Month: August 2010

There is a three letter word the BBC and others does not wish to mention – tax. The main reason Mr Rudd, the previous Labour PM lost his job, was higher taxes. Parliament and people disliked his higher taxes and charges in the name of a climate change policy, and voted them down. Then he tried a new tax on resource companies. He thought that too would be popular – why not tax the rich and successful corporates. Australians instead thought he was taxing one of the foundations of their economic success, and they objected strongly.

Ms Gillard did her best to clean up the mess, but she too belonged to a party associated with damaging higher taxes. It should act as a warning to all who think higher taxes are fair , green and popular. In Australian they were seen as mean, damaging and unhelpful.

Each year the state spends on average £10,000 for every man, woman and child in the country.

The idea of public accountability, democracy and more transparency over how public bodies spend your moeny is that you should be more involved in how this money is spent.

I would like to hear from you on your priorities. How do you think your £10,000 a year should best be spent?

For my part I feel I am getting more defence than I want. I could live without the wars in the Middle East, but like to have professional forces to defend our country. I have more levels of government than I want, and wish to see the end to regional government and to much of the EU bureaucracy as it applies to the UK. I have more regulations than I need, and more quangos than I can remember the names of.

How would you like your £10,000 spent? And how much do you want of it spent on you, and how much are you prepared to see spent on the neighbours?

Labour’s big change in transport policy was to increase the amount of subsidy going to the railways substantially, whilst cutting back the amount spent on roads. We received little by way of new railway line or roads during the last thirteen years, other than the completion of the Channel rail link initiated by the previous government. Much of the railway money paid for operating losses.

Yesterday the Coalition government announced a compensation and purchase scheme for home owners affected by a proposed new rail line from London to Birmingham, cutting through the Chilterns. The railway presumably has to be part of the public spending exercise.

Prior to the election the Shadow Cabinet led us to believe that this project could not be started on the ground before 2015, so the main costs of building it will fall outside the current spending review. However, initial costs of planning, land acquisition and the like may well fall in the next few years.

I would be interested to hear from bloggers if they think this is an important public spending priority. If it is, are there ways more of the capital cost can be met from private risk capital to save the taxpayer? Can future running costs and revenues be brought closer together to limit the subsidy cost? What should the timetable be for this project if it is one you like?

In the US the Stock market has been falling because many investors no longer believe printing more money and running up a collosal public deficit is the way to sustained recovery. Mr Obaama continues with more of the same in the hopeless belief this will save him in the mid term elections this autumn.

Labour in the UK belong to this outdated school. If a huge deficit and large amounts of money printing haven’t yet fixed it, why not try some more they ask? They live in denial of what happened to Greece, Ireland, Portugal, Spain, Iceland, the Baltic states and others who overdid the borrowing, only to be forced into worse spending cuts and higher interest rates.

Meanwhile, some in the Uk say our recovery cannot last either, because the government is cutting spending and raising taxes to cut the deficit. Sometimes the rhetoric is more believed than the reality. For as readers will know, overall public current spending carries on rising in cash terms over this Parliament. It is silly to spook people for cuts that are not going to happen. The public sector should explain their true budgets, not make up fictions about the depth of the overall “cuts”.

Talk of cuts of 25% or 40% in public spending is alarming people who depend on public money needlessly. Public spending on current services according to the budget will rise by £90 billion over the course of the next five years, taking it up from £600 billion to £ 690 billion.

Labour spending on current services was £10,000 for every man, woman and child in the UK last year. This government plans to increase that to £11,500 by 2015. Spending on health is going to go up by more than price inflation every year. I expect schools spending to increase every year as well. State pensions are going to go up by prices or wages, whichever goes up by more. Labour was only raising £7500 from every person in the country on average in taxes, and borrowing the other £2500 each.

The questions we should all be asking are these. Are we each getting £10,000 of value from the public service spend today? Will the extra £1500 each be well spent on the right things? Why are some parts of the public sector saying they will have to make clumsy and unpopular cutbacks, when overall spending will go on up in cash terms?

Those of us on good incomes know we have to pay much more than £7500 in tax. Many of us do not expect to get our £10,000 of public spending. If like me your children have left school you receive no education spending. If you are earning a good living you do not need or receive benefits. If you are healthy you do not need to go to the hospital. Those three services alone account for more than half the average £10,000 per person spent.

Many of us are happy to pay extra tax so the sick can receive proper care and the disabled can receive benefits. We are happy to pay for the neighbours children to be educated. It is part of good neighbourliness to pay more in tax so any neighbours who are disadvantaged can enjoy the rising prosperity of our age as well. We are less happy to pay more tax if we think the money is wasted, building bloated bureaucracies or indulging grand political projects that will not make our lives better. By far and away the biggest item in my annual budget is the cost of government. Tax takes far more than my housing or food or travel which I buy for myself directly.

That’s why it is a good idea that central and local government takes a hard look at all that is being spent to drive better value for money, and to get rid of the irritating or wasteful items. What we do not want is another parade of the bleeding stumps, as public sector managers trot out unacceptable cuts to try to avoid making sensible economies in the way they are doing things. If the main public services end up cutting important services when the money available to them goes up it is a sign of bad management, not of insufficient money.

We have been debating three proposals for better decisions on building and planning.

The first is my proposal to pay compensation for loss of amenity, view, and worse quality of life to existing homeowners. This proposal has several advantages. It can be done under the current law. Where I have seen it used it works. People accept the compensation, allowing planners to grant the permssion without objections from those closest to the proposed development. It can speed up the planning permission and avoid long appeals and court battles. It pays the money to those who otherwise lose out. It can be a cheaper solution for the developer.

The second is the idea put forward that we should auction planning permissions, with the money going to the state, probably in the form of the Council. This is a more formal version of Section 106 Agreements which we have today, which are individual negotiations with developers by Councils to make an infrastructure contribution. I have no objection in principle to an auction to determine the value of a planning permission. It is not, however, entitrely straightforward.

If the state already owns the land then it works very well. The state grants itself planning permission and then sells the land with permission, capturing the gain through the auction sale. This already happens.

If the land is privately held the problem is who will bid in the auction other than the current landowner? There would be no point in offering to pay a large sum for planning permission unless you already had secured the land so you could sell the package on or develop it yourself. An auction of one is a negotiation, which is what we have at the moment.

You could create a more serious auction if Council announced it was prepared to grant so many permissions to allow building of a specified number of homes or a speficied fllor area of commercial property. Competing landowners could then submit bids for how much they were prepared to pay to be one of those allowed to develop. Some areas would be ruled out for other palnning reasons – Green belt etc.

The third proposal is to go over to a system of LVT. Proponents of this see it as an easy answer to all our problems. Others see it as land nationalisation.

The full scheme replaces some taxes with a rental charge on all property payable to the state. It is therefore a more penal tax on all those who have already bought freehold interests in property, and may still be paying off the bank loan or mortgage, as their freehold effectively is taken away from them as the state becomes their landlord. I have never seen a satisfactory explanaiton of how the transition would be handled fairly, given the huge numbers of property claims that underpin the banking system and the current pattern of widely spread property ownership.

Mr Hughes thinks Lib Dem backbenchers should have a veto on Coalition policies. Some would say only if Conservative backbenchers as well can have one, to be fair.

The truth is simple. If all Lib Dem backbenchers vote against a Coaltion government proposal, even with Labour support, the government will still win the vote.

If a large number of Conservatives rebel, but Labour supports the government, the government will win the vote.

It is only if more than 40 Conservatives vote against the government and Labour opportunistically agrees that the government might lose.

Democratic politics is about numbers as well as arguments.

Today we hear that Mr Clegg will set out his proposals and vision for a more equal and just society. Here are some of the things he could address.

The main reason too many people are poor in the UK is they do not have jobs. During the long Labour years around 5 million people of working age stayed on benefits, even during the good times. Many people were invited in from abroad to take new jobs through a liberal immigration policy.

Tackling unemployment requires a growing and recovering economy, a more sensible immigration policy, benefit reform and improved results from money spent on education and training.

Much inequality begins from school days. The rich can choose to send their children to good schools which they pay for. A select few obtain places at grammar schools, giving the children of the not so well off similar chances in life to the children of the rich. In some parts of the country there are excellent comprehensives which can be a good platform for success. In other localities people on low income are sentenced to sending their children to low performing schools where expectations are low and often self vindicating.

Central to the task of promoting greater justice must be the task of widening choice and quality in state schools serving families on low incomes. The government’s school reforms and pupil premia are designed to tackle this. It may take more than the proposals announced so far, but they are a step in the right direction. Poor performing schools often do not lack money or numbers of staff. They lack the right ambition and direction from the top. They may also be working with unsupportive parents.

Central to the aim of getting more people into work must be sensitive but firm reforms to the benefits system. I am sure Mr Clegg and I agree that our benefit system should be generous and supportive of people who cannot work owing to incapacity. We might also agree that if someone has duvet disease, the inability to get up and out in the morning to hold down a job, they need to face the reality that there will be no benefit if they turn down gainful employment.
Getting the present “availability for work test” or its successor to function well is not easy. Each different case is a judgement. Did the individual knowingly or unknowingly put off the employer from offering the job? Did the person lose the job through no fault of his own, or because he didn’t want to carry on doing it? These are difficult balances to strike.

Labour will also say poverty can be the result of low incomes in work. That is true, and that is why both main parties in power have for a long time paid benefits to people in work to top up working incomes. A minimum income protects the poor. The Minimum wage can protect the taxpayer to some extent, requiring a higher proportion of the minimum income to come from the wage packet. The Minimum wage, if set too high, will cut the number of jobs available, and force more people to be reliant on the state entirely rather than partially for their income.

The good news about low pay is for many it is a temporary not a permanent phenomenon. The best way to get a job is to already have a job. The best way to get a better paid job is to start with a less well paid one and work up. It is this spirit of self improvement which is lacking in some benefit recipients. They say if they went to work they might be little or no better off. That is to miss two points. The first is, if you can earn the money you should. The second is, if you take a not very good or well paid job it might lead to a better one. You can travel with pride and in hope if you have a job.

Recent programmes showing bosses going under cover have, I hear, usually ended in the bosses discovering the greater worth of some of their less well paid employees and giving them new duties, rewards or better jobs. You need to put yourself in the way of something better happening. I have been impressed in recent visits to local supermarkets how keen they are to establish a possible career path from shelf stacking to store manager. We need more to make those journeys.

Ending poverty may require different policies from the state. It also requires different attitudes and contributions from some who feel they are locked in benefit but may not have to be.

We will never create an entirely equal society. We will not even create pure equality of opportunity. Some are born with a better natural endowment, and others with a better inheritance. We should strive to do better, whilst recognising the limits to what benefits can do.

One of the main issues which embitters many a planning dispute is who pockets the large windfall gains from the conversion of cheap land to dear land with building permission?

There are three models on offer or regularly debated. The first is that the developer or land owner should claim the gain , because it is their land or their activity which is leading to improved value and the new homes.

The second is that the community should seek a substantial portion of the gain. This currently happens on larger developments through Section 106 agreements. A developer negotiates with a planning authority, offering to give the Council money for public facilities, or offering to build public facilities as part of the plans. The developer may offer roads, flood schemes, leisure facilities or whatever the Council thinks the community wants.

The third is that the wider nation should pocket the gain, through moving to a system of land nationalisation, where everyone just rents their property from the state and the state collects all the rents and therefore benefits from new construction. Effectively land values are abolished as no-one is allowed to be a freeholder apart from the state. Various Labour figures are pressing for a variant or starting point for this, proposing for example that the state should levy a tax on all properties adjacent to new infrastructure improvements in cities, on the grounds they are benefitting from this state investment and their property values have gone up as a result.

I am not keen on any of these three versions. The first leaves many people feeling it is unfair that large landowners can make huge sums out of the artificial scarcity created by planning permissions. A true free market system would leave the land owner free to profit, but it would also allow any landowner the right to build as they wished, creating much more competition and lower prices for buildings than a planned system does. Our current system allows enterprising people to make money out of rationing.

The second leaves many feeling the relationship between Council and big developers is too cosy, as the Council will make a profit out of the development if it allows it to go ahead more or less as the developer wishes. Quite often the 106 money or infrastructure contribution is spent in ways that do not help the home owners who feel they are disadvantaged by the new development. It is, for example, a final insult to the houseowner objecting to new homes on the greenfields next to his house, if the development goes ahead and the Council places a noisy play area adjacent to his house, paid for out of the Section 106 money.

The third if done in full is so radical that no-one has satisfactorily explained how you could get to it from where we are today, even if you wanted to. Partial implementation is just another kind of tax on those unlucky enough to live near “improvements”.

It seesm to me the large profits thrown up by scarce planning permissions should be shared with those most immediately affected by the development. The way to make people feel a new development near them is fair would be to give them a share of the winnings by way of compensation. They would then be able to decide for themselves whether to accept it gracefully or to spend the money on the costs of moving if they really cannot stand the change in their local environment.