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Margaret Thatcher and the cult of personality

Robert Henderson

Two Cults

Margaret Thatcher was the subject of a cult of personality. This was not the result of calculated  propaganda, but simply the creation of her extraordinary personality. Because the cult of personality developed not in a totalitarian state but a country where public opposition was possible, there were two cults of personality attached to her in a relationship which mimicked the matter/antimatter duality. These were the Thatcherite religious believers fulfilling the role of matter and the Thatcher-hating Left  acting as the antimatter.

Both the matter and the antimatter Thatcher cults were  potent.  The religious believers  bowed down before the great god MARKET (and Thatcher was his prophet) and, when things  went wrong,  did what all religious believers do until they lose their faith, denied reality by simply pretending something had not happened or by giving a calamity some  absurd spin to ”prove” the god had not failed.

For the Thatcher-hating Left she was the personification of the Devil and consequently credited with all manner of evil,  but, as is the way with personifications of the Devil, never portrayed as anything but powerful, a being possessed of a political juju (doubtless ensconced in her handbag) which could wreak any degree of havoc  with all that the Left held dear is if she so chose.   Like all those who believe in evil spirits the Thatcher-hating Left ascribed every act of ill fortune to her.

The attitude of both bands of cult followers was essentially superstitious, attributing powers to the woman which she did not, and often could not,  have.  The religious Thatcherites imagined she could  speak the spells which would miraculously convert Britain from a  country making silly old fashioned things such as steel, ships and cars and mining coal to a country stuffed to the gunnels with entrepreneurs creating new non-unionised service industries; the Left saw her as a witch practising black magic to contaminate and transmogrify the world they knew.

Because the Thatcherite religious believers  and her leftist haters  could not and still cannot see past the woman’s   gigantic political personality,  they made and continue to make the same mistake, namely, seeing the two cult figures as the reality while ignoring  her actual policies and their outcomes.

The reality of Thatcher

The reality of Thatcher is that objectively she achieved little if any of her wishes. It is a bitter irony for the woman (and Thatcherites generally)  that her policies were of a nature which  undermined the  ends  she espoused.  Perhaps the prime example is Thatcher’s  avowed wish to see a strong and wealthy Britain  whilst creating through her  commitment to laissez faire economics the very circumstances that would weaken the country. Under her economic regimen and its lingering aftermath ever since Britain  has become ever less self-sufficient in strategically important economic activity such as the production of  food and energy  and vast swathes of British business were  either bought up by foreigners or ceased to operate from Britain because of offshoring and the absence of government action to protect our own economy.   She simply did not understand that you could not have laissez  faire in both the domestic and international economic sphere and have a strong nation state.   Had Thatcher  known any economic history she would have realised that, but even without such knowledge  common prudence should have told her that a country which is dependent on others for necessary goods and services is a weak country.  Moreover, one of her claimed tutelary heroes Adam Smith readily understood there are things which are either strategically important such as armaments or social goods which are  never going to be supplied universally by private enterprise such as roads.  Thatcher never gave any indication of realising that Smith was not the unrelenting free marketer of her imagination.

Thatcher’s  failures in making policy to  achieve her ends were legion. She  destroyed much of British heavy industry in the belief that those made unemployed would rapidly be re-employed in private sector jobs. The new jobs did not materialise and she was reduced to presiding over massive and long lasting unemployment  which she funded with North Sea oil and gas tax revenue and the receipts from privatisation, whilst fiddling the unemployment figures shamelessly. She sold off state owned  services  (which belonged to the community as a whole not to the government)  in the belief that service would  be improved . It was  not. Instead vital services such as the railways and the provision of energy and water became ever more expensive whilst providing poorer service and less employment. She introduced so-called private business methods into the NHS and higher education in the belief that they would become more efficient. The result was massive increases in  bureaucracy and an ever climbing  cost of  both the  NHS and higher education and a substitution of the pursuit of  money for the public service ethos because money was attached to individual patients and students. She introduced the Community Charge or “Poll Tax” in the belief that it would be fairer than the old domestic rates. The result was widespread unfairness because it took no account of an individual’s means  and  provoked the nearest thing to a national movement dedicated to the non-payment of taxes known in modern times.  She raged against  EU interference in British affairs but signed up Britain to the Single European Act (SEA)  in the belief that it would create a genuine single market within the EEC.  It  did not create such a market and merely presented the EEC with an open goal for ever more audacious sovereignty grabs.  A supposed opponent of further mass immigration, her signing of the SEA also opened the door to free movement within the EU, a situation worsened by her strategy of dramatically widening the EEC.  She signed Britain up to the  She embraced “Care in the Community” for the mentally ill or disabled on the grounds that it was more humane than keeping  such people in long-stay institutions. The result was thousands of people left to largely fend for themselves in the outside world who were quite incapable of doing so. She sold off great swathes of social housing (which belonged to the community as a whole not to government) to tenants in the belief that this would result in a “property owning democracy” whilst more or less ending the building of new  social housing.  The eventual result was the growing housing emergency we have today. She instigated the disastrous “light touch”  regulation of the financial services  industry by abolishing credit controls and  failing to meaningfully regulate the  industry meaningfully after “Big Bang”  in 1986  which  effectively de-regulated the London Stock Exchange to bring in a brave new world of free trading (http://www.telegraph.co.uk/finance/financialcrisis/8850654/Was-the-Big-Bang-good-for-the-City-of-London-and-Britain.html)  with the dire results with which we are now living.

Even in the few areas where she was ultimately successful such as the Falkland’s War she was at best negligent in ignoring warnings from the Foreign Office of a growing threat to the Falklands  in the months leading up to the invasion and even after the expeditionary force had been dispatched  she agreed to a US organised plan which would have not offered the Islanders either self determination of or any meaningful security (http://www.telegraph.co.uk/news/politics/margaret-thatcher/10008116/Margaret-Thatcher-how-she-took-on-the-men-and-won.html).

There were also acts of omission and collusion with policies with which she supposedly fundamentally  disagreed.  Most importantly, Thatcher failed utterly to carry her strong views against further mass immigration into her period in office. Not only that but, as already mentioned,  she made things much worse on that front by signing up to the Single European Act. She agreed to the institutionalisation of political correctness in public life, especially in the Civil Service, schools and universities. In addition, she allowed the “progressive” educational establishment to destroy a first rate  school examination system  by swopping the certificate of Secondary Education (CSE) and O(rdinary) Levels  for the dangerous absurdity of the General Certificate of Education (GCSE), an exam   supposedly for all 16 year olds but which was in reality two exams masquerading as one.  Despite the fact that Tory support rested heavily on the countryside  she allowed the de-regulation of rural bus services to occur  which reduced them so  severely that to live in countryside meant owning and driving a vehicle or at least having access to someone who did.  To make matter worse, this was done in tandem with a wilful neglect of the then nationalised railways.

The protests after her death were unsurprising

Just based on her economic disasters the uproar surrounding her death is unsurprising.  In the space of a few years she raised the unemployment  pay claimant count from 1.4 million when she took office in 1979 to 3.2 million by 1986 (http://www.economicshelp.org/macroeconomics/unemployment/measuring_unemployment.html) That bald figure is startling enough but the reality  is ten times worse. She  must have known her policies would result in mass unemployment,  at least in the short term, when she removed the financial support of taxpayers from nationalised industries or sold them off in the belief that private business would be able to do the job more efficiently with  much smaller workforces.   Further, as these industries were concentrated in areas where they were by far the dominant employer she should  have realised that structural unemployment would be created  in many parts of the country.  To imagine, as she did, that new jobs would rapidly sprout in the areas showed  a  shocking lack of understanding of economic history which has no example of such a thing happening on the scale required in 1980s Britain.

What is certain is the fact that she had no doubt about the destructive possibilities of laissez faire economics, viz:

“Adam Smith’s ‘invisible hand’ is not above sudden, disturbing, movements. Since its inception, capitalism has known slumps and recessions, bubble and froth; no one has yet dis-invented the business cycle, and probably no one will; and what Schumpeter famously called the ‘gales of creative destruction’ still roar mightily from time to time. To lament these things is ultimately to lament the bracing blast of freedom itself.” — Margaret Thatcher, Statecraft P. 462

A politician of conviction?

The idea that merely having convictions is praiseworthy is a rum one. Hitler, Stalin and Mao had convictions. But even  if the  quality of a person’s convictions is ignored, this is one of the most mystifying of myths attached to Thatcher.  The reality was she frequently changed her position on the most important issues she faced or adopted methods which went against her avowed policies when she had created a mess, most notably with the massive rise in unemployment resulting from her slash and burn approach to the British economy which greatly  increased the benefits bill for many years and left people unemployed for years, in many cases for decades.

The most significant publicly  admitted changes of policy  were on immigration, the Europe and global warming.  Before the 1979 election she had spoken of the need to control immigration  because the country was in danger of being “swamped”:

‘If we went on as we are then by the end of the century there would be four million people of the new Commonwealth or Pakistan here. Now, that is an awful lot and I think it means that people are really rather afraid that this country might be rather swamped by people with a different culture.’

She went on to say, ‘The British character has done so much for democracy, for law and done so much throughout the world that if there is any fear that it might be swamped people are going to react and be rather hostile to those coming in.’

 ‘If you want good race relations, you have got to allay peoples’ fears on numbers. […] We do have to hold out the clear prospect of an end to immigration…’ (http://www.runnymedetrust.org/histories/race-equality/59/margaret-thatcher-claims-britons-fear-being-swamped.html)

Once in office she did nothing despite still feeling strongly about the subject in private  (http://www.telegraph.co.uk/news/politics/margaret-thatcher/6906503/Margaret-Thatcher-complained-about-Asian-immigration-to-Britain.html).

On Europe she went through the following metamorphosis:

-          1975 she campaigned and voted for Britain to remain within the European Economic Community (EEC – the EU was only formed  by  the Maastricht Treaty in 1993).

-          By 1980 she was convinced that the EEC was not  acting in Britain interests.

-          By 1986 she had  signed the Single European Act giving the EEC immense powers to interfere  with Britain’s sovereignty.

-          In the late 1980s she adopted the policy of enlarging the EEC which meant that a vast new swathe of workers from poor countries would be allowed free movement within the  EEC.  The effects of this also allowed the federalists to press for things such as Qualified Majority Voting on the grounds that the EEC/EU had become too unwieldy to operate under the original  rules and to generally press forward with the creation of a United States of Europe.

-          In 1990  she took the UK into the Exchange Rate Mechanism (ERM)  despite being opposed to a single currency to which the ERM was a stepping stone with the pound effectively shadowing the Deutschmark.

The idea that Thatcher only realised what the EEC was after taking office in 1979 is simple nonsense. Thatcher’s speech to the  Conservative Group for Europe at the start of the Wilson referendum on the EEC clearly shows her viewing the EEC as far more than a  simple free trading area, viz:

That vision of Europe took a leap into reality on the 1st of January 1972 when, [ Edward Heath] Mr. Chairman, due to your endeavours, enthusiasm and dedication Britain joined the European Community.

 * The Community gives us peace and security in a free society, a peace and security denied to the past two generations.

 * The Community gives us access to secure sources of food supplies. This is vital to us, a country which has to import half of what we need.

* The Community does more trade and gives more aid than any group in the world.

* The Community gives us the opportunity to represent the Commonwealth in Europe. The Commonwealth want us to stay in and has said so. The Community wants us.

 Conservatives must give a clear lead and play a vigorous part in the campaign to keep Britain in Europe to honour the treaties which you, sir, signed in Britain’s name.

 We must do this, even though we dislike referenda. We must support the [ Harold Wilson] Prime Minister in this, even though we fight the Government on other issues.

 We must play our full part in ensuring that Conservative supporters say “Yes to Europe”. (http://www.margaretthatcher.org/document/102675).

In any case, the Treaty of Rome left no room to believe it was merely a free trade organisation.  No one could read that and be in any doubt  that the intention was to create a United State of Europe. Thatcher, the supposed obsessive  who was a stickler  mastering a subject,   should have read it before the referendum.

As for global warming, she started the ball rolling whilst in office and then reversed her position in her autobiography published in 2003. Here she is speaking to the  UN general assembly, in November 1989:

“What we are now doing to the world … is new in the experience of the Earth. It is mankind and his activities that are changing the environment of our planet in damaging and dangerous ways. The result is that change in future is likely to be more fundamental and more widespread than anything we have known hitherto. Change to the sea around us, change to the atmosphere above, leading in turn to change in the world’s climate, which could alter the way we live in the most fundamental way of all.

“The environmental challenge that confronts the whole world demands an equivalent response from the whole world. Every country will be affected and no one can opt out. Those countries who are industrialised must contribute more to help those who are not.” (http://www.guardian.co.uk/environment/blog/2013/apr/09/margaret-thatcher-green-hero)

By  the time she had published her political work Statecraft in 2003 she was thinking along these lines:

“The doomsters’ favourite subject today is climate change. This has a number of attractions for them. First, the science is extremely obscure so they cannot easily be proved wrong. Second, we all have ideas about the weather: traditionally, the English on first acquaintance talk of little else.

“Third, since clearly no plan to alter climate could be considered on anything but a global scale, it provides a marvellous excuse for worldwide, supra-national socialism. All this suggests a degree of calculation. Yet perhaps that is to miss half the point. Rather, as it was said of Hamlet that there was method in his madness, so one feels that in the case of some of the gloomier alarmists there is a large amount of madness in their method.” (http://www.masterresource.org/2013/04/thatcher-alarmist-to-skeptic/).

There were other issues where her public position was at odds with her actions, for example, the troubles in Northern Ireland and the rule of law. Thatcher claimed that there would never be a surrender to  IRA terrorism.  Yet after she narrowly escaped death in the Brighton Grand Hotel bombing in 1984 (12 October)  the Anglo-Irish agreement was signed little over a year later in November 1985 giving the Republic of Ireland government  a say in what happened in Northern Ireland and committing the British Government to accepting the principle of a united Ireland if a majority were in favour. (http://news.bbc.co.uk/onthisday/hi/dates/stories/november/15/newsid_2539000/2539849.stm). There was no obvious reason for such a change of heart beyond the fear generated in Thatcher by the bombing of the Grand Hotel.

As for the rule of law, far from respecting it as she claimed, she laid the basis for the ever increasing authoritarianism of the British state by permitting the police to act unlawfully during the miners’ strike by stopping miners and their supporters from travelling across the country and turning a blind eye to any police excesses as they clashed with the miners and their supporters.

A politician of conviction? Only if you define  someone as such who runs from one position to another while vigorously embracing each  successive position regardless of its  contradiction of a previous  advocated policy or set of ideas.

Nor was she someone who would take responsibility for her actions. When she found her policies were a disaster she either claimed she had been badly advised or cheated (for example, the Single Market, global warming) or attempted to ignore the mess she had created  (for example, enduring mass employment and ) by misrepresenting it, or in the case of unemployment, using North Sea oil  tax revenues,  the privatisation receipts and blatant manipulation of the unemployment statistics to paper over the unemployment cracks.

Why did Thatcher get things so horribly wrong? 

Why did Thatcher get things so horribly wrong?  Her behaviour  strongly suggested that she was seriously lacking  psychological and sociological insight. This meant she constantly made horrendous mistakes such as trusting the EU over the single market and imagining in truly infantile fashion that millions of jobs shed from heavy industry and coal mining would be rapidly replaced by “modern” jobs in the service and light industry sectors.  Her record in choosing people to support or employ was also dismal.

Far from being a free thinker her cast of mind  made her the ready captive of an ideology:

“…as Leader of the Opposition MT once cut short a presentation by a leftish member of the Conservative Research Department by fetching out a copy of The Constitution of Liberty from her bag and slamming it down on the table, declaring “this is what we believe”. (http://www.margaretthatcher.org/archive/Hayek.asp).

It is dangerous to trust anyone who is  susceptible to ideological capture for the simple reason that all ideologies, whether sacred or profane, are inadequate descriptions of and guides to reality.    This means that ideologues constantly have to try to fit reality within the ideology rather than having  reality driving their choices.  Those which include economics are particularly dangerous because their reach is so vast.

Ideologies are the prime example of Richard Dawkins’ memes, mental viruses which capture the individual and direct their thought and behaviour.  Those who are captured by them by them give up their mental autonomy.  That speaks either of a character trait such as that of requiring a source of authority for choices or a  weakness of intellect which seeks ideological  algorithms  developed by others to answer political  questions because the person’s capacity to answer the questions by rational pragmatic examination based on their own knowledge and intelligence  is inadequate.

How good was  Thatcher’s mind? She  is frequently  represented by her adherents as ferociously intelligent.  This view  will not stand up to examination.  She read chemistry at Oxford but only achieved a second class honours degree (http://womenshistory.about.com/od/thatchermargaret/a/Margaret-Thatcher.htm).  Oxford at the time did not divide the second class degree into  upper and lower second classes  and had a fourth class honours division instead.  The old Oxford second  is generally taken to be the rough equivalent of an upper second.  That raises questions over her intellect.  Chemistry at degree level in the 1940s had not become heavily mathematized  as it now is.  Diligence would get a student a long way. This   quality Thatcher  reputedly  had in spades. If she did, the fact that she only took a second suggests that she was not very intellectually gifted. That is particularly the case when it is remembered that she went up to Oxford during wartime when competition for places was severely reduced because so many of the potential male students went into the forces rather than to university. A beta plus mind at best.

What people probably mistook for intelligence was her avid seeking and retention of data. But it is one thing to learn facts or arguments parrot fashion, quite another to mould them into a coherent intellectual whole.  Based on her frequent renunciation of previous positions, it is reasonable to assume that she simply did not have the intellectual wherewithal to put the data she took on board to any useful purpose. She certainly never  gave no indication that she ever saw the bigger picture.

There were also the question of her how fitted she was by experience to fill the role she played, that of the hard-core economic libertarian forever seeking ways of making people take responsibility for their lives both socially and in their work.  When I look at the present Tory front bench I have a similar feeling to that  which I experience when thinking of the Nazi leadership.  The Nazis had a rather noticeable lack of Aryan types amongst them: the present Tory front bench is remarkably short on people who have been entrepreneurs or indeed of people who have any great  experience of work outside the narrow confines of politics.

Margaret Thatcher was a forerunner  in this respect. She graduated from Oxford in 1947.  For the next four years she worked for various private companies as a research chemist. At the age of 26 she married a millionaire. He funded Thatcher’s career change from chemist to barrister. She took the bar exams in 1953 and practised (specialising in taxation) until 1961, the last two years of the period occurring after she was elected to the Commons in 1959.  After that it was all politics.

Thatcher’s experience of the real world of work is at best four years as a research chemist and eight years as a barrister.  However,  being married to a millionaire at the age of 26 rather dulls the idea of her living a normal working life.  The truth is she made her way not as a self-made woman but by the traditional route  for female advancement of marrying a rich man.

There was no need for Thatcherism

The really angering thing about Thatcher’s time in No 10 is that she could have done what she was elected to do, tame the unions, without engaging in the deliberate wholesale destruction and alienation of much of Britain’s heavy and extractive industry and the placing in private hands of the public utilities, especially those of gas, electricity and water.   This was because Thatcher had the great good fortune to arrive as Prime Minister just as North Sea oil and gas was coming on-stream in large quantities.  Those revenues alone would have provided any government with a very large safety net to finance temporary difficulties caused by serious confrontations with the larger trade unions.   She also enjoyed  the very large receipts from the big privatisations such as gas, electricity and BT.  No British government has ever had such a sustained revenue windfall as hers.

There was absolutely no economic need to destroy so much of British industry or place much of the state-owned  organisations  into private hands.  Continental countries such as Germany and Italy retained their shipbuilding; France,  Germany and Italy retained a native mass production car industry.  Germany still has a substantial coal mining industry. Privatisation proceeded at very different speeds throughout Europe.  That no other large industrialised  country followed Thatcherite policies  with anything like the speed or fervour of Britain  yet  survived and frequently out competed Britain economically  demonstrates that Thatcher’s policies were not a necessity but simply an ideological choice.

Her government could have spent the 1980s taming the unions sufficiently to prevent the excesses of the 1970s.  It is true that the very high level of unemployment  of the 1980s was an aid to this, but it was probably not the main rod which largely broke the Trade Unions’ back.  Home ownership had been rising steadily throughout the twentieth century and by the time Thatcher came to power in 1979 not far short of 60%. The highest it reached even after Right To Buy was only 69% – the idea that it was Thatcher who made it possible for the working man and woman to own their homes for the first time is another myth about her(http://www.telegraph.co.uk/finance/personalfinance/houseprices/10005586/Home-ownership-falls-for-first-time-in-a-century.html).  .

The fact that so many people were owner occupiers with mortgages  meant that they were much less willing than they had been to strike at the drop of a hat because they feared losing their home.  Even those who were not owner occupiers had much more to lose in terms of general comfort, security and prospects of greater opportunity for their children than had been the case before, say, 1939.  To take just one example, children from poor families had a greater opportunity than ever to enter  higher education. This growing reluctance to come  out whenever the union called for  strike  was why the National Union of Miners’ leader Arthur Scargill was not willing to hold a ballot of all  his members before calling a strike. He feared such a ballot would be lost.

The combination of this increasing  reluctance to strike amongst union members together with the legal restrictions on unions such as no secondary picketing and severe penalties for strikes called with a formal ballot would have been enough to end the anarchy which prevailed in the 1970s.

Apart from the social and economic upheaval of the Thatcher years, she can also be blamed for a continuation of the damage she caused both in the long term structural unemployment but also in the fact that she subverted  the Labour Party so that it adopted most of what was damaging from the Thatcher period, most particularly in the adoption of her devotion to laissez faire economics and in Labour’s all too ready acceptance of the EU  elite’s desire for comprehensive political and economic union.

The 1980s could have been so very different.  The revenue from North Sea Oil could have been put into a sovereign wealth fund which  by now would be worth hundreds of billions.  If  the Single European Act had not been signed the movement towards a  federal EU would have been halted in its tracks  (national vetoes applied to this area of decision making  at the time). If Thatcher had not argued for an ever wider EEC the poorer nations from the East would not have joined and the immigration threat they carry would not exist.  Indeed,   Britain could have left the EU entirely because the Tory Eurosceptics could have allied with Labour under Michael Foot or even Neal Kinnock. New social housing could have been built with the proceeds of Right to Buy thus obviating to a large degree the shortage of housing now.  If the nationalised industries had been sustained there would have been no serious structural unemployment.  Had proper attention been paid to the strategic importance of  essential economic areas such a food and energy self-sufficiency we should not be so dangerously reliant on foreigners for such things today.  Most importantly, if  that had been the general thrust of politics in the 1980s it is doubtful in the extreme that Blair and NuLabour would ever have arisen.

The tragedy of Margaret Thatcher is that she had a sense of patriotism and probably genuinely thought she was doing the best for her country at the time she implemented or advocated policies (her honesty when policies went wrong was  another matter).  The problem was that her judgement  and understanding was all too often hideously wrong or defective. She so often provided comforting rhetoric, especially on Europe and immigration,  but she never delivered the goods. The fact that she was such an overpowering political figure made things worse because it meant she could steamroller her cabinet on most issues at most times. It is difficult to think of another politician  in the past three centuries who wrought so much damage on Britain.

How governments created the present welfare mess

Robert Henderson

The current attempt by the British Coalition Government to radically alter the welfare state by severely restricting benefits is an exercise in gross  hypocrisy.  Why? Because the  increasingly shrill and uncouth portrayal of those in receipt of benefits as scroungers by Tories’ (and some on the left like Labour MP Frank Field) overlooks one very inconvenient fact: it is the actions of governments of all political hues over the past 35 years which created  the  welfare mess  we have today.    Between them these governments have produced a situation where millions of Britons  cannot either get a job at all  or can only obtain a  job which does not  pay enough to support them and their families  even meagrely.  This has produced the truly mad situation where substantial  benefits are out of necessity  paid to  not only the unemployed but to millions who are  in work, mainly  through tax credits and  housing benefit, because the wages on offer are too  low to allow someone to live an independent life.

Mass unemployment

How did this dire situation come about? Let us begin with the shrinkage of jobs.  Sustained large-scale unemployment did not begin with Thatcher in 1979 but she greatly increased it.  Unemployment was officially 1.4 million in 1979 and rose to over three million  (even by the dole claimant count) by the mid-1980s ( http://econ.economicshelp.org/2007/03/uk-economy-under-mrs-thatcher-1979-1984.html ).

Shocking as the 1979 figure of 1.4 million was at the time, it was primarily  the consequence of the  oil price quadrupling after in 1973, something over which the Labour governments  from 1974-79 had no control over because  North Sea oil was not yet flowing in commercial quantities.   Conversely, the remarkably rapid rise of unemployment in the 1980s was caused by the wilful economic vandalism of the Thatcher government which publicity celebrated (yes, I did say celebrated) destroying much of the UK’s heavy and extractive industries.

Privatisation

Privatisation   was the platform which placed large swathes of the public services into private hands,  including the strategically important providers of  gas, electricity, telecommunications, railways and water.  This alone removed several million well paid and secure jobs from the UK.  It also created areas with structural unemployment. Many of those made redundant in such areas never again obtained anything other than a low paid job or, worse, never obtained a new job.

The early big privatisations , such as those of gas and telecommunications,   were unashamed; other privatisations  proceeded piecemeal through the contracting out of public services to  private business.  Later  from the 1990s onwards came the Private Public Partnership and Private Finance Initiative which involved either joint financing between government and private business or private business providing the money for a project up-front with the taxpayer repaying the debt on generally extortionate terms  over periods of time as long as thirty years. As well as reducing employment and service standards  built up massive amounts of public debt whilst keeping most of it from being added to the official National Debt.  Bizarrely, the supposedly Labour governments headed by Blair and Brown  were  even more enthusiastic than the Thatcher and Major governments about using private contractors for public works. The effect of all these various forms of privatisation was to reduce manpower and conditions of work radically.

Outsourcing

Privatisation was followed and after the 1980s accompanied by outsourcing. The Thatcher  years broke the back of mainstream political resistance to laissez faire in both the domestic and foreign markets.  British companies exported jobs to the Third World incontinently squeezing the available jobs further both in terms of numbers and pay and conditions. This trait was propelled to a significant degree by the willingness of British governments of any political colour to allow British companies to be purchased by foreign countries. These had even less reason to retain jobs in Britain than British owned businesses.

The European Union

When the Single European Act  (SEA) was signed in 1986 the UK effectively  lost control of its borders and  its commerce and industry because the SEA required member states to allow the free movement of “goods, persons, services and capital”. (http://europa.eu/legislation_summaries/institutional_affairs/treaties/treaties_singleact_en.htm).  Later treaties whittled away the UK’s sovereignty a good deal further.

The signing up the SEA  fitted the laissez faire economics of the Thatcher government in one sense – a single market within the EU – but  not in another because it restricted UK trade with the rest of the world.  The Thatcherites also found the remnants of state economic control in the EU  such as the Common Agricultural Policy  unpalatable. As time passed they also had a growing concern about  the growing extent of EU  ambitions to remove sovereignty.

For all these reasons the Thatcher government developed a policy of enlarging the EU.  This policy was eventually adopted by all British governments up to  this day – David Cameron is  even now pushing for  Turkey’s admission  (http://www.bbc.co.uk/blogs/seealso/2010/07/daily_view_camerons_turkey.html).  The policy of enlargement was to have  profound consequences for immigration as  the EU expanded as workers from poor EU states, especially the new entrants from the old Soviet Bloc such as Poland flooded to the UK from 2004 onwards ( http://www.guardian.co.uk/uk/2010/jan/17/eastern-european-uk-migrants).

Immigration

On top of all this came immigration from outside the EU.  This really took off from the advent of Blair as Prime Minister  in 1997.  The combined net immigration from both the EU and the rest of the world (RoW) was  50,000  in the year before Blair took office . This rose to 250,000 in 2010, the year Labour lost power  (http://www.telegraph.co.uk/news/uknews/immigration/9713954/Interactive-graphic-how-UK-migration-has-changed-1964-2011.html).   The British population has officially  increased by a net 3 million from immigration  since 1997 (http://www.migrationwatchuk.org/).   How far these figures are accurate is debatable, but they certainly do not overstate the numbers which rest on the 2010 UK census.  It is probable that they substantially understate it as illegal immigrants  will not appear in a census for obvious reasons and foreigners generally may be cautious about registering for a census because they come from countries where the state is not trusted in any way.

Massive immigration  produced severe competition for jobs, most of them low-skill or unskilled, but also for skilled workers especially in the building trade.  The immigrants not only took jobs from native Britons but did so by accepting much lower wages.  The huge influx of immigrants also had the adverse effect of helping to raise housing costs, both for buying and renting.

Housing: the poison in the UK economy

House prices were inflated by the failure of all governments to continue to build enough new social housing from the mid-eighties onwards,by the introduction of Right-to-Buy (RTB)  which greatly reduced the existing stock of social housing by giving tenants the opportunity to buy the properties they rented at huge discounts and the lunatic absence of controls over the  provision of mortgages,  which at the height of their absurdity were being offered at 125% of the value of a property.   Come the crash of 2008 no deposit mortgages vanished and lenders began to demand deposits of 20-30%. The result was property prices too high for most first time buyers because they could not raise the deposit  and a general weakening of the housing market  as those with mortgages found that they could not re-mortgage on affordable terms when short term deals came to an end or obtain mortgages for a new property.  The freezing of the property market  meant that more and more needed to rent. Most could not find social housing and  were left at the mercy of  private landlords  who relentlessly raised rents to unaffordable levels for large sections of  even the employed.

To understand exactly how inflated property have become  compare the prices today with what they were in 1955.  Then the average residential property price was around £2,000. Uprated for inflation the average price of properties today would be around £40,000.  It is housing costs which are  the primary poison in the British economy. If there was sufficient housing to both rent and buy at the sort of  prices to wages ratio  which existed even  20 years ago, much of the general problem of rising benefit costs would not exist.

The manipulation of the UK’s unemployment statistics

Today the official unemployment figure for those drawing unemployment  benefit (the claimant count) is 1.54 million, which is the nearest to the way the 1979 figure is calculated. The 2013  Independent Labour Organisation measure of those seeking work has unemployment at 2.52 million. (http://www.hrmguide.co.uk/jobmarket/unemployment.htm) However,  the contrast between  the 1979  unemployment figure  (1.4 million) and the one now  is a false one because the figures are not really comparable.   This is because there has been a massaging of the unemployment figures, many  more pupils staying on a at school after the age of sixteen and a dramatic rise in those going into higher education.

Thatcher began the government’s  habit of fudging the employment figures by cynically shifting people from the unemployment registers to long-term sick benefit. By 2011 2.6 million were claiming such benefit. (http://statistics.dwp.gov.uk/asd/index.php?page=statistical_summaries).  In 1979 around 600,000 were doing so (http://www.guardian.co.uk/society/2011/jan/19/lax-benefit-rules-not-responsible-more-disability).

To this distortion was added the constant changing of the rules for eligibility for claiming benefits, the definition of who was unemployed and the exclusion from the unemployment claimant figures of those engaged in government training schemes receiving what was to all intents and purposes unemployment benefit .  To put the cherry on the massaging of the statistics those in training were counted as employed in the total workforce  statistics. This suppressed the unemployment figure as expressed as a percentage of the total workforce.  There were also issues with students. Between November 1986 to September 1990 they could claim some unemployment benefits in the summer vacation. They were excluded from the unemployment count.  ((http://www.radstats.org.uk/no072/article4.htm).

These changes to and exclusions  from the unemployment statistics had considerable repercussions. The Bank of  England wrote in 1991 “…although unemployment is falling because there are more jobs, it is also true that much of the decline in the claimant count which has occurred since mid-1986 has been due to a shift in the unemployment/employment relationship resulting from changes in the Government’s range of Special Employment Measures – especially the introduction of more rigorous availability for work tests and the rapid growth of the Restart programme (quoted in SSAC, 1991, p. 59). Ibid.

On top of all this came the vast increases in the numbers in post-16  education. The 1980s saw the beginning of the governmental drive to have much larger numbers of  schoolchildren staying at school  until they were eighteen . By 2011 they had almost doubled from the rate of those staying at school after the age of  sixteen  from what it was in in 1980  (see p10 www.parliament.uk/briefing-papers/sn04252.pdf).  From 2015 all those under the age of 18  will, in theory at least, have to be either in education or training – http://www.sec-ed.co.uk/news/warning-over-raising-of-school-leaving-age-to-18).

The expansion of  higher education   was even more dramatic. In 1980 only 13% of young Britons went to  into higher education (page F152 – http://users.ecs.soton.ac.uk/nmg/1468-0297.00102.pdf).  More than forty per cent of British school-leavers are now going on to start degree courses.  (The last Labour government had a target of 50% of school-leavers entering higher education  and in 2010/11 47% of those between the ages of 17-30 were in higher education  -http://www.timeshighereducation.co.uk/419496.article)

The false classification of people as long-term sick rather than unemployed, the rise in children saying on at school and the increase in students taking degrees means the official statistics  considerably understate  the true level of unemployment.    The wrongful classification speaks for itself,  while the extended schooling and increased university participation is important because it  delayed the point at which millions entered the employment market.

Exactly how distorting these interferences with the unemployment statistics are compared with those before 1980 is debatable, but its effects must be very substantial.  Those between the age of 16-64 deemed economically inactive  were 9.04 million according to the  official figures issued in October  2012  (http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/october-2012/statistical-bulletin.html.  This  gives an indication of the huge numbers who should really be listed as  unemployed.  Even if  the schoolchildren above the age of 16, the students and the sick and disabled were discounted, there would be several million left. Add that to the official unemployment rate of around 2.5 million and the true unemployment rate could be in the region of 5 million or even more.

But the picture is even bleaker than that because  large numbers of those now counted as employed are on short time. Many of those and the full time employed are on short contracts and have no security of employment.

Working tax credits

All of this – the destruction and export of jobs,  mass immigration,  and the government driven housing market  –  produced a  Britain which had become both a low-wage economy and an extremely expensive place to live. Many people in full time employment  could not afford to live on their pay.  As rents soared housing benefit was increasingly taken up by even those who ordinarily would not have been thought of as being at the bottom of the income pile. Eye-watering amounts of housing benefit  were paid for those with large families (http://www.telegraph.co.uk/news/politics/5663014/Family-claims-147000-a-year-in-housing-benefit-for-seven-bedroom-home.html) ,  especially to those  in London where by 2013 families  in private rented accommodation were paying 59% of their household income according to the housing charity Shelter (http://www.bbc.co.uk/news/uk-england-london-20943576).

In April 2003, the Blair government tacitly acknowledged that wages for many were simply inadequate  to support life by introducing working tax credits. (http://www.hmrc.gov.uk/taxcredits/start/who-qualifies/workingtaxcredit/work.htm).  This had several pernicious effects. It acted as a subsidy for employers which allowed them to offer ever lower wages secure in the knowledge that the taxpayer would subsidize business by making up their inadequate wages with working tax credits.  The regulations for working tax credits also allowed people to claim them when they were working part-time.  This provided an incentive for employees to work the minimum hours,  which were as little as 16 hours for a single parent. The employer also had an incentive to employ a number of part-timers rather than full time employees because the wages of the part timers could be kept below the level  at which national insurance had to be paid .  It thus became cheaper to employ two or three part-timers rather than one full timer.

The effects of working tax credits were made worse by the Blair and Brown governments ideologically driven desire to have every woman of working age out at work. This resulted in childcare tax credits (http://www.hmrc.gov.uk/calcs/ccin.htm#1) whereby mothers were paid to leave their children in the hands of other women while they went out to work.

The benefits situation  needs fixing but the way the Coalition is going about it is unreasonable. They are not starting from where we are now and taking regard of the effects of their changes in policy on people who are already encased in the circumstances of high unemployment, low paid and often insecure jobs and ever rising rents. Instead they are using the blunt instrument of cutting benefit suddenly and seriously disrupting the lives of millions.

Housing is the main bugbear.  it makes no sense to say housing benefit will be capped if this makes continued residency in an area impossible because of rental costs way beyond their means or the £26,000 cap on benefits. The policy may well drive many people in employment out of the area in which they not only live but work causing them to become unemployed.  Even if people are unemployed forcing them to move any real  distance will have effects on those with children at school and take away the informal support mechanisms of family and friends.

Similarly, the attempt to move those in social housing out of their properties if they are deemed to be too large for those now resident there (the “bedroom tax”)  is absurd unless there is smaller social housing accommodation they can move into. If this forces social housing tenants to move a long way from where they live they will suffer the same problems that those who move because they cannot afford private rented accommodation.  If social housing tenants have to rent from private landlords that will cost more than the social housing. Such tenants on housing benefit would be more expensive for the taxpayer to support.

What should be done?

What should be done? The answer is to change the general circumstances which cause the welfare bill to be so high. This can be done by creating an economy  in which any  full time wage will at least support a person and ideally will maintain a family. This can be done by adopting these policies although Britain would need to leave the EU or get the EU to agree to change the rules governing free movement of labour, goods, capital and  services to impose  many of them):

1. Cease all further mass immigration.

2. Address the housing shortage by introducing rent controls and much stronger legal backing for secure tenure  in  private rental properties, engaging in a massive programme of social house building, restricting all future social house tenancies to those born British citizens, abolishing  Right-to-Buy, banning  buy-to-let mortgages,  banning  foreigners from buying residential properties and giving private builders an incentive to build by taxing the land they hold until they build.

3.  Place a tax on employers for every foreign worker already here they employ to discourage their employment.

4. . Remove benefits from all foreigners to encourage those already here to return home.

These policies would have short term and longer term effects. For example, rent controls  and strong tenure conditions could  be brought in very rapidly giving tenants in private property both an assurance that they could continue in their rented  property for a long time with a rent that did not suddenly rise beyond their means. Building large numbers of new properties would take several years to gain momentum but there should be a considerable increase in the housing stock within five years.

Policies such as stopping further mass immigration and  incentives  for foreign labour already here  to leave like placing a tax on  employers if they employ foreigners and removing all benefits from foreigners should tighten the labour market . This will raise wages and make employers use labour more efficiently.

A tighter labour market will produce higher wages which added to much cheaper housing will lessen the need for people to draw benefits whilst in work and the cost of housing benefit generally should reduce substantially.  That will draw most of the poison from the benefit debate.

Even as things stand, the current hysteria about benefits is unjustified in its own terms. Most of the public say that it is right that the old and the ill or disabled are looked after by state action. That is very interesting because most of the benefit bill is spent on the old, the sick, the disabled and, this is the real  tragedy, on those in employment who simply cannot live on their wages.  (http://www.guardian.co.uk/news/datablog/2013/jan/08/uk-benefit-welfare-spending#zoomed-picture). The British elite are very successfully pursuing a policy of divide and rule by setting the less well-off members of society at each other’s throats. It is both highly distasteful and unjustified. The real culprits for the mess we have now are all the politicians who have produced the situation we have now and their all too compliant media supporters, especially over the past 25 years.

Housing: to the haves shall be given….

Robert Henderson

The central plank of the 2013  UK Budget  – boosting house building and sales activity –  was both morally disgraceful and criminally reckless. The Government proposes to underwrite mortgages to the tune of 20%  of the value for both first time buyers and those with properties who are trying to move up the housing ladder and from 1st April 2013, even more recklessly,  to provide loans of 20%  of the value of  new build properties up to the  value of £600,000  for three years from April 2014.   The loans will be interest free for five years after which  an annual fee of 1.75% will be levied on the government loan, with the fee rising  annually by the retail prices index (RPI) inflation plus  1%. The loan can be paid off at any time up to and including the time when it is sold. ( http://www.hm-treasury.gov.uk/10012.htm ). The amount taxpayers will risk on the underwritten mortgages is  estimated  to be  £12bn  with the full value of the mortgages underwritten  totalling  £130bn,  while £3.5bn of taxpayers’ money will be committed to the loans.

This policy is morally disgraceful because it is yet again favouring the haves over the have-nots . It is  made doubly offensive because  it is being done at a time when the Coalition Government’s attitude towards those in social housing  is increasingly shrill  with a constant portrayal of those in social housing as being parasites on the taxpayer because they do not pay the market rent for their properties while owner occupiers  pay their way.

The reality is rather different. Social housing tenants have long received far less subsidy than owner occupiers who have been granted  massive benefits by governments since at least 1969 when Roy Jenkins introduced Mortgage Interest Relief At Source (MIRAS).  MIRAS lasted until 2000 when it was ended by Gordon Brown.  In addition to MIRAS   owner occupiers receive  or have received these benefits:

1. Right-to-Buy (RTB). The gains from RTB both from a considerably reduced purchase price (way below the market value)  and the huge rise in property values in the period 1980 to 2008.  The rules to qualify were tightened and the discounts offered were gradually reduced in the period,  but have been boosted again by the Coalition Government which announced a discount of up to £100,000 in the Budget (http://www.standard.co.uk/news/politics/budget-2013-100000-off-righttobuy-a-london-home-8540690.html).

2. Private residence tax relief. No capital gains tax is paid on a property used as a private residence when it is sold.

3. No inheritance tax (IT)  is paid on a private property when it is inherited by a spouse who is resident in this country. Regardless of who are the beneficiaries, no IT is paid on a property if it forms part of an estate worth less than the inheritance tax exemption limit (£325,000 in 2012-13). No IT is paid on a private property if the private property has been gifted to someone else more than 7 years before the death of the person making the gift.

4.  Housing benefit for the interest paid on a mortgage.  This could be received by  someone unemployed or employed,  but with an income so low they qualified for housing benefit.

5. A surprisingly large number of taxpayer funded schemes  providing substantial grants, especially for energy saving improvements (http://www.freegive.co.uk/grants.htm).

6. The lax credit policies  from the mid-1980s onwards which allowed mortgage providers to grossly inflate property  prices before the 2008 crash by granting no deposit mortgages and even mortgages up to 125% of the purchase price.  In addition, “light touch” regulation of the banks and their ilk greatly increased the money supply which also inflated  property prices. Finally,  prices were inflated further by  the permitting of  massive  immigration during  the years of the Blair  and Brown Governments which added some three million to the UK population.

7.  Since the crash of 2008 successive British governments have offered massive  direct and indirect aid to those with mortgages. The direct aid has been  such things as mortgage  payment  holidays (http://www.guardian.co.uk/politics/2008/dec/04/brown-mortgage-interest-break-repossessions),  and indirect protection, for example,  keeping Bank Rate at microscopically low levels.

Whilst all this has been going on social housing has become ever scarcer as several million social housing properties have been sold off under RTB (http://www.politics.co.uk/reference/right-to-buy) and the provision of new social housing since the mid-1980s has been meagre in the extreme.

Criminal recklessness

Morally obnoxious as the policy may be, the fact that it is criminally reckless is even more worrying.  The almost certain short term effect of this taxpayer funded largesse is that house prices will rise because there will be more money chasing scarce housing.  This will make purchase even with the helping taxpayer hand more and more difficult, especially for first time buyers who will be tempted to pay over the odds because the terms look so easy and the participating mortgage lenders will be willing to lend more in the secure knowledge that the taxpayer will either cover a substantial minority of them mortgage or provide a buffer against future negative equity because of the  significant amount of equity resented by the taxpayer funded loan.  Suppose a house is purchased for £500,000. The purchaser pays a 5% deposit and the taxpayer makes this up to a  25% deposit with a 20% equity loan to the purchaser.  This leaves the private mortgage provider to find  £375,000. Provided the property can be sold for  £375,000 the mortgage provider will lose nothing.  If it is sold for just £375,000,   25% of the original purchase price (the total deposit) will be lost. The taxpayer would lose £100,000.

The intentions of the Government – to boost house building, enable first time buyers to get on the housing ladder and loosen up the property market generally – are likely to be undermined further because  it appears Britons buying second homes and foreigners will be able to access the taxpayer funded privileges (http://www.telegraph.co.uk/news/politics/9947031/Wealthy-homeowners-could-use-state-backed-loans-to-buy-second-homes.html and http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/9952998/Foreigners-can-qualify-for-state-subsidised-mortgages.html)

The danger in the longer term is that the housing market will tank as the Irish and Spanish ones have done  and property  prices halve.  This is a significant  possibility,  because  apart from the general economic turmoil in the EU,  UK interest rates will have to rise substantially sooner or later  and this alone will suppress the market dramatically as very large numbers cannot meet their mortgage payments.   If  property prices do collapse it  will leave the taxpayer taking a severe  financial hit. Osborne is effectively betting the national farm on a recovery in the housing market.

What housing policy should the Government be pursuing?

I suggest this:

1. Use  the money they have earmarked for the underwriting of risk and the 15% deposits in new build properties up £600,000 to engage on a massive social housing building programme.

2. Put a tax on land held by property developers with planning permission while they refuse to build on the land as per the planning permission.

3. Ban Buy-to-let mortgages.

4. Introduce rent controls on private landlords. If rents were frozen for a number of years this should not impact too seriously on most private landlords, the majority of whom will either own their properties or have small mortgages on them . Even those with large mortgages should be able to survive in the low interest environment which looks as though it will continue to several years at least.  If they can pay the mortgage now they should be able to keep in paying it until interest rates rise significantly. By that time

All of those policies could be done whilst we remain within the EU. If we left the EU it would be possible to:

5. Deny all social housing to foreigners.

6. Ban foreigners from purchasing residential property.

7. Put an end to further mass immigration.

These policies will greatly increase the supply of housing in the medium term if not sooner . If even 1-4 were implemented  this would do a great deal to bring the cost of housing to a level where  those on the average wage could  afford to rent in most areas and

Governments bear the responsibility

For thirty years or more British Governments have been almost entirely responsible for the truly dismaying rise in the cost of property  both to buy and to rent  through a failure to ensure enough housing both private and social was built, by removing rent controls,  ending credit controls on mortgages,  failing to control mortgage  lending generally  and, most dramatically, by allowing mass immigration to add between three and four million people to the population in the past 15 years.

To understand exactly how inflated housing costs have become compare property prices today with what they were in 1955.  Then the average residential property price was around £2,000. Uprated for inflation the average price of properties today would be around £40,000.  (http://livinginamadhouse.wordpress.com/2010/10/24/the-vicious-poison-in-the-british-economy-is-the-outlandish-cost-of-housing/). Makes you think.  If that was the case now,  even those on half  of the average national wage (half of the present average  wage  would be about £13,000 ) would be able to purchase a property of some sort.

Housing and the Coalition’s dirty secret

Robert Henderson

There is a dirty secret which none of the mainstream parties is willing to publicly reveal: those who are owner-occupiers with mortgages are being heavily subsidised at the expense of those who live in private rented accommodation. This is being done by  the supposedly independent Monetary Policy Committee (MPC)  of the Bank of England (BoE)   keeping of British  interest rates at dangerously low levels (Bank Rate kept at half of one per cent since March 2009) while inflation is driven well above the MPC’s sole remit to keep inflation within one per cent above or below a  two per cent per annum target (http://www.bankofengland.co.uk/monetarypolicy/pdf/chancellorletter110323.pdf) by a mixture of  low interest rates and the Quantitative Easing (printing of money in effect http://www.bankofengland.co.uk/education/inflation/qe/video.htm) practised by the BoE with £200 billion put into the economy so far with another  £75 billion on the way (http://www.bankofengland.co.uk/publications/news/2011/093.htm).

Low interest rates and quantitative easing are just what the Coalition Government would have ordered had they been formally making the MPC’s decisions for them,  because the Coalition’s  focus has been on ensuring demand stays healthy to  prevent recession and promote   growth to reduce the massive and rapidly growing national debt.  As the MPC has spectacularly failed to keep within  the Committee’s   inflation remit for over two years,   with Retail Price Index (RPI ) inflation now at  5.6% and the Consumer Price Index (CPI)
inflation at 5.2% in September 2011,  (http://www.bbc.co.uk/news/business-15344297) it is not necessary to be unduly cynical to suspect  that the MPC is less than separate from
government.   This is scarcely surprising because of the way the MPC is recruited, viz: “The Bank’s Monetary Policy Committee (MPC) is made up of nine members – the Governor, the two Deputy Governors, the Bank’s Chief Economist, the Executive Director for Markets and four external members appointed directly by the Chancellor.”   (http://www.bankofengland.co.uk/monetarypolicy/overview.htm).

The effect of low interest rates and governmental pressure  on mortgage providers to not  foreclose quickly on those who default on their mortgages  has been to maintain (so far)  most people with a mortgage in their homes.   At the same time, the financial crisis has seen the  ending of easy-money mortgages  with little or no deposit and their replacement with mortgages which require a substantial deposit, commonly in the region of 20 per cent.

Because there is a general housing shortage in the UK,  the sky-high property bubble  prices have not collapsed dramatically enough to make the saving of such a deposit  practical for  most  people who are not on the housing ownership  ladder.  This has caused a  great  increase in demand for rented housing . The vast majority of that demand can only be satisfied by private rented properties because of the depredations on the social housing stock of Right-to-Buy (RTB)  and the failure to build much social housing since the 1980s.  Add in the additional  demand of the net two million immigrants  who have arrived in Britain since 1997, most of whom have gone to London and its environs,  and the result has been a massive hike in private rents since the  failure of Lehmann Brothers in 2008 fired the starting gun for the financial turmoil which still grips the world.

The private rental figures are bad for the whole country, but for London are  truly astonishing:  “FindaProperty.com  publishes a regular rental index. The typical monthly rent in London is now £2,075 compared with average net pay in Britain of £1,924 …” (http://www.thisislondon.co.uk/standard/article-24000371-renting-in-the-capital-tops-average-take-home-pay.do).

The proposed change to a so-called Universal Benefit (in reality many  benefits lumped under one heading) between 2013-2015 will have a cap on total benefits which “is
expected to be £350 a week for single person households and £500 for all others”. (http://www.thisislondon.co.uk/standard/article-24008380-130000-homes-face-rent-crisis-under-reforms.do).  That will  clearly make it impossible for people on benefits dependent on  private rented accommodation  to live in London, but the rents do much more than that. They bar people even on an above London average pay packet from living in private rented accommodation in London.  The £500 limit is equivalent to a gross pay of about  £35,000. London median  gross pay  is less than £35,000. ( Go to Office of National Statistics and search for Annual Survey of Hours and Earnings Pension Tables – 2010 Provisional Results).

The cry is increasingly heard that if people cannot afford to live in an area they have no right to do so. If you feel that way just sit and think about the consequences of such a mentality.  Large towns and cities do not run themselves. They need an army of people to service them who are on pay which would not allow them to buy a property or rent decent accommodation  in the private sector within the town or city.  That means  people doing such work who do not live in social housing have to choose between  travel ling a fair distance to work (increasingly expensive), living in indecently crowded accommodation or squatting.  It should be added that the large majority of people servicing expensive areas such as London fall into this category.   Make it impossible for people to work in expensive areas either because they cannot live there or afford the fares to commute and sooner or later things will fall apart.

Places like London are surviving at the moment because there is still a good deal of social housing there and large numbers of people of relatively modest means purchased properties before  house prices reached their  present absurdly high  levels.  But that situation will worsen steadily if the Coalition Government puts into operation their  proposal to massively raise social housing rents for new tenants  (80% of  the market rate is being mooted),  who will also have time-limited tenancies, the renewal of which will depend on things such as whether the tenant is in work and if they are,   their income remaining below a level deemed to be poor enough to warrant social housing.   (It is clear that the Coalition want to move those they consider  “unproductive” away from expensive areas  – http://www.totallymoney.com/news/index.php/2011/10/coalition-plans-to-uproot-unemployed-from-their-homes/).   There is also the likelihood that an 80% of market rent regime would make the rents too high for workers on average or below average pay in places like London and the South East.

Under the proposed new regime. the power to decide conditions will rest with the local council which  could in theory  still award lifetime tenancies and keep rents low. (http://propertydrum.briefyourmarket.com/Articles/Specialist-new-home-sales/The-end-of-council-tenancies-for-life-.aspx).  However, neither of those courses of action are likely to be followed because it is obviously not in the interest of councils to keep rents low or have tenants on long tenancies  who are very difficult to  remove.  Nor would it be logical to allow life tenancies to new tenants while adopting the policy line that a tenancy should be only for the less well off.

Bizarrely, the Coalition proposes to increase housing by reviving sales under the Right-to-Buy  (RTB), which affects council and housing association properties,  by increasing discounts  with  the money raised being used to build new “affordable housing “. This has obvious flaws.  The most obvious is that if social housing properties are sold at a heavy discount,  by definition they will not  provide sufficient funds to build equivalent properties to those sold  in the same area, because the new properties would have to be built at the  full market price.  It is also likely that a new build property would be more expensive than an existing council  or housing association property.

The next difficulty would be the acquisition of land. In many  places, especially  London,  it is unlikely that there would be  sufficient land  available on which to build replacement properties, and,  if the land had to be purchased rather than building on publicly owned land,  it will be prohibitively expensive to purchase.

To those objections can be  added the fact that even if like for like properties were built, the overall stock of social housing would be reduced because the new build properties would take time to  complete. During the building time  the social housing stock would be reduced because the property sold would be removed from the stock and no replacement added to it.

The upshot of these difficulties would be almost certainly significantly  fewer properties built than were sold and, most probably,  many properties not built in the area where the sales took place.

It is also  far from clear that  a new surge of RTB sales could be engineered. To begin with most of the desirable social housing has already been purchased through RTB . Buying flats in large blocks  on leaseholds is not an attractive proposition when the freeholder (the council or housing association) can hit you with massive  repair bills to maintain the fabric of the building and substantial service charges and ground rents.  To that barrier  can be added the outlandish property prices, especially in London. Even if the very generous discounts which used to be given for RTB were reinstated,  it might  well be that the discounted prices would still be beyond the reach of  most  social housing tenants. There is also the question of whether the proposed fixed term  tenancies will they have the RTB.   If  there is no RTB for new social housing tenants that will to a substantial  degree sabotage the plan to use RTB proceeds
to build new housing because the pool of potential purchasers will be considerably reduced over a relatively short time because there is a substantial turnover of  social housing tenancies.

If RTB is allowed for new tenancies how would this work? Would a tenant on a two year tenancy have the RTB or would they have to gain an extension of the tenancy?  If tenant’s financial circumstances improve substantially during a fixed-term tenancy, would that disqualify the tenant from RTB?

There is also the idea of providing social housing for “essential  workers” . This would be the city or town equivalent of the servants wing in a country house , with of course the threat of eviction if the person ceased to be an “essential worker”.  Entire towns and cities could become  a form of gated community, the gate being the possession of money or the lack of it, with housing being provided to the poor who serve the rich.

There have  always been parts of Britain which are more expensive than others, but the idea of whole towns or cities or even regions being beyond  the reach of not merely the poor but  people on average earnings or, in the case of London, people on double the average earnings, is something new.

London used to be noted as a place where  wealth would live cheek-by-jowl  against dramatic poverty,   Buckingham Palace a few hundred yards from Pimlico; Bloomsbury  next to the slums of Kings Cross.  The cost of housing, both rented and purchased reflected such differences.  Even 15 years ago London  (even  central  London) was  not a diabolically expensive place for property.  In 1996, The average house price in Greater London   was £84,000 (http://www.home.co.uk/guides/house_prices.htm?location=london).  In 2011, the average London price is £438,000 (http://www.houseprices.co.uk/london).  If prices had remained stable since 1996  in real terms,  the average price of a London property in 2010 would have been £123,000 (http://www.bankofengland.co.uk/education/inflation/calculator/flash/index.htm).

The Coalition shows no sign of understanding how devastating  the present housing shortage is.  What is needed is a programme of  council house building on the scale of that in the 1950s, a time when a Tory Housing minister Harold MacMillan could boast of building 300,000 homes in a year.  There are  plenty of brownfield sites in our towns and cities, much of it owned by councils.  The land which is held by private  companies, especially that with planning permission given but no building started , should be  subjected to a substantial tax every year
while it remains undeveloped.    Second  homes  and  unoccupied residential property  such be subject not to full council tax (as is already being considered by the Coalition) but council tax at one and half times that of fully occupied property. Those measures, together with a massive cut in new immigration, could save the day. Unless something radical  is done we could end up with armies of homeless on the streets in ten years. The situation is that serious.

A secure home is the most precious thing a human being can have. A society with  large numbers of people denied that will always be an unhappy and fractious one.  The present situation is simply immoral.

No 10 ‘interfered to push through £600m plan for virus superlab’

London Evening Standard
  
Mark Blunden
20 Jan 2011

Campaigners against a maximum security “superlab” in the heart of London are calling for a parliamentary inquiry claiming that there was political interference in the bidding process.

The UK Centre for Medical Research and Innovation, behind the British Library in St Pancras, will be capable of containing flu viruses, malaria, tuberculosis, cancer cells and HIV.

Residents living close to the centre are calling for an inquiry into the £600 million project after Cabinet Office emails, seen by the Standard, revealed that the previous government was keen to “make it happen” before the tendering process had closed.

They also claim Camden council failed to inform residents fully of the severity of the diseases to be tested at the 3.6 acre site and is stonewalling their questions.

Today, it can be revealed that in July 2007, Jeremy Heywood, a Cabinet Office civil servant, emailed officials, including the Department of Health and the Chief Scientific Officer, stating: “The PM (Gordon Brown) is very keen to make sure the government departments are properly co-ordinated on this project – and that if there is a consensus that this is indeed an exciting project, then we do what we can to make it happen.”

The email, released under the Freedom of Information Act, was sent the week before the first bids were due in and six weeks before the shortlist was finalised.

Other documents reveal that among 27 competing proposals for the site were a multi-faith centre and hundreds of affordable homes in a borough with 18,000 people on its housing waiting list. Both of these proposals complied with Camden’s brief for the site, but it is alleged the superlab initially did not.

Resident Robert Henderson, a retired civil servant, 63, said: “Camden went against their own original plan for a mixed-use development.

“There’s been political interference with the bidding process as well as the grave security issues. There should be a parliamentary inquiry because £250 million of public money is at stake.”

Read more at

http://www.thisislondon.co.uk/standard/article-23915802-no-10-interfered-to-push-through-pound-600m-plan-for-virus-superlab.do

 
Letter sent to Evening Standard 21 Jan 2011
 
Sir,
 
I can expand upon Mark Blunden’s report “No 10 ‘interfered to push through £600m plan for virus superlab’” (20 Jan) .  
I am the person who obtained the evidence of Brown’s interference using the FOIA. I have a mass of documents showing that Brown was pressing for the sale to UKCMRI before the formal  bidding process had ended and afterwards before a formal decision was made. Here is an example of the documents: 

  Sent: 27 November 2007 13:09

To: HOLGATE NICHOLAS

Cc: _[40]_____________

Subject: RESTRICTED – Land to the North

 Hi Nicholas,

 Jonathan spoke to Jeremy Heywood this morning. Jeremy said he needed the bid to be agreed by next Wednesday – 5 Dec (or Thursday latest) as PM wanted to get MRC in then (or possible public announcement.

Jonathan explained that there are two issues from our point of view: .No revised formal offer has been received by DCMS .HMT are not being helpful of recycling returns – without an improved offer from HMT JS said it would he v hard to justify.

JR said he thought the offer was sent to us yesterday – have checked but nothing in JSs post or email – JH will chase. JH also said he would go back to HMT to see what  more they can do, but that ultimately PM may have to arbitrate.

 Cheers

 Private Secretary  to Jonathan StephensDepartment for (Culture, Media and Sport 2-4 Cockpur Street, London SWlY) 

  This was a public bidding process. The decision was supposed to rest with the the Minister heading the DCMS. Brown as Prime Minister should have played no role in the decision. There were 28 bidders of whom 9 were placed on the short list. It would be interesting to know how they feel about the conduct of the bid.

Yours sincerely,

Robert Henderson

See also

http://ukcmri.wordpress.com/

Do we really want to live forever?

Research into ageing is progressing to the point where a substantial increase in  the human lifespan may become reality within a generation or two. In November 2010  Ian Sample of the Guardian reported   http://www.guardian.co.uk/science/2010/nov/28/scientists-reverse-ageing-mice-humans#history-link-box   ) on research at the John Hopkins University of Baltimore which has rejuvenated  mice

“What we saw in these animals was not a slowing down or stabilisation of the ageing process. We saw a dramatic reversal – and that was unexpected,” said Ronald DePinho, who led the study, which was published in the journal Nature.

The question which humans need to consider seriously now rather than later are  the effects , both on the individual and on society at large, of substantially increased lifespan.

Greatly increased human lifespans are potentially profoundly dangerous because they will detach humans from the lifespan evolution has prepared them for.  it is a mistake to imagine that few people live to be old until recently, the very low average life expectancies in the past and the third world today were and are primarily due to infant deaths before the age of 5 with very heavy mortality in the first year.  If you got past 5 you had a good chance of reaching adulthood and if you reached adulthood a sporting chance of living  beyond 6o, with significant numbers living into what even today we would consider extreme old age.  In short,. There have always been people living to the outer limits of the natural human  life span so that any substantial increase in longevity will mean entering into virgin territory. 

The greatest fully-authenticated age to which any human has lived is 122 years 164 days by Madam Jeanne Louise Calment of France. She was born on February 21, 1875 and died on August 4, 1997. However, few humans have ever got past 110. More and more people are living to be 100 in the developed world but the vast majority of those die not long after reaching their century.  The average  lifespan of those not struck down early by illness, accident or  violence is  probably between 80-90. 

Suppose  humans begin to live until the average lifespan is  160, about double the average of those living in developed countries now.  That will mean some will probably live to 200+.  Few would welcome a century or more of extreme old age with all its natural physical privations.  But suppose  that scientific advances slowed the ageing process to half it is now , with a man of 80 being the equivalent physically of a man of 40 today.  Surely that would remove the obstacle to enjoying twice our current lifespan?  It would probably not do so.

The person might be physically the same at 80 as they were previously at 40,  but the psychological and sociological place they would be in would be completely different. Imagine having to live with the same partner for 120 years or more. Think of having to deal with your siblings for  a century and a half.  Consider the prospect of having to occupy yourself, with work or otherwise, for 120—140 years, with many decades of waiting for advancement.   Some would  adjust to it, but I doubt whether most would be able to beat off ennui . In this context it is worth thinking of the large number of people, mainly men, who die early in their retirement.

Of course, in all probability expanded life expectancy would not mean a life where the ageing process had been  slowed proportionately to the increase in lifespan, but even if  it  had been, an  average lifespan of  160 would mean  twice as long suffering the physical and mental inhibitions of old age.  Nor is it probable that all illnesses could be prevented or cured or damage caused by accidents or wilful violence repaired to restore the damaged individual to full health and capability. Imagine suffering from arthritis not for twenty years but forty years or having to care for someone suffering from dementia  for  half a century.  The toll on individuals and the taxpayer would be vast.

To those problems would be the prime sociological one of how and when to breed. Even if puberty was delayed in the same way general agein and a person was likely to be 50 before they bred rather than 25, that would still leave 110+ years to know their children. And who would want to have a childhood stretching out to 50 years?

Then there would be the problems of vast population inflation even if breeding rates remained as they are today because twice the longevity equals twice the population and the subsequent pressure on resources.

If age was extended beyond  160 all these problems would multiply.

There would be the very real  danger of the rejuvenation treatment being restricted to the rich or some other form of an elite. This would in effect create two species of homo sapiens. It would also provoke, sooner or later, great social unrest.

Could man ever be immortal even in principle? ? To achieve  that would require the ending of all mortal disease and the repair of all mortal  injury, but even then death from accident, war or murder would happen sooner or later.  Perhaps it will become possible to “download” a personality with all its memories and then “up load ” the personality to an artificial body or more probably a clone of the original, but what would that be,  you or something else altogether?

The rich have never had it so good

Nutory Boy’s absurdly titled “enterprise czar”, Lord Young of Graffham, managed to put not one but two feet inextricably in the political mire with his “people have never had it so good”  fantasy vouchsafed to a Telegraph journalist to the sounds of cutlery clacking and glasses clinking in what was doubtless a very decent Westminster watering hole.

Young based his extraordinary claim on the idea that those with mortgages were enjoying a bonanza because of  exceptionally low interest rates. The first hole in his proposition is that one third of British residents live in rented accommodation  (67.9pc of all households, down from 70.9pc in 2003 either own a house outright or have a mortgage –  http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/7299866/Rental-figures-soar-as-home-owners-decrease.html) .That means around 7 million households have not benefitted from low mortgage re-payments.

The second hole is that  of the 14.6 million owner-occupiers a majority will either own their property outright or have modest mortgages and, consequently,  will  have gained little  from low mortgage repayments http://england.shelter.org.uk/housing_issues/Home_ownership_issues).

The third hole is the fact that only those with tracker mortgages – a minority of a minority – will have madereally substantial  gains.

The fourth hole comes from the decline in property values since 2007, falls  which have probably wiped out even the gains made by those with large tracker mortgages.  

The fifth hole appears because by keeping interest rates down and printing £180 billion of money through quantitative easing  the government has ensured that inflation has remained high.  This means the savings made on reduced mortgage repayments have rapidly lost their value and the drop in house values is even worse than the face value figure shows.  (If a house was worth £200,000 in 2007 and is now valued at £160,000 but inflation since 2007 has reduced the value of the pound by 10% then that 10% has to be taken of the new face valuation. Inflation eats away at the mortgage repayment cost, but the gain in present circumstances is  much less than the loss from  asset depreciation ).

Buying a property has become impossible for  the vast majority of first time buyers as the supply of mortgages has shrunk and  no deposit mortgages have been replaced by demands for deposits of 15-25%.   For those who have not been able to get on the property ladder the position is increasing bleak as the pressure on rented accommodation becomes ever greater as more and more require it.  Social housing cannot be got for love nor money in most parts of the country and private rental property is expensive and getting more so. (A report on 17 November 2011 found that renting a property was more expensive than  paying the average mortgage in 80% of British towns. http://www.telegraph.co.uk/finance/personalfinance/8140384/Renting-a-home-is-more-expensive-than-buying-one.html).

The dirty secret of the housing  slump is that those in rented accommodation who have been forced by the government to subsidize those with property. By keeping interest rates low and introducing measures designed to encourage mortgage providers not to re-possess at the first opportunity,  owner-occupiers, although they have seen the value of their properties fall, have been protected from much greater falls in property values (the Republic of Ireland has seen property prices halve) and many have retained their properties incircumstancs which would have  seen them repossessed in earlier times. Not only that, had interest rates been set at a level to keep inflation under control, very large numbers of property owners would have lost their homes because an increase of a few per cent  in their  mortage rate would have pushed them over the financial cliff. That of course would have depressed property values much further as large numbers of properties came onto the market.

On the income side, unemployment has soared to around 2,500,000 officially (and is probably much higher) and will probably rise substantially when the 100,000 public sector jobs go. Those in employment have suffered short time working and wage freezes which mean in effect significant  wage reductions as inflation continues.  (The number of part-time workers  has risen to record numbers and the headline employment figures are fudged because they do not distinguish between full and part time workers). At the same time the government has changed the inflation yardstick by which  benefits and publuic sector pensions are uprated from the Retail Price Index (which includes housing costs) to the Consumer Price Index (which excludes housing costs). The CPI being normally significantly below that of the RPI, there is effectively a  loss in the future. This change will be followed by private pension funds.

Bank Rate at half a per cent has meant minimal returns for savers, which amounts to a loss because inflation exceeds the interest.  The cost of living for those on fixed incomes such as pensioners  has risen substantially above the official  inflation figures because people  on small incomes spend their income on a much narrower range of goods and services such as food, housing, clothes and heating than do the better off. Those essentials have risen more rapidly than the general price indices in the past few years.  

In the future people,  know for the next few years at best,  they are facing reduced pensions, a higher state retirement age, university education priced beyond the means of many, reduced wages, reduced benefits, reduced public services, higher rents, higher mortgages  and continuing uncertainty about their jobs.  There is also the looming problem of the gigantic public debt already built up and the seemingly unending problems with the banks both at home and abroad.  It is probable that  either taxes will have to be raised even further  or public services cut even deeper. It is also by no means certain that the recession is over and a double dip will not occur or the EU be sent into turmoil by the collapse of the Euro.

Those are the bare materials bones of our economic condition.  What they do not tell you is the mental anguish which comes from losing your job or fearing you will lose it; having to go onto short time working; not having a secure home in which to bring up your children.  People like Young, who comes from a comfortable middleclass  home, simply have no conception of such a plight. That is what makes his comments so obnoxious. He put his first foot in the mire by being factually wrong; the second foot followed as he adopted not only words but  a manner which made clear that he thinks those who complain are merely the rotten apples of society. This he did with his telling comments about people who thought the taxpayer owed them a living, this from a man who has never known what it is to be poor.

The truth is that, as with the Great Depression,  the only people who have never had it so good have been the rich, for their cost of living has reduced as asset prices drop and wages fall as people get desperate for work.

The “Taxing the rich produces little money” lie

 A favourite elite mantra is  that “taxing the rich brings in little money”.  Let’s have a look at that claim. Research by CoreData Research UK (http://www.burning-pants.com/2010/10/im-alright-jack/) published in September 2010 suggest s that   a minute  1.1% of  UK households  have combined wealth of well over a trillion pounds.   

The research  concludes that there are “284,317 individuals/households  in the UK with more than £1 million in net assets (excluding an individual’s/family’s primary place of residence)” and their total wealth,  not  including main residences,  is put at a cool £1.28 trillion.  To put that in context ,  2010  UK GDP is calculated by HM Treasury  at £1,474 trillion. If the value of main residences was included the wealth of the millionaires would probably exceed total UK GDP as it is reasonable to assume an average of £1 million per  property.  

The official government debt figures as at 2010 are: 

“Public sector net debt (excluding financial interventions) was £842.9 billion (equivalent to 57.2 per cent of GDP) at the end of September 2010. This compares to £687.5 billion (49.0 per cent of GDP) as at the end of September 2009.

“The unadjusted measure of public sector net debt (including interventions), expressed as a percentage of gross domestic product (GDP), was 64.6 per cent at the end of September 2010 compared with 58.5 per cent at end of September 2009. Net debt was £952.0 billion at the end of September compared with £821.5 billion a year earlier.” http://www.statistics.gov.uk/cci/nugget.asp?id=206

(Those figures give an idea of the frighteningly rapid  increase in British public debt.)

If a ten per cent on their accumulated wealth was levied,  it would produce in the region of  £130 billion (or £150 billion if the value of main residences was  included ).  Tax their wealth (excluding primary  residences)  at 70% and it would clear the official current UK national debt (excluding financial intervention such as bailing out the banks)  and if the primary residences  were included, such a tax would clear the debt including bailing out the banks and their ilk.

Of course making paper calculations is one thing, collecting the tax quite  another.  The rich can generally work their way around taxes by using tax avoidance experts or engaging in evasion by moving money abroad. Nonetheless, that is largely due to the nature of the taxes they avoid and evade and the often complicit behaviour of British politicians and Her Majesty’s Customs and Revenue (HMRC).

 In a country such as Britain, all personal taxes from income tax to capital gains are so surrounded by exceptions ranging from allowing people to take remuneration as capital gains instead of income to outright surrender by HMRC whereby the truly rich come to an ad hoc agreement with the British tax authorities which essentially comes down to what the rich individual is willing to pay. (The Telegraph – 9 11 2010 – reports that there are more than UK 1,000 tax allowances  -  http://www.telegraph.co.uk/news/newstopics/politics/conservative/georgeosborne/8118719/George-Osborne-set-to-close-tax-loopholes.html).

What is needed is a tax  which has no exceptions and which can be levied on assets which are not easily portable.  A wealth tax with no loopholes  is the best bet.  Easy to understand and as it is targeted at the rich,  it has the immense political advantage of avoiding the usual problem associated with increased taxes, namely,  significant effects on  the lives of large numbers of people .  Hence, no large number of disgruntled voters at the next election.

 It also has the advantage of being a tax not levied by many  governments in the developed world. This  would in principle make it much easier to levy on assets outside of Britain. There are many reciprocal arrangements between Britain and other developed economies to prevent double taxation, that is, to prevent tax being taken on the same liability in two different jurisdictions.  If the other jurisdictions do not have a wealth tax, then there would be no clash of taxation and Britain could levy a wealth tax without disrupting the present  double taxation agreements. A wealth tax being a wholly  new tax would also could also be outside  the present  taxation exemptions for the  non-domiciled, that is, those with the right to reside in Britain but who live abroad for most of the year and nominate their domicile as somewhere other than Britain.  

There would also be various measures that a British government could take that would at least apply to assets held outside of the EU and to Britons living outside the EU. (The position within the EU is unclear, but I suspect that the European Court of Justice or the European Court of Human Rights would come into play to adjudicate on whether levying tax on assets within EU  countries other than the UK  was legal. If  Britain left the EU, the problem, of course,  would dissolve).  

If Britain had regained her sovereignty by leaving the EU,  it would be possible to do such things as impose criminal sanctions on those who placed assets outside of Britain and failed to pay a wealth tax or  make British citizenship dependent on the payment of the wealth tax. The latter would  catch those who went abroad with their assets.

 At worst , the British government  would be able to levy money on assets held  in this country , which would include at least a substantial property, something that could not be rapidly  converted into cash and even if a property was sold the tax liability would remain. Indeed, the tax liability could be attached to the property so that even if  it was sold,  the tax would be liable from any purchaser.  If foreign property purchases

But there are good reasons for believing that much more could be done. It is no small matter to uproot a  family and take them to a foreign country, a particular difficulty if you have children of school-age or dependants such as aged relatives or relatives who are seriously disabled.  A spouse or partner may not wish to leave the country;  children may play merry hell at the idea of leaving everything they know or the disability of a dependant may be of a nature which precludes moving either because of the demands of the condition or because would-be receiving countries will not allow the disabled person to settle there.  These considerations could apply to both Britons and foreigners who have been in the country for a substantial period of time.  

More generally, there is the problem for those raised in Britain  of having, in effect,  to make the choice of a change of nationality for their children. This is a very emotive issue.  The Pilgrim Fathers sailed  for America because they had left England for Holland because of  religious persecution and after several years began to fear  their children would  become Dutch. That decided them to leave Europe for the New World.  Parents generally want their children to be part of the world they have known, to replicate their experience.

Doubtless if a wealth tax was announced in Britain there would be a tendency for the rich to say they would leave the country for friendlier fiscal climes.  Many of the  uber rich would probably   leave the country in many instances.  However, that would not be the position of the majority of people, let us say those with  capital in the £1-5 million range. It is one thing to say you will go an live in Germany, France, Switzerland or the USA if you are in the billionaire class. It is quite another when you have only a few million to play with, especially  if you choose a country where free at the point of use services such as education and healthcare are not available or if available nothing like as comprehensive as those provided by Britain.

The objection would be raised that this would drive the rich abroad and this would mean a great loss to Britain . There are two responses to that.  First, as a proportion of their income,  the rich pay little direct tax in Britain and their accumulated wealth suffers no regular deduction. Second, their  accumulation of capital slows the rate of circulation of money because  the rich as a class, contrary to popular myth, do not propel economies forward by lavish spending. Take a million pounds and give £1,000 each to a thousand of the poorest people and they will rapidly put the money back into circulation by spending it on a wide variety of basic goods and services. Give a millionaire a million pounds and most probably most of the money will simply be invested in one or two bulk investments. Of course, the millionaire’s million would l eventually filter through to the general economy where it will be distributed more widely,  but the rate at which it reaches the wider economy will be much slower than the million pounds given to the thousand of the poorest.  As consumer consumption is, for good or ill, the prime driver of  our economy, this is not a small consideration.  The rich also inflate asset prices,  most damagingly, those of property.

Would a wealth tax cause a great upheaval? Louise XIV’s minister Colbert  famously said “The art of taxation consists in so plucking the goose as to get the most feathers with the least hissing.”  Suppose the tax was a one off charge of 5 per cent followed by an annual  1 per cent a year . Would that be likely to cause a mass outflow of the rich?  There is no reason to believe it would. There are many great advantages to living in an  advanced and sophisticated country such as Britain and  developed countries which have used a wealth tax have not experienced a mass exodus of the wealthy. What I have proposed is a tax designed not to frighten the millionaire horses and that alone would stop sudden and massive asset depreciation as there would be no need for a fire sale. The rate I suggested for a yearly tax is well within the range of wealth taxes levied by first world countries without catastrophe occuring.

Disagreement  with the idea of a wealth tax may be made  on ideological grounds,  but  not on the ground that it would not raise a great deal of  revenue.

Nailing the “We’re all in this together” lie

Amongst the many obnoxious lies put about by the coalition is the claim that “We’re all in this together”,  which is embellished by their other parrot cry  of “the rich are being hit harder than the poor”.  This is obvious nonsense because the poorer you are, the less discretionary spending you have.  

Let’s take an example. Compare the position of  a banker with an income of £2 million a year against a hospital porter earning £15,000.  Assume they are both single.  If the banker finds his tax bill rises from 40% to 50% tax , he will still take home around £1 million. It will make no meaningful difference to the way he lives.  If the porter finds his tax bill increased by 5% he will lose around £500 taking into account his personal tax allowance.  That would have a significant effect on his life.

The message is simple: the richer you are, the less you will be affected; the poorer you are, the more you will be affected.

The coalition’s behaviour is all the more obnoxious because of the background of its leaders.  These are men and women who are at best genuinely rich and at worst comfortably off. In the case of the three most dominant players – Cameron (NuTory Boy); Osborne (OldTory Boy) and Clegg  (leader of the Party for Adolescents) – all have backgrounds which have handed them the lives of rich men on a plate through the accident of birth.  They are also firmly in the mould of modern professional politicians, being able between the three of them to muster a meagre 10  years of employment outside of politics, and that is stretching it.

Cameron was born into a family which has extensive connections with the financial world, his father being a senior partner at the stockbrokers Panmure Gordon. His great-great grandfather Emile Levita, a German-Jewish financier who obtained British citizenship in 1871, was the director of the Chartered Bank of India, Australia and China. Cameron’s great-great grandmother, was a descendant of the wealthy Danish Jewish Rée family.

Educated at Eton and Oxford, he  Joined the Conservative Research Department straight after Oxford.  In 1994 he left to become Director of  Corporate Affairs at Carlton Communications, a media company which won the ITV franchise for weekday TV.  He left Carlton in 2001 and was elected an MP in that year.  The journalist Simon Heffer describes his seven years with Carlton as Cameron being employed as “a PR spiv”.   It does seem rather odd that a man without any background in the media should have been appointed to a senior media post at the age of 28. Perhaps this was a case of not what you know but who you know.

Osborne comes from the  an Anglo-Irish family which was  part of the old Ascendency in Ireland. He is heir to a baronetcy. His father co-founded the fabric and wallpaper firm   Osborne & Little He was educated at St Paul’s School and Oxford.   Coming down from Oxford in 1994 he joined Conservative Research Department and remained employed by the Tory Party until his election in 2001.

Clegg’s  father is   Nicholas Clegg,  chairman of United Trust Bank. He has various Ukrainian, Russian and German strains in his not too distant ancestry. His wife is Spanish.  Clegg  was educated at Westminster School, Cambridge,  the University of Minnesota and the College of Europe in Bruges.  Something of a professional student. He spent a gap year as a ski instructor, had a summer working as a junior in an Helsinki bank  and had some short lived work in the media both at home and abroad. In reality, his working career, if it can be called that, did not start until he was 27 when he obtained a post with the  European Commission. He became an MEP in 1999,  which lasted until 2004,  and an MP in 2005 between leaving the European Parliament and becoming an MP, he became a partner of a political lobbying firm, GPlus.

As can be seen, these are people who will never have known any anxiety about where the next pounds was coming from; never had to fret over putting a roof over their family’s heads; never known any insecurity about the future. Yet now they dare to inflict upon those who do know such fears a disproportionate burden of greater poverty, poverty resulting from the reckless incompetence of politicians in allowing bankers and their ilk to behave as the chose and the unrestrained selfishness of the bankers and their ilk who became caricatures of the rootless capitalist. It is also a savage irony that these creatures should bleat on about the wonders of private enterprise when they have so little experience of it.

The massive void between the likes of these people and the public can be seen in the decision to increase the foreign Aid budget by 40% at a time when so much has been cut which will affect the people they are supposed to represent, namely, the British. The Aid budget will soon exceed £9 billion a year.  That £9 billion alone would have funded the cuts in child benefit and provided the money to engage in what is sorely needed, a massive programme of council house building.

The vicious poison in the British economy is the outlandish cost of housing

The price of housing, both to purchase and rent, is severely distorting British society. The absurd cost of property now – around £165,000 on average and considerably more in areas such as  Central London where a studio flat costs  upwards of £200,000 – makes it impossible for the large majority of people to get on the housing ladder which in turn inflates rents. The lack of housing scandal, for that it what it is, poisons the lives of ever increasing numbers of people in Britain.  The fault lies at the feet of reckless politicians who allowed the incontinent housing boom, failed  to build adequate  social housing for 30 years and  permitted  mass immigration.

Things used to be very different. In 1955, a time when there was  still a shortage of housing after the war,  the average price of a UK  property was £2,000 (1) , which adjusted for inflation is £39118 in today’s money  (2 ). The average weekly wage  was £10 17s 5d  (3),  worth £ 212  in 2010 (2).  This meant that someone on average earnings in 1955 could purchase the average priced property  for less than four times yearly earnings.

Today  the average wage is approximately £25,500 having dropped from £28,000 in the first six month so 2010 (4) , With the average price at £165,000, the average earner needs more than six and a half time annual earnings to purchase the average property.   In fact, the would-be purchaser today is even worse off because the taxation of  the average wage now is more severe than it was in 1955.

To the problem of obtaining a mortgage today  is added the need for much increased deposits  since the economic crisis became full blown in 2008 after the collapse of Lehman Bros. To get property suitable for raising a family in most parts of the UK would cost in the region of £200,000. Even on an income of £50,000 a couple would struggle to find the now commonly required 15-25% deposit for such a property.

As for the large majority earning around the average income or below , a property purchase is out of the question. In places such as London even those on £50k would be priced out of the market  because a studio flat can cost £250-300k. The sad truth is that most people who have not already got on the housing ladder are unlikely to ever get on it as things stand. Instead they will have to pay extortionate rents with precious little security of tenure.

Imagine how easy it would be to live in Britain now  if housing was in real terms as cheap now as it was in 1955.  Someone on less than half average earnings would be able to buy a starter home. The private rental sector would fall considerably  both  because much of the cost of renting comes from the capital value of the house and the demand for rented housing would be much reduced.

The cost of housing is striking at the heath of society in the most fundamental  way: it is preventing people from  starting a family viz.:

“The findings suggested 18 per cent of 18 to 44 year olds, equivalent to 2.4 million people, are actively putting off having children because of high housing costs. This rises to 24 per cent among 18-34 year olds. One in five 18-44 year olds have waited for as long as six years to start a family, while 37 per cent expect housing costs to continue to delay their plans for another four years, according to the survey by the charity Shelter.” Two million Britons delay having a family due to high housing costs – Myra Butterworth : Daily Telegraph 18 Jan 2010)

This is unsurprising,  for how can a young couple today who cannot afford to buy a property – the vast majority – be expected to have any sort of settled family life when they cannot   buy , social housing is scarce and private rented property has little security of tenure..

The coalition government has just made a bad situation worse. In the 2010 spending review it announced that new tenants for social housing would have to (1) pay 80% of the market rent – which would make it impossible for large parts of the population to live in places such as London – and (2) not have security of tenure for life. (There  is policy creep on these things and it is odds on that once the principle is established, part of all of the new regime  will be extended to existing tenants.)

It is important to understand that it isn’t only those who have purchased a property or who own it outright who are effected. If only a fifth of those struggling to pay their mortgages lose their homes that will be hundreds of thousands of people in need of rented accommodation on top of the hundreds of thousands who are already on council and Housing Association waiting lists.  Such an influx will not only increase competition for social housing,  it will push up private rents. The other major effect of reducing house prices will be fewer and fewer new build houses.

We are rapidly returning to the housing shortages of the post-war decade. Then a massive programme of council housing was followed by first  Labour and then the Tories. The same is needed now together with action to force developers to build on land they hold or the land to be subject to compulsory purchase at a price for the land without planning permission.   The following is also needed:

1. The end of the Right To Buy

2. The end of buy-to-let mortgages

3. The re-imposition of formal controls on mortgage lending to ensure there is not another housing bubble – see appendix.

4. A restriction of social housing to those born British citizens.   It is indefensible for foreigners to be given housing before those born and bred here have their needs satisfied.

Of those suggestions all  but the last are still within the remit of Westminster.  Britain can stop immigrants from outside taking social housing , but as was shown by the response to Gordon Brown’s “Social housing for local people” in his last months in number 10, such preference would fall foul of both British and European law; British law because of the requirements  of our equality legislation  and the obligation on local councils to house vulnerable people in need, especially those with dependent  children, and European law because any person legitimately resident in the EU has the right to move to any part of the EU and receive equivalent treatment in terms of social provision to the citizens of the receiving state. It is also probable that the Human Rights Act would come into play, most probably with the clause relating to the right to enjoy a private life.  Britain would have to either leave the EU or force a change in EU law to stop EU residents from  outside the UK taking social housing.

The problem of immigrants taking social housing is significant. The Equality and Human Rights  Commission  produced a report in 1989 which showed immigrants in approximately  10 per cent of social housing (5).  Even with the coalition government’s proposals for new tenants,  t his  is likely to increase substantially   as those who flooded into the UK when the new entrant countries such as Poland joined will soon begin to qualify for social housing.

The cruel truth is that the prudent have been subsidising the imprudent since the beginning of  this crash. Those without mortgages, both those who own outright and those who rent, are paying through depressed wages, lower benefits, reduced public services and the long term debt caused by the excesses of the past 12 years. Those who are being subsidised are the people who took out massive mortgages, often by the straightforward fraud of exaggerating their incomes, and/or ran up vast debts by drawing on the equity in their homes. The heaviest losers are those who have never owned a house outright or had a mortgage. They have gained nothing during the property boom and have had every rising rents inflicted upon them as property prices inflated unconscionably.

(1)  http://www.wwwk.co.uk/culture/housing/index.htm/

(2) http://www.bankofengland.co.uk/education/inflation/calculator/flash/index.htm/

(3) http://www.thisismoney.co.uk/news/article.html?in_article_id=486323&in_page_id=2/

(4) (http://www.dailymail.co.uk/news/article-1293121/Average-annual-salary-drops-2-600-just-months.html

Appendix

A sane policy on mortgage granting would require these simple controls:

1. No mortgage of more than 3 times earnings for an individual or 4 and half times earnings for a couple.

2. Minimum of 15% deposit.

That was roughly the position until Thatcher removed the controls on lending in the 1980s.

The end of self certificated incomes for mortgages is welcome but it needs to be done efficiently. It is no good looking at just pay slips for those under PAYE or accounts for the self employed because these are potentially under the control of the mortgage seeker through the forging of convincing payslips (easily done with modern computers and printers) or a collusion between the mortgage seeker and a crooked accountant.  Moreover, an honest accountant is dependent on what the self-employed give them by way of accounts.

For the vast majority (those under PAYE) the check  should be done using not only current payslips,  but the previous year’s P60 (this is HMRC’s statement of earnings and deductions for those under schedule E (effectively those under PAYE). In addition, bank statements and credit card statements should be sought to verify claims of indebtedness or the lack of it. The mortgage provider also has many opportunities via Internet searches in including most pertinently credit rating agencies and county court judgements. I would not mind betting these searches are not made in the vast majority of cases.  What is not needed is a minute audit of a person’s spending habits.

For the self employed the position is more complex because the best they can ostensibly do is provide accounts compiled by a qualified accountant.  Here they often find they have shot themselves in the foot because in  preparing accounts for tax purposes real incomes are almost invariably  understated if the person is earning above the tax threshold. Thus they evade tax but find the mortgage providers taking the tax income figure as the earnings even though it is much below the real income. However, provision of bank and credit statements could go some way to mitigating the problem by providing evidence of the real income. In addition, things such as credit rating checks and county court judgement searches would be most important because a self-employed person is more likely to end up with county court judgements against them. They are also much more likely to have been made bankrupt.

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