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Westlake Legal Group > Posts tagged "rent"

James Frayne: More welfare spending. A business tax avoidance clampdown. The new economic policy that voters will want.

At some point, economic concerns will trump health concerns for the majority. Furlough has delayed this, but it’ll shift: when the death rate drops significantly, or when it becomes clear the country can’t sustain the level of support to wages granted until now.When this happens, what will the public want economic policy to look like in the long recovery period? And how should the Government think about public opinion?

Each of these questions is worth an article in its own right, but let’s start with the likely economic position in a few months: significant numbers of businesses will go bust; many cling on at the best of times and reduced demand will finish many off.

In turn, we can expect significantly higher levels of unemployment than during recent times, and more people on welfare.

Many businesses, too, in fear of a second wave of infections, will be cautious about hiring and investing generally; many will terminate or reduce office space and pay rises will be a thing of the past.

We can assume that those parts of the country where the private sector is relatively weak – and relatively much more reliant on consumer spending – will be more severely hit than the affluent South. High streets that were already struggling will be decimated. And we can assume astronomically high levels of debt. All in all, a terrible place to be.

Let’s now consider some of the parameters of policy for Government that will be set by public opinion.

First, public spending. The public will want health spending increased significantly. When people look at why Britain was so badly hit, even if a consensus emerges we should run healthcare differently, it’s inconceivable that one of the conclusions won’t be that the health service needs more money – it’s already what people think.

We can also be reasonably sure of demands for greater spending on social care, given how badly those in care have suffered.

It’s also likely the public will expect additional spending on welfare – to support the rising number of unemployed and more generally to support those communities which have suffered disproportionately during the crisis. While the public are, in normal times, quite sceptical of welfare spending, they are not going to see the new unemployed in the way that they saw (healthy) people without jobs in a near-full employment economy.

It’s also a reasonable bet the public will demand greater support for those in “precarious” work – workers seen to have kept the country going during lockdown. While there are many reasons to suggest those working in the gig economy love the freedom they’re granted and don’t consider themselves “victims” in any way, the likely campaign that Labour will run to reward these workers will have an irresistible attractiveness.

In other words, there will be significantly more money across three major areas of public expenditure. On the flip side, the public are less likely to have the same demands on expenditure on policing; defence; or even education, but these are likely to be dwarfed by the size of the welfare and health budgets.

Second, tax. The public will demand action is taken against those businesses perceived to unfairly avoid tax (presently and historically) – particularly if they have enjoyed bumper sales during the crisis.

When there are bills to be paid during the long recovery period, there will be no longer be any hiding place for them. And there’ll be demands for action against those businesses that splurged cash on high salaries and dividends while furloughing workers.

One area that has had relatively little attention, but could get much more, is the behaviour of commercial landlords across the country. This aspect of public debate could be very ugly.

On the other hand, they’re likely to be very positive towards the idea that tax cuts for small businesses are a necessary stimulus. They are likely to be open to the idea that these businesses need a break from high business rates and high levels of corporation tax.

It’s possible that they will ask for lower personal tax rates so they can start to save to accumulate protection for any possible re-emergence of the virus. Whether the Treasury thinks that such a policy is advisable is something else; but they’ll at least likely have freedom to think about targeted tax cuts.

Whether these two sides balance – higher taxes on a small number of very large businesses, lower taxes on a large number of small businesses – is another question. Together, these spending pressures and the need to stimulate the economy will put enormous pressure on Ministers for some time. It is fortunate that this Government doesn’t seem to have any philosophical adherence to low spending and debt, or the next year would be very uncomfortable.

Thinking about economic policy more broadly, it also seems likely this crisis will open the door to much greater radicalism in a number of areas. The nature of tax, spend, and economic policy could change very substantially.
  • We could end up building a lot more, a lot faster. Construction is an obvious place to go for a fiscal stimulus, and there will be huge pressure on the Government to meet some of its infrastructure promises before its term is up. That requires changing the planning system.
  • We could see much bolder incentives to industries that are essential for “national resilience” – pharmaceuticals and life sciences are the most obvious example, but agriculture and energy would be others. It is probably no coincidence that many of the countries that have done best during Coronavirus have also had decades of effective industrial policy.  There will be a race to replicate it here. (It is hard not to see how, in many parts of the country, universities will be part of the policy mix.)
  • Anything that rebuilds town centres and communities will be enthusiastically welcomed. Completely re-hauling the business rate and general small business taxation system is plausible.
  • Of course, the long-anticipated reforms to the structure of the state have been put on ice while the Government has been trying to deal with Corona. Here, the public simply don’t care that much – but the performance of different parts of Government during the pandemic will, surely, be used as a reason to reshape the state.

None of these are new territory for the Government. It’s the combination of parochial and modern that was obvious in the general election manifesto last year. But while the epidemic has created demands from the public, it does also create space to achieve large amounts in the next three and a half years, and change a lot of rules.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Neil O’Brien: How the Conservatives can do better with younger voters. And remain a compassionate party.

Neil O’Brien is MP for Harborough.

We need to be tough on Corbynism, and tough on the causes of Corbynism. After crushing Labour last year, it might be tempting to rest on our laurels. But we need to act now to keep the extreme left locked out of Number 10 in the long term. This piece is about two ways we can do that.

First, doing better among young people. Second, making sure we remain trusted as a compassionate party.

Both are about uniting the country post Brexit. Let’s start with younger people.

In the last election, Boris Johnson raised our share of the vote across the board.

But we made bigger gains among older people than young. Despite the improvement compared to 2017, last year we still got just 19 per cent of the vote among 18 to 24 year olds, while Labour got 62 per cent. Contrast that with 1979 and 1983 when got 42 per cent of the vote among 18-24 year olds. That was nearly the same share we got among the over 55s those years (47 per cent).

It is true that younger people are always more left-wing. But the gap in voting behaviour between young and old became way bigger in 2017 than it had been before, and that massive gap was still there in 2019.

While today’s younger voters are likely to become more conservative as they get older, we are starting from a much lower base. So if we don’t fix those cracks in the foundations, we risk our 2019 triumph crumbling away over time.

There are multiple factors causing young people to shift left, including: the larger proportion of younger voters who are not white (20 per cent among under 34s, compared to five per cent of those over 60); the liberalising effects of the expansion of Higher Education (three per cent going to uni during the 1950s, and 50 per cent now); and housing costs going up (from 10 per cent of renters’ income during the 1970s to a third now, while twice as many are renting). Other factors include tuition fees; the Financial Crash; Brexit, and the rise of social liberalism.

What’s clear is that we need to make some big changes to do better among younger voters. That means for starters, that the forthcoming spending review has to have something to offer them. Our new Chancellor, Rishi Sunak, is one of the smartest people I have met. But if we don’t want debt to grow relative to the economy, he inherits no room to go on a spending spree.

So where can he find the money to help young people?

One asset is the remaining stock of local authority housing. Transferring it to not-for-profit housing associations would allow them to borrow against rents, unlocking £27 billion for housing. That would let us build a huge amount of housing for younger working people who don’t get council housing. It could include cheap rented accommodation to build up a deposit, and homes for discounted sale.

Another place to look is our universities. We now know that there’s a large group of young people for whom going  won’t be worth it financially, either for them or the taxpayer.

That’s true for between a fifth and a quarter of those who currently go. Frankly, many are being mis-sold a degree.

For example, the average creative arts graduate isn’t earning enough even ten years after leaving university to pay back any of their loan. We are doing young people no favours by loading them up with debts in return for such degrees.

They also cost the taxpayer a large amount in written-off loans. Clamping down on low value courses could save enough money to either cut the cost of going to university in half, or free up money to invest in top flight technical education and higher apprenticeships. That would also help “Level up” places where more young people go down technical routes.

The other part of combatting the causes of Corbynism is making sure we tackle the big social challenges.

I’ve spent a long time arguing for a focus on people who are not at the bottom, but are “just about managing”. But reasonable, middle of the road people will only keep voting for us if they feel we have a plan to deal with people who are, well, “not managing at all”: people in poverty.

People want to know we are doing the right thing. And people who are just about managing are also the most directly exposed to social breakdown. That means going further to tackle things like rough sleeping. It has gone up since 2010. And that is only partly because we have funded more outreach services and so identified more rough sleepers.

It is true that there are a larger number of EU nationals sleeping rough. And it was deeply unhelpful that EU law banned efforts to return rough sleepers to their home countries. When I did outreach work with street homeless, I met people who wanted to get home after things in London had not worked out.

But there are also large numbers of British people sleeping rough – and shamefully, six per cent of them are formerly of our own armed forces.

In my time working with rough sleepers, I met many who couldn’t face going into a shelter because they’d had a bad experience in one. That’s why the pilots of “Housing First” are important. In Housing First, people are housed first and then have their problems worked on. The Rough Sleeping Initiative also seems to be working in areas where it is operating. But we now need to put rocket boosters under both these schemes.

Take another challenge: food banks. They exist in pretty much every country in Europe, even the richest. France has “Restos du Couer” while Germany has “Tafel” (Food Tables).

How can we drive down the number of people in Britain who need to use them? The main network of food banks, the Trussell Trust, suggests reducing delays at the start of Universal Credit claims so people don’t struggle while waiting for their benefits.

Currently claimants can opt to get an advance loan to reduce the wait for money. We could make this the default, though such loans can still lead to problems paying back the money later. Alternatively, we could make UC payments work more like the old system: with an upfront payment, paid every two weeks, and the housing benefit element direct to landlords as standard.

There would be a cost to upfront payments: as much as £1-2 billion nationally. So we should experiment by trying it in some areas, and seeing what difference it makes to foodbank use and other social problems. If it works, we should do it nationally.

More broadly, the new government should set out a clear new framework for tackling poverty: an approach that tackles the underlying causes, with clear goals to drive down rough sleeping, drive up school standards, drive down worklessness and so on.

Our Prime Minister studied the classics, and will recall how triumphant Roman generals would have an Auriga on hand to remind them that “you too are mortal”, and generally keep them down to earth. He has produced a historic triumph in the general election. Now is the time, when he is strong, to secure the long term future of the party. The time to put his compassionate instincts into action, and build a united country.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Neil O’Brien: Five ways to help resolve the housing crisis

Neil O’Brien is MP for Harborough.

To many Conservative voters, we seem to have built a lot of houses in recent years. Yet much new development seems poor. And young people still can’t afford to buy a house. What’s going on?

The last fortnight saw the publication of Roger Scruton’s final report – a Government Commission on “Building Better, Building Beautiful”. It tries to answer some of these questions.

There’s much in it I agree with. But if we’re really going to “build better” and solve the housing crisis we need massive changes. We need:

A clearer vision of where we want development – with more in cities.

At present, councils have to build enough to meet their “Objectively Assessed Need” (OAN). In practice this means meeting forecast population growth. But the forecast just reflects recent trends.

Instead of saying that the future should reflect past trends, there are strong arguments for preferring more development within cities: it means more walking, less congestion, less pollution and lower energy use.

And as Create Streets has shown, denser cities are not about grim tower blocks. The densest places in Britain (Kensington) and Europe (Barcelona) are nice places to live, dominated by tall terraced houses and low-rise apartments. Paris is twice as dense as New York.

Britain has the least dense cities in Europe. And also cities which have grown very little. Places like Dundee, Glasgow, Liverpool, Sunderland, Birkenhead, Hull and Newcastle all had smaller populations in 2017 than 1981. Let’s choose more regeneration of cities and less sprawl. Let’s change OAN to target building more in cities.

A clear vision of what kind of development we want – with less piecemeal development.

Even if more development happens within cities, there will still be some in suburbs and shires. Do we want more piecemeal, infill-type development, or a smaller number of larger, properly planned developments? Should we stick more estates on the edges of all our villages, or build a stand-alone garden village, or a town extension?

At the moment, we have mainly piecemeal infill. Developers prefer it, as it’s far more profitable. You don’t have to pay for new schools or GPs surgeries, or new roads, or any expensive “place making”. Instead, you can piggy-back off existing facilities.

But infill is the type of development that attracts most opposition. That’s unsurprising: it means building right next to people. And specifically, to people who chose to live on the edge to get a nice view.

There are also physical limits to how much piecemeal development you can have and still have a nice place. Roads through the centre of a village (often not built for cars) become impossibly congested. Even if you had money, there’s no space to expand the village school, because it’s surrounded by houses.

With larger strategic developments, you aren’t building next to as many existing residents. You can plan for the infrastructure properly, get land for that new school. Build a new main road that doesn’t have people living on it, and so on. Let’s give councils the tools to have genuinely planned development, not a free-for-all. First of all that means…

A better system for making development pay its own way.

Part of the opposition to new housing comes from the fact that too often it comes without the infrastructure required.

So your road and the local school and GP’s surgery get overcrowded. People see developers making huge profits while infrastructure is either not provided at all, or the cost is dumped onto the taxpayer.

Section 106, the main way councils secure contributions from developers, is utterly dysfunctional.

Councils cannot use it to fund recurrent expenditure. They cannot use it to fund anything to meet existing needs in the community, only new needs created by the development. Contributions are tied to a very specific purpose. If what people want has changed five or ten years later, tough luck. Because collection is confusingly fragmented between fire, police, health, county and district councils, sometimes developers get away without paying.

There were tight limits on pooling multiple payments which have been recently eased. But payments are still time-limited, and developers can hold off payments by keeping construction below certain trigger thresholds. So if a developer can hold off paying, the opportunity to secure a site for a new village hall may pass. Or, if there are only enough developments in a given time to pay for half a school, then plans to build up funds may get timed out, meaning developers avoid paying.

For all these reasons, huge sums are returned to developers. In 2014, the BBC found that councils alone had returned £1.5 billion of community funds back to developers. We need to either take off all restrictions on Section 106, or replace it altogether.

Give councils the other tools they need to improve development.

In my constituency, there’s derelict land on the site of an old factory. It’s two minute’s walk from the railway station, which is just an hour’s journey from London. The council first granted planning permission in 2004. But nothing has happened, and the owners currently lose nothing from sitting on their hands.

We need to learn from Europe and the USA. Give councils borrowing power to buy land and grant themselves planning permission. At the moment that’s a legal minefield for them. We should reform the 1961 Land Compensation Act to clarify that local and central government can purchase land at current market use values. We should stop land prices from being inflated by the expectation that developers will get away without paying for infrastructure. We should make Homes England into a sort of Flying Squad to help councils plan and deliver brownfield regeneration. And make sure local planning departments can raise money through developer fees to hire and retain good staff.

Use the tax system to boost home ownership.

Home ownership here is fourth lowest in Europe. While increasing the supply of new homes relative to population growth improves affordability, it does so only in the long term.

France built twice as many homes as Britain since 1970 and real house prices increased half as much there. But in the short term, the effect of more building on house prices is almost zilch, because new supply is so tiny compared to the existing stock.

The only way – and I mean the only way – that we can get home ownership up by the next election is by changing the balance between rented and owner-occupied housing.

From 2002 to 2015 we saw a relentless collapse in home ownership (from 71 per cent to 63 per cent) as the growth of buy-to-let outstripped new supply.

In 2015, we started phasing in limited changes to the tax treatment of buy to let and second homes. It worked. The collapse stopped. Ownership has even ticked up slightly, to 64 per cent. But that’s still low. Ten countries in Europe are over 80 per cent.

We don’t need to, and shouldn’t, change things for existing landlords who have invested on the basis of the current rules. But we must use the tax system to encourage new investments to flow into companies, not into inflating house prices. To favour owning over renting.

We either do this, or we will fail to increase ownership, and we’ll drive young people into the arms of the Corbynistas. Simple as that.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

“My Government will embark on an ambitious programme of domestic reform”. The Queen’s Speech – full text

This morning, Her Majesty delivered the second Queen’s Speech of 2019. Whereas the last one was a tightly-focused pitch to the voters, this latter is the chance for Boris Johnson to set out what a majority Conservative Government will do.

We had intended to offer a run-down of the specific bills included, as we did in October. But so far the version of the speech on the Gov.UK website does not include annotations specifying individual pieces of legislation (as its predecessor did), nor does an official list appear to have circulated anywhere else.

This might simply be an administrative delay on the part of the Civil Service, or it might reflect the fact that the Government has been taken somewhat by surprise by last week’s election result and hasn’t yet finished drawing up the relevant bills. Either way, we’ll have a full side-by-side comparison of the bill lists as and when it emerges.

Until then, below is the full text of the speech delivered by Her Majesty in the House of Lords this morning.

My Lords and Members of the House of Commons.

My Government’s priority is to deliver the United Kingdom’s departure from the European Union on 31 January. My Ministers will bring forward legislation to ensure the United Kingdom’s exit on that date and to make the most of the opportunities that this brings for all the people of the United Kingdom.

Thereafter, my Ministers will seek a future relationship with the European Union based on a free trade agreement that benefits the whole of the United Kingdom. They will also begin trade negotiations with other leading global economies.

The integrity and prosperity of the United Kingdom is of the utmost importance to my Government. My Ministers will work urgently to facilitate talks to restore devolved Government in Northern Ireland.

My Government will embark on an ambitious programme of domestic reform that delivers on the people’s priorities. For the first time, the National Health Service’s multi-year funding settlement, agreed earlier this year, will be enshrined in law.

Steps will be taken to grow and support the National Health Service’s workforce and a new visa will ensure qualified doctors, nurses and health professionals have fast-track entry to the United Kingdom. Hospital car parking charges will be removed for those in greatest need.

My Ministers will seek cross-party consensus on proposals for long term reform of social care. They will ensure that the social care system provides everyone with the dignity and security they deserve and that no one who needs care has to sell their home to pay for it. My ministers will continue work to reform the Mental Health Act.

A modern, fair, points-based immigration system will welcome skilled workers from across the world to contribute to the United Kingdom’s economy, communities and public services.

My Government will bring forward measures to support working families, raising the National Insurance threshold and increasing the National Living Wage. To ensure every child has access to a high-quality education my Ministers will increase levels of funding per pupil in every school.

Measures will be brought forward to encourage flexible working, to introduce the entitlement to leave for unpaid carers and to help people save for later life. New measures will be brought forward to protect tenants and to improve building safety. My Government will take steps to support home ownership, including by making homes available at a discount for local first-time buyers. My Ministers will develop legislation to improve internet safety for all.

My Government is committed to a fair justice system that keeps people safe. My ministers will establish a Royal Commission to review and improve the efficiency and effectiveness of the criminal justice process. New sentencing laws will ensure the most serious violent offenders, including terrorists, serve longer in custody. New laws will require schools, police, councils and health authorities to work together to prevent serious crime. My Government will ensure those charged with knife possession face swift justice and that the courts work better for all those who engage with them, including victims of domestic abuse. Legislation will be brought forward to support victims of crime and their families. Measures will be developed to tackle hostile activity conducted by foreign states.

My Ministers will bring forward measures to ensure that every part of the United Kingdom can prosper. My Government will invest in the country’s public services and infrastructure whilst keeping borrowing and debt under control; maintaining the sustainability of the public finances through a responsible fiscal strategy. My Government will prioritise investment in infrastructure and world-leading science research and skills, in order to unleash productivity and improve daily life for communities across the country. It will give communities more control over how investment is spent so that they can decide what is best for them.

To support business, my government will increase tax credits for research and development, establish a National Skills Fund, and bring forward changes to business rates. New laws will accelerate the delivery of gigabit capable broadband. To ensure people can depend on the transport network, measures will be developed to provide for minimum levels of service during transport strikes.

My Government will continue to take steps to meet the world-leading target of net zero greenhouse gas emissions by 2050. It will continue to lead the way in tackling global climate change, hosting the COP26 Summit in 2020. To protect and improve the environment for future generations, a bill will enshrine in law environmental principles and legally-binding targets, including for air quality. It will also ban the export of polluting plastic waste to countries outside the Organisation for Economic Co-operation and Development, and establish a new, world-leading independent regulator in statute.

A Constitution, Democracy and Rights Commission will be established. Work will be taken forward to repeal the Fixed-term Parliaments Act.

My Government will continue to invest in our gallant Armed Forces. My Government will honour the Armed Forces Covenant, which will be further incorporated into law, and the NATO commitment to spend at least two per cent of national income on defence. It will bring forward proposals to tackle vexatious claims that undermine our Armed Forces and will continue to seek better ways of dealing with legacy issues that provide better outcomes for victims and survivors.

My Government will work to promote and expand the United Kingdom’s influence in the world. An Integrated Security, Defence and Foreign Policy Review will be undertaken to reassess the nation’s place in the world, covering all aspects of international policy from defence to diplomacy and development. My Ministers will promote the United Kingdom’s interests, including freedom of speech, human rights and the rule of law. My Government will work closely with international partners to help solve the most complex international security issues and promote peace and security globally. It will stand firm against those who threaten the values of the United Kingdom, including by developing a sanctions regime to directly address human rights abuse, and working to ensure that all girls have access to twelve years of quality education.

Members of the House of Commons

Estimates for the public services will be laid before you.

My Lords and Members of the House of Commons

Other measures will be laid before you.

I pray that the blessing of Almighty God may rest upon your counsels.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Ryan Bourne: To help grow prosperity, let’s focus on people and not places – such as towns

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

Stian Westlake describes it as the “Strange Death of Tory Economic Thinking”. Conservatives have ceased telling an economic story about why they should govern, and how. Sure, there’s still the odd infrastructure announcement, or tax change. But, since Theresa May became leader, the governing party has shirked articulating a grand economic narrative for its actions.

This is striking and problematic. From Macmillan to Thatcherism to deficit reduction, the party’s success has coincided with having clear economic agendas, gaining credibility for taking tough decisions in delivering a shared goal. But, arguably, deficit reduction masked a secular decline in interest in economics. David Cameron and George Osborne, remember, wanted to move on to social and environmental issues until the financial crisis and its aftermath slapped them in the face.

Now, with the deficit down, economics is in the back seat. Fiscal events are low key and economic advisors back room. To the extent the dismal science is discussed, it’s as a means to other ends, or a genuflect to “Karaoke Thatcherism.”

In short, I think Westlake is right: the Tories do not have an economic story and, post-Brexit, it would be desirable if they did. So we should thank both him and Sam Bowman (formerly of the Adam Smith Institute), who have attempted to fill the vacuum. In a rich and interesting new paper, the pair set out to diagnose our key economic ailments and develop a Conservative-friendly narrative and policy platform to ameliorate them, even suggesting reform of the Right’s institutions and think-tanks in pursuit of the goals.

Such an effort deserves to be taken seriously, though not everyone will agree with their starting premises. It is assumed, for example, that Conservatives believe in markets and want to maintain fiscal discipline, which bridles against recent musings from Onward or thinkers such as David Skelton.

But, again, the key economic problem they identify is incontrovertible: poor economic growth. Weak productivity improvements since the crash have been both politically and economically toxic, lowering wages, investment returns, and necessitating more austerity to get the public finances in structural order. And the nature of modern innovation, arising from clusters and intangible assets, means that growth that is experienced isn’t always broadly shared.

Their agenda’s aim then is to achieve both concurrently: maximize the potential of the economy by taking policy steps on planning, tax policy, infrastructure, and devolution, to increase investment levels, allow successful cities and towns to grow, and to connect “left behind” places to local growth spots through good infrastructure. None of their ideas are crazy. Indeed, I would support the vast majority of them.

And yet, something bothered me about their narrative. In line with the current zeitgeist, they too discuss “places” and their potential, as if towns and cities are autonomous beings. My fear is this focus – shared by those who want to regenerate “left behind” areas – creates unrealistic expectations about what policies can achieve in a way that undermines a pro-market agenda. Importantly, it warps what we should really care about: “left behind” people, not left behind places.

A people-centred narrative recognises that just as firms fail in the face of changing consumer demands and global trends, so high streets, towns, cities, and even regions will shrink too. As Tim Leunig once said, coastal
and river cities that developed and thrived in a heavy manufacturing, maritime nineteenth century world might not be best placed to flourish in a service sector era of air and rail.

A true pro-market policy agenda would admit -and that’s ok. Or at least, it should be, provided we understand that raising growth and sharing prosperity requires adaptation, not regeneration. That means removing barriers for people either to move to new opportunities or have control to adapt their situations to ever-changing circumstances. This might sound Tebbit-like (“get on your bike”), but really it’s just saying policy must work with market signals, not against them.

Today though, interventions actively work in a sort of one-two-three punch against inclusive growth and adjustment. First, we constrain the growth of flourishing cities. Tight land use planning laws around London, Oxford, and Cambridge contribute to very high rents and house prices, and prevent these places benefiting from growing to obtain thicker agglomeration effects.

This contributes to the “left behind” scandal, but not in the way people imagine. When rents and house prices are higher in London and the South East and we subsidse home ownership or council housing elsewhere, it’s low productivity workers from poor regions that find it most difficult to move given housing cost differentials. As a result, they get locked into poorer cities and towns that would otherwise shrink further. That’s why Burnley, Hull and Stoke are the most egalitarian cities in the country, whereas prosperous London, Cambridge and Oxford are the most unequal, even as inequality between regions has intensified.

Having restricted people’s mobility through bad housing policy, we then impose one-size-fits-all solutions and subsidies which dampen market signals further. National minimum wages, fiscal transfers, national pay bargaining, and more, might be designed to alleviate hardship, but they deter poorer regions from attracting new businesses and industries by trading on their market cost advantages. Then, to top that off, we compound the problem further by centralising tax and spending powers, preventing localities from prioritising their spending and revenue streams to their own economic needs.

Now, as it happens, Bowman and Westlake’s policy agenda is perfectly compatible with assisting  “people” rather than “places,” precisely because it’s market-based. They advocate planning liberalisation, a flexible right to buy, and stamp duty, all of which would improve labour mobility. They prioritise infrastructure spending based on benefit-cost ratios, making investments more profitable with sensible tax changes, and devolving more transport power to regions and localities. All, again, will help facilitate areas adapting to changed economic conditions, rather than reviving Labour’s failed top-down regeneration attempts.

But pitching this as a city and town agenda still risks creating the false impression that the net gains from “creative destruction” nevertheless can be achieved without the destruction, and that all places can thrive in the right policy environment.

One can understand why they framed it in this way. Their aim is to persuade the party and its MPs of their platform. Anti-market commentators would call them fatalistic and “abandoning” places if they acknowledged the downside, as if facilitating more free choice amounts to design.

Successful past Tory economic narratives, though, willingly acknowledged hard truths. Deficit reduction entailed tough choices to curb spending. Thatcherism entailed making the case for letting inefficient industries fail. If a new Tory vision is serious about raising productivity growth and spreading opportunity for people, it will have to confront the inevitable market-based adaptation for some places.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Neil O’Brien: Corbynomics – and why it means that your house, business and savings don’t really belong to you,

Neil O’Brien is MP for Market Harborough.

What is Corbynomics? It goes without saying that it’s a much more extreme economic programme than Labour have ever had before. And that government will spend, tax and borrow more. But Labour have a lot more damaging, half-baked and dangerous ideas.

No-one is thinking about them at the moment, but the scary thing is that within weeks these ideas could be affecting your house, your pension and your job.

For me, the most frustrating thing is that Labour have identified various important issues, but their proposed “solutions” would make matters worse. Let’s look at a couple of examples.

Seizing 10 per cent of all large companies’ shares

Lots of people, including me, worry that current corporate structures create pressures that make managers behave in a short-termist way, squeezing investment to hit short term profit targets and dragging down productivity growth. I’m concerned that publicly quoted firms are beholden to increasingly transient shareholders, interested in immediate returns. They certainly invest far less than privately owned firms who can take a longer-term view.

But my answer to this would be to change the tax treatment of investment, and increase capital allowances so that there’s no disincentive to invest.

Labour’s answer, in contrast, is to forcibly transfer 10 per cent of all companies shares to create a sort of employee-ownership-at-gunpoint.

This is a terrible idea, which would make investment into the UK dry up overnight. After all, if government can steal ten per cent of your shares, what’s to stop them coming back for the rest? Labour protest that the shares are not being stolen – just given to the workers. But that’s a lie, as they also propose that a Labour-run Treasury would take the great majority of the dividends that those shares attract. At the moment, these are owned by savings and pension funds – so the money is ultimately coming out of your pocket.

The total value of the shares stolen by government would be around £300 billion, according to the Financial Times. For comparison, raising the basic rate of tax by one per cent raises £4.5 billion a year, so you can see what a vast tax grab this would be.

Forcing people to sell their properties at a price set by government, and control rents

There are major issues about the balance of rented and owner-occupied property in Britain. We had a long period when the number of properties being moved into the rent-to-buy sector was outstripping the number built, meaning owner occupation fell dramatically. Between 1996 and 2016, the home ownership rate among middle income people aged 25-34 fell from 65 per cent to 27 per cent.

However, in 2015 the Conservative Government reformed the tax treatment of rent to buy and second homes, and in the years since we have seen homeownership rebounding upwards, with both ownership and the rented sector growing in a more balanced way. There are lots more things we could do to grow home ownership.

Corbynista Labour doesn’t really believe in home ownership. They are nostalgic for the world of the 1970s, where around two thirds of households in places like Islington lived in social housing. But they know ownership is popular.
So they have announced the “private sector right to buy”. This will give private tenants the right to make their landlords sell their properties to them at a discount.

In an interview last week, John McDonnell made it clear that government would set the price: “You’d want to establish what is a reasonable price, you can establish that and then that becomes the right to buy,” he said. “You (the government) set the criteria. I don’t think it’s complicated.”

It’s not complicated. But it is deeply unfair. It would be a retrospective raid on people’s assets. People, including some who are not so rich, have invested in property under certain rules, and would have their savings ripped off them, while other people who invested their money in other things would not. This is arbitrary and unreasonable and would I’m sure be challenged in the courts.

Labour would also set rental prices, promising in a recent document that “There should be a cap on annual permissible rent increases, at no more than the rate of wage inflation or consumer price inflation (whichever is lower).”

This is unworkable or will lead to under investment in rented properties. Why spend lots doing up a flat if you can’t charge more for an improved property? We would quickly be heading back to the 1970s, when there wasn’t enough rented accommodation to go round, and conditions were squalid because of rent controls.

Sectoral wage bargaining

With the National Living Wage, the Conservatives have introduced one of the highest minimum wages in the world. For the lowest paid, the National Living Wage plus the cuts in taxes for lower paid people mean that they take home £4,500 more than they did under the last Labour Government – while employment has soared to a record high. We should be really proud of our record.

However, the National Living Wage is still set by an independent body, and as percentage of average pay in the market, so there is a sensible link to what businesses can afford without sacking people.

In contrast, under Labour politicians would just set rates directly. Labour have also pledged to “roll out sectoral collective bargaining”. Labour said it would “fix the going rate” in each industry and “set fair conditions” for the sector. This would represent an end to the system whereby unions negotiate company by company and, instead, give them power effectively to set national standards on pay and conditions. A new government unit would work with unions to bring firms into line.

This means that if politicians or trade unions decide your business is part of a particular “sector” (a pretty subjective question) then you would be in line for a change in wages which your business might simply be unable to afford. The scope for union bullying and endless court cases and demarcation disputes is obvious. In the car industry, wages are high, so a sectoral wage would be high. If I make plastic bits for the car industry but also other industries, is my business in or out of the automotive sector?

Rebecca Long Bailey has also said that “Labour will also legislate to reduce pay inequality by introducing an Excessive Pay Levy on companies with staff on very high pay.” There is no detail on what the rules will be, but the idea of having wages directly controlled by Jeremy Corbyn is likely to deter inward investment.

What do these ideas have in common?

When New Labour left office, a million people had been thrown on the dole, we’d had the deepest recession since the second world war and government was borrowing more than at any time in our whole peacetime history. In the final year alone, they borrowed £7,900 for every family in Britain.

And that was New Labour. Imaging what the country would look like after Corbyn and McDonnell.

Where Corbyn’s ideas really differ from previous Labour leaders is that he doesn’t really believe in the rule of law. Your house, your business, your savings: all these things don’t really belong to you, in Corbyn’s eyes: you have them only as long as the government suffers you to have them, and they can be retrospectively taken away if he sees fit. In the week Robert Mugabe died, we’ve seen underlined just how important the rule of law is. But under Corbynomics, it would be the first casualty.

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Kevin Hollinrake and Rosalind Beck: Rent controls would hit London hardest

Kevin Hollinrake is MP for Thirsk and Malton. Dr Rosalind Beck is a doctor of Criminology and a Conservative Party member in South Wales.

Most people assume when you have a shortage of a product, the answer is to create more of it. Currently, in the context of the UK housing shortage, however, this is not seen as the answer; instead, the thrust of policy is to play musical chairs with what already exists.

This is seen, for example, in policies to force the transfer of houses from one tenure (private and social rented housing) to another (owner-occupation), via punitive taxation and regulatory measures in the private rented sector (PRS) and by Right to Buy in the social sector. This does nothing to alleviate the original problem – a shortage of housing.

What’s worse, as pointed out in a recent report by Jacob Rees-Mogg and Radomir Tylecote, some of the ‘solutions’ in turn create new problems, for which further solutions must be found.

Theresa May’s sudden decision to scrap Section 21 notices in the private rented sector (PRS) is a case in point. If this knee-jerk decision goes ahead it will mean tenants gain indefinite tenancies; this is because landlords won’t be able to serve a notice on them unless they breach specified conditions of their contracts, which would have to be proved in a court of law. Scrapping Section 21 would be disastrous for the PRS and we are hoping that this will not be pursued by the new administration.

Of course, no sooner did Theresa May make this announcement, than George Monbiot, amongst others on the left, predictably called for the next ‘solution’ to the problems this will create:

“The government’s promise to repeal section 21 of the 1988 Housing Act, which enables owners of property to evict tenants without good reason, will achieve little if it does not come with a cap on rent rises: otherwise landlords can engineer de facto evictions by hiking the price.”

And so the clamour for rent controls began, notably with Sadiq Khan demanding powers to introduce them in London. He has made this his flagship policy, despite having no idea how it would work and what the impact would be.  Sadiq Khan’s team don’t know if leftie rent controls will help Londoner.

Although it is in the Labour Manifesto to introduce them nationwide, the more immediate threat is in London, so we will focus on that here.

The special case of London.

In recent years, it has often been stated that rents are soaring everywhere in the UK. This is false as rents have generally tracked inflation and in London rent rises are already well below inflation, increasing by just 0.9 per cent in the year to June compared to CPI standing at two per cent.

This is therefore a curious time to demand rent controls, as it could mean increases being capped at, for example, 2.5 per cent.  This could result in 2.5 per cent becoming a target and rents rising more than they would have otherwise done.

To support the policy of rent controls, emotive arguments are often deployed, especially about the experience of renters in London. One hears how expensive rents prevent them from saving so they can later buy a home of their own.

This is of course regrettable, but there are two sides to every coin and two sets of circumstances to look at; those of the recipient of the housing and those of the provider of it. Without the willingness of the latter, there would be no rented housing. However, in a currently febrile atmosphere, with hardly anyone willing to speak up for private landlords, their perspective is, rather stupidly, rarely considered.  Taking no account of landlords in this, is not only bad for them; it is extremely damaging also to the interests of tenants.

An analysis of the situation demonstrates that rent controls would in fact devastate the PRS in London, where the proportion of private rentals is higher than anywhere else in the country, at around 40 per cent of all housing.

To illustrate this, one only has to compare, for example, Bermondsey, in London, with Mountain Ash in the South Wales valleys.

In South Wales many two-bed houses can be bought for under £65,000 and be rented out for under £100 per week. This rent amounts to a gross yield of 7.4 per cent.

In contrast, a similar two-bed home costing £500,000 in Bermondsey would typically be able to command a rent of £1,550 pm. The gross yield here would be 3.7 per cent.

As one landlord explained to us:

“Some London tenants might think their rent should be capped or reduced to some arbitrary figure set by Government, so that they can manage without worrying. But on a £500,000 house, the landlord is likely to have put down a deposit of £100,000  from their own savings. They will only do that if they can get some return on their money. Does the Government and the tenant think that a previously unknown-to-them private individual – that is, a landlord –  is going to reduce their charges so that they make nothing or even a loss?  What landlord would agree to do this? How would this subsidising be sustainable over the long-term?”

Because £1,550 pm rent seems a lot to most people, Khan and others misrepresent this as though London landlords are committing some heinous crime in seeking a modest gross return of not much more than 3%.When other costs, including mortgage payments and maintenance, are taken into account the figure is more likely to be around one per cent, if that.

Somebody needs to explain business, yields, returns and commercial decisions to Khan, as he clearly does not understand the small margins involved in the PRS.

In a situation where yields are already so tenuous, if caps are put on what landlords can charge, many will make nothing on their investment. The new tax levy, known as Section 24, has already pushed many landlords into a loss. Caps would push this further and many landlords would be forced to sell up.

There are further complications. Rent controls would also be likely, for example, to mean that a time comes when rents no longer meet lenders’ requirements – which have become more stringent because of Government legislation – and the landlord may not be able to re-mortgage when their mortgage term come to an end.  In such circumstances, landlords will have to sell up, evicting the tenants in the process.

As Richard Lambert of the National Landlords Association has said:

“Sadiq Khan… needs to tell us why rent control won’t reduce the number of private rental homes available to Londoners, as it did before, and as it has done everywhere else it has been introduced.”

Some people might welcome this, thinking that first time buyers can buy the sold houses. They need a reality check; such homes are way out of most first-time buyers’ league and have been for decades. Indeed, it is only because landlords have been willing to let out such homes for a small gain (capital appreciation may also occur, but is not guaranteed), that any tenants can afford to live in these areas. This has been critical in supporting the London economy, but the contribution of private landlords has not only not been recognised; it has been derided as though they have done something wrong.

In addition, were caps to be introduced, not only would current landlords bale out, but this would lead to a complete halt on further investment. One need only look to Barcelona, where the Mayor, Ada Colau recently legislated to force developers to include a 30 per cent social homes quota in all new developments of a certain size. Colau boasted that this would lead to 300 new affordable homes in the city each year. Instead, as the quotas make new development unviable, building has collapsed in the city; developers have simply taken their investment elsewhere.

Similarly, who is going to choose to build homes to rent in London, when rent caps are in place, meaning scant, if any return on their shareholders’ investments? Why would they not just go elsewhere?

It is thus rather galling that this issue comes up time and time again with no-one learning from the international and historical experience of rent controls.

The lessons are:

  • Rent caps kill investment.
  • Rent caps lead to a contraction in supply
  • Rent caps lead to a lowering of quality in private rented housing.
  • Rent caps are not a solution to a problem.
  • Rent caps create new problems.


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Andrea Jenkyns: Help to Buy largely helped the better-off – instead let’s support those who really need it

Andrea Jenkyns is MP for Morley and Outwood.

Conservatives have traditionally been the party of homeownership, and Margaret Thatcher’s idea that owning one’s home gives them a sense of independence and a stake in their country it is still more than valid. While the Housing Act 1980 gave five million council house tenants the right to buy their own houses, it is now difficult for part of the population to secure their first property. We have just chosen a new Prime Minister in Boris Johnson: this is an unmissable opportunity to be the party that champions home ownership and puts in mechanisms to help people get on the property ladder, whatever their background.

There is a link between homeownership and social mobility, and these two are enshrined in the conservative ideas that hard work pays off. To regain our mantle as the party of homeownership, we need to again make it possible for people on lower incomes to have the opportunity to own their own home. Currently, it is too difficult for the aspirational working class to save enough money to buy their first home, especially if they do not have parents who can help them with a deposit.

I would like to see the introduction of a new housing strategy in the form of a ‘Social Mobility Housing Policy’. This would be aimed to help both those in social rented housing, who are unable to save for a deposit. and those in the private rented housing sector, who pay much higher rents than those in social housing and also struggle to find ways to save up to buy a house.

Government schemes to promote home buying have been successful but they are not reaching a large part of the population who aspire to own their own homes. The average household income of those benefitting from Help to Buy is £52,000.

The National Audit Office found that 60 per cent of those using the scheme could have already afforded to buy. Rather than enabling those who otherwise couldn’t afford it onto the property ladder, for many it simply helped them to buy a bigger house, sooner.

In my constituency of Morley and Outwood average pay is £26,500 but first-time buyers need to stump up nearly £25,000 for a deposit. Unsurprisingly, this is the main obstacle to owning their home.

I recently asked the previous Housing Minister what assessment he had made of the effectiveness of the Help to Buy scheme in supporting less well-off people to buy a home. He said that the scheme helps those who cannot raise a large deposit, with over half of buyers putting down only a five per cent deposit to purchase their home.

What about the hard-working families who can’t even raise this whilst they are paying rent each month? They remain stuck in the private rented sector feeling unsettled about whether they can put down roots and start a family. Millions of them could afford the mortgage repayments, which are on average less than private rents in every region, but they are held back by the initial, prohibitive deposit hurdle.

With Help to Buy coming to an end in 2023, we should now be planning a wider range of homeownership models that support families who couldn’t otherwise afford it onto the housing ladder.

One model that inspired me when I was PPS to the Minister of State for Housing, was a Rent to Buy Scheme, where tenants save to buy the home they are renting. Unlike other schemes, it doesn’t require an upfront deposit but rather takes into account the renters’ earnings and potential to save. Under the model, tenants move into a brand new, privately financed home, pay an affordable rent (80 per cent of market rent including service charges) and benefit from a long-term tenancy of up to 20 years. This enables them to put more money aside each month towards a deposit whilst they can settle in a house they know they will one day own. When they are ready to buy, they are further supported by a gifted deposit worth ten per cent of the property’s market value.

To significantly increase homeownership, we must support innovative schemes like this that really tackle the barriers for those who are less well-off. I hope that the new Prime Minister will make home ownership a priority.

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Can hotels refuse to rent rooms to ICE?

Westlake Legal Group Marriott Can hotels refuse to rent rooms to ICE? The Blog rent marriott Immigration and Customs Enforcement illegal aliens hotel rooms detention

This probably sounds like an odd question, but it came up when I was reading a report at the Daily Caller about various hotels being “pressured” by liberal groups to not rent out rooms to Immigration and Customs Enforcement (ICE) for the temporary detention of illegal aliens awaiting court hearings. It’s apparently not all that common of a practice, but it is an option that’s available when normal detention centers are overcrowded or the detention takes place at a location far from one of the normal facilities. Some hotel chains, including Marriott, have been buckling to this social justice warrior pressure and stating that they would prefer not to accept the business.

Unions and advocacy groups are pressuring hotels not to assist Immigration and Customs Enforcement in housing detained migrants, in the latest showcasing of how the private industry is being dragged into the political battlefield of immigration.

Marriott, Hilton, Choice Hotels, Best Western, Wyndham, Hyatt, IHG and MGM Resorts all released statements explaining they do not wish to participate in the detention of migrants following President Donald Trump’s announcement of illegal immigrant arrests scheduled for the weekend of July 13, The Associated Press reported.

While the corporate position is made clear by each company’s statement, individual hotels are not necessarily barred from housing migrants since their franchise agreements do not prohibit migrant housing, according to AP.

This phenomenon isn’t limited to hotels. As the linked article notes, transportation companies including Greyhound, United Airlines and American Airlines have issued statements saying they would refuse to transport detainees to detention centers.

This leads to two obvious questions. First of all, on what basis can a private company offering public accommodations refuse such services? This is clearly a politically motivated decision. Is Marriott saying that they could also instruct their workers to refuse a room to anyone wearing a MAGA hat or a Bernie Sanders t-shirt if they find such things offensive? Seems to me that they would wind up on the losing end of a lawsuit fairly quickly if they did.

This doesn’t seem to be a case of a company declining to bid on a government contract (which they could obviously do) but rather individual cases of detainees needing a place to stay. That assumption is reinforced by the fact that Marriott admitted that individual franchisees could choose to ignore the guidelines and rent the rooms out. Since when are such businesses allowed to turn away paying guests based on their detention status or the law enforcement agency accompanying them?

The second question is why any supposedly “progressive” activist would want the hotels to turn them away. These groups are allegedly outraged that some detainees are kept in “cages” or left to sleep on cold floors. I’ve been to many Marriott rooms. (In fact, I’m a platinum level member of their reward program, though I’m reconsidering that now.) I can assure you that even in the most modest of their accommodations, the rooms are more than nice enough, with comfortable beds and clean bathrooms and showers. Would these activists prefer that the detainees be stuffed into a truck for an overnight ride to the aforementioned “cages” and put there? One would imagine they might like these illegal aliens to have a nice room and a shower.

Partisan liberal nonsense aside, the original question remains. When can companies deny service to paying customers based on the fact that they don’t like the completely legal, government jobs the officers hold? Most of the people they will be turning away would be from Mexico, Central or South America. Sounds kind of racist, doesn’t it?

The post Can hotels refuse to rent rooms to ICE? appeared first on Hot Air.

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Sponsored Post: Richard Lambert – Housing is too important to be used to create a legacy 

Richard Lambert is Chief Executive of the National Landlords Association (NLA). This is a sponsored post by the NLA.

Why has the Conservative Party turned its back on the self-sufficient, the entrepreneur who is prepared to work hard and plan for their future?

The Thatcher Government inherited a dysfunctional housing market, and opened up the sector, fast-tracked home ownership and liberalised the laws around private renting. Over the ensuing three decades this has paid dividends. The UK’s flexible workforce is able to move to where jobs are, students can move to study in other parts of the country and, at the same time, people have been able to restore previously destroyed pension pots. These are Conservative values which Theresa May undermined with an announcement to try and create a legacy.

Private renting has gone from strength to strength, and we have all benefited from the flexibility that it provides, which is why Number 10’s proposed abolition of Section 21 ’no fault’ evictions in April was met by landlords with dismay and outright anger. Anger at a policy that has not been thought through and is based on a news cycle, rather than solving the issues that do exist in the private rented sector. The announcement shows a basic misunderstanding of the private rented sector in the highest echelons of government. Landlords’ anger has yet to dissipate; instead it is now accompanied by incredulity at the lack of consideration Theresa May has shown for the likely outcomes of this proposal.

The importance of Section 21 is not so much in its use – only around 11 percent of landlords have used Section 21 in the last five years, according to YouGov. Section 21 provides landlords with a process through which they can be certain of vacant possession, as long as they comply with the legal requirements to give appropriate notice to tenants and in providing a safe home. As no evidence of fault is required, landlords can follow an accelerated possession claim and avoid attributing blame to an individual and stigmatising them. It also avoids putting both parties through a court hearing, in an already over-stretched court system.

Ministry of Justice statistics show that from July to September 2018, there were 5,183 accelerated possession claims using Section 21 which did not require a court hearing. During the same time period, there were 5,781 private landlord claims heard in court through the standard route. Without Section 21, the courts could see a dramatic and potentially catastrophic increase in the possession claims they would need to hear.

This is compounded by the lack of funding for courts, which has seen 90 out of 240 county courts close between 2010 and 2018, and increased pressure placed on those that remain. Is the Treasury going to reopen these courts and adequately fund the legal system? May’s government has repeatedly underplayed quite how dire the situation currently is for users of the courts system. National Landlords Association members take an average of 145 days at a total cost of £5,730 to regain possession using the courts. The lengthiness, cost and uncertainty inherent in using the courts has resulted in the reliance on no fault eviction.

The reality is, wholesale reform of the court process is a necessary precursor to any changes in possession procedures. A new housing court or tribunal needs to be introduced if the new Prime Minister wants to continue May’s headline-grabbing announcement. There would need to be a meaningful and successful change to the way landlords regain possession. Those involved in the tribunal will need to have specialist knowledge of housing law to ensure clarity and consistency with decision-making; something which is currently lacking. This cannot be accomplished on the cheap; who is going to fund it? Doing nothing will not be an option.

Removing Section 21 and failing to address the courts means piling more and more risk on the households who need the most help. Those who can’t access the social rented sector and who have no realistic opportunity to access finance for a mortgage are the ones who are going to find it increasingly difficult to rent a home. The Government is committed to ending homelessness; this one policy will undermine all the work that has been done and is being done by councils and central government.

The next leader of the Conservative Party has an important decision to make when it comes to housing. Does he want to lead a government which promotes aspiration to property ownership and self-sufficiency or one that can only look to recreate the mistakes of the 1970s? Scrapping Section 21 may seem bold and popular, but in reality, it is a policy that Sir Humphrey would describe as brave, perhaps even courageous.

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