The one thing we shouldn’t be worrying about over the provision of social housing is funding. With interest rates on the floor it is a simple matter to raise the funds required through the issue of 30 year gilts, currently costing less than 3% pa, and transfer those funds on to the Housing Corporation in the form of 30 year mortgages. The Housing Corporation in turn would pass the funds on again over perhaps 25 years to housing associations, local authorities or indeed anyone else wanting to build and rent social housing. This way the capital is fully repaid by the time the gilts mature, and the quarterly repayments can be used partly to pay the interest and partly to invest in a repayment wealth fund. With rents at the levels they currently are it should be easy to make the finance work, and of course any strain would be taken by housing benefit. That in turn will reduce as unemployment falls. Important of course that rents are set at market levels for this to work.
Encouraging private landlords into social housing is just as important. Historically private landlords have avoided social housing like the plague, as they regard the whole system as hopelessly unreliable. I remember once ringing round six different estate agents in Oxford to find private social housing for someone, and every single one of them said ‘no’. Three said it was a matter of company policy, and the others admitted they did not trust the system. And I can see why. Benefits officials tend to shoot first and ask questions later, leaving the claimant unexpectedly stranded, even though there may be nothing wrong with their claim. On top of that we now have the Coalition proposing an end to direct payments. One of the things I remember from my time as Finance Director at PCHA is how much time our housing officers had to spend with tenants just helping them with simple domestic budgeting. Direct payments were often key to getting the rent paid on time.
To overcome this, and hugely to increase private sector investment into social housing, I propose the setting up of a Landlords’ Guarantees Agency. In return for a small commission off the rent, sufficient to fund the agency’s costs, the agency would offer landlords charging a social rent guaranteed payment of that rent, less commission, on the nail in advance every month. The agency would then collect the rent from the tenant which, with all the powers of the state behind it, it would be in a much stronger position to do. The arrangement could also benefit the tenants since if necessary the agency could press the landlord to fulfill his own obligations under the tenancy agreement, such as for maintenance for example. It would provide protection from rogue operators on both sides of the fence.
I also propose the introduction of a flat rate benefit for the homeless. Perhaps at a rate of £100 pw or thereabouts, this would allow people who are entitled to housing benefit but who cannot actually claim it, because there is insufficient social housing available and who therefore quite literally end up on the streets, to take the initiative to sort themselves out. Their ‘demand’ would encourage the charitable or private sector provision of hostels or they could find lodgings, though what they actually do with the money would be entirely up to them. This way the most vulnerable of all in our society would no longer be caught up in the dependency culture the current system creates through having to wait for some bureaucrat to fall out of bed the right side that morning. They can get on with it themselves. The cost would be nothing, as the money is already mandated in the form of housing benefit.
UKIP have quite rightly said that all new housing must be built on brown-field sites, and that the starting point will be to set up a register of where they all are. I was relieved to hear that about one third of these are thought to be in the South East, where presumably most of the homeless are, but it is not something to leave to chance. Essentially the aim must be to build the houses where the brownfield sites are, and then to create the jobs where the houses are. This requires an effective and structural regional policy.
This is not the only reason we need such a policy. Regional imbalance is also an impediment to reducing unemployment, as well as a factor in dealing with devolution and the Barnett formula.
Regional policy has never been successful in this country, and the reason I believe is that it has always been applied to the supply side of the economy. Stimulating the economy, which is essentially a matter of increasing consumer demand, given that investment follows demand, is like trying to move a piece of string lengthways. If you push it (supply side) it will just crumple. To get the whole thing to move you have to pull it (demand side). This became obvious in the late 1980’s. The relatively rapid recovery of the economy in the early eighties was caused by the removal of credit restrictions so that people started to chase up house prices by increasing their mortgage borrowing. When on top of this Nigel Lawson then cut taxes in his 1987 budget people used the extra money to jack up their mortgages even further and the boom just took off. I suspect this memory inspired George Osborne’s Help-to-Buy policy, which indeed has had some success. So it works at the national level; it just remains to apply the same principles at the regional level. It also chimes with UKIP’s policy of lower taxation.
I propose therefore that a second personal allowance be introduced into the income tax system, applied on a local post-code basis and related to local levels of unemployment, and perhaps also to housing availability, by an appropriate formula, so that people living in areas of higher unemployment would pay less tax for a given income than those living in areas of lower unemployment. I am sure this would go down very well in places such as Clacton, Rochester and Margate! It would regenerate local communities from within, which is by far the best way to do it.
I also advocate the setting up of a chain of Local Community Banks, on the German model but owned by the Bank of England, to take in deposits and lend them on to local small and medium-sized businesses (SME’s). They would not get involved in payment clearing or mortgages in any way and would not therefore replace the clearing banks. But they would allow lending criteria to be skewed in favour of areas of higher unemployment, a sort of localised quantitative easing (QE) if you like, whilst keeping its overall lending book balanced.
These policies would have the effect of creating a much more even level of percentage employment across the land, which in turn would enable average unemployment to be reduced much further before London and the South East trigger inflation. This is essential not only to deal with housing mismatch but also to reduce the deficit. As I have said elsewhere, UKIP can eliminate the deficit entirely by reducing unemployment by between 4 and 5% because for every one percent reduction in unemployment the deficit reduces by between 20 and £25bn. However there are a number of impediments to reducing unemployment this much. The first of course is immigration, but regional policy comes a close second. Both are required, and I would argue also for a big increase in the welfare earnings disregards in order to ‘make work pay’, something Universal Credits does not appear designed to achieve, but that is really a separate subject.
A separate regional policy will enable us to lift regional considerations out of issues such as HS2 and devolution. UKIP has of course committed to abolishing HS2 anyway, but the argument that regional policy is dealt with separately adds further grist to the mill. Devolution is a more interesting matter.
Many of you may remember the old rating system that used to exist in London whereby it was always the poorest boroughs that charged the highest rates. Margaret Thatcher always argued that this was due to their profligate loony-left policies and there may well have been an element of that, but the principle reason surely must have been that they had fewer taxpayers and higher costs. Although there was supposed to have been a redistributive balancing formula, it never seemed to work.
All public expenditure, with the possible exception of transport which is largely user financed, involves a transfer of wealth from rich to poor. Our progressive tax system is based on this principle, as is the principle of allocating expenditure according to need. A moment’s reflection will indicate that this will only work if both taxpayers and recipients are all in the same pot. If you compartmentalise the pot then you are likely to end up with most of the rich in one compartment and most of the poor in another, and the transfer mechanism is broken.
There is also the question of where you locate expensive and scarce facilities. You may not be able to afford to supply one for each pot, or there may be insufficient demand to justify one for each smaller pot. In the case of Aisha King’s cancer treatment the NHS could not afford the required machine at all and he had to go Prague, which was of course private sector and therefore available to anyone across the globe. This is what I call the Dis-economies of Devolution.
Much of the upsurge in popularity for the SNP is I am sure due to the recession; what the medical profession calls a ‘referred pain’. It is illogical to suppose that if you are independent then that somehow gives you access to more funds or that you could use them more efficiently. Almost certainly that is not the case for Scotland, both because I suspect that a disproportionate number of higher-rate taxpayers live south of the border (not an issue that was discussed at all during the referendum campaign as I recall) and because the referendum has now highlighted the fact that Scots receive more public funding per head, about £1,500pa as I recall, than the English.
Devolution means we can no longer allocate expenditure according to need (the management mechanisms necessary to do this are now entirely missing anyway) and it follows we must go for a ‘fair’ equal allocation of funds per head instead. Of course the Scottish government can always add their own layer of taxation to make up the shortfall (which probably will be less than popular!), but what they can’t do is subtract from UK taxation. UKIP is committed to revising the Barnett formula onto this basis, though my proposed tax-based regional policy would go some way towards redressing the balance on an equally fair basis.