeah, Tories grinding the faces of the poor into the dust again. But what's this?

Employers aren't fantastically keen on someone has not worked for a while.

Umm, yes, that's the point of these sorts of schemes. It comes from the work of Richard Layard, who has been pointing this out since the 1970s (it was in textbooks in the 80s at least). Employers don't want people, for some reason, who have been long term unemployed. So, if we have long term unemployed then we've got to get them a job of some kind, doing damn near anything, so that they're not long term unemployed, but perhaps partially employed, employed, short term unemployed even, where they have a chance of attracting an employer.

This is the very point of it all, the aim and intention. Which is why, whole the name has changed over the decades, each and every government has been trying to implement some similar sort of scheme since those 80s. On the grounds that Layard is actually correct in his analysis. Welfare to Work was just one other name for exatly this same plan and for the same darn reasons.

It's not so much that people are ignorant of all this it's that commentators on the point seem to have all of the necessary information to hand but still willfully ignore some of it.

Why would we cut taxes for those who will cost the NHS more?

There are strange ideas, weird ideas and then there are those that just don't make any sense whatsoever. Take, as our example for today, this one, the idea that we should cut taxes on those who will cost the NHS more to treat:

Britons should be rewarded with tax rebates for giving up smoking, staying slim or drinking less as a way of relieving the "mind-boggling" increase in demand for NHS care, a thinktank urged on Thursday. 20/20 Health says incentive schemes that reward healthy lifestyles would encourage people to be more responsible about looking after themselves and avoiding damaging habits.

This simply does not make any sense at all. And it's also very easy indeed to work out why 20/20 Health has got itself into such a tangle: they're simply ignorant of the economics of healthcare. Something that should makes us a tad wary of taking their advice on such things.

Smoking, boozing, being a lardbucket, these are all things that have substantial costs, this is entirely true. However, most of the costs are private costs, costs carried by the people who do or are these things. Most notably, the costs of having a shorter lifespan.

There are also public costs from these things: the healthcare treatment that people who do these things will require. But there are also savings in public costs as a result of people doing these things: most notably in the health care that people who do these things will not receive because of those shortened lifespans. Yes, it's true, treating lung cancer is expensive but on average someone who dies of that at 67 isn't going to be needing a hip replacement at 75 nor round the clock care during a decade of complete senescence.

And the truth is that, and it has been studied many times, these behaviours which shorten lifespans reduce, not increase, the costs to publicly funded health care systems. And when you add in the pensions not claimed (and of course the extra taxes paid on boozing and tabs) then the economic model is overwhelming.

There are substantial private costs to these three behaviours, smoking, drinking and being obese (we are, of course, assuming that all are being done to excess here, not that couple of glasses of wine a day that is positively beneficial to health) but there are substantial public savings from them.

It is this that 20/20 Health are ignorant of and thus why they've come up with such a strange suggestion. That those who will cost the public health care system more should be taxed less for the behaviours that will cost the public health care system more.

Madness through ignorance we might call it.

Why Labour's rent controls will do more harm than good

Now that we have more detail, Labour’s new ‘rent control’ policy is not quite as bad as I'd initially feared. Instead of the old school price ceilings that destroyed parts of New York City, Labour are proposing ‘second-generation rent controls’, which limit the ability of landlords to renegotiate rents during tenancies, and ‘make three-year tenancies the norm’.

The real-world effects of this are likely to be that expected rent increases over the three-year lease will be priced in to the starting rent, so it’s unlikely to actually make anyone better off unless there’s an unexpected increase in rents. If rents fall below expectations, this would hurt tenants.

Since landlords are bound within tenancy agreements, rises in rents are likely to be sharper than they currently are for new tenants. This means that housing mobility is likely to be reduced – tenants locked in to a relatively low rent will find it more costly than they otherwise would to move. This is very important: it looks as if lowered housing mobility causes higher unemployment, because people are less able to move to find new jobs.

Rent controls of any kind are likely to decrease the supply and quality of available housing. ‘Second-generation’ controls are less tight and so less harmful than classical rent controls, but as Hopi Sen has pointed out, the German experience does not seem encouraging. There, rents have risen far more quickly over the past decade than they have in Britain, as new construction has slowed.

There is also evidence to suggest that second-generation rent controls have a similarly negative impact on housing quality as classical rent controls. A 1985 study by the Richmond Fed found that controlled housing units were 7.1% lower in quality in 1974, and 13.5% lower in 1977, pointing to a cumulative negative effect. If classical rent controls are only worse than bombing, second-generation controls may be close to petty vandalism.

One interesting aspect of this announcement is that it may affect supply now, as would-be investors in new housing are discouraged by the prospect of stricter controls on their investment. If the measures are actually brought in – crossing the rent control Rubicon – an expectation of tighter controls may reduce supply even more.

It’s not clear what mechanism Labour is proposing to make three-year tenancies ‘the norm’, but it’s hard to imagine any effective measure that would not end up hurting tenants who want shorter leases. This probably means young people.

As we say virtually every day, the best way to reduce the cost of housing is to build more. Labour’s proposals seem counter-productive, but they’re nothing compared to the harm caused by the planning system.

We recently learned that more of Surrey is covered by golf courses than by houses. Rolling the green belt out even a bit – by, say, a mile outside London – would create space for hundreds of thousands of new homes, relieving pressure on existing housing stock, reducing rents and – a nice bonus – creating lots of jobs and adding a few percentage points on to GDP growth. We can dream.

Why we support this globalisation thing

Being grossly bourgeois, as we are, there are several reasons why we might support this whole globalisation thing that's been going on over the past few decades. As bourgeois liberals we applaud the manner in which freedom of trade, ofcapital movement, allows people to do as they wish with their own money. Invest where and when, purchase from whomever, they might wish. An addition to human freedom.

But also as those grossly bourgeois types that we are we are able to welcome hundreds of millions, nay billions, into those petit bourgeois pleasures of regular meals and a roof over the head. As Branco Milanovic, who is one of the experts on these things, points out:

When we look at the global population rather than at countries, however, there is a positive side. The unprecedented growth of China and, from the early 1990s, of India, as well as much of the rest of Asia has lifted millions out of poverty. For the first time since the industrial revolution, income inequality among world citizens has fallen.

We have regularly pointed out this result from Milanovic here. But there's more:

It is also a fragile middle class because it is still relatively poor. Even when we include among the global middle the groups whose real incomes increased (in percentage terms) the most between 1988 and 2008 – that is people with incomes from $3 to $16 per day – it is only those at the upper end of the range who overlap with what is considered the lower middle class in rich countries.

The major beneficiaries of this globalisation thing have not been us rich world people, most certainly not the plutocrats in the gilded castles. It's been those just struggling up out of that $1, $2 a day poverty who have been, propotionately, benefitting the most.

It all sounds like rather a good system really. A bit more freedom for people to do as they wish and we find that the poor get richer, inequality declines and that bourgeois section of the population just grows and grows. Milanovic does sound one note of caution: it's possible to slide back from that $4 and $6 a day sort of income back into real poverty. It's only when incomes rise about $10 a day that that backsliding seems not to happen. So we'd probably better keep going in what we're doing then, eh?

Unfare Competition

It’s not really a huge surprise that Brussels, the home of EU bureaucracy, has recently banned ‘cab app’ service Uber from the city. The Brussels court unashamedly declared the company “unfair market competition” to the town’s two (yes, two...) taxi companies, and drivers face a €100,000 fine if they use the app to pick up customers. This isn’t a one-off, either; Uber’s had a bumpy ride from the start. Across the USA and Canada they’ve endured cease-and-desist letters, impounded cars, sting operations and suspended trading. Taxi drivers in Chicago are suing the city itself over them,  Berlin’s slapped on an injunction, and in France enraged taxi drivers are getting physical.

Uber hit London in Summer 2012. Given the range of ventures on the scene- Black cabs, mini cabs and fleets of Addison Lee, as well as apps like Kabee and Hailo – Uber’s operation should be uncontroversial. Not so. Instead, the Licensed Private Hire Car Association (LPCHA) has called upon TfL to ban cab app services for failing to conform to relevant legislation, citing , uninventively, public safety concerns.

Reading all of this Uber come across as renegade cowboys, tearing through cities kidnapping passengers. Reality is far more boring.

Uber’s critics deem them an unlicensed taxi company (or as per the Chicago lawsuit, an ‘unlawful transportation provider’), who blatantly violate regulations. In actual fact, Uber are a new kind of entity: an app-based, ‘logistical’ intermediary. They use GPS to connect passengers with self-employed (and in the UK, licensed) drivers, and handle payment through a registered card. Their trick is that in only ‘matching up’ independent drivers with riders, they don’t count as a taxi operator.

Additionally, in the UK private hire vehicles can’t ply for trade like registered taxis and must be booked in advance. It seems that a rider requesting a pickup through Uber counts as a booking, allowing a nearby driver to accept a request and be there in minutes. In these ways it does seem that Uber and other like it have thrown away the rulebook, but only because they’ve been ingenious enough to innovate around it. Uber’s model also brings other innovations too, such as price discrimination through ‘surge’ pricing, truly flexible work for drivers, and a highly responsive rating system of both drivers and passengers.

There’s no wonder that incumbent players are worried. But it’s sad, if not surprising, that anti-Uber sentiment comes not from governments angry at rulebreaking but businesses threatened by fresh thinking.

State intervention imposes huge costs and barriers to entry on the taxi industry (think of London cabbie’s ‘The Knowledge’, fixed taxi fares, and America, where taxi medallions have sold for over $1m) - scuppering competition and innovation. Reform of the industry with its often cozy cartels is long overdue.

Companies like Uber show other firms how they can improve their game. In fairness there is an argument for ‘leveling the playing field’; it’s not one actors want to use. When Uber works around (or even flouts) a jurisdiction’s regulation, other players can use Uber’s success as evidence that restrictions are superfluous to providing a good service, and therefore unfair on them.

Instead of demanding more relaxed regulation, however, incumbent actors have decided which side their bread is buttered, and would rather keep the status quo than improve their service. Instead of competing, they cling to the regulatory chains binding them and wail for others to be shackled by them too. They might cry the cry of public safety, but it’s the safety of their market share which they’re really concerned about.

Sadly, vested interests have had far too much success in this area. Where Uber hasn’t been banned completely, lawmakers have often caved in and introduced new restrictions. Frequently, this doesn’t stop protestors. And it isn’t just Uber who has such woes. Companies with similarly innovative models such as AirBnb and Aereo have also faced an uphill struggle of acceptance.

TfL should disregard LPCHA’s demands. It certainly isn’t up to the government to protect old industries and vested interests, but sadly so many other cities clamping down on Uber adds false weight to their claims. It’s beyond obvious that consumers, not regulators, and certainly not business rivals should be the judge of an effective (and safe) service. That said, the fact that cab app services are making so many competitors uncomfortable is a pretty good indicator that they’re doing something right.

We've said this before and no doubt we'll have to say it again

In the short term, if you want to alleviate hunger then the obvious thing to do is give the starving food to eat. If you want to stop people getting wet then give them that kagoule we've just mugged off the trainspotter at the end of the platform. And if people are poor, poverty being not having money, given them some money.

This is, obviously, not the long term solution to any of these problems: that good ol' mixture of capitalism and free markets is what has alleviated our own poverty, is what is alleviating it for billions more currently and will, estimated by the end of this century, abolish absolute poverty once and for all for our species. But as we know, the long and the short term are rather different: telling people to farm better does work but doesn't alleviate the immediate suffering of famine.

All of which leads to this interesting paper at Vox. Making a poiint that we've made here a number of times: whatever it is that you're trying to do do please make sure that you're doing it efficiently. That is, achieve your goal at the least possible cost. They're rather more worried about inequality than we are (we reserving our ammo for dealing with what we see as the real problem, absolute poverty, the solution to which see above) but they're making absolutely the same point about efficiency:

Other countries also have similar programmes that are sold as pro-equality but are inefficient or even harmful for that goal (IMF 2014a). In developing countries, measures that tax, subsidise, or price-regulate food and energy tend to be highly inefficient tools for improving the income distribution, and frequently even have the opposite effect. A disproportionately small share of social spending goes to the poorest 40% of the population (IMF 2014b). Of the $400-plus billion that countries spend on fossil fuel subsidies each year, far less than 20% of the benefits go to the poorest 20% of the population (International Energy Agency 2011). Conditional Cash Transfers, on the other hand, have proven highly effective – they reach the poor and promote education and health.

Don't try to rig markets, don't try to freeze or subsidise prices. If you want the poor to be able to consume more just give them money so that they can buy more.

This has domestic lessons for us in the UK as well. The much talked about idea of "predistribution" is exactly this. Attempting to cock up markets so as to gain a more pleasing distribution of consumption. It won't work for it's, by definition, cocking up markets. Redistribution is a more efficient method of achieving that consumption levelling goal. And if the nation has run out of appetite for more redistribution then, well, that's just tough, isn't it? As it does appear to have done...

Subsidy is not the way to export success

UK Chancellor of the Exchequer, George Osborne, says he wants to see more 'Made in Britain' stickers appearing around the world. So would I. But we have to create the right conditions for that to happen.

We certainly don't want 'Made in Britain' stickers to appear round the world only because we are subsidising our production. We tried that in the 1970s with shipbuilding, steelmaking and volume car manufacturing. It just loaded cost on taxpayers and created vast monopolies that grew inefficient because they faced no effective competition. But in fact, other emerging economies such as Korea could do all these things better and cheaper than we did.

Adam Smith pointed out 250 years ago that by means of glasshouses and hotbeds you can grow good grapes in Scotland, and make wine out of them – but at around 30 times what it costs to make wine in France. So we should stick with what we are better at than others – design, fashion, finance, tourism, education and luxury goods such as Scotch Whisky.

What we certainly should not be doing is subsidising industries such as renewable energy. If these are potentially money-making industries for the future (as the government say, to justify the subsidies), then private investors would be well ahead of any government investment bureaucracy, that is for sure.

Perhaps Mr Osborne is riled by the fact that Germany, even though its economy is flatlining, has expanded its exports to China, while the UK, even with its devalued pound, hasn't. But the solution to that is a proper growth agenda. Roll back the acres of regulation on employment and manufacturing, making it easier for people to hire workers and less risky to invest. Then stand back and watch the 'Made in Britain' stickers streaming out.

Once more we find Adam Smith was right

This should come as no surprise to us all for, as we all know, almost all of economics is either footnotes to Adam Smith or wrong. But we've nice evidence that once again he was right. That evidence comes from a study of entrepreneurs and what is necessary to allow, possibly encourage, them to succeed:

Indeed, entrepreneurialism is strongest in countries that share the English common law tradition – five times higher than those with a French legal origin. There is also a strong correlation between high rates of entrepreneurship in a country and low taxes. Equally, a low regulatory burden correlates strongly with high rates of entrepreneurship. On the other hand, those government and supranational programmes that politicians love to announce to encourage entrepreneurship – such as the EU’s Lisbon Strategy – tend to fail. The lesson is clear: to encourage innovation and entrepreneurialism, governments should do as little as possible, beyond cutting taxes and regulations.

It's always interesting to see people pointing to the Common Law as we're quite certain that it's one of the major beneficial attributes of our society. But leaving that aside this is remarkably similar to Smith's comment:

Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.

One other point that the study makes: there's a very large difference between self-employment and entrepreneurialism. I, for example, when writing am self-employed but I am not an entprepreneur. When I am fossicking around for scandium I am both and when I find a nice large pile of it I will be employed by a company but still be an entrepreneur. and as the study notes the rates of the two things can often move in opposite directions. The rate of self-employment in Silicon Valley, the most entrepreneurial spot on hte planet, is actually half the self-employment rate for California as a whole.

Is Keynesianism finally dead?

Jamie Parker explains why Keynesianism has lost in the UK, and where macroeconomic policy may go from now. Little over a year ago now, and after yet another quarter of GDP flat-lining, the Coalition’s mandate for fiscal austerity looked increasingly fraught. As George Osborne sat in Whitehall reflecting on 2012, there was little to console him from the gloom and despair. In April, his ‘Pasty Tax’ Budget had been awash with disastrous U-turns and was overshadowed by a downgrading of Britain’s AAA rating. Not even the country’s gold medal haul in the Olympic Games could create the ‘feel good’ needed to dispel the dark clouds hanging over Britain.

When the Chancellor actually went on to blame the poor weather for dismal growth figures, one could not help but feel the argument for spending cuts was becoming a rather desperate one. For the duration of this period, at least, it seemed that the combined forces of economic stagnation and a public wary of further cuts had handed the initiative to Keynesian expansionists on the Labour front benches. Indeed, Ed Balls’ warnings against cutting “too fast and too far” and kicking the economy while it was flat on its back seemed to be gaining currency.

The picture we are presented with today is, for ministers in the Treasury anyway, undoubtedly a rosier one. And it is amazing just how quickly the initiative can change hands. For now it would appear, it is for those on the political left, the advocates of ‘Plan B’, to explain why, in spite of their predictions, the government is running down the deficit and at the same time the economy is achieving growth figures of 2.7%. Of course this is made little easier given how the alternative is playing out across the Channel. Hollande’s crippling ‘Robin Hood’ tax policy and fiscal expansionism, far from promoting growth and prosperity, has sent unemployment soaring and the country’s finest talent packing for London. The mantra of ‘tax and spend’ appears as unattractive an alternative as ever. Indeed, everywhere it is the advocates of fiscal expansion who are in retreat and ministers in the Treasury muttering ‘I told you so’.

For them, the events of the past 12 months have played out as well as they could have hoped. Recent data suggests that all sectors of the economy have been expanding rapidly and the Confederation of Business and Industry argue that growth has become “entrenched” here in Britain. This is supported by news that record numbers of people are in work, of which full time work is showing the greatest increases. Such overwhelmingly positive data, quick in succession, gives reason for optimism and is likely to put a smile back onto the Chancellor’s face. I suppose then the question going forward now is whether austerity has won out, is this recovery balanced and sustainable as the treasury would claim? And, what’s more, can we believe Ed Balls when he argues that the “three wasted years” of ‘damaging flat-lining’ were, as he would claim, suffered needlessly?

I think the first thing to concede, before supporters of the government get too excited, is that the economy is far from fixed. Of course, there are now clearly ‘green shoots’. The labour market, which has remained fairly robust throughout, seems to be showing signs of further strength – any week now the unemployment rate is likely to fall below that elusive 7% target the Bank of England is so interested in. This is supported by strong, slightly above trend growth figures, stable inflation and increased consumer confidence. However, it is also worth pausing and considering the risks that still threaten a sustainable recovery – I share Vince Cable’s “cautious optimism” about what we are seeing happening in the economy at the moment. There are the devil’s advocates who, rightly or wrongly, remain unsettled by the kind of recovery the country is experiencing.

The first concern relates to the notion of a ‘balanced’ recovery, something which arouses particular attention from economists. A return to growth in the long-neglected manufacturing sector is of course a welcome diversification away from the country’s decades-long reliance on financial services. However, the strong performance we are seeing in these industries is coming from a very low base and exports are still far from sufficient to eradicate, lesser still exceed, the nation’s hunger for imported goods. What this seems to suggest then, is that Britain’s economic success continues to rest precariously on an uneasy compromise between consumer spending, cheap credit and the City of London. These are, of course, vital elements of the economy. It is important that they continue to flourish. However, it is important mistakes of the past are not repeated. It would be wrong and foolish to lay all eggs in one basket only to see them all then break if something goes horribly wrong again, as it did in 2008. The easy solution now would be to let financial services and credit cards do all the hard work, and not accept that sustainable, long-term growth lies in business investment, productivity gains and competitiveness in our exporting industries.

Now that the demand-side of the economy is recovering, it is important to remain focused on the more intractable weaknesses in Britain’s ‘supply-side’. Successive governments have cowered from making firm commitments to invest in long-term capital spending projects. These are needed if the UK is serious about modernising and revitalising its infrastructure. If London is to remain a destination for business and investment, aviation capacity must be able to meet demand from China and the Middle East. If the North East and the Midlands are to share in the country’s wider prosperity, then they must be well-connected and receive investment to grow. Furthermore, schools and colleges must provide young people adequately with the skills and competencies they require to succeed in competitive, globalised labour markets. This may require a more rigorous reassessment of the subjects students take – orientating back towards more traditional disciplines, such as maths and science. With a competitive tax regime, a pool of skilled labour and modern infrastructure, Britain will be far better placed to address the gap in productivity which has emerged with her European competitors.

What’s more, these issues have become compounded within a wider criticism of the government over the ‘cost of living’, which is Labour’s new strapline now that the economy has returned to growth. Putting aside political point-scoring, hard-working people have been squeezed by rising utility bills, rail fares and commodity price fluctuations. All this in the context of stagnant, or even declining, real wages. The 2008 recession did enormous damage to the country. It would of course be wrong not to expect a pinch in the pocket as a result. However, what people seem to be asking, six years on, and at a time of public pay freezes and stagnating living standards, is why is it that bankers in Canary Wharf continue to enjoy such generous bonus packages while we, the innocent victims, pay the price? Prolific amongst alienated, working people is a sense that the taxpayer is carrying the burden of risk and private enterprises are enjoying the profit. The government may well stress the need for London to remain ‘competitive’ and ‘open to business.’  However, defending the questionable practices of the City is becoming more and more difficult. To many, we should be concerned more with issues of fairness and morality than merely with profit and greed.

This is not helped of course by alarmist fears that there is an asset bubble being reflated in the housing market. According to some commentators, the market is being fuelled artificially by the government’s ‘Help to buy’ scheme, accelerating foreign demand and severe supply constraints. While I think there is reason to be wary of the fragile nature of this recovery as it takes hold, media headlines warning of “double digit” rises in house prices do not tell the whole story. House prices have started to rise again, as we would expect. Indeed, in some places they have done so quite spectacularly. However, giving the impression of an ‘asset bubble’ or a ‘crisis of liquidity’ is unhelpful when we are talking about a phenomenon almost entirely exclusive to London. Furthermore, the construction sector has remained in the doll-drums for six years now. As private building firms return to more normal, pre-recession levels of investment, the supply of new housing will restore equilibrium in the market. It is comforting as well to see is that it is the Bank of England that is overseeing the ‘Help to buy’ scheme and not a defunct regulatory authority like the FSA. Perhaps, then, we are starting to learn some lessons from the past.

So how would the alternative to fiscal tightening have fared?

Counterfactuals are always dangerous because circumstances change and of course that impacts the decisions that would have been made anyway. That said, Ed Balls has admitted that a Labour government would have had to have made cuts. I suspect as well we would have seen more interventionist initiatives, such as jobs programmes, aimed particularly at young people. Taxation would likely have been more progressive – both on income and also possibly in the form of an inheritance or a banker’s tax. What’s more, the public applause for Ed Miliband’s Conference pledge to freeze energy prices tells a story. Laissez faire policies, which allow unregulated markets to do as they please, generate a climate of discontent. Energy prices have been steadily increasing for years now. In the meantime the ‘Big Four’, mostly foreign owned, energy companies have been making record year-on-year profits. The public want a fair solution and the Labour Party have offered one.

This is not necessarily to say that what they have suggesting is right, or indeed, feasible. From the opposition benches it is easy to criticise and offer hypotheticals. In reality, breaking up the energy market would be hard. The high fixed and sunk costs of production and distribution necessitate large scale operations. Moreover, freezing prices for a year may provide respite for squeezed households in the short term. However, if investment seizes up, what are the medium and long-term prospects for our, and future generations?

The core issue here is that the energy industry has become cartelised, with a few large firms able to maintain profit margins by exploiting their share of the market. The solution must address the cause, that there is a private monopoly in operation, and not the symptom, which is that prices are rising. Opening up the energy market to greater accountability and transparency would help to ensure that prices fairly reflect wholesale costs. It would also offer a more sustainable solution than a price freeze. As too would exploring and investing in alternative sources of energy. It is important that the government follow up on the findings recently published in the Wood Report, which lay out the prospects for North Sea Oil. They must also remain negotiable to the potential nuclear power and renewables offer. The energy problem faced by the UK is intractable, and ultimately requires a more considered, long-term solution than that which regulation can provide. This is not merely a case of fat cat directors at EDF and British Gas exploiting helpless consumers.

In reality, these concerns run deep into the ideological differences which separate the two major political parties. The Labour Party argues the need for greater government intervention to address structural weaknesses in the economy, such as youth unemployment. Of course, no-body wants to see large numbers of young people without the fulfilment and prospects work can provide them with. However, subsidising labour markets, when the national debt stands at 86% of GDP and is set to grow further still, is difficult to reconcile. Last month, a Shadow Treasury Minister conceded that Labour’s Job scheme could only be supported for one year after a student leaves school or college. In reality then, the only way to sustainably improve work prospects for young people is to channel resources into education and training. Forcing firms to take on school-leavers, who lack sometimes even the most basic skills and competencies, passes the buck unfairly from government to business. This will have either the effect of eroding competitiveness in the UK or will simply drive employers away to Europe and America.

Again, the causes and not the symptoms must be addressed.

The causes of youth unemployment lie in the inadequacy of the education system to provide young people with relevant and useful skills. This is what creates occupational immobility and bottlenecks in the labour market. Given that the government spends roughly £4000 per year per pupil in England, there is something inherently concerning in the fact that some young people are leaving secondary school still unable to read and write. That is a damning indictment, not of businesses and labour markets, but of schooling here in the UK.

The public’s enthusiasm for government intervention is quite often matched by an enthusiasm for redistributive taxes, particularly targeted at wealthy bankers and property-owners. Nick Clegg’s proposed Mansion Tax on millionaires carries a strong political message. Indeed, it ties in well with the party’s more organic vision - for a society built on the foundations of equality and fairness. However, taxes such as these must be considered within a wider perspective.  As I said before, one need only look at what is happening in France to realise the impact ‘Robin Hood’ scare taxes are likely to have on national wealth. What, on the surface appears to be a well-intentioned levy on the assets of the very rich may, by the law of unintended consequences, adversely affect the interests of the nation as a whole. Driving away wealth and talent to safe havens overseas is no way to encourage investment, employment and opportunities at home. Last year, Senior Liberal Democrat officials conceded that the party’s tax proposal would derive ‘in the grand scheme of things…relatively little revenue.’ Creating a political culture which is opposed to wealth creation and ambition is damaging for all. The key is to strike the balance between doing what is right, out of principle, and doing what is needed in practice, to make British people better off and more prosperous.

In many ways, presenting a false dichotomy between fiscal expansion and ‘austerity’ is unhelpful. An eclectic approach is needed here. On the one hand, this means rolling back the frontiers of the state where it has become bloated and bureaucratic. On the other, it means recognising that government has an immense capacity to restore the economy to more normal levels of output and demand.

More of Surrey is now under golf courses – about 2.65% – than has houses on it

We all know what's wrong with the British planning system: the British planning system. It won't allow anyone to build housing where people actually want to live and insists that housing can only be paced where no one does wish to be or, alternatively, in the middle of flood plains where they'll get swept away every few years. And this is why, as the man says, more of Surrey is under golf courses than is used for housing:

Cheshire lays into "supporters of urban containment policies who argue that Britain is a small island that we are in danger of concreting over", claiming it is a myth because green belts cover one and a half times as much land as all of England's towns and cities put together. "Moreover, there is little or no public access to green belt land except where there are viable rights of way," Cheshire says. "Green belts are a handsome subsidy to "horseyculture" and golf. Since our planning system prevents housing competing, land for golf courses stays very cheap. More of Surrey is now under golf courses – about 2.65% – than has houses on it."

He calculates that there is enough green belt land within Greater London – 32,500 hectares – to build 1.6m houses at average densities. "The only value of green belts is for those who own houses within them," Cheshire argues. "What green belts really seem to be is a very British form of discriminatory zoning, keeping the urban unwashed out of the home counties – and, of course, helping to turn houses into investment assets instead of places to live."

The answer is, of course, to blow up that planning system. We might, for example, simply say that all golf courses in Surrey now have planning permission for housing on them: that would mean doubling or more the land available for housing without losing even the slightest iota of farmland or wilderness. But a better idea would be to adopt our long written plan here at the ASI, Land Economy. In essence, simply state that low density housing may be plonked where people wish to live.

We're never, ever, going to solve the "housing crisis" without reforming the very thing that causes it, the planning system.