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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.

In advance of its Housing Policy Conference in June, Labour Housing Group has published ‘One Nation Housing – 50 Policies for Labour’ for consultation and comment. The paper, reproduced below, aims to provoke debate about a radical agenda for housing under the next Labour Government.   

Comments can be posted below on Red Brick or sent to the Secretary of LHG, Paul Eastwood, on [email protected] 

One Nation Housing – 50 Policies for Labour 

Housing is central to Labour’s One Nation approach and our plans for economic recovery and social well-being.
Housing Investment
1. Housing should be a central feature of a new National Infrastructure Plan looking ahead 10, 20 and 30 years at the country’s requirements for a modern economy and a cohesive society.
2. Increasing housing investment in all tenures should be a key component of economic policy.
3. To ensure an adequate supply of affordable homes, capital investment subsidies should be restored to 2008 levels as quickly as possible, with over-riding priority given to building homes for social rent.
4. Councils should be enabled to invest much more under the new self-financing regime. The existing borrowing cap should be lifted and international conventions for measuring public borrowing (which exclude public corporations) should be adopted.
5. Smart national accounting should be adopted that recognises how housing investment contributes to savings in health, education and benefits budgets.
Planning for Housing
6. Councils should be under much stronger planning duties to meet housing needs in their areas, to plan for mixed communities, and to co-operate in planning for new housing across sub-regions, especially City regions.
7. Local plans should prioritise social rented homes separately from other sub-market rented and low cost home ownership homes.
8. Local communities should benefit more clearly from development through requirements for affordable housing and other facilities.
9. The New Homes Bonus should be ringfenced to be spent on housing infrastructure and benefits for communities affected by development only and should be phased out.
10. A proportion of new homes should be made available to people from the local area.
11. There should be much stronger duties on public agencies to release land for affordable housing.
12. As a general principle, brownfield land should be used first and broad Green Belt protections should remain.
13. Minimum space standards should be applied to all new homes.
14. More rapid progress should be made towards achieving high environmental and energy efficiency standards in new homes, with higher priority given to cycling, play and recreation facilities.
15. Planning permissions should expire sooner and should be based on project completion.
16. Planning powers should enable Councils to take more effective enforcement action against rundown and empty homes that blight neighbourhoods.
Tenure Reform
17. Labour should undertake comprehensive tenure reform with standard mandatory tenancy conditions across private and social renting.
18. Labour should adopt a plan to ensure that the Commonhold form of tenure, introduced by the last Labour Government, is more frequently used.
19. Labour should renew its commitment to co-operative and new forms of tenure.
Private renting
20. The private rented sector should be modernised and reformed, with longer tenancies, more predictable rents, better regulation, and proper enforcement of safety and decency standards.
21. There should be tough regulation of letting agents and encouragement of not-for-profit agencies.
22. Stronger enforcement action should take place in cases of landlord crime like harassment, illegal eviction and theft of deposits.
23. All landlords should be registered in a self-financing scheme.
24. As part of a package of reforms, Labour should review the tax treatment of private landlords to encourage investment, and reintroduce repair grants to achieve a new PRS decency standard.
25. Shared housing should be regularly inspected to ensure compliance with standards.
Social housing
26. All social landlords in receipt of public money should be subject to effective regulation and occasional inspection to achieve higher standards in terms of customer service, efficiency, governance, accountability, and viability.
27. Statutory requirements for tenants to be involved in scrutiny and in the regulatory system should be strengthened and the right to complain to the Ombudsman should be strengthened.
28. Labour should ensure that housing associations remain not-for-profit organisations and review the scale and use of their surpluses.
29. There should be genuine ‘like for like’ replacement of Council homes sold under Right to Buy. Give-away discounts should be restricted. Councils should be enabled to take an equity stake in sold property and strict covenants should be applied in relation to future letting and onward sale.
30. A new social sector Decent Homes Standard should be adopted with stronger environmental and communal area requirements.
31. All social landlords should produce an annual Asset Management Statement, demonstrating how they have made best use of their stock. There should be a presumption against unjustified sales of property.
32. Security of tenure should be restored so there is a basic requirement that a household cannot lose their home without the landlord’s case being tested in a court.
33. It should be a priority to ensure that homes that have been ‘converted’ from social to so-called ‘affordable rent’ revert back to their original status.
Home ownership
34. Government help for home ownership should be targeted to provide help with deposits for first-time buyers.
35. Labour should require the energy industry to provide better grants and loans to ensure minimum standards in energy efficiency.
36. Repair grants should be reintroduced in housing priority areas to enable owners to bring their homes up to basic standards.
37. Labour should work with the development industry to introduce a Rent To Buy scheme for first time buyers.
38. Labour should work with the mortgage industry to deliver more loans at higher loan-to-value ratios but without encouraging sub-prime lending.
Tax and benefits
39. The total benefit cap should be regionalised to take proper account of rent differentials between areas of the country.
40. Local Housing Allowance should be made available up to the level of median rents in an area rather than the 30^th percentile.
41. HB direct payments to landlords should be restored based on tenants’ choice.
42. The ‘bedroom tax’ should be ended in favour of a new national plan to tackle under occupation based on incentives and a stronger ground for possession with a right to suitable alternative accommodation.
43. Labour should develop and adopt a long term plan to switch from personal subsidies to investment subsidies in housing, reducing the benefit bill by reducing the cost of rented housing.
44. A Mansion Tax on properties valued at £2m or more, or additional Council Tax bands, should be introduced.
45. Options should be investigated to impose additional taxation on foreign buyers in the prime property market.
46. Additional charges should be levied on long-term empty properties and unused development land.
47. A fundamental review of property taxation and reliefs should be undertaken, including council tax, capital gains, stamp duty, to find a system that meets wider housing objectives.
General
48. It should be a key target of a Labour Government to reduce homelessness. The strong homelessness safety net should be restored.
49. A new National Tenant Voice should be created, for all tenants
50. Labour’s commitment is to encourage mixed and sustainable communities across the country – in cities towns and rural areas.

Red Brick’s immediate verdict on the so-called ‘Help to Buy’ policy when it was introduced in the March 2013 Budget by George Osborne was that ‘no rational person wanting to splash the cash in the field of housing would do what the Government has done’. We asked ‘If there is no money left, how can billions be found to support (help to buy)?’
The central criticism was that the scheme as proposed would be much more likely to lead to house price inflation than to increase supply, but that this was exactly what the Chancellor wanted to achieve. Rather than learn the real lesson of his economic policy – that austerity damages growth and is largely self-defeating – he would rather look to cover his tracks by engineering a feel-good increase in house prices, and possibly a mini-increase in consumer spending.
Since then, ‘Help to Buy’ has attracted growing critical attention, from the Governor of the Bank of England to the International Monetary Fund and from the Guardian to normally reliably-Tory Spectator magazine (‘George Osborne’s property bubble will lead to disaster’).
Let’s look at what the IMF actuually said:

The 2013 Budget announced a new scheme, Help To Buy, aimed at boosting activity in the housing market. This measure may temporarily help boost confidence in the housing market, but there is a risk that, in the absence of an adequate supply response, the result would ultimately be mostly house price increases that would work against the aim of boosting access to housing. To mitigate this risk and engineer a supply response, the government should consider fiscal disincentives for holding land without development.’

It is action on the supply side that is most urgently needed to get Britain building again. There are many possibilities. Even Boris Johnson has recently been railing against ‘pernicious land banking’ as developers sit on land as its value goes up. ‘To constrict supply to push up prices by land-banking is plainly against the economic interests of this city’ he said.
Developers are, of course, relatively rational people who like to reduce risk and maximise their profits. But their activities tend to be governed by the confidence with which they view the future. In the current marketplace, they see significant demand from foreign investors at the luxury end and they see rising demand from landlords with a buy-to-let mortgage in their pocket, but they do not see much demand from first-time buyers, and they don’t see any change on the horizon.
The fact that developers aren’t building is just another verdict on Osborne’s failed economic policy.

This blog post was published on Left Foot Forward yesterday and was written by our regular guest contributor Monimbo, writing as Gordon Banks.  We have made the case for changes in the Treasury borrowing rules many times on Red Brick. We have focused on the benefits this would bring to housing investment, but the logic applies to other sectors too.
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By Gordon Banks

The treasury’s rule that includes the borrowing of public corporations as part of general government debt is unique. No-one else in Europe does it and the international organisations all regard public corporate borrowing as a self-financed trading activity.
The effect in the UK has been to squeeze out borrowing by public corporations that would be entirely justified by their business plans. One casualty has been council housing but attention is now being given to other sectors, like transport and the Royal Mail.
The campaign to change the borrowing rules to allow more council housing investment is a long one, but Labour and the trade unions should now be campaigning to change the rules to allow the Royal Mail to stay in public hands.

Nothing could better illustrate the stupidity of the rules than their use in justifying the need to sell a profitable business. Royal Mail has growing profits which could be used to service any borrowing it needs to invest in improved services, which of course is precisely why it’s an attractive proposition for private investors.
But why shouldn’t those profits also be available to the exchequer?
Instead, ministers want to sell off the golden goose (well, maybe not golden, but at least a convincing shade of silver). The unions are rightly up in arms – their members have made the sacrifices needed to modernise the service, only to see it flogged off. We, the taxpayers, have also taken on the burden of its pension fund to make it more profitable. Yet we are going to see a valuable business sold and – no doubt – pay higher charges in future so as to generate bigger profits for those who invest in it.
Yet how does the responsible minster, Michael Fallon, defend his position that he has no alternative? He claims that “every £1 it borrows is another £1 on the national debt”. He also asserts: “We can’t divert capital we need for schools and hospitals to Royal Mail – a very large business making substantial profits”.
There is of course absolutely no reason why Royal Mail should have to compete for public borrowing in order to invest – if it weren’t for treasury rules. Royal Mail is a public corporation which, in any other country, would be able to borrow outside general government borrowing constraints.
There are already rules in place to ensure that its borrowing is prudential and paid from its revenues. And in pushing it into the private sector we are creating yet another business that will be too important to be allowed to fail if its new owners make a hash of it.
As Fallon said, “It’s a great British brand with the Queen’s head on it”. Presumably then we would never allow it to go bust, so the taxpayer will continue to have a hidden liability.
It’s interesting that ministers have had to move onto the shakiest possible ground to justify the sale. After all, the argument used to be that the Royal Mail was a basket case that could only be dealt with by private enterprise. Well, surprise, surprise, it’s now doing pretty well in the public sector, so the justification is now that it’s competing for funds with schools and hospitals.
Let’s spell the argument out simply so that even the likes of Fallon can understand it. There are certain parts of the public sector which are classified as public corporations, not part of government, because they pay their own way. Bodies like Royal Mail, council housing, Manchester Airport and the tram companies are all in this sector. The rules that put them there are international ones, administered here by the Office for National Statistics.
In every other country, public corporations are also treated differently when it comes to assessing what counts as public borrowing. We have to follow these international rules in the forums that matter, like the IMF and the EU. However, in the UK itself we insist that there is no difference between a profitable business that pays its own way, like the postal service, and one that depends mainly on taxation to fund it, like a school or a hospital.
This is a nonsense which allows other countries who do make this sensible distinction to compete against us – as we have seen in the French and German government-owned firms who have taken over our public utilities. We need to stop the nonsense and bring our rules into line with everyone else’s.
There may be (though I personally doubt it) a respectable business case for privatising the Royal Mail. But if there is, let ministers make it, and don’t let them come out with spurious arguments based on treasury rules which (contrary to the impression they give) are far from being written in stone.
Gordon Banks is a regular contributor to the Labour housing blog Red Brick

Mayor Boris Johnson is good at making a loud noise and bad at delivering anything of any value to Londoners. Yesterday there was a big splash from the final report of his London Finance Commission chaired by Professor Tony Travers. The report, Raising the capital, is full of good analysis and challenging conclusions. But like Boris’s last big idea – London keeping its share of stamp duty – the big question is ‘will anything happen as a result’?
The Commission’s central conclusion is that the financial arrangements for London are a major restriction on growth. It says London needs an integrated capital investment plan, fewer borrowing constraints for infrastructure, and more devolved tax powers – although the first of these points makes you wonder what Boris has been doing for the last 5 years and the second and third will put Johnson on a collision course with George Osborne.
The report unashamedly backs greater prudential public borrowing for capital spending as the principle way to solve London’s many problems, targets existing borrowing controls for removal (borough housing caps and the caps applied to the GLA group are main targets) and identifies new ways of funding these borrowings (eg tax incremental financing). A strong case is made for the early devolution of property taxation to London’s control although I do not think they have considered sufficiently the problem that devolving a range of taxes to London (starting with stamp duty but there are many other proposals) would create for the national Treasury by reducing central Government tax take – creating a hole that would have to filled by something else.
The report is strong on the need (as well as demand) for housing and the vital importance of providing sufficient homes that are accessible and affordable for those on lower and moderate incomes. It could be argued that current policies are the very opposite of this: instead of providing homes for poorer people, policy is shifting poorer people out. To meet population growth, London has to provide around 40,000 additional homes a year, around twice the historic trend.
For the short term the Commission recommends the lifting of the cap on borrowing within the new regime for council housing finance, a move that has many supporters. They are also in favour of finding a way to switch public subsidy from benefits to investment – over 10 years, London has received £17 billion of capital investment in public housing compared to £50 billion for housing benefit. Despite calling for further assessment of IPPR’s proposal to combine and devolve all housing budgets, they accept that it is seriously problematic to do so, especially with the coming of Universal Credit. I think they are right to say that the key challenge ‘in any attempt to shift away from revenue to capital subsidy through control of benefit are the transitional consequences for low income households in receipt of benefit that continue to pay high rents while funds flow out of benefits and into home building. Additional funding would be required to mitigate these transitional costs.’ Exactly.
In my view the most important housing-related conclusion is that ‘the relaxation of borrowing controls is the only obvious solution to enable the delivery of greater supply’ which would, ‘over time, allow reduced dependence on high-cost privately rented housing for low-income households.’
Boris Johnson will see the main benefit of this report as enabling him to make the case for London whilst actually doing nothing because he knows Osborne will not concede the central points it makes. I see the main benefit of the report as providing a framework for radical new economic policies for Labour – investment-led growth, public sector leadership where needed, and a major increase in infrastructure generally and housebuilding in particular.

There is much to admire about Alan Johnson, although I have disagreed with many of his policy positions over the years. He has always seemed to be a charming yet serious person, with many achievements and a hinterland, a politician with a real story to tell.
Now he has told his story, or at least the first part of it. His autobiography This Boy takes us up to the age of 18 in 1968 and covers his childhood in what is now called Notting Hill,  in the area between the canal and the railway which is also variously described as Notting Dale, North Kensington, Kensal Town, and Golborne. With a disappearing father and a sickly mother, it is a tale of grinding poverty and appalling housing conditions told in an unsentimental, humorous and brilliantly observed way. It is both inspirational and thought-provoking. When we read so much about the failings of the poor, and the apparently growing belief in our nation that they bring it on themselves, here is something closer to the truth: a family that took on any job that came their way, and took every opportunity. It’s just that opportunities were few and far between.
The book is fascinating because I know the location so well, having lived not far away for more than 30 years. As Alan tells constant stories of the streets, and lived through the Rachman era, the riots, the racist murder of Kelso Cochrane, the slum clearances ending with the building of the iconic Trellick Tower, the building of the Westway, and the spookiness of the house previously known as 10 Rillington Place where he delivered milk, he makes it all seem so familiar. It is a personal story so he doesn’t delve in to the political context of the area at the time: the indifference of the Tory Council, the explosion of community action, and the rise of organisations like the Notting Hill Housing Trust.
Like so many other genuine stories of working class life, this book is mainly about women. His mother was from Liverpool and endured a life of penury, but lived and worked for her children. The real heroine of the piece, Alan’s sister Linda, took responsibility for the family in her early teens as their mother fell ill and eventually died, constantly standing up to authority and holding things together. There are other remarkable characters: friends who share what little they have without hesitation when crisis looms, a social worker who keeps Alan and Linda out of care, and an inspirational and caring teacher.
Alan’s book is about a time of hardship which was only 50 years ago. So many things have improved since, inside toilets for a start, and most of us thought we would never go back. But as welfare reform bites and more people fall below the poverty line, we will hear many more stories of families struggling against the odds in just the same way.