Wednesday, 18 August 2010

Winter Fuel Allowance - EUReferendum nonsense

As EUReferendum makes it too difficult to post comments (what are they afraid of?), I cut and pasted the nonsense on Winter Fuel Payments in italics below.

The point is that everyone gets the Winter Fuel Allowance - the qualifying factor is not need, but age. So rich OAPs get, OAPs whose rent includes heating costs get it and OAPs who spend the winter in Spain get it. It's a straight supplement to the Old Age Pension.

The government's energy policy may be foolish (fuelish?) - although I would suggest it's too early to say. But it's got nothing to do with payments to old people.

Incidentally, they use the stupid socialistic phrase "fuel poverty" as if it was something special. Presumably, if you are poor, you are also "food poor", "clothing poor" and "package holiday poor". If you are on a low income, you have to choose what you spend it on more carefully than if you are on a high one. It would be perfectly rational to decide to spend less on keeping a house warm in favour of spending more on something else. That is what being poor means. The winter fuel payments are a way of making these choices less keenly felt, and are in many ways (non-means testing for instance) a good thing.

Anyway, here's the nonsense:

There would be some very great sense in tightening the qualifying criteria for winter fuel payments, as this administration is considering doing, if at the same time efforts were being made to keep fuel costs down.

However, it should be remembered that the core policy of the Cleggerons – as it was with the previous administration – is to increase the costs of home heating, so to promote fuel economy and thereby reduce carbon dioxide emissions.

The winter fuel payments, in this context, are a mechanism for mitigating the inevitable effects of increased fuel poverty and the concomitant increase in the death rate amongst the elderly, who are particularly vulnerable to hypothermia.

Not least of the problem here though is that the Cleggerons have such a limited grasp of the effects of their own policies. They are unable to link the effects of two diverse actions.

But then, such an activity would require them entertaining two separate ideas in their foetid little minds at the same time – something entirely beyond the capability of our current rulers. Unfortunately for the soon to die prematurely, the consequences of the linkage are going to be all too apparent.

Tuesday, 17 August 2010


Capitalism is good at creating wealth, but doesn't share it out in ways 'we' approve of.

Housing is an area in which this truism is at its most obvious. And what a muddle we have made of dealing with the result.

  1. Poor maligned capitalism hasn't even been allowed to do what it might to solve the problem. Planning restrictions of one sort or another have reduced the supply of new private dwellings to a pitiful level. The fabled years of Macmillan's time at the Ministry of Housing are often mentioned in this context - some 300,000 houses a year at the peak. Even more relevant to my way of thinking are the 1920s and 30s, with developers still able to build on what is now the Green Belt, when almost entirely unassisted (or impeded) by the government many thousands of perfectly serviceable dwellings were built and useful employment created to boot. Now, I suppose it's not a goer to concrete over the South-East, but stimulating private building seems a total no-brainer to me. It won't cost the Treasury a bean, indeed it will boost tax receipts, and local authorities will gain a useful income stream too. I gather that the coalition has already put a modest incentive in place for local authorities to grant more planning permissions - the more the merrier, I say. And bvgger the nimbies.
  2. Various charitable organisations (Peabody Trust, Housing Associations etc. etc.) have come into existence to house the poor. The problem with these, historically speaking at any rate, is that even non-profit landlords had to charge relatively high rents to cover the cost of land, building and maintenance, which in turn shows why housing is such an intractable issue: it is inherently expensive to provide 'decent' housing in a country like Britain with its inclement weather and high expectations. Moreover, because their margins were low, these organisations could not afford to be particularly tolerant of non-payers (pre housing benefit). Consequently, they tended to house the respectable working classes i.e. not the indigent. No doubt the descendants of the original tenants are now mainly owner occupiers (if they haven't emigrated to Australia).
  3. Thanks to the gap in market left by 1. and 2., and in the absence of housing benefit, the municipal socialists stepped in and created council housing. Key features were that often remarkably high quality housing was offered at lower prices to the working classes and that rent arrears were more often tolerated. Security of tenure was generally good. Houses could often be passed down the family. Since its creation, however, council housing has become a little over-ripe. For one thing, it ceased, often, to be high quality and became associated with cheaply built and indeed horrid high-rises. Increasingly, it was allocated on the basis of need rather than association with a particular area and, however objectively justifiable such a change in policy was, this meant that the social mix deteriorated to the extent that people would actively avoid much council accommodation if possible.
  4. The private rented sector has been through various travails, which included a period in which you had to be mad to be a private landlord because you might as well just hand over your property to the tenant. This was largely dealt with by the Thatcher/Major governments and left alone by New Labour. It seems to work (at a high level anyway - I understand there are lots of objections in the detail).
  5. Housing benefit was introduced as a way of ensuring people didn't lose their homes when they lost their jobs. Predictably, now it ensures they never work again. Because housing is by far and away most people's single biggest cost (see 2. above), any benefit which covers it indefinitely is going to be mighty hard to get off. Moreover, it covers people in private rented, owner occupied and social housing.
  6. As a consequence, we now have a total muddle, in which people who could afford to house themselves live in subsidised social housing, while people who will never be able to afford it live in expensive property (the proverbial unemployed Somali bus-conductor). The Housing Benefit bill has gone through the roof.

What is to be done? People must be given incentives to behave rationally with property. What does this boil down to?

  1. Free developers to the maximum possible extent. Personally, I favour something close to a free for all, but if that's too rich for the public then some system should be found to incentivise locals to favour development. Cash payments by developers (via auctions for planning permission?) would be the most transparent method.
  2. The British obsession with occupying as much housing as possible should be curbed. There are, I suggest, two or three ways of doing this: i) CGT on all residential property (at the moment it only applies to privately rented property and second properties). But I hate CGT and think it's a deeply flawed tax for all sorts of other reasons, which I may go into at some point. ii) raise Council Tax and increase the number of bands so that it hits expensive properties harder. I think this is probably the best option, politically, since it incorporates elements of the LibDems' mansion tax and the collection machinery is already in place. But iii) Land Value Tax is almost certainly the best option, as it gives an incentive to develop as well as one to trade down. I am not as messianic on this as some, but I will no doubt discuss more at some other time.
  3. I think Housing Associations are here to stay, more or less unchanged. The point is sometimes made that their tenants often don't really need to be in 'charity' housing and perhaps a more rigorous system of auditing to ensure that they justifiy their tax privileges is justified. But as more or less private organisations, they provide a test-bed for innovation in housing provision and, provided they do not depend too much on the public purse, ought to be left to their own devices.
  4. The provision of subsidised housing ought to be rationalised. It makes no sense that someone is better off depending on whether or not they were lucky enough to get a council house. It's equally mad that someone might effectively be propelled into the upper middle classes (by income, anyway) simply because housing benefit pays for a house in an expensive part of the world. This, I agree, is easier to write than to achieve but the solution lies no doubt in a withdrawal of automatic cheap long-term tenancies in council housing (I stress cheap, for if tenants can afford market rents, then why shouldn't they pay them?) combined with some form of more or less universal housing benefit payable irrespective of the housing solution favoured by the recipient which is either not means tested or which has very low rates of withdrawal. I do not see why recent arrivals to this country should be entitled to any form of housing assistance except in the direst need.

There are my modest proposals, impractical and very possibly unaffordable - but surely we can't go on like this. The government will no doubt attempt to tackle things in a piece-meal way (e.g. recent cuts in housing benefit) - I'm just attempting to set some principles aimed at ensuring that housing policy:

  1. Allocates scarce resources in a rational way.
  2. Ensures that all are housed to an acceptable minimum standard.
  3. Minimises the cost to the taxpayer.
  4. Deals with all types of person equitably.

I'm expecting a flood of comments on this one!