Housing and the Autumn Statement

414585868_2c8513d269_nThe full ramifications of George Osborne’s pronouncements on housing during the Autumn Statement will no doubt take a while to emerge. Some of the rumours of nasty surprises proved to be unfounded. There were some surprises that were broadly positive – such as the increase in stamp duty on Buy-to-let and second homes. And there were some policy changes that didn’t take quite the form that commentators had guessed they might – notably the transfer of the LHA mechanism from the private rented sector to the social housing sector.

Members of the housing blogging community have already been providing valuable, and extended, commentary. If you’ve not seen it already, Joe Sarling provides a helpful overview of the changes in relation to housing supply and the likely impact on affordability and who actually does the building. Brian provides an expansive discussion on a similar theme, drawing in a number of issues and raising a wide range of questions. Whether Osborne’s push to increase owner occupation stands in the way of dealing with the more important issue of affordability is a question that looms large. That his policies can do anything to arrest the decline in the rate of owner occupation is a claim to be treated sceptically. Similarly we must be alive to the possibility that the agenda of the Autumn Statement was less to do with addressing housing issues seriously and more to do with Osborne’s leadership ambitions.

One question of major significance lies in a completely different direction. Does the Autumn Statement represent the death knell for social rented housing? [Read more…]

Constitutional ‘crisis’

Legislation DefinitionThe Chancellor’s defeat in the House of Lords on Monday over cuts to tax credits has, rightly, generated acres of commentary. I don’t propose to review the debate in detail here, other than to observe, as a number of commentators and bloggers have already noted, that on this occasion George Osborne is largely responsible for boxing himself into a corner. It is the nonsense of his fiscal charter, coupled with ringfencing of some budgets and already eye-watering cuts to unprotected services that has left him with limited room for manoeuvre.

The Government’s proposals were obviously going to cause hardship. Treasury arguments that cuts in tax credit would be compensated by rises in the national minimum wage and tax thresholds were shown to be so much hot air quite a while ago. The absence of transitional relief would have indicated to anyone who was paying attention – and, as Chris pointed out, that is perhaps rather fewer people than should have been – that Osborne was going to administer a shock to the system. The showdown with the House of Lords was rather predictable. Government defeat was perhaps less so. But it was hardly surprising in the context.

The Government’s tactic of manufacturing a constitutional dimension to this issue was, presumably, meant to scare the Lords into line. But it didn’t work, in part because it wasn’t an entirely plausible claim from the outset. The Government paid the price for its own dissembling. The failure to be straight with the electorate in the run up to the election over where cuts to the welfare bill would fall, coupled with the use of secondary legislation to sneak the provisions through the House, were its undoing. We wait to hear what, if anything, the Government’s retaliatory review of the role of the House of Lords will deliver.

It is this last point that I wanted to pick up here. [Read more…]

Policy-induced uncertainty

[Originally posted on The Policy Press blog, 24/07/15, under a different title. Reposted here under the original title.]

Choices of a businessmanGeorge Osborne’s recent “emergency” budget proposed many changes to state support to lower income households in a bid to fulfil the Conservatives’ manifesto pledge to cut £12bn from welfare spending.

One unexpected aspect of this package was the proposal to cut housing association rents by 1% each year for the next four years.

This proposal was justified with reference to social housing rent rises over the last few years. These have pushed up the already substantial housing benefit bill. Households have needed greater state assistance in order to afford the rents being set. Bearing down on rents over the next few years will, it is claimed, both reduce the housing benefit bill and force social landlords to deliver efficiency gains.

To the unwary or unfamiliar this argument could appear entirely plausible. It is surely time to try to rein in this sort of behaviour: landlords extracting income at the taxpayers’ expense.

Yet, it is important to understand how we have arrived at the current situation and what the consequences of this policy change are likely to be. [Read more…]

Through a glass, darkly

414585868_2c8513d269_nThe community of housing bloggers has already offered plenty of comment on the implications of the Chancellor’s “emergency” budget for housing. Comment from almost all quarters – be it Jules, Ken, Joe, SteveTom or Gavin – highlights, in more or less lurid terms, the challenges the budget measures are going to present the housing sector.

Some of the changes announced in the budget – the reduction in the benefit cap, cuts in tax credits, and the benefit freeze – were heavily trailed. However unwelcome they might be, they didn’t come as a huge surprise. Yet, the precise dimensions of the change – the reduction of the cap to £20,000 outside London and the inclusion of LHA in the benefit freeze – made for grimmer reading than many might have hoped.

But other policy changes were rather more of a surprise. [Read more…]

Osborne’s surplus rule and citizen economics

3542341781_2e07e18657_nThere is much that is troubling about George Osborne’s proposal to oblige future governments to run a budget surplus in normal times.

There is the small matter of identifying “normal” times. It implies something important about how one is thinking about the macreconomy. What does “normal” look like? In the thirty years that I’ve been paying attention to the macroeconomy there always seems to have been some argument or other floating around as to why things weren’t quite normal just at the moment.

This could drive us to the conclusion that the whole thing is a charade. It’s a policy that will never be implemented because there is so much wriggle room built in.

A contrary conclusion might be that whatever macroeconomic behaviour we’re observing is normal, given an appropriate understanding of the macroeconomy. So it’s surpluses all the way.

And then there is the small matter of who gets to define “normal”. It would appear that George Osborne would quite like to pass the responsibility to the OBR, who clearly aren’t all that keen to take it.

A more significant reason to find the Osborne proposals troubling is the sense that they are all politics, no economics. They owe everything to Osborne’s desire to drive home the Conservatives’ political advantage on the economy. It is the next stage in the strategy of boxing Labour even further into a corner. It is clearly working, if Chuka Umunna’s comments in yesterday at the Independent are anything to go by. [Read more…]

Housing markets and economic stories

Part of the story isn’t being told.

As we move towards the General Election strands of news and snippets of information have emerged which circle around the issues but there is a gap in the middle where the story could – and should – be.

I’m thinking here of housing-related aspects of the party manifestos: cuts in inheritance tax on property versus mansion taxes. I’m thinking of the observation that buy-to-let lending was the only component of mortgage lending not to stall in February. I’m thinking of Hannah Fearn’s argument that removal of the obligation to invest pension pots in annuities can be interpreted as a move to recapitalize the bank of mum and dad. And finally I’m thinking of Christine Lagarde’s words of support for George Osborne’s strategy for economic management.

So what’s the story that is missing? [Read more…]

The Tory £12bn and manifest inadequacy

The leak to the BBC hinting at the scale of the cuts to welfare budgets being modelled by the Department for Work and Pensions has caused consternation. And so it should.

Given that George Osborne has refused to say what he is proposing to cut from welfare spending it was inevitable that any halfway credible information would attract attention. It is frankly outrageous that he is unwilling to be transparent with his plans. But that’s a different issue.

The BBC leak suggests that disabled people, unemployed people and those with caring responsibilities could bear the brunt of reduced spending.

The Conservatives have been quick to deny that the leaked figures represent agreed policy. This is just modelling possible options. Nothing has been decided. This statement is presumably aimed at defusing the row or deflecting attention.

But it shouldn’t. [Read more…]

Economics in the bubble

414585868_2c8513d269_nMy plan was to write something following up last week’s Autumn Statement. But what with having to do other things – work and that – I’ve not had the chance.

In the interim there has been bucketloads of analysis. So I’m not sure there is more to say on the substance. All right thinking people are agreed that George Osborne, along with frontline politicians in the other parties, is suffering from what Gavin Kelly has christened a “candour deficit”. No one is being honest with the electorate over the scale of the cuts being planned. And, equally importantly, no politician is being honest about what cuts on that scale imply for unprotected services. Rick illustrates the point beautifully drawing on data from the OBR, the IFS and elsewhere (here and here).

Even Fraser Nelson is calling Osborne out for the sleight of hand he used to claim that the Government had cut the deficit in half. Fraser Nelson. Crikey! [Read more…]

Fiscal foolishness

Budget Cuts sign with clouds and sky backgroundI’ve had an unusual and vaguely discomfiting experience. I found myself largely in agreement with a leader in the Economist. I may need a lie down.

I can console myself with the thought that what the Economist is saying – that the Conservatives’ fiscal plans for the next Parliament are damaging nonsense – would seem to be pretty much the majority, if not the consensus, view. Seeking to legislate to remove the deficit through slashing spending while at the same time delivering a tax cut is not the most impressively coherent agenda ever advanced. It will undermine public sector functions that are vital to the overall success of the economy. And it will almost certainly slam the brakes on the economy at the same time as inflicting further pain on some of the poorest in society.

The main difference of opinion seems to be around Osborne’s intentions. Are his proposals serious? In which case, he’s a bit of an idiot. Or do they signal an implicit acceptance that the Conservatives are not going to win next May? Osborne is simply trying to stake out a position he will never have to implement but which will provide a platform from which to mount an attack on the incoming government’s actions when they are, inevitably, less fiscally stringent. In which case, he’s a bit of an idiot.

Most commentators might think Osborne is talking rot, and that, at the very least, Labour’s proposal to exempt infrastructure spending from the self-imposed fiscal straightjacket is a step towards a more plausible policy. But fewer have offered alternative approaches towards bridging the gap in the public finances.

Here the Economist comes off the fence and sets out a distinctive proposal. [Read more…]

On agreeing with George Osborne

3542341781_2e07e18657_nI have to admit I found the whole situation rather discomfiting. Yesterday I found myself agreeing with George Osborne.

Of course, as David Gillon (@WTBDavidG) pointed out on Twitter, we can all join George Osborne in agreeing that Iain Duncan-Smith is not perhaps the sharpest knife in the drawer. But, beyond that, most right-thinking people tend to find themselves parting company from the biggest cheese on Horse Guards Road.

So when I read reports of Osborne’s comments on raising the minimum wage I was rather surprised that my initial response was to agree with him. Especially as he seemed to be setting out a position in opposition to that adopted by St Vince of Cable, who, as we know, is generally right about such things. [Read more…]