Gideon wields his axe [The UK's Comprehensive Review Thread]

[Francesca R]

No what is like reading tea leaves is the pretence of people in the finance industry and academic experts that they can predict the future. They can't.

And yet I'm pretty sure I heard Cameron say that the "jobs tax" (employers' NI rise) would kill the economy, and Brown/Darling say that going ahead with any budget tightening in 2010 would do the same.

So far what you have said suggests strongly that they were "pretending" too.

 

[The Don]

It's also not worth forgetting that it is because of the Tories in the first place that we have so many poor people claiming HB, given Thatcher's 'right to buy' policy that eliminated much of the cheap social housing, leading people to move to the private sector. Cutting 51% from the Housing Budget (as they are doing) won't help that.

I agree that the right to buy was ridiculous for a number of reasons:

• It drastically reduced the stock of subsidised housing
• It further fuelled the British mania for house ownership resulting in.......
• .....an ongoing house price bubble and.......
• .....a comparatively small private rental sector

I have mixed feelings about council housing though. Friends of ours are in their 70s and live in a lovely 5 bed council house which is maintained by the council and which is subsidised by us all.

They have lived there for over 40 years, the last 25 years or so as a couple in this huge house.

While I don't begrudge them a nice place to live, and I don't even begrudge subsidising them (despite their generous private pensions), I feel that this house would be better suited to a family with children and that if they want to continue to live in subsidised accommodation, they should move to something smaller and allow a family (who are presumably suffering in a B&B right now) a place to live.

They are naturally reluctant to move out of "their" house. I don't really have a good answer to that one...


I thought I was in favour of "short-term" tenancies as outlined by the government but when I hear the counterpoint (that in effect every estate would become a sink estate) I can see that it's a poorly thought through knee-jerk reaction.

I think we somehow have to come up with a solution which addresses as many as possible of the following:

• Our stock of affordable housing is too small
• The stock we have is inefficiently used
• In some cases, I am subsidising the housing of people considerably wealthier and with more income (total and disposable) than myself
• HB has had the unintended consequence of driving up rental values and hence housing values
• Which has made things less affordable for everyone, private renters, private buyers, taxpayers and so on
• We also have a shortage of housing full stop
• For a variety of reasons not enough houses are being built or sold

Unfortunately I don't have an answer. What do other countries do ?

 

[Darat]

If people in finance thought they were unable to 'predict' the future they'd never invest any money at all.

Or go and see a psychic. I do find it amusing that the "financial experts" and those that follow them seem to share a lot in common with psychics and their followers. Doesn't seem to matter how many times they make a wrong prediction it can be explained away or simply ignored and it doesn't dent the belief.

 

[Darat]

I agree that the right to buy was ridiculous for a number of reasons:

• It drastically reduced the stock of subsidised housing
• It further fuelled the British mania for house ownership resulting in.......
• .....an ongoing house price bubble and.......
• .....a comparatively small private rental sector

I have mixed feelings about council housing though. Friends of ours are in their 70s and live in a lovely 5 bed council house which is maintained by the council and which is subsidised by us all.

They have lived there for over 40 years, the last 25 years or so as a couple in this huge house.

...snip...

On way (and this is in very large brush strokes) would be to have a tenancy which is reviewed every X amount of time and the same criteria that is used to allocate public housing is reapplied. If they are found to no longer meet the criteria for such a property they would be offered a property that matched their new circumstances. However, and this is really important bit, unless the alternative property was in the same area with the same access to amenities and so on they would not face a compulsory move.

Of course this would mean that more public housing would have to be built and areas would have to have a range of different types of properties that suited everyone one from a singleton at the start of their life to the singleton at the end of their life. Hey it would be like having a community!

 

[Francesca R]

Well, we always imagine the Jeremy Kyle teenage father living in a £100,000 flat in Kensington

I'd be rather surprised if you could find a flat in Kensington worth as little as £100K, even an ex-LA one.

According to the news team at Channel 4, (who are usually quite good but infuriatingly seldom show their research data) there are 82,000 households (200,000 people) "at risk" from housing benefit changes, although it does not make clear whether there are this many receiving more than £400 per week, or whether it is because they are impacted by other changes. I suspect the latter. The DWP data doesn't show any distribution by LHA award that I can find--though it does have data showing the average award sliced up various ways, but not regionally, and it seems to be more in the region of £80-100 per week.

I expect the rhetoric on both sides of the politics show is overblown (wouldn't that be a shock?). There are not many households claiming fifty grand a year LHA; and there are probably not going to be many that are forced out of London.

 

[martu]

Or go and see a psychic. I do find it amusing that the "financial experts" and those that follow them seem to share a lot in common with psychics and their followers. Doesn't seem to matter how many times they make a wrong prediction it can be explained away or simply ignored and it doesn't dent the belief.

How else could you invest money today expecting a return tomorrow if you did not make predictions about tomorrow?

 

[Darat]

The housing benefit is giving Boris Johnson a leg-up in his re-election campaign, for him it doesn't matter if he wins or loses the battle: http://www.bbc.co.uk/blogs/nickrobinson/

 

[Francesca R]

I think the Johnson-Cameron fight is an example of what is a fairly standard relationship between municipal and central government politics, and even within central government when district representatives are not bound by whips, or if not so much weight is placed on government viability being damaged by losing a house vote on something.

It's relatively rare for the UK because this set-up is relatively rare. Ken Livingstone's relationship with the Labour party was even more "colourful" than this is so far.

 

[brodski]

feelings about council housing though. Friends of ours are in their 70s and live in a lovely 5 bed council house which is maintained by the council and which is subsidised by us all.

Can you show where the subsidy comes into the system?
If they're not on HB chances are that over the lifetime of their tenure their housing "subsidy" has either been neutral or negative (as in they have paid more in rent than has been spent on their home, including servicing the initial housing debt), depending on where they live.

 

[The Don]

Can you show where the subsidy comes into the system?
If they're not on HB chances are that over the lifetime of their tenure their housing "subsidy" has either been neutral or negative (as in they have paid more in rent than has been spent on their home, including servicing the initial housing debt), depending on where they live.

They pay a little over £50 a week for this property. That's £2,600 a year.

The market rate in that area is around £500 a week which presumably reflects the true costs of providing that housing PLUS a profit. Even if the profit is 50%, that's still a significant subsidy.

Heck, the buildings insurance alone on a property worth about £1,000,000 is well over £1,000. Funding a replacement (for when the house falls down) will be several thousand a year. Never mind getting a notional return on the capital invested in the property, the cost of maintenance and so forth as well as the administrative costs of running that property.

 

[brodski]

They pay a little over £50 a week for this property. That's £2,600 a year.

The market rate in that area is around £500 a week which presumably reflects the true costs of providing that housing PLUS a profit. Even if the profit is 50%, that's still a significant subsidy.

Heck, the buildings insurance alone on a property worth about £1,000,000 is well over £1,000. Funding a replacement (for when the house falls down) will be several thousand a year. Never mind getting a notional return on the capital invested in the property, the cost of maintenance and so forth as well as the administrative costs of running that property.

the admin costs and average maintenance costs (what is spent rather than want needs to be spent) of running a council house are a couple of pounds a week. The entire Housing Revenue Account Subsidy System (the system by which LA rents are redistributed to LAs) has been in effective surplus for the last couple of years (ie more money has come from council rents to HMT than HMT has had to put into the system- discounting HB payments). In the years when the HRASS was not in surples, the average HMT contribution was arround £2m PA for England, or around about £1 PA per council house. Now, this misses 2 things. Firstly the majority of rent for council housing is paid through HB, so it comes from HMT in the first place second although on average council housing is (or almost is) self supporting, we could if we wished make (more of a) a profit from council housing, and that loss of income is effectively a subsidy, but the idea that council housing costs more to run than it charges in rent is often incorrect.

 

[The Don]

Thank you, I stand corrected.

 

[geni]

Can you show where the subsidy comes into the system?
If they're not on HB chances are that over the lifetime of their tenure their housing "subsidy" has either been neutral or negative (as in they have paid more in rent than has been spent on their home, including servicing the initial housing debt), depending on where they live.

Assume the property has a value of say half a million (probably higher). They are effectivly getting a loan at a rate of about 0.5%. A more realistic low end mortgage rate is around 4% which means they are being subsidised to the tune of £17K a year.

 

[geni]

• Our stock of affordable housing is too small
• The stock we have is inefficiently used
• In some cases, I am subsidising the housing of people considerably wealthier and with more income (total and disposable) than myself
• HB has had the unintended consequence of driving up rental values and hence housing values
• Which has made things less affordable for everyone, private renters, private buyers, taxpayers and so on
• We also have a shortage of housing full stop
• For a variety of reasons not enough houses are being built or sold

Basicaly you need the tories to abandon their election pledges and allow central goverment to force through planning permssion for new housing estates. Inefficientcy can in part be addressed through raising council tax for OAPs. Of course both of these hurt the baby boomers so are not going to happen.

 

[brodski]

Assume the property has a value of say half a million (probably higher). They are effectivly getting a loan at a rate of about 0.5%. A more realistic low end mortgage rate is around 4% which means they are being subsidised to the tune of £17K a year.

I addressed the issue of opportunity cost in my second post, if that is what you mean by subsidy then sure, they are. But in hard cash terms the HRASS covers the servicing of housing debt, and chances are a 5 bedroom house (as opposed to a unit in a post war tower-block) has been a net contributer to the HRASS.

 

[Lothian]

I do like how people are saying this is "higher than expected" - expected by who? Those folk that didn't notice the iceberg a couple of years ago?

I had hoped that we'd have given up with reading the tea-leaves but apparently not we are still reporting these folk as if they can make accurate predictions.

I think in most cases it is by the treasury.

There is an expectation of growth that in turn leads to an expectation in tax yield that in turn leads to an expectation about the activities that can be funded. Obviously not quite that simple, they also need to consider the unemployment and benefits, the balance of payments etc. The forecast will also take account of seasonal adjustments.

These are important as it is the growth forecasts on which the budget is based. If growth turns out to consistently be higher than the treasury expects you can look forward to a tax bonanza in the next budget; or a higher tax burden depending on the politics or motivation of those in charge.