Daily Archives: 23 June 2006

Childish behaviour

Liberal England points to an intriguing story from BBC Leicestershire:

People are lying to the police about anti-social behaviour to get groups of children dispersed, police have said.

A senior policeman admitted there was an increasing trend of residents calling to complain about innocent behaviour, like playing football.

Inspector Andy Ramsey, from Leicestershire Police, said incidents were exaggerated or even invented to ensure officers intervened.

I get the sense this story is merely the tip of the iceberg. And while the young are the obvious victims here, there is something sad about a society where adults are so disempowered and infantilised that this is what they resort to. But then, isn’t this what the “Respect Agenda” is all about?

Social mobility and housing

(apologies for the lack of posts on this thus far – I’ve been remarkably busy over the past few weeks and that is set to continue. But I’ll do my best to keep this updated when I can).

From what little feedback I’ve had about this website so far, a lot of people seem to think my main hobby horse is pensions. This is probably partly because of launching this site during the same week that the government announced their new pension plans.

In fact, personally I think pensions are a bit of a red herring. For a long time people have been awake to the emerging problem of what to do about the “pensions timebomb” and I think Adair Turner got the balance about right. If there is still a problem, it lies in the fact that financial pressures will force a number of people to opt-out of their second pension.

Where do those financial pressures come from? Rising graduate debt doesn’t exactly help, but if I were to pick out what I think is Public Enemy Number One it is simple: the lack of affordable housing.

Housing is a remarkably equal opportunities social issue. Well, lack of housing doesn’t seem to be affecting those at the very top of the tree, but for everyone else it is a problem, affecting both middle and working classes alike – worse, it is forcing the middle classes to scrounge off the working classes.

In London, the average house price is now £306,664. Back when I was at school, we were taught that you could only borrow up to 3.5 of your income. Under this quaint old rule of thumb, you have to be earning £87,618 p.a. in order to get a foothold on the housing ladder.

In reality of course, people have a broader range of options. There are graduate mortgages, where a bank essentially lends you more on the basis that your future earnings are set to increase. If you are a “key worker” you can get some support from the government. A growing number of more entrepreneurial people are resorting to buy to let. In essence, if you can’t afford to live in the area where you work (common in London), buy a property somewhere else and live off the rental income. This in turn of course means that the pressures on London property prices essentially seep out across the rest of the country, exacerbating the problem.

For most people however, it means getting a top up from their parents or other relatives. That’s if they have parents/relatives who can afford it. It doesn’t take a genius to work out that means that how well you are likely to be able to get on is going to be increasingly dependent on your social background.

In short, the options available to young people attempting to get some long term security are some combination of scrimp and save, pass the problem onto someone else and depend on inherited wealth. Is it no wonder that social mobility has taken a nose dive?

The papers have been rife over the last few days about a new study published by the Sutton Trust about how professional careers are now dominated by public school educated people. Lots of theories have been floating about as to why this is in an era where class is generally perceived to no longer be particularly relevant. Once again, much of this boils down to housing. As Will Hutton writes:

Another factor is that London has become more expensive and the growth in starter salaries has not kept pace. Having parents who can support you early in your career is more crucial. London house prices prop up the middle class’s closed shop as effectively as independent schools.

I don’t think you can underestimate this factor. Many professions – from law to journalism to party politics – are propped up by an internship system that relies on the fact that people are prepared to work for free in the expectation that it will get you a rung on the ladder. The think tank “sector” (such as it is) that I work in is incredibly nepotistic and extremely dependent on unpaid interns. Even for a tiny organisation like the one I work for, competition for places is considerable. We’re all too aware that getting an internship gives people a major advantage in terms of getting paid work in the sector, yet the only people who can afford to take an internship tend to have comfortably off and understanding parents. It’s a conspiracy of convenience that quietly and surely gives the comparatively wealthy a clear advantage regardless of talent.
The mass expansion of education was supposed to create a more level playing field but in fact the opposite has happened – because so many more people have degrees now, employers need other ways to differentiate potential applicants. Bizarrely, we’ve created a system whereby young people are forced to get themselves into tens of thousands of pounds of debt for a degree that is worth far less than its free equivalent 30 years ago (John Harris has some interesting related statistics here: the argument for tuition fees was always that graduates would earn, on average £400,000 more over their working life; in fact, an arts grad can expect to earn £22,000 more).

To cut a long story short, lack of housing is starting to have a severely detrimental effect on social mobility. Far from realising the Eighties dream of everyone being a homeowner, what is instead happening is that we are creating a landed middle class with almost impenetrable power over an unlanded underclass. While this is good for those families who got on the housing ladder over the past couple of decades, it’s bad news for everyone else and it’s dreadful news for the economy.

So, what’s to be done? Unfortunately, the problem is not as simple as “build more houses.” No developer wants to build affordable housing when they can make vastly more money on more expensive housing for the same cost. Speculation has a stranglehold over the property market – indeed, as a society we worship this fact. That speculation leads to over-inflated housing costs and an artificial limitation of the supply of available land. In short, developers are quite happy to sit on land and wait until the price is right. But land is not capital, which loses value over time. Indeed, sitting on land can be a very profitable business indeed.

We have to end this nonsense. The simplest mechanism I have come across for doing this is an annual tax on land values. This tax would be levied on landowners whether the land was in development or not; sitting on land would cost and thus the supply would be much larger. And because land values are entirely based on external factors such as accessibility to public services and transport links (as opposed to the capital costs of property such as bricks and mortar or double glazing), it is a virtuous tax as the money raised is created by society and not the landowner in any case. What’s more, the money raised from it could replace taxation elsewhere. The most obvious candidate is council tax, but most people agree that land value taxation could raise much more than that.

The alternative? Well, we can sit back and watch the concept of a dynamic, meritocratic society go down the toilet, or we can spend billions of pounds of taxpayers money enriching the very people who are sitting on land and causing the problem in the first place. I’m open to other ideas, but I haven’t heard anything better.