Vince on “social housing”

6162309761_6e59bfde6d_nVince Cable made a substantial speech to the Royal Economic Society at the beginning of this week. The speech is worth reading in full because it represents one of the most thorough, thoughtful and wide-ranging perspectives on the economy that you are likely to hear from a front bench politician. Vince very clearly differentiates his position from that of the Conservatives on a whole host of points. He also, in my view, provides a more balanced assessment of the nature of economic policy under Coalition than you are likely to get from any member of the Quad. Vince does not pretend that the Coalition has adhered resolutely to plan A in the face of temptations to change course. Rather he acknowledges that things have not played out in the way that was anticipated in May 2010. He acknowledges that the recovery, though real, is not balanced and consequently places a welcome emphasis upon the continuing need to rebalance the economy and upon investment.

Vince identifies four major areas of policy action in pursuit of a sustainable, balanced recovery. These are “boosting the disposable income of low and middle earners; stimulating business investment (with the help of public investment); taking action, including through the industrial strategy, to tackle bottlenecks in skills, business finance, exports and UK supply chains; and building lots of new homes”. There is much that could be said about his thoughts under each of these headings, but my eye was inevitably drawn to his comments on housing. [Read more...]

Share

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...]

Share

A voyage of rediscovery

street scene (2099)Today’s papers bring us further news of the sickness that afflicts our housing market.

On the front page of the Telegraph is a piece focusing on St Vince of Cable’s warning that the housing market is exhibiting all the signs of overheating and that Mark Carney is considering stepping in on the lending side. He fears we’ll repeat the mistakes of the benighted Brown. The story takes the usual form – there are references to the danger that the market ‘may be heading for a bubble’, never the suggestion that there’s already a problem. There is no real appreciation of the lags associated with these types of macro-relationships. The market has already been given a big push, which hasn’t worked its way through the system yet. And nor, of course, is there a discussion of the difference between a boom and a bubble.

In my view Vince is right to be worried, but I don’t suppose it will have much effect. Yet by the time it becomes hard to dispute a boom is in progress it’s already way too late to act.

Over in Graunland private renting is described as the “social scandal that is being ignored”. And there is a piece about our old friend Mr Fergus Wilson, Britain’s biggest buy-to-let landlord. It reports that Mr Wilson has decided to evict the 200 of his 1000 tenants who receive housing benefit. The argument here is that rents are increasing while benefits are being eroded. Benefit-dependent households are therefore more likely to be in arrears, even before the arrival of Universal Credit. Mr Wilson considers he’d be better off reletting the properties to Eastern European migrants because they are more reliable. [Read more...]

Share

Help to Buy and the death of Keynesianism

House Prices High Monitor Showing Expensive Mortgage CostsWhen I first studied macroeconomics the Stagflation era of the 1970s and the death of Keynesianism were still being quite hotly debated. They were still contemporary events. Well, they were contemporary events in the way that the election of Tony Blair is a contemporary event for us today – it seems like just yesterday for the lecturers but has almost no significance for the students because they were far too young at the time.

At an empirical level the death of Keynesianism was intimately associated with the breakdown of the Phillips curve. The trade-off between inflation and unemployment had been at the heart of macroeconomic management. The death of Keynesianism was hastened at a theoretical level by the Lucas critique and the rise of rational expectations.

But the death of Keynesian was also tied up with the argument that the nature of the macroeconomy is such that government attempts to fine-tune demand were inevitably doomed. Active policy has its effects only with a significant lag – 12 or 18 months. Governments were succumbing to the temptation to ‘fine-tune’ before they’d let previous changes work their way through the system. As a consequence the economy was forever under- or overshooting. Volatility was greater than it would have been if governments had resisted fiddling around. This is a practical argument, but it is also an ontological argument. It is about the very nature of the economy.

This old argument came to mind when we saw yesterday that asking prices for housing in London had increased by 10% over the last month, according to Rightmove. That follows a sharp upturn in prices in the previous month. The London average now stands at a truly eye-watering £544,232. [Read more...]

Share

Zero-hours contracts – normalisation and back

storage roomZero hours contracts are not new. But that doesn’t mean they’re not news.

Today the BBC reports on a study by CIPD that suggests there are four times as many workers on zero-hours contracts than previously thought – a million rather than 250,000. Perhaps as important as the absolute number is the speed at which the use of such contracts appears to be growing. They have been around for a long time and are prevalent in particular industries – such as domiciliary care – where demand for services has always fluctuated substantially and unpredictably. But it appears that they are becoming normalised.

Many of those on the employer side of the labour market see the development of zero-hours as positive. It’s a positive indicator of the flexibility of the UK labour market. So it’s good for UK plc.

But it may be that flexibility needs to go further. At least one Tory MP was on Twitter yesterday arguing – rather incredibly – that zero-hours contracts are a product of the unnecessarily restrictive regulation of the UK labour market. If only more of the regulatory burden were lifted from employers then they would be willing to offer more regular, more secure employment. That is, of course, despite the country already having one of the least regulated labour markets in the world. [Read more...]

Share

Economical with the truth?

The agenda for this year’s Liberal Democrat Spring Conference carries the strapline Stronger economy, Fairer society. Given the parlous state of UK plc, and the deeply inequitable impacts of the Coalition austerity policy, the strapline touches on two of the biggest issues of the day. So the unwary among us might think that the discussion would have the economy somewhere near the top of the agenda.

Nothing could be further from the truth. In fact, the cynic might suggest there was strong circumstantial evidence to the contrary. The party leadership is doing as much as it can to avoid giving an airing to the issue of the direction of economic policy.

6162309761_6e59bfde6d_nFirst, Vince Cable has not been given the opportunity to speak to Conference as a whole. Instead, he found himself on a less high profile platform: speaking to a Friday evening fringe meeting organised by the Social Liberal Forum. The meeting nonetheless attracted an audience of a couple of hundred delegates. [Read more...]

Share

Is the “one-in, one-out” rule complete, or only partial, nonsense?

Getting rid of inefficient and ineffective regulations sounds like a good idea. So does stopping the proliferation of inefficient or ineffective new regulations. The problem is, of course, that views on what constitutes inefficient or ineffective regulation differ sharply.

The Coalition agreement, in its section on supporting business, made a number of proposals relating to curbing regulation. This is one area in which, one might suppose, there is scope for Conservatives and Liberal Democrats to unite in common cause. Economic liberals tend to be even more averse to overenthusiastic and over-detailed state regulation than Tories. Vince Cable’s chapter in The Orange Book puts the case very well.

It is, however, transparently clear that there are sharp differences within the Coalition about regulation and, more specifically, deregulation. Cable’s speech last week on the reform of employment law is fascinating in this regard. Adrian Beecroft’s report advocating that employers be allowed a much freer hand in dismissing staff is already widely known. And there are no doubt those at the other end of the spectrum who would see any change to the status quo, however minor, as constituting a significant erosion of workers’ rights. Cable’s carefully crafted speech tries to chart a course between these two extremes.

Cable’s comments were primarily directed at pouring cold water on what might be dubbed the Beecroft tendency.  Cable observed, rightly, that the UK already has one of the most lightly regulated labour markets in the world and noted that competitor countries are doing rather better than the UK even within a more restrictive framework of labour law. He invites the submission of evidence to demonstrate that strengthening employers’ rights to dismiss employees would enhance economic efficiency. Only then will decisions be taken. One gets the sense that he isn’t expecting much robust evidence to be forthcoming. So this is tantamount to kicking the issue into the long grass.

Cable’s stance draws support from a frank recent speech by Michael Heseltine, who notes that German economic success, in particular, has not relied on deregulation. Jim Pickard at the Financial Times reports Heseltine as saying:

There have been many deregulation initiatives but I can’t think of one – including mine – that has achieved significant success.

Heseltine goes on to state that he thinks it is a good idea to get rid of “outdated red tape”. He endorses the Government’s one-in, one-out initiative. This is where we need to understand more clearly what is happening. [Read more...]

Share

Steve Hilton, blues skies thinking and the resurgent deregulatory impulse

Steve Hilton has attracted flak across the old and new media following the FT’s revelations about his suggestions for stimulating economic growth. The proposals that hit the headlines included the abolition of maternity leave, labour market policies that contravened European law and the suspension of all consumer rights. Many have criticised the proposals for a range of offences including apparently overlooking the rule of law. Others have defended the utility of blue skies thinking when seeking ways to deal with the challenges that face us.

Personally I’m not averse to blue skies thinking. But the idea that off the wall thinking is central to the role of a strategy director is curious. One would have thought strategy should entail something rather more concrete and grounded, at some point in the process at least. And as someone more disposed to bottom up decision making and a Parliamentary party that is charged with representing the collective will of its members, I’m not so keen on the idea that one unelected, unaccountable and largely anonymous individual should have such influence over policy in the first place.

But the main thing that strikes me about these revelations is that they are not very “Blue Skies” at all. [Read more...]

Share

Dr Cable: the Cassandra within Cabinet?

Vince Cable seems to be occupying a somewhat awkward role in Government as the Coalition enters its second year. While continuing as Secretary of State for Business, Innovation and Skills, he appears to be acting as agent provocateur-in-chief of the new style Lib Dem “opposition within government”. He popped up as the surprise guest at the recent Fabian Progressive Fightback conference. And ConservativeHome placed him squarely at the top of their Yellow B**tards Premier League.

Yet, while this role appears rather awkward from the point of view of cabinet unity and collective responsibility, you get the sense that it is more congenial to Vince personally.

Vince is at it again in an interview in the current New Statesman. [Read more...]

Share