Another day, another desperate throw of the dice (34)

The government's attempts to force banks to continue lending into a falling housing market to keep the bubble inflated, by nationalising and bullying RBS and Lloyds, doesn't really seem to have worked, so they're now going to try an even more direct approach.

From The Daily Mail:

Post Offices will start offering controversial 'super-size' mortgages to help young people with little savings buy their first home, the Government will reveal today.

Under the radical plan, Britain's struggling network will hand out mortgages to people who can only afford a 10 per cent deposit. It raises fears that they will be left exposed to a negative equity nightmare if house prices fall sharply over the next few years, as some economists predict...

... under the new plans, millions of people who have not visited, or rarely visit, their Post Office will be encouraged to return by a new range of products. The radical shake-up will include a proposal to force Britain's banks to pay a new 'community levy'... The money will be used to help the Post Office and credit unions to hand out cheaper loans to people, who would typically be targeted by loan sharks...

The decision to offer 'super-size' mortgages comes just days after the Chancellor scrapped stamp duty on homes bought for up to £250,000 for first-time buyers until March 2012. For many young people, they feared they could not take advantage of the tax break because few banks would give them a mortgage.

The number of 'super-size' loans has collapsed since the credit crunch. In August 2007, there were 829 loans for those with a deposit of only 10 per cent. Today there are just 154.

Coalition of the willing (2)

UPDATE 24/05/08 - the online poll over here is currently standing at 24 'ayes' and 23 'noes', most heartening indeed! Why not drop in and have your say?

Measuring social value

Here's my letter to the FT, sadly not printed.

"Sir,

Your article "New philosophy blurs party lines" (13 May) states "The Tory leader said ministers in his government would take account of 'measures of social value' - the added benefit of having a local GP, library or post office - to promote 'not just economic efficiency but also social efficiency'. But how would this championing of social values be squared with the harsh realities of needing to close thousands of post offices to stem losses of £3.5m a week?"

The answer is simple.

The 'social value', in other words the value to society, of subsidised or taxpayer funded services that benefit any particular locality, can be measured by looking at location values - the additional price that people are prepared to pay for properties in that locality as opposed to one that lacks these services - and hence on local land values. The revenues from a tax on local land values, however measured, could in turn be compared with the cost of funding that "local GP, library or post office".

As long as the proceeds from the tax at least covered the cost of the subsidies, then we would have not just economic but also social efficiency.

In the specific case of post offices, for example, annual losses of £182 million could - should property owners so wish - be funded by an annual land value tax of one per cent of one per cent on UK site-only land/location values (which currently stand at approximately £2,000 billion).

Yours sincerely"

Note: the blanket tax to subsidise all post offices was just to illustrate the sums involved - I explained how this would work in practice here.

"Commons vote on Post Office closures"

I can now put some numbers on my proposal that local voters should decide whether or not their local Post Office should be subsidised, and if they decide to do so, the subsidy should be collected via their Council Tax. The closure of 2,500 Post Offices will cut losses of £4 million per week, if I understand this correctly.

So that's £200 million subsidy per annum divided 25 million households/Council Tax payers = an average increase in your Council Tax bill of £8 per annum to keep your local Post Office open, which may or may not seem like good value.

"Tories seek post office rethink"

Look chaps, all this wrangling is not a matter for central government! If people are happy for post offices to be subsidised, then this should be paid for out of local taxation paid by local voters. And subject to local referenda.

"Council bids to run post offices"

Fundamental to the whole debate about the survival or closure of rural post offices is the question, are post offices...

1. Businesses like any other, which should not be getting subsidies and have to survive or fail like any other, or

2. Providers of 'merit services', like child nurseries or public libraries, i.e. services that would be provided by private businesses if demand were there, but which ought to be subsidised/publicly provided to make them available to more people. In the case in hand, we do have to at least consider old people who refuse to get involved in internet banking and so on and may not be able to travel miles to the next nearest bank or cash machine etc.

3. Public goods, i.e. a core function of the State like law'n'order, protection of private property rights or defence, for which there is no real free-market solution, and which must be paid for out of general taxation.

If the answer is 1, then of course Post Offices should not get subsidies, end of debate*.

If the answer is 2, then remembering that the state is lousy at actually running anything, this is a case for local taxation, i.e. there should be a separate line on your council tax bill showing your share of the subsidy paid to the local Post Office, and of course the council should also publish details of how much subsidy each individual Post Office receives. Then every council tax payer can make up his or her own mind whether it's worth it or not.

If your answer is 3, then I'm afraid you haven't understood the question.

* Yes, I know that EUsceptics like to blame the closure of rural post offices on the EU, who are officially against state subsidies (unless it involves French farmers or German banks, of course) but all-in-all I am against subsidies as well, so there! If council tax payers are happy to pay the subsidy, then this is no business of the EU!