Recent Articles

Foreign money is turning London’s housing market into an unaffordable bubble

According to the Bank of England, each year since 2010, £23 billion of foreign money has poured into the London property market. One would think that this is a good thing for the economy, but most of these foreign buyers have never been to London, or at least have no intention of spending any time here.

It’s all about the preservation of wealth. The residents of unstable oil-rich countries fear the Arab Spring. The residents of China and Russia fear their governments. All are looking for stability. It has become the fashion to “park” money in London. It’s what wealthy people do when they don’t trust the banks, they “park” their money through the purchase of an asset, as a store of value. In this regard, the London property market has become a gynormous piggy bank.

In 2011, Regent Street was valued by The Crown Estate at £2bn. Each year a multiple of over 11.5 times this in ordinary homes is being snapped up. That’s the equivalent, each single year, of Oxford Street, The Strand, Fleet Street, High Holborn, Trafalgar Square, High St Kensington, Old Bond Street, Berkeley Square, Park Lane and Knightsbridge, and more. That’s just one year.

The reason government is doing nothing about this, is because the economy has been so delicate for the last three years, and the question of whether we are in or out of recession have been so finite, that any short term economic activity has been welcomed.

Far from rebalancing the economy, this government are just desperate to fend off the calls for a Plan B. Far from building a long term prosperity, they are trading the benefit of short term finance, for long term misery. This chancellor, who once accused Gordon Brown of being “dishonest” with the British people, is now covering the tracks of his own failure, fully in the knowledge that a future government will be forced to clear up the mess.

The dividing lines between Labour and the Conservative Party is clear. We believe the state has a role to play in building a better society, they believe that the market is supreme in every regard. We believe that government can guide or regulate the market as and when it becomes destructive. They do not.

In this case, the destruction is due to the sheer scale of housing that is being taken out of productive use. The situation has got so bad that even the bankers are being edged into poorer districts. This then bumps the next social class into the next district and so on. In my area of Tower Hamlets, period housing used to be priced at a premium, but as prices push against the ceiling of affordability, the prices of ex-council flats are coming into line with the Victorian terrace.

As prices rise and foreigners become excited by their returns, more money pours into the market causing more housing inflation. If this speculative bubble were caused by the British population then there would be some constraints imposed by the size and the wealth of the native population, however, we are talking about massively greater forces at work.

We keep reading polling that tells us this is not a major issue to the electorate, but that is the reason why Labour should be hammering the message home. Ever since George Osborne’s economic policies failed, we’ve seen increasingly dangerous long-term problems being created by a government who are only concerned with securing their own jobs.

They will continue to do so until the Labour persuades the nation of their folly and creates a consensus for restrictions on foreign purchasing.

So how did Quantitative Easing work out for us?

So the era of ‘Quantitative Easing’ seems to be coming to an end.

In time to come people will ask, “Did you really just turn on the printing press, and let it rip?”

They’ll say, “Oh, yes. Three hundred and seventy five billion worth. We know a good thing.”

“Wow! And what did you spend it on? Cathedrals? Bridges? Space exploration?”

“Nah, we just gave it away to the bankers.”

“Really”, they’ll ask. “Why was that?”

“Convention. When high street lending seized up, we needed to get money into the system, we printed tons of the stuff and bought gilts from the high street banks for massively over-the-top prices. That way they had money to start lending again.”

“So at least you got them lending again.”

“Well, no. Not quite. It turns out that the people asking for loans were unrealistic. Like the ones you see on Dragon’s Den who don’t know what day of the week it is. The £375 billion we gave to the bankers ended up in the stock market instead. But the good thing is that the bankers absolutely loved it. Money for free.”

“But why didn’t the realistic companies want loans?”

“Because they were all cutting back. Austerity scared them shitless, so they didn’t want to invest, which caused more austerity and so on.”

“But surely, you could have built 200 St Paul’s Cathedrals with that kind of money. At £30m a mile, we could have had 12,500 miles of motorways. Eleven new HS2 train lines could have been built. The economy would have taken off with that kind of money.”

“True, but it would have looked like a Plan B. So we knocked that one the head straight away.”

“So you gave £375 billion to the bankers rather than be seen to do a plan B?”

“You bet we did. The bankers loved us for it. The stock market went ape.”

“So did that solve the problems?”

“It made sure there was enough money in the economy. The problem was that it didn’t cause the money to move about. There was no circulation. The money went to one part of the economy and kind of sat there. The money was sticky.”

“Wow. Well I think that was a major cock up. The electorate must have been furious?”

“Nah. They didn’t understand it. The politics worked out fantastic for us Tories.”

Why Britain should play an active part in arming Syrian rebels

If the UK government is considering arming Syrian rebels, it should also consider embedding British personnel with rebel forces.

This arms supply method was developed by Fitzroy MacLean in his dealings with the Partisans in WW2. It is accounted for in MacLean’s famous book Eastern Approaches.

The reason for embedding personnel, with our equipment, is partly that we can then be sure who is using our arms, but also in order that we have a relationship and an influence, both now and in post-conflict Syria.

In WW2 the Balkans were just as bloody as Syria is right now, if not more. Whole villages were executed as Nazi punishments. Engaging the Partisans, MacLean would often dissuade them from responding in kind. “A modern country would not do that kind of thing.”

He was reminding them that after the war they would be expected to join the international community, as a nation, not a barbarous tribe. MacLean probably averted a considerable number of massacres and atrocities, but he was only able to do so because he was present.

British influence, of this kind, would be felt by the Syrian rebels, if we were arming and amongst them.

Most of the reports concerning the character of the rebels comes from Turkish and American intelligence in Syria. The problem with this intelligence is not that it is wrong, but that it paints a picture of the rebels unaffected by a relationship with us. They long ago gave up on the west as allies. We have little influence, while Saudi Arabia and Qatar has considerable clout.

My point in describing the MacLean system is to draw attention to the humanitarian benefits, which cannot be replicate by sitting on the sidelines and saying “Nothing to do with us. We’re not responsible.”

Do we achieve innocence through inaction? If a man is drowning and we stand by and watch, are we not responsible for his death, due to our lack of action? If a doctor watches a man die, knowing that the medicine in his bag which could save him, has that doctor done nothing wrong, by his inaction, of has he killed the man by his failure to act?

If the rebels demonstrate themselves as barbarous, while under the influence of the Saudis, are we not at least partly responsible, by our refusal to enter and engage?

By embedding our personnel, we can pick and choose which militia can use our technology.

We can encourage talks and cooperation between factions, acting as honest broker. We can influence a peaceful outcome and avert further tragedy. That is the type of player we should be.

The economic case for more social housing across Britain

Rising house prices used to make cheery headlines in the papers. It was associated with economic success. We were all getting richer. If people can afford to pay more and more for houses, then the economy must be getting bigger and bigger.

In truth, the rise in house prices had just as much to do with the easy availability of mortgages, which created an “effective demand”.

As a youngster, I remember how people’s excitement of buying their own council flat infected everyone else. Aspiration amongst the working population must be one of the most important factors to a thriving economy, and it was very much instilled in the east enders in the ‘80s. This is how Thatcher won.

Today we hear commentators speak of the “lack of animal spirits”, referring to an economy which is moribund. Few people are investing lavishly. Few new enterprises are born from a sketch on the back of a beer mat. There’s a general lack of excitement, of inspiration.

The problem is that if we want to fix the problem of over-valued houses, then we would need to supply enough new homes to cause house prices to fall. However, deflation would stop developers buying land for fear of losses through falling prices. House price deflation would effect consumer spending. If people believe they are getting poorer in their assets they will avoid splashing out. How many politicians would choose policies that would have such an effect?

George Osborne must have considered these issues, when he chose to support the buyers, rather than the builders, of new homes. Such is his largesse that his subsidy will include houses up to a value of £600,000. So much for first time buyers.

The problem for the Tories is that they will only look at one section of the housing stock. When considering the solution, it helps to see housing as two separate stocks, with two separate economies. Private housing with it’s market economy, and social housing with it’s demand economy. They are both effected by supply and demand but in different ways. A lack of supply increases prices in the private stock, and waiting lists in the social stock.

The solution is to greatly expand the social because this can increase the amount of available housing without effecting the value of private homes, as social housing doesn’t compete with owner occupation. It would likely bring down private rents but we’re not so concerned about that, because falling rent puts money directly into the pockets of tenants, so the economic effect of rent deflation is more than mitigated.

A dramatic increase in the stock of social housing is an existing policy of Labour. Ed Balls proposes to build 100,000 new homes by providing 20% deposits to Housing Associations, who would raise the rest on the capital markets, using a business plan that combines homes for sale with not-for-profit rent. However, he should probably consider a figure closer to 300,000+ if he really wants to make an impact.

He should also make it his business to sell the economic argument for a greater expansion of social housing to the wider electorate, with a particular emphasis on the likely lower rents, as this provides a benefit to those who haven’t had the good fortune to get a social home themselves.

So it’s not just units that Mr Balls must contend with. He should also turn around the sorry reputation that social housing has developed from past mistakes. That makes a whole other challenge.

How ‘competitive tendering’ is ruining our economy

Year on year, every year, contractors and suppliers have to do their job for less money. These days it is written into the contract that savings will be made next year and the year after, so it is no longer just about suppliers believing they can save money now, it is also about faith in a future that will somehow, from somewhere, deliver savings.

So if I bid for a contract to clean a residential street, I must calculate the cost of the worker and the cost of his brush and pan, and then I must seek to reduce it. Next year I must reduce it more, and the year following, more still.

The previous Labour government were very much a part of encouraging this process, because the economy used to be so inefficient, and there is no doubt that we have a more competitive economy as a result. However, there are costs to the never ending pressure on suppliers.

Companies bid so low for contracts that they have to then make a profit by cheating small amounts from the fringes. This has become epidemic in the culture of our economy, and is turning us into a nation of petty crooks.

The ordinary consumer suffers similar infuriating raids. We get fined for parking, fined for paying our bill, fined for this, fined for that. Extras are piled on top of extras. The price in the end is always greater than the price up front.

Everything is about presenting one figure then aggressively snatching money through underhand tricks. Dishonesty and cheating is the new norm.

Government policies made it worse. Working Family Tax credits subsidised wages and enabled suppliers to enter lower bids. Immigration brought into the country people willing to work hard for less money allowing bids to be lower still.

The real problem is that Competitive Tendering has outlived its usefulness. We live in a world where “Meals on Wheels” are delivered for such a low price that the elderly person doesn’t even hear the word “hello” before the delivery person is back out the door and onto the next address.

There was a time when efficiency simply didn’t exist in the system. That was why we sought to create value. We trimmed the fat and made systems streamlined. It was a good thing that we did this. However, the job is now done. The fat is trimmed. Why are we continuing? Do we need to trim bone? This isn’t doing any good. Much the opposite. We’re creating a very nasty society.

We need a new concordat which is based on values beyond money, and allows the supplier to make a profit without defrauding at the fringes.

We need respect for our fellow human beings whether they receive a service or are part of the team that delivers it. We need to recognise that Competitive Tendering is no longer the solution, but is now a part of the problem.

Do we need a different approach to criminals?

It’s an interesting piece of ancient philosophy that a criminal has broken the rules of society and therefore does not deserve to receive the benefits from society. In our world this philosophy has completely disappeared.

For us, we are all equal in the eyes of the law and the law is equal in all our eyes. A mass murderer in prison serving a life term has equal access to law, medicine and the protection of the police, as any other member of society, regardless of his conviction.

But should left-liberals think about re-evaluating this approach?
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Palestine and the media

The problem with the Gaza disaster appeal video is that it focused itself on the Palestinians as victims rather than being a call for peace. This is not new. The media’s focus on the Palestinians as victims has been a considerable part of the problem over the last 20 years. During the First Intifada, when children threw stones at Israeli soldiers, pictures were beamed around the world and it became the biggest media story of the day, but the effect on both Israel and the Palestinians was disastrous.

The need of western-world television viewers and magazine readers was to share the suffering of a small people, but children in the West Bank and Gaza found themselves with a choice of going to school or going to where the western press scrum were gathered and be a hero before cameras that told their story to the whole world. Perhaps a billion dollars worth of media was made out of that story, by Reuters, AP and the BBC, but I doubt if the Palestinians received a single penny of that money.
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