Andrew Dixon: If left unfixed, the divide between the generations will doom ‘levelling up’ to fail

21 Sep

Andrew Dixon is Founder of Fairer Share.

Levelling up has repeatedly been framed as a means of making the UK fairer, but ministers have a problem. While a significant amount of time and effort is clearly being spent on place there has, to date, been very little focus on people – especially young people.

Unless this changes, and quickly, the whole agenda is doomed to fail before it has even started.

Over the past fortnight the Government has taken a step backwards in its attempt to bridge the generational divide. Increasing the tax burden on working age people to pay for the social care of older generations will put a further dent in the pockets of younger people.

The idea of taking from younger workers looks even more unfair if we consider how many older people have accumulated vast amounts of unearned and untaxed wealth through property ownership over the past thirty years.

Pitting grandchildren against their grandparents – which is effectively what the National Insurance policy does – is counterproductive. Show me a grandparent who doesn’t want a better life for their grandchildren. The Government is misjudging the public mood and the deep ties that bind generations.

The row over social care funding highlights the need for renewed effort from ministers to tackle the inter-generational unfairness that exists across the UK, of which the starkest indicator is surely a housing system that has led to younger generations increasingly being shut out of owning their own home.

Ten years ago, the average age of first-time buyers in the UK was 30. The latest English Housing Survey shows that average age of today’s homeowner is now 32, rising to 34 in London. But not only are young people today far more likely to have to rent privately than their parents did at the same age, more than one in five 25-34 years old now live with parents or other relatives in so-called “concealed households”.

Part of the problem with the housing market is that the property tax system in England is not fit for purpose, ensuring that people who live in modest homes suffer a worse deal than those living in the wealthiest areas, while struggling renters are hit just as hard as their, often older, counterparts who have made it on to the property ladder. Earlier this year academics and think tanks from across the political divide united to state that the current council tax system is a “wealth tax” on poorer parts of Britain and is in urgent need of a comprehensive overhaul.

The reality is that the Government’s social care funding plan and our unfair property tax system amount to a double whammy against young people.

A simpler and fairer system would replace both council tax and stamp duty with a proportional property tax set at a flat rate of 0.48 per cent of a home’s value. A proportional property tax would be revenue-neutral for the Treasury and would mean cash savings for the vast majority of people. There is growing agreement that the time has come to open the door to a proportional property tax with David Willetts the latest high-profile figure backing the policy.

Previous analysis has shown that three quarters of households across England would gain from lower monthly bills under a proportional property tax, with some of the most deprived parts of the country benefiting the most.

Now a new report from Fairer Share also shows how a proportional property tax would also increase the number of transactions in the market, while freeing up vacant homes and releasing many thousands of second homes though a surcharge rate on these properties. The combined effect would be many more homes for young people and families who need them.

Around 600,000 homes could be released throughout England. This could mean up to a quarter of a million one- and two-bedroom homes freed up for young people who most need them, along with many more family homes. In London, up to 47,000 one and two-bed starter homes could be released – more than any other part of the country. Meanwhile under the proportional property tax 8.7 million renting households would be removed from property tax.

The Government has rightly strengthened its team of ministers within the newly created Levelling Up Department. The intellectual heft of Michael Gove, Kemi Badenoch and Neil O’Brien – combined with Andy Haldane at the Cabinet Office  –  will add much needed clout to levelling up agenda. But unless it adapts quickly on hugely regressive areas of policy such as council tax, then the whole project will be stalled before it even gets going.

Ultimately, if levelling up is to have fairness at its heart then it cannot just be about geography, with action only focused on a handful of so-called priority areas and young people across the country losing out. Instead, real levelling up will require policies such as a fairer property tax system to help reduce the intergenerational inequalities which exist across the country.

Health and Social Care 3) Ryan Bourne: The battle for spending control and lower taxes appears to be lost

8 Sep

Ryan Bourne is Chair in Public Understanding of Economics at the Cato Institute.

The Prime Minister sold his health and social care plan yesterday as one delivering “tough decisions” that previous governments have shirked. It certainly constituted major policy change, the scale of which is rarely seen outside of budgets. But Conservative MPs who study it carefully will realise it does not “sort” the social care issue in a meaningful sense.

Consequential reform required ascertaining what people want and need from social care, what barriers exist to delivering it, and then determining what taxpayers should provide. It needed to create better incentives for providers and councils to serve our needs, to consider the challenges of aging, weak productivity, aggressive minimum wage hikes, and poor quality care. It needed to acknowledge that most people want to live at home, not in a home. A durable framework meant avoiding social care going the NHS-route of becoming a political football.

The plan did not achieve those objectives. Instead, the Prime Minister, Chancellor, and Health Secretary agreed a proposal to breach their manifesto tax pledge, but in the service of providing funds to patch up our inadequate current model. The majority of money was flung, once again, at the NHS. The major social care innovation, in fact, was to pay more of some care receivers’ bills, by implementing the 2011 Dilnot Commission’s recommendation to protect inheritances from being as eaten up by care costs.

The vast majority of the initial £12 billion per year in spending would firefight the NHS’s backlog. Just £5.4 billion would go to social care over three years, of which £2.5 billion is for protecting inheritances (the costs of which will grow in time). Under this component, no individual would pay more than £86,000 in eligible lifetime social care costs. Those with assets below £100,000 will get means-tested assistance, and those with less than £20,000 will likewise have eligible costs financed. In essence, a major new age-related social insurance entitlement would be tacked on to a welfare state creaking in anticipation of a demographic tidal wave.

This would all be paid for, we are told, by a 2.5 per cent tax rise on employees (1.25 each on employee and employers’ NICs, both ultimately borne by workers). But, combined with a dividend tax rise and an equivalent levy on pensioners’ work income, these will be bundled up and spun off to become a brand new tax from 2023/24 – the so-called “health and social care levy.”

Why, then, will this plan not settle the issue?

Well, no plan failing to address productivity growth, ageing, minimum wage hikes, tailoring care to individual needs, or councils’ incentives to build more homes is going to provide a lasting settlement on social care. And this one explicitly avoids all that, saying “We expect demographic and unit cost pressures will be met through Council Tax, social care precept, and long-term efficiencies,” determined at the Spending Review. Already the sector is bemoaning that the non-Dilnot funding aspects don’t go far enough. In other words: expect more government spending and tax rise battles in the very near future.

In fact, there are plenty of reasons to expect that this plan’s approach will result in even more spending. Will the Government really allow NHS budgets to fall after backlogs are cleared to fund social care, or will this mean a permanent NHS baseline increase, with social care scrambling for funds later? To ask the question, I think, answers it.

It would be tempting for Tory MPs to consider that a problem for another day. At least this provides some relief, and gets the Daily Mail off your back, right? I’m not sure. Governments raising broad-based taxes to pump money in will create the expectation of improving social care quality. By making a big song and dance about “sorting” social care, in fact, the Conservatives will take ownership of its many failures, as James Frayne warns.

Then there’s the disappointment that will come once the contours of the “cap” become clear. Under Dilnot’s proposal (which I assume is the Government’s position too) you would still pay room and board costs throughout your care. As importantly: only the means-tested local authority rate would accumulate annually towards your ceiling.

In other words, if you want a nicer or more expensive care home, you’ll pay a top up that’s not counted eligible towards the cap, which you’d still continue paying even after the cap is reached. The practical consequence is wealth will still drain significantly for many, requiring either deferred home sales or people downgrading on their care.

This is what might, ultimately, undermine this plan politically, creating new demands for more subsidies in time. In a few years, it’s easy to imagine the Mail running stories about people still having to pay £150,000 on total care costs “despite Boris’s promise.’

In fact, there’s downside public finance risks across the board. Employee taxes are a shrinking relative tax base, while social care costs tend to be inflation-busting given weak productivity growth. Even before these inheritance subsidies, remember, social care costs were forecast to nearly double from 1.2 to 2.2 per cent GDP over the next 50 years due to aging.

In that regard, ask yourself: why might a government introduce a whole new earnings tax which, stood alone, gives the impression of having a very low rate? The answer: to create a new revenue stream which, with its fluffy connotations, makes it easier to raise taxes in future. Manifestos can return to pledging no income tax, NICs, or VAT rises again once the levy is in. In approving this tax, Tory MPs would therefore be facilitating a reform that will make the growth of government easier. They should reflect on who that helps most.

Much of the pre-announcement chatter was about their being more “progressive” ways to raise the funds. But this concedes too much—implying the spending is all good and welcome. Commentators who usually witter about distributional consequences are silent on the fact the cost cap benefits most those very wealthy care receivers, who live longer in care and have more assets to protect. While the desire to protect assets is netural, it’s not clear why protecting them is an imperative of Government policy. But that philosophical battle appears lost and will only result in spending going one way.

The real focus now is on the immediate consequences of tax-and-spend without reform. While Johnson might sell this plan as a grand solution, I suspect it will resolve little. In fact, the paradox is that the more the Prime Minister builds this up as “sorting” social care, the greater the political risks to the Government if quality doesn’t improve, the NHS eats all the money, or people realise the limited scope of the sop to inheritees.

Andrew Griffith: Unpick the triple lock – because it’s unfair for pensioners to gain from the misfortunes of others

24 Aug

The author is MP for Arundel, founder of the Campaign for Economic Growth, and the former Chief Operating Officer of Sky plc.

Would you keep £50 if you found it lying in the street? Most Britons say that they wouldn’t, and quite rightly. As a nation, researchers regularly find us in the very upper echelons of honesty.

No one would wish to profit from the unprecedented Covid pandemic. But that moral scruple is what lies at the heart of the debate about the so called ‘triple lock’ which currently gives recipients of the State Pension the higher of inflation, a guaranteed 2.5 per cent every year or annual growth in wages.

In an unexpected twist of fate, without an amendment to the current rule, today’s pensioners stand to benefit from the misfortunate of others. Not, to be clear, at their own instigation but as the result of the unique volatility in wages which fell sharply last year as millions, predominantly in the private sector, suffered from the shuttering of businesses and collapsing demand in many sectors.

In theory, election manifestos ought to come with an insurance-policy style page of disclaimers: “excludes acts of nuclear, chemical and biological warfare, large scale cyber terrorism or, as in this case, a global disease pandemic without precedent in modern times and which has left no country on the planet unscathed.”

Perhaps in future they will. But it would be sophistry to ignore the difficulties of the last eighteen months, and pretend that an event which saw cross-party support for Parliament invoking emergency powers didn’t happen. I don’t even believe that most pensioners would wish this.

Pensioner poverty for many is real – although, thanks to past increases in both the state pension and the pension credit, there are 200,000 fewer pensioners in poverty today than a decade ago. As a Member of Parliament, I know the burden felt by those on fixed incomes of annual council tax increases above inflation – ironically, often to put another log on the fire of funding someone else’s final-salary local government pension. But we should not conflate this longstanding issue with an indiscriminate, across the board increase on the back of a Covid19-induced distortion.

Unnoticed in the understandable focus on Afghanistan, last week the Office for National Statistics published wage growth for the three months to June of a record 8.8 per cent. Growth in July – the basis of any annual pensions uprating – is expected by some to be even higher. Demand for staff has been squeezed by the recovery for those businesses able to operate whilst the widely admired furlough continues to protect jobs elsewhere.

The result is a labour market that is so tight you can hear the rivets starting to pop. Using this statistical anomaly of a near double-digit rate of wage growth to increase pensions would, I believe, be wrong.

The Government has been bold and decisive in many of its measures during the pandemic, stepping outside the usual parameters. Similar logic and confidence should pertain to the approach to the April 2022 pension uprating. One example: applying the higher of the rate of inflation or 2.5 per cent would deliver a healthy increase of at least five per cent across the two years of the pandemic, protecting pensioners against the rising cost of living whilst shielding those of working age from what would be an unfair additional tax burden.

One of the positive aspects of the crisis was the collaborative way in which Parliament came together for the common good of the nation. In the summer heat of recent weeks, that has dissipated somewhat. As colleagues return to Westminster in the cooler air of the autumn, I hope that we can build consensus on what should not really be a subject of controversy but a sensible and pragmatic response to post pandemic management of the economy.

Harry Fone: The financial situation in Slough is even worse than thought

10 Aug

Harry Fone is the Grassroots Campaign Manager for the TaxPayers’ Alliance.

A recent Slough Council meeting has further highlighted how desperate its financial situation is. In a presentation to members, the new Section 151 officer, Steven Mair, focussed attention on borrowing. In 2015-16, Slough’s debt was a seemingly manageable £1,200 per head of population. But in just five years it had more than quadrupled to £5,000.

Most interesting of all, is the council’s Minimum Revenue Provision (the minimum amount that must be charged to an authority’s revenue account each year for financing of capital expenditure). Slough should have somewhere in the region of £15 million allocated for this; it has just £40,000. The situation looks bleak. Not only does it have to find the cash to plug this hole, but the authority will likely have to convert short-term borrowing into long-term borrowing which is estimated to cost an additional £6 million per year. Currently, 20 per cent of the council’s budget is spent on debt charges.

Another factor that looks set to make matters even worse is rising inflation which could inflict yet more damage on debt repayment. No wonder Cllr Wayne Strutton, Leader of the Conservative opposition, is calling for the previous Section 151 officer, Neil Wilcox, to face questioning from council members. Wilcox is under no obligation to do so, but I hope will take up the offer. Unfortunately, as things stand the cuts to frontline services will likely be even greater than originally forecast.

A load of rubbish 

Controversy abounds in Stirling, Scotland after the council announced plans to move to four-weekly bin collections. Rubbish and recycling isn’t exactly the sexiest topic in politics but it is one aspect of local government where taxpayers can easily see firsthand what their tax pays for.

The council claims the reduction in collections will save money and be beneficial to the environment. However, documents from a council show that the waste services budget will actually increase from £8.58 million to £9.47 million by 2025-26 – this is despite cuts and things like garden waste charges.

As for the environmental side of things, the case doesn’t look watertight either. Falkirk Council is currently the only other local authority in Scotland to operate a four-weekly landfill bin collection which was introduced in 2016. Figures reveal that the switch from a two-weekly collection has led to a decline in recycling from 55.2 per cent in 2013 to 53 per cent in 2019. It can’t be ignored either that residents may end up making more car journeys to the tip and increased fly-tipping can’t be ruled out either.

It’s no surprise that many taxpayers are annoyed about these new plans. Stirling has the eighth highest Council Tax bill in Scotland at £1,344.29 (Band D) causing many local residents to question if they are getting value for money. Once again it’s a case of paying top dollar and not getting the frontline services that residents deserve.

Council Tax rises and inflation

As I alluded to with Slough Council, inflation could be the next ticking time bomb when it comes to local authority debt. So I was eager to find out how English Council Tax bills have fared since 1993 when adjusted for inflation. Using government data I recalculated Council Tax figures from 1993-94 into their 2021-22 equivalents and the results are quite interesting.

As is true today, the lowest Council Tax bill in 1993-94 was in Westminster at £749. Average bills have only increased by £80 since then to £829. Conversely, the highest bill in 1993-94 belonged to Newcastle upon Tyne at £2,013 but bills have only risen by a mere £10 since then. Newcastle upon Tyne, Greenwich, Manchester, Haringey and Liverpool made up the top five for highest council bills in the country in 1993-94. Compare that today where the top five consist of Nottingham, Dorset, Rutland, Lewes, and Newark & Sherwood.

The top five highest percentage increases in real terms went to Huntingdonshire (79.9 per cent), Hambleton (77.5 per cent), Hinckley & Bosworth (75.8 per cent), Tewkesbury (75.5 per cent) and South Cambridgeshire (74.9 per cent). The five lowest were, Wandsworth (-25.9 per cent), Greenwich (-17.6 per cent), Hammersmith & Fulham (-14.3 per cent), Hackney (-9.8 per cent) and Islington (-7.5 per cent). Between 1993-94 and 2021-22 only 12 councils have seen a real-terms decrease in Council Tax. Of those Manchester was the only council outside of London to see a reduction in bills.

The overwhelming majority of Council Taxpayers have seen year after year of inflation-busting council tax rises. This data shows exactly why the TaxPayers’ Alliance calls for councils to start a War on Waste. All too many households are seeing bills shoot up and receiving sub-par services.

Harry Fone: Unanswered questions about Slough’s bankruptcy

13 Jul

Harry Fone is the Grassroots Campaign Manager for the TaxPayers’ Alliance.

It wasn’t a huge surprise when I learned that Slough council had declared itself bankrupt. As I’ve pointed out in this column, the authority’s frivolous spending and poor financial accounting practices all contributed to its downfall.

This being the third English council bankruptcy, it’s worth analysing exactly what went wrong for Slough. In the past, senior council executives and leaders have often pointed the finger at cuts in central government funding. But interestingly, that narrative doesn’t seem to be taking hold this time, perhaps for obvious reasons.

If we look at historical council tax data, it’s clear for all to see that Slough council shouldn’t have a revenue problem. In 1996-97 it increased council tax by 17.8 per cent; only four councils raised rates by a higher amount in this year. Increases of 10 per cent or greater followed in the next two years. Then 9.9 per cent in 2002-03 before another astronomical increase of 17.5 per cent in 2003-04.

Previous research by the TaxPayers’ Alliance showed that between 1997 and 2017, Slough’s council tax bills increased by 72 per cent in real terms – 15 per cent higher than the average for England. But if you look at Band D bills from 1995 to the present day, they have nearly doubled from £900 (inflation adjusted) to £1,795.

And what have residents got for their hard-earned council tax in recent years? Sticking out like a sore thumb is the £49 million spent on a new office complex complete with “innovative collaboration spaces, a tranquillity room, innovation room and even an exercise studio.” In 2019, the TPA’s Town Hall Rich List revealed Slough’s outgoing chief executive at the time, Roger Parkin, pocketed total remuneration of nearly £600,000 – the highest in the country. Then, almost unbelievably, in November last year, councillors awarded themselves a pay rise despite the devastating effects of the pandemic on many Slough residents.

Perhaps most comically of all, the council created a snazzy website with the phrase “Let’s Be World Class” adorning one of its pages. I’m still waiting on a response from the council as to the cost of the website, but judging by the flashy graphics and slick animated videos it can’t have been cheap. The council proclaims how well it has coped with Covid as it “redesigned [its] world class leadership structure” and “Launched the Brilliant Basics ways of working framework.” Clearly, there is more work to be done to justify these bold claims.

In a leaked internal video to Slough council staff, chief executive, Josie Wragg, made clear the council had endured a “challenging situation based on poor financial practice over a number of years” adding “as the closing of the 18-19 accounts progressed, the exposure of the financial challenges was starting to become apparent.” Additionally in an email to staff, Ms Wragg wrote, “Since April our new ‘A-team’ of financial experts, together with the Leadership team, have been undertaking a review of our finances, financial processes and other related matters.” Begging the question, was the previous ‘A-team’ up to scratch? Seemingly not.

We know from a recent audit report that the council’s accounting practices were lacking. The wait for the publication of the draft statement of accounts for 2019-20 goes on and 2018-19’s accounts are still unaudited. For me though, not enough attention has been focussed on Neil Wilcox, the former Section 151 officer at Slough council. He announced his resignation in April this year supposedly to “spend more time with family and friends” but the timing is interesting to say the least.

In an email sent on April 22nd to Slough council staff, Wilcox said, “for 2021/22 the Council balanced its budget”. Yet just a couple of weeks ago, his replacement, Steven Mair, filed a Section 114 notice for bankruptcy and declared the budget will not be deliverable after all.

So several key questions remain unanswered. Did Wilcox know about the massive black hole in the council’s finances? If he did, when was the discovery made and did he raise the alarm with chief executive Josie Wragg? And if Ms Wragg was made aware, what action did she take? Conversely, if Mr Wilcox was not aware of the looming financial armageddon then I think it would be fair to ask whether he was fit for the role and worthy of his six-figure taxpayer-funded salary.

Council tax is a huge burden on households and many feel short-changed when it comes to frontline services. Local authorities have a tremendous duty of care to taxpayers’ money. This sorry saga raises serious concerns about Slough’s management structure and whether checks and balances were in place. Lessons must be learned and those responsible held to account. The nation can’t afford to see a fourth, fifth, or even sixth council go bankrupt.

Chris Whiteside: Scrapping the pensions triple lock would be wrong, but not reforming it would be a missed opportunity

12 Jul

Cllr Chris Whiteside MBE is an economist and member of the Cumbria Pensions Committee; he is also Deputy Chair (political) of the North West region of the Conservative Party.

The principles behind the pensions “triple lock” are as relevant today as when it was introduced, but perceived balance of economic justice between generations has reversed in the intervening years. The policy needs updating.

In a few months, because of the Covid rebound, the triple lock as it currently stands would require the Chancellor to make a huge payment many people will see as unfair and unaffordable.

To scrap the triple lock would be economically and morally wrong, but not reforming it would be a missed opportunity. There will never be a better chance to make changes which are needed. If it’s not reformed this year, sooner or later a future government will have to scrap it altogether because it will become unaffordable.

To explain the need for reform, let’s start with why David Cameron made the promise in the first place, and why it made sense then.

Today many people are concerned that the younger generation have lost out, but in 2010 the generation perceived to have lost out badly in preceding decades was pensioners. Both views are massive generalisations – some pensioners suffer hardship today, some young people did in 2010 – but there were real economic facts justifying both perceptions.

The government whose term was mercifully ending when the “triple lock” promise was made had undermined pensioners from start to finish, treating their savings and investments like a piggy bank it could raid at will.

Gordon Brown’s first budget included a £5 billion a year raid on pension funds which did enormous long-term damage to the stability of pensions. Consequently, as Frank Field, pointed out, Labour inherited the best-funded pensions in Europe and finished among the worst. That wasnt the only damage Brown inflicted on pensioners.

Brown implemented a hundred tax rises: many of these, particularly massive rises in council tax, impacted disproportionately on pensioners.

Labour added insult to injury with the lowest annual pension rise in history, just 75 pence for a single pensioner.

By 2010 the relative incomes of many pensioners had dramatically failed to keep pace with those of people in work. To stop this Cameron promised basic state pensions would increase each year by whichever was highest of:

  1. 2.5 per cent (never again a derisory increase like 75p)
  2. Rate of inflation (protecting the purchasing power of pensions)
  3. Average increase in wages (never again would pensioners fall further and further behind those in work.)

Each element of that promise looks reasonable: but the whole package was only fair because the pensioners had fallen behind wages and the aim was to help them catch up.

Over a full economic cycle this set up a ratchet guaranteed to improve the relative position of pensioners. If wages and salaries fall behind inflation or drop during a recession, real incomes of the working population will drop but pensioners are protected by the 2.5 per cent minimum increase or the inflation element of the triple lock. When the economy grows again, wages cannot catch up to the previous relative position no matter how fast they increase because of the single-year earnings lock.

However, it isnt sustainable to permanently guarantee any section of society a relative income which can never get worse but can and ultimately will keep improving. Eventually either political consensus will emerge that the correction has gone far enough, or the policy will become unaffordable. The triple lock may have reached that point.

During 2020 the Covid-19 recession shut down huge chunks of the economy, put millions on furlough, and those in work generally received little or no pay rise, sometimes a pay cut. Average incomes crashed for those of working age.

The state pension did not: the triple lock protected pensioners, exactly as it was meant to.

This year wages recovering from Covid will generate an extreme example of the triple lock ratchet.

Those of working age who were clobbered last year and now experience some recovery won’t see it as a pay rise, but getting back what they lost last year. The triple lock algorithm won’t treat it that way.

Year-on-year figures for average earnings are likely to show a rise of about eight per cent. Under current rules pensioners will also get an eight per cent rise to match the bounce-back from last year’s drop in income which they didn’t suffer. Some of the £3 billion cost of that rise will come from taxes paid by workers who did suffer that drop in income.

Rather than scrapping the triple lock altogether, or the earnings component, we should ask whether there is a fairer way pensions could keep pace with wages.

There is.

Instead of basing the earnings component of the pensions lock on the year-on-year change in wages, we should base it on an index of cumulative change in wages. This will still guarantee pensions cannot fall behind earnings, without the ratchet.

Set a base year – the year before the pandemic hit would be a possible choice – for an index of earnings, and a pension index. The earnings component of the triple lock should then require the cumulative change in pensions to be at least as high as the cumulative change in earnings. Pensions cannot be a lower proportion of average earnings than they were in that base year.

The reformed triple lock would guarantee the state pension increases each year by the which highest of

  1. 2.5 per cent
  2. Rate of inflation
  3. Increase necessary to ensure the cumulative state pension index is at least as high as the cumulative earnings index.

If average earnings are up by 25 per cent since the base year, the pension must be at least 25 per cent up on that year. This respects the spirit of the “triple lock” promise,

Here’s how a modified triple look based on an earnings index compares against the current version:

Whatever the Government does about the triple lock will upset someone. I am convinced that putting the earnings lock onto an index rather than year-on-year basis is the fairest, most sustainable option they could go for.

Paula Higgins: British homeowners are vital to reaching net zero. But we must ensure climate targets are achievable for them.

2 Jul

Paula Higgins is the CEO and founder of HomeOwners Alliance.

As focus moves from setting to delivering the UK’s world-beating climate targets, our homes have moved to the centre of the debate.

Insulating millions of houses and replacing polluting gas boilers with cleaner alternatives is essential to reaching net zero and will require the buy in of the vast majority of the British homeowners. As such, it is essential that there is a practical, consumer-friendly, and affordable means of cutting carbon from domestic life.

It has been suggested that homeowners should be required to upgrade the energy efficiency of their home before putting it on the market. This is a complete non-starter for a number of reasons. For many sellers, they will not have the cash, time or energy to upgrade their home before moving on. This is especially true for downsizers.

But this doesn’t mean that there isn’t a route to net zero for our homes.

Instead of punitive regulations, which will more than likely lead to shoddy work and disgruntled homeowners, there are dozens of policies, tax changes and other levers that government can pull to climate proof our homes.

First place to look is the recent Green Homes Grant, which despite many flaws, showed that there is huge public appetite for upgrading homes. At HomeOwners Alliance we were overwhelmed with questions and requests for more information about the scheme. It’s nonsense for the Government to use the excuse as a lack of take up to axe the scheme.

Hopefully this should give ministers confidence to deliver a big and improved demand-led scheme, allowing Brits to make upgrades to their homes at a time that suits, instead of being forced into it when looking to move. A drop-in replacement for this popular scheme is a no-brainer.

The tax regime is also weighed against home improvements that will decarbonise our homes. Home improvements are expensive. Add on VAT at 20 per cent and you can see why our research reveals one third of homeowners are deterred from doing home improvements at all, or forced to pay cash to afford the work. The zero VAT rate for new homes should be extended to homeowners undertaking major refurbishment works and efficiency upgrades.

Changing council tax and stamp duty to free up cash for greening our homes, either through rebates, reduced rates or cashback schemes could also be a vital step towards net zero.

There is precedent to changing stamp duty to achieve wider goals, as seen in the pandemic recovery. With net zero as one of the government’s core tenets, there is surely scope for doing it again, especially with such enthusiasm from Brits about cutting carbon footprints.

Another option is interest free loans, comparable to those issued more than two million times in Germany and on offer in Scotland, are yet to be made available across the UK.

For it to be worth its salt, the Government’s upcoming strategy to decarbonise our homes need to utilise every option on the table.

Replacing a broken-down boiler with a heat pump currently costs more, but the Government can get involved here too. Energy supplier Octopus is aiming to slash costs for heat pumps by half by the end of next year, but a targeted innovation scheme to cut costs would spur it on with some competition.

We already have a “buildings mission” which aims to halve the cost of efficiency retrofits, why not the same for heat pumps? By setting a challenging goal, not only will costs for homeowners fall, but we can be sure that the UK’s clean heat industry will flourish.

Until prices plummet, following trajectories set by renewable energy sources and electric cars, boiler scrappage schemes can also help with up-front costs, as can schemes such as the £4,000 Clean Heat Grant which should make clean heating more affordable.

Virgin Money and Nationwide are starting to offer green mortgages, offering lower rates for more climate-friendly homes yet crucially not increasing APR for those yet to be upgraded. Greener homes are cheaper to run, so green mortgages can also be flexed to offer additional funds for efficiency upgrades when loans are taken out.

There also will be, as the Climate Change Committee warned this month, a growing number of homes that overheat as our climate warms. Heatwaves this year and last stress the need for new policies and action from government to protect families living in the quarter of English homes that are at risk of becoming too hot in years to come.

Ensuring that Britain’s homes are upgraded for summer warmth, winter cold and clean heat at the same time is vital for keeping homeowners on board. Carrying out upgrades once and ensuring they are done well, ensuring that the numerous benefits are clearly explained and making sure that government support is accessible, easy to understand and effective are all vital for the impending strategy to decarbonise heat and buildings.

There is no doubt that Brits want to take part in the net zero transition, with public enthusiasm for climate action higher than ever. What is needed now is the policies and pledges that make upgrading our homes easy and effective.

John Redwood: The UK’s reliance on cheap labour to fill occupational shortages has always been wrong – and a barrier to innovation

23 Jun

Sir John Redwood is MP for Wokingham, and is a former Secretary of State for Wales.

The airwaves are alight with the demands of anti-Brexit MPs and commentators to let more economic migrants into the UK to take low paid jobs in hospitality, care, agriculture and other sectors that got used to a steady stream of eastern European migrants to carry out the less skilled work.

We are told of shortages of people to pick crops, serve in cafes and clean care homes. At least it provides a welcome refutation of all those anti-Brexit forecasts of mass unemployment we used to get.

One of my main motivations coming into politics was to promote prosperity and wider ownership for the many. I have always sought to propose and support policies which would help more people find better paid work and to acquire a home and savings of their own. I do not like the cheap labour model.

I have also recognised that we cannot simply legislate for everyone to be better paid. Each person who wants higher pay has to go on a personal journey, acquiring skills, experience, qualifications that justify the higher income. Every company and government department has to go on a journey to help promote higher productivity to provide the higher pay people rightly aspire to.

One of the crucial debates in the referendum was the debate about free movement and low pay, with Brexiteers saying they wished to cut the flow of people accepting low pay from abroad, to help raise pay here at home and promote more people already legally here into better paid jobs.

Just inviting in hundreds of thousands of people from lower income countries in the EU is not a good model for them or us. Many of them live in poor conditions and sacrifice to send cash back to their wider families. They may not be able to go on a journey themselves to something better. It may work for the farm or business by keeping labour costs down, but only at the expense of pushing the true cost more onto taxpayers.

Low paid employees may well qualify for benefit top ups for housing, council tax and general living costs which the state pays for. Each new person arriving needs GP and hospital provision in case of illness or accident. They need school places if they bring a family with them. They need a range of other public services from transport and roads to policing and refuse collection.

The country has had to play catch up in many of these areas given the large numbers of people who have joined us in recent years. The EU once suggested a figure of €250,000 was needed for first year set up costs for a new arrival. The biggest cost is of course the provision of housing where the state plays a big role for those on low incomes. The need to build so many more homes creates unwelcome political tensions in communities facing concrete over the greenfields.

It’s not as if we have been short of newcomers in recent years. According to the ONS 715,000 people arrived in the UK for stay of more than one year in the year to March 2020, 312,000 more than the numbers leaving. They all needed homes, and many needed jobs or other income assistance. The UK is trying to catch up with demands for everything from roadspace to school places and from homes to GP appointments.

There is also in practice a cost to the businesses that specialise in low pay and a loss to the wider development of the economy. If a business has easy access to low paid labour it will put off looking at ways at automating or providing more computer or machine support to employees to raise their productivity. If farms find cheap pickers they do not provide the same support and demand for smart picking aids or machines.

We live in a period of digital turbulence, when artificial intelligence, robotics and digital processing of data and messages are transforming so much. Harnessing more of these ideas could both power greater technological development and associated businesses here in the UK and could boost productivity and therefore potential wages in the businesses they serve.

The UK and the EU has spent the last two decades leaving much of the digital and robotic revolution to the USA. It is time to catch up. Successful harnessing of it will spawn more new large companies and offer the chance of higher pay from higher productivity.

Harry Fone: Northamptonshire’s downfall was brought about by highly paid group-think

15 Jun

Harry Fone is the Grassroots Campaign Manager for the TaxPayers’ Alliance.

One of the common rebuttals to the TaxPayers’ Alliance’s Town Hall Rich List, is “if you don’t pay top dollar, councils can’t attract the best staff”. I was reminded of this after reading an in-depth report published recently by the Ministry of Housing, Communities and Local Government (MHCLG) into the bankruptcy of Northamptonshire County Council in 2018.

It’s a highly critical analysis of a failed council and lays bare the “cultural malaise” that engulfed the authority. The report’s authors write:

“A ‘group-think’ mentality had prevailed at the Council for many years, with senior officers and politicians inclined to pursue misguided courses of action while failing to accept the reality of the organisation’s predicament. Dissenting voices were ignored, partners were brushed aside if they didn’t adhere to the Council’s view and offers of help from within the sector were rebuffed until it was too late.” 

Perhaps no surprise then, that an impartial assessment of the authority’s finances revealed that a forecasted shortfall in the budget of £8 million was actually nearer £64 million – it would almost be funny if the consequences weren’t so serious.

Looking back over the figures for 2017-18, Northamptonshire employed 19 members of staff who received remuneration in excess of £100,000. The annual bill to the taxpayer for these staff alone was £2.8 million. Adding insult to injury, the outgoing chief executive – who ironically then went on to work for a firm that advised councils on how to reduce financial pressures – received a loss of office compensation package of £142,000. So much for the top dollar argument…

If you’re a councillor and your authority also suffers “from a lack of strategic direction” or a “preoccupation with far-fetched experiments and ill-thought through exotic solutions”, I urge you to read the report and act on its recommendations.

Can we have some more, please?

From one report to another, as the Public Accounts Committee released its latest report on COVID-19 and the effects on local government finance. As you would expect, it details the impact of the pandemic on council finances – despite injections of funds from central government the future still looks bleak.

A number of recommendations are made to MHCLG. A key one is that there should be more certainty about the amount of funding coming from central government. Consequently, there have been yet more calls for gaps in council budgets to be plugged by central government.

This is one of the big issues I have with the report. Yes, I’m sure MHCLG could improve, but what about local authorities? The report notes that councils are making efficiency savings to make up for funding shortfalls but seems to suggest that the pips are already beginning to squeak.

As I hope I’ve made clear in this column over the weeks and months, there is still plenty of fat left to trim. Councils’ first instincts shouldn’t be to demand more money from central government (read: taxpayer) – this mentality must change.

The highs and lows of Council Tax bills

Last week I visited Nottingham where residents are now paying the highest council tax in the country at £2,226 for a Band D property. On the journey, my colleague asked me what the highest bill in England was irrespective of banding. I didn’t know, only that it would be over £4,000 for a Band H property in Nottingham. This got me thinking, we always talk about Band D bills because it’s a handy average but what about bills at the high and low end of the scale?

Data reveals that the highest council tax is indeed in Nottingham with a Band H bill coming in at a colossal £4,452. 104 local authorities in England have a Band H charge in excess of £4,000 but only one is in London – Kingston-upon-Thames charges £4,114.

On the other end of the scale, only eight councils charge less than £1,000 for a Band A bill (without any form of discount, e.g. single person or carer discount etc). Of those seven are in the capital, the City of London, Hammersmith & Fulham, Kensington & Chelsea, Newham, Tower Hamlets, Wandsworth and Westminster. Westminster has the lowest Band A bill in England at a mere £553. Windsor & Maidenhead is the only local authority outside of London to charge less than £1,000 for Band A at £982.

It’s interesting to see the huge range in Council Tax charges across the country. However, if trends continue next year we’ll likely see fewer people paying less than £1,000 and more facing bills of over £4,000. This is why it’s vital that authorities eradicate as much wasteful spending as possible.

Starmer’s interview. The Labour leader showed his real self, and ideological inclinations – but will it boost the party’s success?

3 Jun

On Wednesday the British public was treated to an episode of Piers Morgan’s Life Stories with Keir Starmer. You could call the Labour’s leader’s appearance either brave, or the act of a man who has nothing to lose. Let’s go for the more generous interpretation: it showed that Starmer is a fighter – even when faced with some pretty dire local election results.

Did it work? In several respects, the interview was a success for Starmer. For one, it showed the Real Starmer, not the slightly robotic one we are used to in the House of Commons. Although I found some of the “experts” on his life a bit random – Dame Helena Kennedy tells us that “school was where Keir blossomed” (was she there?!), you get a good understanding of him – and what makes him tick – by the end.

Inevitably, a large part of the show was dedicated to Starmer’s life as a barrister. He is clearly someone who thrives on having big targets to achieve, rising from QC to Director of Public Prosecutions to Labour Party Leader in, actually, quite a short period of time. Furthermore, his cases tell us about his ideological inclinations. One that features is in 2005 when Starmer famously represented two penniless environmental campaigners who were sued by McDonald’s for libel. The then government ended up reviewing libel laws as a consequence.

At that time, Starmer said of the case “Until now, only the rich and famous have been able to defend themselves against libel writs. Now ordinary people can participate much more effectively in public debate without fear that they will be bankrupted for doing so. This case is a milestone for free speech.”

This rather John Proctor-sounding Starmer is miles away from the one we now know, who not long ago was part of a “second referendum” campaign that would have erased a fair few “ordinary people’s” votes… He should bring this energy back to Labour and discuss not only “ordinary people”, but “ordinary” things, be it council tax, living costs, rather than the Twitter politics that have consumed his party.

Lots of headlines have been focused around the emotional parts of Starmer’s interview. He talks about the death of his mother, Josephine, who had Still’s Disease, adding “For some people it comes and goes, for mum it came and it came and it came again”. He also spoke of his father who was “totally devoted” to her. Elsewhere he talks about his wife, who impressively shuts down one of Morgan’s questions with a joke.

These sections, particularly around Starmer’s parents, are touching – and show a man who has had a lot of hardship in his life – but stayed strong for his loved ones. You would have to have a heart of stone not to sympathise. And yet, on a broader note, I do wonder why we now expect political leaders – and otherwise – to share their personal lives. Is this the Prince Harry effect?

Overall it was a “good” interview because it increased Starmer’s likeability – he even boasts about getting drunk with George Clooney in it. He comes across as someone with thick skin, a sense of humour and unshakeable determination (don’t worry, I’m still a Conservative voter). Will this boost support for Labour?

One challenge will be viewing figures. Apparently Starmer on Piers Morgan was watched by 1.6 million people, compared to Coronation Street’s 3.7 million (on immediately before). You can be as charming as you like, but if no one’s watched it, then meh.

Then there’s the fact that Labour still doesn’t have a credible proposition, with lots of fractures between party members. A jolly chat with Piers Morgan won’t change that.

Saying that, I rather agreed with Robert Halfon yesterday, who wrote about the importance of Conservative voters not getting complacent around the Labour Party (or indeed other threats).

The issue I spot is that the Conservatives are drifting, as their voters see it, to the Left, with their “green revolution” and the Tory rebellion over the cut to foreign aid. Voters are crying out for lower living costs, and the “conserving” of the nation’s finances and culture. An alternate that’s stronger here – combined with the likeability factor – is the risk.