The council housing debate

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Wednesday saw both a government promise to build 2,000 new council houses across England, and a critical report from the Audit Commission explaining that there has been too much focus on building council houses, at the cost of maintaining the existing stock.

The response from the main parties has been one of predictable point-scoring, with the Government declaring that they, “reject any claims that there is too much emphasis on new house building," while the Conservatives were sure that, “there is a powerful case for renovating rather than demolishing rundown housing stock," and the Lib Dems complained that Labour was, “denying councils the money they desperately need to improve local housing."

Bickering over how best to provide housing, no-one pointed out the obvious: that no government, however well-intentioned, well-managed and well-resourced, can possibly hope to run something so complicated as the provision of housing for two million people. The political parties don’t send out press releases telling us how they think it’s best to provide bananas, or cars, or holidays, so why do they think they know what to do with houses?

The moment that government realises the arrogance and the folly of Soviet-style central administration of low-cost housing, is the moment the lives of those stuck in council houses will start to improve. Council houses should be sold off and the government should build no more.

So what instead? In the long-term, we should abandon the failed welfare, education and economic policies that generate state dependency, but in the short-term we should look to the system of housing allowances which give the consumer the choice of where they want to live, and leave provision to the market.

The ISA: These children aren't yours

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The greatest abuser of children is the left. They use them to push through any legislation that grants them more power and intrude more into our lives. From climate change, to healthcare, to (the obvious) education, all of our actions should be undertaken thinking of the next generation and protecting them from harm. When all else fails, the way to drive policy through is to fall back and drag the children into the argument. How does this government create a database that will ecentually cover the whole population: by proclaiming that children would come to harm without it.

Their latest ploy is to ensure that parents that come into any type of contact with children (paid or voluntary, public or privately) have to be vetted by the Independent Safeguarding Authority*. Be it taking your neighbours child to school with your own children, assisting reading in classes or even serving food to them in a canteen, all would mean you are in need of being vetted. The children are not ours anymore. The left have made them wards of state and finally politicized them by attempting to ensure that no harm is done to them. Soon all adults will be vetted before they can have children, currently only those who wish to adopt or undertake IVF, via the NHS, are checked.

Our natural interactions as independent adults/parents have been made irrelevant. The grand firewall that now stands in the way of normalised conversation is the left's third way. We will now only interact with the government, they will be the one to pass our messages along to others about what we can and can't do. And the message the government passes on will be one that is suffused with political correctness and directives on how to live according to what they hold dear. The destruction of society is complete: it has been nationalized.

*ISA a soft reassuring name that hides the government's true involvement in trawling for all our data. (Although the url is a give away.)

The 'Phoenix Four'

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A government-commissioned report just released shows how five senior executives earned almost £42m in pay and pensions from carmaker MG Rover before its eventual collapse in 2005. The 'Phoenix Four' of John Towers, Nick Stephenson, Peter Beale and John Edwards bought the company from BMW for £10 in 2000.

MG Rover, originally part of the Leyland ran into trouble in the 1970s, and survived only on cash injections from the government. British Aerospace, a privatized planemaker, took it over but sold the ailing business on to BMW in 1994. Five years later, BMW realised it had bought a pup – losing £600m in a single year – and pulled the plug. There was much pressure on the government to bail it out and 'protect British jobs', but no deal. So the four managers stumped up £10, saying they could turn it around.

They did indeed cut its losses, but the company still collapsed, in April 2005. The withdrawal of a £100m bridging loan promised by Tony Blair's government did not exactly help. Meanwhile, the Four had paid themselves £9m each, and another £5.7m went to the Chief Executive, Kevin Howe. There were accusations that the executives asset-stripped the company to line their own pockets, rather than investing in it to save all those British jobs – 6,300 of them, plus many more in firms making components and supplying services to MG Rover.

While the executive team might have acted over-optimistically and even immorally, their actions (as owners of the company) don't exactly seem illegal. But the government has used all its power and spin, and taxpayers' money, to conceal its own shabby role in the whole affair and pass all the blame on to the executives. A lot of public money had gone into MG Rover, and governments were to say the least a bit careless in what then happened to the company – putting the fear of job-cut headlines ahead of its long-term soundness. MG Rover went bad just before the 2005 General Election, after all, which is why ministers went so headless-chicken about saving it. When it failed, they commissioned an investigation by accountants and lawyers which conveniently kicked the whole issue into the long grass, and avoid Freedom of Information requests, until well after the election. And how. Four years later, £16.3m of taxpayers' cash, and an 850-page report that naturally says nice things about the government that commissioned it. But then, do you think they would have published it, if it had criticised them?

The big picture

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This week the FTSE 100 index of London's blue-chip share prices soared through the 5,000 barrier. I don't know what these people in the City are on, but I'd like some. Perhaps they're all cheered by the 'Recession Over!' headlines in the newspapers, since the latest economic figures suggest a very slight positive growth after over a year of severe falls. And of course, companies are reporting better figures these days.

There are two sorts of market analysts, those who look at the big picture, and those who look at companies themselves. The latter tend to be more optimistic, more gung-ho for the companies they track. That's natural. But company figures only look better today because their reports over the last year have been disastrous. Their descent may be slowing, but they're still in much worse shape than they were. It looks OK because they've already fired everyone so don't have big wage bills to pay. They still have customers because they're running down their stockpiles of unsold stuff. But you can't operate like that for ever.

Nor is the big picture rosy. I don't trust growth figures, which comapre two sets of already-unreliable aggregates. Sure, £175bn of new 'quantitative easing' cash has got to do something to boost things. But it may be a doubly false boost. First, it's fine to print money if the problem is a shortage of it. But stubbornly high inflation figures suggest that there's still plenty still out there, helping to bid up prices. Second, what the Bank of England is doing is simply buy up government debt in exchange for this new cash. But that makes the government look like a much better risk than it really is. Sooner or later, the Bank will have to rein in again. And then the true shakiness of the government's finances will be obvious. Which ain't gonna help the stockmarket at all.

No longer us versus them

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The government’s response to the financial crisis has been a shambles. It has coddled “British" firms (such as Indian-owned Jaguar) with tax-payers’ money and restricted foreign lending of some of Britain’s biggest banks (whose UK clients work around the world). It trumpeted the G20 meeting in London, where leaders committed themselves not to indulge in protectionism, and have gone away and broken this promise, most notably through government-driven Buy Local “stimulus" packages triggered by Barack Obama’s “Buy American."

These moves illustrate how trade policy is so out of touch with the reality of 21st Century commerce.

A generation ago, the factory floor was bound by four walls and usually by national borders too. Today, a product might be designed by a team in Bristol and Bangalore, have raw materials from South Africa, Peru and Thailand, and then be assembled in Slovakia or Taiwan, from where it will then be shipped around the world. This has been made possible by dramatic reductions in trade and investment barriers, and revolutionary changes in communications and transport, which have unleashed a truly global division of labour, specialisation and exchange that would have astounded the great Adam Smith – and certainly reaffirms his insights.

Trade can no longer be characterised as a competition between national producers – or “Us" versus “Them". Instead, it is now a competition between collaborations of some of “our" producers and some of “theirs" – to our mutual benefit.

Take the iPod. It begins life in Apple’s design lab in California. Components from Singapore, Taiwan, Korea, and Japan are then assembled in China, before the finished product is shipped around the world. The biggest winner from each iPod sold is Apple because they add the most value through design and marketing. The Chinese, who manufacture almost everything, actually add the least value.

This new commercial reality demands policies that welcome imports and foreign investment and that minimise regulations or administrative obstacles – all based on misconceptions about some vague or ill-defined “national interest."

The only stimulus package that will work is removing trade barriers.

Alec van Gelder is Network Director at International Policy Network. To read IPN's latest report by Dan Ikenson, No Longer Us versus Them, click here.

Under the influence

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The British Medical Association (BAM) has been slamming one of our nation’s favourite pastimes in its new publication “Under the Influence". It has claimed that as over 1/3 of adults regularly exceed the government’s alcohol consumption guidelines “the rising cost [of drinking] – socially, economically and to our health services – really is unacceptable".

The BMA believe that “reducing alcohol-related harm in the UK requires a comprehensive strategy that….seeks to remove or mitigate the unhealthy and unhelpful influences on behaviour". In essence, that UK citizens should be regulated in what they are exposed to, in order to condition their own thinking and desires. Their solution is a blanket ban on the advertisement of alcohol. The BMA claims that alcohol advertising attempts to cast drinking as an essential activity, particularly drawing attention to the sponsorship of music festivals and premiership football by big brands. However, as the Portman Group patiently explained, evidence suggests that advertising encourages brand switching and loyalty, not the abuse of alcohol.

The BMA not only want to control what can be shown to us, but to meddle in market mechanisms, through the instigation of a minimum price for alcohol. Their report states that ASBOs should “not be slapped on the vomiting teenagers, they should be slapped on the irresponsible marketers" – suggesting that companies should be held responsible for the actions of the consumer. Another authoritarian suggestion of theirs is to limit the density of on and off-licensed premises within an area. If people already have enough places in which to drink, then a proposed business will fail. If they do not, why should an entrepreneur be denied a place in the market?

The UK has been a nation of drinkers for thousands of years. No association (or government) should hope to change a society’s habits by telling them what they should and should not do and by restricting an adult’s exposure to a ‘harmful substance’ (just look at the failed ‘war on drugs’). Real social change can only come about when individuals themselves adopt a new attitude to drinking. The best way for this to occur is through the unbiased education about the costs and dangers of alcohol, which people can choose to weigh up against the satisfaction they derive from drinking a pint (or six.)

Let’s just hope that those in Parliament haven’t had enough subsidised pints to think that the BMA’s measure might work too.

Power to us

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David Cameron is seeking to institute another step along the road towards more power in the hands of fewer parliamentarians. This time putting forward a cut in public spending via the curbing of the excesses of the Houses of Parliament. He wants to see a reduction of 10% in the costs of parliament, a 5% pay cut for ministers and the abolition of MPs' communications allowance. This along with a reduction in the number of MPs to 585 would see an overall saving of £120m a year. Or 0.0169% of the projected government expenditure of £710b in 2010/11.

Currently constituencies in the UK average around 68,492 eligible voters (England averages just over 70,000, Wales 55,000, Scotland 65,000 and NI 63,000). Under Mr Cameron's plan this would rise to an average of over 75,000 (if not more as the population grows) a distinct erosion of representation and yet more power coalescing in the hands of fewer (and lesser) MPs. Despite much of the UK's legislation being decided overseas this is a move that weakens our democracy. This piffling reform is yet more tinkering around the edges rather than attacking the real problems of our democracy.

Parliament needs to be able to concentrate on two things: defence and the implementation of a system of justice. Local government needs to be the level where decisions over health, education, welfare etc are made. The abolition of quangos should not mean that government departments take over the work, it should be left for local councils to pick up and ask the people to decide. Indeed government departments define how centralized this country has become. We may all live on an island but we all are different with different wants and needs. The time has come for a radical reshaping of the structure of democracy in this country. It would actually give power to the people.

(The figures used in this article are based on the 2005 General Election, and the ONS's latest population figures).

Banks: Some home truths

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Last autumn’s near collapse of the UK banking system was unprecedented. The reality was that two of the UK’s four major clearing banks – RBS and Lloyds (including HBOS) - were close to financial oblivion. And, whilst Barclays did not require an injection of public equity, it was in poor shape: its fortunes have subsequently recovered. As for Midland, its owner, the esteemed Asian-based Hong Kong and Shanghai Bank, was never likely to fail. Indeed, not surprisingly, it attracted a large inflow of deposits from discerning investors seeking a safe bank.

To enable the survival of RBS and Lloyds, the Government injected an astonishing £37 billion of new equity capital. It was the previous lack of sufficient equity, commensurate with the increasing risks that RBS - especially post the disastrous ABN-AMRO deal - and Lloyds were running, that proved their undoing. At the recent G20 gathering, there was an encouraging consensus that increased levels of bank equity capital were paramount.

There remains a strong case for periodic stress-testing of the UK’s four clearing banks, perhaps over a three-year cycle: immediate restorative action to boost balance sheets could be implemented if necessary. In terms of bankers’ bonuses, there is an ongoing debate both about capping and/or taxing them, and the widespread wish to maintain secrecy. Since the pay of directors is painstakingly reproduced in Annual Reports, perhaps a reasonable compromise would be to publish bonuses over a certain level.

Finally, the four clearing banks should not necessarily operate on a level playing- field. Two passed ‘Go’ to collect a massive level of Government equity to stay afloat – two did not. Hence, if like RBS, you end up with majority state ownership, your activities will inevitably be more constrained.

Moral: never get into a situation that requires a public bail-out. Correct?