Danger of ghettoisation of the poor as government axes housing benefit

<h3><img style=”margin-left: 5px; margin-right: 5px;” title=”Josh Ryan-Collins” src=”https://neftriplecrunch.files.wordpress.com/2009/07/josh_ryan-collins.jpg” alt=”” width=”34″ height=”34″ /><em> </em><a href=”http://www.addthis.com/bookmark.php” target=”_blank”><img style=”border:0 none;” src=”http://s7.addthis.com/button1-share.gif” border=”0″ alt=”Bookmark and Share” width=”125″ height=”16″ /></a>Josh Ryan-Collins is a researcher in the Business, Finance and Economics team at nef.<em>
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One of the great joys of living in London is its social and economic diversity. One minute you can be walking past million pound mansions in Kensington and the next you will find yourself in the middle of a housing estate populated by a mix of native London working classes and first or second generation immigrants from all over the world. Get on a bus or a tube and a similar mix confronts you.  A similar dynamic can be found in other large UK cities, like Birmingham and Manchester.

Its quite a different story in  other European cities, where poorer residents and immigrants in particular are often ghettoised in to particular areas of the city.  In Paris, the poor are located in ‘Les Banlieues’, grim, grey and endless blocks with high levels of crime and racial tension.

The are a variety of reasons for London’s mix, not least the chaotic and organic growth of the UK capital, but the coalition government’s recent announcement that it is going to massively reduce housing benefit could drive things in quite the opposite direction.  The local housing allowance for those on low incomes or unemployed will be reduced from the level below which 50% of local rents fall to 30% and capped at £400 for a four-bed and £250 for a one-bed home.  According to The Guardian, this could result in a new form of ‘social cleansing’ as poorer residents are forced out of the richer areas of our cities and towns, in the South East in particular.  This is because demand in the private rented sector (PRS) remains buyount in this region, so landlords will happily evict poorer tenants who are no longer able to meet their rental costs in the knowledge that there are plenty of wealthier tenants to take their place. 

The UK already has some of the highest levels of wealth inequality in Europe, with London the most unequal city the developed world according to research by Professor Danny Dorling, who in a recent book showed that London’s richest were worth 273 times than the poorest.  More severe economic and geographical polarisation is only held in check by universal welfare programs like housing benefit.  The government, if it is to live up to its promise of not making the poor pay for reducing the budget deficit, needs to have a serious rethink on housing policy.  

Housing benefit is a massive cost to the taxpayer and there are many good arguments for reducing it from an economic efficiency perspective, but first the fundamentals need to be sorted out.  Firstly, we have to found a way of bringing house prices back down to earth.  Increasing or creating new property taxes which would put off speculative buy-t0-let investors in the PRS and bring first time buyers back in to the market, reducing the demand on the PRS.  The decision to raise capital gains tax by 10% is a step in the right direction but is nowhere near enough and its a shame Vince Cable obviously lost the battle to raise it to the same 40% level as income tax.  Why is it fair or sensible to tax earned income at a 12% higher level than unearned asset appreciation?  

Secondly, its necessary to increase supply by building more homes and bringing empty properties back in to use.  Regarding home building, the Tories Green paper on housing suggested incentivising new house-building by matching local authorities’ council tax take for each new house built for six years, with special incentives for affordable housing.  A great idea, but sadly no mention of this in the recent budget.  Instead, Eric Pickles, the local government secretary has abandoned local council building targets, resulting in the reversal of many thousands of planned new homes.  This will, of course, have a knock-on effect on the construction sector and jobs.  

These non-sensical policies have no doubt been made easier to drive through by the demotion of the Housing Minister – the lively Grant Schnapps – from the coalition’s cabinet.  If anyone can find some good news in the new government’s plans for housing, please do let me know.

The Green Investment Bank is born

Tony Greenham is head of the finance and business programme at nef.

Big Sticks, Big Solutions and the Unmentionable Funding Proposal

Now don’t get me wrong – I am a big fan of the proposals launched this week by the Green Investment Bank (GIB) commission. Let’s celebrate a report that explicitly recognises market failures, and applies some big brains to how to encourage investment in useful low-carbon infrastructure. Let’s hope that George Osborne, having set up the commission, acts quickly to create the GIB.

So why mention big sticks? In launching the report to a packed house at the Green Alliance summer reception, commission Chairman Bob Wigley was refreshingly blunt. Surveying the dismal impact of previous policies to encourage domestic households into energy efficiency and renewables, he observed that the old regime was one of “grants and advice”. To really get anywhere what we need is a regime of “Sticks, grants, advice and loans”. The GIB can do something about the last three; the first requires political guts.  Penalising house owners for not being green enough? Go, Bob, go. However, Mr Wigley was understandably diplomatic when asked his opinion of the fortitude of the government’s guts.

And what of big solutions – isn’t that what we need? Well up to a point, yes. There will be many large scale infrastructure projects to fund. But the commission identifies that most investment funds are too big to invest in small scale community energy projects, of which we need tens of thousands. The solution it seems is to aggregate the small morsels of community energy into a suitably large and appetising dish for the institutional fund managers to feast on.

Instead, how about making it easier for people to invest directly in their local energy co-operative and not give the cash to the giant institutional funds in the first place? Oh no, hold on – how would the City earn its cut? Best not go down that route.

And finally, what about the Unmentionable Funding Proposal? The commission says we need to find £550bn over 10 years to invest in the low-carbon transition. A questioner from the floor pointed out that the Bank of England had pumped £200bn into the economy in as many months to save the financial system. This has clearly not caused a Zimbabwe style monetary collapse, despite the orthodox horror of ‘printing money’, but now it seems that it is rather impolite to mention it. When there is spare productive capacity in the economy, why not use ‘green  quantitative easing’ to kick start the GIB? Bob was characteristically blunt in his evasiveness: “I’m afraid as a former member of the Court of the Bank of England I’m going to dodge that question”.

77 months and counting…

Andrew Simms is nef‘s Policy Director and head of nef’s Climate Change programme.

“If you want to build a ship, don’t call together some men just to gather wood, prepare tools and distribute tasks,” proclaimed the French writer Antoine de Saint-Exupéry, “Instead, teach them the longing for the endless sea.”

The evidence of the recent budget, in which the environment was like a salad leaf abandoned to wilt in the June sun, suggests that the wrong approach has been taken to building a green economy.

It’s a shame, because there is no shortage of tasks and tools to distribute, and a long list of patient, rational reasons why we should do so.

For example, in the recently published Zero Carbon Britain 2030, both the ample potential of switching in a short period of time to a genuinely clean energy system, and the dangers of not doing so, are comprehensively examined. In these austerity-minded times in which the government is acutely concerned about our balance of trade, a single figure makes the point: based on an oil price of $78 a barrel, which could prove far too modest, replacing our own North Sea oil and gas with like-for-like imports will add £53 billion to the trade deficit, the report estimates.

Even at a time of broader cuts, the potential economic, social and environmental benefits of spending on a carbon detox for the UK economy have been repeatedly and exhaustively made.

Neither is there any mystery about the necessary conditions needed to make it happen. New sources of funding to encourage investment are needed from, for example, a green investment bank, which has been approved but not capitalised, and a high price for carbon to make change economically attractive.

There are the easy, reliable no-brainer initiatives, such as the mass roll-out of energy efficiency makeovers for buildings, wind, wave and solar power, which in turn create jobs. But there is also no shortage of more exotic, less reliable ideas to keep people entertained.

This month, cloud whitening or so-called “seeding” to help reflect heat away from the atmosphere enjoyed a shower of new interest. Research from the Carnegie Institution and the Indian Institute for Science suggested the potential for a cooling effect, but not without consequences. It reduced overall global rainfall and simultaneously created a more extreme pattern of monsoons.

And yet, for all the time that the rational case for action is put and its benefits outlined, we are failing not just to leave the harbour on our journey to an economy that operates in balance with the biosphere, but our boat lies in pieces by the dockside, incomplete and construction barely begun.

A longing for the adventure in unknown seas, in equal parts fearful and exhilarating, is yet to be released. Admittedly, at the moment, this is made more difficult by the fact that when most people watch pictures of the sea, it’s typically covered in a vast oil slick in the Gulf of Mexico, courtesy of BP.

On current trends, in 77 months time, by the end of 2016, it will no longer be likely that we will be able to stay on the right side of the risks that surround destabilising our climate system. Yes, we need to start building our low carbon energy arks. But we need more than that, an excited longing for things to be different, better.

The human impulse at the heart of modern society has been brilliantly co-opted by the sellers of disposable, upgradable consumer goods, not to mention by TV makeover shows. Counter-intuitively, in some ways we embrace change – but we demand it in unambitious ways, through novelty, redesigned gadgets with extra functions and added apps. In this sense, we approach the world on the assumption that it is never good enough. The impulse may be destructive when harnessed to conspicuous consumption, but does it have to be a bad thing, innately, and can’t it be dematerialised, and redirected from simply having more stuff towards a better way of being?

The thinker Zygmunt Bauman makes the point that the “the good society is the society that is convinced it is not good enough.” He calls gardeners, “obsessive compulsive utopians,” always trying to improve the world around them in a job that is never complete.

As we try to ensure a world fit for future generations, have a look around and ask yourselves, is this the best that we can do? What would it take, and what could we achieve if we were able to harness our transformative impulse for good? Instead of tying ourselves into a bloodless, technocratic exercise, what if we were able to find a longing for the endless sea?

A surplus of technology

Stephen Whitehead is a project manager in the Democracy and Participation team at nef

This week, I was lucky enough to see American social media evangelist Clay Shirky talking about his latest book, ‘The Cognitive Surplus’. Shirky argued that the new creative and collaborative possibilities unlocked by the internet will allow us to unleash this surplus – the vast reserves of time, skills and enthusiasm that we currently fritter away in front of the television – to solve some of society’s biggest problems. But, while I liked much of what he had to say, it struck me that Shirky is being both too too ambitious and too cautious. Too ambitious, that is, about technology, and too cautious about human potential.

To begin with, I have a problem with Shirky’s idea of an untapped ‘cognitive surplus’. Although many of us may spend a large amount of time passively consuming media right now, this has hardly been the case througout human history. The so-called cognitive surplus is a product of the hollowing out of social life through increasing atomisation. The decline in social networks chronicled by observers like Robert Putnam, and rooted in a labour market which demands increased flexibility, mass migration (both domestic and international) and the erosion of traditional class identities, is what has robbed us of ways to use our energies in ways which are both productive and social. And just as, once upon a time, we had institutions which offered us outlets for our time, enthusiasm and creativity – from evening classes, to amateur sports, to churches – there’s no reason why we can’t do so again. The internet is one place where we can spend our ‘cognitive surplus’ but it’s by no means the only place.

And there are reasons why it might not be the best place. In his first book, Shirky talked about how ‘ridiculously easy group formation’ enabled by the internet let us find people who shared our interests and collaborate with them. But this is not the only way to find people. The most vibrant cities and towns create spaces – parks, libraries, cafes, even pavements – where we can mix with people who are very different to us, and yet who we share something important with: that they are our neighbours. By keeping us away from what Jane Jacobs called the ‘serendipity’ of sidewalk contacts, online spaces filter our social networks to people just like us, potentially making us less tolerant and more extreme in our views.

There are other problems too. Online collaboration is very good at certain kinds of tasks. Shirky drew on three different examples. The first, Liftshare is an American site which lets people find others to share long roadtrips with. The second, Patients Like Me, lets patients log their condition, symptoms and medication and then aggregates and anonymises that information to share it with researchers. And the third, Wikipedia, needs no introduction. But all of these sites have something in common: they are about bringing together information and presenting it in a useful way. And all three approach that task by crowdsourcing – getting lots of people to make small, easy contributions which by virtue of their sheer number add up to something very big. That’s a powerful tool, but it’s only one sort of tool. That’s a powerful tool, but it’s only one sort of tool. If crowdsourcing is a hammer, it doesn’t mean that all the problems we face are nails.

What’s more, crowdsourcing, by reducing the work of individuals to bitesize, contextless contributions, offers a hollowed out idea of what it means to create things. In essence, it’s a new form of assembly line which transforms intellectual work into deskilled, mechanical processes. It may be extremely effective, but maybe that’s not the only criteria by which we should judge it.

Creation is important, not just because of the things that we create but also, and perhaps more importantly, because of the way that it effects the creator. Making art, music, software code, or even blog posts, has value not just because of it’s capacity to change the world but also because of its capacity to make us feel inspired, valuable and powerful. Working with other people in close collaboration at a human scale creates a sense of community which can’t be reproduced by making tiny contributions to a project that’s vast beyond our capacity to imagine. The inconvenient friction of working together with sometimes difficult other people in a shared space is not just an obstacle to creating wonderful things, it’s also a way in which creating them makes us better people.

Shirky, then, is too ambitious in that he argues that online collaboration is the tool which will allow us to solve the problems of the 21st century. It’s powerful, true, but it’s only one of the tools that we need. But he’s also too cautious in that he asks too little of people. He offers them easy participation, without perhaps, reflecting that there might be a value to doing difficult things.

Reporting back from the Steady-State Economy Conference

Our guest blogger, Lucy Glynn, is a writer and activist based in Leeds.

The global financial crisis, climate change, poverty and BP: the extent of the problem is clear. But what is the best way to solve it? This was the question asked at the first Steady State Economy Conference held in Leeds on June 19.

The conference was organised by Economic Justice for All (EJfA), a Leeds economics and sustainability debating group and the Center for the Advancement of the Steady State Economy (CASSE), with the aim of coming up with some concrete policy recommendations.

“If the leaders of the main political parties in the UK are not thinking seriously about an alternative to economic growth, then we the people must urgently start and develop the discussion,” Dr Lorna Arblaster, of EJfA, explained.

It was a discussion that was urgently needed. The conference attracted over 250 academics, economists, community organisations, activists, NGOs and business people who played as much a part in making the day a resounding success as the keynote speakers: Peter Victor, author of Managing Without Growth and Professor in environmental studies, York University, Canada; Andrew Simms, Policy Director at nef; Dan O’Neill, European Director of CASSE; and Tim Jackson, author of Prosperity Without Growth and professor of sustainable development, University of Surrey.

Peter Victor opened the conference by challenging our “fear of a no growth disaster” and reminding us that until 1950 there was no discussion of economic growth as something to strive for.

“Can we have full employment, no poverty, fiscal balance, and reduced greenhouse gas emissions without relying on economic growth?” he asked. “You bet!” was his resounding reply, which he backed up with a detailed computer model.

Participants were then asked to put forward alternative policy recommendations in expert-led workshops on how this could be done in the UK.

These included eight policy-focused workshops: limiting resource use; stabilising population; reforming the monetary system; maintaining low unemployment; distributing income more fairly; changing business practices; measuring quality of life and achieving a successful UK transition within a globalised economy, as well as two process workshops: changing consumer behaviour and engaging politicians and the media.

Well-being and work-life balance were key themes of the day as was reconnecting with ourselves, reconsidering what it means to be human and deciding what we really want from our lives. And as Andrew Simms reminded us, not forgetting to have fun.

The conference was just the start. The ideas and proposals which were discussed in the workshops will be collated into a manifesto, which will outline how to achieve a steady state economy in the UK and will form the basis for the movement’s next step.

So what of Leeds now that the steady state caravan has left? There’s a buzz in the city; people who missed the conference feel that they’ve lost out and others who had never heard of a steady state economy have seen the local media coverage.  With all the crises and government cuts they may even be starting to question whether there is another, better way.

Legal aid and the market for lemons

Susan Steed is a researcher in the Valuing what Matters team at nef.

In the wake of George Osborne’s first budget speech, many are wondering how the coalition government’s plans to cut the deficit will affect the public sector.

The case of the legal aid and human rights charity Refugee and Migrant Justice provides some rather grim warnings. The organisation is currently under administration because of changes in the funding of legal aid, which attempt to ‘marketise’ legal aid provision.

There are many problems with these changes. They make no provision for quality advice over quantity supplied. Indeed it has many parallels with the classic economic problem famously described by economist George Akerlof in his 1970 article ‘The Market for Lemons‘. Akerlof wanted to illustrate how uncertainty in the quality of the good or service being provided can drive out good providers. The classic example is used cars. Used car dealers generally know whether the car they’re selling is an old banger – a ‘lemon’ – or a decent little runner – ‘cherries’. Because of all sorts of hard-to-detect factors, such as the previous owner’s driving style, the customer has no idea whether they’re getting a cherry or a lemon. So, they assume that the car they’re looking at is probably half-way between the two: an average quality car. And they pay an average price for it. The end result is that only people who have lemons put their cars on the market.

Now, back to legal aid. In the Commons  debate on the 17 June Ken Clarke proudly announced that the ‘number of people who want to provide service in this area has gone up’. It remains to be seen whether these providers are giving good quality legal advice or ‘lemons’. At present, the government has not introduced a way of monitoring the quality of services. Many critics have argued that the fixed fee has been set too low to provide quality advice. It takes quality providers with the skill and expertise to understand when the law is not been applied correctly or when a case can be taken to the level of a European Court. No longer is this a question of getting a decent used car: for people seeking legal aid, these are matters of life-changing importance.

This problem is complicated by the fact that justice isn’t a private good like used cars, it’s a public good. We all benefit from living in a society where we can uphold our rights and have a means of enforcing them.  By introducing contracts that focus on numbers of individual cases of advice, we’re missing some of the fundamental functions of legal aid. It is not just about responding to demand – and creating more demand as markets do – but responding to this demand proactively. This includes taking on test cases, policy work, preventative and education work. None of these are included in the new contracts.

The consequences of this are pretty dire. First, it may actually cost more. Cutting the cost of advice provision is a false economy: it can contribute to cost further down the line in costly appeals. Second, we haven’t begun to explore the cost in human terms to those unable to access quality advice or find representation for their case. But it also shifts the debate about public spending cuts. At nef, we believe there are ways to do more with less, but have warned about the unintended consequences of poorly thought through efficiency savings. The problem is not only that budgets are being cut but the way services are being commissioned and delivered are constraining their ability to work for public benefit. Rather than correcting market failures they may be creating more of their own.

As the workers at RMJ clear their desks the government can congratulate itself on the increasing number of providers trying to get into the market. There may well be more providers of ‘advice’. But will we live in a society with more justice?

Keynes and the Treasury

David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

In the library of the Treasury, there is an ancient copy of one of Keynes’ pamphlets, and it has been scrawled over by Treasury officials with the words ‘bankruptcy’ and ‘insanity’.

Keynes was challenging the Treasury idea, which seems to have been in their DNA since time immemorial, that the way out of recession is to get people to save not spend.  The money has to be in the banks, ready to lend.

Keynes’ view was that, in the end, this kind of puritanical retrenchment led to death – “a peregrination in the catacombs with a guttering candle”.  But we don’t have to worry because that was in the 1930s.  Or do we?

A little bird told me recently that the attitude in the Treasury has reverted to type faced with the recession and deficit.  Once again, the official view is that people should be encouraged to save not spend, so that the money is available for lending.

Since Keynes’ day, there are two extra problems with this, and they are not small.  There are hardly any banks left, and those that survive have long since dismantled the infrastructure they need for local lending.  Their attention is elsewhere.  They can’t do it.

So when the Treasury persuade George Osborne to raise VAT to 20 per cent, this is the agenda: don’t spend, save.  Unless he and Cable and Danny Alexander can stand up to the Treasury, and tackle this hideous and ancient mistake, I fear it may be the peregrination in the catacombs for us.

The squeeze on society

Anna Coote is Head of Social Policy at nef.

The government wants to build a ‘Big Society’ at the same time as a imposing a very big squeeze on spending for public services.  This will not work unless spending is focused more sharply on preventing needs arising or intensifying ,and on supporting individuals and groups so that they can do more to help themselves and each other.

The danger is that the first victims of the squeeze will be the very things that are essential for preventing harm, improving well-being and encouraging self-help and mutual aid.  Examples include healthy and appetising school meals, child care services, open access to swimming and other sports, community meeting places, training and other resources for local groups, ‘social prescribing’ by GPs, out of school activities for young people, programmes to keep older people active and socially connected, more and better green spaces in urban areas, and much more.  Cuts in these areas will only push up demand for services in the longer run.

Read more about nef‘s take on the Big Society; why we think prevantative public services are valuable, especially for children; how welfare can be transformed to meet the economic and climate crises; and how co-production can improve the experience of service users and public servants.

George is right. The crisis did start with the banks. Now it must end with the banks too.

David Boyle is a nef fellow, a writer and the editor of nef‘s newspaper, Radical Economics.

One good thing about the budget: the recognition by George Osborne that the financial crisis began with the banks.  This was the justification for the £2 billion bank levy – though, as nef’s Tony Greenham points out, this is only a third of what they paid out in bonuses.

The implication – though Osborne didn’t say this bit – is that it will also end with the banks.  Only the most anal deficit hawk can possibly believe any more than we can cut our way to recovery.  Quite the reverse.  John Maynard Keynes warned that this approach will lead to “a peregrination in the catacombs with a guttering candle”.

No, the only way out of recession is to get the enterprise economy working again, despite decades when official attention – and certainly the attention of the banks – has been elsewhere.  The fantasy is that somehow the free market will do this magically, when it clearly won’t – and the main reason it doesn’t is that we no longer have a banking system fit for purpose.  Its structure and attention is on the speculative economy.

So, although Osborne may have made the link between the banks and the crisis, the full implications of that don’t seem to have been worked through in the budget. There is nothing but more cuts ahead unless we can produce a useful, local banking infrastructure out of the oligopoly of dinosaurs we have inherited from the huge banking mergers that the UK government encouraged throughout the 20^th century.

We have names now to the banking commission that will investigate this, but they are not hugely inspiring ones, and the hands of the expensive lobbyists for the banking industry are everywhere – and desperate to keep us all chained supplicants to the old dispensation.

The key point we need to get across is that solving the problem of our ineffective banking infrastructure is critical to bringing recovery forward, and staving off more cuts.  It is a fantasy to suggest that somehow UK bankers can be cajoled in lending more effectively locally.  They don’t have the systems or the people in place to do that.  It is a fantasy to imagine that enterprise will somehow emerge without lending.

Budget response: banks, climate change, poverty, jobs and tax

Banking
“The Chancellor has unequivocally stated that this crisis began with the banks. It is clear that his next step must be radical reform of the banking system to ensure that such a crisis doesn’t happen again. But let’s keep the £2 billion banking levy in perspective: it’s only a third of what the bankers pay themselves in annual bonuses,” said Tony Greenham, head of Business and Finance programme at nef.

Climate change
“The Chancellor says he is committed to a Green Investment Bank, but we still have no more detail about what it will do and how it will be funded. Mr Osborne spoke a great deal about the ‘crisis’ of national debt, but barely mentioned the much bigger and more dangerous crisis of climate change. These are supposedly five year plans, but we heard nothing about the need for a rapid transition to a low carbon economy.” said Dr Victoria Johnson, climate scientist at nef.

Poverty
“The Chancellor was giving with one hand and taking with the other,” said Dr Faiza Shaheen, researcher in economic inequality at nef. “The increase in the income threshold is a positive measure, but the hike in VAT will have a disproportionately negative impact on low income groups. Also, the Chancellor’s cap on housing benefit overlooks the root cause of the rise in costs, namely the property boom and lack of social and affordable housing.”

Jobs
“While we welcome the waiver of National Insurance contributions from new businesses in the Midlands and the North, this won’t be enough to fill the jobs gap created by cuts in the public sector,” said Dr Faiza Shaheen, “Nor does it deal with the considerable barriers to the success of new enterprise in these regions.”

Tax
“The cut in employer’s National Insurance contributions is the kernel of a great idea since it involves shifting the burden of tax away from something we want more of: employment,” said Tony Greenham, head of the Business and Finance programme at nef, “The Government now needs to follow this logic through and make up the difference in revenue by taxing things we want less of: short-term financial speculation, pollution and waste of natural resources.”