FAO Ed Milliband

An especially dispiriting feature of current public life is the combination of low government approval ratings and a lack of credible alternate narrative from the opposition. Labour's dossier on the NHS reforms might be a sign of greater feistiness, but I've yet to notice any real headway on economic matters. The government's economic messages are dominating the media. Their basic framework seems to be:

• The country is dangerously in debt. ("...the whole world is concerned about high deficits, and our economic stability depends on allaying those concerns [...] We will not take Britain back to the brink of bankruptcy [...] the country has run out of money")
  
  
• Labour spent too much. The debt is their fault. ("...we have inherited from the previous Government plans – if you can call them that [...] Not a single penny of savings had been identified [...] The debts we were left threatened every job and public service in the country")
  
  
• Too much was spent on public services and, in particular, welfare. We can't afford to spend so much on these things. ("We have chosen to cut the waste and reform the welfare system that our country can no longer afford...")
  
  
• Therefore public spending must be cut as fast as possible. ("...eliminate the structural deficit by balancing the cyclically-adjusted current budget over five years, by 2015-16. And we set a target of national debt falling as a proportion of national income by that same year [...] for reasons of caution, we will achieve both these objectives a year earlier in 2014-15">
  
  
• Cutting spending will, in and of itself, provide a stimulus to economic growth. ("The crisis in the Eurozone shows that unless we deal with our debts there will be no growth. And these forecasts demonstrate that a credible plan to cut our budget deficit goes hand in hand with a steady and sustained economic recovery.")

Labour is having trouble countering this story, which makes a certain amount of simplistic sense when repeated often enough with firm hand gestures. Nothing is that simple, however, and the government's story is based on ideology and fallacy. Labour, here is a suggested economic story that you could be telling.

Let us go back to the very basics. An economy is a system for allocating resources. Economies came into being as a method for humans to allocate resources more effectively. They do not exist in order to grow endlessly. An economy that does not improve the wellbeing of those who participate in it is a failure, whether or not it is growing according to measures of Gross Domestic Product (GDP). An economy that inflates on paper but has no impact on quality of life is wasting resources.

It is becoming increasingly clear that increases in national GDP have little or no impact on wellbeing in developed countries. Indeed, a rash of recent books (I recommend Happiness by Richard Layard) point out that measured wellbeing has flatlined in recent decades. The government has even acknowledged this, but without accepting that they might need to do something about it. Politicians are elected with a responsibility to improve the wellbeing of their electorate. The economy is not the electorate, and a narrow focus on promoting economic growth is an abrogation of responsibility.

When you approach the government narrative from that perspective, it looks much less credible.

"The country is dangerously in debt." Government debt has previously been at higher levels and the country has survived . What makes the current situation specifically worse is that credit ratings agencies, financial markets, and the International Monetary Fund say it is worse. All three have strongly vested interests in taking that view. Credit ratings agencies make assessments of how well national governments and companies can repay debt, but are not held accountable for the accuracy or impact of their assessments. They are profit-seeking companies, not independent agencies. Credit ratings agencies are in fact part of the financial markets that make their profits from betting on whether debt can be repaid. The IMF is an organisation driven by flawed free-market ideology. Reducing public spending is its policy prescription for any economic downturn, an approach which contributed disastrously to the 1997 Asian financial crisis.

"Labour spent too much. The debt is their fault." The last government spent a lot of money bailing out the banks. I don't know whether that was the right decision, but it should at least be seen in a wider context. Most European countries were also bailing out their banks in late 2008, as was America. Blaming the Labour government specifically is ridiculous, as this was the same approach taken, for good or ill, by the rest of the Western world. Until the bailouts, UK debt levels were stable.

"Too much was spent on public services and, in particular, welfare. We can't afford to spend so much on these things." This is manifestly ideological. There is no specific level of public spending that an economy can afford. Different countries choose to tax and spend to different degrees, according to political persuasion. To say that basic public services cannot be afforded presupposes that the economy is more important than people's wellbeing. If the economy is growing but wellbeing decreasing, the government has the wrong priorities and policies. Whilst it isn't inevitable that lowering public spending will reduce wellbeing, in the case of the coalition's cuts it seems inevitable. Security is an immensely important aspect of wellbeing. Reducing the welfare safety net, the quality of healthcare, the accessibility of education, the affordability of public transport, and the availability of the emergency service, whilst unemployment rises and prices inflate; that's a recipe for insecurity and anxiety.

"Therefore public spending must be cut as fast as possible." The speed at which cuts take place is likewise ideological. Spending time carefully considering the evidence and evaluating the risks of withdrawing and reducing public services assumes you value them in the first place. The government simply does not. Their debt deadline is entirely arbitrary; there will not be bailiffs banging on the door of the Treasury if we still have a deficit in 2015.

"Cutting spending will, in and of itself, provide a stimulus to economic growth." This is a delusion. Spending cuts have only just started and the economy is already contracting, with growth forecasts repeatedly cut. Even if economic growth was an aim worth pursuing in itself, rapidly cutting public spending would not make it happen.

The government is cutting public spending quickly, with no understanding or interest in how it will hurt the vulnerable. Not only is this damaging the wellbeing of millions, it is not even going to achieve the stated aim. These are the messages that Labour should be emphasising more clearly. When the challenge comes back, "But you didn't have a plan to deal with the deficit!", the obvious response is that rebuilding and reforming the economy in order to avoid a repeat of this kind of banking collapse takes time and evidence. A considered approach is clearly preferable to rushing into dramatic contraction of the whole public sector, with only discredited ideology to support you. The coalition government threw together an emergency budget in less than a month, cutting millions without considering the unintended consequences. Labour need to say clearly what this means: that the government does not care how the cuts blight people's lives. Labour should position itself as the party that puts people before economic ideology, whereas the government does the opposite. Perhaps they might even consider supporting the claim with some policies.

I should mention that I've never actually voted for Labour in a general election. It isn't that I'm a staunch Millibandit (or whatever you'd call it), I just yearn for a strong opposition in Westminster. Hopefully Labour are currently formulating an approach that will lift the level of debate above the present no-cuts-versus-all-the-cuts doldrums. I enjoyed the friendly atmosphere whilst marching for the alternative on March 26th, but demonstrations like that aren't nearly enough. The government's economic policies must be challenged more strongly by politicians. The coalition's narrative is not just slightly misleading, it is entirely wrong. It's time that the opposition stood up and said that.

If they already have and the media has failed to inform me of the fact, please be so kind as to provide a link.

Don't You Know There's A War On?

I know I should be used to it by now, but I still can't help getting enraged by the government's specious and hypocritical War on Town Hall Non-jobs (currently being enabled by The Telegraph). Quite apart from the fact that this is a 'war' on a largely low-paid, majority female workforce that are trying to make other people's lives better, it's the bare-faced idiocy of it that really gets to me. Quote:

This week Mr Cameron singled out Manchester city council for what he said were “politically-driven” cuts.

He said that, rather than closing help centres, libraries and swimming pools to save £110 million, the council should look closer to home at the chief executive’s pay, for example.

So the Manchester City Council Chief Executive is being paid more than £110 million a year? Somehow I doubt it. Moreover, David Cameron is hardly in a position to tell anyone else off for making 'politically driven cuts', is he?

You know, I wish this much-touted localism was actually genuine. Then maybe local councillors would be able to freely decide who councils employ to do what and, as long as the community were happy, it would be absolutely none of Eric Pickles' or David Cameron's damn business.

Numbers Game

If yesterday's Cambridgeshire County Council meeting was dramatised as a Hollywood movie, the trailer would sound a little like this:

Fifty-four councillors...
Nine and a half hours...
Two arrests...
£161 million cuts over five years...

ONE BUDGET

The full details of Cambridgeshire County Council's budget can be found here. I've been trying to digest what they mean. The meeting really did last until 8pm and was repeatedly held up by hecklers. Amongst all this kerfuffle, the council meeting discussed the budget by five service areas.

Children and Young People's Services will no longer be universal, but rather targeted at the most vulnerable. This includes Connexions, Youth Service, and Children's Centres. Services that are currently provided to all schools will also be targeted in this way, notably transport to school. Subsidies for music activities will end. Capital funding for new schools has all but disappeared, so the need for more school places 'may mean mobile provision in the medium term'. Non-urgent repairs and improvements to schools are to be delayed until more money becomes available.

Community and Adult Services take up the largest proportion of council spend, as it includes care for the elderly, disabled, and abused. Almost all adult social care services are already outsourced, so there is little the council can do to reduce their cost other than asking providers to find efficiency savings. The emphasis is on trying to prevent the need for costly care, by encouraging continued independence. The so-called 'offer to users', in other words the extent of support available, will reduce by 25%.

Community and Adult Services also includes libraries, which will see a 40% cash reduction in their budget over five years. 13 libraries in the county are under review; if they cannot be integrated with other local services or run by communities, they will close by April 2012. The frequency of mobile library visits will be reduced by 50%.

Environment Services cuts include the complete phasing out of bus subsidies, reduced road maintenance, fewer road safety campaigns, and the removal of universal road safety education in favour of targeting 'accident clusters'. The Trading Standards service will be restructured and reduced. Spending on the environment and climate change will be cut by nearly half a million.

Corporate Services includes the back office stuff like coroners, customer service, scrutiny, and democratic services. All of those areas are being reduced, as well as communications, emergency planning, and IT (which will cease to exist as a separate team and be cut by 35%). This rather unsettling phrase sums it up: 'there will be a move towards greater self-sufficiency and uniformity'. Opening hours for contact centres will be reduced, with the aim of ensuring as many people as possible get information online. The council will stop publishing magazines, reduce building maintenance by 38%, and stop any work on energy management. Several offices will be closed.

The final service consists of everything shared with Northamptonshire County Council, in a scheme that was designed to save money before anyone even knew to fear Eric Pickles. It covers things like legal services, human resources, finance, and procurement. Cost savings will be squeezed from here too, by reducing management and improving use of technology.

The documents available to the public don't specify which services the 450 council employees are being made redundant from. The answer is all of them.

Councillors obviously had incredibly difficult decisions to make, faced with £50.4 million savings to be found in a single year. Towards the end of this epic meeting, though, they really misjudged the public mood by overwhelmingly voting against a 5% cut in their allowances, proposed by the single Green councillor. If life was indeed a Hollywood film, at this point someone would have stood up and made a stirring speech about how we're all in this together and the motion would have carried. However this is the real world and the meeting did not end on such a happy note. So if you live in Cambridgeshire, make the most of your local library, rural bus services, specialist teaching, and transport to school now. Soon they will be replaced by the Big Society, or not.

The Big Issue

The phrase Big Society has been ubiquitous recently. Frankly I am getting tired of hearing it, particularly as no-one really knows what it means. Last week I watched Ten O'Clock Live, which was pretty entertaining and is still available on 4od here. The best bit was a loud argument between Johann Hari, Shaun Bailey, and Phillip Blond. Ostensibly this was meant to be about whether the Big Society is a good idea, but was really a debate about what it is. Each panellist had a different view. Amusingly, they apparently continued to argue about this off-air.

Hari described Big Society as a mere phrase, used as a pretext to justify huge cuts in public services.

Bailey saw Big Society as agreement that the government would stop interfering with charities and let them solve social problems in their own way.

Blond enthused that Big Society would lead to co-operatives springing up everywhere, and public services being run by independently by, presumably, enthusiasts.

Evidently, each man's view was entirely shaped by his background and particular hobbyhorses. Bailey is a former Conservative candidate for Hammersmith and now runs a charity there. Hari is a left-wing journalist, columnist for the Independent, and a staunch critic of the cuts. Blond is director of a right-wing libertarian think-tank that has been banging on about mutualisation, collective ownership, and co-operatives for ages.

I can see how all three perspectives have some merit, but overall the debate just gave me the impression that the Big Society is a void into which each individual projects their opinions. This is curious, given the fuzzily-articulated philosophy of collectivity and togetherness that seems to underpin government rhetoric. Of course, for the intended definition of Big Society, it's worth checking with the man who foisted it upon us, Cameron himself. In a recent Guardian article, he laid it out:

...it combines three clear methods to bring people together to improve their lives and the lives of others: devolving power to the lowest level so neighbourhoods take control of their destiny; opening up our public services, putting trust in professionals and power in the hands of the people they serve; and encouraging volunteering and social action so people contribute more to their community.

The article is actually worth reading, as it is a lot clearer than most of the waffle that the government has put out on the subject. Some of it even makes sense, but it is a totally partial approach. Cameron talks of the cuts to public services as an opportunity, but ignores the element of risk. The current government, many of them millionaires, don't see the public sector as a necessary safety net but as an impediment to progress. This post sets out this problem with the Big Society, along with a number of others.

More important than what the Big Society is, though, is what it'll mean. I agree with the David Cameron that the Big Society could transform Britain. It could turn it into a more compassionate, actively involved, resilient place - eventually and in some areas. In others, it could exacebate inequality and tensions between social groups, cause a rapid deterioration in infrastructure and the public realm, and trap people in blighted communities. Basically, diffusing public services into a confusing mass would cause rapid divergence.

That is, if you take David Cameron at face value. Let us look in more detail at his three policy threads, 'devolving power to the lowest level so neighbourhoods take control of their destiny; opening up our public services, putting trust in professionals and power in the hands of the people they serve; and encouraging volunteering and social action'.

Devolving power: the Localism Bill defies its name by containing over a hundred new powers for the Secretary of State for Communities and Local Government, including the ability to decide what constitutes an 'excessive' council tax increase. Urban areas without an established 'neighbourhood forum' won't be able to make use of the planning powers in the Bill, and require local councils to mediate between competing bids to take on this status. They also rely on planning authorities to provide advice and resources, which will not be available. Taking control of your destiny through planning is only meaningful if development of some sort happens, which requires investment. Not much sign of public investment any longer, so this require the private sector. Small, largely inexperienced and unresourced groups vs huge developers; the former may notionally have the statutory planning powers, but I think the public sector is needed as a mediator here, or at least a backup.

Opening up public services: the Localism Bill doesn't give community groups any precedence over private companies in bidding to run public services. Realistically, who is going to bid lower? Who is going to demonstrate economies of scale and a track record of delivery? It'll be the big companies. As for collective ownership, I'm not seeing a lot of enthusiasm for that at the coalface of local government cuts. Where's the support for mutualisation? Where are the precedents? Blond mentions one, a port. Has this been tried for housing services, planning departments, highways? All are being cut back at the moment. How do you take collective ownership of something like that? Anyway, when faced with cuts this sudden, local councils just don't have the time to properly consider outsourcing or 'opening up' services. Budget cuts of 20% will arrive before the Localism bill becomes law.

Putting trust in professionals: TRUST? Don't make me laugh! Have you read any press release from CLG lately? Have some samples:

Mr Pickles has raised strong concerns over the frequency of council papers, politically contentious advertising and use of lobbyists, pledging to rewrite the rule book. He believes councils should redirect resources into protecting front line services.

Whitehall has cut back the red tape which holds local community groups back and councils should now do their bit to support this national day of celebration

The taxpayer has a right to look under the bonnet of their Town Hall and see what decisions are being made on their behalf and where their money is being spent [...] Today I'm publishing a new code that will help decipher the Town Hall maze of middle management, bringing more public information to light. This will also give the few remaining refuseniks a clear game plan to follow.

And those are just from the past week! Also within the week, CLG responded incredibly defensively to a Local Government Chronicle article interrogating the department's published spending information. Quote:

The Local Government Chronicle has made claims that "Eric Pickles has spent millions on consultants since he took the reins in the Department for Communities and Local Government reflecting the cost of the reorganisation under way at Eland House."

This assertion is based on a factually inaccurate analysis of the spending over £500 that the Department now publishes as part of its commitment to transparency.

A spokesperson for the Department for Communities and Local Government said:

"It is completely untrue to suggest that millions have been spent on consultants since the change in administration. Several of the figures quoted are incorrect, refer to spending under the previous administration or have been incorrectly entered as consultancy. [So in most cases, it was their mistake not LGC's interpretation]

So much for trust. No wonder the relationship between local and national government is at an all-time nadir. Public servants are being painted as faceless, wasteful bureaucrats in order to justify making hundreds of thousands of them redundant.

Returning to Cameron's 'power in the hands of people', in general this is not a new power or legal change as such, but the expectation that sudden absence of public services will unleash innovation and creativity in dealing with, say, potholes. There are shades of Shumpeter's 'gales of creative destruction' here, the concept of something new and better emerging from chaos. A very old idea, almost always promulgated by those who would remain entirely unaffected by such chaos.

Last of the Big Society characteristics is the encouragement of volunteering and social action. This is laudable, but should also be bounded by realism. Twenty-four per cent of people volunteered formally at least once a month in April-September 2010, which is a fall from 29% in 2007/8 but still not bad. Can volunteers really replace trained public sector professionals, especially when the volunteers need to earn a living themselves?

Meanwhile, the support mechanisms that would allow people to donate more of their time to the community are being cut. Disabled Living Allowance, Child Benefit, in fact all benefits are being cut and/or capped. Social housing is being phased into 'affordable rent' - 80% of market rent unless circumstances are 'exceptional'. Cutting Education Maintenance Allowance and raising tuition fees will reduce access to further and higher education. None of these developments will foster a sense of security and resilience, both of which seem vital to the Big Society even starting to seed in an area.

I don't feel that I've got my head around the Big Society yet, but it doesn't look like anyone else has yet, either. The point that sticks out in my head is this, though. The reductions to public services, the cuts in benefits, and the retreat of the state are not uncertain. They are happening now. The Big Society is still potential, small-scale, and vague. It will work in some places but not others. It is characterised by a huge risk, that when the public sector withdraws, nothing will fill the space in some places. The government thinks this risk is worth taking and indeed seems quite keen on risk in general (just look at what they're doing, or rather not doing, with the economy). That's all very well for politicians, all they have to lose are votes. The majority of the public could find their life blighted if they make their home in a place where society remains that bit too small.

Return of the Localism Bill: What the Experts Say

The Localism Bill is currently stomping through parliamentary processes, Labour's attempt to derail it having failed. I recently found myself on theyworkforyou.com, an astoundingly useful website, reading transcripts of public bill committee discussions. This committee of MPs debates the Bill and calls representatives from relevant groups to talk about it. I came across some very revealing comments.

Chief Executive of the National Housing Federation on how the Localism Bill will change the supply of affordable housing:

Our assessment of what is likely to happen with this system, as we understand it, is that it will probably deliver new homes, but at intermediate rents. The overall stock of property available for letting at what we currently call social rent will significantly diminish—probably by between 125,000 and 130,000. There will, in fact, be a transfer away from social rent to higher intermediate rents.

Chief Executive of Shelter, on the effect the Localism Bill will have on the vulnerable:

Regarding the first part of the question about the impact on vulnerable groups—not just 16 and 17-year-olds—we think that the provisions to allow the discharge of homeless duty into the private rented sector will significantly threaten the stability that they might have. We will see a revolving door, with people constantly being in short-term lets in the private rented sector re-presenting as homeless. It does not give them a secure settled home and does not understand the nature of the problems they are facing. We would strongly contend that this is the wrong solution and that it will create significant difficulties in those areas.

On the private rented sector:
[...]
What this proposal lacks, if the Government wish to go down this route, is any licensing or regulation of the private rented sector. It will see a greater dispersal of very vulnerable people into the already least regulated sector. One of the Government’s first moves was to remove any agenda in the Rugg review or any desire to put more regulation into the private rented sector. That is a mistake.

And on private sector rents:
[...]
Let us be clear for a start: only 30% of the private rented sector in any one area will be available under the proposals because the Government have made it clear that that is the rate at which [Housing Benefit] will be paid. All those people who are being discharged will go into that—the bottom 30% in any one area. The Government are acting on the heroic assumption that landlords will put their rents down. We have seen no evidence from landlords or anyone else that rents will go down. Everything would suggest a marketplace with an increased demand and no increase in supply, where the prices will go up and up. We have pushed and pushed the Government on this, for their evidence as to what it suggests, and we have pushed the Department for Work and Pensions and the Ministers for the evidence, and they have shown us none. We are fearful that a lot of these assumptions are based on the misconception that rents will go down. It is a significant problem both for this Bill and the welfare Bill.

MD of Harrow Estates, a major national housebuilder, on planning:

The Bill provides for the abolition of regional spatial strategies, which is a high profile issue, and that removes one layer of the planning system. However, the Bill then introduces neighbourhood planning frameworks, so we are effectively removing one tier and replacing it with another. The number of hurdles that must be considered in order to navigate the planning process and deliver housing remains effectively the same. [...] The neighbourhood development plans can potentially introduce a plethora of issues, but at an extremely local and detailed level. The burden on the house building industry—the cost and investment of resources in order to deliver houses—potentially remains the same.

Chief Executive of Taylor Wimpey, another one of the UK's largest house-builders, on rent levels:

Having heard the tail end of the previous discussion about [private] rents falling, I would very much concur: I can’t see that happening at a point when the availability of capital is low and house prices are still relatively high. The only meaningful long-term solution involves a greater degree of housing supply, because that brings down the overall cost of housing, whether for private owners or the rented sector.

On when the housing industry will be able to build houses at 2007-8 levels, which it should be noted was still below the level of demand:

Without the Bill, with the status quo, it would probably be somewhere around six years before you saw the industry producing at the same level. With the Bill, I would estimate longer, because I think the transition will slow things down. Plucking a year out of thin air, that would be more like seven or eight years. It will make a difference to the speed of planning permissions, but it will be slow. It will not be slow because of the industry’s ability to build. It will be slow because of mortgage and planning permission availability.

[the other developers state that they agree with this view]

[...] can I tell you my great fear? In three years’ time, it all stops. We are operating currently on existing consent and on land banks. We need a flow of consents coming through the process to maintain and grow business. I fear that we will reach a point, in about three years’ time, when what we have currently on the stocks runs out, where in fact we have not got that supply coming through. That is the big challenge. That is the sort of transition [...] which so badly needs to be addressed.

President of the Planning Officers Society on the cost of Neighbourhood Plans:

[...] resources are a significant issue. What we have proposed in our response is that there should be some mechanism for councils, working with their communities, to resolve priorities. In my borough in London, for example, we have many very deprived wards, and we are already doing a lot of master-planning work with communities. It is not quite in this form [...]
Those are very expensive processes. They can take around 12 to 18 months. As well as using staff in the council—perhaps the equivalent of two full-time workers throughout the period—we have to employer master planners, urban designers, traffic consultants and the like. You are talking about £130,000 to £150,000 for a community of about 10,000. Even then, that is not a very detailed set of proposals for the whole place—one focuses on key issues. We have spent up to £250,000, or something of that order. These are places that need that master-planning work, not only because they are very deprived communities, which need to see change and investment, but because they are part of our growth area, so there is a wider benefit to creating more homes and more jobs for more people.

How does that sit as a priority alongside the neighbourhood planning proposals, which could come from other parts of the borough that we would not necessarily regard as having the same need?

Chief Planner for the Town and Country Planning Association on climate change:

The challenge [...] is what we are going to do with the major issues like climate change and renewable energy, and all sorts of forms of development that play out at a regional or national scale. My point is a tough one, and I do not really like to represent it because it is unpopular: will the sum total of 350 individual local authority decisions on carbon deliver the effective action we need on climate change—or on housing or on retail development?

On Neighbourhood Fora of the 'My House of Me & Two Housemates' type:

Planning suffers from a lack of legitimacy. The nightmare scenario is three people standing together as a neighbourhood forum in an urban area and taking on considerable powers. Looking at the detail of the schedules, I am conscious of two things: that local government, having once approved them, cannot dissolve them; and that as non-public bodies, none of the equalities duties would apply to them, the climate duty would not apply to them, and the sustainable development duty would not apply to them.

To conclude, an exchange between MPs.

Barbara Keeley, Labour MP:

I have a strong impression that this Bill was not ready. Parts of it have had very little consultation. In fact, I think that the community empowerment section has not had any scrutiny whatever; that was admitted in the note from the Department. To start with, as we have to spend our time on this for the next five weeks, I want to ask whether the Bill was not ready, and whether perhaps there has been a rush to get it out there. Is that why there are 126 order-making powers for the Secretary of State?

[...] in many of the sessions we have had this week, very negative concerns have been expressed about bringing chaos to the planning system, and getting to situation where we are not building the homes that we want and causing levels of homelessness. The difficult environment in communities and local government means that there are not the resources to do the necessary things. There are themes that have come across again and again in all the sessions. I had the impression sometimes that they were surprisingly negative and very strongly expressed by witnesses.

[...] there has not been enough scrutiny or consultation. Before I came here I was told that consultation was promised that never happened. Any Bill is poorer for that. There is no reason I can see to rush this Bill. If you are trying to make a profound cultural change, you need it to be accepted and not bridled at.

And the response from Robert Neil, Conservative MP and CLG Parliamentary Under Secretary of State:

[...] My judgment is that this Bill is in a good state of readiness.

Even though experts are saying very clearly that the Localism Bill would have massive unintended negative effects, I do not think the government is listening. The Housing Minister definitely isn't, as despite this bill determining the future of affordable housing, he is not even on the public bill committee.

Let It Grow, Let It Grow, Let It Grow

This week we learned that the UK economy shrank by 0.5% in the last quarter. George Osborne blamed the snow, conveniently forgetting that much of continental Europe experienced the same arctic conditions. Meanwhile Sir Richard Lambert, the outgoing head of the Confederation of British Industry, heavily criticised the government for having no economic growth strategy.

Sir Richard is right, when it comes to growth the government has some policy gimmicks but no actual strategy. Back in October last year a 'Local Growth' White Paper came out, awkwardly titled 'Realising Every Place's Potential'. Although the paper wanders erratically across planning, housing, sustainability, and region-bashing, the main message is summed up by this quote:

A further feature of earlier approaches was the belief that planning could both determine where growth should happen and stimulate that growth. This approach failed as it went against the grain of markets. Regional and other strategies stifled natural and healthy competition between places and inhibited growth as a consequence.

This makes it pretty evident that the new plan is to have no plan. The government doesn't think it needs a growth strategy. It considers the encouragement of economic growth not really any of its business; all it needs to do is destroy as much of the public sector as it can, and the economy will grow like Japanese knotweed. This is a very simplistic form of neoclassical economics, based on the lovely myth of perfect free markets. So as to ensure that the Department of Business Innovation and Skills doesn't look like a waste of space, though, a couple of policies have been announced.

Technology and Innovation centres are to be established, the first of which will allegedly open in less than two months. Next to nothing is known about what these are or what they'll do, other than the fact that they got £200 million funding in the Spending Review.

The other policy trotted out as supporting the economy is the Regional Growth Fund. This consists of £1.4 billion over 3 years, scraped together from various government departments (BIS, CLG, DEFRA, DfT, and the Treasury) for projects to 'rebalance' the economy away from the public sector. Regional Growth Fund is caught in something of a Catch-22. Public sector bodies categorically cannot apply for it. Private sector organisations can, but must ensure that they aren't breaking the rules on state aid, which try to prohibit the government from propping up certain companies at the expense of others. State aid rules are complex, hard to understand, and greatly restrict the monetary support that businesses can get. As you can imagine, this presents problems. Nonetheless, the first round of the fund (a maximum of £300 million) attracted nearly 450 bids totalling well over £2 billion.

£1.4 billion may sound like an awful lot of money, but it is trying to replace multifarious infrastructure and transport funds, on top of the £6 billion spent in the last few years alone by Regional Development Agencies. For all their faults, RDAs provided business support and economic strategy. They are being wound up at the moment and their functions centralised or simply stopped. They will not be replaced, unless you count the completely unfunded Local Enterprise Partnerships, which I am not inclined to.

How successful is the No Plan economic plan likely to be? To date the signs aren't encouraging. The government is ignoring the fact that the public sector used to spend a lot of money in the private sector. And the fact that the private sector relies on public services and infrastructure to operate. And the fact that business confidence is heavily linked to government policy. And the overall state of the world economy in relation to the UK. The economy is shrinking, and the cuts have barely started yet. VAT hadn't risen yet in the last quarter, either.

The UK is vulnerable to economic forces far beyond its control. Rises in petrol prices, which the press have been up in arms about recently. Rises in food prices, as we import so much of what we eat. Rises in cotton prices, as we import almost everything that we wear. Inflation is therefore rising whilst the economy contracts. Stagflation, as it is charmingly known, was a feature of the 1980s. Inflation now is nowhere near what it was then (4.8% compared to over 20%), but give it time. Peak Oil is on its way.

The government wants private sector growth, which would require internal demand and/or exports to pick up. Demand for products and services within the UK is unlikely to grow given high and rising unemployment, limited credit availability, and higher VAT. Faced with reduced government support for the young and elderly, people will tend to save more. The disaster that is housing policy will increase costs in that sector, too. House prices will continue to rise as new supply gets scarcer.

Demand for UK exports has grown as the value of the pound falls, but is limited by the economic troubles of our main export partners (the US, Ireland, and the rest of Europe). Moreover, our major exports are cars, weapons, and financial services. Car demand is influenced by the likelihood of unemployment and wider economic climate (alarming), credit availability (poor), and petrol costs (rising). Weapons demand is influenced by government defense spending (being cut). Financial services got us into this mess in the first place.

Despite all this negativity, I am aware that I live in one of the few places to be prospering economically. The high-tech cluster around Cambridge is one of the few bits of the UK to be a net contributor to the Treasury. But at the moment the government isn't interested in what's holding this area back; overloaded transport infrastructure, unaffordable housing, and loss of public sector co-ordination and expertise. These are market failures which cannot be fixed by the private sector.

The government has lost sight of the basic fact that you have to invest money to make more money. That's practically the only policy lever it has left, in any case. National interest rates have little influence on levels of inflation or the cost of new borrowing nowadays. Regulation and tax incentives for business aren't popular with our neoliberal coalition. Their No Plan is to spend less to make more, probably based on a hunch.

This is not to say that no economic growth equals economic doom, far from it. Growth is pointless unless it improves wellbeing, and in any event cannot carry on indefinitely. At the moment government policy seems to be shrinking the economy and reducing wellbeing, although as ever I console myself with the fact that greenhouse gas emissions fall during downturns. Ultimately the UK and the rest of the world will have to reshape our economies to operate within environmental limits. Perhaps a coalition-assisted double-dip recession might set the scene for a lower carbon, less oil-dependent economy? It's a long shot, but hope for a green revolution springs eternal. Even when government economic policy seems entirely misconceived.

The £1,560,000,000 Question

I'd like to draw your attention to a couple of headlines that the mainstream press haven't really covered.

Labour politicians attempt to block Localism Bill. I hope they succeed in getting a longer consultation period, at least. This bill is actively centralist, has nowhere near enough safeguards, and will make the planning system impossible to navigate. I find it hilarious that the government's method of cutting the undoubted surfeit of red tape in planning is to remove the strategic and predictable layer of regional plans, and replace it with an atomised, unwieldy, and capricious neighbourhood layer. Much more work is needed on the Localism Bill, otherwise it'll prove in parts destructive but mostly just chaotic. Since it is meant to have such a huge impact on local communities, shouldn't they get the chance to have a say in what it contains?

'Affordable rent' could add £1 billion to benefit bill. I am so glad that someone has pointed this out to the Department of Work and Pensions. Surely it cannot have been hard to infer that if you increase social rents, housing benefit would have to rise, as the people living in social housing are the poorest and most vulnerable. Incidentally, the headline is slightly misleading - the rise could actually amount to £1.56 billion per annum. If the government intends to chop billions off the benefits bill, this is clearly not the way to go about it. Tellingly, no government impact assessment of the new 'affordable rent' (up to 80% of market rent) system has been published. Perhaps not even undertaken, if an independent research organsisation has to point out this glaring discrepancy.

I'm disappointed that this hasn't been more widely reported. There are two potential implications. Either:

The government has miscalculated the future benefits bill by one and a half billion pounds by not taking into account a shift in social housing policy. That would be an extraordinary failure of communication, planning, accounting, and indeed common sense. It is not a small mistake. With numbers like that, the responsible ministers should be getting serious questions from parliament, at the very least.

Or,

The government didn't factor the additional rent into the benefit bill because they don't intend housing benefit to cover it. That would result in that same one and a half billion a year apparently being paid by social tenants - the poorest, most vulnerable people. The elderly, disabled, carers, low-paid parents, and the like. It does not seem remotely realistic to expect them to be able to afford such rent increases. The average income of a social renting household is £14,800 per annum; 65% have incomes of less than £15,000.

The result would be vulnerable people in their thousands being priced out of housing, all housing. The purpose of social homes is to give those who cannot afford private rent or ownership a roof over their head. If this policy isn't reconsidered, the housing benefit bill will have to rise by billions or endemic homelessness will be the inevitable result. What a choice.

The epithet 'affordable rent' is doubly ironic; either the tenants can't afford it or the treasury can't. The higher rents are supposed to pay for investment in more social housing, to make up for the cuts to the Department of Communities and Local Government's budget. There's a certain cunning about channelling money from the Department of Work and Pensions into affordable housing, I'll admit. Unfortunately, the policy's success relies on DWP not noticing an annual one and a half billion pound overspend.

By the way, just in case you might somehow have temporarily forgotten, we are all in this together.