Sorry to tell you this but Angus Deaton has gone horribly wrong on US poverty

Fighting words from mere policy wonks to a Nobel Laureate of course but we're afraid it's true, Angus Deaton is going badly wrong in his analysis of US poverty. The claim is that there are those in the US suffering the sort of poverty, that $1.90 a day type, we more normally associate with what Donald Trump described as "shitholes."

This is not true. What is true is that there have been a number of reports, books, screeds, making the assertion but they don't stand up to analysis.

The first that Deaton mentions is Philip Alston's UN report on the subject. One of us corresponded with him to discuss his report and we didn't get any useful answers, just "gosh this measuring poverty thing is difficult, isn't it?" Or, as one of us put it elsewhere:

Just to emphasize this when they talk about child poverty (para 25) we’re told that 18 percent of children live in poverty, 13.3 million. Then in paragraph 29, we’re told that food stamps (SNAP) lift 5 million out of poverty, the EITC another 5 million.

So, the number of children “living in poverty” is not 13.3 million, is it — it’s 3.3 million. That comes out to just 4.5 percent of children “living in poverty,” after the effects of just two of the things we do to reduce poverty.

In their own report, the U.N. is detailing how their claims of the number in poverty in the U.S. are entirely wrong – codswallop in fact.

The measurement of poverty being used is how much poverty would there be if government wasn't doing something. This is not a good measurement of how much poverty there is after government has done its - no doubt wasteful, not very effective but still extant - work.

Deaton also references the Edin and Shaefer work. Our opinion is that this was deliberately constructed to be misleading. For they look at cash income only. Our $1.90 a day figure is consumption, not cash income. Not only does the E&S "work" not include what government does to alleviate poverty, as above, but it also fails to account for consumption from savings. 

Imagine, for example, that you were laid off from a job this Friday, start the next one in 10 days on the Monday but one and don't claim unemployment in the meantime. By their measurement system you are on less than $2 a day cash income over that period and thus absolutely poor. 

This is a nonsensical method of measuring poverty - except, of course, if you were more interested in a polemic which showed there was absolute poverty in the US. 

We thus return to our long articulated insistence. In terms of that $1.90 a day absolute poverty defined by the World Bank there is no such poverty in the US today. It simply does not exist. Any policy based upon the idea that it does is therefore going to be wrong. 

Just one numerical example. The average, among those who receive anything at all from the program, food stamp allocation is $29 per week per person. 45 million people receive this slightly more than $4 a day. Food stamps are not included in either of the above two mentioned poverty calculations, neither the UN one nor the Edin and Shaefer. There is no $1.90 a day poverty in the US.


EU trade commissioner should bring her message home

Today at the World Economic Forum in Davos (don’t worry I’m not there, just watching from a safe distance) the EU trade commissioner Cecilia Malmström said that she had “some grave concerns on China [which is] massively subsidising state-owned companies.” 

She’s right to have these concerns, but just as charity begins at home so does tough-love. While we’re looking at reforming China, she might want to have a quick word with some EU member states. 

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Finland is a particularly bad example of this. According to OECD data for 2014, the Finnish State was, in 2012, an owner in companies and unincorporated state enterprises with a combined value of approximately 53 per cent in relation to GDP. These include internationally trading companies such as steel producer Outokumpu (where the government owns 27.3%), aerospace engineers Patria (50.1% state owned), and energy producers Fortum (52.43%). Finland’s government is even going backward, purchasing stakes in companies Gasum and Fingrid that will bring them back under majority state control (50.1%). France is not much better with the state maintaining stakes in international companies such as Areva (where they control 86.52%), Air France-KLM (17.58%), and Airbus Group (10.94%). 

That last one is particularly interesting. One of the largest and most troubling of the internationally subsidised industries is aircraft. Government subsidy and intervention on behalf of aerospace giants has left them dependent and left us all at risk of escalation into broader trade wars. So it was in the dispute between Bombardier and Boeing, and so it is with Airbus. In 2011 the WTO ruled that Airbus had received $18 billion of illegal subsidies. In 2016 the WTO found that not only had they failed to deal with action against $17 billion worth of those subsidies provided to Airbus, but that an additional $5 billion in illegal launch aid had subsequently been provided to support the building of the A350. 

This is billions of taxpayer money from across Spain, France, Germany and elsewhere in the EU. Taxpayers are coerced into gambling on the success of subsidized commercial projects (like the A380 whose production is currently being pared down). And this kind of intervention only leads to rent-seeking in order to obtain more and more subsidy, while disguising the full cost of goods and services. 

So far, so academic. But one of the key reasons to get governments out of the industry worldwide comes from a new entrant and another government entering the fray. In May of last year the C919, a new jetliner produced by China’s state-owned COMAC, saw its first flight. Now it is fully commercial it will be in competition with aerospace producers in the US and EU. With subsidies being provided by the EU it will be hard to argue with a straight face that the Chinese state shouldn’t be able to use its political clout to force through contracts, that it shouldn’t use public funds to prop up the company or unduly support the company. In other words, even more rent seeking, and capital tied up beyond what’s needed in the jet manufacturing industry 

But shouldn’t we support these ‘strategically important sectors’? Well, whenever money is lent, there is a risk it won’t be paid back. Government money is either crowding out the private sector or it is supporting lending that private-sector lenders judge too risky. There is one good thing I can say about foreign subsidy. That is, that it is keeping our import costs low on the back of their taxpayers. Unfortunately, as talk of trade wars at Davos shows, they encourage what my old colleague Sam Bowman described as a form of a kind of subsidy alcoholism, where our own government and lobbies move to protect industry after industry from pernicious foreign actions. That is where the real rot sets in. And that is why it is so important to stamp out the practice early on where we can. 

The EU’s trade commissioner works across borders, with a mandate to free-up trade and secure efficient markets. It’s her job to ensure the EU is on a level playing field. That has to start at home. She should tell member states to cease their subsidies. 


The collapse of Carillion—the mega-company used by the British government to build and operate things like schools and hospitals under the Private Finance Initiative (PFI)—leaves me conflicted.

The collapse has led to demands from folk like the Opposition leader Jeremy Corbyn that public infrastructure should be built and run by public (i.e. government) employees. And the debate on the subject has also revealed that some of the PFI deals turn out to be a very expensive way of financing such projects.

I’m conflicted because colleagues and I at the Adam Smith Institute had a lot to do with the origination and design of PFI in its early years. But through the 1980s and beyond, the scheme has been a complete dog’s breakfast, and very poor value for money. But let’s not throw the good idea out with the bad prosecution.

The original idea of PFI was this. Public building works were very slow, and therefore costly. In the UK it took an average of 11 years to build a prison that private companies in Australia were building in 11 months. The counter argument was that governments could always borrow more cheaply than private companies, as there was less risk premium with governments. But that was always nonsense. Even if you borrow more cheaply, tying money up for 11 years while a building project lumbers on is clearly going to cost you more. Also, if you are relying on public sector workers, there is no competition to keep down costs and bid up quality and efficiency.

Another thought behind the PFI idea was that the government could pass some risk on to the private sector and encourage market-style decision-making in what infrastructure should be provided. For example, a new motorway could be financed by tolls paid to the builder/operator—who would then have an incentive to keep the road running smoothly and in good repair, and provide any other facility that made road users happier. And it would also encourage firms to come forward with ideas, pointing out where a new road, or new hospital or school, say, was most urgently needed.

But there were three snags. Firstly, the public sector turned out to be very bad purchasers of this kind of deal. Whitehall officials, with very little experience in business negotiation, got totally done over by private companies who negotiated contracts every working day. Is that a failure of the PFI idea? It’s more a failure in the customer. And it is one that could and should have been addressed, but wasn’t.

Secondly, government officials love big stuff. So they looked for big companies who could deliver big projects. Before long, just a few firms like Carillion were completely dominating PFI projects. It’s like the banks—too little competition means companies get too big to be fail without a lot of political fallout. Many of the projects undertaken by Carillion should have been split into smaller contracts with several suppliers, so spreading the risk.

And (thirdly) many of them should not have happened at all. When Gordon Brown came into office, he removed any last vestige of the original idea. Instead, he turned it into a giant mortgage scheme. He could take the credit for getting lots of new schools and hospitals built (regardless of whether the locals thought they were needed) without raising the taxes to pay for them. He simply got private companies like Carillion to put up the cash. Even better for him, that did not even appear as borrowing in the public accounts. But in fact it was merely a disguised form of borrowing. And it would be paid for, not by current taxpayers, but by future taxpayers. That’s a very attractive prospect for politicians, who know they won’t be in office for ever, and paying stuff back will be their successors’ problems.

Most st of the current PFI contracts were signed off by Gordon Brown, a man not known as a radical free-marketeer. That is who we should blame for the dismal outcome.

So I’m against PFI in its present form. It’s a mortgage scheme, not a way of embracing private-sector initiative, talent and finance. And thanks to Whitehall ineptitude, it has turned out a very bad mortgage deal at that. It’s a mortgage deal that we are locked into for a generation, and that future taxpayers will have to continue to finance. 

Could we get back to the idea of private, competitive enterprises financing, building and operating public services? Yes, we could. After all, the government buys its paperclips and computers from private companies. It may not be a very businesslike purchaser, but it could be made a lot better, and contracts could be kept small enough that competition was encouraged. And if we actually got PFI Mark 2 right, it could be very much better value for money than the present mess—and very, very much better value than nationalising everything.

10 things to love about the economy of the 1980s

The 1980s were a better decade for fashion than the 1970s, and produced a plethora of brilliant movies. They were also noted in the UK for a turn-around in the economy that took Britain from being the basket-case of Europe into the top rank.

1. Under Margaret Thatcher the trade unions were brought under the law. It was done steadily, step by step, instead of in the wholesale reform attempted unsuccessfully by her predecessors. Instead of confiscating union power, she devolved it from the leaders to the members. Members were given the right to elect leaders by secret ballot, and to be balloted before strike action. This resulted in more moderate leaders and more moderate behaviour.

2. Secondary picketing was banned, and unions could be sued and assets confiscated if they broke the law. The UK went from having the highest strike rate in the EU to become the country with the lowest. The lack of industrial unrest created a better environment for business success and economic growth.

3. Exchange controls were abolished, allowing investment in overseas assets as well as allowing travellers to take currency abroad. Pension funds could now include foreign equities and foreign bonds in their portfolios, allowing alternative counter-cyclical investments to UK equities and bonds. They were able to grow substantially as a result.

4. Many of the state monopolies were broken. When Telecoms were privatized, a competitor called Mercury was allowed alongside it, and later reviews added more competitors. The result was to put Britain among the most competitive telecommunications markets in the world.

The state energy companies were privatized and opened up to competition. Ones that had previous been thought of as natural monopolies were made competitive by the separation of the networks from the suppliers, so that customers had a choice as to who they wanted to supply down that network.

5. Inflation was brought down by control of the money supply and fiscal prudence. The double-digit rates disappeared. Businesses were able to plan ahead for the investment and sales in the confidence that spiralling inflation would not make a nonsense of their plans.

6. The mass privatizations under Margaret Thatcher turned loss-making state enterprises into profitable private ones that paid taxes instead of receiving subsidies. Many of the newly privatized companies were able to compete on world markets, contributing to economic growth in the UK.

7. Personal taxes were brought down. The top rate went down in stages, first to 60% and then to 40%, and the basic rate was lowered to 25%. The result was that revenues were raised, and the top 10%, who had paid 35% of total income tax, now paid 48%. This made work much more attractive and raised living standards.

8. Business taxes were lowered. Small profit Corporation Tax was lowered to 25%, and its standard rate gradually brought down to 34%. These were substantial reductions, hugely beneficial to business and the economy, and contributing to the economic growth that characterized the 1980s.

9. After state services were privatized and exposed to competition, they improved their quality output in order to attract and retain customers. They were further able to make investments based on expectations of future custom, rather than on what government felt it could afford. The result was that services improved dramatically in both quality and consumer responsiveness.

10. Once state production was transformed into private companies, there were substantial improvements in the quality of its products. Ships, trucks, aircraft, cars and other things climbed up in quality. This was partly due to better management in the private sector, partly to competition, and partly due to investment in new technology. It was also down to the fact that in a competitive environment, quality matters, and successful firms recognize that and monitor it to maintain it, whereas the state did not.

If only people knew what they were talking about

As we know there's a lot of talk around today about inequality, the screaming increase in it, the necessity of something being done about it and so on. At which point, in The Guardian from someone deeply involved in the shouting about this

Lucas Chancel is a French economist who worked with Thomas Piketty on the World Inequality Report 2018

We would, I think, hope that someone working that deeply within the subject would get things at least around and about right, yes? 

It’s hard to exaggerate the difference between western Europe and the USA when it comes to inequality. In 1980, these blocs of similar population and average income were also similar in income inequality: the top 1% captured around 10% of national income, while the poorest 50% took around 20%.

Things have changed dramatically since then. Today, the top 1% in Europe take 12% of income (in the US, 20%) while the bottom 50% have 22% (in the US, 10%).

Well, no, as another recent paper puts it:

According to official measures, which are based on income, inequality has risen steadily in the US since the early 1970s (DeNavas-Walt and Proctor 2015). An important limitation of the official statistics is that they are based on pre-tax money income, which does not account for tax credits and in-kind transfers such as housing benefits and food stamps, which have increased sharply over time. Income inequality still rises for measures of income that more closely reflect family resources available for consumption, but the rise is less noticeable.

Broadly speaking (not quite, the change started in the mid-70s) US income shares changed from being post tax post benefit to being pre- tax and benefits. That is, the current US figure is, largely enough, income inequality before the things done to reduce inequality, while the old one was after. The European numbers are post reduction all along.

That is the sort of thing we'd hope an inequality researcher would both know and tell us, yes? But it gets worse:

Generous welfare states need to be financed, of course. Europe is a patchwork of taxation systems. But overall the continent has been good at protecting progressive taxation – which has not been the case in the US, Britain and also countries such as India, where inequality has mushroomed. Progressive taxation is a proven tool against entrenched privileges at the very top; it also helps finance investment and public expenditure designed to lift income levels at the bottom.

The US tax system is *more progressive* than near any of the European ones.

For progressive here is not a synonym for "lots of taxes" nor even for high rates. It has a specific meaning - if average tax rates as a percentage of income rise as income does then the system is progressive. The more they do so the more progressive the system is. And that US tax system is more progressive than European ones by exactly that definition.

The cause is that the US is largely (many parts have sales taxes but at lower rates) free of regressive consumption taxation, relying much more upon the very much more progressive income tax. This is not an arguable point it is a simple fact.

This really is something we would hope someone shouting about progressive taxation would know - that the US has a progressive, more so than much of Europe, taxation system.

But apparently not. Which does rather call into doubt everything else this person, and his ilk, are trying to tell us about inequality, taxation and the joys of progressivism, doesn't it? A pity, because conversations about what we should do would work rather better if we started from where we actually are, no?

10 things to hate about the economy of the 1970s

The 1970s might have been a great time for popular music, but it was a naff decade for fashion with flared trousers and ridiculously wide lapels. It was in the economy, however, that it was really bad.

1. It was a decade characterized by strikes. Britain's trade unions were literally above the law, in that they could not be sued for the losses they caused to their companies or to the general public. Leaders and shop stewards were often elected by show of hands, leading to intimidation and the election of militants and extremists. Walkouts would be called at the drop of a hat, and working conditions imposed that caused massive inefficiencies and increased costs. The UK had the worst record in the EU for days lost through industrial disputes.

2. The unions used their powers to bully, and to advance the interests of their members at the expense of the public. The public regularly found their services interrupted by walkouts over demarcation disputes. A friend phoning her mother in South Africa found a union official on the line telling her that it didn't sound like an urgent call, and disconnecting her because the union had blocked non-urgent calls to that country. This was not national policy; it was union policy.

The press was among the worst victims, with non-existent workers drawing pay packets to pay into union funds. Union leaders would warn governments what policies were not acceptable to their members, and the unions successfully defeated attempts to bring them under the law by both the Harold Wilson and Edward Heath governments, using industrial action or the threat of it to do so.

3. Inflation spun out of control in the 1970s, peaking at about 25% in the middle of the decade. Firms stopped printing the prices on their goods, or put stickers over the previous prices. Huge pay demands backed by union militancy meant firms had to increase prices to absorb those cost increases. Governments resorted to printing money to pay their way and inflation became endemic. Those on fixed incomes, such as retirees, saw their living standards eroded, though government officials on index-linked pensions were protected against this inflation.

It had a detrimental effect on Britain's ability to sell goods, not only because prices kept increasing, but because they were unpredictable.

4. Many major industries were state owned and loss-making, supported by taxpayer subsidies. These included steel, coal, gas, electricity, telephones, and the manufacture of cars, trucks, buses, aircraft & ships. They included the state airline, shipping company, freight company and bus company. Most of these were uncompetitive, providing inferior products and services, and were not customer-oriented. State housing accounted for 35% or residences, and was let at subsidized rents and was poorly maintained compared to privately-owned properties.

5. Many state-owned industries were monopolies, lacking the stimulus of competition, and were chronically under-invested because government always had more claims on its spending. This made them outdated, lacking the newest technology and practices. The state telephone service would rent, not sell, people a black phone with a rotary dial designed in the 1930s for about £15 a quarter. The waiting list in some areas was over a year. The gas showrooms on every high street where people bought gas appliances had unlisted phone numbers so they were not bothered by calls from customers.

6. Personal taxation was at very high levels, with a top rate of 98%. This consisted of a top income tax rate of 83% plus a 15% surcharge if people drew income by investing in business and industry. These high rates were a disincentive to work and wealth creation, and deterred foreigners from settling in the UK and contributing to its economy. People had to pay up to 35% in Capital Gains Tax, which was not indexed, so they were paying on nominal gains only.

7. Taxes on businesses were very high, with a small profit rate of Corporation Tax at 42% for much of the decade and a standard rate of 52%. This obviously deterred business activity and expansion by making it less worthwhile. By increasing the costs on business, it increased the prices they charged for goods and services.

8. Exchange controls limited the ability to transfer funds. UK travellers could take only £50 out of the country, and UK investors could not invest in overseas assets. This imposed major limits on the way UK businesses could operate, as well as on investors, in addition to the inconvenience to travellers. It turned ordinary citizens into law-breakers.

9. UK state services were generally sub-standard. This resulted from lack of competitive pressure, combined with producer capture and the exercise of union power to seek the convenience of their members rather than the convenience of the public. Under-investment was also a key feature as government responded to electoral pressure by spending on transfer payments instead of on investment and infrastructure.

10. Many UK goods and services in the 1970s were of low quality if not downright shoddy. Part of the reason lay in the industrial disputes that dogged the economy, part lay in under-investment resulting from high tax levels. Many UK goods gained an international reputation for poor quality, a reputation that took time and determination to overcome.

The European Union has just invented the perfect tax for us here in Britain

Glory Be, the European Commission is mulling over the imposition of a policy which creates the perfect form of taxation for us here in Britain.

You see, the problem with tax - any tax - is that it's a cost. Sure, we can buy such lovely things with the money raised but we also lose those things we would have had if the cash hadn't gone off to the Revenue. The answer to this is, of course, that them over there pay the tax while we get the spending. As Monty Python put it

Politician: Bravo, Madge. Well done. Taxation is indeed the very nub of my gist. Gentlemen, we have to find something new to tax.


Man In Bowler Hat (Terry Jones): To boost the British economy I'd tax all foreigners living abroad.

Well, yes, why not, and that's just what is being proposed:

Brussels could seek the moral high ground by covering the application costs of EU nationals who want to stay in the UK after Brexit, under proposals being discussed at the highest levels of the European commission.

The UK Home Office has threatened to charge a £72 fee for applicants seeking so-called “settled status” in the UK, which grants them indefinite leave to remain. Applicants will have to demonstrate five years’ continuous residence and pass a criminal record test.

It has emerged that the European commission president, Jean-Claude Juncker, has expressed sympathy with a suggestion that Brussels could cover the fees if the UK does not make a more generous offer during further negotiations this year.

According to EU sources, Juncker agreed in a meeting with the European parliament’s Brexit steering group to personally take up the issue of the charges with Theresa May. However, he is said to have recognised that Brussels may need to look at funding the costs through the EU budget.

If that fee were being paid by those Europeans who wish to stay in the UK post-Brexit then we'd want to make sure that it is such a modest sum just to cover the cost of the paperwork. However, look what happens when it is the EU budget which covers it.

We here in Britain won't be contributing to EU coffers post-Brexit (well, not if anyone's got any sense we won't). If that budget is picking up the cost then the applicants won't be paying it either. So none of those will be discouraged by whatever the rate is. But the sums raised will be contributions to the UK budget, those contributions being paid by those who are still taxpayers chipping into the EU budget.

That is, the money will be spent upon us and it will be, by definition, foreigners living abroad who are paying the tax. It's the perfect form of taxation therefore.

At which point, why be pikers about this? £72 a head? Why not £720,000 a head? 

Yes, sadly, it's not going to happen. But we can dream, can't we? 

Living the high (street) life

All that is gold does not glitter. Sometimes even the dullest sounded policy names actually contain exciting possibilities. So it is with a little-known planning permission policy called ‘Permitted Development Rights’ that allowed a change of use from office space to residential. PDRs come from rights not given by local authorities but from parliament. 

The allowance of change of use began as a temporary order, under the Coalition government but, after the period showed a rise in the numbers of homes being created at a time for decreased demand for office space, the Conservative government in 2016 decided to make it permanent. It was a small change but it has been instrumental in helping the government meet its 200,000 new homes per year target. It is also a change that is helping towns and cities provide young people with new and affordable homes. 

But there are a couple of issues with it. Firstly, commercial areas are still exempt and will be until 30 May 2019. This means places like the City of London, Westminster and other inner London Boroughs have time to apply for what is known in the jargon as an Article 4 Directions to remove the Right in their area (what everyone else would call a special exemption and protectionism). 

Secondly, it doesn’t go far enough. Permitted Development Rights are aimed at redundant office space, allowing quick and efficient transfer between use of a building. But it leaves A1 and A2 (in human speak this is what we call shops) requiring change of use to receive prior approval from (and subject to objection) local authorities. There is also still a space limitation of just 150sqm on the transfer from shop to residential. Yet reported vacancy rates on our high streets stand at 11.1% in England, 11.9% in Scotland and 14.5% in Wales and the Federation of Master Builders estimated that we could build nearly 400,000 homes if we converted these empty shops. We have the untenable situation where shops on high streets are boarded up and left to rot while people are clamouring for somewhere good, convenient and affordable to live.

And when people have moved in, guess what they will need? Places to eat, drink, socialise, buy their groceries, their DIY supplies. And they’ll want to work near to where they live and have community spaces that draw people in. Getting people back living in the centre of town will be a boost for businesses of all forms there. 

We should all welcome the return of people living in our cities. Cities filled with young, educated, and skilled workers are more productive. Creating more choice for workers that don’t fancy a long commute but do fancy living where they socialise. Not to mention that creating more opportunities for innovation and entrepreneurship could help Britain’s cities boost the country back up the productivity league. 

We can breathe life back into the high street, provide affordable homes, boost Britain’s productivity and do it simply. Let’s extend Permitted Development Rights to allow empty shops to become houses and get back to those streets paved with gold. 

The effect of the Trump tariffs

Although designed to protect American jobs, the new Trump tariffs will have
consequences wider than those intended. The tariff on imported large
residential washing machines is to be 20% on the first 1.2m machines imported,
and then 50% on those above that number. These tariffs will decline to 15%
and 40% respectively in the 4th year. This is designed to protect US companies
such as Whirlpool, but it means that domestic US consumers will have to pay
more for their washing machines because rival products made by Samsung
Electronics and LG electronics will rise in price. It could also hit sales at Sears,
which outsources its Kenmore brand to LG factories.

The tariff on solar panels is to be 30% in the first year, declining to 15% by the
4th year. This will undoubtedly hit America’s booming solar energy industry by
raising its costs. It could add $750 to the cost of fitting out a house, and the
Solar Energy Industries Association estimates it could cost 23,000 US jobs.
Crucially, it will also slow down America’s switch from coal and oil to alternative
and cleaner energy sources. The rapid decline in solar energy costs has been
one of the factors in driving the US to rely more and more on less-polluting
energy generation, and the solar panel tariff will set that back.

In the affected countries, China and South Korea, there will be job losses as an
important export market raises barriers against their goods.

The higher costs to hard-hit American households and the threatened job
losses there are not what the tariffs were intended to achieve. On a wider level,
they raise the prospect of retaliation and a trade war that will cut trade and
economic growth worldwide. The tariffs are not good news.

Baby steps, baby steps - Guardian correctly divines the cause of high housing costs

But, sadly, doesn't manage to come up with the right solution to this problem. Still, baby steps, the correct diagnosis is a step toward crafting a solution:

The rooms in their houses are likely to be cramped: Britain is reckoned to have the smallest new-build homes in Europe, partly because there are no mandatory national space standards. And too many of these places lack the shared spaces and amenities that might give them some small sense of community: meeting halls, sizeable play areas, any space for businesses beyond a single small supermarket.

What is going on here? Since 1995, the total value of UK land has increased more than fivefold. According to the Valuation Office, whereas the average price of agricultural land in England is £21,000 per hectare, the equivalent with planning permission for housing now comes in at a cool £6m. Impossible land prices cut out developers beyond the tiny handful of giants who dominate the market. The sums they have paid for their plots have consequences not just for house prices, but basic standards: developers too often try to make their profits by building houses as cheaply as possible, and squeezing the share given over to “affordable” homes.

As we have been saying, ad nauseam, there is no shortage of land in Britain upon which houses could usefully be built. There is a shortage of land upon which housing may be built which is why that gross price difference between land where the permission exists and where it does not. 

There is a simple answer to this, grant more permissions and the cost of them will decline.

There is another problem which you readers here have pointed out to us. Which is that affordable housing requirement. This is a tax upon the building of new housing. If you build some number of units then you must also build some other number of units which cannot be sold at their cost of building. Yes, this acts as a tax - we get less of the things that we tax thus we're getting less new housing as a result of the affordable requirements. Thus we should abolish said requirements as well.

Fortunately, if we solve the price of building land problem by just issuing more permits then we don't need the special allocation of affordable housing simply because we'll have made all housing more affordable by the building of new houses. Further, of course, cheaper building land will lead to less squeezing of units onto a no longer extremely limited supply, neatly solving the size issue as well.

The Guardian's proposed solution involves more tax and more regulation. That government should do more. And we do agree that government should do more here. You know, issue more permits. Or, even, do less by deconstructing the system which requires such permits.

As we say, the analysis of the problem is pretty good. Britain's housing prices are caused, at least in large part, by the cost of land with permission to build. So, increase that supply and prices will decline. What's difficult about this?