Author: Steve Hilditch

Monimbo
It hasn’t taken long for Danny Alexander’s claims to fall apart. He was supposed to have announced the most comprehensive, ambitious and long-lasting capital investment plans ever. Instead, it turns out that the plans will keep capital investment at its present level, at best.
The IFS led the way by pointing out that at least until 2017/18 there will be no increase in investment levels following the latest spending review.  Public Sector Net Investment will be broadly flat for four years, which means as a proportion of GDP it will actually fall.  Colin Talbot added up several decades’ worth of figures to compare the decade from 2010 with previous ones.  He shows that, as a proportion of GDP, investment in the current decade is expected to average 1.7% whereas in the decade before 2010 it averaged 1.8%.  In the 1970s, we were investing a staggering 4.5% of GDP, but presumably this is too far back to be included in Alexander’s definition of ‘ever’.
Mark Hellowell, in Public Finance, has added up investment over the two decades and concludes that, for the ten years from 2010/11, the government will spend £450 billion in total; in contrast, in the ten years up to 2009/10 the previous government spent £530 billion if PFI projects are included (as they should be).  Looked at in terms of proportions of government expenditure, the respective figures are 6.2% for the current decade and 7.6% for the previous one.
Turning to housing, the cards are similarly stacked against Alexander. He made various boasts, including his promise of the ‘biggest public housing programme for over twenty years’ and that the 165,000 target for the three years from 2015/16 would be ‘a higher number of houses than Labour ever managed in 13 years in power’.
Let’s compare the figures.  According to the statistics bible, the UK Housing Review 2013, the previous government’s National Affordable Housing Programme (NAHP), over its three-year life from 2008/09, averaged just under 58,000 new units per year.  The current government’s Affordable Homes Programme, over the four years 2011/12-2014/15, will produce less than half this, at under 23,000.
If the Alexander programme that follows on for the three years from 2015/16 delivers as promised (surely a big ‘if’), it will produce 55,000 units per year.  While that level of output would be very welcome, it will still be rather less than what Labour’s programme achieved.  (Alexander will quibble that most of the last year of the NAHP was after the 2010 election, but surely even he couldn’t argue that the coalition government built houses in schemes that were on site when they took power, could he?).
Of course, his new claims are only possible because he assumes the government can, yet again, reduce grant levels.  Under Labour’s programme average grants were £51k per unit. They’ve now fallen below £20k per unit; the Alexander programme would see them go down even further to £18k.  Given the conditions that will apply to the new grants, including converting relets to Affordable Rent and sweating housing association assets even more than currently, it must be questionable whether associations will engage with the new programme to the extent required to build at more than twice their current output. Wouldn’t they be better off simply developing at market rents without grant, keeping their social rented stock and adding to it as when the profits from market rents allow?
Certainly, a strategy that depends on high levels of welfare benefits when these are under renewed threat, not to mention even greater leveraging of associations on top of their already high levels of debt, seems… shall we say… a rather shaky one.  Danny Alexander is probably hoping that his plans for Investing in Britain’s Future will be quietly forgotten by the time of the next election, whoever wins power.  And in that respect alone, he might well be proved right.

• By Monimbo

Welfare reform is driven by ‘ideology and electoral calculation’.  Its function is to turn the not-very-well-off but not-really-poor against the really poor.  Red Brick readers may not regularly look to the London Review of Books for their political analysis, but if they don’t they’ll miss Ross McKibbin’s regular pithy commentaries on the current political scene.  His latest full article is a succinct summary of why and how the Tories are attacking the welfare state, and it should be cut out and pasted on Liam Byrne’s noticeboard. He’s updated it in light of the recent speeches by Ed Balls and Ed Miliband.
McKibbin argues that ‘welfare reform’ has little to do with defects in the system.  Yes it’s true that it’s very complex, and a unified system would in theory be better. But while its complexity is a result of various new bits being bolted on over the decades, the reason for them was that they responded to new problems and recognised a vast range of different needs.  Universal credit won’t work as the means to reconcile these conflicts because it’s poorly designed, inadequately tested, flawed by its reliance on online claims by groups that often aren’t computer literate or rely on one-to-one advice, uses contractors whose role is to force people to work even when they can’t, and to save money is being artificially constrained by benefit caps and other limitations.
The government’s main argument for change – that the system is massively exploited by scroungers – is simply not supported by the facts. McKibbin argues that the drivers are ideological and political – hatred of the system and belief that change will benefit the Tory party by attracting votes from the sections of the working class who can be persuaded that the main source of their problems is other, slightly poorer, sections of the same class.  In other words, the changes won’t end ‘scrounging’ because it isn’t a significant problem and reducing it to zero is impossible anyway.
But the changes might just deliver enough working class votes to win the next election for the Tories.  The evidence for this is in the opinion polls: not the ones on party support but the polls on people’s attitudes to welfare. McKibbin points out that people typically think 41% of welfare spending goes to the unemployed whereas the true figure is 3%; people think 27% of spending goes in fraudulent claims whereas the government says it’s 0.7% (I haven’t checked his figures, but they sound right).  McKibbin argues that for Labour to largely accept the Tory reforms would both be morally wrong and bad economics, even though changing these perceptions is a huge challenge.
As Red Brick pointed out, Ed Miliband’s recent speech was a welcome start in trying to shift the debate, for example in its focus on worklessness and low wages.  But Labour has to do much more to drive home the message that it’s not the welfare state that’s out of control, it’s the government’s economic failure, lack of jobs, low wages and unaffordable housing that are combining to put so much pressure on the welfare system.  Cutting welfare can never work in this environment – the government’s own figures show housing benefit costs are projected to grow by a further £2 billion over the next four years, even with all the planned ‘reforms’, and this is very likely to be an underestimate.
Another little-noticed effect of government’s plans for universal credit, highlighted in the CIH’s new UK Housing Review Briefing Paper, is that it draws far more people into the benefits/credits system. This is because it withdraws benefits/credits more slowly from working tenants. A typical family in the private rented sector (couple with two children; rent of £100 per week) will drop out of the housing benefit system when their gross earnings rise to about £480 per week, and tax credits at about £620 per week. But they’ll soon be able to continue drawing universal credit until they earn as much as £725.  Their rent would only have to be £130 for them to be simultaneously eligible for universal credit and caught by the higher (40 per cent) tax rate.
Government figures project that two thirds of working families with children will be better off under universal credit – and many will become benefit/credit recipients for the first time.  Labour can use this as a stick to beat the Tory arguments: look, even your own system recognises that more people need government help, and that’s because wages are too low and rents too high to enable ordinary working households to earn enough to live on without state assistance.  A big part of the need for welfare reform is that the economy is failing those on moderate wages – and the Tories’ own projections for universal credit are the proof that this is so, and getting worse.

It is a common lament on Red Brick that the word ‘subsidised’ appears before the words ‘social housing’ on so many occasions with no explanation or justification or proper comparison with what really happens in the ‘market’ sectors. (See our previous post ‘Who gets subsidised housing?’). It is all part and parcel of a view that ‘markets’ are universally good and efficient and that public provision is invariably poor and inefficient.
A new report from the Centre for London says that social tenants in London are ‘subsidised’ to the tune of £5,300 each per year. They use this ‘fact’ to argue for charging ‘wealthy’ tenants more rent, starting at the London average (£27,000), using a sliding scale until market rent is reached. The extra income would then be used to fund more affordable home building.
This is a proposed variant on the Government’s own ‘Pay to Stay’ scheme which, rather than being graduated, has a single cut off point, below which you pay a social rent, above which you pay a market rent (creating a very steep marginal tax rate).
The proposal is based on a particular theory about what a subsidy is. The Centre for London’s figure of £5,300 is a simplistic calculation which wouldn’t worry the back of a fag packet. They pick the average weekly social rent, take it away from the estimated average weekly market rent for such properties, and multiply by 52. Bingo.
This view of subsidy (in economic theory it is called ‘economic subsidy’ because there is no cash transfer) seems to be uniquely applied to social housing, largely by people who like to exaggerate the cost of social tenants to the rest of us. However, the gap between a better and more efficient socialised system, which produces high quality homes at a low cost, and a very imperfect and failed market model, which often produces low quality homes at high cost, cannot in any sensible dialogue be called subsidy. Social rents are not set by ‘the market’ and never have been.
The strength of council housing is that rents cover costs, including debt interest, and indeed make a profit. There is no subsidy if it is looked at this way. For housing associations, the calculations are different because there has normally been an upfront capital grant to get the home built – but the benefit of building the home will be felt not just by the current tenant but by all tenants in future, possibly for 100 years or more, during which time it will indeed make a profit.
On the Roehampton Estate in Wandsworth, bad policies over many years have led to much of the estate being sold off, and probably one-third of the stock is now in the hands of private landlords letting to students at the local University. The landlords divide rooms and often let a 4 bedroom flat at over £600 per week. Does this lead to the conclusion that the flat next door, still occupied by a council tenant, is ‘subsidised’ by something like £500 a week? Of course not. It only means that the students are exploited by the ‘market’ and the price should be regulated.
Or look at other sectors. What subsidy do you receive by sending your children to a state school? Is it the broad cost of the school divided by the number of pupils? I would say yes. Or is it the difference between a free place and the fees charged by local private schools – ie the market? It would be ludicrous to say so. Similarly, what subsidy do I receive by going to the doctors? Is it the cost of provision or is it the fees charged by local private doctors?
Forgetting the ‘market rent’ subsidy issue for a moment, I have no real objection to the principle of charging more to wealthier tenants, but the Government has failed, and the Centre for London has also failed, to overcome the key issue that you have to means test everyone to discover who has a high enough income to pay the extra. I suspect the Government may try to get away with placing people under a duty to declare their incomes if they are above the defined level, but that approach is at variance with how any other tax or benefit is organised.
The Centre for London’s more complex model would involve full means-testing of everyone. The report makes light of all such issues and assesses administrative costs as being about 10% of the income that would be raised. In truth they don’t know because landlords have never had this function before and would have to set it up from scratch. Would it be total household  income, would it include bonuses and overtime, what happens to people with variable weekly or monthly earnings, are family circumstances taken into account, would there be a mirror image of the bedroom tax, an extra rent for underoccupiers? And what would people make of the choice between seeing their rent double on the one hand and getting up to £100k subsidy to exercise the right to buy on the other?
Moving to a universal means test for social tenants may be a good thing to do in the long term – but only if we switch entirely to an income-based method of setting rents (eg at 30% or 35% of disposable income). That might be worth the effort but is an issue for another post in the future.
Pay to Stay, whether the Government’s or the Centre for London’s versions, imposes an inappropriate market theory on a socialised sector. It is also potentially a bureaucratic nightmare. We shouldn’t touch it with the proverbial barge pole.
 

Following a Freedom of Information request, in October last year Red Brick revealed that 82,000 social rented homes were likely to be ‘converted’ to the much more expensive ‘affordable rent’ regime in a desperate attempt to fund the Government’s flagship programme.
A new independent report on the affordable rent programme by Future of London shows that, at December 2012, there were 543 lettings of new build affordable rent homes in the Capital but 2,571 conversions from traditional social rent – nearly 5 conversions for every single new build home so far. It effectively means that these homes have had an imposed rent increase of 40-50%.
Because the Government stipulated that ‘affordable rent’ homes should be let on the same basis as ‘social rent’, the inevitable has happened: new tenants are even more reliant on housing benefit. Not only have social rented homes been hijacked but also the pain will be felt through increased housing benefit payments for many years to come. While Labour is busy developing policies to turn ‘benefits into bricks’, the Tories and LibDems are busy making the system ever more reliant on benefits.
The report shows that the ‘affordable rent’ homes are being let to tenants who are ‘on average, in greater poverty than existing social tenants’. This is in total contradiction to the many words of wisdom uttered by Iain Duncan Smith about ending benefit dependency and ‘making work pay’.
In London, ‘affordable rent’ is the figleaf behind which Boris Johnson hides his housing policy. It seems likely, says the report, that the programme will deliver its aim of 16,000 homes, although the chances of this being achieved by 2015 as planned seem slim given that the programme is very heavily backloaded, with most homes being built in the final year.
The housing programme is not just about numbers, it matters what is being built and for whom, and at what cost. The ‘affordable rent’ programme is using up housing associations’ borrowing capacity, stretching their financial covenants, increasing risk, using up available land, creating an expensive product and undermining a cheaper model, and raising the benefit bill whilst intensifying the effect of poverty.
The report argues for changes post-2015, with effectively 2 different products: a higher rent, but still sub-market, regime for people in work as an alternative to private renting, and a programme delivering homes at social rent levels. This would take us back to the Livingstone London Plan regime which separately identified ‘social’ housing and ‘intermediate’ housing. Reinventing the wheel is sometimes the best thing to do.

As the Government quietly erases social housing from our system, the European Union seems to be getting more excited about the idea. Earlier this month the Parliament adopted a resolution proposed by the Greens calling on the Commission to set out a ‘European social housing action framework’ to pull together the various programmes that affect the issue. ‘Social housing may not be seen only as expenditure but as productive investment, too, since it creates jobs’ said the MEPs.
Rapporteur Karima Delli (Green) said that ‘investing in social housing means boosting construction and renovation sectors and the opportunity to create green jobs’.  Recognising that ‘social housing plays a key part in the achievement of the objectives of the Europe 2020 strategy, especially its poverty target’ the Parliament called for adequate funding to be made available in the EU financial framework and for national, regional and local authorities to do more to invest in  social housing.
The Parliament also called for member states to take action to prevent evictions caused by the economic crisis.
For those with an interest, back in January the EU produced a useful briefing note on social housing in Europe, available here through the International Union of Tenants website. It showed that virtually all Member States had experienced a growing demand for social housing at the same time as there has been a narrowing of traditional sources of financing. In addition, States had seen a diversification of housing needs, with ‘housing vulnerability’ rising higher up the income distribution, the growing importance of fuel poverty and energy demand, and the different needs of an ageing population. There is useful information about the big differences in definition of social housing in different countries and some interesting examples of innovative housing schemes.

The private rented sector continues to move up the political agenda.
This week the London Assembly’s Housing and Regeneration Committee published a considered and sensible report about the sector called Rent Reform: Making the Private Rented Sector Fit for Purpose. The report contrasts the problems of the sector in Britain to the successes in many other continental countries where regulation and affordable rent levels are the norm.
Some of the facts listed by the Committee are fascinating. The private rented sector in London has grown by 75% in 10 years, is now bigger than the social rented sector and in 12 years’ time on current trends will catch up with home ownership. Private landlords receive over £13 billion in rents from over 800,000 London tenants. Median rents grew 9% in 2012, rising to £1,196 per month, which can be compared to gross monthly incomes under the minimum wage of £990 and £1,368 for the Living Wage. In two-thirds of London boroughs the cost of private renting is more than half average wages. For working and non-working tenants, the cost of Local Housing Allowance grew 36% between 2009/10 an 2011/12 to more than £1.9 billion.
The profile of private renters has also changed dramatically, reflecting the groups who have been squeezed out of social renting and priced out of home ownership: low income households and ‘generation rent’.
The Committee makes a wide range of recommendations although it is the analysis of rent levels that is probably the most interesting. Learning from the experience of other countries and our own history, they do not recommend rent control as we have previously known it but a new ‘rent stabilisation’ approach which is a feature of many mature European private rental markets. Linked to longer tenancies, especially for families, this approach looks to make rents more predictable throughout a tenancy. The report also  speculates about the possibility of linking rent increases to an inflation index.
Lettings agencies come in for criticism, as well they should. Their interests are different from those of both landlords and tenants because they benefit most from frequent turnover and increases in rent between tenancies. Tenants lose out due to rent inflation and landlords lose out because they experience more void periods. The Committee goes along with reputable agents who have been calling for regulation and also supports the Livingstone plan to establish not-for-profit agencies.
It is rare to find any consistency of opinion between Boris Johnson and his London Assembly Tories and the Government, but they are united in their view that nothing much should be done about the private rented sector in London. In a dissenting note, the Tories on the Committee argue against any form of ‘artificial control’ of rents, arguing that it is only increased supply that will bring rents under control. This basically means doing nothing at all while we wait for demand and supply to come into some form of balance. And it begs the question as to why an increase in supply of 75% in 10 years has failed to bring rents under control.
There is so much steam in the rental market at present, with buy-to-letters outbidding first time home buyers and rents racing well ahead of incomes and prices, that some form of intervention is essential. Employers have started complaining about the impact that housing costs are having on their businesses and their ability to recruit staff. The Committee quotes evidence that the supply available to people on Local Housing Allowance is being heavily squeezed, with for example only 5% of lettings in Barnet falling within the LHA cap. David Cameron and Iain Duncan Smith’s promise that rents would fall due to the benefit changes looks embarrassingly wrong; instead many more low income people are being forced out of the capital altogether.
With the Tories committed to the free market and Labour resistant to anything that looks like ‘old-style’ rent control, the rent stabilisation model looks like the best option available, but more work is needed on the detail.

If you are lucky enough to become a tenant of a social landlord, what should determine the rent you pay?
Should it be a national Government-set formula that takes account of local incomes and property values? Or the cost of providing the home? Or your landlord’s local policy? Or your income? Or what will enable you to work or to stay within some benefit cap? Or the name of the programme your home was provided under? Or whether your landlord is currently building new homes or not?
Labour’s rent policy for social housing, rent convergence, was criticised for being very top down, with Government dictating the rent of each social rented home in the country (well, almost). It related rents to regional incomes and property values through a complex formula. Over time it aimed to converge council and housing association rents (the latter being significantly higher on average), with the consequence that council tenants faced faster increases. In addition to social rented homes, there were also various schemes that aimed to provide homes at discounted market rents, with or without a bit of subsidy, which were gradually subsumed with shared ownership into the category of  ‘intermediate homes’.
Whatever the criticisms and inflexibilities of the rent convergence policy, it provided some stability for a decade. Landlords generally knew where they were and could plan ahead. Tenants saw rents rising more rapidly than inflation but in a controlled way and they were mainly treated fairly in that the same system applied equally to all. Yet quietly, behind the scenes almost, subsidy for investment declined and rents took more of the strain. And that meant that housing benefit costs also rose.
Since 2010 things have got a lot more complicated, and with increasingly random effects on tenants. The system is the same if you are offered a normal social housing re-let, but there are scarcely any new ones to consider. Following the first spending review, the Government put what was left of the housing budget into the so-called ‘affordable rent’ product, where rents could go up to 80% of market rents (compared with the typical 40-50% for social rented homes). But the actual rent was determined through the bidding and negotiation process between the developer and the Homes and Communities Agency, and the outcomes vary hugely. To make the ‘affordable rent’ scheme work, a share of social housing re-lets (believed to be around 20% of lettings currently, otherwise estimated at 82,000 homes nationally over the life of the programme) were ‘converted’ from social to ‘affordable’ rents – ie stolen from the social rented stock. Everyone got confused by the term ‘Affordable Rent’. This was a deliberate ploy, it was ‘intermediate rent’ masquerading under a different name and was anything but affordable.
Now it appears the Government wants to distinguish between the tenants of ‘developing’ housing associations and ‘non-developing’ ones, enabling the former to charge higher rents and have faster increases. It may be that someone in CLG can make sense of this, but to a new tenant entering the sector the rent they are likely to pay will seem to be almost random. And that’s before they start considering any implications for them of the benefit changes.
The rent you pay should not be so hit-and-miss: it should be related to some rational process of assessment. There are many possibilities. Linking social rents to market rents has always seemed a daft concept to me as the factors involved are so different and markets are unpredictable. The concept of rent pooling, with surpluses from older properties helping to meet the costs of newer ones, made council housing work through its best years. There is more interest in linking rents to incomes (the London Labour Housing Group has talked about a ‘London Living Rent’ of 35% of disposable income) but this would involve a means-test and any such system would have to make sure that landlords could cover their costs.
The Government is talking about setting out a long term policy for rents during the Spending Review. I personally doubt if they will produce any coherence out of the chaos they have created. Looking back, Labour’s rent convergence policy looks a better decision than it seemed at the time, but the tide of opinion is moving correctly towards having more subsidy for building, keeping rents down and making us less dependent on housing benefit.
In a little poll, 85% of Inside Housing readers have opposed the idea of placing developing and non-developing landlords on different rent regimes. I’m not surprised.

It was Alan Watkins, the former Observer and Independent columnist, who coined the phrase ‘politics is a rough old trade’. This week has been an example of it. Under constant pressure for months that it had no new policies, Labour produces some and is instantly denounced because it isn’t exactly the same as what was said before.
Mr Ibiza’s attack on Ed Miliband at PMQs (or should that be Questions to the Leader of the Opposition, as David Cameron never answers any himself) about child benefit is a case in point. Labour supported universalism before, and now will not prioritise giving child benefit back to people on higher incomes. So it is ‘flip-flopping’ and ‘indecisive’ – or betraying the welfare state, whichever you prefer.
Earlier this week, we suggested looking behind the headlines about Ed Balls’ speech on the economy. Despite the universal focus on his proposal to withdraw winter fuel payments from more affluent older people, there was real substance in the speech and we highlighted the parts relating to housing investment.
Something similar has happened with Ed Miliband’s speech today on welfare, which, if media comment is the guide, was solely about putting a cap on benefits. Reading the speech as a whole, the core message was about twin issues of worklessness and low pay and the fact that the taxpayer picks up the costs of failure in both. He pointed out that the growth rate of social security spending was higher under Thatcher/Major than under Blair/Brown because of their failure to provide jobs. ‘There’s nothing in Labour values that says that this is a good way to spend tax-payers’ money’, Miliband said, and ‘Britain just can’t afford millions of people out of work.’
In housing terms – and it’s encouraging to see housing feature in a big way in speeches from the Leader of the Opposition and the Shadow Chancellor in the same week – Miliband argued that it is the failure to build enough homes that lies behind the rapid rise in housing benefit.
And he highlighted the policy direction that is causing a lot of excitement at the centre of the Labour Party: ‘We can’t afford to pay billions on ever-rising rents, when we should be building homes to bring down the bill. Thirty years ago for every £100 pounds we spent on housing, £80 was invested in bricks and mortar and £20 was spent on housing benefit. Today, for every £100 we spend on housing, just £5 is invested in bricks and mortar and £95 goes on housing benefit. There’s nothing to be celebrated in that.……. let me be clear: any attempt to control housing benefit costs which fails to build more homes is destined to fail.’
The specific proposal he talked about was this: individual private tenants struggle to negotiate with landlords on their own; councils believe that they can achieve significant savings by negotiating with tenants on their behalf, so they should be given stronger powers to do so. So far so good, but the interesting part of the proposal is the incentive: councils that make savings in HB could keep some of the savings to invest in building new homes. This is a good example of the creative thinking that is currently taking place within Labour to deliver the principle of switching from financing benefits to supporting investment.
So, once more, there is more substance in the speech than is suggested by the headlines. And, to join things up, switching subsidy from benefits to investment would be a terrific way of delivering a cap on benefits.

It is worth reading Ed Balls’ speech on the economy yesterday in full because it gives a different flavour from that which ended up on the media last night – a good example of how the interaction of spin and journalistic obsession leads to the public being misinformed about what is really going on.
The focus of attention was on the announcement that labour would remove winter fuel payments from the wealthiest 5% of pensioners. Of course there is an argument to be had about universalism, but this proposal seemed more like a political than an economic judgement. Elsewhere in the speech, there were proposals that were more clearly based on the economics, and that deserves more attention than it is getting.
Balls explains how damaging the Government’s austerity programme has been to growth, how damaging the lack of growth has been to tax revenues, and how damaging the collapse in tax revenues has been to the deficit-reduction plan. He argues that George Osborne’s doctrine of ‘expansionary fiscal contraction’ – that the faster you cut public spending, the greater the boost to private investment and growth – is intellectually bankrupt, with even the IMF now saying that the plans are ‘a drag on growth’. And he also criticises the fixation with ‘trickle-down economics’ – the belief that letting the rich get richer and cutting taxes for the highest earners will lead to more investment and growth, with wage rises trickling down for everyone else – which has been further discredited.
For housing people it is important to note that Balls fully accepts the argument in favour of a major boost to investment even if this involves additional borrowing initially. He says it is ‘consistent with medium-term fiscal consolidation for the Government to act to boost capital spending over the next two years – financed by a temporary rise in borrowing as Labour has also urged – to build our way to a stronger recovery.’
He makes a case that will be very familiar to Red Brick readers: ‘With thousands of construction workers out of work and interest rates at record lows, there is a growing consensus that investing now in improving our infrastructure, particularly housing, would give an immediate boost to the economy, encourage more private sector investment, and give us a long-term return as we strengthen our economy for the future….. If the entire infrastructure boost recommended by the IMF was spent on housing over the next two years, we calculate that it would allow the building of around 400,000 affordable homes across the country, and support over 600,000 new jobs in construction,…… helping people aspiring to buy their own home, reducing waiting lists, and easing upward pressure on rents and housing benefit bills.’ I hear the sound of music.
Trailing another speech later this week to be given by Ed Miliband, Balls had some interesting things to say about benefits. Specifically on housing benefit, he said ‘Labour will…. place a ‘fair cap’ on household benefits, not one that costs more than it saves, …. which takes account of housing costs in different parts of the country – with an independent body, like the Low Pay Commission, advising on whether the cap should be higher in high-cost housing areas like London, but potentially lower in other parts of the country’. He also talked about ‘housing benefit reform which tackles high rents and addresses the shortage of affordable housing’, which reflects Labour’s growing interest in the case for switching spending from housing benefit to housing investment subsidies.
We will need to see where Ed Miliband takes these arguments later in the week, but at least it seems that behind the headlines there is some serious thinking taking place. The biggest fear remains political: will the Government be able to focus all of the attention on Labour’s commitment to borrow more, even though this is economically the right thing to do, or can Labour transform this into a debate about an alternative strategy for growth?
Ed Balls’ speech is a comprehensive statement of his position and hints at a lot of new policy directions behind its tough exterior.
But Labour continues to swim against a tide of media opinion about benefits and ‘strivers versus shirkers’, and dealing with that will require bravery and some clever politics. Ed Miliband is next on to the stage.

It seems unlikely that a leftish blog would find support for one of its favourite policy lines in the shape of former Tory Prime Minister Sir Winston Churchill, but in May 1909 he made a great speech on land called ‘The Mother of all Monopolies’ (admittedly whilst he was still a Liberal).
He argued for a tax on land by distinguishing it from other sources of unearned wealth. ‘Land’, he said ‘which is a necessity of human existence, which is the original source of all wealth, which is strictly limited in extent, which is fixed in geographical position.’
The core of the argument was that the land owner ‘sits still’ whilst others create the value. ‘Roads are made, streets are made, railway services are improved, electric light turns night into day, electric trams glide swiftly to and fro, water is brought from reservoirs a hundred miles off in the mountains – and all the while the landlord sits still. Every one of those improvements is effected by the labour and cost of other people. Many of the most important are effected at the cost of the municipality and of the ratepayers. To not one of those improvements does the land monopolist, as a land monopolist, contribute, and yet by every one of them the value of his land is sensibly enhanced. He renders no service to the community, he contributes nothing to the general welfare; he contributes nothing even to the process from which his own enrichment is derived.’
And he commented on the equivalent of modern ‘landbanking’ – deliberately withholding land from development whilst its value grows.  ‘The greater the population around the land, the greater the injury which they have sustained by its protracted denial, the more inconvenience which has been caused to everybody, the more serious the loss in economic strength and activity, the larger will be the profit of the landlord when the sale is finally accomplished. In fact, you may say that the unearned increment on the land is on all fours with the profit gathered by one of those American speculators who engineer a corner in corn, or meat, or cotton, or some other vital commodity, and that the unearned increment in land is reaped by the land monopolist in exact proportion, not to the service, but to the disservice done. It is monopoly which is the keynote, and where monopoly prevails the greater the injury to society the greater the reward to the monopolist will be.’
And the impact on the taxpayer: ‘The municipality, wishing for broader streets, better houses, more healthy, decent, scientifically planned towns, is made to pay, and is made to pay in exact proportion, or to a very great extent in proportion, as it has exerted itself in the past to make improvements. The more it has improved the town the more it has increased the land value, and the more it will have to pay for any land it may wish to acquire.’
And his prescription? A tax on undeveloped land. ‘This property of yours might be put to immediate use with general advantage. It is at this minute saleable in the market at 10 times the value at which it is rated. If you choose to keep it idle in the expectation of still further unearned increment then at least you shall be taxed at the true selling value in the meanwhile.’
Now there’s an idea that might aid the public finances.
 
With thanks to David Rodgers for drawing my attention to this remarkable speech, which can be found in full on the Co-operative Individualism  website.