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Friday, November 24, 2017

Was the budget stamp duty cut an economic dead end?

The failure of the Tory Government to get to grips with the UK housing crisis is no better illustrated than the smoke and mirrors which surrounds the axing of stamp duty for properties selling for less than £300,000.

As the Independent reports, the Resolution Foundation believe that the measure will inflate house prices by more than the saving it will deliver for many buyers. They add that the change will only marginally reduce the time it takes an average first-time buyer to save up to buy a property – from 19 years to 18.5 years.

The Foundation's calculation is that the rise in house prices that the policy is likely to cause equates to a £3,200 increase in the cost of an average-price home, more than double the average £1,600 saving it will deliver:

The Office for Budget Responsibility (OBR) also said the measure was likely to inflate house prices by 0.3 per cent, meaning buyers will pay more.

The OBR said: “Post-[stamp duty] prices paid by first-time buyers would actually be higher with the relief than without it. Thus the main gainers from the policy are people who already own property, not the first-time buyers themselves.

“For some potential first-time buyers with smaller deposits, who are constrained by loan-to-value lending criteria, the relief will enable them to borrow a multiple of their stamp duty saving, allowing them to buy properties that they otherwise could not afford – but more expensively.”

Despite the potential benefits, some commentators criticised the relatively small number of people the policy will help. The OBR said the change will benefit just 3,500 buyers – meaning it will cost £160,000 for every person it helps next year and £190,000 per person by 2022-23.

Damningly, given the shortage of affordable homes, the £2.9bn the stamp duty cut will cost could have funded 40,000 new social homes or more than 100,000 homes built through the Government’s Housing Infrastructure Fund.

All of this suggests that the stamp duty cut is an economic dead end that fails in its purpose to help first time buyers, and that a direct subsidy would have had a much more beneficial impact for those seeking housing, especially if they are on a low income.

Thursday, November 23, 2017

Budget forecasts put the UK in intensive care

The most striking part of yesterday's budget speech was not the abolition of stamp duty for properties selling at less that £300,000 as some Tories hoped, but the news that growth forecasts for the next five years are on the critical list.

As Vince Cable pointed out in his response, each person in Britain is set to be £687 worse off per year compared to forecasts before the election. And as living standards are squeezed the Government is setting aside £3.7 billion to cover the cost of a 'no deal' Brexit.

In other words the Chancellor found more money in the Budget to plan for Brexit than he did for the struggling NHS, schools and police. Vince writes:

'A Liberal Democrat budget would have looked very different today. Founded on a vision of a high-tech, high-skilled economy that is green, open and entrepreneurial.

We would invest £6bn per year in our NHS & Social Care system, paid for by a penny on income tax. And Lib Dems would kick-start the economy back to growth with productive investment of £100bn over ten years to build more homes and infrastructure for the next generation.

Today’s Budget reinforces our belief that Britain is better off in Europe. We are fighting to remain in the Single Market and the Customs Union, and to give the people a vote on the final Brexit deal.'

The Liberal Democrats have highlighted seven areas where the budget failed to address some of the most urgent problems facing the UK. These include not tackling the funding crisis in the NHS, not funding a pay rise for public sector workers, failing to adequately address the housing crisis, not putting money into social care, thus increasing pressure on the health service, and waiting until January to address problems with universal credit.

The Government's obsession with Brexit is destroying our economy, undermining living standards and diverting money away from key services. And Labour's complicity in supporting that agenda means that only the Liberal Democrats are providing an effective opposition to this looming disaster.

Wednesday, November 22, 2017

Judging the Tories by what they do, not what they say

As we wait the budget, an event that seems to be more significant for Phillip Hammond's future than that of the UK economy, if media reports are to be believed, it is worth considering some of the hype.

Theresa May is reportedly keen to grasp the UK's housing crisis by the neck and sort it out. Already, Ministers have made speeches and suggestions that implies that (a) they understand what needs to be done; and (b) they are going to do it. However, their track record on this issue is not so good.

It is pointless promising massive investment in housing, that x number of homes are going to be built or that measures are going to be put in place to assist builders, if at the end of the day very few, if any new affordable homes are built. And yet that appears to be where we are going with this agenda.

One case in point is illustrated in the Independent. The paper points out that the 2014 Starter Home initiative, which held out the prospect of delivering 200,000 discounted new homes to first-time buyers is yet to see a single one built.

This scheme promised to achieve its target by pushing councils and developers to bring forward unused land and build on old industrial sites, measures that Chancellor Philip Hammond will again pledge to carry out as he allegedly makes housing a key plank of his Budget later today.

At the same time there are claims that Conservative spending plans since 2010 have stripped some £20bn out of UK housebuilding projects, robbing the country of an extra 280,000 homes. Grants to local councils and housing associations to invest in new homes has been cut from £4.1bn in 2010 to £764m last year, a fall of 81 per cent.

If this government is serious about tackling the housing crisis then they need to give money directly to those organisations who will use it to build new affordable homes - housing associations and local councils. They need to help build the infrastructure to free up landlocked sites and they have to legislate to put in place disincentives to stop builders holding onto housing land, preferably some form of land value taxation scheme.

There also needs to be assistance so small builders can access the finance they need and overcome some of the other barriers that hold up development, such as connections to statutory undertakers.

We can no longer afford half-measures and unfulfilled promises. If we are going to tackle this housing crisis then the government needs to go all in and put its money where its mouth is.

Tuesday, November 21, 2017

Labour frontbench unite with Tories in pro-Brexit vote

The Independent reports that John McDonnell and fellow Opposition frontbenchers joined with the Government to vote down a Labour backbench Brexit proposal designed to protect the customs union.

They say that the Shadow Chancellor was among the 18 Labour MPs, 283 Conservatives, eight DUP and two independents who defeated an amendment to the Taxation (Cross-Border Trade) Bill, which aims to put in law a new post-Brexit customs regime:

MPs heard the Bill will pave the way for domestic legislation that will enable the UK to charge customs duty on goods - including those imported from the EU - and outline how customs checks will be made.

Labour former frontbencher Mr Murray's amendment sought to exempt EU goods from the new regime, and was supported during the vote by Tory rebels Anna Soubry and Ken Clarke.

It has long been known that despite harvesting millions of anti-Brexit votes in the General Election, Labour are in reality committed to leaving the EU. This vote confirms that, and further shows that the opposition front bench also have problems with us remaining in or wedded to the single market.

Labour have betrayed those voters who entrusted them to look after their economic interests and reneged on their role as a functional Official Opposition.

Monday, November 20, 2017

Time to act on the independent adjudication of the Welsh Ministerial code

'It is wholly unacceptable for the First Minister to be the sole decider on whether he and his cabinet colleagues have broken ministerial rules.' That was the judgement of the then leader of the Welsh Liberal Democrats, Kirsty Williams in November 2012 as she led a move to establish a system that allows the Ministerial Code to be policed independently of the Welsh Government and the National Assembly for Wales.

Kirsty moved a motion in the Assembly Plenary on 21 November calling for the Welsh Government to commit to ensure the policing of the ministerial code is independent and transparent. The record of Proceedings can be read here. The Welsh Liberal Democrats group were concerned that the only person who decides on whether or not the ministerial code of conduct has been broken is the First Minister.

Unfortunately, the motion was defeated on the casting vote of the Presiding Officer with the First Minister arguing that there is nothing wrong with the current system. In summing up he said:

We have to bear in mind, of course—and I will draw my remarks to a close at this point—that the ministerial code is a matter for me. It is right to say that Ministers are answerable and accountable to the Assembly and, in their professional performance, to me. I am, in turn, accountable to the Assembly and, ultimately, to the people of Wales. We do not have a system where nobody is accountable in any way. There is clear chain of accountability through this Assembly and, ultimately, to the people of Wales. In the absence of any examples of where the system has failed, in the absence of any suggestions as to why a presumably paid independent adviser should be put in place to deal with an exceptionally small number of complaints, and in the absence of any argument that suggests that an independent adviser would be in a different position to the civil servants currently providing independent advice to me, the Government is not able to support the motion as presently proposed. There are sufficient checks and balances in the current system. There is no suggestion that the current system is, in some way, not working. There is no suggestion that the current system has, in some way, failed to discover any wrongdoing by Ministers.

If anything the five years that have passed since that debate, and I recent events in particular, have underlined the relevance of the motion brought by the Welsh Liberal Democrats. The First Minister himself stands accused of misleading the Assembly, with no satisfactory means of investigating that complaint and holding him to account. 

In addition, serious allegations against a Minister were passed to the Labour Party to be dealt with by the First Minister, instead of using the existing, unsatisfactory process. 

As I said in that debate in 2012, 'We have a situation where the Welsh Government seems to be unique in being the only body, institution, or group of people in Wales that still sits as judge and jury on complaints against itself.'  No body or institution can justify that position in the light of all that has happened. It was difficult enough to argue in favour of that status quo five years ago. Surely it is time for change.

Sunday, November 19, 2017

Driverless cars from a driverless government

I am a bit of a luddite secretly, at least when it comes to technological advancements that aim to cut out the human touch. I don't do on-line banking, I don't have a Netflix or Amazon account and for the life of me, I don't see why anybody would want to develop driverless cars.

Don't get me wrong. I am not the sort of person who mourns lost employment opportunities following the abolition of the man with a red flag who used to walk in front of the earliest motorcars. Nor do I want to go back to the days when one emerged from printing political leaflets covered in ink from an old Gestetner. And let's face it, I am a sci-fi fan who enjoys losing myself in tales of human endeavour in space involving technology beyond our reach.

For me, driving is a joy. Yes, it gets you from A to B, but it is also a challenge that opens up previously unseen vistas. I still remember getting lost on the Llwyn Peninsular and not wanting to turn back because I was so captivated by the scenery. As an AM I often embarked on long distance journeys when the getting there was more enjoyable than the event itself.

So what is the attraction of cars which don't need a driver? Will it really “put high-tech Britain in the fast lane”, as the Chancellor of the Exchequer suggests. I can understand the need to distract people from the Government's failures on Brexit, but surely the only impression that comes from this announcement is that it is the Government itself that is driverless.

The one motor vehicle investment I can support is the proposed investment in electric car points. If we are to move on from polluting petrol and diesel vehicles then that is the sort of infrastructure that needs to be in place. 5G mobile networks are also essential for the growth of business.

In my view driverless cars are the 21st Century equivalent of the Sinclair C5 car. They constitute a technological cul-de-sac. The investment would be better directed elsewhere.

Saturday, November 18, 2017

Is Ireland an insurmountable obstacle to a Brexit deal?

Just how difficult disengaging ourselves from the EU will be has come into stark contrast this week with Ireland's determination to block any deal that puts up physical or other barriers on their border with the North.

As the Guardian records, Ireland’s prime minister, Leo Varadkar,has said that he will not be prepared to back progress of the Brexit negotiations to trade talks at the summit in December without a formal written guarantee there will be no hard border in Ireland. Britain:

Varadkar’s warning was the most blunt, though the EU is likely to take the lead from Ireland when it assesses whether enough genuine progress has been made on the issue of the border with Northern Ireland, one of the three key topics which must be agreed before talks progress to trade.

“We’ve been given assurances that there will be no hard border in Ireland, that there won’t be any physical infrastructure, that we won’t go back to the borders of the past,” Varadkar said before his meeting with May. “We want that written down in practical terms in the conclusions of phase one.”

Leaving the summit several hours later, Varadkar said he was not satisfied with the progress. “After 40 years of marriage, most of them good, now Britain wants a divorce, but an open relationship the day after,” he told Sky News. “We have heard now for 18 months … that the UK does not want a hard border in Ireland. But after 18 months of the right language we need to understand how that can be achieved in law.”

“We don’t have a counter-proposal from the UK government yet which makes any sense, but we would certainly welcome one,” he said.

Earlier at the summit, Varadkar was scathing about UK politicians who had backed Brexit: “It’s 18 months since the referendum. It’s 10 years since people who wanted a referendum started agitating for one. Sometimes it doesn’t seem like they have thought all this through.”

The issue of course is not just about physical infrastructure. Any barrier to trade such as differences in regulatory standards could be considered to be a problem.

This is going to be an issue that will task even the most malleable of negotiators and it will certainly threaten the Northern Ireland peace settlement. The Brexiteers cannot say they were not warned.

Friday, November 17, 2017

The impossible task facing government on Brexit

Another day, yet another warning about the mountain the government has to climb to effect a successful transition out of the European Union. This time it is the Public Accounts Committee, which is raising doubts as to whether civil servants can deliver more than 300 projects and hundreds of new laws in time for Britain’s exit from the EU. They have warned that non-Brexit-related business could be “neglected” by swamped officials.

The Independent says that much of the burden of transition will fall on medium-sized departments such as the Department for Business, Energy and Industrial Strategy and the Department for Environment, Food and Rural Affairs.

They add that a National Audit Office (NAO) report says up to 1,000 pieces of secondary legislation need to pass through Parliament before exit day in March 2019 and that Brexit officials have warned all departments there is “minimal room” to consider other statutory instruments.

Public Accounts Committee Chair, Meg Hillier said: “This document lays bare the daunting challenge faced by the Civil Service in coordinating Brexit.

“I question whether Whitehall has the ability to deliver the 313 projects and hundreds of new laws it says are needed. There is a risk that anything non-Brexit related will be neglected.

“This raises the issue of whether DExEU, Treasury and the Cabinet Office are really doing enough to ensure government departments aren’t overwhelmed, and can continue to deliver the vital public services we are all relying on, alongside a smooth exit from the EU.”

It is not just the negotiations that are going badly, so is the government's preparations at home. Time for a rethink surely.

Thursday, November 16, 2017

Do the Tories understand what needs to be done to tackle the housing crisis?

We will have to wait for the budget of course, before we can fully evaluate whether Theresa May's promise to personally solve the UK's housing crisis is going to deliver, but proposals hinted at in this article appear to me to fall well short of what is needed.

The Independent say that the chief measure will be the Chancellor will free up housing associations to borrow millions of pounds more for housebuilding. He will do that by taking housing associations’ debt off the balance sheet, with the goal being that they have a stable investment environment to build more homes.

In fact that move is being forced on him by an Audit Office ruling that housing associations count as public sector bodies and that their borrowing counts against the public debt targets. The Welsh Government are already taking a bill through the Assembly for the same reason.

Unless the budget allocates substantial sums of money to help fund a massive increase in the building of social and affordable housing, puts into place arrangements to help small builders overcome red tape and access finance, and simplifies planning rules then it is unlikely that the Prime Minister's crusade will the impact she hopes.

Do the Tories really understand what is needed to start tackling the UK's housing crisis. The devil is in the detail.

Wednesday, November 15, 2017

Consequences

Wales may have voted to leave the EU but did those who formed that slim majority fully understand the possible consequences of their actions?

The latest potential outcome could have a devastating effect on the Welsh car industry, with Aston Martin’s Chief Financial Officer warning that leaving the EU without a deal could prove “semi-catastrophic” for the car manufacturer and force a temporary halt to production:

Aston Martin selected the Ministry of Defence’s St Athan site in the Vale of Glamorgan as the location for its second UK manufacturing plant. Earlier this year it stated it was on target to start production of its new SUV, the Aston Martin DBX, in 2019.

At present, cars approved by the Vehicle Certification Agency (VCA) can be sold across the EU. If a deal is not agreed to allow this arrangement to continue after Brexit production will have to stop until new certification to sell vehicles abroad is secured.

Mark Wilson set out his concerns to the House of Commons Business, Energy and Industrial Strategy Committee:

He said: “[For] Aston Martin it is far, far simpler than it is perhaps for Honda and some of the other larger international players. We are a British company.

“We produce our cars exclusively in Britain and will continue to do so and without VCA-type approval it really is quite a stark picture for us.”

He warned that if this type of approval was not carried over there would not only be “significant costs” but “the semi-catastrophic effects of having to stop production because we only produce cars in the UK”. Mr Wilson also stressed the need for clarity so the company could plan where to invest.

Let us hope that the UK Government are listening.

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