Wednesday, 20 July 2016

Theresa May: hopes raised, hopes dashed.

Via DBC Reed, from the FT, hopes raised...

On to housing. The wealth of some pensioners has expanded by more in retirement than it did in work simply because the value of their homes, which they tend to own outright, has risen so rapidly. That price expansion is largely due to repeated shortfalls in home construction and the increasing use of housing as a financial asset. Neither is directly the fault of baby boomers, but it means younger people are spending greater proportions of their net income on housing and taking on debt for longer periods — the Council of Mortgage Lenders reports that almost three-fifths of first-time buyers take a loan of more than 25 years.

Mrs May acknowledged this is an undesirable outcome: “Unless we deal with the housing deficit, we will see house prices keep on rising. Young people will find it even harder to afford their own home,” she said at her campaign launch [a fortnight ago]. “The divide between those who inherit wealth and those who don’t will become more pronounced.”

[The 'increased supply' thing is ineffective in itself, it has to be done together with a whole bundle of other things as the UK did pre-1980s to keep prices down. It fell far short of proper LVT but did the particular job on a rough and ready basis].

From The Evening Standard today (I can't find the link), hopes dashed...

Responding to the Labour leader calling for an end to austerity, she snapped "He calls it austerity, I call it living within our means."

(As background, the Tory government is running and historically they have always run, larger deficits than Labour governments. Weird but true.)

The brief exchange set out her battle lines against Labour on spending and home ownership. Mr Corbyn attacked the upper limit for [government subsidised loans to encourage first time buyers to pay more for housing] set out in government policies, saying it was too high.

But Mrs May pointed out that it reflected everyday life for people in bis Islington constituency.

All right, sod her, she's an evil Homey witch like the rest of them who has abandoned any principles she held a fortnight ago.

FFS, if the government wastes taxpayers'  money on encouraging first time buyers (a sub-set of taxpayers) to get even deeper into debt in order to pay even more for overpriced housing, how does she square that with the worthy idea of "living within our means"???


Blue Eyes said...

The Labour / Tory deficit conundrum might be solved by looking at when Labour and Tory governments tend to be elected. Labour get voted in when people feel like things are going well and they can afford to be generous. Tory governments get elected when people feel as though Labour have run things out of control. Thus, at the start of any Tory government the deficit is likely to be much larger than at the start of any Labour government...

Mark Wadsworth said...

BE, that is true for the 1997 - 2010 Labour government.

But what about the 1979 - 1997 Tory government? You can blame the first few years deficits on the 74 - 79 Lab government if you wish... but that Lab government in turn could blame it on the 1970 - 74 Tory government etc.

And the current Tory government has been in for six years already, they clearly have no intention of reducing the deficit, they just say they have to as an excuse for persecuting the unemployed and disabled.

mombers said...

"Neither is directly the fault of baby boomers"
If it's not their 'fault', then it's not theirs to keep at the expense of everyone else. LVT with an option to defer. Not the fault of those who don't have housing lottery winners as parents either and don't get a windfall inheritance...

Lola said...

MW. The Tories claim that they are reducing the deficit in proportion to GDP. And that is true. Whether or not that is the right way to think of the 'reduction', is up for argument.
And I think it is contestable.

Random said...

ITSM if a government makes house prices decline, it loses. It is that simple. Explains 1997 and 2010.

"Thus, at the start of any Tory government the deficit is likely to be much larger than at the start of any Labour government..."

In a sovereign free floating currency, the national debt is the right hand side of the Sterling balance sheet. It is the equal and opposite balancing figure for our savings on the left hand side (the national assets if you like).

The change in debt - the 'deficit' - represents down the the penny the net savings made in Sterling in that accounting period by the non-government sector.

Those savings were mostly paying down loans in 2010 - deleveraging.

Dinero said...
This comment has been removed by the author.
Dinero said...

> Random ,

conventionally debts paying to the balance sheet go on the left hand side of the balance sheet.

Mike W said...

I was taught, and I prey I have it around the right way!





As Mark always says, folks are thrown by the last one!

D is Random committed to an error, not sure?

Mark Wadsworth said...

M, that's classic Home-Owner-Ism

"It's not our fault prices are so high, so we shouldn't be taxed on it. That's our children's problem, not ours."


"We worked hard for our home and paid for it out of taxed income and did all the improvement, it is unfair to tax it again on our earnings"


"If you tax our homes it erodes the "capital" we can pass on to our children"

All these statements are inherently bollocks and they contradict each other.

Mark Wadsworth said...

R, D, MW

In a normal TB, assets (and expenses) are on the left and borrowings (and income) are on the right. "Capital" is a balancing figure of assets minus borrowings and is also on the right.

But to confuse matters, the Bank of England used to swap the sides, just to be a bit different. So in a sense, R might be correct.

"Capital" is a vastly overused term and is misleading because it can mean several quite different things. People refer to their long life assets as "capital". People refer to monopoly rights like land as "capital" when they are not. "Capital" can mean the balancing figure as mentioned above. And so on. It is just as meaningless as "reserves".

I prefer to limit the use of the word "capital" to real productive or man made capital (plant machinery buildings know how software etc).

DBC Reed said...

All these problems are obviated if we only tax house price rises over the year (as John Stuart Mill suggested before Henry George started stealing his thunder and claiming Mill supported racist ideas). A few years of stillstand and house prices will ratchet down as speculators give up on the game.

Mark Wadsworth said...

DBC, the post-war package of housing policies provably kept prices down, so why invent something new?

You still haven't given examples of how it is calculated. Will the sentinel tax be levied as a % of the increase in selling price or will be a tax on the rental value minus the rental value when the tax is introduced? it does make a difference.

Anyway, what provably works is

- rent controls and tenant protection
- higher taxes on landlords (slap them with VAT and NIC and disallow all interest, for example).
- - get rid of Stamp Duty Land Tax or reduce it to flat 1% like it used to be. Get rid of capital gains tax on landlords, the previous measure is to encourage them to sell so taxing them for doing so would be stupid.
- lots more social housing
- mortgage-to-income caps of about 2.5
- more private construction/less NIMBYism
- Domestic Rates instead of Council Tax (a bit like LVT)

Bayard said...

"- more private construction/less NIMBYism"

I'm not sure that you'll ever decrease NIMBYism without LVT, nor that more private construction will be required. After all most of the demand for new homes will be met by either more social housing or landlords selling up.

"- Domestic Rates instead of Council Tax (a bit like LVT)"

with yearly mandated re-rating, or we'll end up where we were before the Poll Tax was brought in.

DBC Reed said...

Not sure that all the minor policies kept house prices down. There was a biggie: the tax on imputed rent in Schedule A Income Tax, which the Tory hysterics who were going through their post Macmillan decline abolished as a straight bribe to vote Conservative in 1963.They didn't bother with cover stories in those days.If there is going to be a change it has to be dramatic, to counter the house price inflationary psychology which is making this country impossible to live in and nurturing a core of right-wing extremist voters who do not give a fuck about wages and employment levels as long as their house price goes up .Hence " we don't need Europe and its free trade zone : we just need big government property bribes"