Tuesday, 30 June 2015

The BBC is under threat because its success challenges market ideology

Polly Toynbee in The Guardian

'The cuts are so severe that they risk sending the BBC into a downward spiral.' Illustration by Joe Magee

Groping for British emblems to bind together an ever more diverse and fissiparous society, politicians struggle to find cultural and emotional social glue. Make your own list from the Queen to Glastonbury, but overwhelmingly people put the NHS and the BBC right up there near the top, deep-dyed into British DNA.

But not this government. Whatever Conservatism once meant, it’s no longer about conserving precious things. The NHS staggers under the fragmenting Lansley act and the BBC is under more severe assault than ever before,threatened with licence fee cuts – and perilous charter renewal ahead. Is it payback time for Rupert Murdoch’s election support? According to BBC political editor Nick Robinson, Cameron on his battle-bus said of the BBC: “I’m going to close them down.” Joke or threat, it’s too close to what many in his party want to be laughed off. Many of the newer Tory MPs, Thatcher’s children, detest the very existence of the BBC – its phenomenal success an affront to market ideology.

Threats come thick and fast. John Whittingdale, newly promoted culture secretary, called the £145 licence fee “worse than the poll tax” in his former role as head of the culture select committee. Sajid Javid, the business secretary,complained this month that the licence fee was “a large amount for many families” and “needs looking at”. Other Tories shed crocodile tears for the poor who can’t afford the TV licence, calling for non-payment to be decriminalised – a compassion not shown to twice as many prosecuted for not paying council tax.

Decriminalisation would lose the BBC an estimated £200m a year – and that’s deliberate. The BBC may lose £600m if forced to carry the Department for Work and Pensions’ cost of exempting over-75s from the licence fee. And there’s a proposed five more static years to add to the current seven-year licence fee freeze.

The risk is that these become seen as “moderate” cuts, a “compromise” with the factions that want the BBC killed off. Yet they are so severe that they risk sending the BBC into a downward spiral, where fewer good programmes mean weakened public support, allowing yet more cuts. The loss of the Olympics to Eurosport from 2022, for an unaffordable £920m, is exactly what the BBC’s head of sport warned recently: as BBC income shrivels it can’t compete – and the licence fee looks less good value.

Barely a day goes by without the Mail, Telegraph and Rupert Murdoch’s papers attacking the BBC. This week’s Sunday Times had a full page of gleeful, barely veiled encouragement to the young not to pay their licence fee if they only watch catch-up TV on iPads or smartphones. It reported 150,000 more households in the past three months abandoned traditional TV and the licence fee, claiming not to watch it live. Everyone admits there’s a growing problem with attaching the licence fee to a TV set – but that’s easily fixed with a household fee or by bringing iPlayer under the licence.

Murdoch bullies ceaselessly for a subscription system, to shrink the BBC to the tiny size of America’s PBS. His paper’s poll shows apparent “waning” public support, with only 48% saying the licence fee is value for money, slightly more preferring funding by advertising. Left out was the inconvenient answer to one poll question which found only 9% want it funded by subscription. The BBC quotes 11 other polls showing that support for the licence fee at 42% is higher than for any other form of funding. What’s astonishing is that 96% of people use the BBC every week, spending an average of 18.5 hours watching, listening or online.

This week BBC Radio 4 launched its new season with a special celebration. With strong emphasis, its director general, Tony Hall, warned in a speech: “It’s something none of us should take for granted – there’s nothing else like it in the world.” He’s right, the station is the soundtrack to the nation, a never-ending conversation of remarkable intelligence and pleasure, reaching deep among Sun and Mirror readers, defying accusations that it’s a middle-class silo. By rights, this Reithian relic should have died out long ago: instead its listeners keep growing – up from 9 million a decade ago to 11 million now.

In the kitchen, in the car or out jogging with an iPod, I can’t imagine life without it. On a desert island, isn’t the entire back catalogue what you’d choose? The Now Show, More or Less, Neil Macgregor’s History of the World in a 100 Objects – only God and gardening have me reaching for the off button. Now here comes a whole day of poetry. Even the awfulness of the Archer family has me gripped.

Those 11 million Radio 4 adherents listen for an average of 12 hours a week – and each shining hour costs just 1.4p per listener. Nothing was ever such good value. The entire BBC has half the budget of Sky and a quarter of BT’s – which offer a fraction of the quantity or quality.

Choice busts out of every new provider – Amazon, Netflix and many more to come – yet the BBC, at £12 a month, dominates the British airwaves, while Sky charges an average £47.

The other line of attack will be on BBC governance – even though its every move is already over-policed by governors, trust and all the acronyms: Ofcom, NAO,PAC, DCLG, plus many parliamentary committees. From millions of BBC words, blunders and scandals are relatively few.

The BBC’s success infuriates its enemies because it defies Hayekian laws of gravity; the market ought to offer better value but it doesn’t. Attacks on BBC “bias” rain down: James Harding, head of BBC News, protested at the “hell on wheels” “ferocity” of attacks during the election – a little faux-naive, perhaps, from a former Murdoch editor who knows the agenda from the other side.

The BBC has a near impossible task in finding unbiased truths in an ideological world – and sometimes it splits the difference to stay on the safe side when forced to choose between sense and nonsense. The establishment leans heavily, the weight of an 85% Tory and europhobic press breathes hard to push it off its foothold. There is too often a blandifying of essential arguments when intimidation by bullies drains life out of reporting on the NHS, benefits, austerity or Europe.

Pinko bias is an illusion of the right – and voters gave Cameron his win. Before wielding axes, Tory MPs should think hard about constituents who spend 18.5 hours a week with the BBC – and of its place in national life as an unmatched cultural treasure.

Teaching the poor to behave

G Sampath in The Hindu

By shifting the burden of poverty alleviation from the state onto the poor themselves, behavioural economists are ignoring the structural causes of poverty. They are also erasing the behaviour of the owners of capital from the poverty debate

The World Bank’s World Development Report (WDR) 2014 was about ‘Risk and Opportunity’. The 2013 WDR is simply named ‘Jobs’. The 2012 WDR is titled ‘Gender Equality and Development’.

Other WDR themes in the recent past include ‘Agriculture for Development’ (2008), ‘Equity and Development’ (2006), and ‘Building Institutions for Markets’ (2002). They all have an overt economic dimension. Naturally — for it’s a bank, after all. But the World Bank’s 2015 WDR is titled ‘Mind, Society and Behaviour’. That’s right. Now, what would a bank — or, if you prefer, a multilateral development finance institution — want with mind, society and behaviour?

There is a two-word answer to this question: behavioural economics. In its 2015 WDR, the World Bank makes a strong pitch to governments for applying behavioural economics to development policy.

As the report notes in its opening chapter, “The analytical foundations of public policy have traditionally come from standard economic theory.” Standard economic theory assumes that individuals are rational economic agents acting in their best self-interest.

But in the real world, people often behave irrationally, and not always in their own best economic interest. For instance, they might splurge when they could save, or give excessive weight to the immediate present as opposed to the distant future.

Is poverty a mindset?

Behavioural economics uses insights from psychology, anthropology, sociology and the cognitive sciences to come up with more realistic models of how people think and make decisions. Where these decisions tend to be flawed from an economic point of view, governments can intervene with policies aimed at ‘nudging’ the targeted citizens towards the right decision.

All this seems fairly unobjectionable. However, things change when behavioural economists focus their attention exclusively on the behaviour of the poor. Till date, there is no evidence that monitoring and ‘nudging’ the behaviour of the world’s poor is a better route to alleviate poverty than, say, monitoring and ‘nudging’ the behaviour of the financial elite. Surely the latter cannot be deemed as altogether rational economic agents — not after the 2008 crisis?

The second assumption of behavioural economics — presented as a new ‘finding’ based on research, and regurgitated wholesale by the 2015 WDR — is that the poor are less intelligent than the rich. It is an obnoxious idea, and also politically incorrect. Of course, this is not stated in as many words.

The correct way to say it, then, is to state that “the context of poverty” depletes a person’s “bandwidth” — the mental resources necessary to think properly — as a result of which he or she is, well, a poor decision-maker, especially compared to those who are not in “the context of poverty”, such as the rich and the middle classes.

Lest anyone misunderstand, the authors of the report hasten to add that it’s not just the poor but anyone — even the wealthy — who, when placed in a “context” of poverty, would make wrong decisions. (For the record, it must be noted that the poor are — all else being equal — more likely to be in “the context of poverty” than the rich.)

To support these assumptions, a number of research studies are trotted out. One such study, mentioned in the report, was conducted on Indian sugarcane farmers, who typically receive their income once a year, at the time of harvest.

It was found that the farmers’ IQ was ten points lower before they received their harvest income than afterward (when they were flush with cash and were comparatively richer). So ideally, they should not take major financial decisions before harvest time. Such an insight into how poverty affects behaviour could have policy implications for, say, cash transfers — which can be timed, or made conditional, on displaying certain behaviours pre-determined by the state as ‘rational’.

The report states in all earnestness that poverty “shapes mindsets”. From here, it is a hop, skip, and jump to holding, as the leading behavioural economists of the day do, that the poor are poor because their poverty prevents them from thinking and acting in ways that can take them out of poverty.

Thus the focus as well as the burden/responsibility of poverty-alleviation would shift from the state — from macroeconomic policy, from having to provide employment, health and education — to changing the behaviour of the poor. The structural causes of poverty — rising inequality and unemployment — as well as the behaviour of the owners of capital are evicted from the poverty debate, and no longer need be the focus of public policy.

Behavioural economics

In this context, it might be pertinent to note that the rise of behavioural economics as a discipline parallels the rise of neoliberalism, starting from the 1980s and rapidly gaining respectability and funding from the 1990s. All the leading lights of the field such as Daniel Kahneman, Amos Tversky, Robert Shiller, Senthil Mullainathan, Richard Thaler and Cass Sunstein made their mark in this period, and are heavily referenced in this report.

A fundamental principle of neoliberal thought is to find market-led solutions to socio-economic problems. No matter that poverty is often a symptom of market failure. Free market ideologues attribute poverty and all socio-economic ills to market distortions caused by state interference. The economists who get to shape the World Bank’s WDRs are chosen for their ability to toe this line.

On the odd occasion that the lead author of a WDR made a bid for intellectual independence, he had to make an untimely exit. For the 2000-01 WDR, titled ‘Attacking Poverty’, the original draft prepared by the distinguished development economist Ravi Kanbur — incidentally brought in by Joseph Stiglitz — spoke of the need to build effective safety nets for the poor before the introduction of free market reforms.

Both Mr. Kanbur and Mr. Stiglitz were out of the World Bank before the report was. As the economist Robert Wade points out in an essay on this episode, titled ‘Showdown at the World Bank’, the version eventually published no longer spoke of creating prior safety nets for the poor. It instead called for putting them in place “simultaneously with labour-shedding reforms”.

The point of this detour into WDR history is that — to borrow the jargon of behavioural economics — the overarching necessity to conform to free market ideology may be said to impose a ‘cognitive tax’ on World Bank economists, as a result of which their ‘mental models’ do not permit the ‘framing’ of poverty in ways that may contradict this ideology.

The Keynesian formula of safety nets from the free market may well be permanently banished from the policy agenda. But that still leaves unresolved the problem of how to manage the social and political consequences of the widening income gap between the 1 per cent and the 99 per cent. This is critical because growing discontent could lead to political instability. After all, in order for markets to function, and commodities to flow freely and predictably, the excluded masses must be taught to behave. This is where behavioural economics comes in.

Action and behaviour

In order to change the behaviour of the poor, one must first understand it. It is this understanding that behavioural economics promises to codify into knowledge. To be sure, the WDR readily acknowledges that even the rich, the economists, and the World Bank staff themselves, might be subject to cognitive biases.

But nowhere in its 230-odd pages does the report present an instance, or even a hypothetical example, of a behavioural economics-inspired policy intervention whose target is, say, a class of billionaire investors, despite the fact that today, compared to the poor, this is a group that wields far more influence, per capita, on a nation’s economic destiny. Changing their behaviour — for instance, manipulating them into deploying their billions on productive rather than speculative investments — could generate more beneficial, and more effective, outcomes than micro-manipulating the financial decisions of a poor peasant.

A major confusion that dogs this report is the conflation of ‘action’ and ‘behaviour’. The term ‘behaviour’ comes with the baggage of the empirical sciences. It is typically used with reference to animals and objects under scientific observation. Behaviours can be studied for patterns. To the extent that human beings are also animals, they can also be said to exhibit behaviours. But what makes them human is precisely their capacity to transcend behaviour patterns — in other words, to act.

The political theorist Hannah Arendt, in The Human Condition, speaks of three kinds of human activity: labour, work and action. Of the three, what distinguishes action is its political nature. When behaviourist economics speaks of poverty as a “cognitive tax”, it writes ‘action’ — the political agency of the poor — out of the equation.

As democratic nation states reorient themselves to being accountable to global financial markets, non-democratic bodies such as the World Trade Organization, and trade agreements such as General Agreement on Tariffs and Trade and Trade in Services Agreement , they will necessarily become less responsive to the aspirations of their own citizens. With overt repression not always the most felicitous or cost-effective policy option, it has become imperative to find ways and means to ideologically tame the economically excluded. Hence the new focus on the minds and behaviour of the poor.

Behavioural economics, insofar as it is concerned with the behaviour of people in poverty — and it is this stream which dominates this year’s WDR — is simply the latest addition to the neo-liberal toolkit of political management.

Sunday, 28 June 2015

The moral crusade against Greece must be opposed

Zoe Williams in The Guardian

‘Greece is being sacrificed to maintain a set of delusions that enfeebles us all.’ Illustration by Robert G Fresson

‘This is our political alternative to neoliberalism and to the neoliberal process of European integration: democracy, more democracy and even deeper democracy,” said Alexis Tsipras on 18 January 2014 in a debate organised by the Dutch Socialist party in Amersfoort. Now the moment of deepest democracy looms, as the Greek people go to the polls on Sunday to vote for or against the next round of austerity.

Unfortunately, Sunday’s choice will be between endless austerity and immediate chaos. As comfortable as it is to argue from the sidelines that maybe Grexit in the medium term won’t hurt as much as 30 years’ drag on GDP from swingeing repayments, no sane person wants either. The vision that Syriza swept to power on was that if you spoke truth to the troika plainly and in broad daylight, they would have to acknowledge that austerity was suffocating Greece. 

They have acknowledged no such thing. Whatever else one could say about the handling of the crisis, and whatever becomes of the euro, Sunday will be the moment that unstoppable democracy meets immovable supra-democracy. The Eurogroup has already won: the Greek people can vote any way they like – but what they want, they cannot have.

On Saturday the Eurogroup broke with its tradition of unanimity, issuing a petulant statement “supported by all members except the Greek member”. Yanis Varoufakis, the Greek finance minister, sought legal advice on whether the group was allowed to exclude him, and received the extraordinary reply: “The Eurogroup is an informal group. Thus it is not bound by treaties or written regulations. While unanimity is conventionally adhered to, the Eurogroup president is not bound to explicit rules.” Or, to put it another way: “We never had any accountability in the first place, sucker.”

More striking still is this line of the statement: “The Eurogroup has been open until the very last moment to further support the Greek people through a continued growth-oriented programme.” The measures enforced by the troika have created an economic contraction akin to that caused by war. With unemployment at 25% and youth unemployment at nearly half, 40% of children now live below the poverty line. The latest offer to Greece promises more of the same. The idea that any of this is oriented towards growth is demonstrably false. The Eurogroup president, Jeroen Dijsselbloem, has started to assert that black is white.

And that brings us to the crux of the troika’s programme: what is the point of reducing this country to rubble? The stated intention at the start of the austerity package was to restore order: allow Greece to take a short hit to its GDP in the interests of building a stronger, more balanced economy in the long run. As it became clear that growth was not restored and that even on its own terms – the creditor must come first – the plan was failing, the line changed. It became a moral crusade, a collective punishment of the Greeks.

In 2012 the head of the IMF, Christine Lagarde, said in an interview with this newspaper, “Do you know what? As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax. And I think they should also help themselves collectively.” How? “By all paying their tax.” At the time, it sounded strange: how, in a country of cripplingly high unemployment, with whole families living off the depleted income of one pensioner, was the answer going to come from tax?

She was offering not a solution but a narrative: the Greeks were in this situation because they were bad people. They wanted a beneficent state, but they didn’t want to pool their resources to create one. The IMF was merely the instrument of a discipline they dearly needed. This line has broadly held – the debtors are presented as morally weaker than the creditors. To give them any concessions would be to reward their laziness and selfishness. The fact that debt is a two-way street – that the returns on debt exist because of the risk that the money might be lost, and creditors have their own moral duty to accept losses when they arise – is erased by this telling of the events.

Also airbrushed out of that story is what the late economist Wynne Godley called (in 1992!) the “lacuna in the Maastricht programme”: that while its single-currency proposal made provision for a central bank, it had nothing to say on the matter of what would replace the democratic institutions – the national governments whose power, once they had no control over their own currency, would be limited. Now we have our answer: the strongest takes control. At the moment, Germany knows best. How do we know they know best? Because they are the richest. The euro was founded on the idea that the control of currency was apolitical. It has destroyed that myth, and taken democracy down with it.

These talks did not fail by accident. The Greeks have to be humiliated, because the alternative – of treating them as equal parties or “adults”, as Lagarde wished them to be – would lead to a debate about the Eurogroup: what its foundations are, what accountability would look like, and what its democratic levers are – if indeed it has any. Solidarity with Greece means everyone, in and outside the single currency, forcing this conversation: the country is being sacrificed to maintain a set of delusions that enfeebles us all.

Greece crisis could be a Sarajevo moment for the eurozone

Franz Ferdinand Archduke of Austria and his wife Sophie, Duchess of Hohenberg moments before they were assassinated in Sarajevo on 28 June 1914. Photograph: Design Pics Inc/Rex/Design Pics Inc/Rex

Larry Elliott in The Guardian

Sunday 28 June 2015 19.15 BST

 A hundred and one years ago on Sunday, gun shots rang out in a city in southern Europe. Few at the time paid much heed to the assassination of Archduke Franz Ferdinand and his wife as they drove through the streets of Sarajevo. Within six weeks, however, Europe was at war.

Make no mistake, the decision by Alexis Tsipras to hold a referendum on the bailout terms being demanded of his country has the potential to be a Sarajevo moment. The crisis is not just about whether there is soon to be a bank run in Greece, although there is certainly the threat of one. It is not just about whether the creditors overplayed their hand in the negotiations, although they did. It is about the future of the euro itself.

Greek banks to stay closed on Monday

There will be much talk in the next few days about how Greece can be quarantined. The three people who have been leading the negotiations for the troika - Christine Lagarde of the International Monetary Fund, Jean-Claude Juncker of the European commission and Mario Draghi of the European Central Bank - can still cling to the hope that Tsipras will lose the referendum next Sunday.

In those circumstances, the Syriza-led coalition would have little choice but to hold an election. The return of a government headed by, for example, the centre-right New Democracy, would open up the possibility that Athens would sue for peace on the terms demanded by the troika.

There is, however, no guarantee of this. The troika was certain last week that Tsipras would fold when presented with a final take-it-or-leave-it offer. They were wrong. The Fund, the ECB and the European commission made a fatal misjudgement and have now lost control of events.

The immediate decision for the ECB was whether to cut off emergency funding before the country’s bailout programme formally ends on Tuesday. Wisely, it has chosen not to make matters worse.

In recent weeks, the Greek banks have only been able to stay open because Draghi has provided funds to compensate for capital flight. Sunday night’s announcement of an emergency bank holiday and capital controls demonstrates just how critical the situation has become.

Germany strongly supports the immediate end to emergency liquidity assistance (ELA), arguing that taxpayers in the rest of Europe should not be further exposed to the risk of a Greek exit from the single currency. The ECB, however, has always been reluctant to take what would clearly be a political decision to escalate the pressure on the Greek banks, and has announced that it will continue providing funding at last week’s level.

Greece crisis: a disaster for Athens and a colossal failure for the EU

Even so, Greece now faces a week of turmoil. Tsipras bowed what seemed to be inevitable on Sunday by announcing controls to try to prevent Northern Rock-style queues outside the banks and - just as importantly - money leaving the country.

The Greek government will also be making contingency plans for exit from the single currency. Tsipras and Yannis Varoufakis, his finance minister, say that is not their wish or intention, but if the result of the referendum backs the government’s stance it is hard to see any alternative. Cyprus stayed in the euro after introducing capital controls, but it was done with the approval of other single currency members and involved knuckling down under an austerity programme.

In the meantime, the blame game has begun. The creditors say they offered Greece a deal that would have secured future financing in return for reforms and budget savings which would have hastened the country’s economic recovery. Lagarde has said there is now nothing on the table and that Greece should not expect the same terms to be available after the referendum.

Tsipras said the troika was proposing an “extortionate ultimatum” of “strict and humiliating austerity without end”. A spokesman for Varoufakis said the referendum meant the end to five years of “waterboarding”.

The stance taken by the troika has been wrong-headed but inevitable. Greece has seen its economy shrink by 25% in the past five years. A quarter of its population is unemployed. It has suffered a slump of Great Depression proportions, yet the troika has been demanding fresh tax increases that will suck demand from the economy, stifle growth and add to Greece’s debt burden.

If Greece were outside the euro, IMF advice would be different. The fund would be telling Greece to devalue its currency. It would be telling the country’s creditors that they would have to take a “haircut” in order to make Greece’s debts sustainable. It would then justify domestic austerity on the grounds that the benefits of the devaluation should not be frittered away in higher inflation.

The Greeks for whom all the talk means nothing – because they have nothing

This option, though, has not been made available to Greece. It is unable to devalue and European governments are resistant to the idea of a debt write-down. So the only way Greece can make itself more competitive is to cut costs, by reducing wages and pensions.

A fully fledged monetary union has the means to transfer resources from one region to another. This is what happens in the US or the UK, for example, with higher taxes in areas that are doing well being redistributed to areas with slower growth and higher unemployment.

The euro, however, was constructed along different lines. Countries were allowed to join even though it was clear they would struggle to compete with the better performing nations such as Germany. A stability and growth pact designed to ensure a common set of budget controls was a poor substitute for fiscal union. From the start, it was obvious that the only mechanism for a country that ran into severe difficulties would be harsh austerity. Greece is the result of what happens when politics is allowed to override economics.

If Greece leaves, the idea that the euro is irrevocable is broken. Any government that runs into difficulties in the future will have the Greek option of devaluation as an alternative to endless austerity. Just as importantly, the financial markets will know that, and will pile pressure on countries that look vulnerable. That’s why Greece represents an existential crisis for the eurozone.

It will be said in response that Greece is a small, insignificant country and that the single currency has much better defences than it had at the last moment of acute trouble in the summer of 2012. Diplomats in Europe’s capitals took very much the same view in late June 1914.

My fix for the housing crisis: ban ownership by foreign non-residents

'Politics never looks more pitiful or, frankly, animal crackers than in the housing debate – it’s almost a relief when they don’t discuss it.' Photograph: Helen Yates

 Zoe Williams in The Guardian

It is the one point on which all people and parties agree: Britain’s housing problem is one of supply and demand. The solution is to build more homes. It doesn’t matter who owns them: once we have more supply, the normal market – where perfectly equal individuals reach great deals through mutual self-interest – will resume. This orthodoxy on house-building is so ingrained that if you query it you are regarded as a person who doesn’t understand supply and demand.

Last week the economist John Kay argued that, at the current rate of building – 100,000 homes in 2014 – even to replace existing stock will take 270 years, given that there are 27m dwellings in the country. But this is not accurate – there were actually 141,000 built last year, I guess he was rounding down for ease of arithmetic. It is not enlightening – like a TV chef filling a bus with sugar and yelling “Milwaukee consumes this much sugar every quarter”, the extension is supposed to give a sense of scale, but instead bestows senseless impotence. Ultimately, it is misleading; houses aren’t people, or crops: they don’t have to be replaced every year. Indeed, if you make them really well, you might expect them to last 270 years.

But the supply argument is not a simple mistake; it is deliberated and dearly held. Once you accept it, other things follow: supply is too low because planning is too stringent, because people are selfish and they would prefer to have a large garden than to help their fellow man. It follows also that supply wouldn’t be a problem if demand were lower, so now there are people to blame: immigrants, baby boomers with their great big houses, divorcees who have perverted the supply chain with their toxic personalities, people living alone, whose atomised existences are unsustainable in our tiny jewel of an island.

Home ownership: how the property dream turned into a nightmare

Supply-and-demand turns this into a character weakness. We’re all a little bit too selfish and nimbyish; we’re inconsistent, wanting our house prices to rise but moaning when our kids can’t get on the property ladder; we want cheap labour but don’t want to accommodate the new arrivals who provide it; we’re just bad people who have created the market we deserve; those who’ve had no agency –the under-30s – should direct their ire towards those who have – their own parents and grandparents.

This depressing analysis is, fortunately, quite wrong. The problem of supply, for one thing, is not one of planning but developer incentives. Land value rises faster than the value of housing stock: expecting developers to crack on, to build and sell, is to expect them to get rid of an asset that would otherwise rise in value. This system would work fine if property development were a social enterprise. However, where the aim is maximising shareholder value, these incentives more or less guarantee that they will drag their feet: land with planning permission will remain undeveloped; when it is developed, the housing stock will be thrown up as cheaply as possible.

This is really easily solved, without having to undertake a mass reversal of the modern psyche. We could have a land value tax; the Labour proposal to compulsorily purchase land that was left idle would have worked. The Conservatives branded that “Stalinist”, while including in their own manifesto the proposal to appropriate social housing, then sell it. Politics never looks more pitiful or, frankly, animal crackers than in the housing debate – it’s almost a relief when they don’t discuss it.

But that isn’t the half of it. What we have seen over three decades is a rise in house prices far beyond what people can afford. This is thought of as a London problem, but that can apply only to things that do not infect the rest of the nation. Beards are a London problem – unaffordable housing costs have already spread to Reading, Cambridge, Oxford, Bristol, Brighton and beyond. GDP figures are mainly telling a story of housing costs in the south-east. Cities where housing is less expensive have no part in this economic growth but are expected to rejoice in it anyway. This could never have happened through simple shortage. “The housing market,” wrote Faisal Islam in the Default Line, “is driven principally by the availability of finance, mainly mortgage debt, but sometimes bonuses, inheritances, or hot money from abroad.” He is not, by the way, a Marxist; his career as a broadcaster relies on his impartiality.

To deal with those in reverse order: the money from abroad needn’t even necessarily be hot – 75% of inner London housing is never shown on the UK market, going straight to mainly Asian investors. Last week I shared a panel with a developer, Martyn Evans, and we were looking at a website’s illustration of a block of flats aimed at foreign investors. Apart from Canary Wharf showing up in the background – a scene of geographical impossibility – the funniest bits were the characters: a young man who looked like Prince William, on his phone; a kid with a bunch of balloons, running past in a blur.

This was actually the main point of difference between Evans and me. (It is amazing how many developers also think the system is completely broken.) He said investors look for exactly the same qualities as residents do. No (I insisted): residents want somewhere to live. Investors want somewhere where their investment will be safe. What could possibly be safer than a place where multiple balloons can be carried? Who last saw a child carrying a bunch of balloons?

It has become so normal for housing to be sold abroad that to complain about it sounds old-fashioned, almost racist. However, when anybody from anywhere can buy a flat in your city, sooner or later the people who live and work in it won’t be able to afford to. Rents will become difficult – last week the average monthly rent in London hit £1,500 for the first time. Soon after that, your population is in lifelong servitude to a landlord class, or it moves to Wales. The solution could not be easier: we could ban the ownership of housing by foreign non-residents, as they do in Norway and Australia.

Inequality has also played its part, as salaries in the financial sector have ratcheted up what sounds reasonable. Yet far more important has been the role of banks in extending credit.

This is how money is created – banks lend it to people, and it appears in the economy. Of this lending, 85% is on existing residential housing stock. Essentially, what looks like economic growth is simply the extension of credit to fuel a housing boom. Banks cannot lose: instead of being indebted to them for 20 years, it’s 30; or owing them three times our salary, it’s six; the very luckiest among us have wandered into a state of debt peonage to a high street bank, while the unlucky – who will never get on to the housing ladder – work to service the investments of the lucky. This is a bit more complicated and may involve an overhaul in the way we create money.

But when we look at how badly things are being done – the vanishingly small number of people served by the status quo, the huge numbers, entire generations, who will have to live differently because of what we’ve allowed – this can’t be allowed to stand. So sure, we can talk about supply and demand, and even create the political will to do something about supply. But the exciting bit will start when we allow ourselves to think bigger.

Where Cruelty Is Kindness

Those who promoted laissez-faire economics required an explanation when the magic of the markets failed to deliver their promised utopia. Malthus gave them the answer they needed.

GEORGE MONBIOT in Outlook India

Kindness is cruelty; cruelty is kindness: this is the core belief of compassionate conservatism. If the state makes excessive provision for the poor, it traps them in a culture of dependency, destroying their self-respect, locking them into unemployment. Cuts and coercion are a moral duty, to be pursued with the holy fervour of Inquisitors overseeing an auto da fé.

This belief persists despite reams of countervailing evidence, showing that severity does nothing to cure the structural causes of unemployment. In Britain it is used to justify a £12 billion reduction of a social security system already so harsh that it drives some recipients to suicide. The belief arises from a deep and dearly-held fallacy, that has persisted for over 200 years.

Poverty was once widely understood as a social condition: it described the fate of those who did not possess property. England's Old Poor Law, introduced in 1597 and 1601, had its own cruelties, some of which were extreme. But as the US academics Fred Block and Margaret Somers explain in their fascinating book The Power of Market Fundamentalism, those who implemented it seemed to recognise that occasional unemployment was an intrinsic feature of working life.

But in 1786, as economic crises threw rising numbers onto the mercy of their parishes, the clergyman Joseph Townsend sought to recast poverty as a moral or even biological condition. "The poor know little of the motives which stimulate the higher ranks to action — pride, honour, and ambition", he argued in his Dissertation on the Poor Laws. "In general it is only hunger which can spur and goad them onto labour; yet our laws have said, they shall never hunger."

Thomas Malthus expands on this theme in his Essay on the Principle of Population, published in 1798. Poor relief, he maintained, causes poverty. It destroys the work ethic, reducing productivity. It also creates an incentive to reproduce, as payments rise with every family member. The higher the population, the hungrier the poor became: kindness resulted in cruelty.

Poverty, he argued, should be tackled through shame ("dependent poverty ought to be held disgraceful") and the withdrawal of assistance from all able-bodied workers. Nature should be allowed to take its course: if people were left to starve to death, the balance between population and food supply would be restored. Malthus ignored the means by which people limit their reproduction or increase their food supply, characterising the poor, in effect, as unthinking beasts.

His argument was highly controversial, but support grew rapidly among the propertied classes. In 1832, the franchise was extended to include more property owners: in other words, those who paid the poor rate. The poor, of course, were not entitled to vote. In the same year, the government launched a Royal Commission into the Operation of the Poor Laws.

Like Malthus, the commissioners blamed the problems of the rural poor not on structural factors but on immorality, improvidence and low productivity, all caused by the system of poor relief, which had "educated a new generation in idleness, ignorance and dishonesty". It called for the abolition of "outdoor relief" for able-bodied people. Help should be offered only in circumstances so shameful, degrading and punitive that anyone would seek to avoid them: namely the workhouse. The government responded with the 1834 Poor Law Amendment Act, which instituted, for the sake of the poor, a regime of the utmost cruelty. Destitute families were broken up and, in effect, imprisoned.

The commission was a fraud. It began with fixed conclusions and sought evidence to support them. Its interviews were conducted with like-minded members of the propertied classes, who were helped towards the right replies with leading questions. Anecdote took the place of data.

In reality, poverty in the countryside had risen as a result of structural forces over which the poor had no control. After the Napoleonic wars, the price of wheat slumped, triggering the collapse of rural banks and a severe credit crunch. Swayed by the arguments of David Ricardo, the government re-established the gold standard, that locked in austerity and aggravated hardship, much as George Osborne's legal enforcement of a permanent budget surplus will do. Threshing machines reduced the need for labour in the autumn and winter, when employment was most precarious. Cottage industries were undercut by urban factories, while enclosure prevented the poor from producing their own food.

Far from undermining employment, poor relief sustained rural workers during the winter months, ensuring that they remained available for hire when they were needed by farms in the spring and summer. By contrast to the loss of agricultural productivity that Malthus predicted and the commission reported, between 1790 and 1834 wheat production more than doubled.

As Block and Somers point out, the rise in unemployment and extreme poverty in the 1820s and 1830s represented the first great failure of Ricardian, laissez-faire economics. But Malthus's doctrines allowed this failure to be imputed to something quite different: the turpitude of the poor. Macroeconomic policy mistakes were blamed on the victims. Does that sound familiar?

This helps to explain the persistence of the fallacy. Those who promoted laissez-faire economics required an explanation when the magic of the markets failed to deliver their promised utopia. Malthus gave them the answer they needed.

And still does. People are poor and unemployed, George Osborne and Iain Duncan Smith claimed in this week's Sunday Times, because of "the damaging culture of welfare dependency". Earlier this month, Duncan Smith, in a burst of Malthusiasm, sought to restrict child benefit to two children per family, to discourage the poor from reproducing. A new analysis by the Wellcome Trust suggests that the government, which is about to place 350 psychologists in job centres, now treats unemployment as a mental health disorder.

The media's campaign of vilification associates social security with disgrace, and proposes even more humiliation, exhortation, intrusion, bullying and sanctions. This Thursday, the new household income figures are likely to show a sharp rise in child poverty, after sustained reductions under the Labour government. Doubtless the poor will be blamed for improvidence and feckless procreation, and urged to overcome their moral failings through aspiration.

For 230 years, this convenient myth has resisted all falsification. Expect that to persist.

There’s method in Greece’s madness – it could pay off

Iain Martin in The Telegraph
In the upper reaches of the Euro elite, where leaders are forever driving up to summit meetings in shiny German cars and looking grave and self-important for the cameras, where smooth diplomats know that the way to get business done is to do it discreetly with fellow officials, there is no surer sign that a colleague has gone stark raving mad than him announcing that he is going to hold a referendum on matters European.
It is bad enough that David Cameron has decided to put Britain’s future in the EU to the voters. But at least the UK Prime Minister has given warning several years in advance and has enlisted the support of the British business establishment to win his vote in 2017. By contrast, the Greek leader, Alexis Tsipras, announced on Friday that he wants to hold a referendum in Greece on the eurozone crisis on July 5.
In the eyes of the Euro elite, this momentous decision made Mr Tsipras the instant winner of the European madman of the year competition. Several years ago, when his now forgotten predecessor in Athens attempted a similar manoeuvre, demanding a public vote, the Germans ordered Georges Papandreou not to be silly. Indeed, the then French president, Nicolas Sarkozy, told President Obama that the Greek leader was a “madman”. Truly, that was the pot calling the kettle noire.
Now, Mr Tsipras wants his own vote. What does he think he is doing? Does he realise that this is not how the eurozone and the European Union work? Who knows what will happen if Greek voters are asked whether they approve of the final offer of new terms from stricken Greece’s creditors. Goodness, the voters might say no. So exasperted were the other Eurogroup leaders that on Saturday they decided that the referendum move means their latest offer is void and Greece is on its own. It looks as though the referendum will go ahead regardless.
That fear of referendums on the part of EU leaders and officials is rooted in bitter experience, of course. The messy attempt to smuggle the integrationist Maastricht Treaty past European electorates in the early Nineties was followed by the long-running wrangle over the abandoned EU constitution and the Lisbon Treaty. Voters are awkward. Sometimes they do not do as they are told by the leaders and officials who do the deals. Why take the risk?
But Mr Tsipras is certainly not mad, or not in the sense that he has lost his marbles. Despite his Marxist beliefs and trainee demagogue antics, there is something rather compelling about the cunning way in which he has handled this crisis and declined to be railroaded by the corporatist EU powers-that-be, even though he has been slapped in the face (literally, last week) by the atrocious Jean Claude Juncker, the president of the EU commission. This is to say nothing of the ineffective behaviour of the over-rated German chancellor, Angela Merkel, cooed over by diplomats and the foreign policy community despite no one ever being able to name a single great achievement or convincing act of leadership in her career other than the knifing of her mentor Helmut Kohl.
But surely the real madmen here are not the Greek Marxists at all. The real madmen are those who created the euro, this cock-eyed construct, who thought political dreams and vanity could trump economic sense and cultural and national differences, by creating a currency union on a vast continent without the necessary safeguards.
Yet instead of facing these realities, and accepting that the EU model as currently constituted has had it, the Europhile leaders intone pompously about European Union values being agelessly sacrosanct. It is as though these men and women believe themselves to be functionaries of the Holy Roman Empire, rather than representatives of a modern botched-together political experiment that was only created in its latest form when German and French politicians misdiagnosed the consequences of the end of the Cold War as recently as 1989 and prescribed the euro.
This weekend, as those in the markets brace for the likelihood of Grexit, and a mammoth default on debts of more than 300 billion euros, it seems likely that Mr Tsipras has wanted Greece out of the eurozone all along, pretending throughout the negotiations that he is trying for an accommodation and debt relief when really he wanted to leave. That is what observers of Syriza, his party, believe.
But Mr Tsipras had a problem when he came to power. Although many Greek voters like his style, they also liked the euro because it meant membership of a supposedly democratic club that confers respectability. That is why he had to be seen to try for a deal, to create the illusion of good faith, so that he can say to the Greek electorate that while he did his best, the wicked architects of austerity – the central bankers and International Monetary Fund technocrats who want to make poor Greek pensioners (age: 57) homeless – would not see sense.
Now, Mr Tsipras may win either way. Either the creditors retreat in the next few days, because European financial institutions are exposed and the IMF is looking at a giant hole in its books, thus enabling Syriza to proclaim victory. Or, much more likely, Greece defaults on its debts and reintroduces the drachma as its currency against a backdrop of grievance and anti-German feeling that will serve the Greek Left well for generations to come.
The Greek people certainly won’t be winners, or at least not in the short term. On Saturday they were jogging to their banks in preparation for a full-blown bank run, in the expectation that the government will have to introduce capital controls, restricting the flow of money out of the country. If it does not do this, then the banks will have to close their doors. On Tuesday, Greece will start defaulting on the first chunk of 9.7 billion euros it owes the IMF this year. And that is all before the expected referendum on Sunday, which is a vote on a deal that eurozone finance ministers are declaring void already. What a mess.
Leaving will not be easy, contrary to the predications of British Eurosceptics, or at least not straight away. The experience of previous major defaults and hasty reorganisations suggests that it is extremely difficult to hold down inflation. It is also unlikely that the high-taxing socialist Mr Tsipras will introduce the capitalist policies and reforms that will attract inward investment and grow the economy.
At this late hour, in the final act of the Greek drama, enter David Cameron, like a man who arrives at a pub when the other customers and staff are administering the kiss of life to a regular who has collapsed on the floor next to the bar after consuming way too much ouzo.
Mr Cameron clears his throat and asks if someone wouldn’t mind awfully getting him and his British friends a pint. There is silence, until someone points out that they have their hands full at the moment.
In a similarly fraught atmosphere, Mr Cameron was given a few minutes to read out his proposals for reform to EU leaders last week as they grappled with Greece and the migrant crisis in the Mediterranean. His demands – on benefits and the promise of a post-dated cheque guaranteeing who knows what from the other countries after the referendum – are pathetically small.
There remains one fascinating other possibility, however, which may get the escapologist Mr Cameron off the hook in that style of his to which we have all become so accustomed. If Greece does leave and the effects are explosive, then it might – just might – finally persuade the Euro elite that their approach is bust, and that what is needed instead is a way for Europeans to trade and be friends without the architecture of an integrationist, incompetent, failed super-state.

State or private? Painful school choice that still fuels inequality in Britain

Will Hutton in The Guardian

Locals and Harrow boys meet outside Lord’s at the 1937 Eton v Harrow cricket match. Photograph: Jimmy Sime/Getty Images

I remember vividly one harrowing night at the end of the school summer term 23 years ago. My nine-year-old daughter was inconsolable. All her friends were leaving her very good state school to be placed by their parents in various private schools in the Oxford area. She cried at her loss. My wife cried. Her younger sister cried, because her sister and mother were crying. The house was drenched in tears. We were living the continuing divisive disaster that is the British education system, the most socially engineered to advantage privilege in the world.

At the playground swings a few days earlier, I had overheard a group of mothers explaining to one another why they were going private. The state schools weren’t challenging enough for exceptional children like their own and the comprehensive was only just recovering from a reorganisation. They just weren’t prepared to take the risk. Best of all, their daughters could continue their friendships and mix with other children like them.

I remember thinking that the local comprehensive didn’t deserve such criticism; it got an exceptional proportion of its students to university. But it was part of the national conversation that there was little good in state education, dominated, as it was, by trade unions, trendy teaching methods, an ideology that all should have prizes and a general lack of commitment to excellence. Two years later, Chris Woodhead was appointed chief inspector of schools. The language and attitudes of those mothers at the swings suddenly became the lingua franca of the man charged with improving our schools.

His death last week was the trigger for another outpouring of brave-Chris-the-man-who-said-it-like-it-should-be-said pieces, admiring his honesty in declaring that there were 15,000 teachers who should be sacked, his excoriation of soft teaching methods and praise of his insistence that kids needed to acquire both skills and knowledge for knowledge’s sake. His target was the “blob”, the educational establishment identified by former education secretary Michael Gove, who defend “collectivist” public education and the mediocrity of the status quo. The consensus was that we need yet more of that energy now to mount the ongoing fight against the liberal/left blob still defending the indefensible.

Except there has been a quiet revolution taking place in our state schools, especially primary schools, which would be hard to imagine if the blob really was as effective in sustaining mediocrity as its critics say. The inconvenient truth is that the state school system is in the round good and improving. Sir Michael Wilshaw, who enraged so many educationalists by insisting when he took the job as chief inspector of schools that he would tolerate no excuses for failure, now declares that after 7,000 school inspections over the last year, 82% of primary schools and 71% of secondary schools are good or outstanding.

Governance is better; leadership is better; incentives are better; teachers are better motivated; trade unions support higher standards; academies are working; even initiatives such as Teach First are making a measurable difference. Indeed, a recent Sutton Trust report found that there are now 11,000 ex-Oxbridge teachers in the state sector, having doubled since 2003. Young men and women, as I know from my college in Oxford, want to make a difference to society rather than teach the already privileged. In some parts of the country, there has been something of a revolution. London now outperforms the rest of the country in GCSE and A-level results, a legacy of the last Labour government melding a Woodheadian commitment to academic rigour with more collectivist money and encouraging and rewarding better leadership. A generation of education reform has worked.

Yet I have no doubt that there are groups of middle-class mothers at playgrounds still shaking their heads at the well-publicised problems of the state system – despite its improvement. They need state schools to be crap to justify what would otherwise be an obvious attempt to advantage their own children over others and embrace the social apartheid of private education. The centre-right press ensures that every failing is magnified, every success under-reported. Wilshaw, complain centre-right commentators, has gone rogue. Doesn’t he know that state school teachers are unionised second-raters who don’t understand the importance of literacy and numeracy and who put up with disruptive classes? Ofsted should be abolished and the state school system dismantled into a system of free schools removed from all forms of suffocating public influence. Indeed, with the government pledged to create another 500 on top of 400 already created, the free school movement is well entrenched.

Which, as it grows, will become a disaster. The derided blob has always had one aim: to offer the best education for all. It probably did over-emphasise comprehensiveness over excellence in the 1970s and 80s, but those days are long gone. Today’s left/right blend of commitment to universality, less bad funding, rigour and leadership has worked. The danger is that the government is going to kill that alchemy and by rolling back universality, publicness and, crucially, the funding so crucial to recent success, further worsen the dreadful inequalities besetting education and wider society. But from their point of view, who cares? The casualties of this process don’t vote Tory anyway. Their constituency is the opters-out, private and public; 48% of Tory MPs are privately educated.

Opting out is the process that fuels inequality, still the hallmark of our education system. The Sutton Trust found that despite the recent improvement, children from the richer fifth of neighbourhoods are nine times more likely to go to a good university than the fifth from the poorest. Inequality defines life chances. Part of the explanation is private schools: part that socioeconomic background is crucial to family stability; and part that free schools and academies are disproportionately represented in richer areas. If we want a society in which the mass flourishes, then fragmenting our system into one built on autonomy, opting out and individualism – cementing inequalities – is precisely the wrong direction of travel.

Anthony Seldon, outgoing headmaster of Wellington College, complains of the narcissism of so many parents – videoing, rather than watching, school plays and rarely turning up for parents’ evenings. But that is where the values of libertarian conservatism leads. Looking back, my wife and I felt that parents like us should stand by the universal system; our daughter did well and many of her friends at the time, whose parents believed in their exceptionalism, have had unhappy lives. It would have been so much better if those children had been allowed to stick together in a system that spelled out their togetherness while teaching them with rigour. The English tragedy is that we will never get there.

Saturday, 27 June 2015

The work of a great teacher is for life

Michael Henderson in The Telegraph
Teachers, as John Osborne observed, are underpaid as child-minders, and overpaid as educators. DH Lawrence, who, like many writers, was a teacher, knew even more keenly the difficulty of imparting knowledge both to young people who are not particularly interested and to those who are. Education is a significant feature of his twinned novels, The Rainbow and Women in Love.
The wisest teachers understand that the best work they do may not be apparent for many years – decades, even. From the sunlit meadows of middle age, it is possible to recall those who taught us in our youth, and recognise the debt we owe them. But it would be a very precocious teenager who could say as much.
Getting good grades is important, but it is not the only important thing, and ultimately it is not the most important thing. Our lives are shaped by other forces, and so it is only with the passing of the years that we acknowledge the value of those teachers who opened doors, though we did not at the time recognise their many acts of kindness.

Last month, our school held a memorial service for an English teacher who opened doors aplenty, not least in the summer months when he captained a cricket team, the Vagabonds, that wandered around the villages of Derbyshire. Michael Charlesworth was a liberal, tolerant man who knew that our language was our greatest gift. He was also a superb director of plays, and a bit of a mummer himself.
Although he retired a quarter of a century ago, the chapel was full of people who had travelled from far and wide to celebrate his life. There were proper hymns, well sung, and Shakespeare made his customary appearance before Sir Christopher Frayling, one of Mike’s old boys, presented an address on behalf of us all. Then we recessed to the organ voluntary – the theme tune from Match of the Day!
Most people, one hopes, had a teacher like that. A Mr Chips figure – appropriate in this case, as the great Robert Donat film of 1939 was shot at our school. The horrible modern word is “inspirational” but if your life has been touched in some way, you feel it in your blood.
Sir Chris Woodhead, who died this week, admired Lawrence. He, too, understood the difficulties of “drawing out” (from the Latin verb “educare”), but he spent most of his life trying to do just that, first in the classroom and then as head of Ofsted. That he had to put up with years of abuse from bigoted, incompetent teachers was a tribute of sorts. He told them what they needed to hear but feared to be told.

Christopher Woodhead visiting Davenant Foundation School in Essex in 1998
If anybody required a reminder of just how ghastly some of these teachers were – and are – the evidence could be found on websites after Woodhead passed away. “May you rot in hell,” screamed one delightful scribbler. Consider those words, and imagine, if you can, the person who wrote them: an adult with responsibility for educating children.
Belatedly, there is recognition, even from his opponents, that Woodhead was on to something. Just as many teachers, the ones not brainwashed by the “holistic problematised pedagogies” that Woodhead liked to mock, realise that Michael Gove’s reforms are beginning to bear fruit.
Although, like every generation before, today’s pupils may have to wait years to find out how and why.

The real benefit cheats are the employers who are milking the system

In the last year, Tesco has cost the Treasury £364m in pay-rate supplements. Photograph: Carl Court/AFP/Getty

Deborah Orr in The Guardian

I really don’t know why the government is making such heavy weather of cutting £12bn off the benefits bill. That sum, and much more, could be cut at the stroke of a pen – though it would mean that the government would have to put its money where its mouth is and make it a legal requirement for employers to pay the living wage. If a company really can’t afford to, then it’s the company that should be applying for supplements, not the people who work for it.

Cameron wants to curb in-work benefits. No wonder: just £8bn on benefits goes to the unemployed, while an estimated £76bn, according to James Ferguson of Money Week, goes to people who are working. The government says this shouldn’t be happening. Cameron insists employers should be paying wages people can live on – which, funnily enough, is the sort of thing unions say, although they no longer have any power to make it happen.

It’s what Labour says, too, now the party is out of power. When it was in power, it avoided confrontation with employers offering poverty wages, and with the unions, by kindly offering to make up the difference between the minimum wage and a living wage via the benefits system.

It would be funny if it wasn’t so sad. The Tories excoriate Labour because Labour accepted the Conservative idea that employers should be freed from the burden of social responsibility. Labour spent a lot of money on protecting employers from such irksome duties. The Conservatives still don’t want to impose such irksome duties, but don’t want to stump up for the hefty bill that ensues from failing to do so either.

Just one of the woeful consequences of Labour’s drive to support employers by supplementing employees is that it makes the figures look like the Department of Work and Pensions is showering taxpayers’ money on the feckless, when it is actually showering taxpayers’ money on businesses. Employing someone has come to be seen as such a noble pursuit that businesses are paid to do it. Businesses don’t, of course, complain that this interferes with the free market. Money spent supplementing wages should be coming from the Business and Enterprise budget, with companies vetted to assess whether they are justified in offering pay below the living wage. Those who are can be offered loans to cover the difference, repayable in much the same manner as student tuition fees. They are hiring staff to grow their own businesses, after all. Such entrepreneurial risk-taking is seen as admirable. But when the taxpayer is taking on so much of the cost, and the benefit-receiving employee is getting so much of the blame, there’s really only sheer nerve and hypocrisy left to be admired.

Businesses, of course, would hate having to admit that they expect the state to prop up their poverty wages. They despise “red tape”, after all. Although that doesn’t stop them employing individuals who must submit themselves and their families to miles of red tape and minute government scrutiny because their wages aren’t enough to live on.

Work in the retail sector is notoriously badly paid, so it should be no surprise that around £11bn in in-work benefit is paid each year to people working in retail. Employees at Next receive more money in pay-rate supplements than the company pays in tax (about £2,087 per low-paid worker). In the last year, Tesco has cost the Treasury £364m in pay-rate supplements. Cameron talks about dysfunctional merry-go-rounds of tax and spend. But the culprits aren’t ordinary people scraping by. The culprits are employers milking the system.

The in-work benefits system also encourages businesses to employ lots of people part-time, rather than fewer people full-time. A couple has to work 24 hours a week to qualify for in-work benefits, and a single person 16 hours. The more part-time people you employ, the more the government is supplementing your payroll, and the easier it is to get competent staff on the cheap.

Much of the reduction in unemployment seen over the last couple of years is because people are taking part-time work when they would prefer full-time work. The government may trumpet the decline in unemployment. But its complaints about the cost of in-work benefits are an acknowledgement that the Department of Work and Pensions is paying out a lot of cash to make that happen.

A system that minimises costs while maximising profits is bound to result in a mismatch between what people earn and what it costs them to live. This tendency can be seen most clearly in the housing market. In 2009-10,according to House of Commons figures, 478,000 people with jobs claimed housing benefit, at a cost of £2.2bn. By 2014-15, it was 962,000 and £4.6bn, and it’s set to continue rising if things don’t change. What things?

It’s endlessly said by everybody that the social housing supply has to increase. But no one seems willing to take their valuable piece of land and render it much less valuable by building social housing on it, when they could keep it as an asset or sell it to private developers instead. Private landlords are the obvious beneficiaries.

But again it’s the person claiming the housing benefit that is seen as the problem, not the person who wants the “market rate” when the market isn’t paying it. Again, the person making the profit gets the benefit, rather than the person who doesn’t have enough income to put a roof over his head. Just as it’s time to restrict state benefits paid to employers via employees, it’s time to restrict benefits paid to landlords via tenants.

The Conservatives, I’m afraid, seem to do nothing at all in government except complain that Labour spent too much money on mitigating the effects of the previous Conservative government’s policies. Employers are allowed to set wages and landlords allowed to set rents without regard to the amount of money people have to live on. The least the state can do is be honest about the amount of state money that is spent on defending the right to make profits, instead of blaming the hapless citizens from whom the profit is wrung.

Friday, 26 June 2015

Dutch city of Utrecht to experiment with a universal, unconditional income

Louis Dore in The Independent

The Dutch city of Utrecht will start an experiment which hopes to determine whether society works effectively with universal, unconditional income introduced.

The city has paired up with the local university to establish whether the concept of 'basic income' can work in real life, and plans to begin the experiment at the end of the summer holidays.

Basic income is a universal, unconditional form of payment to individuals, which covers their living costs. The concept is to allow people to choose to work more flexible hours in a less regimented society, allowing more time for care, volunteering and study.

The Netherlands as a country is no stranger to less traditional work environments - it has the highest proportion of part time workers in the EU, 46.1 per cent. However, Utrecht's experiment with welfare is expected to be the first of its kind in the country.

Alderman for Work and Income Victor Everhardt told DeStad Utrecht: "One group will have compensation and consideration for an allowance, another group with a basic income without rules and of course a control group which adhere to the current rules."

"Our data shows that less than 1.5 percent abuse the welfare, but, before we get into all kinds of principled debate about whether we should or should not enter, we need to first examine if basic income even really works.

"What happens if someone gets a monthly amount without rules and controls? Will someone sitting passively at home or do people develop themselves and provide a meaningful contribution to our society?"

The city is also planning to talk to other municipalities about setting up similar experiments, including Nijmegen, Wageningen, Tilburg and Groningen, awaiting permission from The Hague in order to do so.