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newtjoh

Reviewing Starmer’s Conference speech

1st October 2022 by newtjoh

Keir Starmer’s 2022 Labour Party conference speech sketched out his strategy to occupy the political ground vacated by Trussonomics.

Labour would put working people interests over those of the rich, be the party of opportunity, of aspiration, of fairness, as well as of sound public finances and of economic competence.

Kwasi Kwarteng’s September mini-budget comprising £45bn of tax cuts – the biggest since 1972- with its immediate economically and politically disastrous aftermath provided a helpful backdrop to resonate his message to define the ideological blue water between Labour and Conservative, largely hidden during the May and Johnson administrations.

Trussonomics is essentially Reaganomics (relying on tax cuts on the rich to spur growth) mixed with Modern Monetary Theory – it is basically OK for governments that issue and borrow in their own currency to resort to money-printed deficit funding until an unsustainable inflation inflection point is reached.

In short, it is the Conservative free market equivalent of Corbynism, save that: the rising tax unfunded deficit will be the result of taxes being cut rather than of spending increased; John McDonnell was more wedded to fiscal sustainability and would have unlikely to have introduced discretionary spending unfunded increases to take the deficit to 7.5% of GDP, and if he had, would have prepared the ground better with the financial markets in a more pragmatic fashion;  the aim is to achieve a 2.5% headline growth rate just before a 2024 election – regardless of its sustainability and the ability to fund future health and other core social welfare activity – is more political cynical and single-minded in its pursuit of perceived party over national interest.

It is unlikely that will come to pass even on its own terms. Evidence is lacking that tax cuts concentrated on the top five per cent will lift growth – Reagan’s tax cuts in the 80’s led to a ballooning public deficit that had to be closed later.  It suggests instead that increased inequality retards rather than helps sustainable growth.

Embarking on unfunded borrowing to pay for tax cuts at a time when the public deficit is near to a record high, the balance of payments current deficit is widening, inflation is at a 30 year high, and when sterling was already weak, was asking for trouble. It soon came as the following chart showed.

Fiscal and monetary policy are now actively working against together to such an extreme that the Bank of England had to resort within days to a £65bn purchase of long-dated government bonds (gilts) to stop a calamitous sell off by pension funds facing margin calls due to bond prices collapsing in response to the sudden rise in gilt yields.

Most commentators expect mortgages rates to approach 6% by 2023. Combined with sterling at near parity with the dollar (which increases import costs) living standards on the vast majority will be squeezed that much tighter and first-time buyers thwarted as mortgage costs become unaffordable.  Outcomes that will heavily weigh down on growth making the tax cuts self-defeating in the process.

The political optics of reducing taxes on the already rich at a time when most working households are struggling to juggle their budgets with many without savings facing real hardship was also dire.

Kwarteng thus gave Starmer practically an open goal to shoot at. Shrouding his speech with his family backstory, parental struggle in a pebble-dashed semi, their hard work and aspiration accorded with the approach suggested in Starmer’s Story Must Be Labour’s Story. 

The headline flagship of his speech was 100% clean energy by 2030. Public-private partnerships spearheaded by a new Great British Energy state undertaking established within the first year of a new Labour government would unlock investment in domestic renewable energy sources to create a “million new jobs training for plumbers, engineers, software designers, technicians, builders” as well as insulate 19 million homes.

Complementing the £8bn National Wealth Fund that the shadow chancellor, Rachel Reeves, had announced the previous day, all this was rather suggestive of a green updating of Harold Wilson’s White Heat of Technological Revolution pre-1964 election banner, creating British jobs on the back of British innovation and investment.

Growth would also be bolstered by targeted capital allowances and borrowing to invest for long-term economic benefit within a wider fiscal framework where the current budget would be balanced: a resurrection of Gordon Brown’s golden rule. Fiscal rules would require debt as a proportion of GDP to reduce, with all policy commitments fully costed and funded, guided by (a previously announced) Office for Value for Money.

To support the customary Labour commitment to safeguard the NHS, more nurses, midwives, and doctors would be trained, funded from the proceeds of a reimposed 45% higher rate; in effect, a sleight of hand, insofar that reversing a cut simply restores to previous position: by the same logic reinstating the national insurance increases and Health and Social Care Levy would create the opportunity for £16bn of spending on new commitments.

70% home ownership would be sought by a policy framework favouring first time buyers (FTB) rather than Buy-to-Let investors and second home purchasers. Foreign purchasers would be charged a higher rate of transaction stamp duty, while a Mortgage Guarantee Scheme would aim to reduce FTB deposit requirements.

Such a commitment without some systemic reform of the current housing system based on private business models dependent on rising house prices, appears to risk becoming a false target akin to the Conservative 300,000 homes one, diverting attention from the substance of strategic policy change although mention was made to “reform planning so speculators can’t stop communities getting shovels in the ground”, which, however, is a slogan rather than a policy.

There were some other specific taxation pledges, namely retaining the reduced 19% basic rate and not reversing the national insurance increase – and relatively unremarked on – abolishing business rates, replaced with an alternative system (undefined) that would provide for early payment of revaluation discounts.

In that light, no indication was given how Boris Johnson’s existing September 2021 social care package – let alone an improved fairer one – would be financed nor was note made of the impact of Kwarteng’s tax cuts on its current progress.

Taxes on workers and employers have deadweight effects on employment, wages, productivity and growth, but given the public finances will be in mess if and when Labour forms a new government, such commitments beg questions as how spending on rising health care and social care needs in an aging society, on further education conducive to growth, on investment in affordable housing and bringing private sector housing up to Decent Homes Standard, is to made compatible with Labour’s proposed fiscal framework.

To square that circle is a long odds gamble on growth and lower interest rates coming to the rescue of the real crisis of the fiscal state: the mismatch between the public expenditure requirements of the UK and the political and electoral willingness for them to be met through forms of taxation that are efficient, sufficient, and transparent.

Honest and deep debate on public funding requirements matched to sources is accordingly avoided, invariably subverted instead to short-term political presentational purposes. The impoverishment of public services and an almost default governmental resort to hidden stealth or inefficient forms of taxation is the inevitable end-result.

In that light, it was disappointing that Starmer’s speech appeared to accept the Conservative take on the that taxes need to reduce, resorting to a New Labour-type tactical triangulation response, such as the linkage of increased spending on doctors and nurses with a reimposed 45% tax rate.

He could have focused instead on the trade-off between investing for growth and tax cuts, highlighting the impact of frozen tax allowances as a prime example of taxation by stealth on the hard-working majority, linking it to the need for system reform across the health and social care, housing and education sectors.

Strategy and tactics need to be rebalanced over the coming year.

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Filed Under: Economic policy Tagged With: Labour, Starmer

Time for a Modern Land Tax?

3rd September 2022 by newtjoh

1          The Vision of Henry George Revisited.

“Let the individual producer keep all the direct benefits of exertion. Let the worker have the full reward of labour. Give the capitalist the full return on capital.  The more labor (labour) and capital produce, the larger the commonwealth in which we all share.

 This general gain is expressed in a definite and concrete form through the value of land, or its rent. The state may take from this fund, while leaving labour and capital their full reward. And with increased production, the fund would increase commensurately.

 Shifting the burden of taxation, from production and exchange to land value (rent) would not merely give new stimulus to the production of wealth – it would open new opportunities. Under this system, no one would hold land without using it. So land held from use would be thrown open to improvement.

 The selling price of land would fall, and land speculation would receive its death blow. Land monopolization would no longer pay. Millions of acres, where others are now shut out by high prices, would be abandoned or sold at trivial prices.

 This is true not only on the frontier, but in cities, as well”.

Henry George, Progress and Poverty, 1879.

 Progress and Poverty sold more copies in America in the 1890s than any other book except the Bible, making Henry George a popular author across the English-speaking world and beyond.

It continues to well repay reading both as work of economics and philosophy. George –self-taught of humble origins, who worked as a seaman, typesetter, and printer before becoming a journalist – set out in accessible English a coherent world view centred on a tax reform that modern economists of differing political persuasions have re-awakened to as an efficient and equitable means to bolster growth.

His overarching tenet was that while people possess the right to the fruits of their labour, natural elements or ‘Nature’s (God’s) bounty’ not produced by human effort – air, water, sunshine, and land – should be vested with the community.

Private ownership of land would mean continuing suppression and exploitation of working people by the landowning class – a process that would intensify as land values rose with the population and with economic and urban development, so allowing landowners to subtract more and more wealth from the community.

George offered a solution – even a panacea.  Not political revolution in favour of the proletariat where the state took control of capital and labour, as well of as of land. Not progressive systems of taxation levied on income.

Rather, a single tax on the economic rents derived from land ownership as the: “The simple device of placing all taxes on the value of land would, in effect, put land up for auction to whoever would pay the highest rent to the state. The demand for land determines its value. If taxes took almost all that value, anyone holding hold without using it would have to pay nearly what it would be worth to anyone else who wanted to use it.”

The eighteenth and nineteenth founders of modern economics, including Adam Smith, David Ricardo, and John Stuart Mill, following the pre-revolutionary French Physiocrats, had earlier identified that land as a fixed factor of production in inelastic supply – the value of which depended on its use and location rather than its intrinsic characteristics – provided scope for its owners to capture massive unearned gains for reasons connected with the wider development of society (initially increased demand for food from a rising population, then for urban space in accessible locations), not the owner’s own actions.

As to what is meant by economic rent, or, more precisely in in this case, land rent, definitions include:  the difference between what land (or other factors of production: labour and capital) currently earns and what it would do in its next best use, regardless of the acts of the owner; and payments to a factor of production (including land) greater than the minimum needed for it to be supplied.

George’s single tax on land – meaning that it would replace and render unnecessary other taxes – involved taxing land rent at a 100% marginal rate, minus an allowance to prevent plot abandonment to obviate any need for the state to take ownership and to lease it out with accompanying risks of inefficiency and corruption.

Conceptually, if a land plot fixed in supply and is taxed according to its best possible use regardless of its current use, its owner to prevent financial loss will either put the land to that best use or sell it to someone who can or will.

A tax on land, in theory, is the most economically efficient tax, predicated on the assumption that the supply of land is perfectly inelastic or zero – its supply does not change at all in response to any change in its price.

In accord with that assumption, owners of land plot(s) cannot respond to the imposition of the tax by restricting its supply. Alternatively, if did respond by increasing its price, demand will fall returning the price again to its previous level.

The tax will be completely borne by its existing owner, therefore: its imposition will not alter or distort economic decisions concerning the current or subsequent use the plot is put, save that where the tax is levied on its best use, the plot owner will be incentivised, as noted above, to put it to that use.

If its value rises as result of a future change in its use, any consequent higher land tax liability will follow and not cause that change in use, avoiding – unlike other forms of taxation – economically harmful deadweight effects.

The 2011 Mirelees Review of Taxation defined deadweight loss, albeit less eloquently and less fired by belief than did George, as follows:

“By increasing prices and reducing quantities bought and sold, taxes impose losses on consumers and producers alike. The sum of these costs almost always exceeds the revenue that the taxes raise — and the extent to which they do so is the deadweight loss or social cost of the tax”.

Wider costs of tax collection and avoidance can also add to the deadweight cost of tax.

On the other hand, desired ‘merit’ (lower consumption of drink, alcohol, gambling, sugar, or other products deemed harmful) or externality (taking account of pollution, congestion or other effects resulting in costs not borne by the producer) impacts that can produce positive social benefits or ameliorate externality disbenefits that may subtract from deadweight cost.

Mirelees went on to emphasise, however, that reform should be driven by the core objective of minimising, as far as possible, the deadweight loss of the overall system.

George himself likened a single tax on land rent to “removing an immense weight from a powerful spring”, because it lifted the need for other taxes on labour, production, and on exchange: taxes that would otherwise reduce effort, output, trade, consequently constricting the community’s wealth.

Workers instead would keep the full fruits of their labour, capitalists their full return on capital, generating more income, investment, and wealth.

Such a tax would therefore “drive (rather than) act as a fine on improvement” in a dynamic and self-sustaining cumulative process. Landowners whether building or improving an orchard, homestead, or factory on a plot would pay no more in tax than they would if they kept it in its former unimproved state.

That would be true regardless of the cost of any improvements made, which would no longer have to absorb the input cost of other taxes on materials and labour.

George also identified that the incidence of a tax (whom its actual economic burden will fall) will not necessarily correspond or vest with the economic agent – whether company or individual – that formally pays it in cash.

In a telling, and ever timelier, answer to his own rhetorical question as to why – if a tax on land values is so beneficial – does the government resort to so many other taxes, he replied that it was the only tax that cannot be passed on to others: borne by landowners, it provides that group with a powerful interest to lobby and resist its imposition.

In contrast, businesses feel less need to oppose taxes, such as levies on inputs that they can then ultimately shift to consumers, especially when they “come in such small amounts, and in such invidious ways, that we (the consumer) do not notice them”.

Indeed, one could imagine how scathing George would be on the default propensity of modern UK governments to indulge in stealth taxation, such as tax bracket creep: the insurance premium tax fits his diagnosis to a tee.

National insurance employer contributions that increase the cost of labour – depending on the relative market power of firms, workers, and consumers – reduce wages to a point lower they could have reached otherwise and increase consumer prices: deadweight effects.

Land value taxation thus offers to bridge the socialist or communitarian nostrum that unearned wealth based on ownership of nature’s bounty (land and natural resources) should be harnessed for the benefit of the community with that of the premise that wealth-creation requires the lifting of economically burdensome and incentive-sapping taxation (deadweight) effects on business and individuals.

George’s prognosis that governments would be reluctant to impose a single tax on land however has proved almost entirely correct, however, for reasons that later Sections will explore.

2          The Modern Gradualist Georgist Approach

 Contemporary advocates of a Georgist approach to taxation straddle the UK political spectrum, encompassing the Labour Land Campaign, the Alter Group of the Liberal Democrats, and the Scottish Land Revenue Group.

Free market-oriented think tanks, including the Institute of Economic Affairs and the Adam Smith Institute, have also expressed past support for the principle along with many, if not the majority, of mainstream economists, including in the UK, the independent and influential Institute of Fiscal Studies (IFS), most notably in its flagship 2011 Mirelees Review.

The American Nobel Prize winner in a 2015 paper, Joseph Stiglitz, linked the enormous widening of wealth inequality in America since 1980 to two main causative factors: first, changing tax, education, health, anti-trust, regulatory, and monetary public policies; second, to an explosion in economic rents, especially land rents and values (expressed in rising real estate values).

He ascribed rising land and real estate values as the main driver of the increased wealth-output (and income) ratio recorded across most advanced economies since 1980, noting that productive capital (contributing to future growth of output, profit, and wages) is only a subset of total wealth, 42% of which was owned by the top 1%, with the top 0.1% owning 22%.

He concluded that such an unequal distribution and ownership retards and hinders economic and social opportunity, providing an underpinning reason why contemporary America, far from being the ‘Land of Opportunity’, offers to most of its people one of the lowest levels of equality of opportunity amongst the high-income countries.

Moreover, as land is a store of value dependent on its future expected value, land prices are prone to untethered self-fulfilling rises, resulting in speculative bubbles that, in turn, can and often do give rise to wider economic instability with its attendant costs.

Stiglitz, endorsing George’s arguments that Section One summarised, concluded that: “a tax on the return to land, and even more so, on the capital gains from land, would reduce inequality, and by encouraging more investment into real capital (plants, machines, research and development), actually enhance growth”.

Recent relevant data tends to vindicate George and Stiglitz. A dataset produced by the Organisation of Economic Co-operation and Development (OECD) found that across its membership the share of total non-financial assets taken by land was within the 40-60% range.

The UK Office of National Statistics (ONS) May 2022 national balance sheet estimates, covering the 1995-2021 period, puts the value of UK land (exclusive of the value if dwellings and other building structures that may be built upon it), in 2021, at £7.0 trillion (seven million million), around 60% of the UK’s assessed total net worth.

Table 2 of the same estimates reports that the total value of produced non-financial assets (best proxy for productive capital) was £1,684,803million in 1995 when the total value of land (non-produced financial assets) was £1,066,725million, but by 2021 that position was transposed, with land accounting for £7,011,740 compared to £5,100,144 million of non-produced financial assets (capital).

A July 30th 2022 Economist  opinion piece noted that in 2020 the world’s largest asset class, real estate, accounted for around 68% of the world’s non-financial assets – a category that includes plant and machinery as well as intangibles, such as intellectual property.

It went on to argue that, whether in the ‘West or China’, such rising values are tending to divert capital from productive uses, constricting both national business investment and productivity, before concluding that taxing and reducing land values could counteract that adverse trend with beneficial macro-economic effect.

A pure land value tax (LVT) is now usually defined as a periodic and recurring charge on the assessed (usually rental) value of a demarcated parcel of land (plot), exclusive of the value of what may be built upon it.

 Modern such treatments invariably shun the original Georgist conception of a near 100% tax on land rent, in favour of a more gradualist approach, where it is phased-in over several years to reach rates usually closer to five per cent than 100%.

The primary reason is practical. The sudden fall in land and housing asset values that could be expected to follow the announcement of a near-100% tax on land value, along with the associated wider economic uncertainty, would almost certainly produce irresistible political pressures for the quick repeal of such a tax; pressures, in practice, that would prevent its introduction in the first place.

Tony Vickers, in a paper for the Liberal Democratic aligned Action for Land Taxation and Economic Reform (Alter) pressure group, while recognising that a pure LVT introduced at a low starting rate would yield total proceeds insufficient to replace all other taxes, noted that its rates could be increased over time and that such phasing was preferable to successive failed post-war attempts to use betterment taxes or other more complex instruments to tax planning betterment gain.

Applying assumptions that all land plots would be revalued annually and taxed at a LVT set at one per cent of their assessed capital value in their “optimum permitted use” (except agricultural land, valued at its existing use), Dave Wetzel  (formerly the Greater London Council’s transport  chair in Ken Livingstone’s early eighties administration, who led on the Fare’s Fair Programme that although was ultimately vetoed by the Law Lords set an important marker), in a paper for the Labour Land Campaign (LCC), posited that such a LVT would yield £50bn – a figure then based on a 2017 Office of National Statistics (ONS) £5 trillion valuation of all UK land.

If that rate was then progressively increased to four per cent over a “two-term ten-year Parliament” the LVT yield would commensurately rise to over £200bn, enough, Wetzel argued, to “abolish” national insurance contributions (NICs), council tax and business rates, and to allow income tax “to be significantly reduced or eliminated altogether for low and some middle-income earners”.

Updating to a 2021 seven trillion-pound land value subject to a one per cent pure LVT, would potentially generate £63bn (63 thousand million) per annum. A four per cent rate would raise c£250bn per annum.

Such projected LVT receipt levels compare with 2021-22 VAT tax receipts of c£143m, total National Insurance Contributions (NICs) of c£160bn and Pay as You Go (PAYE) income tax receipts of c£193bn.

Such figures should be considered as a consciousness-raising indicative examples of the potential of a LVT, insofar that they simply assume that a stated percentage tax on total land value, as reported in the National Accounts, will be realised – which itself assumes that plot valuations in practice (assuming necessary valuation arrangements are put in place) will total up to the NA estimate; will be accurate and non-contestable to a point that the tax can be collected; and that the LVT and the expectation of progressively rising LVT rates will have no impact on future land values, as will the impact of changes in the macro-economic environment on such values.

The projections will also depend on the likely time lag between LVT levies and countervailing tax reductions, and the overall political feasibility and sustainability of such a programme.

In more technical contribution that addressed some of these issues (mainly at an econometric modelling level), the former Bank of England senior advisor and LSE professor Charles A Goodhart  (the originator of Goodhart’s Law: when a measure becomes a target, it ceases to be an good measure) with other distinguished American economists, in a 2021 Centre for Economic Policy Research (CEPR) discussion paper, recommended that a Land Value Asset Tax (LAVT) should be levied on the capitalised value of future after-tax land rent values inclusive of price appreciation, in accordance with “a tax on a stock, the capitalised value of future after-tax land rent values inclusive of price appreciation.”

Using American institutional data, they modelled that over a 20-year period, such a LAVT reaching a rate of around 5.5% in 0.5% increments – assuming balanced budget tax cuts on labour and asset incomes – would spur output gains of close to 15% and 3.4% in welfare gains.

Such a gradual speed of implementation, according to the authors, would smooth the windfall and cash flow impacts of the proposed LAVT and accordingly alleviate political opposition to it.

Increasing the LAVT rate further up to a 20% – a rate they perceived as a cap consistent with political feasibility – would generate higher gains and raise up to 55% of total tax revenue.

The largest proportional gains, however, would still be realised at low LAVT rates, and remain large until a 10% LVT rate was reached.

The flame of George’s vision has begun to burn brighter again, with mainstream economists increasingly joining dedicated and longstanding disciples of disparate political backgrounds.

Very rare does one encounter both groups waving the same torch, inducing the almost exasperated gasp as to “why can’t the politicians simply bite this golden bullet”.

Two of the more immediate apparent issues are now addressed, the valuation of land for LVT purposes, and the institutional environment (in the UK context) that is a major determinant of actual change in land values.

Valuation issues

Henry George’s proposed 100% tax on land rent was a theoretical construct that largely ignored practical issues of implementation, including the assessment of the value of diverse plots in their best use that tend to change over time.

The paucity of observable land price data generated at scale by a functioning competitive market means that even today direct measurement of land prices by government agencies is the exception rather than the rule.

Without such measurement, estimation of plot land value to a degree of accuracy that can command confidence and legitimacy for LVT purposes becomes even more difficult.  

EuroStat provides useful background from a national accounts (NA) perspective on some of the underlying valuation methodological issues.

South Korea provides one of the few exceptions. Since 2006 it has been mandatory for real estate agents brokering transaction, involving residential buildings or land, to report actual transaction prices (ATPs) to the relevant local government body within 60 days.

The ATP data – as elsewhere, only a small proportion of plots are traded each year – is then compared with publicly appraised and noticed prices (PNPs) that are secured from an annual sampling survey inspection process.

Both sources are then used to value delineated plot(s) at market prices or market price equivalents for land taxation and compensation purposes.

Across many Organisation of Economic Co-operation and Development (OECD) countries, available information is instead largely restricted to real estate values – combined land and structure/dwelling (CV) plot value – and involve the use of indirect land value estimation methods that require the estimated separation of land and CA values.

Estimating the land-to-structure (LSR) ratio and the residual value of land are the two main approaches taken.

The ONS advised in a March 2022 methodological paper that the UK uses the residual approach for NA purposes. This is because estimates of residential investment are only produced at the national level in the UK, while the value of land varies considerably both within and across its regions.

This residual approach takes CV as the starting point of the calculations using the available Valuation Office Agency (VOA) and HM Land Registry data.

Because English dwellings were last valued for council tax purposes in April 1991, historic valuations are converted into current prices using regional price indexes based on the Land Registry data.

Estimates of the net capital stock (gross new and improvement investment, depreciated or consumed according to set assumptions) value of the dwelling/structure is then subtracted from the plot CV, to produce a residual land value estimate.

It is an imperfect process, largely replicated for non-domestic business property, that suffers from a range of methodological and data source problems.

Given that urban use values can rapidly change, a pure LVT would require regular, if not annual, land value valuations for tax liability to be computed accurately and transparently.

Both VOA and Land Registry data sources fail to identify accurately all dwelling and property attributes including area and neighbourhood, condition, and other characteristics, with resulting inaccuracies.

The ONS is seeking to make to improve CV estimates before reviewing the relationship between CV and underlying land values.

It plans to publish updated indicative estimates of land underlying dwellings and land underlying other buildings and structures by the end of 2022.

Goodhart and colleagues recommended that the building residual valuation method should be adopted instead. This is where the value of its land in its highest and best use is subtracted from the market value of a development plot (combined value of land and building/structures placed on it) to obtain the residual value of the building rather than the land element of the CV.

The land residual method, they observe, can undervalue land value. The valuation of the buildings (based on their depreciated construction cost) tends to take insufficient account of their on-going locational (in contrast to their physical) obsolescence, citing, as evidence, the widespread conversion of centrally located commercial property to residential use in the United States.

American conditions may not apply across other national planning environments. Also, the building residual model presupposes an accurate mechanism to measure the land value directly or, at least to separate the respective values of the land and structure within the combined plot value.

Many LVT advocates argue for plot valuations to be based on their capitalised rental value, pointing out that the Valuation Office Agency (VOA) already compiles and updates – at roughly five-year intervals – a rating list for each local authority in England and Wales.

That process involves the computation of an estimate of the annual rental of all its non-domestic properties, based on their individual locations and attributes (see Section Six: LVT and Business Rates).

Such an annual list with input from the Land Registry could then be extended to include the boundaries of each property and its area measurements, which could assist any future move to the separate valuation of plot land and building elements.

The government in October 2021 indicated an intention to shorten that valuation cycle to tri-annual, as a possible (tentative) first step to annual valuations.

Where there is a will, there is the way, as the saying goes: the overriding problem is that such will has largely been absent.

Garnering and harnessing the political will of sufficient strength and resilience to put in place a pure LVT linked to the wider political acceptability and feasibility of pure and partial LVT variants is the real challenge that later Sections will consider.

Valuation methodological issues are a related subsidiary albeit significant issue, insofar that a pure LVT to be acceptable and sustainable would require accurate land valuations, notwithstanding these are likely to be contestable, regardless of their methodological robustness.

Take prime estate in the West End of London: the valuation for LVT purposes of an eighteenth-century square used for mixed residential and business purposes is still likely to prove far from straightforward and simple, where different forms of beneficial ownership that can often be obscured by opaque legal arrangements would need to be unravelled and tracked.

That said, legislation was recently brought forward and expedited to crack down on the flood of ‘dirty money’ into Britain in the wake of Russia’s full-scale invasion of Ukraine.

A new register will now require anonymous foreign buyers to now disclose the beneficial owners, with verified information, to Companies House — before any application to the UK’s land registries can be made.

Its relatively rapid and seemingly worked-through implementation suggests what can be done – given the will to do so amid and engendered by the existence of wider amenable political circumstances.

Politicians will probably need to mould such circumstances to support LVT introduction, when their commitment and willingness to do that is not present or apparent currently.

The institutional environment

Although the supply of land in total might be finite and fixed, and thus perfectly inelastic in supply (excepting reclamation, or loss due to natural calamity or natural process by flood or erosion), uses to which a plot can be put and hence its value or price are subject (and can vary) not only with its own physical characteristics, (topography, soil fertility, and other factors impinging on the cost of bringing into, or changing a particular use), but, crucially, also with the related institutional and other processes that govern how it is regulated, traded, and then used.

In the UK, the planning system largely governs the institutional framework in which land is traded and used.

It attempts to reconcile competing – and often conflicting – economic and social objectives, including the enhancing of urban amenities, the preservation of green belts around towns and cities, as well as the wider environment, including National Parks, designated areas of natural beauty and other green spaces, the provision of adequate transport, education, and health social infrastructure, as well as the meeting of additional housing requirements.

The planning system determines changes in designated development use, including the intensification of an existing building use, the redevelopment of an existing use, as well as the switching of use from, say, agriculture to residential use. Planning permission for change of use usually crystallises changes in the plot’s development value.

The supply of land for business or residential use, therefore, is not completely fixed in the contemporary UK environment. The supply responsiveness of land for specific development purposes can vary significantly according to local and national planning policy processes and their application.

These processes can add time and other costs to the development process. The current value of hectare of agricultural land is c£22,000; when attached with a planning permission for residential development across many areas its average value will tend to exceed £2m:  a hundredfold increase; on the face of it indicating a massive windfall for any lucky farmer waking up one morning and finding that their land has been zoned for residential housing.

It is, of course, not quite that simple. The farmer will invariably need to share that gain with a development partner prepared to invest in the cost of obtaining planning permission.

Section 106 planning and affordable housing obligations and infrastructural levies, as well as infrastructural servicing costs, and then construction cost, will sometimes eat into some of that apparent return, which can, however, remain substantial.

The degree to which a LVT will be partly or even predominately borne by plot owners will still largely depend how price inelastic that supply is: the lower the price elasticity of land supply (when the demand for residential or other use is more price elastic or sensitive), the higher will be both the potential development value and taxation potential of that plot(s).

The empirical delineation of such relative elasticities is incomplete and uncertain, however, varying with area and with the reservation (lowest) price each individual landowner will willingly sell an individual plot(s).

The measurement of land rent that could potentially be available for taxation continues to constitute a central problem in LVT design and implementation, especially in interaction with the prevailing institutional environment, in this case the planning system.

In that light, valuations would need to take account of all current planning conditions and rules relevant to each site.

The government’s 2020 Planning White Paper proposals to move towards to a zonal rules-based system have largely been kicked in the long grass. The planning system in England and Wales is likely to remain to a significant extent discretionary based, contributing to valuation uncertainty.

It follows that a treatment where each plot is valued according to its “highest and best use” or its “optimum permitted use” consistent with applicable planning and zoning rules, it would be set (such as land in current agricultural use but zoned for housing use) with reference to a postulated value that subsequently may not be necessarily realised.

Assuming that planning permission would be granted in line with an assumed zonal valuation could also consequently risk rejudging that decision, giving rise to possible to compensation claims from landowners not securing the planning permission they could argue was consistent with its zoning, although the application of that assumption would tend to act as a nudge, rather than a non-resistible shove, for them to progress change to “optimum permitted use”.

Even though option or other agreements between developers and owners could provide an indication of market valuation of ‘hope’ values based on the expectation that a change in planning use sometime in the future will secure permission would be hypothetical and even more uncertain in realisation.

Another consideration is that a pure LVT levied at a gradually rising rate within the one to five per cent range is not really designed to capture high levels of windfall gains or land rent as defined by Ricardo, as understood by George, meaning that it is likely that planning gain windfalls would still need to subject to other development levies, such as Section 106 affordable housing requirements.

In short, real-world conditions are far more complex than was the case when George proposed his single land tax solution.

Section Three shows that governments across America and European industrial countries – at least in practical policy terms – to all intents and purposes were largely unreceptive to his solution – and have remained so since.

A twist in that tale is that Georgist prescriptions have been successfully applied in high density East Asian urban environments – in a customised society-specific fashion – during the last third of the twentieth century.

3          George’s international legacy

Expectations of the transformative potential of LVT have greatly outreached outcomes.

The use of land value taxes started from a low base around the turn of the twentieth century (Japan had already established one) and have since tended to recede.

LVT practice in local municipalities in the United States (US) – Pennsylvania in particular; Denmark, and then New Zealand – are often touted as positive examples of LVT application, when, in practice, they provide testimony rather to its limited application.

Post war outlier exceptions are concentrated in post war East Asia, including the four east Asian ‘economic tigers’ – Singapore, Hong Kong, South Korea, and Taiwan – which enjoyed sustained annual economic growth rates of seven per cent across recent decades.

Singapore’s application of Georgist principles from its beginning as an independent city state combined with their centrality to its chosen development model and institutional arrangements, provides an exemplar example of effective integration of land assembly, planning, taxation, and housing policy development.

Its exceptional geographical and political institutional characteristics suggest, however, limited direct replicability.

United States (US)

LVTs have tended to metamorphose into wider combined taxes on property that include the value of the structures built upon a plot, and – depending on their design and the frequency of revaluations – of any subsequent improvements made to such structures.

The United States (America) is a prime example. Its cities and states over time have levied property tax variants rather than a pure land tax, before progressively ceding to pressures to reduce their limited coverage and incidence.

That receding trend is not difficult to understand. In 1978, Proposition 13 – a ballot referendum measure in California – capped property taxes to one per cent of a property’s assessed value and that to its original purchase price (rather than its current market value), save for an annual allowance of two per cent. Owners in areas of rapid house price appreciation, such as San Francisco, were thus given a disincentive to move.

Proposition 13 encouraged similar measures across states and localities. It also discouraged state and municipal politicians – fearing similar local taxpayer revolts – from going down the LVT road.

Local governments have tended to become a prisoner of the local homeowner vote: modern American democracy as it has turned out is hardly as George envisioned.

The exception (or possibly the exception that proves the rule) is Pennsylvania. Municipalities there, however, have primarily applied a split-rate tax (a partial LVT where land is separately taxed at a higher rate than is the buildings sat on it), rather than a pure LVT.

One demonstration example in that state often cited is Harrisburg, whose city authorities in 1982 more than doubled the tax rate on land while reducing it on buildings.

The city, according to economist Jerry Jones, in another Labour Land Campaign paper, subsequently enjoyed a rejuvenation in economic activity, in housing supply, and in public revenues.

Another is the former steel city of Pittsburgh. After it lowered taxes on buildings relative to land in the late 1970s, the city experienced a reported ‘building boom’ that ameliorated the impact of deindustrialisation, at least in comparison to other deindustrialising cities, such as Detroit.

The City of Altoona in central Pennsylvania is notable insofar that between 2011 and 2016, according to the Federal Highways Administration (FHA), it was the first and only city in the US to rely on a pure land value tax, alongside 16 cities and two school districts that levied a land tax together with other taxes on buildings (partial LVT), including, presumably, Harrisburg.

In Altoona, a split-level tax was levied on 20% of assessed land plot values in 2002; the plot rate on buildings was concurrently reduced to 80%. The land plot rate was then increased annually by 10% as that on buildings was reduced by 10%, until, in 2011, it became a 100% tax on the land value of the plot and zero on buildings: a pure LVT.

The FHA reported that the assessed value of all land in Altoona accounted for one-seventh that the combined total value of its land and of buildings (real estate value).

The corollary of that low proportion was that the pure LVT tax rate needed to increase sevenfold to match the revenue that the predecessor combined property tax generated.

More generally, where land plot values represent a relatively low proportion of total combined land and building value, a pure LVT must be charged at a much higher rate across a much lower base (on land only, rather than combined land and structure value) to secure the same amount of revenue or yield that a previous combined land and building property tax did or would need to.

In Altoona, notwithstanding its higher LVT rate, 72% of its municipal payers faced a lower tax bill than they previously did under a combined tax regime.

Property owners with land valued less than one-seventh of the total assessed combined land and building value of their plot paid less in total. Conversely, owners with land valued at more than one-seventh of the combined land and building value of their home paid more, as did owners of vacant or underdeveloped plots.

Taxes on agricultural land were not changed under this new land value tax regime.

But no clear link between the LVT and positive subsequent urban outcomes across the city were established – at least by the official FHA evaluation.

In short, the Altoona LVT did not prove a magic bullet and was shelved in 2016. The demise of Altoona LVT , according to its mayor, resulted from two main reasons.

First, the continued existence of other county and the school district-imposed property taxes narrowed the scope for LVT to generate its own incentives, accounting as it did for just a small fraction of the overall property-related tax take.

The second and related reason was that residents and businesses struggled to understand the potential benefits of moving to or investing in the city that the LVT potentially offered.

Its novel exceptionalism meant that businesses might have been deterred from investing by the apparent relatively high rate of tax on land plots, not understanding that as the plot tax rate on buildings was zero, the effective plot rate was usually lower than was the case previously and elsewhere.

City officials noted that the LVT attracted interest from national media and “places as far away as England and elsewhere in Europe intrigued by land value taxes”, underscoring the need such informational perception failures to be overcome in the future.

The FHA noted that the it possibly did improve distributional outcomes, helping to push up property values in a low value area, and encouraging, at the margin, some intensification of use with associated greater economic activity, concluding that a LVT is: “is well suited to established cities and smaller growing cities where there is a need to build new mixed-use infill projects… regular reassessments are essential with the land value tax if municipalities need additional tax proceeds”.

Denmark

Across the Atlantic, in Denmark a land tax accounted for around 50% of local and national government revenues, calibrated to an agricultural yield benchmark historically based on what could be grown on the best quality land. That was in 1903 before it was abolished.

Subsequently, the secular tendency has been for income and other direct taxes to increase as proportion of public revenues.

Direct personal taxes now account for over 50% of its public revenues, the highest of any OECD country (see OECD link reference below).

A separate tax on land value remains alongside a wider property tax calibrated to property values, where a higher marginal rate is levied on higher value properties.

According to the most recent relevant Organization for Economic Cooperation and Development OECD  publication data published in 2021, property taxes represent a relatively insignificant feature in the country’s taxation landscape, not discordant with  a wider international long-term trend where “Between 1965 and 2019, the share of taxes on property fell from 7.9% to 5.5% of total tax revenues on average across the OECD (Figure 6). Canada, Israel, Korea, the United Kingdom and the United States had property tax revenues that amounted to more than 10% of total tax revenues”.

In this high-income Scandinavian country blessed with an enviable taxpayer-funded post-war welfare state, where high levels of direct taxes that might otherwise be expected to be distortionary and inefficient finance high levels of social expenditures that tend to reduce labour costs, supported by high levels of social solidarity, LVT appears more as historical anomaly than a transformative tax instrument, as envisaged by George.

That said, its property and land tax design may well offer pointers for future incremental property tax reform across the UK and elsewhere.

A more detailed and updated case study would be helpful in that regard.

New Zealand

A study of the New Zealand (NZ) land tax noted that from 1894 that it was levied on land value only. The following year it provided around three quarters of total land and income tax revenue.

But fast forward to 1965, its revenue had dwindled to a mere 0.5 per cent of total land and income revenue.

By 1982 only five per cent of its total land value was taxed, reflecting a secular trend for the national LVT to wither on the vine. Agricultural and land residential land had been effectively exempted from its base, before it was finally abolished in 1992.

Instead, local property rates provided the principal source of NZ local authority revenue, while income and other taxes provided the primary base of national taxation revenues.

Some NZ local authorities do, however, continue to impose their own limited land tax. Although these are informed by comprehensive property valuations carried out triennially by the central government, the total yield of all NZ property taxes, including land taxes, by 2018 only totalled around 2% of its GDP – close to the OECD 1.9% average, but less than half the c4.1% recorded for the UK.

Local land-value taxes are common in Australia, but residential property is mostly exempted, thereby restricting their base and yield.

Singapore

The legacy of Henry George in many ways has shone far more brightly in Singapore than it has in his native New York.

A British colony until 1959 when it became self-governing, Singapore then became fully independent from Malaysia in 1965 as a sovereign city state.

Its subsequent story is one of remarkable rapid economic transformation and success, moving from low-income poverty to high income self-sustaining success.

According to the Charter Cities Institute per capita income increased, staggeringly, from c$428 in 1960 to $65,000 in 2018 and is an exemplar of “excellent governance’’ among planned cities.

Singapore like Hong Kong, hemmed in by the sea, was forced to grow by necessity upwards rather than radially, generating exceptionally high urban population densities of over 6,000 persons per square kilometre, notwithstanding that since 1960 land reclamation enabled the extension of its spatial area by a quarter.

It is one of only a few jurisdictions in the world to have successfully implemented a comprehensive system of land value capture mainly through the direct state ownership and leasing of land. Hong Kong’s development also involved the government leasing and collecting land rent from state-owned land.

The resulting revenues helped to induce a virtuous cycle where development unlocks the funds necessary to bring forward the infrastructure needed to unlock further productive development.

From the outset, in accordance with the Georgist principle that no private landowner should benefit from development financed or supported by the community, government land ownership in Singapore largely prevented individuals from capturing rising land values and rents.

Its Land Acquisition Act 1966 provided broad powers to state and other entities to compulsorily acquire land for any public purpose where, “in the opinion of the Minister, it is in the public interest to do so”, at a price that disregarded the contemplated future value of the subsequent development.

A massive and systemic transfer of land from a small number of wealthy landowners to the state followed. Subsequent rises in land values generated by rising and concentrated levels of economic activity were then captured by the Government and used for infrastructural investment. The state continues to own c80% of the city state land mass.

Singapore’s example (as is Hong Kong’s) is one of effective land reform and state ownership and value capture by proactive state direct action – in its case helped by a stable wider macro-economic and political environment.

As such, it can be broadly characterised as a state capitalist model that is wedded to free trade principles, welcoming to foreign inward investment.

Although Singaporean taxes are low by advanced economy standards, it still levies VAT (GST), income taxes, stamp duty, and other taxes, including a property tax that is progressive (rates increases in line with value thresholds and differ between owner-occupied and non-owner-occupied residential properties) based on annual rental value.

The long-term stewardship of land assets by the Singaporean state underpins its widespread provision of 99-year leasehold homeownership to its citizens; an investment in social capital that, in turn, supported its wider economic model, which aimed to keep wages and other business costs low to make Singapore an attractive investment opportunity for foreign firms.

An Asian Development Bank study of Singaporean housing policy provides more detail on the relationship of Singaporean housing policy to its wider economic success.

Between 1961 to 2013, the Housing and Development Board (HDB) – the public housing authority – built more than one million high-rise housing units. It functioned also as a housing finance intermediary, harnessing domestic savings through housing-linked accounts.

Singapore’s public housing was primarily sold to middle-income buyers. Purchasers not only possessed the right to live in their flat, but also sell it on at a market-rate price, or to lease it to a tenant until their 99-year lease expired.

Despite the high levels of state land ownership, rising house price and affordability still proved a problem – land is sold or auctioned at market value for housing – forcing the government to introduce a package of ‘anti-speculation’ measures in 1996.

These included capital gains taxes on the sale of any property within three years of purchase, stamp duty on every sale and sub-sale of property, the limitation of housing loans to 80% of property value, and limiting foreigners to non-Singapore-dollar-denominated housing loans

And, since the noughties, a series of purchase grants tied to household income were introduced that allowed the HDB to price its flats more responsively to a household’s ability-to-pay.

HDB also provides public housing for rental, comprising smaller units, such as one- and two-room flats. They are mainly provided for lower-income households and to those waiting for their purchased flats, and, as such, are attached with lower income requirements compared to units offered for sale.

Reportedly, almost all employed citizens own their home, subject to age and other social eligibility restrictions.

These can be restrictive, however. Young people needed to marry or wait until they attained the age of 35 to qualify, for instance. Economic migrants making up c15% of the total population are not eligible for HDB housing.

4          A Panacea Stillborn in the Twentieth Century

 “The landlord who happened to own a plot of land on the outskirts or at the centre of our great cities ……sits still and does nothing. Roads are made, streets are made, railway services are improved, electric lights turn night into day, electric trains glide swiftly to and fro, water is brought from reservoirs a hundred miles off in the mountains – and all the while the landlord sits still.  Every one of those improvements I effected by the labour and at the cost of other people. Many of the most important are effected at the cost of municipality and of the ratepayers. To not one of those improvements does the land monopolists as a land monopolist contribute. He renders no service to the community, he contributes nothing to the general welfare…the land monopolist only has to sit still and watch complacently his property multiplying in value”. Winston Churchill, The People’s Rights, 1909.

“Henry George failed…because he had been studying the world as it had been for generations and centuries, and arrived at certain conclusions on that basis, and the conclusion he arrived at was that land was practically the sole source of all wealth. But almost before the ink was dry on the book he had written it was apparent that there were hundreds of different ways of creating and possessing and gaining wealth which had either no relation to the ownership of land or an utterly disproportionate or indirect relation”.

Winston Churchill, Speech to Parliament, 5th June 1928, quoted in Churchill Project.

Henry George had published Progress and Poverty in 1879 into a rapidly urbanising and industrialising democratic society marked by high levels of immigration and internal migration, yet, unlike Britain, in terms of population, was still predominately agricultural and rural based.

The last Section showed that George’s prescription of a single tax on land removing the need for all other taxes, ushering in an era of plenty and equality according to desert, proved more a chimera than a panacea in his own country and its closest economic peers.

At some levels conditions appeared potentially ripe for the introduction of a Georgist land tax given rising democratic pressures to protect the majority from poverty amidst riches, while government expenditures remained below 10% of GDP until the turn of the century with commensurate taxation requirements.

This Section considers why his single tax idea was stillborn. Although mainly using Britain as a case study, parallels with his native land are clearly discernible, including that of other issues dominating political discourse and attention, the associated lack of sustained political focus, the lack of a powerful electoral coalition in favour rather than opposed, and the institutional lack of capacity as well as willingness to implement it.

The growing importance of government within the economy necessitated by the First World War and resulting increase in expenditure and taxation requirements then largely resigned the Georgist agenda to the status of historical curiosity.

Historical context

Britain, as the nineteenth century wore on, was increasingly imbued with the democratic influences that post-Revolutionary America already possessed.

The Conservative Disraelian 1867 Reform Act had given the vote to all householders and to those paying more than £10 in rent in towns – enfranchising some of the urban working class for the first time. Gladstonian Liberal legislation in 1884 did likewise for rural workers.

In Britain, the numbers of urban workers increased absolutely and relatively as a proportion of the total franchised population. By 1874 trade unions had already sponsored two working class Liberal MPs.

Trade union membership spread both in size and reach during the next two decades to encompass the unskilled majority.

Urban riots involving workers and the unemployed attracted heightened political concern. Joseph Chamberlain, ex-Mayor of Birmingham, when Liberal President of the Local Government Board during the mid-1880s, for instance, made speeches that yanked together the inequities of inherited wealth inequality to the need for “property to pay a ransom for its security”, presaging Winston Churchill twenty years later.

Yet Chamberlain and other like-minded Social Liberals diverted the focus of their attention to Irish Home Rule (the cross-cutting Brexit issue of that era), displacing the development of a socialistic liberal agenda based on Georgist principles, responding to embryonic demands for the state to intervene to provide at least some minimal level of social protection and security at least to the ‘deserving poor’.

By the turn of the century Chamberlain had reinvented himself instead as the leader of the Liberal Unionists propagating a tariff reform and imperial preference political programme.

By then socialist-oriented political organisations, such as the Marxist Social Democratic Foundation, and then in 1893 the Independent Labour Party (ILP) had formed to further the specific class interest of workers politically. Intellectuals wishing to translate nascent collectivist responses to Victorian laissez faire into more concrete and universal policy programmes also established the Fabian Society.

Along with the trade unions these and similar organisations together provided the nucleus of the Labour Representation Committee soon to become the Labour Party, which would replace the Liberal Party as the main electoral alternative to the Conservative Party.

The government’s need to finance both growing social and military expenditures, including on a rudimentary national insurance system for working men, and on a basic non-contributory old age pension of five old shillings payable at age seventy, as well as on battleships or ‘Dreadnoughts’ to keep pace with the growth of the German fleet, provided the fiscal backdrop to the 1909 People’s Budget.

Its prime movers were the humbly born Welsh chancellor, Lloyd George, and, following his switch to the Liberals from the Tories, the President of the Board of Trade: the more aristocratic Winston Churchill.

Both in their speeches excoriated, as did George, the inequity of poverty spreading amid abundance, highlighting, very much on Georgist lines, the ability of landowners to expropriate the benefits of rising land values generated by community actions and investment, such on water supply and streetlighting.

The 1909 budget, on top of an increased and more progressive income tax, including reliefs for those at the bottom and an additional supertax for those at the top, also proposed a land tax.

At a time when one per cent of the population, some 33,000 people, owned two-thirds of its wealth, a Georgist LVT that could be levied on a wealthy minority for the benefit of the franchised majority (excluding women until 1918) appeared an attractive proposition for a radical government to grasp.

Although it provoked sharp opposition from the opposition and the Conservative dominated House of Lords, the Liberal Prime Minister, Sir Henry Campbell-Bannerman’s pledge “to make the land less of a pleasure ground for the rich, and more of a treasure-house for the nation” resonated with the growing democratic tenor of the age, seemingly aligned on Georgist lines.

But Lloyd George struggled to persuade parliament to introduce a workable LVT that could be implemented quickly. He seemed himself confused as to how it would work.

His package included a 20% tax on the unearned land capital gains revealed on sale, a capital levy on unused land, and a reversionary tax when leases expired, making the proposals more akin to a development tax than a pure LVT.

It presaged post war – and similarly unsuccessful – efforts to tax betterment gains rather than representing a distillation of Georgist principles into a practical policy programme. It was soon abandoned in 1920 on the stated ground of valuation difficulties.

Instructively, in the light of the waxing and waning of Chamberlain’s Georgist star twenty years previously, many historians consider that the radical Liberal duo had had touted a land tax more to provoke the House of Lords so to reject the People’s Budget – and thus set up a ‘People versus the Lords’ election that their then party expected to win – than it was a committed effort to shift the tax base onto landed wealth.

Boris Johnson’s 2019 efforts to provoke the Commons to dissolve Parliament and so precipitate a ‘Get Brexit Done’ election that he banked on then to return him with an unassailable majority, perhaps, provides a modern political example of that same, and far from uncommon, political phenomenon.

And, in any case, free trade versus tariff reform continued to compete for hegemonic political attention, fragmenting political alliances that could otherwise focused on Georgist land reform.

The Georgist moment – even if it had really existed – had passed.  Most of the additional tax ultimately raised after the two People’s Budget elections were sourced through income tax.

The fiscal institutional environment

For much of the nineteenth century, custom and excise duties, along with the ludicrous window tax (which had the deadweight effect of householders blocking in their windows – an effect sometimes still visible in Georgian houses and terraces) accounted for most of the government’s revenue in Britain.

In 1874 – five years before George published Progress and Poverty – customs and excise contributed £47m to the government’s total revenue of £77m, which itself accounted for approximately six to seven per cent of Gross National Product (GNP).

A national income tax had been first introduced during the Napoleonic Wars, was made permanent in 1842, increased temporarily to meet the exigencies of the Crimean War, and then reduced and applied at a low rate for the remainder of the century. It was not paid by the bulk of working population.

Its imposition, requiring personal information to be provided to the state was perceived as a potential threat to personal freedom, contrary to the prevailing liberalism of the age.

Across continental Europe, industrialisation was accelerating across the nascent national state democracies. Growing nationalism, militarisation, power rivalry, and political upheaval followed in its slipstream.

Bismarck increased military spending to further his Prussian territorial ambitions embracing a greater Germany. The first national insurance scheme (funded on a tripartite basis by workers, employers, and the state) for workers, as well as old age pensions, was introduced during the 1880s to stave off discontent and to build up solidarity within a fledgling fragile democratic national Germany polity.

The First World War then dramatically further spiked-up public expenditure requirements in the UK as did earlier the Boer War in  a more muted way.

Income tax rates reached an unprecedented 52%, even though much of the needed revenue was borrowed.

Across the Atlantic, federal income tax in America was introduced in 1913. Although its standard rate in response to wartime financing demands was temporarily increased to six per cent alongside a surtax rate that reached 77%.

As a federal state, local and state taxes remained relatively more significant within a fiscal environment where multiple local government bodies collected over half of all federal, state, and local government revenues. In Britain they accounted for over a third.

Wallis characterises the American fiscal environment the period between 1840 and the early 1930’s as one dominated by local government deploying property taxes as its main revenue base.

It was not until the Great Depression the trend began for the federal government to become more active and increase its share of total government expenditures and revenues as it shouldered increased infrastructural, defence, and social security, expenditure requirements

In the aftermath of the First World War in Britain, or its deluge, as one historian put it, the world had changed. A freshly universally franchised working-class population that had borne stoically the sacrifices required by the first ‘total’ war, no longer was prepared to tolerate precarious poverty and squalor as a way of life.

Wartime levels of taxation, which in incidence largely fell on high income households, could not be returned to pre-war levels. Surtax remained in place, as it did until 1973.

Peacock and Wiseman, authors of a 1961 seminal study of UK public expenditure 1890 to 1955, described that as a “disturbance effect” – where expenditures previously considered desirable, but politically difficult, to introduce become possible, using the graphic metaphor that “It is harder to get on the saddle on the horse than to keep it there”.

Clark and Dilnot termed it, perhaps, more precisely as a “ratchet” effect: in short, war-related imperatives ballooned public expenditure up; the subsequent post war level, although reduced, remained substantially above its pre-war trend level.

War-related social upheavals also imposed new and continuing obligations on governments, forcing governments and their populations to focus on latent problems, such as poverty and poor housing impacting on population health that undermined national economic and military capacity. This Peacock and Wiseman described an ‘inspection effect’.

Appendix Table A-6 reports their computed consistent historical total government expenditure as a percentage of gross national product series, recording that percentage as around 12.5% during the Edwardian era compared to c9% in 1890 (with a disturbance or ratchet jump to 14.4% in 1900 related to Boer War spending requirements).

Although it then dropped back from the over 50% wartime levels to c26% in 1920, it remained ratcheted-up during the inter-war years at more than twice Edwardian levels, notwithstanding government efforts to trim back some social expenditures as part of ill-advised attempts to balance the budget – efforts that in 1936 would be exposed to the critique of James Maynard Keynes.

The experience of the 1917 Russian Revolution had concentrated post war government minds on the need to placate an increasingly non-deferential and potentially rebellious electorate. Increased public spending on social services was perceived as an ‘antidote’ to a revolutionary virus that threatened to replicate domestically.

In that light, the 1919 Addison Act provided for ‘Homes for Heroes’. It introduced generous government subsidies for new public housing with generous space and quality standards, supported by an imposed duty for local authorities to provide such housing, where local housing conditions required it.

Although these subsidies were trimmed back as part of an economy drive, later Housing Acts provided a workable subsidy framework that allowed four million new homes to be built during the interwar years.

Winston Churchill by then had pivoted back to the Tories. As Chancellor of the Exchequer in 1927, he was using his formidable powers of exposition in Parliament to make the argument (quoted at the beginning of this Section) that its consideration of a LVT would simply divert attention from the current and pressing imperative to develop new needed forms of taxation on Britain’s industrial economy.

But given the wider context of the UK in the 1920’s and the part that Churchill played in its economy and politics – including his suppression of the 1926 General Strike and his reimposition of the deflationary gold standard – it could be that he was simply re-exerting the interest of the prevailing ruling class, of which he was such an eloquent and colourful member.

Income and other taxes, not LVT, across both sides of the Atlantic emerged as primary tax sources to finance the upward step-change in public expenditure and hence revenue public requirements, although income tax only began to be paid by most peacetime working households, however, after the Second World War.

Phillip Snowden, chancellor in the National Government did seek to introduce a LVT in his 1931 budget, briefly enacted in that year’s Finance Act, but at the limited rate of one penny for each pound of the land value for every unit of land in Great Britain.

The Hansard record of the time provides some pointers as to why legislators were reluctant to give it traction: limited revenues relative to the costs of collection; valuation challenges amid doubts over of relevance of a Henry George single tax LVT given the massive rise in public expenditures and revenues that had occurred during the intervening fifty years; as well as the spread of individual home ownership on plots with relatively low land values.

One MP observed that Henry George, in effect, had extrapolated from the particular –dramatically rising land values of virgin land that due to their (Californian) location were ripe for development – to a general principle that did not hold in inter war Britain.

Following the 1931 election, conducted in a period of political tumult as the Great Depression took grip, Snowden’s half-hearted land tax, lacking any real political wind or momentum behind it, was soon repealed.

Labour MP and LVT campaigner Andrew MacLaren did introduce a private member’s bill in 1937 but that, too, was defeated.

Soon afterwards in 1939, across the Thames, Herbert Morrison, leader of the London County Council, began to progress a Land Value Tax Bill before that was scuppered by the outbreak of the Second World War.

That conflagration resulted in another unprecedented but unavoidable spike in government spending, borrowing, and taxation, with government expenditure this time reaching 72% of national output.

When Churchill was elected Prime Minister in 1951, government spending was stabilising around 40% of national output – a historic peacetime high.

The introduction of a LVT did not seem even to cross his mind as a practical policy or taxation tool to raise the revenues that a modern emerging welfare state required.

Why was a Georgist LVT was stillborn?

An academic economist turned permanent secretary in an influential post-war and multi-edition book declared that the: “writings of Henry George, although still enjoying a wide circulation, have ceased to command much attention or to be an important force in the world today. They are no longer considered even so dangerous by the academic economists as to be worthy of vituperation or rebuttal. And, in the working class movement they have long since been superseded by other theories”.

Eric Rolls, History of Economic Thought (p.386, 1992 Penquin fifth edition; first edition published in 1938)

Rolls, put the “meteoric rise and almost equal rapid exhaustion of (George’s) power” down to “his mixture of oracular presumption, insistence of a single idea, and muddle-headedness on economic problems”.

That may have reflected the academic consensus of the time but such a dismissal of George’s ‘single idea’ (although echoing the 1927 Winston Churchill quote, reproduced at the heading of this Section) now comes across as short-sighted.

A much more rounded understanding of why a Georgist tax on land rent did not take off and continues – at best – to be left on the political backburner, is required.

In a 2019 paper Whitehead and Crook assert that the: The simplest models of land taxation (starting from Henry George, 1879) assume that land is homogeneous, its total amount is fixed and that all land will be taxed at the same rate. If that is the case the price of land is demand determined by the highest valued use and any tax will simply have to be absorbed by the landowner. The same applies to taxing increases in land values. However, this model bears no relation to the real world. As only a small part of total land is actually developed, more land can be made available as prices increase and land can be taken out of development if taxation makes it unprofitable. More importantly land has very different attributes and therefore the highest value productive use differs between plots – so planning and taxation will modify both the total amount of land made available and the allocation of land to different uses.

George could not be expected to have foresight of future foreign institutional systems, nor was he offering an analytical abstract economic model with consistent micro-foundations. His work was rather a call for action based on analysis and argument.

Polemical over-simplification is not an uncommon characteristic of such works. It is a fair charge that can be laid at George’s door.

That said, his central theoretical construct of capturing land rent through the imposition of a near 100% tax to avoid what are now commonly called the deadweight effects of other taxes is coherent on its own terms based as they were on Ricardo and others, made more cogent as the wider tax burden as a share of national output and average household budgets has grown.

As Section Three noted Georgist ideas in essence have been successfully implemented in Singapore – a point that Rolls ignored or escaped his notice.

What George neglected to consider carefully was that taxable land rent will differ between plots. He did not specify how liability would be determined and collected with reference to the institutional environments of his own time and place.

He did correctly predict that vested interests were quite likely to capture government and smother his proposed LVT at birth.

Federal and state governments chose or had earlier chosen to give land grants to railroad and other moguls at sub-market prices, rather than auction at market prices or introduce a LVT.

They likewise offered large tracts of virgin or Indian dispossessed land in the Great Plains and West through Homestead Acts to settlers (but often purchased by land speculators) at rock-bottom prices.

There was an economic rationale for this. Government lacked the wherewithal or taxable capacity to plan and fund such economic infrastructure and relied instead on private corporations and individuals to drive development. A less legitimate reason wa that many if not most legislators enjoyed getting the associated bribes, kickbacks, or donations that often followed.

Indeed, during a period when national politics in America was notoriously corrupt, clientist, and ‘spoils-based’, it is not apparent that a 100% tax LVT would be electorally popular or understood by a still largely rural and agricultural population. Farmers of varying holdings were electorally significant, while Homestead settlers, as landowners could not be expected to welcome it.

Prussian aristocratic landlords, large American landowners, or the English aristocracy basking in an Edwardian Indian summer of privilege were other powerful interests standing in the way of a Georgist tax within their own societies.

Politicians then, as now, pursue multiple objectives for mixed motives that often conflict. Their short-term focus, subject as it is to contingent events impacting on their own ambitions and interest, makes it difficult for a single overarching idea or principle to retain traction and momentum.

In 1883, Henry George, himself, highlighted continuing immigration into a now often ‘overcrowded’ country whose lands had filled up, as a primary issue, asking in a shrill, and to our ears seemingly racist, voice: “What, in a few years more, are we to do for a dumping ground. Will it make our difficulty any the less, that our human garbage can vote?”. Hugh Brogan, p393, the Penquin History of the United States, (new edition.)

Policy programmes or initiatives, most particularly an overarching one like a Georgist LVT, if they are to be implemented, must first command and then maintain hegemony and attention for a prolonged period.

The fleeting flirtation of Chamberlain and Churchill with an incompletely and vaguely conceived idea of a land tax lacking institutional machinery to implement, demonstrated that in Britain.

In George’s America, cyclical depressions with deflationary wages and agricultural prices often necessarily became of paramount political concern. During such times, with railroads, corporations and farmers going bust, a 100% LVT would be as welcome as a bullet in the head.

Tariff reform, as for example in the 1892 presidential election, became a pressing national political issue there, as did the relative arguments for, and the respective interests advanced by, keeping to the Gold Standard, moving to a bimetallic standard, or simply relying on a paper ’Greenback’ fiat currency.

Obstacles or crisis events, more generally, (such as Ireland Home Rule in the nineteenth century; the Great Depression in the early twentieth; the Global Financial Crisis (GFC) of 2008-009; and, most recently, the Covid pandemic) can rear their head out of the blue, as do other internal and external shocks, such as the agricultural depression of the late nineteenth century and the current cost of living crisis.

The subsequent cumulative rise in public expenditure and taxation requirements that marked the last and hitherto this century mean that shifting the tax burden onto a single land tax has now become akin to turning a tanker around in a tumultuous sea of economic and political uncertainty, rather than bringing a horse to water in a nineteenth century agricultural community when even that proved not possible.

5          The Feasibility of a Modern Gradualist LVT

It follows that a sudden transformation to a single Georgist LVT simply won’t happen. Modern democratic economies and societies are just too complex and encumbered with accumulated institutional baggage and entitlements.

Indeed, putting one eggs into a LVT with stated single tax ambitions, given the uncertainty of future events impacting on the economy and their short term to medium term interaction with such a future LVT, would render it an unwise hostage to fortune that would be almost certain to be shot down politically before it left the runway.

The experience of the 2017 general election is not promising in that regard. The manifestos of the Labour Party, the Liberal Democrats, and the Green Party included (very outline) proposals for a LVT, with p.86 of the Labour manifesto announcing that: “We will initiate a review into reforming council tax and business rates and consider new options such as a land value tax, to ensure local government has sustainable funding for the long term”.

Carol Wilcox of the LCC later noted that such a “mere mention of ‘considering’ LVT in their 2017 manifesto did for the Labour Party. Along with the dominant Tory press, headlines blazing from every high street and supermarket – Your Council Tax will treble and House Prices will plunge – leaflets were pushed through millions of doors. It may have lost Labour the election”.

Most LVT advocates in recognition of such practical political difficulties, propose an incremental phased-in approach that can command sufficiently strong support to get off the starting blocks.

Goodhart and colleagues, for instance, in their study recommended over a 20-year period a gradual rise in the LVT rate from 0.5% to 5.55% that would result in both substantial output and welfare gains and allow reductions in other taxes.

According to their modelling, to raise 55% of American public revenue (on a balanced-budget assumption), enough to allow income taxes to be abolished, the LVT rate would need to be increased to 20% – a level they considered represented the limits of political feasibility.

This Section identifies the main issues and possible problems connected with even such an incremental approach within a UK where land underlying dwellings has progressively accounted for a rising and increasing predominant share of national wealth.

Wealth and the British Housing Story

The inter-war years saw the establishment of a secular trend of displacement of private renting by owner occupation, across England especially. It was fuelled by a growth in salaried employment, in building society mortgage finance and in the availability of cheap land suitable for speculative and, in some cases, public housing development.

In the forefront of that trend were railway companies wishing to offer affordable new suburban semis in areas that their new lines had now made accessible: a prime example was the Metroland created around the Metropolitan line that now crossed Middlesex before reaching Buckinghamshire.

A landowner was now less likely to be a distant aristocrat or plutocrat, but – especially across southern and other areas left relatively unscathed by the Great Depression – could hail (at least as mortgagees) from a growing group of humbly born salaried workers, possessed with rising aspirations to escape into more virgin territory from the crowded dirty cities, forging a fresh future for their usually young families.

The post-war economic expansion amid accompanying full employment amid growing mass affluence that brought most wage earners into the income tax base also allowed increasing numbers to step onto the housing ladder. By the early seventies owner occupation was the majority tenure.

During the Thatcher era of the 1980s, the financialisaton of the economy (encompassing the globalisation and international integration of national capital markets, the liberalisation of domestic financial and credit markets, and the mounting and related importance of financial services within the economy), the right-to-buy programme coupled with the cessation of council building programmes, all turbo-charged the tenure.

Under New Labour, helped by a reducing but stable interest rate trend, it touched a peak of c70%, before receding.

Growing numbers of young people were priced out by real house prices – responding to the rise in monetary demand for housing enabled by a liberalised mortgage market offering loans at rising income and house price multiples – rising much faster than their incomes, while supply failed to keep pace and become progressively more inelastic in supply.

Nevertheless, extolled by both Labour and the Conservatives as the natural and default tenure of the aspirational majority, homeowners have become and remain an increasingly pivotal electoral swing constituency.

Rising real house prices rises – most marked in areas of buoyant economic activity and rising house prices, largely concentrated in London, the home counties, the south-east, and other places within commuting distance of secure well-paid sources of employment, where new supply was constrained by the planning system and by market failures in an increasingly concentrated housebuilding industry.

Housing wealth owned by households (composite value of dwellings and of underlying land) across those areas has progressively taken larger shares of national net worth (wealth).

Meanwhile the real construction cost of building new homes changed relatively little, meaning that the value of the land underlying dwellings accounted for most of that rise, with increased housebuilder profits also taking a share.

According to a ONS March 2022 methodological paper, land in 2020 was the most valuable asset in the economy, estimated at £6.3 trillion in value – nearly 60% of the UK’s net worth, with land underlying dwellings accounting for £5.4trillion of that value.

Table 11 of the latest May 2022 ONS national balance sheet estimates indicates that the value of land underlying dwellings owned by households as a proportion of total land and structure value (including dwellings) rose from 25% in 1996 to 68% in 2021.

Although such estimates should be considered with caution due to valuation and other uncertainties, it is undoubtedly true that residential land has assumed an increasing share of national wealth at the expense of produced non-financial assets (proxy for productive capital).

Significant implications follow. First, it provides evidence in support of commentators, such as Stiglitz, who argue that increased land values can dampen investment and productivity, as well as incomes, increasing wealth of the paper rather than the productive kind.

Second, it strongly suggests that across high value areas in the UK, the pure land value (land underlying dwellings) will often exceed 70% of the combined land and building residential plot value, presenting a sharp comparison to the one seventh that Section 3 reported as prevailing in Altoona, Pennsylvania, when a pure LVT was applied there. The ONS does not break the UK data down regionally, unfortunately.

Third, such high land values strengthen the potential scope and capability of a pure LVT levied at relatively low headline rates to raise enough revenue to be replace council and potentially other taxes; but, by the same token, the incidence of such rates will still be high in cash terms with associated saliency and political acceptability implications.

Political acceptability and feasibility

Given the uneven distribution of house prices, the replacement of, say, council tax, with a pure LVT levied on the value of land underlying dwellings is likely to involve the creation of myriad gainers and losers, sometimes involving significant magnitudes, across the ‘Middle England’ households and older aged groups.

Taking an average priced c.£500,000 house in London and some other high value areas, assuming a 70 per cent land value (underlying the dwelling, excluding its value), a one per cent annual pure LVT would come to £3,500 (the rate roughly required UK-wide to secure proceeds approximate to the current council tax), rising to £14,000 if a four per cent rate was levied.

Even the revenue-neutral rate could prove a problem for homeowners with limited disposable income, net of housing, childcare, and other essential expenditures, as it would be for asset-rich but income-poor pensioners. It certainly would at higher rates.

Where it was believed that the tax will be levied and phased-in as announced and not repealed in short order by a future government – its impact would also be capitalised into capital losses, proportionate to its incidence.

Changes that impose large, unexpected losses relative to previous expectations can be considered ‘unfair’ insofar they infringe the ‘legitimate expectations’ of owners at the time when they purchased their asset.

A LVT introduced at a low but gradually increasing rate should dampen house prices and not precipitate a crash, however.

Nevertheless, combined with a recession impacting on income and employment or with other shocks, that outcome remains possible and is one that is likely to be highlighted by opponents.

Impacts on individual household and business budgets mitigated by transitional arrangements, variable rates, allowances, exemptions, reliefs, and deferments until death or sale of property or by other payment holidays, would tend to cloud and blunt the potential beneficial effects of a LVT, wedging new layers of complexity and confusion into the overall tax and benefit system, reducing net revenues in the process.

‘Gaming’ of the process by economic actors to minimise their tax liability under such transitional arrangements could also undermine or subvert the core intention of reform.

Essentially, a trade off exists between maximising revenue raising capacity of a LVT (and ability to replace other taxes) and minimising its possible lumpy salience, its volatility, and overall cash flow impacts that could surpass the immediate ability-to-pay capacity of individual taxpayers.

The introduction of a LVT gradually and in partial form, perhaps as part of a wider and long-term reform to council tax or business rates introduced on a revenue-neutral basis could postpone many of the putative benefits of a pure LVT, but could still come with feasibility issues.

In that light, the Scottish Local Government Finance Review published in 2007 that “although land value taxation meets a number of our criteria, we question whether the public would accept the upheaval involved in radical reform of this nature, unless they could clearly understand the nature of the change and the benefits involved….”.

Goodhart and colleagues, recognising that, argued that:  the overarching issue is that the bridging the gap between economic efficiency and political acceptability requires extensive public consultation, education and communication…to include short, accessible and realistic examples of the effect of the reform on different types of taxpayers, which for the vast majority will show that the gains from lower taxes elsewhere will far outweigh the losses from higher land taxes.”

That tends to gloss over, however, the ‘rough-and tumble’ way that new proposals are examined by the media, especially during the heat and sound of an election campaign when voter perceptions are prone to be moulded by untrue or partly true selective slogans and soundbites.

Unfortunately, the current political environment is geared to garner electoral support based on attitudes and perceptions, not to expound sound policy development supported by painstaking preparation in a process more conducive to the education of the electorate of the long-term benefits of a LVT.

The failed attempt of Theresa May to explain her plan to reform adult social care financing during the 2017 General Election, forcing its ignominious withdrawal after a media onslaught provides a salutary lesson in that regard.

Politicians of the mature industrialised countries – with England an exemplar example –have also become increasingly beholden to the electoral clout of the greying homeowner vote.

They can be expected to be extremely wary that potentially affected voters will take with more than a pinch of salt any promise that income tax cuts (in any case less attractive for retired households with limited incomes) sometime in the future will more than offset the publicised here and now impact of a salient pure annual LVT; many are likely to perceive it simply as a bigger council tax bill.

Such voters, many of whom plan in the future to bequeath their home to their children, can also be expected to react negatively to media-magnified fears on the impact such a LVT will have on its future value.

Any prospect of a successor government reversing introduction of a LVT would add to uncertainty with attendant adverse consequences.

Threats to do so could undermine its prospects of success from the start, sowing doubt as to whether the gradual benefits – notwithstanding that they could, indeed, accumulate exponentially over time – justify the short-term political hassle and risks involved.

A new government is likely to be dogged by vocal campaigns from those that would lose from its introduction, by other contingent political squalls, and by other pressing priorities; all can be expected to intrude and quite likely to knock off course a smooth LVT transition or phasing-in.

A revenue raising LVT reform, on the other hand, can be expected to induce correspondingly stronger political opposition.

In the absence of both overriding commitment and an effective and sustainable political counter strategy, the likelihood remains that it risks remaining as stillborn as it was in the nineteenth century.

That said, the increased proportion of residential property value taken by the underlying land does also mean that alternative reforms of council tax that address directly its current regressive vertical and horizontal inequity and efficiency, could offer a proxy to a LVT.

A proportional tax on total property value, as proposed, for example, by the Fairer Share campaign at a 0.48% rate, which they estimate would be sufficient to allow the abolition of Land Stamp Duty tax, seems credible in that context.

6          LVT and Business rates: line of least resistance?

“The property tax is, economically speaking, a combination of one of the worst taxes — the part that is assessed on real estate improvements — and one of the best taxes — (the part based) on land”, William Vickrey, Nobel Prizewinning economist

“Taxing business property inefficiently discourages the development and use of business property. If possible, it would be better to tax the value of the land excluding the value of any buildings on it, which would have no such effect …. is such a powerful idea, and one that has been so comprehensively ignored by governments, that the case for a thorough official effort to design a workable system seems to us to be overwhelming…. and significant adjustment costs would be merited if the (current) inefficient and iniquitous system of business rates could be swept away entirely and replaced by an LVT”…and that “a much stronger case for having a separate land value tax in the case of land used for non-domestic purposes”.Institute of Fiscal Studies (IFS) Green Budget 2014

Business rate (BR) reform or abolition, at least at first glance, seems to provide a potential line of least resistance to the introduction of at least a partial LVT.

BR is a tax predominately on economic activity operating from fixed premises, assessed according to the assessed rental value (RV) of such premises rather than on turnover or profit.

Its deadweight impacts, acting as a fixed cost, thus potentially weigh down particularly heavily on the investment and employment decisions of small business owners, although the smallest do get relief (see below).

Although such rental (rateable) values in principle should revalued according to a five-year cycle, in recent years revaluations have been delayed due to the external shocks of the GFC and of Covid.

The relative infrequency of five-year valuations, even when they occur, mean that RVs tend to become outdated as the cycle progresses, while subsequent revaluation adjustments induce uncertainty and often volatile changes in BR liability with associated cash flow problems for many business owners, leading to further adverse deadweight impacts.

The last revaluation came into effect in April 2017, when April 2008 assessed values were replaced with April 2015 assessed values – a seven-year gap that straddled the 2008-10 GFC.

Significant change in relative valuations between locations occurred in the meantime, requiring transitional and dampening arrangements to mitigate consequent impacts on business budgets.

BR is also an unpopular tax for these reasons. As such, it attracts quite general attention – at least at the conceptual, if not at the detailed implementation level – providing some political head of steam favourable to reform.

The 2019 Labour Party manifesto retained the option of a land value tax on commercial landlords to replace the existing system of business rates.

In September 2021, Rachel Reeves, the shadow chancellor, announced that Labour “will cut and eventually scrap business rates” as part of wider plans to set up an Office for Value for Money with a remit “to tax fairly, spend wisely and get the economy firing on all cylinders”.

But she did not spell out, however, how the BR system would be reformed and what arrangements would replace it and whether they would include a LVT, or the timescales involved.

Liberal Democrat policy is for business rates to be replaced by site value taxation, as “a first step towards a wider system for taxing land value”.

The 2019 Conservative manifesto specifically committed to a ‘fundamental review’ of the business rates system.

The relevant findings of the HM Treasury Review published in October 2021 are considered later in this section.

The current system

Business property comprises the building structure (which can be altered, used more intensively, or extended) and the land (which is fixed) that it sits on: business rates constitute a tax on both composite elements.

They are charged on all non-domestic properties, subject to reliefs or exemptions for the smallest businesses (those with a RV less than £12,000 are exempt and those with a RV above that but below £15,000 receive tapered relief), and are collected by local authorities. Agricultural land and outbuildings are exempt.

BR raised during 2019-20 approximately £30bn across the UK (£25bn in England), about 3.6% of total current public receipts (TBC).

The liability of each business premise is its rateable value (RV) – based on its notional annual rental indexed for inflation – multiplied by a government prescribed multiplier, which in 2021-22 was 0.51 (in England) for most business properties.

The National Valuation Office (NVO), using a set of economic and locational assumptions, assesses the RV of each business premise for each successive valuation cycle.

It does not currently assess the proportion of the assessed combined value of each business premise (land and premises) that is taken by the land underlying the business premises (excluding the depreciated value of the premises).

That land or site value can vary sharply, as it does for residential land, with its location and connectivity.

RVs are generally much higher in London and across other economically buoyant urban areas, although regional variations in business land values tend to be more muted than they are for residential land.

What might take its place

A potential window of opportunity might exist therefore to design a LVT that could redistribute the burden/incidence to richer landowners and away from productive businesses, so generating associated static and cumulative macro-economic gains and/or increased public revenues.

The IFS in its 2014 Green Budget review of business rate taxation concluded that because the demand for business premises is much more responsive to price than is its supply that over the long run, the incidence of such a LVT in practice will be mostly passed on to the owners of properties via lower rental income.

An annual LVT could also extend the tax base by taxing empty sites, encouraging their development.

The review did, however, also caution that over the short run, downward rigidities in property rents linked to contracts and leases could result in its incidence falling on the occupiers and users of business premises.

This is because BRs are currently generally paid by the business occupier in accordance with their lease or other contractual arrangement with their landlord that often include five year no downward movement rent review clauses.

Such a LVT could be levied on the freehold landowner of business premises rather than its occupiers, although this would presumably require some statutory redrawing of the that contractual framework.

This incidence impact issue is likewise relevant to residential tenants; the ability of landlords to pass on the tax should be limited – at least in the longer-term – if, as theory predicts, house prices fell because of the tax; but, on the other hand, especially in the short term, a shortage of suitable alternative rented accommodation and the costs of moving, as well as tenancy contractual arrangements, could well allow the landlord to pass on at least some of the cost of the tax onto current or new tenants.

The IFS went on to note that a periodic four per cent LVT on land value could replace business rates on a revenue-neutral basis, phased-in over several years.

Other commentators have proposed variations, such as a two per cent LVT tax while retaining half of business rates, allowing a shorter phasing-in period.

A June 2022 ONS methodological paper concerning the valuation of land underlying other buildings and structures advised that such land was estimated to be worth £869bn in 2021, accounting for 12% of the total c£7trillion value of UK land. Just over half (51%) of that £869bn value was estimated to come from property subject to business rates.

Using those estimates, a pure LVT levied on the value of land underlying business premises would need to be set at seven per cent to raise c£30bn of revenue – approximating to the recent BR total yield across the UK (869*0.51*0.07=c30).

Any phasing-in period would likely need to be accompanied by mitigations shielding businesses – likely to be concentrated in London and other high value urban centres –from suddenly facing higher bills.

Such arrangements, however, could risk undermining the effectiveness and efficiency of any reform.

As in the case for residential land, the same trade-off between softening potential and actual opposition and reducing the need for transition arrangements while maximising net public revenue and economic efficiency gains, remains.

A revenue-neutral scheme while still helping to reduce deadweight loss and to increase efficiency in relation to the use of business premises, is still likely to throw up gainers and losers.

Gainers may well outnumber the losers in numbers, but the latter often tend to be most vocal and possessed of greater lobbying and media influence powers.

Any significant reform involving a business premise LVT is also likely to require a Parliament or more at least to implement.

Even that timescale assumes that reform is implemented early in the life of a government elected with a secure majority that was prepared to treat the reform a core legislative priority, had already a scheme up its sleeve to give to civil servants to work up into well drafted legislation, and it was implemented in parallel with the necessary supporting valuation arrangements.

The HM Treasury  Review  of Business Rates, published in October 2021, however, recommended that the current system is retained, explicitly rejecting the adoption of an alternative LVT, as advanced by the IFS above and others, concluding that the arguments made in its support: “are outweighed by a lack of evidence (concerning its) benefits, the significant practical challenges of introducing (it), and the probable adverse impacts in relatively high-value areas such as city centres”.

It did, however, announce the government’s intention to move towards more frequent three yearly valuations of business premises, starting in 2023, as well as to “carefully consider the case for an annual revaluations cycle, in the longer-term” based on capital values.

Incremental tinkering of the existing arrangements rather than radical BR reform accordingly appears on the cards as currently laid.

That could change with the arrival of a new Prime Minister in September 2022, given that commitments during the leadership contest to reduce taxes, at least in the absence of cuts to public service funding, appear to be built on very shaky public finance foundations.

In that light, a BR reform that could be presented as furthering the Levelling-up agenda in a way that is economically efficient and friendlier to smaller businesses as well as provide a potential to secure more net public revenue, could become an increasingly attractive political proposition.

In any case, any move to a regular one-year revaluation cycle should help to underpin an emerging overlapping technical consensus more favourable to the future rolling out a wider partial or pure business rate LVT underpinned by regular and accurate valuations.

These would need involve the ONS and NVO working in closer partnership to allow these to include separate valuation of business premises and the land underlying them.

The Labour Party and Rachel Reeves may likewise find it politically expedient to frame up their stated ambition to abolish BR to include a partial BR LVT.

Even a limited transitional business rate reform involving at least a partial LVT (which seems the most promising line of political least, but still possibly significant, resistance) aiming to redistribute from landowners to business owners and ultimately to consumers – a process that over time should raise more net revenue – needs to be clearly explained and justified, however, and be driven by clear and understood objectives.

6          Concluding comments

 The Real Crisis of the Fiscal State is the mismatch between the public expenditure requirements of the UK and the political and electoral willingness for them to be met through forms of taxation that are efficient, sufficient, and transparent.

Honest and deep debate on public funding requirements matched to sources is accordingly avoided, invariably subverted instead to short-term political presentational purposes. The recent Conservative Party leadership contest recently showed that in spades.

The impoverishment of public services and an almost default governmental resort to hidden stealth or inefficient forms of taxation is the inevitable end-result.

The public deficit overhang left by the government’s response to the Covid pandemic combined with continually rising real demands for social expenditures generated by an aging society, and quite likely in the future by post-Ukrainian invasion defence expenditure increases (Liz Truss committed to raise it to 3percent of GDP), underscores the impending fiscal imperative to develop forms of taxation that are efficient and equitable, as well as sufficient and sustainable.

An accelerating secular trend for land values to account for ever-rising shares of national wealth across many high-income countries and the UK in particular and its relationship to tardy investment, productivity and growth outcomes has helped to interest re-awaken in a modern Georgist LVT (phased-in gradually) across informed economic circles.

The analysis of Henry George in terms of its translation into practical policy may have suffered from its over-simplification and lack of engagement with the institutional environment.

Nevertheless, based on the pioneering work of the founders of economics as an academic discipline, it has been supported and even vindicated by such recent trends, as well as by modern modelling that a switch from direct and indirect taxes on labour, goods and services, and firms in favour of a LVT would generate substantial direct economic gains in a cumulative self-sustaining manner, as well as dampen speculative activity and wider cyclical instability.

The experience of Singapore has shown that long-standing economic and social returns can be achieved by suppressing private land speculation and the capture of rising land values for public benefit.

Yet obstacles to the effective implementation of even a gradual modern LVT, notwithstanding its huge potential latent benefit, remain formidable within current political environments.

The main ones can be headline summarised as follows:

  1. Its benefits are potential and uncertain and will be sensitive to the contingent wider macro-economic and political environments that it is rolled-out into, subject to unforeseen shocks and events that could well blow a gradual LVT off course, given that future certainty concerning its retention and future progression is necessary for its benefits to be realised;
  2. Its introduction as a planned flagship programme in the first place would carry substantial short-term electoral political and electoral risks linked to its perceived immediate incidence impact on homeowners; these are likely to deter its political adoption;
  3. Measures– including revenue-neutrality – designed to mitigate above are likely to blunt some of the beneficial impacts of a LVT, introduce new complexities and uncertainties, and underscore concern as to whether its potential long-term benefits would justify the political risks and upheaval costs incurred in the short-term.
  4. Comprehensive and accurate valuation arrangements that need to be put in prior place presuppose at least a nascent political commitment to introduce a gradual LVT that is currently lacking.

Perhaps, most seriously, for a LVT to raise enough revenue to significantly reduce the need for economically more harmful taxes in a UK context, it would need to be levied on residential land and at rates that would increase bills for many households above what they currently pay in council tax – a very problematic political proposition.

Yes, such a tax would allow other net taxes to be reduced to the point that the net tax burden of most such households would be reduced. But that, indeed, would be in the future (unless the any short-term transitional shortfalls in public revenue were met by borrowing) not at the time of initial implementation: in short, possible jam tomorrow, but pain today.

Given that, politicians, even of a reforming bent, might well conclude that an incremental non-revenue raising reform of the current council tax system, focused on relieving some of its most pressing regressive inequities, such as its regional incidence (the occupier of a  lower-value dwelling in the North or Midlands, for instance, can pay as much as a much higher value dwelling in London), presents a more appealing and realistic option, with its potential to chime, for instance, with a wider ‘Levelling-Up’ agenda.

A combination of such a reform – as was noted in Section Five, the increased proportion of residential dwelling value taken by the underlying land means that a proportional property tax has become a closer proxy to a LVT – with the business rate reforms discussed in Section Six, is probably the best that can be hoped for and would be greatly beneficial in their own rights, and consistent with possible LVT progression over the medium term.

Any move to more frequent and accurate valuations, facilitating the separate valuation of land from buildings and structures, would offer a supporting step in the that direction.

Wider progress will ultimately depend however on both government and opposition politicians recognising and addressing honestly the Real Crisis of the Fiscal State.

That at present must be considered a hope rather than an expectation.

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Filed Under: Economic policy, Housing, Time for a Social Democratic Surge

Response to DLUHC Consultation on Compulsory Purchase Compensation July 2022

20th July 2022 by newtjoh

ASocialDemocraticFuture has submitted its Response to  the Department of Levelling Up, Housing and Communities (DLUHC) Consultation on proposed changes to compulsory purchase compensation.

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Filed Under: Consultation Responses, Housing

December 2021 Kolkata

27th January 2022 by newtjoh

This post mixes personal asides and commentary on Indian national and local issues prevailing during a December 2021 visit to the family home of my wife in Kolkata, India.

It is usually an annual event but did not occur last year due to Covid travel bans; my wife, however, did manage to come to the IJK in the summer but had to quarantine in a hotel close to Heathrow.

The autumn relaxation of restrictions lulled me into a false sense of security so when I heard that after a long hiatus India was again granting travel visas, I quickly purchased an Air India ticket consistent with a two month stay, at a bargain price.

What I did not factor-in was that the quick and painless electronic ‘E’ visa, which during my last 2019 visit could even be obtained on arrival without fuss, had not been reinstated.  I had to revert instead to an earlier process: first make a registered on-line application and then an appointment at one of the out-sourced Visa Application Centres located in Islington and Hounslow.

To my horror, the earliest available date for such an interview was weeks away beyond the booked date of my flight departure! Following intensive efforts to get an emergency visa direct from the Indian High Commission, it sent an e-mail that offered me an appointment slot at Hounslow (located in back streets close to the soon-to-be redeveloped historic Hounslow Calvary Barracks) the day before my planned departure.

A false hope. The counter clerk soon disabused me: after collecting the fee he flatly stated that my visa would be ready in four working days and then valid only for travel for 30 days post-entry, not the usual six months.

If I had known that I would have rearranged my outward flight earlier. The resulting late notice counted as a no-show that with the required change in flight dates set me back not far short of £2,000 – more than thrice the cost of my original ticket.

Very frustrating and not the best of starts. I consoled myself that at least I was fortunate that a period of paid employment during the Covid period had allowed me to accumulate savings; and that I only had to bear the costs of changed itinerary for myself only, rather than for a larger family that some of my fellow on-the-day visa-seekers at Hounslow now faced (mainly UK passport holders of Indian origin): swings and roundabouts and all that.

In case you are wandering, this long personal preamble provides an entry into the serious business of politics. The new tight visa regime was limited to UK and Canadian nationals, who consequently took the collateral damage for an apparent tit-for-tat governmental visa dispute.

Ironically later that month it emerged that the latest Foreign Secretary, Liz Truss, the Thatcherite-mantle-bearing wannabe successor to Boris Johnson, wanted to pursue a trade deal with India that involved the easing of visa restrictions on Indians wishing to study and work in the UK with the return expectation that India would ease restrictions on inward British trade and investment into its growing service sectors, such as IT.

I allowed myself a slight sardonic chuckle remembering the not-too-distant times when the Conservatives presented themselves as the party that explicitly favoured white ‘kith and kin’ immigration. A positive but probably unintended post-Brexit consequence that could make easier ‘brown’ immigration from the sub-continent central to the government’s Global Britain mantra. One to track.

Finally arriving in Kolkata early in December, as we travelled along the Airport Road, passing a cheesy replica of Big Ben before hitting the ‘expressway flyovers’ that now traverse the east and south-central parts of the city, its usual cacophony and bustle enveloped the car. Shuttered restaurants and internet cafes suggested that its recovery from India’s previous Covid waves remained uncomplete, however. To see the impact of the first Indian lockdown starting March 24, 2020 on Kolkata view this video.

That said, at the national level, India’s main stock exchange indices continued to spurt in step with a recovery in GDP that is forecast to reach nine per cent for 2021-22, following a seven per cent Covid-related decrease the preceding year.

Such figures at the national level, of course, do not necessarily replicate at the regional or grass-roots level. Incomplete detailed official statistics limits evidence-based interpretation but most commentators believe Indian post-1991 reform development model has skewed GDP gain to benefit of the middle-class and rich with the poor rural and insecure urban wage worker majority benefiting very much less, save for, to my eyes at least, widespread mobile phone usage.

Covid can only have compounded distributional inequality. I was left to wander how workers, such as the neighbourhood cycle rickshaw men, managed to maintain themselves and their families during close to two years of lockdown or muted demand. Apparently local Temples provided some support. I don’t know whether the official cash transfer scheme introduced in March 2020 following the country’s first lockdown percolated to them and their families and for how long along with the overall effectiveness of that and successor schemes.

I received my booster jab the week before my arrival, instilling confidence that I could avoid testing positive preventing my departure from India within my 30-day visa validity, which would be a problematic and expensive eventuality to say the least.

The emerging threat of Omicron provided a growing backdrop throughout my visit. I had not only missed the December exponential explosion in London case-numbers but had arrived in India just in time as inward flights from the UK were banned before the month ended.

On Christmas Eve, we visited Park Street – Kolkata’s West End – enjoying the tremendous festive street decorations, more impressive than in London pre-Covid. The crowds were stupendous, mostly well controlled by a high-visibility police presence enforcing a one-way pedestrian flow with mask-wearing exhortations generally heeded.

But as new recorded Omicron cases ticked up, then began to double in days, many of the large New Year club celebrations were cancelled for yet another year, but this time at the last moment. Even the New year firecrackers seemed more subdued compared to pre-Covid years.

A primary set of themes tend to dominate each annual visit, whether it is demonetisation, mass electronic ID roll out, pollution control, health policy reform, or employment reservation issues.

This time the concerted efforts of the second Modi government, viewed through a Kolkata lens, to impose Hindutva populist cultural nationalism in ideological and policy terms even at the expense of constitutional and democratic norms and values as well as development outcomes was centre stage.

In December the 50-year anniversary of the creation of Bangladesh (loosely translated as the country of the Bengalis) independence passed.

As way of historical background, Bengal and Calcutta was the centre of British colonial power from the late eighteenth century, when Warren Hastings, the first Governor-General with a pan-India remit presided in Calcutta, until 2012 when Delhi replaced it as the imperial Indian capital.

The associated rise and growing self-confidence of a Bengali intelligentsia during the nineteenth century made the colonial city the epicentre of Indian engagement with that same power and later constitutional Indian opposition to it and was where in the early twentieth century organised revolutionary terrorism first reared its head in earnest.

An imperialist viceroy, Lord Curzon, at the apogee of empire in 1904 announced a classic colonial divide-and-rule device to spike such indigenous nationalist  opposition. He split Bengal into separate western and eastern administrative entities. The west in population mainly Hindu, including Calcutta; and the east mainly Moslem, notwithstanding that it included Assam, with the historic Mughal city of Dacca (Dhaka) as its capital.

The idea was that the poorer Muslims, freed from the fear of electoral domination within the existing undivided province and its limited property-based franchise, by the in-built Hindu majority  would ally themselves with the British.

But the change provoked furious Bengali agitation that soon resulted in its reversal, announced no less by the new King George V in his 1911 Coronation Durbar, in tandem with the transfer of the imperial capital from Calcutta to Delhi.

Apart from this giving back to Bengal and Calcutta on one hand and taking away on the other, Britain maintained divide-and-rule by the establishment and entrenchment of separate electorates for Muslims that guaranteed them a minimum number of seats.

The device of separate electorates served to drive a wedge over time between the India National Congress, that since its birth in 1885 had evolved into the paramount national independence party, and the Muslim League (ML) and other parties focused on the Muslim communal electorate and its economic and social concerns.

As independence began to beckon, a brilliant London-educated lawyer, Muhammad Ali Jinnah, revived and mobilised the ML into a mass communal-based political party dedicated to the principle that the Muslims of India to protect their identity and future needed to secure a separate independent nation for themselves, free of Hindu domination: Pakistan – in effect a nation defined by religion.

The Second World War provided conditions opportune for its propagation. Congress leaders were put in prison, as Britain focused on the war effort. In 1943 over a million of the Bengali rural poor were starved by a famine caused by structural inequality and official mismanagement and negligence rather than the shortage of food, per se – what the Bengali economist Nobel Prize winner, Amartya Sen, summarised as lack of entitlements of exercisable claims to available food.

The wider uncertainty that reigned as to the what the precise political future for India held other than ultimate divestiture of colonial power fuelled growing mistrust and latent fear between the two communities. It increasingly led to communally motivated riots and acts of violence, whether precipitated by a small-scale row or brawl that escalated, religious music or processions that antagonised one or other of the communities, or simply a wish by local wannabe gangsters to loot or to take advantage of disorder. Bengal and Kolkata in the 1940’s doesn’t seem that dissimilar to Ulster and Belfast in the 1970’s.

In August 1946 this culminated into mass communal riots and organised killings that resulted in the slaying of many thousands, often by the hatchet and club, known as the ‘Great Calcutta Killing’ that stopped only at the behest of Mahatma Gandhi threatening to fast to death, if it didn’t.

A Calcutta University historian, Suranjan Das, back in 1990 differentiated it in scale and character from earlier communal riots, thus: “It was more organised, more directly concerned with institutional politics (the establishment of ML government in Bengal; the growth of Hindu revivalist organisations linked to Congress; the impact of propaganda for and against Pakistan) and hence in the prevailing climate more exclusionary related to communal politics …. and identities rather than cross-communal leftist and nationalist consciousness”.

Job, well done, Curzon!

The following year British India, amid deadly communal strife and massive population movement, was partitioned into two separate independent and sovereign nations, India and Pakistan: ‘freedom at midnight’ for most; communal-based death and destruction for the multitude victims of the ‘ethnic-cleansing’ of mixed Muslim and Hindu communities either side of the new border drawn through Punjab in the west and Bengal in the east.

Although the Muslim population, representing around a fifth of the total erstwhile undivided Indian population, was concentrated in those two provinces, it was also dispersed throughout the continent (communities often included descendants of the administrators of the Mughals).

Muslims, according to the 2011 Census, still account for over 14% of the total Indian population, by far the largest religious minority to the 80% majority of the population reported as Hindu. Christians the next largest but only accounted for 2.3%, followed by Sikhs, 1.7%.

Pakistan was bifurcated into West and East Pakistan, separated by over a thousand miles of continental India.

East Pakistan was the successor to Curzon’s east Bengal. Bengali Muslims comprised the majority population, which also included poor Muslim migrants from east India, predominately Bihar, who spoke Urdu rather than Bengali, while a Hindu landowning and commercial Hindu minority that remained accounted for around 10% of its total population at its 1947 inception. West Bengal became the Indian state of West Bengal.

The power and resources of Pakistan was concentrated in West Pakistan. The Punjab and Punjabis were hegemonic in the government and the military. They treated the Bengalis of East Pakistan more as colonial subjects than equal citizens; effeminate inferiors to the martial Punjabis; clerks rather than warriors.

Bengali nationalist discontent grew in response. It flared to a head when the Awami League (AL) – created in 1949 as a Bengali nationalist party – in the 1970 national election won 167 of the 169 East Pakistan seats. To avoid the AL exercising its majority in the national assembly, the West Pakistan-resident Pakistan President declared martial law.

A bloody guerrilla war involving atrocities on both sides broke out in March 1971 – a war that India under Indira Gandhi soon joined for its own strategic security reasons. It ended nine months later with the marooning and surrender of the Pakistani army and the establishment of the independent state of Bangladesh, jettisoning East Pakistan into the dustbin of history. Their Bihari local allies, became stateless, confined to squalid refugee camps.

Up to ten million Hindus over the next two decades also sought refuge in India including in squatter settlements around Kolkata and its surrounding rural hinterland. Other households encroached on vacant plots before going on to establishing themselves in emerging suburbs, such as Tollygunge, Chetla, and New Alipore, and across former rural areas absorbed progressively into the Kolkata metropolitan area.

Bangladesh itself was over-populated and confined in part to the Ganges delta prone to both cyclones and flooding, which could and did wipe out its means of agricultural subsistence. Shorn of industry, trade, and resources by previous British and Pakistani overlordship, it lacked an economic base to support its rapidly rising population, threatening a twentieth century Malthusian outcome that Europe the previous century had escaped through industrialisation and urbanisation.

It was a state born in blood with dismal prospects of nemesis rather than peace and prosperity. Certainly, the newly born Bangladesh was one, if not the, poorest country of the world and almost immediately became synonymous with floods and famines, making Henry Kissinger’s epithet ‘basket-case’ appear apt at the time given the new country’s dependence on external official and charitable aid. A memory of my early teenage years were newscasts of famine relief efforts that underscored homilies about not wasting food.

Yet the country survived, stabilised, and even began to prosper, despite periods of political turbulence and intolerance not prevented by weak democratic institutions that remain fragile.

A key landmark was the strategic decision taken in the eighties to develop a comparative advantage in cheap manufactured clothing to provide the primary route to export-led industrialisation. The industry has provided employment to up to four million workers, with the female proportion estimated to be as much 80%, foreign exchange, as well an impetus to invest and innovate, although concerns about child working and other working condition abuses persist. In parallel an indigenous Grameen micro-finance initiative and other social welfare advances provided springboards for a steady improvement in social welfare indicators.

Remarkably, given its inauspicious start, the World Bank  in April 2021 reported that despite its per capita GDP ranking tenth lowest in the world in 1971, Bangladesh had reached lower-middle-income status in 2015, and is expected to graduate from the UN’s Least Developed Countries (LDC) list in 2026. Poverty declined from 43.5 percent in 1991 to 14.3 percent in 2016 based on the international poverty line of $1.90 a day (using 2011 Purchasing Power Parity exchange rate).

Looking forward, according to the Asian Development Bank, expected per capita GDP growth for Bangladesh is 5.5% in 2021 and 5.8% in 2022. It is now higher than India’s according to some commentators who make the case that its growth is broader-based and comes attached with better human development outcomes, vindicating its ‘bottom-up’ development trajectory. That said, the above statistics should be considered with caution given problems of collection, definition, and interpretation. Political and climate change risks remain.  Its economy could become over-dependent on the garment sector.

Undoubtedly there was much for Bengalis to celebrate, and even more to ponder, on its fiftieth anniversary, not only in Dhaka but in Kolkata, a city, as we have seen, so scarred by the 1947 partition that in one stroke rent asunder its natural geographical and economic hinterland causing it to swell with refugees during the ensuing years – an experience repeated in 1971.

Calcutta – as it was then still known – itself had become a synonym for ‘third world’ poverty, squalor, and hopelessness, political violence, a period vividly captured in Geoffrey Moorhouse’s book of that name and period.

Such depictions were and remain resented locally, however; in fact, considerable progress in bustee slum improvement programmes began and have continued, even though the number of huts without a concrete roof during the post war period increased in both absolute and proportionate terms to approach 50% in 1981 – the product of not just of uncontrollable refugee and rural migration, but natural population increase.

Today the typical Kolkata home seems to be a flat in the high rises that increasingly dominates the cityscape. My walks around the local suburbs of New Alipore and Behala, at least, indicate ‘slums’ – as its middle-class term – although often hidden down an alleyway do appear integrated into its neighbourhood and provided with facilities consistent with permanence and the seeking and maintenance of employment and participation in society. Informal settlements without such facilities, along railway lines and without watercourses and close to concentrations of low paid informal employment remain, however.

Securing a true evidence-based up-to-date picture requires hard investigation into hard data from available sources. A possible task for the future.

That Dhaka, the capital of Bangladesh, is less than 160 miles (as the crow flies: less than the distance between London and Manchester) away from Kolkata; the close linguistic and commercial ties between the cities; the legacy of the pivotal involvement of the Indian army in the freedom struggle to create the country; and that the AL – historically sympathetic to its Indian neighbour – has been in increasingly-entrenched power for nearly a decade – all might suggest that ruminations of Bengali (Bangla)-based affinity should accompany Bangladeshi’s fiftieth birthday, encouraging some resurrection of discussion on regional economic and social co-operation, at the very least.

Yet the anniversary passed with muted local notice. Why?

Cultural and class affinities tend to trump any shared ethnic and linguistic identities. Kolkata Bengalis predominantly are Hindu upper caste and middle-class; Bengali-speaking Bangladeshis are mostly Muslim (historically some were lower caste converts to the faith) and working-class.

The long and insecure land border between India and Bangladesh has encouraged focus on illegal cross-border immigration rather than closer economic integration, especially in Assam and neighbouring states, whose indigenous communities frequently react to the economic and cultural threat of Bengali Muslim migration by agitations that sometimes turn deadly violent.

Despite the linear closeness of the Kolkata and Dhaka, such political, as well as geographical – the indented and heavily forested Gangetic delta (the Sunderbans) – factors have mitigated against the development of direct fast rail, road, or ferry links between them, making flying more convenient for travellers that can afford that mode. And, in any case, few Kolkata Hindu households have family left in Bangladesh, their grandparents abandoning ancestral pre-partition lands and houses, as did my wife’s family.

More recently, Narendra Modi’s re-election as Indian Prime Minister in 2019 marked a sharp shift towards Hindutva-based nationalism of an increasingly communal colour, making the national political environment of December 2021 hardly conducive to pan-border or Greater Bengal economic integration and co-operation: something that surely should increase the GDP of both West Bengal and Bangladesh.

Modi’s government ended the special status of the State of Jammu and Kashmir (up to then, India’s only Muslim-majority state) split it into two Union government-administered territories as an obvious ploy to reduce the prospect of potential future Muslim political influence: Curzon revisited.

The Citizenship (Amendment) Act 2019 was enacted, providing  a path to Indian citizenship for  Christian, Sikh, Buddhist, Parsi, and Jain  migrants  that migrated after suffering  persecution in  Pakistan, Bangladesh, and Afghanistan before December 2014, but technically came as illegal immigrants. Such eligibility, however, was denied for Muslim illegal migrants from those countries, making for the first time an individual’s religion an overt criterion for citizenship under Indian law.

During December Modi’s government even revoked the foreign exchange licence of the late Mother Theresa’s world-renowned Kolkata-based ‘Missionary of Mercy’ charity, apparently taking account of accusations that it encouraged poor Hindu recipients of its help to convert to Christianity, blocking it from receiving funds from abroad.

This was in tune with a tide of rising intolerance towards Christians in India, where churches and priests have been subject to physical attacks by local Hindu mobs for allegedly encouraging conversions to Christianity, when in most cases they appear simply to have been practising quietly their own religion.

Even more concerning were frequent reports of Hindu extremist groups spreading inflammatory anti-Muslim propaganda. Even when these went as far as exhortations to kill Muslims, the silence from government suggested silent acquiescence by the ruling Bharatiya Janata Party’s (BJP) top brass to their use at the very least as a dog-whistling tactic to browbeat the main minority.

It recalls Modi’s pronouncement when Chief Minister (CM) of the western state of Gujarat in 2002 in the wake of a firebombing by a Muslim mob of a train causing the death of around 70 Hindu pilgrims at Godra that the “people need to vent their anger”. Hindu mobs massacred 2,000 Muslims in the riots that followed.

The BJP had burst into political prominence three decades back through focused and concerted campaigns to exploit a nascent majoritarian reaction against the purported – but often fake or self-interested – socialist secularism of the Congress Party, the post-independent hegemonic political force, dominated by the family descendants of its first Prime Minister, Jawaharlal Nehru (Harrow and Cambridge), with its associated regional power brokers.

Nehru’s daughter, Indira Gandhi (she married Feroze Gandhi (LSE) – no relative to Mahatma Gandhi), was the prime minister that ordered the Indian intervention instrumental in the creation of Bangladesh. Despite the hiatus of the ‘Emergency’ that she instigated later in that decade and its political fallout, she remained India’s dominant political figure until her assassination by a Sikh bodyguard in 1984.

Her own son, Rajiv Gandhi, Cambridge-graduate and former airline pilot, inherited the her mantle and won the election that followed on a sea of sympathetic outpouring for his mother, but after five uneven and difficult years in power lost the 1989 general election.

In 1991 he also, tragically, suffered assassination, this time by a female Tamil Tiger suicide bomber. Soon afterwards Congress re-assumed power with the multi-lingual South Indian Narasimha Rao as Prime Minister, who appointed Cambridge economist Manmohan Singh as his finance minister.

His government was a key watershed one in the trajectory of post war Indian economic history but it managed less creatively and resolutely the Ayodhya controversy.

It was there in the sixteenth century that the conquering Mughal emperor, Babur, had demolished a centuries-old temple to build an eponymous mosque on the same site. Hindu activists/pilgrims now camped in the town agitating for that Babri Mosque (Masjid) to be demolished and for the temple that it had replaced – purported by them to be the birthplace of Rama – to be re-built. In 1992 they succeeded in demolishing the mosque during a disorder that claimed more than 2,000 lives.

The Yatra Chariot marches that BJP leaders orchestrated and led across India in 1990 proved a key turning point in the demise of Congress as the national hegemonic political power: the BJP leadership saw and took the opportunity to harness its potential to symbolise the side lining of Hindu religious-cultural-nationalist sentiment by the Congress and the political establishment/elite.

When Congress was reduced to a seat tally of 140 out of 543 in the 1996 general election, Rao soon resigned as party leader.  An unstable period of coalition government followed but a conclusive 1999 general election then allowed Atal Bihari Vajpayee, leader of the BJP, to serve a full five year term as prime minister within a National Government Alliance (NGA) coalition.

Meanwhile Congress power brokers had asked Rajiv’s widow, the Italian-born Sonia Gandhi, to become Congress president in the hope that the Gandhi name would help to rally electoral support. After a tricky start she soon learnt to navigate the Indian political jungle, in spite of her gender and foreign origin, asserting herself over the Congress power brokers, as had her mother-in-law two decades before.

She pulled the Congress strings at state and national level as its president during the period of opposition to the  NGA government and then the technocratic edifice of Manmohan Singh’s premiership of a Congress-led coalition that was in power from 2004 until Modi’s 2014 first general election victory, when Congress was reduced to a rump of 44 Lok Sabha seats.

Her son, Rahul Gandhi (Cambridge) was elected to the Indian parliament (Lok Sabha) in 2004 for the family seat of Amethi, progressed through Congress, elected its president in 2017, but resigned in 2019 in the wake of that year’s general election defeat when he lost his Amethi seat.

He continues to make public speeches and to campaign for Congress as does his sister, Priyanka Gandhi. Either could re-emerge as Congress leaders with their mother back as Congress president.

Modi in 2021 seized the opportunity of the inauguration of  the Kashi Vishwanath Mandir (Kashi Temple) corridor project in Varanasi to re-spin the BJP Ayodhya narrative that the Muslim Mughals were alien invaders whose actions and institutions were inimical to time immemorial Hindu culture and society.

Another Mughal Emperor, Aurangzeb, this time had had in the holy city of Varanasi (Benares) demolished a historic temple and replaced it with a mosque, leaving remnants of the previous temple in situ.  Its reconstruction on a nearby site with a clear vista to the Ganges opened-up through the removal of an intervening warren of lanes and alleys, was described by Modi on 13 December thus:  “ the long period of slavery (that) broke our self-confidence in such a way that we lost faith in our own creation”, going on to present the Kashi Temple corridor as both a tangible and symbolic manifestation of India modernising in step with its Hindu cultural heritage: “Today from this 1,000 year old Kashi I call upon every countryman – create with full confidence, innovate….”. Put another way, India’s development must sit within a Hindutva cultural superstructure.

Modi’s second term has shifted away from development towards an ideologically led project to underscore that India and Hinduism is culturally and politically indivisible. The logical adjunct to that is the political neutering of India’s Muslim population and their portrayal as a product of an invasion that was not only military, administrative, but also culturally, alien.  Modi advances that project using the tools of majoritarian political populism

In that light,  Alastair Campbell, Tony Blair’s former spin-doctor, in his Review of 2021 for Tortoise Media posited that a populist demagogic political leader can be recognised by these characteristics:  propaganda is more important than policy;  simple untruths beat complex realities;  you must demand loyalty of others, but not give it yourself;  stirring up division is vital, and good; build slavish media backing and sectarian support; develop a unique way of speaking, rich in imagery and the exploitation of emotions and symbols; rewrite national history; say unsayables; use baseless claims and insults; ignore conventions; weaken Cabinet, Parliament and bodies that threaten ‘the will of the people’, as you define it; never admit you’re wrong; never accept your opponents are right; and, finally, always blame others if things go wrong.

Campbell, drawing-on Populismus für Anfänger (Populism for Beginners) authored by two Austrians, economist Walter Ötsch and journalist Nina Horsczek, concluded that Donald Trump and Boris Johnson “ticked-all the (populist) boxes”. Well, the glove fits well also on Narendra Modi, first elected as India’s Prime Minister in 2014, as it does on Turkey’s Recep Tayyip Erdoğan, in power since 2003, or on Brazil’s, Jair Bolsonaro, who said last August that he sees only three possibilities for his future: “death, prison or winning the 2022 presidential elections”.

All have doubled-down on authoritarianism, chiselling-away at the weakening foundations (or their barest semblance in the case of Vladimir Putin of Russia) of their respective nation’s increasingly fragile democratic institutions, when they can or must to keep in power.

However, compared to Trump or, less starkly, to Johnson, the charge of sado-populism – implementing policies contrary to the material interests of their own electoral popular base – fits less comfortably, however, on the Indian premier.

To retain power, the BJP, depending on and varying with the regional and local political context, must assemble and maintain lower caste and Dajit (‘untouchable’) vote-banks, underpinned by the promise and delivery of jobs, security, and development to their members.

To that extent, development must accompany the practice of Hindutva as otherwise a split vote in the Hindu wider community – defined by socio-economic and historical cultural characteristics than by religious observance, could allow the Muslim vote to assume potential electoral importance: anathema to Modi and his cohorts.

What is most worrying and potentially tragic on a world-scale, is that India with its huge and rising 1.4bn population, its sustained success in escaping colonialism to become the world’s largest democracy, its emergence as an economic global colossus despite its diversity, rising population and continuing mass poverty, has fallen to the populist bug – regressing towards discriminatory communal-based narrow nationalism, leaving its main minorities, at best, marginalised and insecure, and at worst, in physical danger, contrary to the Indian constitution as constituted in 1947 which, however, included ‘paper’ rights such as universal access to health care.

Modi and his closely-knit inner circle (Amit Shah, currently Union Home minister, and Jagat Prakash Nadda, BJP president) during 2021 certainly shunned India’s parliament as they endeavoured to cow its democratic institutions as much as they could. They, however, met humps going down that road.

His government’s dilatory and negligent preparation and response to the Covid second wave that hit India during the spring and early summer of 2021 overwhelmed its health services, shortages of oxygen, mass burial, and even the dumping of bodies in streets, causing the government to lose its sheen of competence.

Concerted and high-profile demonstrations by Indian farmers, infuriated by the lack of consultation and preparation that preceded and accompanied hastily enacted and implemented agricultural reforms, forced their abandonment and repeal less than a year after their enactment. The BJP also lost the West Bengal state assembly elections badly.

These reverses may partly explain Modi’s doubling-down on Hindutva cultural nationalism in the approach to the 2022 state assembly elections. The most populous state, Uttar Pradesh (UP), the Hindi heartland home to more than 200m people, whose current CM is even more of a Hindu militant than Modi, as well Punjab, Goa, and Uttarakhand states will go to the polls this year.

Enter Mamata Banerjee, the CM of West Bengal since 2011. Her portrait blandishes every party and official poster with any exceptions tending to prove the rule, making unmissable her face, endorsements, and homilies wherever you travel in Kolkata.

Her back story illustrates the capriciousness and factionalism of Indian politics. She first came to national prominence as a firebrand young radical in the Congress Party, initially locally and then nationally. Following her election to India’s parliament in 1984, her political career progressed to the point that she held twice the Union government Railways Minister and other key second rank cabinet posts, displaying a dissident streak driven sometimes by policy issues but often by factional personality/power clashes that both induced and accompanied the fragmentation of Congress into national and regional coalitions.

By the nineties Congress was mostly a spent force in Kolkata and West Bengal. She accused it of becoming stooge of the Communist Party of India (Marxist), which, following an unstable period in coalition with Congress had won control of the West Bengal state government in 1977. Through rural land reform and development, trade union links and tightly knit party organisation, it consolidated its electoral reach and hold to the point that it retained control over the West Bengal state government for over 30 years.

Led by the legendary communist, Jyoti Basu, for most of them, as time went on the growing corruption and hubris of the CPI(M) administration opened-up potential space for a well organised opposition to become sufficiently electorally popular and strong enough to withstand and then overcome the powers of patronage and intimidation that ruling parties in India tend to enjoy and employ.

Mamata (as she is known locally) filled it by creating a new party: the Trinamul (meaning: springing from the grassroots) Congress (TM). It focused on addressing state-wide and local issues at such a grassroots level. Spearheading and galvanising opposition to confiscations of rural land that the CPI (M) was instigating to attract international industrial investments into designated Special Economic Zones, proved a vote winner, putting her back into national prominence.

Like her CPI(M) and Congress CM predecessors she is Bengali upper caste. Jyoti Basu spent five years in London as a student in the thirties before qualifying as a barrister, while his son accumulated a business fortune, allegedly helped along the way by the state government.

Following-on from its state assembly poll victory that halted Modi’s electoral juggernaut, the TC won a landslide of seats in the 2021 December Kolkata Corporation elections. Although fiery loudspeaker speeches and processions of a “we will vanquish our enemies” slant and tone interrupted the peace of a couple of evenings, the polling was surprisingly peaceful on the day.

Canvassing and polling booth practice, indeed, proved a near replica of UK election practice and ambience – at least it was where my wife’s family voted, save that the polling station record for the family address included a photograph of an unknown male, leaving some potential scope for voter substitution malfeasance.

That peace quite possibly, or even probably was deceptive, unfortunately, simply reflecting that the TC confident of victory instructed its workers not to conduct any unnecessary electoral infractions or acts that could consequently provoke complaints potentially queering its victory glow. Things can turn out differently during close contests when the stakes are higher.

Yet Indian democracy tends to work, not because it is pristine in process, but because at the political macro level it provides a mechanism for the registration of an overall popular verdict that in response to gross governmental hubris and abuse of authority can presage a legitimate and accepted change-over in power. It also has proved over time a relatively effective channel to balance, sublimate or accommodate the different grievances and aspirations of the manifold ethnic, linguistic, and caste groups that India comprises. Even the bribery and patronage received and deployed by candidates at the micro level can serve to increase their responsiveness to local concerns and priorities.

Modi’s crusade against religious minorities in general and Muslim communities in particular risks removing that safety valve, creating discord to the point that it could make the pre-partition assertion that the founder of Pakistan, Mohammad Ali Jinnah, that Hindu and Moslems cannot live as equal citizens in India, a self-fulfilling prophecy, 75 years after partition.

Perspective, however, is called-for. Indian democracy has suffered even more stark, immediate, and deadly attacks, yet survived. Indira Gandhi’s Emergency during the seventies invoked the cessation of democratic institutions and norms and even countenanced mass forced sterilisation programmes. Her assassination set in train massacres of Sikhs in Delhi, at worst with official Congress sanction and at best with indifference. New Delhi’s treatment of Kashmiri Muslims has long blighted India’s human rights record. Communal strife stoked by continuing illegal migration is a long-term problem in Assam and neighbouring states. Closer to home in Britain our treatment of minorities and migrants often have and remains less than sublime under far more relaxed socio-economic conditions, while, of course, the populist Boris Johnson from the beginning of his premiership unashamedly upended or disregarded constitutional and parliamentary conventions.

Economically, Congress during the post-war period with its ‘licence raj’ prior to the liberalisation reforms of the nineties, generated an anaemic – nicknamed the ‘Hindu’ – rate of growth that between 1950 and 1990 averaged less than 4 per cent per annum, lower than that most of its less developed country comparators achieved during that era.

Although that rate did begin to fitfully accelerate in the eighties when concurrently across poor countries in Africa it stagnated or even declined, India’s growth during the worst years of economic under-performance barely kept pace with population increase and consequently contributed to swelling ranks of the Indian poor.

The social programmes and anti-caste pronouncements of Congress often were also more rooted in rhetoric than substance, serving to disguise the continuing dominance of the upper castes and the economically advantaged across society and their growing share of national income.

The advent of Modi, born into an economically backward caste, who served tea (chai) at the local railway station in comparison to the elite private and university education enjoyed by the members of the Nehru-Gandhi political dynasty, represented in that sense a potentially egalitarian refreshing break or even liberation from the feudal-like paternalism of Congress.

National tax and sales tax harmonisation, grassroots sanitation and social protection programmes increasingly based on the digital Aadhaar Card, conducive to the targeting of direct cash transfers, and the rolling-out of extended publicly-supported health insurance, were all steps in the right direction, as was discussed  here. The tension between his pursuit of Hindutva and broad-based development aims seemed to tilt towards the latter during his first term.

Development momentum has been retarded or swamped by the hard Hindutva focus of his successful second term campaign and subsequent record in office, however.

Modi and his close cohorts need to re-orient back to a development focus and away from using Serbian-type recourse to centuries-old historical events as a populist backstop to promote their Hinduvta cultural-nationalism agenda.

Yet, their united and closed mindset, forged by decades of committed apparatchik activity in sometimes secretive and legally proscribed extremist communal organisations, and their probable equation of their populist political methodology with continuing electoral success, appears increasingly to make that a forlorn and optimistic hope.

The future of Indian democracy requires a united opposition imbued with refreshed ideals fused with pragmatic inclusive goals that can effectively engage with the toiling Indian masses, holding the Modi’s BJP to effective real account.  A tough call given the tendency of oppositions in India to fragment into factions. Mamata Banerjee, for instance, would need to join hands with the Congress leadership and regional leaders from other parties.

Rahul Gandhi in December made a stab in differentiating a tolerant and inclusive Hinduism from Hinduvta in December, but in his usual partial and dilettante way.

The development and systematisation of an compelling alternative narrative to Mod’s hard Hinduvta, focused on the inclusive upliftment of the poor majority, regardless of caste and religion, capable of popular translation by a broad range of coalition partners, awaits.

Hopefully, necessity forges progress in 2022.

 

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Filed Under: India Tagged With: Kolkata, Modi

Pathways to London inclusive housing affordability

4th December 2021 by newtjoh

Although the Greater London Authority (GLA) was established in 2000, it only assumed responsibility to administer, to allocate, and to deliver centrally funded affordable housing programmes in 2012 within a policy framework set by, and negotiated with, Whitehall.

The current mayor, Sadiq Khan, is responsible for two overlapping centrally funded housing programmes: the Shared Ownership and Affordable Homes Programme 2016 to 2023 (2016-23 SOAHP or 2016-23 programme) and the Affordable Homes Programme 2021 to 2026 (2021-26 AHP or 2021-26 programme).

The GLA was allocated £4.8 billion in 2016-23 SOAHP central government funding to deliver at least 116,000 affordable homes by March 2022, a deadline that due to the impact of Covid on delivery was subsequently extended to March 2023.

By April 2021, around 72,000 dwelling starts and 34,500 completions from that programme were recorded. Of the remaining 43,000, around 17,000, according to the mayor, are to be started in 2021-22 and 26,000 in 2022-23, accordant with targets previously agreed with Whitehall.

In November 2020 £4bn from the successor 2021-26 AHP was allocated to deliver 35,000 affordable homes across London by March 2026. London-wide allocations from the GLA’s first bidding round for that programme were announced on 31 August 2021, when £3.46bn was allocated to 53 housing providers to deliver 29,456 homes, none of which have started yet.

The mayor expects the 2021-26 AHP – running alongside the extended and outstanding preceding 2016-23 programme – to provide a combined total of c.79,000 affordable new home starts by March 2026.

The Housing Committee of the elected London Assembly at its 19 October  meeting(the committee), coincident with the publication of its 2021 Affordable Housing Monitor (2021 Monitor),  considered issues relating to the past and future delivery of these two programmes.

This post uses most current up-to-date information that the committee, other forums, and the official affordable and other housing statistics published in November 2021 provide(d) to illuminate London-wide trends and issues likely to impact on affordable housing delivery until 2029.

Associated policy development implications at both central and local level are identified and related, where applicable, to the core themes of A Social Democratic Future, including the real fiscal crisis of the state.

The core conclusion is that the driving principle of the mayor’s successful 2017 Affordable Housing and Viability Special Planning Guidance should be extended nationally, but in a way cognisant with regional, sub-regional, and local housing market characteristics and values.

Such a policy shift would align to the line of current political least resistance to make the Section 106 process simpler, with greater certainty and transparency, making paramount the principle that the planning gain attributable to granting of residential planning permission should be recycled to the maximum possible extent to the provision of affordable housing and supporting social infrastructure.

It should be combined with changes in the public accounting treatment of housing investment that reflected its productive income and wealth effects and its self-funding capacity over a 30-year period.

This should tap into a discernible overlapping political and technical consensus that the provision of affordable housing must be mainstreamed through measures that directly reduce the cost and price of housing into both public and private business models, and thus blur the distinction between market and social housing, so lessening the trade-off between maximising social rented and total affordable currently aggravated by constrained central housing capital budget allocations.

1          Defining and tracking affordable housing

What precisely counts as an affordable home is itself a complex and contestable concept that tends to be tautological rather than illuminating.

The government’s definition was published in the 2012 National Planning Policy Framework, last updated July 2021.

Broadly speaking, dwellings provided at least 20% below local market rents (including service charges where applicable) and 20% below local market values in the case of discounted home ownership, including shared ownership, are counted affordable under that definition, which must remain at an affordable price for future eligible households or include provision for any receipts to be recycled for alternative affordable housing provision is required when public grant is involved.

Defining a dwelling as affordable, of course, does not make it by itself affordable for households of varying circumstances subject to local housing market conditions.

The GLA definition of affordable housing attempts to address that consideration, whilst maintaining conformity with the government’s definition of affordability and other programme funding conditions, where applicable, by requiring it to be made available “at a cost low enough for eligible households to afford, determined with regard to local incomes and local house prices”.

For example, the GLA defines London Living Rent (LLR) as an: “intermediate affordable housing tenure with a London-specific rent introduced by the mayor that will help, through sub-market rents on time-limited tenancies, households save for a deposit to buy their own home. Rents are based on one-third of the estimated median gross household income for the local borough, varied by up to 20 per cent in line with ward-level house prices, and capped to reflect the maximum affordability for an eligible household. Providers of LLR homes funded through the Affordable Housing Programme (AHP) 2021-26 will be required to offer tenants the opportunity to buy the LLR home on a shared ownership basis during their tenancy and within ten years. Finally, the benchmark rents also vary based on the number of bedrooms within the home”.

In planning delivery terms,  Delivering affordable housing (HP4) and Affordable housing tenure (HP6) policies of the 2021 London Plan, published in March, specified the following split of affordable products delivered (proportion of total affordable units provided expressed as 100%) expected to be provided in a development):

  1. a minimum of 30 per cent low-cost rented homes, as either London Affordable Rent or Social Rent, allocated according to need and for Londoners on low incomes (A1);
  2. a minimum of 30 per cent intermediate products which meet the definition of genuinely affordable housing (A2);
  3. the remaining 40 per cent to be determined by the borough as low-cost rented homes or intermediate products (as A1 and A2 define) based on identified need;
  4. Where the proportion of (total affordable) homes provided in in a development exceeds 35% (50% on public land or on industrial sites, and public sector landowners with agreements with the mayor across a defined portfolio of sites, or 60% in case of an appointed strategic development partner), their tenure (split) is flexible, provided that the homes are genuinely affordable, as A1 and A2

The presumption is that the 40 per cent to be decided by the boroughs under (3) will focus on social rent (SR) and London Affordable Rent (LAR). HP6 does, however, recognise that for some boroughs a broader mix of affordable housing tenures will be more appropriate, “either because of viability constraints or because they would deliver a more mixed and inclusive community”, in which case it should be determined through the local Development Plan process or through supplementary guidance.

Social housing is allocated with reference to statutorily defined need categories and is mainly allocated to those on low incomes or are otherwise medically or socially vulnerable.

Intermediate housing in the guise of LLR mainly caters for potential households in employment with moderate to average (middle) household incomes below £60,000; households with gross household incomes of up to £90,000 per annum can be eligible for some intermediate home ownership products, primarily London Shared Ownership (LSO).

As an indication of prevailing actual affordable intermediate costs, a proposed 100% intermediate affordable development in Ealing will offer one bedroomed dwellings attached with a market value of c£450,000; translating – assuming that purchased equity stake is 25% on mortgage with 10% deposit found paid – into a monthly cost c£1,239, including a £223 service charge; and two bedroomed units attached with markets value between c£550-600,000 translating into a monthly cost of c£1,500, including c£300 service charge. Properties will be initially offered to eligible local households demonstrating annual household incomes of £60,000 before higher income applicants are considered.

The official statistical sources

There are lies, damn lies, and statistics. Official housing statistics, of course, don’t propagate lies. They do, however, suffer from frequent definitional and consistency discontinuities, from subsequent revisions of previously published data, from gaps in coverage, and from reporting shortcomings (such as source data omissions and miscoding). All can impact on data accuracy, completeness, and transparency. Data owners can decide what to publish, in what format, over what period, and what is included and omitted.

Published data then gets subject to competing political spin narratives, selective in what data and what time periods are highlighted, presented to paint a picture of the past, present, and future that the narrator, accordant with their own organisational interests and preferences, want beholders to see.

All this makes the interpretation of housing data over time difficult, time-consuming, and an invariably less than definitive experience: confusion can consequently trump understanding.

It is important to understand what a particular statistical source in each case is describing and what it is not.

Tables 1 and 2 of GLA Affordable Housing Statistics reports affordable starts and completions that the GLA has funded or monitored as part of a wider regeneration programme. It can omit affordable housing activity undertaken by councils and other registered providers (mainly housing associations) not recorded by the GLA. It is thus a subset of total gross new affordable housing supply provided in London over any set period.

The affordable housing statistics series published by the Ministry of Levelling up, Housing and Communities (MLHC) in its Live Table 1011 is more complete, but it is only published annually in November. It “aims to provide a complete picture on affordable housing delivered, irrespective of funding mechanism”, including new build and acquisitions from the private sector, (although not losses through demolitions or sales), as well affordable completions reported in local authority as well as GLA statistical returns to MLCH, some section nil grant 106 units that the GLA in its 2019-23 returns may have omitted, as well as units funded through Right to Buy recycled receipts not counted in the GLA statistical series.

Although Table 1011S of that series reports total affordable starts only from 2015-16, Table 1011C provides a time-series for completions back to 1991-92, reproduced in Annex Table One.

The GLA and MLCH series are compared in Table 1 below.

Table 1 London2029

The MCLG technical note to the latest published 2020-21 series explains the variance between the two series, thus: “local authorities are asked to only record (in their LAHS return) affordable housing that has not been reported by Homes England or the GLA. To assist them in doing so and minimise the risk of double counting, Homes England (outside London) or the GLA (within London) sends all local authorities a list of the new affordable housing recorded in their administrative systems. However, despite best efforts, double counting may still occur if local authorities misunderstand the instructions on the form or if, due to differing definitions of completion of housing, local authorities considered that a unit had been completed in a separate financial year”.

It appears higher for completions, where it can reach 40%, as it did, most recently, in 2019-20, reduced last year to 8%. Around 76% of the 2020-21 starts in the MLCH series were recorded as funded either by Homes England/GLA but only about  a third of the same year completions.

Neither the GLA nor the MLHC affordable housing statistical series report net totals that take account of reductions in the affordable stock, including from right-to-buy (RTB) and from demolitions; both negative flows can be considerable.

A distinction on the margin can be made between losses due to RTB and demolitions: dwellings demolished are lost now and for ever as source of affordable housing and require the rehousing of previous occupants; yet when integral to a redevelopment or regeneration programme, they may be replaced in time.

Right-to-buy completions reduce the affordable stock and (all other things remaining the same) deflate the future flow of affordable housing opportunities (although receipts generated by the sale may enable partial replacement) but not the total dwelling stock: the dwelling sold can still be lived in by current and future occupants.

Also published annually each November, Table 118 Housing and Communities dwelling stock statistical series provides a net additional dwellings time series for London (E12000006) that is broken down into components, including new build completions, net conversions, and change in use, with demolitions netted off.

According to MLCH, it is the primary and most comprehensive measure of housing supply that provides the “only consistent data source for providing dwelling stock estimates and changes in net supply between census years in England (London), at least from 2006-7”.

That the series is adjusted to reflect the decennial Census result suggests the possible margin of error attached to it, however. And, like the GLA and MLCH affordable series it does not breakdown units provided by bedroom size (number of bedrooms).

It is not broken down according to tenure, and therefore it cannot be directly reconciled with the MLCH annual affordable housing series. It can only be inferred from both series, that gross affordable completions accounted about a third of total new build completions during 2020-21.

Programme phasing, starts and completions

The GLA affordable housing programme is subject to successive central government funding allocations, themselves subject to comprehensive spending review decisions. Each multi-year funding settlement then is allocated by the GLA to individual development partners following an application, competition, and moderation phase.

Development programmes then involve long lead-in times, requiring total scheme funding to be negotiated or identified, and the necessary scheme approvals to be secured and preparations undertaken, prior to any start on site.

Complex and multi-partner scheme developments take years to gestate and then complete. For example, the large-scale redevelopment of the Hackney Woodberry Down and Ealing South Acton council estates took or will take up to 30 years to complete.

The GLA’s Capital Funding Guide defines dwelling start as the date when the investment partner and contractor has signed and dated the building contract and the building contractor takes possession of the site or property and undertaken some necessary defined preliminary works, such as excavating for foundations or infrastructural drainage work.

The beginning of each programme cycle for such starts invariably is relatively fallow followed by a rapid pick-up that then is translated into a later bunching or concentration of completions towards the, or even beyond the end, of successive funding programme cycles.

For example, in 2014-15 over 18,000 completions were recorded (see Annex Table One London 2029), more than three times the volume recorded the following year, reflecting the concentration of completions at the end of the 2011-15 Affordable Housing Programme.

The latest stipulated date for 2021-26 AHP funded dwellings to start is March 2026 and the end date for their completion is March 2029: a potential gap of eight years between programme inception and end, and three between the start and completion of individual dwellings.

The preceding 2016-23 programme is attached with no backstop completion date, meaning that completions funded by that programme could possibly trickle-in towards the end of this decade.

In that light, October’s Housing Committee (the committee) was reminded that a family can only live in a dwelling when it is completed, not when it is started; on the other hand, assessments of programme delivery need to relate to the applicable programme funding and associated target arrangements.

Using GLA Table 1  affordable starts within the capital funded or reported by the GLA since 2008 have averaged annually, overall, around 11,000: 12,000 during 2008-12; falling to less than 9,000 in 2012-16; rising again to approach 13,000 during 2016-21, as Table 2 of this post catalogues in the next section.

Much care is needed in interpreting such overall averages, however, as they are sensitive to the choice of period surveyed. And any average taken over a period can mask variations marking that period or an underlying trend within an inherently shifting story, compounded as it is by programme phasing and the gap between starts and completions identified above.

Over 30,000 dwellings under the 2016-23 programme were started during 2019-21 suggesting a total figure of c43,000 remaining programme starts between April 2021 and March 2023, nearly double the average annual of 11,120 starts during the preceding decade (excluding any that may also be funded under the 2021-26 AHP).

Such a level of starts, if achieved, will then feed into subsequent 2021-26 completion figures, pushing them beyond the previously record 2008-12 completion average, plus some.

On the other hand, the smaller 35,000 dwelling 2021-26 programme will subsequently come on stream from 2023, pushing down the average annual start and then the completion rate towards the end of the decade.

A total of c108,850 expected GLA dwelling starts between the decade April 2019 and March 2029 (c30,500 2019-21 starts plus 43,000 remaining 2016-23 programme starts plus 35,000 2021-26 programme starts) by itself, if achieved, would provide an overall annual average of just under 11,000 for that period, and an even lower completion average. That figure, however, excludes the unknown number of starts that can expect to result during 2027-29 from any successor programme to the 2021-26 programme, and from any other additional allocations.

All of this, of course, shorn of context is prone to presentational cherry-picking.

Improving statistical reporting

Neither the GLA nor the MLHC affordable housing series break down start and completion activity according to bedroom category. This is an important omission insofar that much new affordable housing in London, as noted earlier, is delivered through multi-decade redevelopment/regeneration schemes. These often involve the phased demolition and replacement of existing social rented and other housing tenures by a higher number of one to two bedroomed units.

In that light, the 2021 Housing Monitor recommended that bedroom numbers should be included in the GLA data, which should also capture all gains and losses to the affordable housing stock, and that starts and completion data should also differentiate between funding programmes.

This website has asked both the GLA and MLCH to make efforts to reconcile its respective affordable housing series, and the MLCH its affordable and net additions series.

And, as the London Plan highlights, the growing importance of Section 106 in providing additional affordable housing supply within London means that it is crucial that their implementation and review mechanisms are monitored to ensure that the additional homes contractually committed are delivered in the form promised.

Its monitoring of affordable housing (HP7) policy, in that light, requires boroughs to have clear monitoring processes to ensure that the affordable housing secured on or off site is delivered and recorded in line with the requisite Section 106 agreement, and to share that monitoring information with the GLA to incorporate within its annual monitoring process, and, to underpin the accuracy of their statistical returns to MLHC.

These returns, in the view of this website, should record all individual housing obligations contained in section 106 agreements, and to track them according to whether they are:

  • delivered in accordance with the agreement; or,
  • remain outstanding; or,
  • were cancelled; or,
  • differed in quantum and composition to the original agreement.

2          What the published available statistics tell us and what they don’t

The most telling message conveyed by Table 2 below concerns programme composition.

Table 2 London 2029

It shifted from social rent (accounting on average for 64% of starts 2008-12) to affordable rent (55% of starts, 2012-16), then followed by shifts in favour of intermediate housing provision (50% of starts) and of social rent (31% of starts), both away from affordable rent during 2016-21.

The total and proportionate share of social housing should increase significantly further in the future on current plans. An August 2021 mayoral press release advised that 57 per cent of the 2021-26 AHP programme will be for social rent, of which half will be delivered by councils; shared ownership or London Living Rent accounting for the rest.

That increased 57% proportion compares to the 46% share that social rent took of the total number of affordable dwellings started in 2020-21, and the 64%, 30%, and 17% of total affordable completions that on average social rent accounted for throughout the 2008-12, 2012-16 and 2016-21 mayoral terms, respectively.

The 2021 Monitor also broke down starts and completion according to borough. Four boroughs completed over 2,000 affordable dwellings in total between April 2016 and March 2021 (over 500, on average, each year): Tower Hamlets, Newham, Southwark, and Ealing. At the top, Tower Hamlets, 4,306 completions, while the other three ranged from 2,709 in Newham to 2,070 in Southwark.
Four contributed less than 400: Richmond, Harrow, Havering, and Hillingdon, with Richmond reporting the lowest: 210.

With respect to social rent/LAR completions, Tower Hamlets, Newham, and Ealing all reported over 500 completions over the same period (18% to 23% of their respective total completions). Sutton reported two; Kingston, three; Harrow, four; and, Richmond, 16.

These headline figures, however, do not provide a good guide as to the progress of each borough in meeting the 2021 London net additional dwelling requirements that Annex Table Two London 2029 reproduces.

Ealing, for example, has a 10-year net completion target ending March 2029 of 21,570 dwellings. An October Planning Appeal decision noted that the borough is delivering, at best, 40% of its objectively assessed need for affordable housing while the council accepts that it cannot demonstrate a five-year supply of deliverable housing sites (consistent with it delivering its London Plan targets).

As the previous section noted, the GLA affordable housing statistics series only cover programme activity that the GLA monitors, thus excluding some local authority and housing association self-funded and nil grant section 106 activity. Nor does it breakdown starts and completions according to type of provision.

Table 3 provides that breakdown by utilising the more comprehensive and complete MLCH series

Strikingly, more than 50% of the total 10,800-odd affordable dwellings completed during the last two 2019-21 years were delivered through the nil grant Section 106 route – a progressive increase from the 13.7% recorded in 2014-15.

To put that secular trend into an even longer-term perspective, until 2013-14 (when they accounted for 12.7% of the total, a proportion that thereafter rose steadily year-on-year, as above) the share of the total affordable supply accounted for by nil grant Section 106 completions had had previously exceeded 10% in one year only: 2006-07 (see  Annex Table One London 2029).

Table 3: Affordable completions, according to tenure type and section 106 status, 2014-21

Table 3 London 2029

In tune with that,  GLA analysis of planning data, published in March 2021, reporting mayoral approvals of planning applications referred to the mayor during calendar year 2020 (largely because application concerned more than 150 dwellings), advised that 37% – the same proportion as 2019, a record – of the total 38,865 units approved (14,337), and 41% of habitable rooms (a better measure as it take account of dwelling size composition and mix) were affordable. That proportion had only reached 30% in 2017, after previously out-turning in the 18% to 25% range between 2011 and 2017.

Apparently discordant with that secular trend, however, MLCH Table 1011S indicates that only c16% of 2020-21 starts were expected to be funded through nil grant Section 106 route.

 Table 4 shows that successive ten-year average completions have not diverged from the 30-year average by more than 8%.

Over successive five year periods more variation is discernible, but the table provides little evidence that the political complexion of the government in power proved a major factor; the two lowest five year averages reflected, first, a squeeze on public housing investment in affordable housing during the early New Labour years; and, second, the during 2016-21, the tail end of fiscal austerity acting disproportionately on housing capital investment presided over by David Cameron and George Osborne, tempered in outcome by increased nil grant section 106 supply.

Table 4 London 2029

Completions recovered to reach record levels during the later New Labour years; as the previous section noted, new record levels can be expected at some point during the next decade as 2019-23 start levels subsequently feed into completions.

On the whole continuity interrupted by macro-economic, public expenditure, electoral, and programme cycles, rather than any overarching ideologically-led policy intervention, consistent with post-Thatcherite governments recognising the need for additional affordable housing, if not the means.

The primary and overwhelming message is that the delivery of affordable supply has grossly undershot assessed requirements and aspirations, regardless of the political colour of the governing party.

Table 5 below uses the MLCH net additions series. It records a near-doubling of net supply from the levels recorded in the early noughties to reach c32,000 by 2009. The impact of the GFC then resulted in a drop to c21,000 in 2012-13, then a progressive increase (interrupted in 2017-18) took it to a record c41,000 dwellings in 2019-20 (including c37,000 new build completions). It then dropped back, probably due to Covid-related impacts, by 9% to c37,000 (including c33,000 new build completions) last 2020-21 year.

A sharp fall in demolitions was also recorded in 2020-21.

Table 5 London 2029

Table 6 below advises that new builds account for most net additions, although between 2015-17 changes in use from office and other uses to residential reached 22%, prompting wider concern about the space and other standards. It dropped back later in the decade.

The source statistical series (MLHC, Table 118) is not broken down according to tenure. The relative negative impact of demolitions on affordable net supply outcomes can be expected to be higher: large scale demolition of existing social housing estates has generally been more prevalent in recent decades than redevelopment of privately owned stock, more predominant in in the 60’s and 70’s.

In that light, a Southwark Monitoring Report  covering the April 2004-19 period reported 15,237 planning affordable home planning approvals but a net increase in affordable supply of only 9,924.

The demolition of estates, such as the Heygate, close to the Elephant and Castle, subject to comprehensive and long-term redevelopment and replacement programmes can cause net affordable housing supply, taking account of demolitions, to subtract from gross affordable supply.

 Table 6 London 2029

The committee was told that housing associations and other social landlords face ‘competing priorities’ between maintaining existing buildings and developing new homes, with the cost of remediating fire safety defects and decarbonising homes reducing the capacity to build new ones. A central headwind echoed in the last meeting of the London First convened  Council-Led Housing Forum (the forum) held that same morning.

Richard Hill, vice chair of the G15 group of housing associations within London, advised the Housing Assembly committee that the ‘operating environment’ its members faced required them to re-focus on building safety and investment on their existing stock, causing their development numbers to go down, noting that housing associations face multi-million billion bill to fix safety issues over the next 15 years that came attached with an opportunity cost of around 72,000 new affordable homes foregone.

The London Plan, indeed, includes requirements for all developments of ten or more homes to be net zero-carbon and to incorporate sustainable urban green spaces as part of a wider drive for London to be a zero-carbon city by 2030.

The mayor in his August press release also confirmed that housing providers building homes funded by the new 2016-23 programme, on top of that core climate change sustainability requirement, will also have to meet new conditions on building safety and design, including:

  1. The installation of sprinklers or other fire suppression systems in new blocks of flats;
  2.  A ban on combustible materials being used in external walls for all residential development, regardless of height;
  3. Minimum floor-to-ceiling heights and a requirement for private outdoor space;
  4.  A ‘sunlight clause’ requiring all homes with three or more bedrooms to be dual aspect, any single aspect one- or two-bedroom homes to not be north-facing and at least one room to have direct sunlight for at least part of the day.

Switching to the crucial wider economic environment, deputy mayor for housing, Tom Copley, advised the committee that rising building costs along with shortages of materials and labour in the construction industry could “have a serious impact on scheme viability”, while Darren Levy, director of housing for the London Borough of Newham, starkly warned that: “We’re seeing materials, labour all increasing in cost. [There are] supply chain issues. There’s a general lack of stability. The labour market is becoming more challenging, there are fewer skilled operators available, and they have to a certain extent got a number of suitors in the construction industry in London… I do think, going into the next five to 10 years, it will have a significant impact into that future pipeline”.

On top of that, NIMBY-related opposition to developments that might meet London Plan and local plan requirements but are perceived as detrimental to the local environment and/or future house price prospects, will also need to be navigated.

One of the appealing characteristics of many parts of London is that high quality and high value residential areas are often cheek-by-jowl to social housing or mixed tenure developments. But residents of the former tend to possess more effective voice power in a local planning decision context to oppose and sometimes block high density new affordable housing developments.

The role of councils

On a positive note, a ‘renaissance of council housing’ was celebrated, which the forum was advised involved the delivery since 2018 of more than 8,000 affordable dwellings by London councils; a figure expected to rise to c.10,000 by March 2022, notwithstanding the recent impact of Covid.

As was noted earlier, councils have been allocated more than 50% of the 2021-26 programme for social rented accommodation, which is expected to translate into an additional c12,000 such units funded with GLA support over the next five years.

Southwark, for instance, has a longstanding commitment to provide an additional 11,000 council homes through ‘various means’ by 2043, as part of its efforts to maintain a net increase in the council stock; an aim helped in recent years by rising values that makes the right-to-buy increasingly unaffordable to existing tenants and by higher social housing re-provision levels after a period when losses of social rented stock resulting from estate -regeneration -linked demolitions and RTB’s exceeded gross new affordable provision..

Barking and Dagenham established in 2017 a wholly owned company, Be First, that with 400 hectares of development land, proclaims plans to “provide 50,000 high quality new homes and 20,000 new jobs by 2037”. More modestly, its 2020-25 business plan that the local cabinet approved in April 2020, envisaged “the delivery of 116 new homes in 2020/21 from four development projects and the commencement of seven new development projects to deliver a further 938 homes up to 2024-25, with an average of 73% affordable housing”.

Moving west, Ealing’s November 2020 Cabinet approved a £390million business plan for BLRP, a subsidiary of its wholly owned housing development company, Broadway Living. Along with the £99m grant that the council secured from the Greater London Authority in 2018, the investment will be used to build at least 1,300 affordable homes within the next six years. In total, the plan expects to see BLRP build 1,513 homes, with the sale and let of some of the homes subsidising the development of more homes for affordable let. The business plan projected that BLRP to pay for itself over the course of half a century by “recouping the initial investment through sales and rents”.

A lot can happen over such timeframes, however, and such local development company initiatives come attached with uncertain and elongated risk profiles embracing, but not exclusively, execution, development linked to market conditions, interest rate, and funding source, risk.

The experience of Croydon’s locally owned development, Brick by Brick, created in 2016 demonstrates their potential impact provides a salutary warning. It received £200m in development loans from the council, but by 2021, after its development programme stalled, had not produced any dividends or returns, contributing to its parent council and owner becoming in effect insolvent and unable to make a balanced budget.

Mr Hayes at the forum related a shift from the previous reliance on housing associations to develop affordable or acquire housing from developers to a reaction to the growth of ‘mega’ associations with confused commercial and social ends, drawing on his previous experience as Ealing’s regeneration-lead to note the actions of two associations in embarking on a bidding war for sites contrary to the local public and social interest.

Councils with their greater democratic accountability and their ability to co-ordinate planning with provision activity and to overview local housing and other markets are relatively well-placed to step-in and step-up provision to fill the gap left by HA’s hamstrung by post-Grenfell pressures to spend on their own stock.

Councils, however, compared to private housebuilders, face higher development costs, including across their material supply chains; in that light, moves to aggregate purchasing across organisations and to secure greater vertical integration of their development activity (such as setting up in-house construction arms) can be expected.

On a different but related note, drawing on his current role at Be First, he also noted the rising value of industrial land, reaching £6m per acre, as a constraint on direct provision, although he felt that values would plateau into the medium-term.

The forum was also told that some London authorities are also approaching their Housing Revenue Account (HRA) borrowing cap and that, overall, the scope for councils to expand further direct provision beyond current plans is likely to be limited.

Taken in the round, the conclusion must be that council provision of social housing will remain a sub-theme rather than a transformative one in London housing the next decade.

The funding environment

Pat Hayes, the current managing director of Be First, also highlighted at the forum possible policy risk, cautioning that the current mercurial ‘right-wing populist’ Johnson-led government, gyrating between radical market- and state-led interventions, could simply decide to move the policy goalposts concerning council provision.

The biggest risk, as it seems to this website, is the replacement of Johnson by a successor more wedded to Rishi Sunak’s proclivity for a smaller state and fiscal conservatism – a far from unlikely scenario, even though one still likely to be tempered by the wider political imperative to retain the recently won Conservative – in the absence of a more precise description – ‘working class’ and ‘red wall’ vote.

Certainly, central government cannot be relied upon to provide increased funding support. Although the 2021 Spending Review (SR21) did announce an additional £1.8 billion in total for housing supply, on top of the existing £11.5 billion investment through the Affordable Homes Programme (2021-26), of which £7.5 billion is over the SR21 period, 65% of the funding will be for homes outside London.

The government’s political driver to target resources to the North and the Midlands – the home of its ‘red wall’ seats – to further its Levelling Up agenda combined with the chancellor’s commitment to bring down the share of national income taken by public debt within three years, means that any further increase in centrally supported housing investment for London is unlikely.

The £4.9bn that Tom Copley advised the committee that is needed ‘every year for 10 years’ to provide affordable housing on the scale needed will remain ‘for the birds’ in the absence of imaginative and radical systemic change to the housing finance system, requiring at least some measure of cross-party support.

The concluding section will return to that.

Changing programme composition

The funding and other sources of affordable housing are multiple subject to frequent change. The average amount of public grant or other support required to deliver affordable housing varies according to tenure, location, and bedroom mix, the prevailing policy environment, as well as wider macro-economic and housing market conditions.

Public grant support was squeezed down practically to nil during the 2014-19 period when public housing investment became a key victim of fiscal austerity. A social rent unit will require more than twice as much public support than an intermediate unit.

As way of example, the GLA’s Building Council Homes for Londoners fund offered £100,000 per Social Rent/London Affordable Rent compared, compared between £28,000 and £38,000 for London Living Rent, London Shared Ownership (LSO) or other genuinely affordable intermediate unit started between April 2018 and March 2022.

Programmes comprising 90% social housing and discounted home ownership, respectively, will generate quite different numbers of additional housing opportunities for households of different social-economic characteristic.

Politics abhors a vacuum, and Tom Copley at October’s committee highlighted that the mayor had successfully argued (or, put another way, the government for its own reasons had been willing to accept the principle) for the majority of the 35,000 homes to be provided (started) by 2026 to be social rent dwellings, the “most affordable and most needed” homes, noting that “the government has come full circle from when it originally wouldn’t allow social rented homes to be created”.

He further pointed out that the 2016-23 programme of 116,000 dwellings was attached with £4.9bn grant support compared to £4bn for the 35,000 dwellings currently expected to be delivered through the 2021-26 programme.

The average unit public grant cost of £42,000 to provide each of the 116,000 affordable dwellings under the 2016-23 programme will rise (mainly due to the change in programme composition towards the more grant-intensive social rent, but also due to build cost inflation and the cost of design, quality, sustainability, safety and equality, diversity, and inclusion benefits) to a projected c£114,000 for each of the expected 35,000 dwellings of the 2021-2026 programme dwellings.

The reversion back to social rent should help to contain the central government housing benefit bill to a lower figure than would be the case if the same units were to be provided at the ‘affordable rent’ tenure (higher rents require more benefit where tenants are eligible, which the majority are) and at the margin should enhance work incentives; crucially, too, the shift from intermediate to social rent should more directly assist authorities to get a greater number of homeless families out of expensive and unsuitable temporary accommodation.

The downside, however, is the much higher subsidy requirement involved in providing a social unit and the resulting trade-off that exists at any given total level of grant availability between, on the one hand, maximising social housing and, on the other, total affordable numbers, largely explains why the total number of affordable dwellings that the 2021-26 programme will deliver (start) will deliver less than a third than its predecessor (expected delivery according to current conditions and plans).

The cross subsidy model

Providers, mainly the mega housing associations, ‘stretched’ receding levels of public grant over the last decade, buttressed by reserves providing a capital risk buffer, and by building units for market sale to cross-subsidise the provision of affordable homes, between and within schemes, for example, when large council estates are progressively demolished and replaced with a higher number and density of predominately private dwellings, which when sold to finance succeeding scheme phases.

But, as noted above, post-Grenfell and other spending pressures bearing down on such providers will curb its future scope.

Across recent decades the predominate development model has been cross subsidy, certainly within London and the main urban conurbations. The process has helped to maintain gross affordable supply during a period of constricted public grant support availability.

But the cross-subsidy model will not by itself provide the affordable housing on the scale required; certainly, in the absence of a scale increase in public grant that the current unreformed public expenditure and wider policy environment will not provide.

It suffers also from other shortcomings that can militate against or even undermine its purported purpose. Cross-subsidy is intrinsically sensitive to wider market conditions, which – as in the wake of the 2009 Global Financial Crisis (GFC) – can interrupt, delay, or even forestall development progress.

The model encourages – and even at the margin is dependent – on providers to maximise market sale proceeds. This incentivises them to market and sell units, for example, to foreign investors or wealthy parents of foreign students, pushing-up prices way beyond the reach of local people on moderate to above average local incomes.

Even where developers can only maximise sale proceeds by targeting local buyers, many of whom are likely to have far from high household incomes, who then, in effect, cross subsidise the affordable units, the numbers of which, in turn, in the absence of additional public grants support, can be crimped when market sales proceeds are limited by local purchasing power.

More fundamentally, but related to above, the cross-subsidy model is predicated on, and perpetuates, a housing system that become increasingly riven and driven by multiple market failures, concentrated in the more economically buoyant sub-regions concentrated south of the Humber and Trent and east of the Tamar.

Use of nil grant Section 106

London in recent years have, as Table 3 demonstrated, increasingly has come to rely upon nil grant Section 106 planning agreements (obligations) to deliver affordable housing. It is, in effect, a mechanism to partially recycle or ‘tax’ the uplift in value secured through residential planning permission; as such it is integral to the cross- subsidy model: a palliative to the imperfections of the broken wider housing market on which it relies.

In the past, information and expertise imbalances between local authorities and developers allowed the latter to game the Section 106 system to their own advantage, increasing developer profit at the cost the number of affordable units provided: St. Mary’s Residential Case study provides a high profile Southwark example

The progressive step-increase in the proportion of total new gross affordable supply taken by nil grant Section 106 since 2013 provides some evidence of greater local authority focus and effectiveness in negotiating and then securing delivery of higher levels of affordable housing within regeneration and other schemes using the cross-subsidy model (as well as to the sterling and painstaking work done by organisations, such as the Southwark-based 35% Campaign.

A key catalyst of that step-increase was the 2017 Affordable Housing and Viability Supplementary Planning Guidance (2017 SPG), now formally enshrined in the 2021 London Plan, supporting its polices including HP5 and HP6 (discussed below), are to be implemented, which must be taken into account as a material consideration in planning decisions.

A streamlined Fast Track Route was introduced for schemes that include at least 35% cent affordable housing, and 50% on public or redeveloped industrial land that enables them to progress without the need to submit detailed viability information and without late viability review mechanisms which re-assess viability at an advanced stage of the development process.

This, according to the mayor, “provided greater certainty to the market, sped up the planning process, and has helped to increase the level of affordable housing secured in new developments”. The consequent greater consistency and certainty has substantially improved outcomes.

Schemes that conversely do not provide the threshold level of affordable housing or meet other relevant policy criteria, or that provide off-site or cash in lieu contributions, must continue to follow the Viability Tested Route and are subject to viability scrutiny and late, as well as early, review mechanisms.

Tom Copley was asked at the committee whether more affordable housing could be squeezed from private developers through the Section 106 route.

He was not hopeful, however, no doubt taking his cue from his peer, the Deputy Mayor for Planning, Regeneration, and Skills, former Hackney mayor, Jules Pipe, who a month earlier advised the September London Assembly Planning and Regeneration meeting in a Question and Answer session that continuing to rely on developer section 106 contributions to provide affordable homes,  is “not a viable way of delivering the amount that we need as a capital city even combined with housing grants. Neither is sufficient….it is still obviously a very valuable tool and we would be loath to lose it. If anything, it needs to be enhanced, but quite how … when you are still requiring all these other things from a development, it will only pay for so much. Going back about ten years, it would have been standard for developers to expect about a 20% return. I think we are getting them down to about 12.5% on many of the developments that we see. Much below that, the real estate community will say, “Well, actually, we do not get enough return in London, we will go and develop elsewhere, thank you very much.”

That last point is addressed below.

4          What needs to be done  

The 2021 London Plan (plan), based on a Strategic Housing Market Assessment (SHMA) undertaken in 2017, publicised that London needs to deliver each year c66,000 net additional completions across all housing tenures for the next ten years, two thirds (c43,500 or 65%) of which should be in social or affordable tenures.

Yet the Planning Inspectorate report that reviewed it concluded that over the next 20-25 years capacity only existed to deliver only 52,000 net new homes per year. Consistent with that, the total ten-year target for new dwelling additions across London contained in the London Plan (reproduced in Annex Table Two) only totals 522,870 dwellings. Little evidence exists to provide confidence that authorities are on track to meet their targets with some, such as Ealing, reported earlier, unable to demonstrate sufficient progress.

The stark fact is that the past, the current, and the planned future provision of both total and affordable homes within London, as demonstrated in this post’s data tables, will continue to fall well short of the plan’s target and capacity.

The improved levels of annual net additions achieved in recent years, reported in Table 5, running at c40,000 still are less than two-thirds of the SHMA requirement, while the proportion of that total taken by affordable dwellings seldom exceeds a third.

Much therefore must change if future delivery is to approach declared needed levels.

On a positive note, a general cross-party – national and local – political acceptance has developed that new dwelling supply, and the share of affordable housing within that total, should, indeed, increase.

That acceptance, albeit sometimes masked by tactical discordant rhetoric – whether emanating from Whitehall or City Hall – has, however, been largely limited to the payment of lip service to a recognition that the ‘housing market’ does not work, save for some measure of government pragmatism in terms of policy change at the margin, such as lifting of the HRA borrowing cap.

But the radical and concerted changes to the strategic policy framework that real progress requires has stubbornly remained backstage.

Why land and multiple housing market failures bedevil new housing opportunity

The slippery slope began with the progressive divorce of the twin-principles enshrined in the 1947 Town and Planning Act that both development control and value vested with state. During the 50’s and 60’s the reduction and abolition of development (betterment) and changes in compulsory purchase legislation, in combination provided scope for developers to realise future gains from value uplifts attributable to the granting or even hope of residential planning permission.

That process and its resulting consequences has been clearly charted by the work Derek Bentley has done for Civitas, most specifically in The Land Question, which by piecing together various sources, noted that between the mid-1950’s and 1990’s, the average price of land attached with residential planning permission, at 2016 prices, spiralled from £150,000 per hectare to £1.3m, surging again to £5m by 2007, reaching £6.2m prior to the onset of the GFC. Values have risen subsequently. Land in agricultural use without prospect or hope of development is attached with an average value of £22,000.

This website in  The Measurement of Land Prices used similar sources to report 1994-2010 valuation trends of land vested with planning permission, while noting problems inherent in the compilation of land price indices (largely ceased since 2010) which try to provide weighted averages of an enormous array of transactions that vary according to site size, location and connectivity, other site circumstances, on the density of its development, and on the planning conditions imposed, as well, of course, on actual and expected future market conditions,

More recently, indicative land values of a hectare of land attached with residential planning permission across London ranged from £6m to more than £35m.

Technical detail should not, however distract from the clear and instructive story that Figure 1  below paints of the upward step-change in land prices that commenced in mid-fifties accelerating across cyclical oscillations, subsequently.

Figure 1

The financial liberalisation of the eighties, lubricated by the secular downward trend in interest rates, easier access to mortgage finance, and growth of dual income households, increased monetary demand for housing.

It was not accommodated by supply, constricted, as it was,  by the cessation of mass council building programmes and by a tendency towards market concentration in the private housebuilding sector.

The prospect of higher market sale proceeds, crucially, bids up the future cost of development value of land, propelling prices further upwards, sometimes in a frenzy to be followed by a subsequent bust that then compresses supply even further. Higher and rising proportions of residential development value, up to 70%, are now accounted for by land.

The housebuilding industry has been transformed from one marked by dispersed multiple small and medium-sized suppliers in often local markers competing on both quality and price to an oligopolistic structure dominated by a few large, mainly national, builders. The three largest Persimmon, Wimpey and Barratt, account now for around a quarter of the market, compared to 1988, when Daily Telegraph columnist, Liam Halligan, in his recent book, Home Truths, advised that 40% of completions were provided by 12,200 companies.

The end-result, now widely noted and recognised across the political and ideological spectrum, is that the these now dominant companies have become price-givers driven by an incentive to restrict supply to maximise their short-term profit rather than output, allowing them to make supra-profits – as much as £60,000 or more per house built, and to pay chief executive and other salaries and bonuses in the millions, while engaging in restrictive practices, such as inserting covenants that involve regular doubling of ground rents on properties that could be sold freehold.

It is a ‘market’ in name for a product – vital to individual and community well-being – distinctive in that it has risen in price so much in both absolute and relative terms in tandem with a quality decline, where consumers can exercise so little real choice. It is truly a market broken by the imperfections and distortions outlined above.

Two pathways – given the prevailing and expected future political and financial environment – appear to provide the best and most feasible routes to future London and national housing affordability.

1         Public accounting for productive housing investment

Across the short-to-medium term, there is little or no prospect of any further step-increase in central government housing investment funding arriving to push up that total substantially to lessen that trade off; the downside risk, rather, is that fiscal conservatism will have re-exerted itself within the Conservative government by the time of the next spending review.

Even in the unlikely event that a Labour or hung parliament was elected in 2023-24, a scale increase in housing investment would require it, not only to set fiscal rules that lift the current 3% of GDP ceiling on investment expenditures, but to juggle and prioritise competing public investment demands in such a way that both maintains financial market confidence and avoids construction industry material and labour shortages.

Recent speeches by the Labour leader and his shadow chancellor have emphasised that Labour next in office will be ‘fiscally responsible’ and will not ‘throw public money’ at problems for the ‘sake of it’.

Quite so, but also redolent of New Labour whose early headline adherence to previous Conservative spending plans to demonstrate its fiscal probity resulted in a squeeze on affordable housing investment during the early noughties, which had deleterious economic and social consequences.

A symptom of the real fiscal crisis of the state marked by a mismatch between the public expenditure requirements of the UK and the political and electoral willingness for them to be met through salient and efficient forms of taxation, or borrowing where economically and financially sustainable and appropriate.

Given that, it is both vital for, and incumbent on, the housing sector to make as strongly and clearly, as possible, both the economic and financial, as well as social, case for increased affordable housing investment, and to integrate that with supporting supply side reform to the construction industry.

Affordable housing investment due to rising rents and values, can be self-financing over a 30 year or plus time span. An increased supply of social housing should reduce and deflate the future costs of keeping priority households in expensive and unsuitable temporary accommodation.

A strong invest-to-save case, therefore, can and should be made, alongside, and integrated, where possible, with innovative reforms to the financing of affordable housing and its associated public accounting treatment consistent with the above.

2        A root remedy to engage with an overlapping political consensus: deflating future land prices directly by embedding affordability requirements 

The 2017 SPG  adopted the Existing Use Value Plus (EUV+) approach (current use value of a site plus an appropriate site premium), to determine the benchmark land value. It serves to embed known and increased affordable housing requirements, crucially, into the generation of shared future public and developer expectations on expected sale receipts and thus acceptable planning gain surpluses, then feeding into future land value and price expectations. That is getting to the root of the matter (addressing a core housing market failure: escalating land prices based on speculative rent.

Housing Policy Five (HP5) incorporated into the 2021 London Plan (para 4.5.4) confirmed that the approach seeks to embed affordable housing requirements into land values and create consistency and certainty across London, noting earlier where there had been a relaxation in affordable housing and other planning requirements, it typically led to higher land values, not an increase in housing delivery. It further advised that the 35 per cent affordability threshold level will be monitored and reviewed in 2021 to determine whether it should be increased, with any changes consulted on as part of an updated Affordable Housing and Viability SPG or through a focused review of the London Plan.

Jules Pipe did shed doubt, however, in September, as the preceding section noted, whether much more affordable housing can be squeezed out of the Section 106 route at the London-level, at least without wider, supporting, and concerted changes to the national policy framework.

A point, indeed, that this website’s  March 2018 Response to London Plan consultation advised that it : “fully supports the aim and content of the Mayor’s AHVSPG (2017 SPG) and believes that it sets a needed template for national housing policy reform as part of a needed package to repair Britain’s broken housing market. This requires the effective direct deflating of land values and a reduction in developer profit margins. But by the same token it is concerned that its intentions to be achieved requires similar reinforcing strategic policy reform at the national level, without which there is a possible danger of a developer ‘strike’ occurring at London-level as the largest housebuilders/developers migrate to locations where they can continue to enjoy excess super-profits. Cross party support for a sustainable reform – based on a credible and sustainable tailored incremental approach – is again a pre-requisite for the effective implementation of the needed package of reforms”.

The driving principle of 2017 SPG to close the gap between existing use and developed land value across all planning authorities should now be extended nationally, but in a way cognisant with regional, sub-regional, and local housing market characteristics and values, where necessary. In some lower value areas an EUV+ of, say, 30%, could, unlike London, render specific affordable housing thresholds almost superfluous.

In short, greater universality and consistency in ends and purpose at a national policy level, which allows a locally tailored treatment, rather than a uniform ‘one size fits all’ prescription, is required.

Such an extension and deepening of the principles of the 2017 SPG would directly reduce the cost of new housing: the root of the matter.

It would align along the line of current political least resistance to make the Section 106 process simpler, with greater certainty and transparency, making paramount the principle that the planning gain attributable to granting of residential planning permission should be recycled to the maximum possible extent to the provision of affordable housing and of supporting social infrastructure.

To take one example of that, the 2017 Conservative Manifesto  (p41) committed a future Conservative government to ‘work with private and public sector house builders to capture the increase in land value created when they build to reinvest in local infrastructure, essential services and further housing, making it both easier and more certain that public sector landowners, and communities themselves benefit from the increase in land value from urban regeneration and development’, consistent with an overlapping political and technical consensus that the provision of affordable housing must be mainstreamed through measures that directly reduce the cost and price of housing and that blur the distinction between market and social housing, into both public and private business models.

The corollary is, of course, is that London political stakeholders should gravitate towards such a broad-based cross- party campaign given that London’s housing outcomes largely depend upon the national policy framework.

Whether any government, especially a Conservative one with strong links with the housebuilding industry with its now entrenched vested and lucrative private interests, would possess the will, focus, and strength of purpose to secure such a change, remains open to doubt. After all, not much has come from the 2017 manifesto pledge.

Perhaps, before long, political necessity will breed boldness to do what is right. The time for helping that moment along is now.

Annex Table One London 2029

Annex Table Two London 2029

 

Introduction

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Filed Under: Housing, Macro-economic policy, Time for a Social Democratic Surge, Welfare State and social policy Tagged With: London

Johnson’s Social Care Plan: social democratic opportunity?

25th September 2021 by newtjoh

Promises to fund a sustainable and equitable social care system fit for a wealthy 21st century state, thus banishing remnants of a Victorian one reliant on a Poor Law welfare model, have been broken by successive governments.

On September 7 to redeem his pledge on entering Downing Street in July 2019, in effect, to finally ‘Get Social Care Done’, Boris Johnson announced his government’s intention to fund £36bn additional expenditure on health and social care expenditure over three years starting in April 2022, through a 1.25% increase in employee and employer national insurance (NI) rates.

Barely a week later the Commons had passed the necessary legislation with a 56-vote majority, with only ten Conservative MPs voting against.

By deploying political panache, has Johnson finally broken out of the social care circle to nowhere, or is his Plan a clever funding sleight of hand that will mainly offer piece of mind to wealthy homeowners concentrated in London and the sub-regions with the most buoyant economies and house prices, protecting the inheritances of their lucky heirs?

The devil of course, will depend, not only, as ever, on the backing detail of subsequent policy announcements but in the scope and nature of any future implementation process and subsequent funding support for social care.

What can be said now, is that Johnson’s Plan is largely confined to a new funding mechanism – the Health and Social Levy, operative from April 2023 – designed to meet his Party’s NHS pledges in the post-Covid environment, with a relaxation of social care means-testing combined with an introduction of a £86,000 cap on user lifetime contribution, tacked-on.

People with modest assets will remain at risk of losing most of their assets and possibly even their home if they need long-term residential care. Transferring the primary payment burden to working households through a payroll levy on earnings received by employees and paid by employers is economically sub-optimal and distributionally unfair compared to alternative sources including income tax.

In that light, this extended post first provides background to Johnson’s Plan, before going on to link its provisions, as they are currently known, to their expected efficiency and equity impacts.

It then considers the implications for future reform within the wider political context set by the real fiscal crisis of the state: that is the structural need and demand for social expenditures has and will continue to outstrip political (based on electoral) willingness to pay, without shifts in political methodology and electoral engagement.

Finally, the scope and space that Johnson’s Plan potentially provides such a needed shift is discussed.

The social care system in outline

Social care is the name given to the range of care and support services to help frail and disabled people to remain independent, active, and safe – for example, help with getting out of bed, bathing, and preparing cooked meals, and getting necessary medication, provided in a residential care home or at home (domiciliary) setting.

It is a local authority responsibility, generally discharged through the commissioning of services from independent care providers. For-profit providers account for 83% of the care home beds and the voluntary sector a further 13%, with the remaining 4% of care home beds run by local government or the NHS. Readers are signposted for further information to the briefing and the bibliography produced this month by the House of Commons library.

The focus of this post following Johnson’s Plan is on care for the elderly, but sight should not be lost that adult social care is not just or even primarily about older people. Demand for support from working-age adults has increased more than twice as rapidly as from pensioners – partly due to falling mortality rates and medical advances: the life expectancy for someone with Down’s syndrome, for instance, has almost tripled over the last four decades. The provision and funding of care for people of working-age must be ‘fixed’ as completely as much it must for older people.

In the past councils used to provide residential care in its own homes and staff until limitations on available capital and funding availability encouraged a shift to private providers who could raise capital easier and convert or purpose-build homes.

Between 1980 and 2018 the number of local authority residential care beds fell from 141,719 to 17,100; during much of the same period, the number beds provided by independent providers (whether owned by the largest private equity-owned providers, housing associations or charities) increased to 243,000 from 76,811.

In recent decades the care home industry has also consolidated. Four private companies owned by private equity or hedge fund investors now dominate the market. They and other entrants into the market were attracted by favourable demographics and property valuations – at least in London and south-east and other sub-regions benefiting from buoyant property prices – and a revenue stream underpinned by state funding.

This encouraged some over-expansion funded by debt, leading to Southern Cross going bust in 2011 and the then-largest provider, Four Seasons, having to be rescued by another private equity purchaser in 2019.

Squeezed LA fees and increased staffing costs exert significant headwinds. These are likely to grow in intensity along with pressures to improve the pay and conditions of frontline care staff in post-Covid and Brexit-environments marked by staff shortages and growing vacancies.

The annual cost per person in residential home sits generally in the £30,000 to £50,000 range, depending on level of care/nursing support provided and location.

About half of the £15-20bn income in the social care industry still comes from the state, with the remainder paid by self-funded residents, who can pay more than 40% more than LA-funded residents.

A feature of the industry is that such funders, in effect, cross-subsidise LA-funded residents. A 2016 Competition and Markets Report  (which also provides substantial background, albeit not up-to-date, information) advising an average differential of £236 a week (over £12,000 a year).

In outline, the essential features of the current means-tested funding system are:

  • Care home residents with capital exceeding £23,250 (the upper capital limit) are not eligible for any local authority funding support. They must pay all their costs above that limit;
  • Care home residents with capital between £14,250 (the lower capital limit) and £23,250 (the upper capital limit) are eligible for funding support, but must contribute a ‘tariff income’ of £1  per week for every full or part £250 their assets above the lower limit, towards the cost of their care;
  • Care home residents with capital below £14,250 are eligible for full funding support and are not charged any ‘tariff income’: their capital is effectively completely disregarded;
  • The non-mortgaged value of the person’s home (housing equity) is not counted as an asset if a spouse or dependent also lives in the home, nor is the value of the home counted towards any means-tested assessment of individual contribution to domiciliary care;
  • A person eligible for local authority funding support is also required to contribute part of their income towards the cost of their care, whether residential or domiciliary; subject to any earnings or other disregards, including an amount each week for personal expenses and (if applicable) household bills, called the Personal Expenses Allowance for people receiving residential care; and the Minimum Income Guarantee for people receiving domiciliary care;
  • There is no cap on the lifetime care costs, which are thus unlimited beyond the upper capital limit of £23,250; meaning that an individual needing residential care or long-term support can pay thousands of pounds for care over their lifetime: even to the point of expending their assets to the point that they, or more usually their family ultimately need to resort to selling their home on their behalf.

In the words of the Resolution Foundation’s, Torsten Bell: “The cap stops you losing your house, the floor stops you losing everything”.

The lower capital (asset) limit of £14,250 can be considered  as the ‘absolute floor’ below which no individual care contribution (other than for personal expenses payable out of pension or other income) is required, rather akin to the personal tax allowance on which income tax is not payable.

Contributions are then levied on a sliding scale until the upper capital (asset) of £23,250 is reached, above which contributions on assets are, in effect, then charged at a 100% marginal rate with no cap or upward limit.

A low limit or floor on the asset (capital) above which user contributions are required is thus combined with a lack of a cap on total lifetime expenditure limiting liability.

It is estimated that one in seven households needing care for long term severe disability (due to dementia, for example) must sell their home to pay for their residential care or spend more than £100,000 on care in total.

The NHS and Social care: siblings in name only

The NHS and social care provision and funding systems could not be much more different.

NHS treatments for both chronic and acute medical treatments, including emergency treatments for catastrophic events such as accidents, heart attack or strokes, are free at point-of-use, as are elective treatments, General Practitioner (GP) and out-patient services.

Provision and access across the board is rationed by available budgets, human and other resources, and policy guidelines assessed with reference to clinical need.

UK-wide tax subvention predominately funds the NHS with a variable quarter met by an annual transfer from the National Insurance Fund secured from employer and employee contributions.

The secular trend of health expenditure has been inexorably upwards during the last fifty years in annual real increase and in ratio of total public spending and GDP terms.

Unpicking the first outturn indicator, the Institute of Fiscal Studies (IFS) in a 2019 commentary  reported that UK public spending on health grew in real terms by an average annual rate of 3.6% between 1949−50 and 2018−19, but lower than 1.5% during the post-2010 fiscal austerity years.

Annual outturn expenditure often exceeded the budgeted planned allocation, as governments topped up health spending to meet particularly acute emergent demand and other pressures that could not be accommodated within allocated budgets.

Social care is local authority funded, accounting for over half of the total spending of many councils.

The local authority sector was the worst affected by post-2010 fiscal austerity. Adult social care spending per person was 7.5% lower in real-terms in 2019–20 than 2009–10, with reductions concentrated in the 2011-16 period.

Central government financial support is provided to cover the annual general expenditure of individual councils, not their social care activity specifically. Revenue support grant is based on an assessment of the ability of each council to meet local needs from its own council tax base, itself subject on residential property valuations frozen since 1992. Some councils had their grant allocations slashed by as much as 65%.

Council tax levels levied locally for many decades have also have been subject to strict centrally imposed limits.

Since April 2016, councils have been empowered to raise an additional dedicated social care precept of up to 3% without needing to call a referendum;  additional time-limited specific grants in support of their adult social care activity were also allocated centrally. These measures of limited amelioration were widely recognised, however, as papering over the cracks caused by the deep and wider Whitehall squeeze on local authority funding.

At an individual level, social care provision is severely means-tested. As the preceding section outlined, it is only free for people possessing assets less than the lower capital limit of £14,250 in value (termed here: the lower absolute floor), with individuals needing residential care required to pay all costs when their assets (including their housing equity) exceed the upper asset threshold of £23,250 (termed here: the upper floor).

Yet when people become older and frailer, the distinction between the medical and social care dimensions of their situation tends to blur to the point of indistinguishability.

Health expenditures, according to a September 2016 Office of Budget Responsibility (OBR) report, at constant 2020-21 prices rise slowly and steadily from an average per capita c£1,500 for cohorts of people in their mid-forties, before doubling in the 60’s cohort to c£4,000, then doubling again to over £8,000 for cohorts in their late eighties and later (Chart 2.3).

The OBR report, with the relevant literature generally, highlights that proximity to death is a more important influence on health spending than is age, per se: hospital costs increase significantly in the final months of life for an average individual regardless of their age; a higher proportion of older age cohorts will be subject to the much higher costs associated with the final months of life when it can occurs regardless of age.

In need and demand terms, the chance catastrophic curse of dementia and other age-related disabilities have and will continue to affect more and more people as the population ages: according to the Office of National Statistics, the proportion of the over 75s within the UK population doubled since 1967; looking forward, the number of over 85s is projected to double again over the next 20 years.

These are events that individuals cannot predict (other than indirectly through genetic history or indirect markers), prevent, or plan for through insurance (theoretical possible, but no such market currently exists) or other means.

The need and case for reform has been clear and urgent for decades.

Social Care reform: Waiting for Godot

Spasmodic efforts over the decades by governments of varied hues to introduce reform to address that gaping hole in welfare state protection were nullified by subsequent procrastination and inaction.

Speaking to the Labour Party Conference that followed his historic 1997 election victory, Tony Blair declared that: “I don’t want [our children] brought up in a country where the only way pensioners can get long term care is by selling their home“.  In accordance with his government’s  manifesto promise, a Royal Commission was established, which in 1999 recommended (with minority member dissent) that: “all long-term personal care should be provided free, funded from general taxation”.

Its proposals, other than that nursing care in nursing homes would be made free (funded by the NHS), were soon kicked into the long grass: the cost was considered counter to the New Labour’s fiscal commitments and other priorities. Only the newly devolved Scottish administration in 2002 introduced free personal care in 2002.

A 10-year hiatus followed, marked much more by talk than action. Green Papers, policy, and official and independent review announcements grappled (unsuccessfully) mainly with issues centred on the development of the personalisation of care and the development of individual care budgets.

Then a ‘Big Care Debate’ (rather echoing the ‘Great Education debate’ that then prime minister James Callaghan launched in 1978) was conducted in 2009.

That year, Andy Burnham, the-then Secretary of State for Health did publish proposals for a ‘national care service’. They, however, failed to get cross party-political traction (now needed that New Labour electoral hegemony was clearly waning and uncertain): the compulsory contribution funding model that he advanced proved a sticking point in the lead-in period to an imminent general election.

Nonetheless, a White Paper, Building the National Care Service, was published just before that 2010 general election.

It committed Labour to establish another commission “to help to reach consensus on the right way of financing a National Care Service… that will be led by local authorities, in partnership with the NHS, and working with third sector organisations, the private sector and communities… which will meet the needs of people when they need help, free when they need it (that) will be for all – whoever you are, wherever you live, whatever your circumstances”.

That ambitious rhetorical reach was accompanied with the rider that new service would need to be built ‘in stages’ within a context set by needed ‘fiscal consolidation’.

After Labour lost power at that election, the new Conservative-Liberal Democrat coalition government asked Andrew Dilnot, Oxford economist and former Institute of Fiscal Studies (IFS) director, to chair another commission, with a remit to deliver an affordable and sustainable funding system or systems for care and support for all adults in England (Dilnot).

Dilnot published in 2011. It declared that “Our system of funding of care and support is not fit for purpose, and has desperately needed reform for many years”, accompanied with the clarion call: “Now is the time to act”.

That call was underpinned by a systematic and evidenced reform agenda. Its core proposals were:

  • Individual lifetime contributions towards social care costs capped to between £25,000 and £50,000; £35,000 was the posited “most appropriate and fair figure” for that lifetime contribution cap (the cap);
  • The means-tested upper asset threshold (the upper floor), above which people are liable for their full care costs, to be increased from the then (and still current) £23,250 to £100,000;
  • Individuals possessing financial and/or housing assets between £14,250 (lower asset threshold or absolute floor) and the proposed new £100,000 upper floor, to pay a contribution (around 30% of eligible assets) towards their residential care, with the state paying the remainder;
  • Local councils to decide how much care is needed and its cost in each individual case;
  • The cost ‘meter’ on individual contributions would then start until contributions of each individual reach the prescribed lifetime contribution cap; then it would stop, save that residential care residents should incur a charge for on-going ‘hotel and food costs’, capped at £7,000-£10,000 per year;
  • Councils to assume that people funding procuring privately provided care themselves will spend the same amount as someone publicly supported but possessing the same needs;
  • The means-tested threshold for home care to disregard the value of the recipient’s home, with individuals needing such care to continue to receive income means-tested support;
  • People born with a care and support need or who develop one in early life should immediately become eligible for free state support to meet their care needs, not subject to any means test;
  • National eligibility criteria and portable need assessments to be introduced to ensure greater consistency of treatment.

In short, Dilnot’s proposals kept the capital means-test absolute floor personal allowance at £14,250, but greatly extended the range of income in which individuals qualified for partial support from £23,250 to £100,000, within which a proportional 30% charge would be levied on their capital assets, until a £35,000 lifetime contribution cap reduced their marginal contribution or tax rate to nil.

Dilnot’s analysis and proposals attracted general approval. Such approbation did not translate into effective and timely legislative action, however: it took four years for the Coalition government to enact the 2014 Care Act – and then largely at the instigation of Lord’s cross benchers and again on the cusp of another general election.

When the Conservatives won that election in 2015 with an overall working majority, it then postponed indefinitely the implementation (including legal backing for a £72,000 cap) of the Act’s provisions, for reasons connected to the continuing period of fiscal austerity presided over by the chancellor, George Osborne.

When Theresa May went to the polls in May 2017 in the aftermath of the 2016 Brexit referendum that had forced David Cameron’s resignation as prime minister, and with George Osborne also gone, her ‘strong and stable government’ election banner, to all intents and purposes was torn down by the half-thought-for social care plans that she then chose to highlight (at the behest of key advisers wanting to broaden Conservative appeal to northern working class voters) during the campaign.

The upper asset threshold or floor below which councils pay for all or part of a person’s social care was to be raised from £23,250 to £100,000, but that Dilnot proposal was yanked together to the inclusion of the housing equity asset worth of homeowners still living in and needing care at home into the capital means test calculation, as it is for people receiving residential care (which did not follow Dilnot).

To soften that pill, the facility for people receiving residential or nursing home to have the cost of their care taken from their estate after their death (deferred) was extended to people receiving care at home.

May’s proposals were quickly dubbed the ‘dementia tax’.

They meant that individuals would receive state support towards their needed social care costs if they possessed less than £100,000 of financial and property assets.

But once that £100,000 upper capital limit was passed the marginal withdrawal rate would become 100% (all care costs to be met by the individual receiving care form their capital where not met by income). That would mean that a person, for instance, with savings of £10,000 and housing equity of £200,000– would, in the absence of a cap, potentially faced losing most or all their assets, save for the £14,250 allowed for by the absolute floor.

That is because everyone possessing more than £100,000 assets and receiving care would then face a marginal contribution or withdrawal rate of 100% on their assets once the new £100,000 upper capital threshold was passed instead of, as they currently do under the current system, £23,250.

It would also have meant that people possessing moderate, but not insignificant, assets, greater than £23,250 but less £100,000 in residential care, would have – subject to the detail of the scheme if it had been progressed (such as the absolute floor level and the rate of withdrawal levied between £23,500 and £100,000) would have paid less.

Take, for instance if a 30% contribution or withdrawal rate was levied between £14,250 and £100,000; then someone receiving care in a residential home owning £100,000 of assets would have paid a maximum of c£26,000 under May, compared to potentially c£80,000 under the current system.

But faced with a furore, Mrs May soon retreated, talking about introducing a cap ‘at a level to be proposed in a future Green Paper’. Her proposals were already effectively dead, however. They are a widely considered to have contributed to the subsequent reduction of the Conservative overall majority to six.

The inclusion of housing equity into the asset means-test for home care was puzzling.

The equalisation of the application of the asset means-test between recipients of residential and home care was advanced as justification; yet the latter is more supportive of independent living and by its nature is less expensive to the public purse.

It also served (disastrously) to focus attention on that people receiving home-based or residential care could potentially much of their housing equity, and away from the keystone proposal of a near fivefold increase in the means-tested upper capital floor threshold: hardly an astute or indeed helpful piece of political presentation.

Shell-shocked by the experience and embroiled in the Brexit saga that finally sunk her premiership, social care reform was put again on the Whitehall backburner.

Then the day after becoming prime minister in July 2019, Boris Johnson, elected Conservative party leader by his MPs and party membership on a ‘Get Brexit done’ platform, declared in front of his new home, 10 Downing Street, that he would also fix “the crisis in social care once and for all with a clear plan (that) we have prepared”, with legislation to follow that year, so that “nobody needing care should be forced to sell their home to pay for it”.

Johnson’s Social Care Plan

It was not until 8 September 2021 that his  government published its plans in the command paper: Build Back Better: Our Plan for Health and Social Care (the Plan), which proposed:

  • A lifetime contribution cap on personal care costs of £86,000 (using the powers available in the 2014 Care Act) to be introduced from October 2023. On reaching that cap, people receiving care will no longer be required to make any contribution towards their care from either their income or capital;
  • The upper capital limit (the threshold above which somebody is not eligible for local authority support towards their social care costs) to rise from £23,250 to £100,000, operative from October 2023 (the threshold limit for each member of a couple to be £50,000);
  • Lower capital limit (the lower asset threshold or absolute floor below which no contribution towards care costs from capital is required) to rise from £14,250 to £20,000;
  • People with capital (assets) between £20,000 and £100,000 to contribute up to 20% of their chargeable assets per year (in addition to their income);
  • The capital means test will be based on total assets, including both the value of a person’s home and their savings, except that for a person needing to continue to live in their own home their housing equity – as under the current system- will be excluded from the assessment of total chargeable assets (the housing disregard).
  • The amount of income that care recipients can retain after contributing towards their care costs (the Minimum Income Guarantee and the Personal Expenses Allowance) to be increased in line with inflation from April 2022 onwards.

In short and simplified form, from October 2023 onwards, anyone with assets or savings worth less than £20,000 will receive full state support; anyone with assets worth between £20,000 to £100,000 who cannot pay for their care from their income will become eligible for capital-means tested help with their care costs up to a 20% proportional charge on their eligible assets until the overarching £86,000 cap is reached when their liability to meet costs form either their income or capital ends.

Applying the tax analogy applied earlier, the personal capital allowance is increased to £20,000; a 20% contribution, withdrawal or ‘tax’ rate is applied on capital asset wealth between £20,000 and £100,000, subject to an absolute cap lifetime contribution rate of £86,000, beyond which the marginal tax rate on both income and capital then drops to zero.

The Plan was both incomplete and lopsided insofar that any detail on future care provision was largely absent. It was also not rooted from consultation with the public or private providers of care, nor meshed with medium and long-term costings of funding requirements related to a minimum-defined standard of care provided regardless of postcode, nor were alternative delivery options calibrated to a future wider care vision.

It ringfences only £5.4bn of the £36bn to be raised from the NI increase for social care funding (£1.8bn cf. to the annual £12bn-plus proceeds of the NIC increase). The rest will go to the NHS. Although the Plan expresses a weak and unconfident hope that that limited share “could possibly increase towards the end of the three-year 2022-25 period”, the additional future allocations required for the establishment of a fit for purpose client responsive care system are clearly contingent on the prevailing NHS funding situation.

The scale of the Covid-related backlog combined with continuing rising costs and the rising real demand profile of the NHS (estimated to require annual real increases in expenditure of c4% per annum to accommodate) means that the social care sector can expect a continuing long wait for their release.

More Waiting for Godot, then – at least unless significant new funding is made available for social care on top of what the Plan currently proposes.

The Plan is indeed and instead predicated upon local councils continuing to meet demographic and unit cost pressures through council tax and other receipts, and from ‘long-term efficiencies’.

This is within a funding environment where the overall level of local government funding (which will impact upon level of the total level of revenue that each council can raise) is to be determined ‘in the round’ in the forthcoming Autumn 2021 Spending Review (para36).

To all intents and purposes that will be driven by Treasury-driven pressures to close the unprecedented Covid-related fiscal deficit. The fiscally hawkish chancellor, Rishi Sunak, wants to cut the deficit from 12% per cent of GDP in 2020-21 to 4.5% in 2022-23: a big ask, dependent on the economy bouncing back both sharply and sustainably, and one that almost inevitably will rule out additional borrowing for either health or social care purposes.

Social care will consequently continue to be provided by councils in England subject to constrained annual funding allocations and to restrictions on their council tax revenue-raising capacity.

On the expenditure side, care costs are almost certain to rise faster than inflation, with care worker vacancies over 100,000 and rising, during a period when the backlog of care cases, as estimated by Age Concern, could reach 1.5m. Under the government’s plan self-funders will also be able to ask their council to arrange their care to ‘help them find better value’.

It is also doubtful that without dedicated training and other investment in human skill capacity and conditions that sufficient trained and motivated staff will be available to meet a growing level of future demand need, whether that is derived from the government’s plans, a loosening of rationing constraints, or from demographics. Most care worker vacancies in the recent past have been taken by migrants; this is unlikely to be possible without modification to current post-Brexit immigration policy. Given such a backdrop, it remains to be seen whether the £500m included in the Plan to support social care workforce-related reforms will prove sufficient.

Is the Plan, therefore, a mere political presentational sop to its core Conservative over 65 and homeowner voter constituency, and, as such, subject to a high risk of future unravelling when buffeted by future on-the-ground reality?

The centrepiece £86,000 cap figure is certainly suggestive of Treasury penny-pinching, which does not augur well for the securing of sustainable funding for a future and sustainable client-centred and responsive social care service.

At a distributional equity level, suffers from two, paradoxically, linked problems.  First, a cap means that once reached represents a ‘cliff’ that when crossed means liability  (or put another way, the its marginal tax rate) becomes zero; and, second, the £86,000 proposed cap is set high enough to still wipe out or take out a substantial proportion of the housing wealth of homeowners residing in low house-price areas, including many in Red Wall seats, breaching Johnson’s manifesto promise.

Both can be traced back to Dilnot. The fundamental problem is that a cap by definition does not rise proportionately or progressively with housing asset wealth, either at an individual or regional level: a shortcoming that has been compounded by subsequent and regionally skewed housing asset inflation.

Back in 2011, Dilnot had noted that someone who had lifetime care costs of £150,000 could lose up to 90% of their accumulated wealth, before asserting that the report’s proposed combination of  a £35,000 lifetime contribution cap and an extended means test floor would ensure instead that no one going into residential care would have to spend more than 30% of their assets on their care costs (Dilnot termed this as the asset depletion rate; used interchangeably in this post with contribution, withdrawal, or ‘tax’ rate).

Yet that still presented a distributional equity problem shown in Table 1: the asset depletion rate peaks for households possessing around an initial £100,000 asset stock (product of the c30% contribution applied on assets applied above the £14,250 absolute floor up to the £100,000 upper floor, before dropping sharply regressively as asset wealth rises), begging the equity-based based question of the fairness of taking c30% of the the assets of homeowners of modest assets when a  lower proportionate and capped share is taken from more asset-rich households.

Table 1

Initial level of wealth Maximum individual spend on care Maximum asset depletion rate
£ £ %
40,000 9,000 22.5
50,000 12,000 24.0
70,000 18,000 25.7
100,000 28,000 28.0
150,000 35,000 23.3
250,000 35,000 14.0
500,000 35,000 7.0

Source: Author adaptation of table that was included in Dilnot Policy Paper

As it stands, the Plan’s £86,000 cap is set high enough to risk some homeowners living in low house price areas, or in retired person or leasehold accommodation that have lost capital value over the last ten years, who need residential care accommodation, to still lose their homes. It will also heavily impact upon tenants reliant that have some but modest financial savings assets, especially such individuals receiving care at home; it thus discriminates in favour of those with housing equity rather than financial asset wealth.

The incidence of user contributions, as Table 2 indicates, under the Plan will in future peak for people requiring residential care who possess assets within the £150,000-£175,000 range (incurring  an asset depletion rate of nearly 50% – compared to the Dilnot 30% level); incidence (the maximum depletion rate) then falls becoming ever more sharply regressive for people with housing equity or other wealth above that level, noting that apparently as many as one-fifth of those aged 65 or above now own more than £1,000,000 in assets compared to the c.£300,000 average asset wealth of someone aged 65.

Table 2

Initial level of wealth Maximum individual spend on care Maximum asset depletion rate 
£ £ %
50,000 6,000 12.0
75,000 11,000 14.7
100,000 16,000 16.0
125,000 41,000 32.8
150,000 66,000 44.0
175,000 86,000 49.1
200,000 86,000 43.0
225,000 86,000 38.2
250,000 86,000 34.4
300,000 86,000 28.7
500,000 86,000 17.2
1,000,000 86,000 8.6
2,000,000 86,000 4.3

End results are more clearly perverse and inequitable under Johnson’s Plan:  someone with £175,0000 worth of assets might have to pay £20,000 more than a neighbour with £150,000, but the same £86,000 as someone owning £1,000,000 or £2,000,000, while the ‘average’ pensioner owning  £300,000 assets will lose a lower proportion of their assets than someone owning less than half of that, but a much higher proportion than asset millionaires needing long-term care.

A recent Conservative Chancellor, Stephen Hammond, put the message that it partly conveys – slightly paraphrased – thus: “we are asking lower income workers, such as supermarket shelf fillers, to subsidise the inheritances of affluent homeowners”. Put another way, the Plan caters more for the future financial interest and peace of mind of the voters of Amersham and Chesham that it does for their counterparts in Consett.

That takes us to how the Plan will be paid for: its centrepiece.

The Health and Social Care Levy (the Levy)

For the 2022-23 year only:

Employee National Insurance Contributions (NIC’s) on earnings and employer NICs (both Class 1) on earnings paid, and self-employed (Class 4) NICs charged on their trading profits will increase by 1.25%, which will mean that:

  • Employee NICs will be levied at a 13.75% rate between the current NIC £9,564 lower earnings and the £50,268 upper thresholds; earnings above the upper threshold will attract a rate of 3.25%.
  • Employer NICs will be levied at a 15.5% rate on employee earnings above £8,840.
  • Self Employed Class 4 contributions on profits will be levied at a 10.25% rate on trading profits above £9,568; and 3.25% on trading profits above £50,270; self employed weekly flat rate Class 2 NIC contributions (set at £3.05) are unchanged.

The Plan also includes a 1.25% increase on the tax levied on company dividend income (when received outside the tax free wrappers of Individual Saving Accounts (ISA) and Self-Invested Personal Pensions (SIPPS), and the first £2000 of dividend income received outside these wrappers). It is expected to contribute £600m a year within the total £12bn raised for health and social purposes (£13.2bn in total, minus £1.8bn compensation paid to public sector employers for their NIC increase).

From April 2023, the NICs above will revert to their former 2021-22 levels but the increase of 1.25%  on the rates levied above the lower and upper thresholds will be collected separately and additionally under the umbrella of a dedicated Health and Social Care Levy, provided with its own legislative status and dedicated line on employee pay slips.

23% of families in England contain someone above the SPA. Even when the social care levy is applied on earnings received by people over the SPA, the IFS reported on 7 September that only about 2% of its total revenue from the Levy will come from pensioner families, compared to the 14% share that they would contribute from an increase in income tax yielding the same level of revenue.

This is largely because NICs, unlike income tax, is a payroll tax that is not levied on state or private pension income (when received at whatever age) – the predominant pensioner income source. Nor is it levied on certain categories of investment income, including property income, such as from buy-to-lets and share dividends.

People above the State Pension Age (SPA), not in employment, will thus escape any additional contribution (save for the dividend tax increase, if applicable to them), despite them belonging to the demographic with both the highest average wealth levels and the one most likely to need social care, at least in the short-to-medium term.

Compared to the employee NIC schedule, the income tax schedule also contains more progressive rate bands. Its basic rate of 20% begins to take effect only once individual taxable income exceeds the £12,750 personal allowance; the employee NIC lower earnings threshold is lower at £9,564.

That divergence means that people on very low annual earnings, including those on the national minimum wage, can pay more in NIC than they do in tax, or pay NIC even though they are not liable for tax.

The Levy’s tax burden (incidence) will fall overwhelmingly therefore upon working age employees and employers; this is in accord with the long-term trend for the tax burden to shift towards people of working age and away from pensioners;  secular trend not offset by new liability for working pensioners to pay the Levy.

A working-age person with average pre-pandemic earnings (£28,388) will pay 20% of their income in income tax, NICs, and the new levy; a pensioner receiving the same amount in pension income will pay just 11%: almost half the rate of the working-age employee.

That secular trend has been paralleled by a reinforcing one of untaxed – save for limited inheritance tax and capital gains tax liability on sales of non-primary residence homes – individual real housing wealth growing greatly to the particular benefit of wealthy pensioners and their heirs.

Working households spend a higher proportion of their net income than do wealthy pensioners and as the NIC increase differentially impacts on working households more than would an equivalent revenue-raising income tax rise, its overall downward impact across the economy on take home pay, consumption and employment, all other things being equal, will be higher, so constraining the future profits and investment capacity of firms and earnings of working age individuals.

The increased NIC employer contribution rate will likewise add pressure on firms to adjust prices upwards and wages downwards, especially in competitive sectors inhabited by small businesses whose labour costs account for a high proportion of their total costs. Such businesses often employ low paid workers (the employer NIC rate of 13.8% is levied above a very low annual threshold of £8,860, except for employees aged under 21 or for apprentices aged under 25).

Another horizontal inequity (different outcomes for different groups with otherwise the same income circumstances) associated with the Plan is that the combined NICs rate on employment income (including employer NICs) will rise from 25.3% to 28.8% compared to a rise from 9% to 10.25% for a self-employed worker: an increase of 3% rather than 1.5%.

This will widen the relative tax benefit of self-employment arrangements – which are often designed to minimise tax liability relative to PAYE working – and thus can be expected to induce perversely behavioural changes tending to reduce total revenue raised.

Overall, therefore, according to a range of independent commentators, Johnson’s choice to raise revenue through an NIC in preference to an income tax increase will prove both economically deleterious and socially inequitable compared to what could have been the case with possible revenue-raising alternatives.

That said, recognition is due that given the political obstacles that Johnson faced in raising the equivalent amount in tax or borrowing, his recourse to the third best (or even fourth best if additional borrowing is included)  NIC funding route in preference to wealth and the income tax rises, was probably necessary, while its political execution and management was efficient and effective.

That brings us around the underlying problem, of which the current health and social care crisis and Johnson’s Care Plan belated and imperfect response to it is simply a symptom.

Social Care and the Real Fiscal Crisis of the State

Johnson’s Plan required him to explicitly jettison his personal (made in the signed foreword titled Boris Johnson’s Guarantee) Conservative Party 2019 manifesto commitment not to raise the rate of income tax, VAT or national insurance.

That core Conservative principle since 2015, his fix NHS funding and social care commitments and the chancellor’s deficit reduction intentions, proved irreconcilable.

Essentially, the Levy is a new tax raising mechanism to raise and earmark an amount equivalent to around 0.5% of GDP first and foremost to close the endemic NHS funding gap.

That latest gap, which while grossly aggravated by the Covid pandemic, stemmed from earlier Conservative austerity under-funding.

Health spending, after adjusting for the growth and ageing of the population, stayed broadly flat between 2009−10 and 2016−17, before rising over the three years to 2018−19, remembering that average real increases throughout that decade was c1.5%, well below the post-war average annual real increase outturn of 3.6%.

That below trend outcome may have been been sufficient to meet demographic pressures, according to commentators, but it was not enough to also meet all the other upward ‘relative price’ pressures (such as, new medical technology and treatments, and as a labour-intensive industry: wage pressures) that continuously characterise the NHS.

The real focus and purpose of Johnson’s Plan is to provide a mechanism to secure additional funding for the NHS to overcome record waiting lists and other pressures  that  Covid and  previous underfunding bequeathed: an electoral imperative.

That the Levy can also possibly part-fund his social care pledge is but a collateral secondary benefit: the commitment of his chancellor to accelerate closing the fiscal deficit and reducing public debt would have otherwise precluded its progression.

Johnson and his advisers calculated that the chosen NIC funding-is more electorally palatable than a direct income tax increase: the erroneous post-Beveridge perception lingers that NICs constitute a social insurance contribution paid by working people to pay for their pension and NHS care and other ‘hard times’ contingencies from accumulated contributions (never true from the outset of the post war welfare state). Employer NICs and their indirect and delayed impact on take home earnings and consumer price levels are also far less visible in their effects on take home pay than is an income tax hike.

In that he followed a path previously trodden by Labour:  in 2002, when New Labour chancellor Gordon Brown raised national insurance rates to boost NHS spending (but on a temporary time-limited basis  during a period when waiting lists had reached record levels) it was apparently seen in Treasury circles as ‘the most popular tax rise in history’, when it was then, as it is now, a relatively regressive imposition compared to an equivalent income tax rise.

The UK does not have an embedded continental-style part social insurance welfare state funding model: it has a pay-as-you-go model contingent on short-term political decisions, rather belied by the fact that in 2020-21, national insurance raised c£147bn, more than VAT at 128bn, and not that much less than the total £198bn raised that year from income tax.

Pensions accounted for £101.bn, nearly two-thirds of NI receipts that year. As the the new state pension is dependent on a 35-year contribution record, to state that NI is simply another tax is not entirely accurate. But other benefits are only loosely related to the contribution record of recipient individuals; in any case, they do not provide an adequate replacement of previous employment income nor necessarily provide one above the poverty line. Each year the amount raised by NI generally exceeds often substantively that paid out in benefits, explaining why a variable quarter-odd can be transferred to support health expenditure for which there is no state insurance scheme.

The NHS, as noted in an earlier section, is predominately funded from other general taxation sources, and social care from a mix of local authority and user own funds.

The final total that individuals can be obligated  to pay towards their lifetime social care has been, is, and will remain under Johnson’s Plan potentially prone to chance catastrophic events outside their control: quite contrary to the founding principles of national insurance and the welfare state.

One of the core overarching themes of ASocialDemocraticFuture is that the structural need and demand for social expenditures has and will continue to outstrip political (based on electoral) willingness to pay: that is without shifts in political methodology and electoral engagement: the real fiscal crisis of the state (the crisis).

The Conservative enshrined self-denying ordinance on raising income tax, NICs, or VAT was just the most extreme and obvious case in point of that crisis, reflecting earlier New Labour practice.

The resulting reliance on stealth taxes such as insurance premium tax, or more materially on failing to align tax thresholds with inflation (fiscal drag) so steadily bringing steadily more people into the higher tax bands are both its consequences and symptoms (it is estimated that  1.3m new and 1m higher rate taxpayers will result from the 2020 Budget decision to freeze tax allowances from 2022-23 for the remainder of this parliament).  Cross-party local competition to freeze annual tax council levies, whether practised by Conservative shire or Corbynite metropolitan councils, another.

The public policy and funding neglect of the social care sector – related to the weak political voice of its users – cannot be divorced from the massive contribution that care homes made to Covid-related excess deaths: the most shameful and shocking consequence of the crisis, but others, such as  inhumane conditions in prisons, inadequate and dangerous mental health services, and cuts in care support for vulnerable young people and youth outreach work, generating death or serious harm, provide obvious other examples.

Put into a wider international context, Britain’s social expenditures remain relatively low to European norms as a proportion of national income – the overall UK tax burden (with the Health and Social Care Levy included), expressed as a per cent of national income is expected to reach 35.5% in 2023-24 with the Levy and the earlier Corporation Tax rise included; that compares with 39% in Germany and 40% in France (noting that definitional and compositional issues mean that the comparison is not strictly like-for like).

It is high, however, historically. A tax-take of 35.5 per cent of GDP would be the highest rate reached since 1950 at the height of the post war reconstruction drive.

The core structural problem is threefold. The level of social expenditures across some key areas, including health, and education, and, of course adult social care, are too low to attain universal standards compatible with individual human dignity and collective needs, in tune with the expectations of a population living in one of the world’s wealthiest advanced economies and one of its longest established welfare states.

Second, little apparent willingness exists within the electorate to action the trade-off between welfare state benefits received and taxes contributed. Benefits can be long-term and their costs not easily relatable to individual consumption or experience; a prime example is social care: the prospect of our future need for social care whether due to old age frailty or dementia is thrust to the very back of our minds; by the time it could be needed we will not be in a state of mind to calibrate what is being offered to our past tax and NI contributions.

Increases in tax, in sharp contrast, invariably result in tangible impacts upon household budgets in the the-here-and-now. Most of us might profess an abstract willingness to pay more for better services yet faced with a choice at election time to pay less or more in practice next year, the calculous of personal interest tends to take over.

Unsurprisingly, political parties vying for votes for power and presence within a competitive electoral market-place subject often to headline soundbites and headlines that can hide or distort the real facts, promise improvements in services but are less than forthcoming and honest about the how these are going to be paid for; or promise that both can be reconciled when they can’t; or even worse , simply ignore or put on the back burner needed reforms, such as to council tax or to social care.

During recent decades that reality has become an unassailable foundation of political principle and discourse, amply demonstrated.

The third, and end-result, is that the funding public services expenditures is not only insufficient and inefficient but inequitable in content and form, as are the taxes raised to pay for them in incidence and impact. Expediency, in short trumps both efficiency and equity.

It is no surprise therefore to this website that Johnson has not honoured yet his ‘fix social care’ pledge, resorting rather to a NIC funding presentational fix that will result in economically sub-optimal and unfair – and ultimately unsustainable – distributional outcomes.

That said, at many levels, the Levy does mark a potential crossing of the Rubicon in social and fiscal policy terms. Its scale and presumed period of imposition (at least three years, but permanency is implied by is dedicated legislative status) with its revenue ringfenced for health and social care expenditure purposes, define the clearest departure in tax public policy since the Thatcherite and subsequent New Labour repudiation of the alleged ‘tax and spend’ days of the full employment and welfare state post-war consensus era.

Whether Covid-enforced or not, Johnson’s government has unfurled the ‘party of low tax’ banner (never true for the majority, in contrast to the wealthy or high-income minority) from the Conservative pole, replacing it with one of ‘needs-must’ when events demand.

Well, what does that or might mean for the future shape of social democratic political process and outcome?

Politics and Social Democratic values (methodology) and social care reform

The future development of Johnson’s Plan into the medium- and long-term, including the Levy, will be contingent on the result of next election, expected anytime from 2023 onwards.

Labour, accordingly, will not necessarily have to identify a funding source to pay for a future need-based and sustainable social care system that it might offer to the electorate: it will already be there; that is unless the Levy is put in cold storage or NICs reduced  before then on the ground that ‘improvements in the economy now allow for needed reduced tax burdens on working people’.

Labour could commit in government to re-distribute the Levy’s proceeds; or to replace it in full or part with an alternative and more equitable and economically efficient funding source, as part of a wider shift towards wealth and property-based co-payment taxation (where individuals and the state share contributions for defined purposes) without therefore necessarily having to increase the overall tax burden.

Labour’s leader, Keir Starmer, has already slammed Johnson’s Levy as an unfair imposition on working people, but has declined to set out firmly Labour’s alternative. Other prominent Labour figures outside the shadow cabinet have been less shy.

Andy Burnham, the former New Labour Health Secretary and current Metro Mayor of Manchester, has led the way, arguing that: “The fairest way of providing social care is on NHS terms through a national care service, and the fairest way of raising the funding to pay for it is by taxing wealth, not work. The government should be looking at reforming taxes and reliefs on assets, land, pensions, property and excessive earnings and profits before hitting younger, low-paid workers with the bill”, before reprising an earlier decade-old “10% levy  imposed on estates” proposal.

But that could have done by the Brown government of which he was a member. It wasn’t.

Labour did not propose funding social care in 2010 through increased taxes on wealth and property because of fears concerning their electoral impact and immediate practicability. That remains the case.

Wealth taxes are easier to prescribe than deliver in practice. They require the liquidation of assets, unless their payment is delayed until death or at time of asset transfer, or unless the rate levied is set low enough to be paid from current income, which would mean reduced coverage and yields unless its incidence was limited to the very rich; that then would suffer from problems of avoidance, and also limited yields.

A wider base embracing those, for instance, own housing equity exceeding a set threshold, rubs against the fundamental problem of how to treat the asset-rich but relatively income-poor pensioner and working families.

In the absence of a cross-party consensus – unlikely – an opposition party linking social care or other reforms to new taxes on people’s assets and homes that would make tangible inroads into the day-to-day budgets of households would invite almost certain electoral and policy defeat – at least in the absence of a compelling and understood engagement narrative that demonstrates and links enlightened self-interest at an individual voter level to economic and social rationality and fairness at the societal level.

No easy answers. The biggest elephant in the room is council tax, currently a property rather than wealth tax. It is demonstrably is unfair and inefficient both in incidence and in its impact on the housing market. Households in low price areas pay more both in absolute and proportionate terms than those residing in areas where average house values exceed £500,000.

An august range of independent bodies have called for reform for decades, most recently and clearly summarised in a Fairer Share campaign manifesto,  endorsed by  former Conservative Minister and current social policy activist, Lord David Willets. All, however, without moving the political dial seemingly an iota.

Such a ‘big bang’ reform would take time to implement, require transitional arrangements, and would be subject to cancellation by successor governments, even assuming a party proposing it as a flagship policy commitment rather than a vague aspiration was elected. Although a nil net cost reform would produce many more winners than losers, the crisis presupposes that such a far-reaching and substantive reform should  result in greater fairness, efficiency and revenue, thus providing an opportunity – in the absence of cross-party consensus -for electoral competitors to paint it as a tax increase.

That, of course, further underscores the need, however, for a shift in political narrative and methodology concerning the link between social benefit and tax contribution.

Given the opening that Johnson’s Plan provides, variants of a housing and other asset levy calibrated to household total net housing equity and other financial asset wealth, which could be paid in lifetime instalments or delayed to when downsizing or death occurs, does seem to offer the most immediately opportune  and fair way forward. Inevitably, however, it will attract the catchy ‘death tax’ epithet from opponents and media during the cut and thrust of an election campaign.

Certainly, a progressive levy on wealth would be patently fairer than either the current or the Johnson Plan arrangements, where individuals needing care face chance contingency.

But it would mean: ‘spend now: get the money to pay for it later’, requiring, meanwhile, the needed expenditure for health and social care  reform  to be met from other tax sources, or from borrowing. That is unless an institutional mechanisms could be established, perhaps with public guarantees, that transparently could allow the levy to be paid by variants of equity release  mechanisms outside public borrowing totals.

Other variants of the same theme, could be to phase out the Levy, replacing it with a widened capital transfer tax covering primary residence transfers (the current exemption costs around £25bn to £30bn in taxation foregone), using the same justification that that wealth rather work is being taxed to provide better health and social care and security for all.

They would however involve inroads into family housing equity, with incidence falling on those who need or choose to move often – a problem that could mitigated perhaps, however, by a linked reduction in Housing Stamp Duty. Proceeds could then justifiably be ringfenced, not just for the funding of health and social care, but also for the mainstreaming of affordable housing into public and private sector provision models.

Or the Levy could be retained with its incidence recast within a wider alignment of NI and tax lower thresholds, as was promised in the 2019 Conservative manifesto.

Another tax relief currently costing around £25bn a year is pension contribution relief. That could undoubtedly be targeted better to the benefit of low- and middle-income earners, and transferred in part for health and social expenditure purposes.

What can be said with certainty is that the Labour opposition must set the debate and future agenda, meshing both it a values-led vision for the welfare state in general and health and social care. Now is the time or never.

In that light, the most relevant recent official pronouncement by the current Shadow Social Care Minister  Liz Kendall in April 2021 , which, notwithstanding its worthy emphasis on “taking a ‘home-first’ approach by increasing the use of early help and technology to help people live independently for as long as possible and expanding the options between “care at home and at care homes”, tended to follow usual groove of generalised critique and future unspecific aspiration. Future efforts should be marked and developed through a detailed and broad-based strategy and policy development process, both within the party and with external stakeholders.

A successful and sustainable reform requires that it is rooted on a vision of what the future social care system should look like and its relationship with the NHS or whether, indeed, the NHS should become the National Health and Care System (NHCS); the total level of funding required over the medium-term to realise that vision; the possible share and implications of that total met by public and private sources (including user charges) with respect to both equity and efficiency drivers; and how minimum client-need based universal standards can be combined with user choice and provider innovation and flexibility.

Such an electoral and stakeholder policy engagement process would depart from the political mores or methodology that governments and parties have increasingly applied since the advent of New Labour times, one more dependent on tactical news-release and more recently occasional Twitter and like pronouncements.

A necessary and vital departure, however, not just for effective and sustainable social care reform, but for wider social democratic ends. Otherwise Johnson could well determine outcomes, for better or worse, over the next decade.

 

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Filed Under: Health Policy, Social Care, Welfare State and social policy

Starmer’s Story Must Be Labour’s Story

29th March 2021 by newtjoh

Christened by working class parents to commemorate the Labour founder, Keir Hardie, the young Starmer trod an upward mobile professional journey through grammar school, redbrick university, and Oxbridge into select Bar Chambers. Becoming a doughty legal defender of organised strikers, anti-capitalist campaigners and death row inmates, he then ‘took silk’ as a QC, providing a pathway to his appointment Director of Public Prosecutions in 2008 – an establishment role he excelled in, exhibiting rationality and competence tinged with radicalism.

Succeeding Frank Dobson – a former Health Secretary but unsuccessful first Labour London Mayoralty candidate – to the inner city, and still largely working class, safe seat of St.Pancras, Starmer quickly but quietly learnt his Westminster ropes. In October 2016, Jeremy Corbyn appointed him Shadow Brexit Secretary – an appointment based not on political affinity, but on a recognition that his skill profile best matched the requirements of the post, surmounting concerns within Corbyn’s inner circle that it would simply provide Starmer with a stage for a continuing audition for the top job.

Which it did. By far the most effective Shadow performer in the Commons, Starmer effectively critiqued the Brexit position of both May and Johnson governments. Elected Labour leader in April 2020 at the height of the first Covid wave, he soon established himself as a measured but effective leader of the opposition, whose gravitas contrasted sharply and favourably with both a Prime Minister almost habitually reliant on bluster and boosterism and with a predecessor invariably out of his depth at the dispatch box.

But doubts began to surface that Labour’s new leader, while brilliant at discharging a brief and in forensically unpicking an opponent’s case, lacked the ability to create and personify a political counter narrative that could resonate within, yet alone beyond, Westminster. It was also noted that his six Brexit tests and espousal of a ‘People’s Vote’ had proved counter-productive in political and economic outcome terms. After a honeymoon period, apart from taking the whip away from Corbyn, his leadership style was characterised by caution and indecision with a proclivity to tack to the prevailing wind of the day in a way that often smacked more of tactical opportunism than strategic vision.

Since 1945 only three Labour leaders, Clement Attlee, Harold Wilson, and Tony Blair have won electoral power at Westminster – all following a long hiatus for Labour in Opposition. The first two did so not by dint of their personalities but rather by their ability to manage and to link a desire for change within the population, the last by a more presidential project that personified ‘New’ Labour’s colonisation of the centreground.

The December 2019 Tory capture of ‘Red Wall’ seats won with an enlarged working-class support base, along with the party’s practical collapse in Scotland, means that to become the fourth, Starmer  – discounting a return of a substantial number of SNP seats in Scotland back to Labour – must secure the largest ever electoral swing that Labour has ever achieved in England of over 12% compared to 10.7% in 1945.

Has Starmer really got what it must take to overcome not only that unprecedented electoral challenge – likely to be compounded by boundary changes favouring the Conservatives – but also concurrently the immense structural social democratic wider political challenge of reconciling necessary fiscal and political responsibility with the accommodation of ever-rising rising demand and need for increased health, social care, and education social expenditure, on top of equitable social security reform – the true underlying fiscal crisis of the state – as well as the secular tendency for education and age rather than social class associational factors to determine voting behaviour, requiring the cultural and the economic to be ever finely balanced in political calculation.

In the short term, policy reviews and prescriptions can wait. Starmer must first build a sustainable value base that can support and illuminate a coherent overarching political strategy chiming with majority concerns covering affordable housing, quality neighbourhood schools, and the building safe and secure communities endowed with well-paid jobs, that some of the more thoughtful members of his Shadow Cabinet, like Rachel Reeves, have begun to build.

Starmer cannot recreate Blair’s presentational elan, but he can mesh such a strategic framework to his personal back story: the son of a disabled mother and toolmaker father who forged a successful career by hard work and application, subsequently marked by public service. He should dare the Mail and Telegraph to sneer at such an epitome of Middle England endeavour and aspiration for honest and in the scheme of things modest material reward.

Starmer as a person and Starmerism as a political project should be joined and projected, linking, by way of contrast, the entitlement and real elitism of the Prime Minister’s back story to his opportunistic and hollow ‘chancer’ policies.

A case in point is the Johnson’s government’s Levelling Up agenda. It relies upon a mix of big ticket and local bus depot-type infrastructural projects with thinly spread centrally determined funding-streams, themselves subject to manipulation for party political advantage.  Starmer must seize as Labour’s own, the emerging overlapping consensus, manifested recently by Bank of England’s chief economist Andy Haldane speaking on behalf of the soon to be defunct Industrial strategy council, that sustained local growth needs to be rooted in local strategies, covering not only infrastructure, but skills, sectors, education and culture, measured by defined understandable transformational outcomes: improved educational attainment and opportunity, the generation of new and well-paying jobs, and the spread and mainstreaming of affordable housing.

He will also need to tap an enlarged fiscal space for government borrowing, evidenced by Biden’s Stimulus and Climate Change Package, taking the opportunity to be both bold and lucky, as Johnson did to combine ‘ getting Brexit done’ with electoral success.  Unlike Johnson, he also must be honest and straight-talking about linking future social benefit and justice to contribution. It is not just about the economy, but also about values and vision. The policies will follow.

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Filed Under: Economic policy, Welfare State and social policy Tagged With: Starmer

Covid: When Muddling Through Won’t Do

26th July 2020 by newtjoh

Summary (added 29th July)

This is a detailed but personal narrative of the UK’s public policy response to Covid to the decision to lockdown on 23rd March.

Minutes and papers of the government’s main scientific advisory group (SAGE) are used along with subsequent parliamentary committees to investigate and analyse the claim made by some members of SAGE and other informed commentators that up to 25,000 of the 45,000-plus hitherto recorded deaths were avoidable.

It concludes that undue retrospective focus on the one week or more delay in the imposition of lockdown diverts from understanding , and acting to remedy the underlying causes of the UK’s (and England’s) high per capita Covid death rate: lack of government preparedness; of foresight; and of focused flexibility, manifested in the concentration of Covid-deaths within its care homes for the elderly as result of negligent acts of both commission and omission.

The last section uses international comparisons to highlight lessons to be learnt that simply put are: learn, learn, and learn; test, test, and test.

Introduction

The first worldwide Covid case was confirmed on 31 December in Wuhan, a large inland Chinese provincial city, home to 11 million people. An animal-based virus had switched across to humans, probably via its under-regulated live food markets.

Dribs and drabs of information concerning its emergence and spread circulated but elicited little focused concern within the policy-making citadels of Europe and America.  Many stockmarkets, apparently unperturbed that a pandemic might soon be unleashed and wreak economic havoc, continued to climb to near-record highs. Aviation traffic continued unabated.

Personally, I travelled from Kolkata in India – my wife’s family home – back to my London home on the 14th January to return to work, without a thought about Covid, then still known by the generic label, Coranavirus.  Before long, like most of us, I was to learn much more.

The first public awareness watershed was Wuhan’s lockdown on January 23. This was imposed by the Chinese government to prevent the further propagation of the virus by city residents travelling for their Lunar New year celebrations. Many already had. Pictures percolated within mainstream media of deserted Wuhan streets. The opening of a 1000 bed pop-up hospital built in short scratch to relieve pressure on its locally overwhelmed health system briefly made the headlines in early February.

Yet all that was still over there; for most people still a distant and unknown continent: there was no suggestion, nor did it cross my mind, that London would begin to endure an even longer lockdown before March was out.

On 31 January – the same day that the UK exited the EU – Chris Whitty, England’s chief medical officer (and principal medical adviser to the UK government) confirmed the first Covid cases in England.

A few days earlier the World Health Organisation (WHO) had declared Covid a public health emergency of international concern.

Cobr(a) – the inter-departmental group named after the cabinet briefing room where it met – convened usually to plan government responses to terrorist threats and to emergencies, such as flooding, had already assembled the first time to consider the threat from Covid.

It was, however, an emerging threat still very much overshadowed by the wider political backdrop, most particularly the continuing Brexit saga.

A 3 February a keynote speech in which the new prime minister predicted a ‘supercharged’ free trading future for a UK now freshly freed from its EU shackles grabbed the headlines. Covid was not going to be allowed to get in the way of that.

The same day, the UK-registered Diamond Princess cruise ship returned to Yokohama port in Japan. 3,711 passengers and crew were quarantined there on board for 14 days.  Some were repatriated by the US and other governments prior to the completion of that initial quarantine period. Others, testing positive but not hospitalized, remained on board throughout much of February, even into March.

711 people (19%) on that ship ultimately tested positive for Covid, many of whom were transferred to over-stretched local health facilities. 13 died, including the first UK national to suffer a reported Covid-related death.

The propensity of the virus to spread quickly but unevenly among an elderly passenger demographic sharing common facilities had been demonstrated: the World Health Organization (WHO) advised that Diamond Princess accounted for half of all Covid cases then reported outside China.

The lesson that was there to be learnt concerning the protection of their respective resident care home populations was not learnt either by the UK government or its devolved administrations or many other European governments.

The initial UK public health policy response was one of containment: detect early cases, follow up close contacts, to prevent the disease taking hold, for as long as possible.

In line with that international travelers from infected areas were taken under police escort to requisitioned hotels for 14 days quarantine. Identified actual cases in the UK were few – fingers on one hand. International airlines withdrew their Chinese flights.

Half-hearted efforts were also made to introduce contact tracing. This identified that a middle-aged Hove man, after apparently contracting Covid in Singapore on a business trip before interrupted his journey home to take a short break in a French ski-chalet, had apparently infected at least five people – a high proportion of the total hitherto recorded as Covid-infected – at least in England.

The part-time scout master was later interviewed in magazine-style format as a bit of curiosity, in rude health following his period of quarantine in a London hospital, reflecting the prevailing media noise, which then seemed as likely to recede than to intensify.

The European response to Covid continued to be muted, restrained, and, in retrospect, blasé throughout much of February; to the point of negligence, even.

Across the Channel in newly liberated Blighty, the political and public policy response to Covid was likewise lacklustre, not ‘supercharged’. In mid-February, Boris Johnson enjoyed an extended period of ‘down time’ at his Kent ‘grace and favour’ historic mansion, apparently basking in the glow of having got both a 80 seat majority for his party – its largest since 1987 – and ‘Brexit Done’. It later transpired that his new partner was pregnant.

And as the days gradually got longer the attention of the wider population drifted rather to the future joys of spring replacing the partial and chosen hibernation encouraged by a dull and wet winter.

The last week of February was half-term. The more affluent jetted-off for skiing holidays in alpine Europe; greater numbers headed to packed domestic attractions. I, myself, organized a short break to Bavaria for the end of March, looking forward to crossing much of the region by public transport, sampling the local sights and amenities.

Poignantly, later, in May, Sir Patrick Vallance, the UK’s chief scientific adviser, was to tell MPs that a wave of imported Covid-19 infections had flowed into the UK in early March – a flow quite possibly accounted for by returning half-term vacationers. Hindsight is both a wonderful and cruel thing.

Although Cobra continued to meet and consider Covid in the prime minister’s absence, the emerging pandemic persisted in media portrayal as primarily a Chinese problem producing incidental issues elsewhere that threatened to become larger.

Nearly all the c.3,000 deaths recorded as Covid-related by the end of February had been recorded in China, save for less than 100 elsewhere in the world.

By the end of March, however, as we will shortly see, the picture had already both burst its frame and inverted: China accounted for c3,300 of a worldwide total of c39,000 deaths.

Boris Johnson finally attended his first Cobra meeting on Covid on the 2 March.

Science, SAGE, and public policy to lockdown

The Scientific Group for Emergencies (SAGE) remit is to provide timely and coordinated scientific advice to decision makers within Cobra, Cabinet, and right across government.

Co-chaired by the government’s chief scientific and medical advisers, mainly comprising independent academics within specialist supporting expert groups, such as the Scientific Pandemic Influenza Group on Modelling (SPI-M): a key group focused on infectious disease modelling and epidemiology. Another was NERVTAG, the novel and emerging respiratory infections group.

From January onwards SAGE met regularly – usually twice-weekly – on Covid. Its operations and deliberations and feeder groups were initially opaque and mysterious, but following accusations of non-transparency, minutes of its meetings, consensual statements, with some supporting papers, were belatedly published, albeit weeks in arrears.

These show that its meetings and papers were marked by uncertainty and tentativeness, practically until lockdown was announced.

There was a reliance, well into February, upon models predicated on assumptions derived from the experience of previous influenza epidemics. Undue weight was placed on transmission by children. The exceptional exposure risk to the very elderly – in care home settings especially – that Covid posed was an absent parameter (not factored-in) in the models assembled for, and considered by, SAGE.

These models therefore missed a key real-world determinant of Covid outcomes across the UK: an omission later explained by Sir Patrick Vallance and other key SAGE members as due to lack of data.

A 3 February statement concluded that without a better evidence base concerning the transmissibility of the virus, the impact of potential interventions and their interaction on Covid spread would be hard to determine, noting, for example, that little direct evidence was available on the effects of cancelling large public events.

And, a 25 February supporting paper considering the impacts of various non-pharmaceutical interventions (NPI’s), concluded that, excepting for school closure, reliable estimates of their impact were lacking, even for influenza. That meant, in turn, that there was “insufficient data to parameterise the simulation model (used here) accurately enough to give a high level of confidence in model predictions of individual policies”.

The ‘science’ was flying mainly blind as the coming Covid storm gathered strength and speed.

What was better understood, however, within SAGE, was that without action a future pandemic would overwhelm the NHS before its peak was reached, but that a sustained application of NPI’s, especially if combined and introduced early, should help to delay and flatten that peak.

Such NPI’s included the:

  • closure of schools and universities;
  • home isolation of symptomatic cases;
  • voluntary household quarantine on occurrence of a symptomatic case in a household; and,
  • social distancing, where all non-household social contact ceased, bar ‘essentials’ and attending school and work.

A 26 February paper extended that conclusion and made explicit an assumption: an alternative strategy focused on the household isolation of over 65’s and other vulnerable groups  and on special measures around care homes, would mean that ‘‘the majority of the population would then develop immunity, hopefully preventing any second wave, while reducing pressure on the NHS”.

It went on to note that it “was a political decision to consider whether it is preferable to enact stricter measures at first, lifting them gradually as required or to start with fewer measures and add further measures if required”.

27 February SAGE minutes recorded (minute 6) that ‘extended mitigations’ could be expected to change the shape of the epidemic curve or the timing of a first or second peak, but it was unlikely they would reduce the overall number of total infections (the attack rate). In other words, such mitigations would re-distribute infections and deaths temporally (over time) but not reduce them.

An action was also recorded for UK academic modelling groups (Imperial, Oxford, London School of Hygiene and Tropical Medicine) with NHS planners to organise a working group (starting week 2 March 2020) to analyse key clinical variables for a reasonable worst case planning scenario for the NHS, which could then be reviewed by SPI-M for subsequent discussion at SAGE.

In the public arena, the government’s first forward-looking Coronavirus Action Plan, published on 3 March, reflected the underlying scientific ambivalence and uncertainty swirling within and emanating from SAGE.

The plan’s declared primary public policy aim was to flatten the peak of the epidemic to provide more time for the NHS to prepare for it. This was hopefully to buy time for a vaccine and/or therapies to be developed. Meanwhile measures to first delay and then mitigate the onset and impact of Covid were to be introduced as part of the plan; but only when assessed “as necessary”, following consideration of their social costs and impacts.

By February it was already known that Covid disproportionately impacted upon the very elderly. Chinese case fatality data reported a c15% death rate for over 80’s, compared to 0.32% for people in the 20-49  bracket, (see, for example: https://www.cebm.net/covid-19/global-covid-19-case-fatality-rates/).

Later datasets have continued to confirm the proclivity of the virus to affect the very elderly people, especially those suffering other respiratory-based and other co-morbidities.

Epidemiological and modelling data, according to the 5 March SAGE minutes,  was by then available to support delay and mitigation measures to modify the epidemic peak and to reduce mortality rates (author note: presumably short-term ones in line with its 27 February minute 6).

In that light, minute two recommended the implementation – within 1-2 weeks (author emphasis) – of:

  • individual home isolation (symptomatic individuals to stay at home for 14 days);
  • whole family isolation (fellow household members of symptomatic individuals to stay at home for 14 days after last family member becomes unwell).

Minute three further advised that scientific data was also available to support implementation – roughly two weeks later (author emphasis) – of the social isolation (cocooning) for those over 65 or with underlying medical conditions, for the same purpose.

Consistent with such advice, on 7 March, the government asked people exhibiting Covid symptoms to self-isolate for seven days.

Both the science and the politics, however, were soon to be swamped by events in Italy.

There – on the back of an earlier exponential spread of infections – an uncontrolled demand surge in admissions and demand for intensive-bed care support had by early March clearly overwhelmed local health systems. Lombardy was the worst hit.  Much of Italy, where deaths rose exponentially in days, was put into severe lockdown.  Spain soon followed suit.

As the empirical situation across Europe and the UK became both clearer and more concerning, unease grew across SAGE and wider scientific community.

Surveillance data, including Covid patients in intensive care units without a travel history, showed that community transmission of the virus within UK communities had begun: the 10 March SAGE minutes  highlighted that the UK was likely harbouring thousands of Covid cases – as many as 5,000 to 10,000 – geographically spread nationally (minute five),  and that transmission was already underway across both community and nosocomial (i.e. hospital) settings (minute six).

The genie was already out of the bottle.

An accordant action was recorded by SAGE that day for the Department of Health and Social Care (DHSC) and the Cabinet Secretariat to develop policy around implementation of: case isolation, household isolation, social distancing for elderly and vulnerable) interventions; data clarifying eligibility, numbers affected, and essential symptoms, was then to be shared with SAGE and its advisory groups.

Minute 14 endorsed the advice of a sub-group that individual case self-isolation should last for seven days from onset of symptoms. Minute 20 recommended that all members of a household should isolate for 14 days from the time that its first member exbibits symptoms. It went on to add that in the event of the first symptomatic person becoming well after seven days, that person can exit isolation but not the other member(s).

Minute 18 reported modelling that suggested, however, that the UK was still 10-14 weeks (author emphasis) from the epidemic peak (not attached with estimates of deaths) if no mitigations were introduced.

Insofar the actual peak was experienced less than one month later, on 8 April to mid-month despite the introduction of mitigation and then suppression measures, this proved over-optimistic.

Minute 30 noted again that special policy consideration should be given to care homes and various types of retirement communities where residents were more independent. No related action or monitoring process was attached to that minute, however.

Its lack of application was to greatly increase the Covid-related death toll over the next couple of months, with care home residents accounting for nearly half of such deaths.

On March 12 efforts to introduce contact tracing evaporated and finally ended. This the 3 March government plan had predicted, noting that as Covid becomes established,  large-scale preventative measures, such as intensive contact tracing, ‘‘may lose their effectiveness’’, which would mean that ‘’resources would be more effectively used elsewhere’’.

In short, the existing UK testing and tracing infrastructure could only cope with a limited number of cases, which no longer was the case: confirmed Covid cases had risen from four on March 3 to 76 by March 9.

Chris Whitty, in a subsequent and rather fraught 21 July attendance before the Health and Social Care parliamentary select committee, justified that decision as “correct given the (then) current capacity”, as  he did the related one to concentrate on providing swab tests to hospital patients.

Beyond SAGE, bars and pubs were still sometimes packed. The young Italian owners of one Chiswick bar were incredulous that no lockdown restrictions had yet been introduced, as Covid ‘’was sure to spread here.’’

In turn, I ventured surprise, on one hand, that the Italian government had demonstrated the wherewithal to implement a comprehensive lockdown; and, on the other, doubt that the economic impact of such a lockdown, on young people especially, would be tolerated in the capital where all of us worked, whereas the youth unemployment rate in Italy constituted a constant and accommodating endemic societal fact of life that the very presence of my hosts partly evidenced.

They got it right; I got it wrong. More to the point, they correctly predicted the need for quicker more concerted action from the government (against their own short-term economic interests) than was forthcoming.

Others had also by then made more evidenced warnings that Covid was sure to spread exponentially soon in countries such as the UK, most notably a 10 March Medium post: Coranavirus: Act today or People will Die that was viewed by 40 million people. The author, Tomas Pueyo, a Californian software engineer made the point that the true number of Covid cases is likely to exceed many times the official recorded number of diagnosed Covid cases. Applying a few assumptions, namely, an average time from onset of infection to death of  17.3 days, a case fatality ratio of 1%, and a doubling time of 6.2 days, he estimated, for instance, after ignoring cases apparently clustered,  that given a figure of 22 Covid-deaths recorded across Washington state on the western seaboard of the United States (US) that the true number cases in that state was c3,000.

His message was simple but stark: The coronavirus is coming to you; it’s coming at an exponential speed: gradually, and then suddenly; it’s a matter of days; maybe a week or two; when it does, your healthcare system will be overwhelmed. It was largely dismissed as in the ‘amateur armchair epidemiologist’ category.

Some schools in the UK, however, by then had already shut their doors by local decision. Responding to the threat of the virus, public behaviour had also begun to change in late February, causing both car and public transport movements to fall. More people began to work from home and to stop unnecessary shopping and leisure trips.

Social distancing and homeworking continued to be encouraged by the government but, however, were not yet made subject to centrally imposed regulation or enforcement.

In that light, the  13 March SAGE minutes highlighted the “risk that current proposed measures (individual and household isolation and social distancing) will not reduce demand (for health care) enough: they may need to be coupled with more intensive actions to enable the NHS to cope, whether regionally or nationally” (minute nine).

Yet minute 21 also recorded that SAGE was unanimous “that measures seeking to completely suppress spread of Covid will cause a second peak”  and “it is a near certainty that countries such as China, where heavy suppression is underway, will experience a second peak once measures are relaxed”: a conclusion in line with the analytic thrust of its earlier published background February papers and minutes.

And, in the public arena that morning , the chair of SAGE, Sir Patrick Vallance, told the BBC Today programme that “if you suppress something very, very hard, when you release those measures it bounces back and it bounces back at the wrong time”; the aim, therefore, was “to try to reduce the peak, broaden the peak, not suppress it completely”, so as “to build up some kind of herd immunity”.

That very same Friday 13th March, 70,000 people, including some of my work colleagues, herded together to watch the Cheltenham Gold Cup, returning to work next week to tell of their luck with the bookies.

Two evenings previously, 52,000 watched Liverpool play Atletico Madrid, including thousands traveling from a country and a city where cases were rising at one of the highest European rates.

Both events provided a swansong for life as until then we had known it. That very evening, the government announced that mass gatherings would be banned from the following weekend.

Matt Hancock, the Health secretary, in a televised interview on Sunday 15 March, denied that herd immunity was government policy. He advised instead that “our goal is to protect life, and our policy is to fight the virus and protect the vulnerable and protect the NHS…(and to do that) … we need to bring the (rising) infection rate down” (and this might involve) “some quite extraordinary interventions that you don’t normally have in peacetime”.

Hours earlier, the preceding Saturday evening, measures to close restaurants, shops, other than  pharmacies and supermarkets, and to shield the vulnerable over 70 age group by means of strict quarantining within their own home or are homes for an extended period, had been trailed through the media  as comprising “part of a ‘wartime-style mobilisation effort” that would likely to be enforced within the next 20 days”. Hancock refused to rule out that their introduction was imminent.

Also leaked to the press that weekend were dramatic claims that without radical action the Covid death toll could reach 512,000 deaths in Great Britain and of 2.2m in the US.

That Imperial College Study, when released, on 16 March, was not ambiguous. According to the modelling assumptions that it applied, even the most effective mitigation strategy (case isolation; household quarantine; and social distancing of the elderly), would see general ward and ICU beds surge limits exceeded by at least 8-fold, resulting in the order of 250,000 deaths in GB, and of 1.1-1.2m in the US.

It concluded that epidemic suppression, where the rate of Covid-transmission or reproduction (the R-rate) was reduced to below one (each infected person on average goes on to infect less than one person: R<1) and then, crucially, was kept below that level, provided the only current viable strategy, and that there was an imminent need for UK to implement it.

Such effective suppression of the epidemic, as a minimum, rather than the more limited mitigation measures (author note: as the SAGE 13 March minutes recommended) would need instead to comprise a ‘”combination of social distancing of the entire population, home isolation of cases and household quarantine of their family members”, supplemented by school and university closures, even though ”such closures may have negative impacts on health systems due to increased absenteeism”. Population-wide social distancing was modelled within the report to have the largest impact.

It further noted that these measures could need to last for 18 months or more – or even indefinitely – until a vaccine(s) was readily available, though with some likely periods of alternating relaxation and re-imposition of individual measures, where and when the emergent data justified, that could vary geographically.

The Imperial modelling chimed with the unravelling Italian experience. It served to highlight the prospect that without a radical change in approach that the UK’s lower per capita intensive bed capacity would cause our NHS to be even more overwhelmed than had proved the case in Italy. UK deaths at the time were beginning to double exponentially across days.

The  published 16 March Consensus view  of SPI-M concluded that a combination of general social distancing and school closures (author note: that is suppression) with case isolation, household isolation and the concerted social distancing of vulnerable groups would be likely to control the epidemic, subject to them being kept in place for a long period.

It noted that SPI-M agreed that this strategy should be followed “as soon as practical”, at least in the first instance.

Sir Patrick Vallance later, when the sole witness to the 16 July Science and Techology Select Committee, appeared to claim that this was when SAGE provided clear advice to government, in effect, to lockdown –  done on the back of emergent data (presumably the Imperial report) that Covid infections were doubling every three days.

Foe the record his precise answer was (Q1041):  “When the SAGE sub-group on modelling, SPI-M, saw that the doubling time had gone down to three days, which was in the middle of March, that was when the advice SAGE issued was that the remainder of the measures should be introduced as soon as possible. I think that advice was given on 16 or 18 March, and that was when those data became available. Looking back, you can see that the data may have preceded that, but the data were not available before that. Knowledge of the three-day doubling rate became evident during the week before” (that is week beginning 9 March).

His chief medical adviser counterpart, Chris Whitty, was later to highlight,  during his appearance at the 21 July Health and Social Care Committee that following consultation with Vallance that “there was an intention on the 16th very strongly to say that more measures were needed, and that is indeed what happened. If you look at the minutes of SAGE, it is clear that there was a package of things that were strongly recommended on the 16th, and those happened then. There was subsequently clear advice to close schools, which previously had not been advised. That happened subsequently”, and that the ‘operational’ difficulties involved in imposing a full lockdown immediately should be recognized.

The Secretary of State, Matt Hancock, himself advised the 21 July Science and Technology Select Committee  that, “If you take 16 March, for instance, on that day we received advice from SAGE advising that the virus was accelerating. By that evening, I was in the Chamber announcing that there should be no social contact unless absolutely necessary and no travel unless necessary. In my eight years in Government, I have never seen faster decision-making on such big issues than happened then, translating scientific advice into Government action with unbelievable urgency”.

By July, however, the ‘science’ and the politics was becoming blurred. So back to the narrative.

On March 17, Sir Simon Stevens, the chief executive of the NHS, wrote a letter to local acute care providers asking them to be ready to postpone all non-urgent elective operations from 15th April at the latest, for at least three months to provide an additional 30,000 acute care beds across England on top of the existing 100,000.

He also urged them to potentially provide half of that new addition (15,000) by ensuring the urgent discharge of patients awaiting discharge or with lengths of stay over 21 days, while community health providers and social care providers were likewise asked to free up community hospital and intermediate care beds “that could be used flexibly within the next fortnight” so as to possibly release up to another 10,000 beds for acute Covid care cases.

Many of the discharged patients were very elderly people who returned to, or were allocated a place in, residential and nursing care homes. They did not begin to get tested for Covid (testing capacity was inadequate even for NHS staff) until 15 April, after when the transfers had begun.

Unsurprisingly an unknown proportion of the elderly and frail were incubating the virus for onward transmission to their fellow residents – in age and morbidity, the group most vulnerable and exposed to it.

That St. Patrick’s Day no parades took place in Ireland as these and other public events had already been banned by the Irish government. The UK government now did likewise. Shielding was also introduced for the most vulnerable. The British public were exhorted to cease non-essential contact and travel.

The closure of schools was announced next day. Exceptions covered the children of critical health workers and vulnerable children when they needed to attend in person – about 2% of the total school population.

That Friday March 20, one week after the Cheltenham Gold Cup, I joined most of the working population in homeworking; much of the working office-based population had begun to do so earlier that week, when I cancelled my planned forthcoming trip to Bavaria.

Pubs, restaurants, and indoor leisure venues were shuttered across the UK from midnight 20 March. The closure of non-essential shops was announced on the following Monday 23 March.

That evening, the Prime Minister, in a  nationwide television address  confirmed the essential components of the UK lockdown that we were to experience well into May: that people should stay at home, save to shop for basic necessities, and then infrequently as possible; to take one form of exercise a day – for example, to run, walk, or cycle – but alone or only with members of your household; to access any medical need; to provide care or to help a vulnerable person; and to travel to and from work, but only where absolutely necessary, where homeworking was not possible.

Non-essential movement was duly restricted from Wednesday March 24. The emergency Coranavirus Act 2020 was passed with regulations enacted on 26 March prohibiting all gatherings of more than two people in public, other than those living in the same household.

The closure of all shops selling non-essential goods​ including clothing and electronics was enforced.

Premises, including libraries, playgrounds and outdoor gyms, and places of worship, were likewise compulsorily shut by statutory requirement.

Similar regulations were enacted by the devolved administrations. The constituent nations of the UK, initially at least, were united in their Covid public policy response.
‍A State-imposed Lockdown unprecedented in scale and reach since the world wars of the last century had been imposed in just one momentous week across the UK, tagged with the public health slogan: Stay at Home – Protect the NHS – Save Lives.

 We were not alone. Across ’every state, every district, every lane, every village’ of India, an even more stringent and remarkable lockdown had begun for its c1.4bn population. The Hindu-nationalist prime minister, Narendra Modi, announced the lockdown likewise on television on March 23, giving Indians less than four hours’ notice before it took full effect that midnight.

The largest urban centres, such as Delhi and Kolkata, had already seen shop closures and scaled down public transport.

The phenomenal and previously unimaginable impact that lockdown had on the previous sheer cacophony of crowded cities like Kolkata can be glimpsed on this video, showing a city of a solitude, quietness, and clear air, never seen before,  an environment that economically and socially could not be sustained.

 India and other low-income countries with limited health systems and high-density urban populations appeared to be the most exposed to Covid. Initially, at least, however the Indian lockdown was successful in securing adherence and stunting community transmission of the virus.

It did attach accompanying grave hardship however on the poorest segments of the community. For example, migrant wage labourers stripped of their source of employment income were forced to trudge back to their family homes often hundreds of miles away in rural India, risking the transmission of the virus there.

Unfortunately, across recent weeks India has experienced a concerning steady rise in infections and deaths (quite possibly under-reported), resulting in the intermittent re-imposition of national, state, and local lockdowns, amid with officially reported cases of Covid, approaching one million, with true cases likely – given limited testing incidence –  likely to be much higher.

My wife whom I had left in her Kolkata family home back in January was unable to fly back to London as planned. As I write, she is still waiting for international flights to be reinstated, and local spikes of Covid cases in my wife’s neighbourhood have become common with police enforcing their transfer to state isolation facilities.

Individual US states in March progressively applied their own lockdown versions, subject also to local variation. States neighboring NY City, and California, led the way.

Their governors sidestepped a reluctant and sceptical president, whom appeared more concerned about avoiding an economic hit that could undermine his November re-election pitch:  that is, essentially, he had improved the employment and income of his blue-collar supporters at the same time as giving the elite political and cultural establishment a bloody nose.

Trump’s blandishments to inject bleach and to take an anti-malarial drug as effective antidotes to Covid, however, were scientifically rebuffed, and generally attracted ridicule across much of the mainstream media.

By the end of March, according to the invaluable open access  OurWorldinData website, the UK accounted for approximately 2,000 of the worldwide cumulative total of c39,000 Covid-related deaths.

Italy reported the largest number at c12,000 due to its early epidemic curve (author rounding of figures due to their uncertainty, variation of definition and reporting process, etc).

But by the end of the next month,  the highest world-total of Covid-related deaths were recorded in the world’s richest large nation: the United States (US) with 61,000 deaths, with New York City particularly hard hit with some other hotspots, such as California.

The north European countries of Italy, France, Spain, and the UK reported cumulative deaths in the c24,000 to 28,000 range. The UK figure was c26,000.

These four advanced economies with the US accounted for something like three quarters of the world total of c228,000 Covid-related deaths at the end of April.

Covid may have started in China, but its initial spread was now concentrated in some of the high-income countries of Europe, and in the US. China and most of its close East Asia neighbours seemed to have escaped much of worst effects of Covid.

Shortly some of the societal systemic and public policy reasons for that will be explored, but first the question has to be posed:  did up to 20,000-25,000 too many avoidable UK Covid-related deaths occur during the spring lockdown period; and, if so, why.

Late lockdown: cause or symptom?

With the benefit of hindsight viewed through a backward-looking lens amok a rising toll of 45,000-plus recorded UK Covid-related deaths (leaving aside for the purpose of this post definitional issues, including that excess deaths will prove ultimately best measure), it seems clear that the government clearly took the decision to lockdown in mid-March too late, with resulting tragic consequences.

Greg Clark, the chair of the 10 June House of Commons Science and Technology Select Committee,  after referring Professor Neil Ferguson, the lead author of the Imperial study, to evidence made to an earlier 25 March meeting that Covid deaths would be unlikely to exceed 20,000, asked him why that proved to be such an under-estimate.

Ferguson replied: “that the epidemic was doubling every three to four days before lockdown interventions were introduced, and so, had we introduced lockdown measures a week earlier, we would have reduced the final death toll by at least a half”, a statement that captured the news headlines for the rest of that day.

Two other members of SPI-M giving evidence with Ferguson that day, Professor Matt Keeling and Dr. Nicholas Davies, made the less dramatic, but still stark point that an earlier imposed lockdown would have “significantly reduced the death toll” – a conclusion echoed by other SAGE members across different mediums, and now embedded within the mainstream consensus.

Sir Patrick Vallance, back in March, had also indicated then that 20,000 deaths would be a ‘good outcome’ but in July conceded that the subsequent UK outcome was “not good”.

A late lockdown provides one explanation. Ferguson suggested to the committee two others.

The first one is consistent with a late lockdown, considered below. The second one relates to the concentration of Covid deaths in care homes, which will be considered in the next section alongside the stream of evidence on that, which came on stream in June and July.

A heavier seeding of infections from foreign visitors – 1,500-2,000 cases from Italy and Spain, but only picked up in subsequent surveillance data and reported in early June – was taking place in early March. Ferguson confirmed that this was neither known nor factored into models at the time.

An exponentially rising tide of Covid infections from late February onwards certainly over-ran the analytic capacity of both the SAGE and Whitehall to respond in a stepped, calibrated, and planned way, with catastrophic consequences.

The first UK Covid-related death had been recorded at the beginning of March. Such deaths, however, lag three weeks or so from the time of causative infection. The models used to project future deaths, hence require accurate information on infection levels that was not available.

That lack of accurate information on the actual infection curve meant that the true incidence of the virus and its likely propensity to spread was not identified by the epidemiological models that SAGE relied heavily upon to inform its wider assessments and recommendations.

The UK simply did not have in place a fit-for-purpose comprehensive fit-for-purpose track, test, and isolate infrastructure, including serological (blood or plasma-based) antibody testing data – denoting current infection levels, whatever the degree of symptoms infected individuals exhibited, to the timely degree of accuracy that the occasion then demanded.

Even when fast forwarding to July, data reported from the dedicated and latest ONS Covid Infection Survey is still attached with wide ranges of uncertainty (confidence intervals). During the 14-day period from 22 June to 5 July 2020, it reported an estimated two new Covid infections for every 10,000 individuals per week in the community population in England, equating to an estimated 1,700 new cases per day at a 95% confidence interval of 700 to 3,700.

Public Health England (PHE) also publishes daily positive cases confirmed by lab tests. These, however, because of the continuing limited coverage of the track and testing regime that has been progressively rolled-out in recent months, still provide only a partial picture of numbers of people infected.

Lack of accurate and comprehensive testing thus provides the underlying reason why the ‘science’ – as was marshalled and offered by SAGE and its supporting scientific community – was simply too ambiguous and uncertain to provide a clear public policy route-map to combat Covid, at least in real-time.

No clear backing or steer was given to government to introduce a comprehensive lockdown to suppress the spread of the epidemic until the 16 March, when it was already too late. Even then that advice, as we have seen, was added with the rider, “as soon as practicable”; hardly a ringing call for urgent immediate action on a ‘clear the decks’ basis.

Even graduated mitigation measures to delay and flatten its peak were only definitely recommended by SAGE in early March (see minutes of March 5 and 13 meetings, reproduced in the previous section).

Instead the mortality figures that the Imperial study modelled were used as a banner cover by the responsible politicians to justify the abrupt policy shift from mitigation to lockdown.

Published on the 16 March, it claimed to have “informed policymaking in the UK and other countries in the last weeks”. Professor Ferguson, more specifically claimed in a BBC Panorama programme broadcast on the 20 July that he had advised SAGE of its main results and implications as early as on the 5 March, but these were not fully accepted by his peers at the time. Perhaps the pessimism bias of epidemiologists in modeling determining variables of morbidity and fatality incidence, did not help.

That be as that it may, but the published study itself acknowledged, however, that its modelling assumptions were only updated in the week prior to the weekend of March 14-15; and that its conclusions had only been reached “in the last few days following  the refinement of estimates of likely Intensive Care Unit (ICU) demand due to Covid based on experience in Italy and the UK”.

Professor Mark Woolhouse, who sits on SPI-M and on the Scottish Government’s Covid-19 Advisory Group, when giving evidence to the same June Science and Technology Committee that Ferguson gave evidence to, (noting that Woolhouse is sympathetic to alternative Swedish approach of partial and voluntary lockdown) asserted that the UK lockdown was a short-term panic measure taken here and elsewhere because “we could not think of anything better to do given the information we had available”, adding that its application should have adjusted quickly in step with emerging outcomes and evidence (Q. 808).

On the available evidence, lockdown – based on a ‘suppression strategy’ reliant on near-confinement of most of UK population (except for prescribed health and other key-workers) – does appear to have been introduced by political decision makers apparently suddenly panicked by a rushing Covid tide that threatened to turn into a tsunami.

Their previously preferred ‘mitigation strategy’ based on two-week quarantines of infected households was swept away, practically before it had even started in earnest.

The argument now made – with hindsight – by many commentators, mirroring Ferguson and some other members of SAGE, is that the UK government, in effect, has blood on its hands, due to it locking down too late, dithering indecisively when the overwhelming of local Italian health systems by Covid, especially in Lombardy, was known, and when the government was beginning at last to receive more assertive prompts from SAGE to quickly introduce some form of restrictions, if not yet full lockdown, to counter its spread.

Perhaps. Italy, Spain, and France, in that order, imposed a full lockdown by or during the period beginning March 9 and ending 16 March, while the UK did so between 16 and 24 March, a period little more than a week in duration.

If the metric taken to measure responsiveness is rather the time period taken to impose a full lockdown after the third or a similar low number of Covid-related death, then the delay, when Italy is taken as the comparator, increases to two weeks,  and to over a week when France and Spain are so taken, along with Belgium and Germany.

These last two countries locked-down about the same time or just before UK did, even though they were slightly behind the epidemic curve in terms of Covid-deaths reported. Germany shut down its land borders on the 16 March.

Such metrics, however, are somewhat abstract, and hindsight-based; prone, in any case, to cross-national and intrinsic ‘like-for like’ data measurement and definitional issues.

That said, once it was decided that lockdown was necessary, the conclusion that then at the very least it should have been done with a very minimum of delay and with concerted urgency and effectiveness appears difficult to argue with.

According to an 16 July FT magazine review Cobra at its 16 March meeting  – with its members presumably by then cognisant of the Imperial modelling and the 16 March SAGE injunction to introduce measures of suppression –  that required sense of urgency was palpably lacking; instead, according to one participant, discussion took place about how the bell-curve of the disease might still be flattened and how people ‘might feel fatigued’ if restrictions were introduced too early.

Was lockdown necessary in the first place?

The author remains reluctant to rush to pass damning judgment on the government’s lateness to lockdown. In part, that is because of the uncertainty of the science.

Also, as might be gleaned from this narrative, it is because I was blasé about the risk that Covid posed myself.

I took the view during February that it would not be sensible to over-react and cause actual economic and indirect social/health damage to counter a potential risk that might or might not arise.

Also by then I had begun to articulate in my mind, if hazily and only in part, that if the purpose of lockdown was to continually suppress the incidence of the virus until its demise, in contrast to delay and flatten its initial peak, in logic, any such  lockdown would need to be both prolonged and combined with measures of strict border control and/or effective entry testing, until a workable vaccine or treatments became available.

Any intermittent lifting and re-imposition of the lockdown, however, at a national level would risk intolerable economic uncertainty and damage.

The other alternative, save for the availability of a safe, effective, vaccine a scale and/or effective treatments remains the acquisition of national herd immunity was acquired through infection (60-70% of population infected), or that the virus becomes otherwise neutered or less virulent over time.

That, essentially, remains the case.

The government at the time of writing is betting that the current state of relaxed national lockdown (re-opened businesses, pubs and businesses, internal and international travel, renewed household contact, but maintenance of social distancing, combined with other adjustments, such as increased use of face masks) can be maintained indefinitely, until a vaccine(s) and/or treatments come to the rescue.

Across the world lifting of lockdown restrictions has largely followed, and been allowed by, a sufficiently reduced level of infection, but with such lifting made conditional on the maintenance of a low and steady infection level, with some notable exceptions, such as some US states, which then have suffered a resurgence of the virus to the point where it again threatens to spread exponentially.

The UK cannot be sure that another national lockdown may prove once again to be the only option left to stem a second peak of deaths – the prime minister declared hope that ‘it may be over by Christmas’ is simply that, irresponsible, as well as unevidenced.

In the autumn and winter, when the schools re-open and office working resumes in earnest, climatic conditions considered more conducive to the spread of the virus will be present. A 14 July Academy of Medical Sciences government commissioned report, in that vein, warned of a reoccurrence of Covid, which combining with the winter influenza peak,  could  on a realistic worst case scenario” – without effective mitigation  measures focused on health and care home settings – surpass by far that of the spring 2020 peak.

The government hopes that the national testing and track infrastructure by then will be sufficiently robust and comprehensive to identify local outbreaks in time for local customized interventions to effectively snuff them out. Leicester has been in local lockdown since June, with some considerable damage to its local economy.

Avoiding another national lockdown does rather assume that  that the current worldwide exponential growth in infections – that even with under-reporting is likely to exceed 15 million by the end of July – does not translate again into another national rising tide of infections that washes over the capacity of localized responses.

Seasonal flu in a bad year can cause excess deaths, when measured against a five-year rolling average. As recently as in 2017-18, according to the AMS report referenced above, England and Wales experienced approximately 50,000 excess winter deaths (seasonal concentration of deaths, not total excess deaths recorded during a period relative to five year average of the same previous period, as is reported by the ONS).

Yet the government does not disrupt the economy to prevent and reduce the flu death toll. To persuade myself that I was not being callous on that score, back in February  I consoled myself with the thought that if Covid proved such an event,  it would enforce attention on the need to take more effective measures to counter the impact of flu on the elderly and vulnerable as well, reducing its future perennial toll, perhaps contributing thus to the net saving of life and morbidity outcomes over time.

Of course, I did not possess the responsibility of, and collective resources and knowledge available to, government; yet it is difficult to conceive that a responsible government would have locked-down in late February, or even very early March, and prevented international travel: such a reaction according to the then available evidence, including from what we now know was coming out of SAGE at the time, would have been an over-reaction in the eyes of most, remembering that the UK is an international air hub: one that is crucial to the functioning of its economy at activity and employment levels consistent with expected real income growth and public financing requirements.

In the aftermath of the initial Covid wave and its consequences, international movements remain very constrained. That, if unchanged, threatens to bankrupt many airlines with resulting impacts on national economies and employment levels. If movements, however, recover they will provide increased opportunities for the spread of the virus back into Europe and UK.

The government, in that light, unexpectedly announced during the last weekend of July an imminent re-imposition of quarantine requirements for travelers from Spain, instantly disrupting the holiday plans of those lulled into booking their usual summer holiday, when the original blanket quarantine requirement was lifted for most European holiday destinations.

The UK remains an international air hub. It is not like Taiwan or New Zealand that can relatively easily impose a shutdown of its airports to ensure in tandem with other effective measures a low or negligible Covid incidence.

The UK with its stake and dependence on the international economy coupled with the high propensity of its population to travel to myriad destinations, is especially exposed to seeding of a second Covid wave through international transmission.

In that light, it is telling that some major airlines, such as British Airways, are now taking the initiative to campaign for a more coherent and international coordinated approach to testing international travelers.

There is also a school of argument that concerted measures of mitigation and voluntary social distancing, as employed by Sweden, would have achieved much the same result with less economic disruption. Proponents point to evidence that the R-value was decreasing before full lockdown was imposed.

Others, such as the leader of an Oxford University research group, have gone further.  In  a May interview  she advised that “I think that the epidemic has largely come and is on its way out in this country so I think it would be definitely less than 1 in 1000 and probably closer to 1 in 10,000”, making the UK Infection Fatality Rate (IPF) – mortality rate of population truly infected –  somewhere between 0.1% and 0.01%., before going on to cast doubt on whether the government back in March should have acted on a ‘reasonable’ worst case scenario.

Professor Johan Giesecke, an advisor to the Swedish Government, and whose protégé, Anders Tegnel, has directed it,  have consistently argued that the Covid IPR is of the region of 0.1%, compared to the 1% modelled by Imperial – a figure consistent with around 50% of the UK and Swedish population having already been infected, mirroring that for seasonal flu.

He further ventured in an UnHerd summary piece contentiously (and inaccurately) that ‘‘Covid-19 is a mild disease and similar to the flu, and it was the novelty of the disease that scared people’’, before concluding that subsequent flattening of the curve in the UK, is due to the most vulnerable dying first, as much as to the effect of our lockdown, and  that ‘’the ultimate result will eventually be similar for all countries”. According to him, the UK public policy ‘’180 degree U-turn’’ in favour of suppression in March was therefore wrong, as the previous approach was ‘‘better’’, noting that the change was based on an unpublished non-peer-reviewed paper (the Imperial Study) that applied too pessimistic modelling assumptions, according to a mathematical modelling methodology that was unsuited ”in any case” for public policy development.

Well, again, perhaps, at least in some respects. Professor Ferguson, the lead author of the Imperial study, himself has taken a more nuanced and less categorical stance in favour of the suppression strategy, suggesting even that up to two-thirds of excess deaths attributable to Covid could turn out to come from the collateral fall out from lockdown, including cancelled and delayed appointments for acute conditions, and the reluctance of people needing such intervention to seek medical help.

Evidence that the stock level of Covid infection – whether displayed or asymptomatic – is anything like approaching 50% in any country, is certainly lacking. Ongoing serological (antibody) studies have reported an incidence of generally below 10% across various population samples, although some counter that future population resistance to Covid will depend upon the prior and innate genetical and other propensities of individuals rather than rely on an increased stock of infected individuals with Covid antibodies.

Such claims, however, come across as reliant more on faith-based assertion or belief, than on scientific-based conclusion secured from supportive evidence that can be validated – well, it well may be true, but it may equally well be wrong, when no-one really knows.  A bit like both epidemiological modelling and politics, then.

Certainly not to shift to strict suppression during that week March 16-23 would have been a very brave, but dangerous course of action for the government to take on the information then available given the then close and present danger that the NHS would be overwhelmed without drastic steps.

Comparing the UK and Swedish approaches using imperfect and uncertain information that can’t be determined with more certainty until the pattern of excess deaths attributable both directly to Covid and  indirectly from the impacts of lockdown is known (and after taking account of factors such as age structure and population density), is a red herring, as is a fruitless retrospective focus on what precise date the UK should have fully locked-down that Professor Ferguson, regrettably, for whatever reason(s), seems to want to fan.

Why the UK lockdown was late 

The key point that has to be learnt and applied in the here and now is that government room to maneuver had by March been lost by lack of preparedness; of foresight; and, of related focused but flexible planning arrangements for, and then in responding to, Covid.

It is these connected failures that can truly and fairly be laid at the door of the UK government, and which need to be understood to allow the lessons to be drawn, necessary to maximise the prospect that a future combined Covid- and Jobocalypse is avoided.

  • Lack of preparedness, in terms of stockpiling and then procuring adequate PPE in both and quality terms, and in providing a fit for purpose test and track infrastructure in waiting for a pandemic previously identified as the biggest future risk to UK national security. Two fundamental and crucial failures.

At the start of the outbreak, the only central stockpile – held by PHE – was designed for a flu pandemic, lacking items such as gowns and visors. Since then money (c£14bn for 2020-21) has been thrown at its procurement but the belated response has meant both unnecessary deaths and likely poor value-for-money.

Swab-based antigen testing, which determines whether a person currently has the virus, with antibody testing, which shows whether a person has previously had it, still needs to be scaled up.

  • Lack of focused flexibility, in terms of an absence of effective and creative civil service and special adviser scanning of what was happening across the world in real time and translating the lessons of that experience into effective mechanisms of policy planning and action at the necessary pace.

Cobra itself proved itself as inadequate institutional mechanism to respond to the Covid crisis. Whether that failure was the result of intrinsic and endemic problems in the wider machinery of government is the crucial question.  Cobra seems to have been replaced by two dedicated Cabinet sub-committees focused on strategic and operational matters: Covid-S and Covid-O.

  • Lack of foresight, in terms of its failure to identify the need and act upon it to protect the care home population against an epidemic, which, even by early February, was identified as mainly a killer of the very elderly and the otherwise medically vulnerable. The care home population given its characteristics and setting was clearly a group likely to be the most susceptible and exposed to the virus.

That last dreadful and shameful failure, in large part, appears to explain the UK’s relatively poor per capita Covid death rate comparative to its close neighbour European peers.

The care home scandal

The second reason that Ferguson gave to the Science and Technology Committee in June as to why actual Covid-related deaths exceeded his and other estimates of 20,000 was the concentration of infections and deaths in residential care homes, related to the disease risk profile of their residents and the tendency of care workers to work within and to hop between close clusters of such homes.

Recently published evidence is depressingly compelling.  ONS  data released on 12 June reviewing deaths occurring in the UK across the entire March and April 2020 period, registered up to 15 May, reported 45,000 excess deaths for that period, 43% more than the average for the same time period over the last five years, 2015 to 2019.

44,628 deaths of care home residents were reported for the period, compared to the five-year average of 22,587, (figure 6 of the linked ONS publication), indicating that they accounted for half of the total excess deaths reported for the period.

England reported the highest percentage of deaths above average within care homes, with 102.0% more deaths than the five-year average for deaths within this group. 44.4% of these recorded deaths mentioned Covid on the applicable death certificate.

In total, as of 12 June 2020, 30% of Covid fatalities in England, 28% in Wales, 46% in Scotland and 42.4% in Northern Ireland were in care homes, according to an even more recent government report.

ONS survey data and analysis of 9,801 care homes in England and their resident population and staff for the period 26 May to 19 June (the Vivaldi Study) also provides supporting evidence of, and possible reasons for, the concentration of the impact of Covid on care home residents.

Across the 56% of the surveyed homes that reported at least one case of coronavirus, 20% of their residents, as reported by care home managers, were estimated as testing positive for Covid (95% confidence interval: 19% to 21%), during that period.

In such homes 7% of staff were similarly estimated to have tested positive (95% confidence interval: 6% to 8%).

Common factors identified in care homes with higher levels of infections amongst residents included the prevalence of infection in staff, especially those making more frequent use of agency nurses or carers.

An association was also found between care homes where staff receive sick pay and lower levels of infection in residents, but, conversely, higher levels of infection cases where care homes employ staff working across multiple sites.

In June, a  National Audit Office (NAO) report pointed out that prior to the Covid outbreak, no process was in place to collect a wide range of daily data from care providers.

DHSC was ignorant on how many people were receiving care in each area. Local authorities generally only kept records on residents whose care they paid for.

It was only from early April that data at a national level was collated on workforce absences, and on PPE levels and overall risks from nursing and residential homes registered with the Care Quality Commission (CQC).

The supply of masks, aprons, gloves, and visors and other (PPE) suitable for use in residential care home settings remained slow and inadequate, only meeting some of the modelled requirements received from health and social care providers, according to the NAO (para 20), until mid-May.

The resident care and nursing home population was the most Covid-vulnerable group, but, in terms of effective public policy attention, it was the most neglected.

From a social policy perspective, it is an outcome that is difficult to divorce from the client group’s lack of possession of political ‘voice’ power.

The needs of mentally ill  patients discharged from asylums built in the Victorian era – often ear-marked for future lucrative redevelopment – into illusory ‘community care’  lacking replacement residential care facilities or adequate personal social work support, provides an example from earlier decades, continued into the present day by the relative neglect of the mentally ill by fragmented health and social services.

Yet the negligence was not one solely of omission, but also of commission.

The NAO in its report (para 6) advised that around 25,000 people were discharged from hospitals into care homes, without testing for Covid,  as part of the expected measures to free up hospital acute bed capacity that the 17 March Simon Stevens letter to NHS bosses set out – a practice that continued to 15 April.

This central failure in the UK Covid response was not an aberration, but was instead intrinsically related to, and a product of, the long-standing fragmentation of its health and social care systems.

This is with respect to the planning, funding, provision, and oversight, of social care and its separation from the nationally funded and coordinated health system.

That core structural problem has been compounded by systemic under-funding that got far worse during the post-2010 austerity years, with funding for local authority support for adult social care reduced by 50% or greater in some cases between 2010 and 2018, or, as Ian Birrell in a Tortoise Media piece reported: over the past decade, government spending fell in real terms on social care by about £300m, despite a 21 per cent rise in the number of citizens aged over 65, compared to  rise in national health spending  of £26bn: what one part of the system taketh, it has taken away from another.

Since 1980 there has been a shift from direct local authority funded care to a ‘mixed economy’ or out-sourced system, where independent for-profit and not-for-profit providers have grown share, with the largest independent providers consolidating the ‘market’, using private equity to provide larger purpose built homes often in the more affluent parts of the country, where self-funding residents are more likely to be located.  Independent providers now account for 243,000 residential care beds compared to 76,811 in the 1980s.

If there is to be only one positive legacy of the Covid-crisis, it is that core structural problem that must finally be addressed in concerted and comprehensive manner.

The UK – England, especially, high per capita Covid death rates cannot be divorced from our societal value-base and patterned inequalities, as well as from functional government sub-performance.

A national health and care system funded in a sustainable and equitable manner is the required legacy.

A related recasting of the working conditions across the catering, cleaning, and care sectors, whose workers tend to have insecure working conditions reliant on the minimum wage and zero hour contracts,  and where BAME groups, especially foreign-born workers, are over-represented (also making them susceptible to Covid, and then, because of their disproportionate dependence on a low wage and their lack of eligibility for sick pay, generated pressure on them to continue working despite displaying Covid symptoms), is also long overdue.

Easy to say, of course, given such a recasting would require substantial additional public spending,  whether funded from national or local sources, during a period of public finance pressure. It is a case of you get what you pay for, while change requires cross-party support for a new settlement, not tinkering at the edges.

International lessons to be learnt

The future Covid landscape is shrouded in the fog of uncertainty.

The tension between a mitigation-based strategy more costly in terms of lives immediately lost and a more draconian suppression strategy that, in turn, has more direct and immediate impacts on the wider economy, which themselves engender longer-term indirect and real health and social future impacts (with any final total apportionment unquantifiable to any precise degree remains. It threatens to continue to bedevil UK policy.

The aim is to navigate away away from the worst of both worlds we inherited in May of high relative per capita death rates and massive macro-economic damage to a ‘new normal’  where low infection rates are maintained, avoiding the need for a any new national lockdown.

The prime minister in characteristically optimistic and swashbuckling style has confirmed that is the UK government objective. In effect, he is relying on hope.

A hope that the above tension can be reconciled by a more empirical evidence-based data-driven approach that can avoid the dire and likely unsustainable economic consequences of another full lockdown based on suppression of the virus.

The genesis of that hope was first set out in the government’s 11 May Recovery Plan.   This heralded a second ‘smarter control’ phase of the public policy response to the epidemic, involving the application of effective testing, tracing, and tracking of the infection.

Public health interventions could then be aligned better to risk, allowing the timely detection of infection outbreaks at a more localised level, and a more tailored, targeted, and effective public response at that level.

The problem remains one of implementation. The debacle of Matt Hancock’s hoisting his 100,000 daily tests to the mast of an end of April target that relegated purpose and effectiveness to supposed and sometimes spurious target figure was followed by a subsequent pattern of patchy and slow development of testing capacity.

A continuing example of the lack of sufficient government focused flexibility: the core cause of the UK’s poor and inadequate Covid performance.

Realization of the hope that we combine a continuing relaxation of lockdown with a containment of Covid, in an international context where reported Covid infections are mounting, and which threaten to rise exponentially, requires that shortcoming to be overturned.

Otherwise we are simply relying on an effective vaccine(s) or treatments to ride quickly to the rescue.

The reluctance and, perhaps, systemic tendency to learn from and to apply international lessons, as summarized below, in a considered and evidence-driven way in a way that works for Britain, will also have to reverse.

The strategies adopted by most east Asian countries have proved invariably and overwhelmingly more effective than the UK’s, when measured against per capita infection and death rates.

This is almost beyond comparison, as starkly conveyed by the Covid-caused deaths per one million people (rounded up to nearest whole number) data, reported below and  extracted from  the Our World in Data  website on 14 July for the following countries.

Japan:                    8;                                                  Thailand:    1;

South Korea:        5;                                                  Myanmar:   0;

Singapore:            4;                                                  Vietnam:      0.

The UK ratio is 660. The disparity speaks for itself.

Although variations exist between these countries in relation to the strictness or otherwise of the lockdowns they imposed, and with respect to their political systems, their strategies  to combat Covid, were, and are, marked by focused and systemic regimes of testing and contact tracing and the quarantine of affected individuals combined usually with effective immigration control.

Both sets of interventions were effectively imposed and implemented at a timely and early enough point in the infection curve.

Vietnam, a low-income country of 93 million with a population of an average per capita income of less than $4,000 has reported no deaths at all and negligible infections attributable to Covid. This almost breath-taking outcome was achieved through the use of comprehensive testing and then quarantining of infected individuals.

Its communist government is now preparing for growth and recovery through the fast tracking of public infrastructure projects, including a north-south highway, two metro lines and a new Ho Chi Minh City (its capital: formerly Hanoi, when the country was divided into southern and northern segments) airport.

A striking portend of the touted coming ‘Asian century’, if ever one can be comprehended. Near neighbours, Laos and Cambodia, have also reported nil Covid deaths.

Although most of these societies possess young age structures, 20% of Japan’s population is over 75, compared to c12-13%, in the case of Sweden and the UK. The success of the E.Asian model to combat Covid cannot possibly be explained away by the relative youth of their populations, therefore.

Institutional factors based on their history and melding of societal value-base and culture with public policy design and implementation systems do appear relevant to their success.

Previous experience of responding to the 2003 SARS or to the MERS outbreak also provided their policy makers with a workable template, and an awareness of the task in hand with the associated imperative for timely and concerted policy response to an emerging epidemic.

In short, their governments  were able to impose in some cases draconian directive measures of control, including quarantining, with ready public consent and acquiescence,  while possessing the wherewithal (and the foresight) to marshal and direct resources to ensure effective and comprehensive implementation of testing and quarantining systems – all  in co-operation with their wider populations and across particular community-settings.

Although the lessons to be learnt are not always precisely replicable to the UK context given their own distinctive political and social cultures and socio-economic realities, the theme of public policy planning and implementation systems that combine focus with flexibility, and that put a higher weighting on effective action and results, not short-term noise, cannot, and should not, be ignored.

The UK per capita 660 per one million death rate is the highest in Europe, save for Belgium; higher than that of Italy, which has the highest proportion of very elderly people susceptible to Covid, and nearly six times higher than that of Germany, which also has an aging population structure.

The figures reported below are less mind-boggling than the Asian comparison, but still revealing, nevertheless.

UK:                         660;                                        Netherlands:                     353;

Spain:                    607;                                       Ireland:                                 354;

Sweden:                475;                                        Germany:                            108;

France;                 460;                                        Denmark:                            105.

Germany  through the application of a timely and proportionate lockdown in March, effective testing infrastructure, and, perhaps, most significantly at all, effective protection of its elderly and vulnerable population especially those residing in care homes (helped by spare capacity within its health system), has succeeded in contained Covid-related deaths to a fraction of the UK’s, despite its elderly age distribution – an achievement that  demonstrates that an European democratic culture is no bar to success.

Test, test more, and test more, again, while infections are low, is the overriding message.

 

 

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Filed Under: Covid

Winning the Final Straight

7th December 2019 by newtjoh

The polls, although tightening with the squeezing of  the Liberal Democrat and Brexit party vote share, continue to project a comfortable working majority for Boris Johnson on 12 December.

Labour itself seems resigned to limiting losses of seats in Brexit-voting areas in the Midlands and North, the same areas, as Brexit and Lies that Matter pointed out,  which will suffer the most from a bad-Johnson Brexit.

The 2017 Corbyn effect has not materialized this time round. His lamentable  failure to lance the anti-semitism boil, and his similar – but different – inability or unwillingness to relate to ‘Middle England’ in a way that his electorally successful predecessors – Attlee, Wilson, and Blair – did in varying ways, continues to dog his party’s prospects.

The actual result on Thursday, of course, cannot be predicted precisely in today’s uncertain political environment.

The young and undecided could still tilt towards Labour on the day.

Local circumstances and issues could intervene and disrupt the national pattern given the vagaries of our current electoral system.

The parties’ respective manifesto commitments, or, rather, lack of substantive ones that can be trusted, could still induce an unexpected decisive and late electoral effect.

Significant electoral shifts, however, invariably follow a wider groundswell of the popular mood. Yet that remains stubbornly stuck in muted cynical mode.

The Conservative’s resurrection of their ‘triple-lock’ commitment not to increase income, national insurance, and VAT rates compares with Labour’s to fund additional expenditure from increased taxes on companies and income-tax payers earning over 80k.

Although clear blue water, accordingly, has opened-up between Labour and Conservative on tax and spending, neither party have articulated a future economic and social vision that engages and resonates with the wider electorate.

It will be tragic if the lies of an entitlement-laden and amoral former Etonian prime minister allows him to win the day because Labour neglected to engage and enthuse Middle England voters, at a time when the intellectual tide has turned in favour of, and national need calls out for, a radical but feasible socialist or social democratic – call it what you will – programme in government.

To deny Johnson a working majority Labour must continue re-orient and its Prioritise its message, but with much more Focus, Consistency and Honesty.

It should mesh its vision and Brexit policy much more clearly, highlighting how a bad-Johnson Brexit will sunder the UK, undermine peace in Northern Ireland (NI), and generate unnecessary economic costs, acting as a deadweight drag or worse on growth and  hence the public finances across the UK.

This when the maintenance, let alone the improvement, of public services to an aging population in reality, will require increased borrowing to fund rising real current expenditures and/or higher taxes, which, if not direct, will be of the less transparent stealth variety, difficult to limit in incidence to higher income groups, even when intended. Funding social care is a case in point; honesty on that score is needed.

To be successful, both in electoral and sustainable strategic policy template terms, ‘Goody-bag’ giveaways and unattainable maximalist gestures should to be downplayed. Measures that interlock economic justice and efficiency should instead be prioritised.

Institutional reform to secure demonstrable efficiency in the selection, planning and delivery of infrastructural investment must be integral, and not subsidiary, to the design and operation of fiscal rule reform: greater fiscal latitude for productive public investment must go hand-in-hand with greater demonstrable efficiency in its selection and execution, as set out in  Making Public Investment Smart.

Individuals are empowered, in practice, to take control over their future by having pathways to suitable, available, and improved education, housing and job opportunities, forged and opened-up across the country, pushing up productivity and expanding economic opportunity to lower income households.

That, in turn, will depend upon high quality transport, digital, and social infrastructure in housing, education, and, to a degree, cultural services within existing high-productivity cities and areas – the London-Oxford-Cambridge triangle is a case in point – to maximise their potential to generate more growth through the further complementary agglomeration of productive firms and people.

At the same time, coastal and smaller cities and towns, especially in sub-regions located north of a line drawn between the Humber and Wash and in Cornwall, that have borne the brunt of decades of de-industrialisation, losing jobs not replaced by relatively stagnant or declining service sectors – the same areas that tend to the most exposed to the loss of EU Structural Funds – will also rely upon targeted and efficient productive investment in economic and social infrastructure.

Is the answer then, growth-friendly general or ‘place-blind’ policies to improve education, healthcare, infrastructure, and affordable housing?

Or more place-based policies to tackle regional inequality, where subsidies, grants, and public infrastructural investment are targeted to individuals and firms, according to location?

Both, according to International Monetary Fund (IMF) researchers in a recent world-wide survey of regional inequality, pointing out that the high cost of housing in high income regions and cities restricts domestic migration, while the rejuvenation of declining areas requires an expanded supply of locally available better paid jobs, supported both by an improved local skills base on the supply side and by rising demand for locally-produced goods and services.

A conclusion echoed in another recent paper on innovation policy, endorsed no less by Dominic Cummings, Johnson’s  human lodestar: an example of  the flow of the intellectual tide mentioned above, but all much more in accord with the Labour manifesto than the Conservative one .

In the UK context, that means partnerships between Whitehall, devolved, and local government to attract and sustain private investment to lagging sub-regions and areas com, where possible linked to university and other sources of expertise that can lead best to the cluster development of productive enterprises, combined with targeted and efficient productive public investment in site preparation, affordable housing, education and skills, and above all in improved connectivity allowing people to access quality employment opportunities within reach of their existing homes.

Reducing the friction of travel Trans-Pennine and within the West Midlands are two of the more obvious examples of productive public infrastructural investment contributing to long-term prosperity.

Another practical example of the potential of public investment to raise productivity and growth in a balanced and equitable way is a sustained increased in investment on affordable housing to a broad steady-state level, meshed with the planned expansion of apprentice and training opportunities targeted to indigenous young people.

Besides its social impacts that should help to mitigate and avoid existing and future labour bottlenecks within the industry, while enhancing human capital and productivity outcomes and making them more balanced in income and spatial distributional terms, thus interlocking economic justice and efficiency in practice.

The costs of providing infrastructural investment should be reduced by directly tackling market failure and rent-capture. Speculation in land largely explains the escalating cost of buying a home,  as is increasingly recognized across the political spectrum, most recently by the Conservative-leaning Financial Times journalist,Liam Halligan, in his recent book, ‘Home Truths’.  Another example of the current flow of that tide that Labour is not harnessing.

The land root of the current crisis of housing affordability, indeed, must be overcome for real progress to be made in a way that impacts on the majority of those wishing to buy and rent affordable housing, not just those most likely to qualify for social housing.

It is quite likely that a Johnson Conservative Brexit government will pivot towards variations of such measures – at least in early rhetoric before the inevitable capture and perversion of ends and process by the same vested interests that fund the party, choke them.

Labour should occupy that ground during the last week of the campaign.

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Filed Under: Brexit, Economic policy, Time for a Social Democratic Surge

Brexit and Lies that Matter.

30th November 2019 by newtjoh

The October draft Withdrawal Agreement (WA) will pass parliament and the UK will leave the EU on the 31 January 2020 if the Conservatives do win a working majority on the 12 December.

How hard – and thus economically damaging –  Johnson’s bad-Brexit turns out will then depend upon whether, despite his campaign rhetoric to the contrary, he extends the transition period beyond December of next year. Under the WA, he would need to make such an application next summer.

That crucial decision will overhang the UK’s entire political, economic, and social future.

Jeremy Corbyn  was right therefore to tackle Brexit head-on as he did on Guy Fawkes Day at Harlow – the bellwether ‘Blue-collar Essex’ seat.

Much better to secure the best possible and least economically damaging deal with Brussels and offer that with Remain as a choice to the electorate with minimum fuss, than for the population to be stuck with a bad Johnson hard-Brexit that will sunder the UK, undermine peace in Northern Ireland (NI), and generate unnecessary economic costs, acting as a deadweight drag or worse on growth across the UK.

UK exit from the European Union (EU) Custom Union (CU) and the Single Market (SM) in economic and social consequence will bear disproportionately on the communities that voted to Leave, such as Harlow. Less well-connected places outside the South-east are likely to suffer the most: Sunderland and Dudley, to take two.

Labour must hammer home in an engaging way to the voters of those areas, often Labour marginal seat, the technical economic realities below.

The  rules of origin  requirements imposed as a result of the UK exiting the CU will progressively chip away the time and cost benefits of existing frictionless trade arrangements between the UK and the EU.

British exporters of goods to the EU post-transition will have to certify that a minimum proportion – varies with sector, but generally is around 50-55% – of value is attributable to domestic production.

This will prove a problem for industries now dependent on pan-EU integrated supply chains, namely motor vehicle, and some machine tools, food processing, and chemical sectors.  The domestic -produced value of cars is less than 40%. A Johnson bad-Brexit will leave UK manufacturing to wither on the vine.

For the purposes of meeting rules of origin requirements included in pan-EU trade treaties with third countries, such as Korea and Japan, British manufacturing value-added no longer will contribute to the EU total they define, providing a disincentive for foreign direct investment in UK plant by companies wishing to benefit from tariff-free trade under such treaties.

Such countries are unlikely to prioritise FTA’s with the UK or Great Britain at the expense of their existing or future EU trading arrangements and a far larger potential market.

Crucially, the benefits of such FTA’s, even if realized, in any case, will prove puny, compared to the cumulative loss of GDP attributable to the loss of frictionless trade with our closest European neighbours.

In sum, export and export formalities, including customs and security declarations, risk-based inspections,  tariffs (when goods are not covered by the FTA) and other taxes payable upon import such as VAT and excise duty, as well on physical border checks on products of animal origin: meat, fish and dairy products, will all impose additional cost and time barriers to trade in goods. Exiting the SM likewise will do to trade across services.

Johnson’s European Research Group (ERG) outriders bark back that is a price worth paying for taking back control of our borders (which ones?), money, trade policy, and laws.

But any future free trade agreement (FTA) with the US will inevitably involve loss of  national sovereignty in practice to a government led by a president who avowedly ‘puts America first’.

Continuing EU membership will help the UK to stand up to Donald Trump, and, much more importantly, in the longer term, to address fundamental issues, such as climate change, the activities of increasingly monopolistic multi-nationals, tax evasion and money laundering, organized crime and terrorism, that transcend the UK border: the modern world, in short.

Besides it is doubtful that a wide-ranging trade deal with the US can ever be reached, given that freer access to American food imports will imperil the sustainability of British agriculture, a source of bedrock Tory support, while allowing access to American health corporations to the NHS and liberalising drug pricing controls is likely to prove too unpalatable on the wider domestic political front.

Trump is wedded not only to a neo-liberal and crassly unequal economic and social system, but to an odious and destructive political methodology driven by fake news, straightforward lies, media manipulation, and appeals to prejudice, seemingly copied and adopted by Johnson, at the behest of his main adviser, simply to secure power.

Something  demonstrated in spades during this campaign. A case in point was Johnson’s statement on Twitter that a future Tory government would not extend the post-Brexit transition period and would pursue a “a super Canada-plus arrangement” with the EU not “based on any kind of political alignment.” subsequently reaffirmed, all in short order. That is simply hogwash, or in his own-speak ‘inverted piffle’.

The more comprehensive a FTA with the EU, the more time – years not months – that it will take to negotiate; and the greater the continuing alignment to EU rules, including labour, environmental and state aid rules entailed.

Such delay and alignment risks the ire of any enlarged hard-Brexiteer contingent within the new parliament and would provide oxygen to the Brexit party outside it; on the other hand, not extending the transition beyond December 2020 would simply create a new cliff-edge, and almost certainly induce recession.

A Johnson bad-Brexit may be done, but its consequences lurk in wait around the corner to bite, not least prolonged uncertainty lasting years, not six months or so, as would be the case with Labour.

Taken in the round, Corbyn on the Brexit front has played a difficult hand relatively well, with a sense of feeling for both sides, not always displayed when he pontificates on international issues, such as the Palestinian question.

His position, in many ways, makes more sense than the premature commitment to campaign for Remain displayed by prominent shadow cabinet colleagues. This puts the cart before the horse, insofar that Labour is committing to negotiating a soft Brexit with Brussels as an alternative to Remain in a second referendum.

Of course, the softer the Brexit, the stronger the relative case for Remain becomes: if continuing alignment with EU rules is accepted as economically necessary, why not then just stay and keep a say in their development?

Labour’s position is essentially thus a route to Remain while providing some semblance of respect for the result of the June 2016 referendum and ensuring whatever the result of any second referendum that economic damage is mitigated as far as possible: pretty sensible, really, in the circumstances, even if politically pragmatic more than strictly logical.

Yet it will not be enough.

Labour’s Brexit and domestic policies have not been connected nor linked to an overarching vision and narrative.

The cumulative damage to growth of a hard Brexit will act as a deadweight not only on the personal incomes of ordinary working people, but on the public finances.

The increased investment in health, housing, education, social care, police, and other public services the country needs, the Brexit-leaning communities most of all,  will become increasingly unaffordable.

Labour must make that inter-linkage in the minds of undecided and wavering voters.

A following post will focus on that shortly as Labour necessarily reframes its electoral strategy to at least prevent a Johnson working majority.

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