If we want to solve the housing crisis, we must answer these three questions

Paul Mason in The Guardian

As housing charity Shelter turns 50, the country is still plagued by overcrowding, rogue landlords, insecure tenancies and homelessness. How do we even begin to make things better?



Boys from the City Of London school on a charity walk in aid of Shelter from Blackfriars, London, to Windsor, Berkshire, on 26 March 1969. Photograph: Len Trievnor/Getty Images


Its official name was Navigation Street, and a glance at a 19th century map suggests its origin: an isolated row of terraced houses leading down to the canal that runs through the middle of my hometown.

Canals were originally called “navigations” and the people who dug them “navvies”. This term – still in use in the 1960s – was code for poor, itinerant, Irish manual workers. So we called it “Navvy Street”: it was where the poorest people in the town lived and probably served that function from when it was built to when it was knocked down and turned into a “close”.

Navigation Street was the place I thought of when the housing charity Shelter reissued documentary photographs from the 1960s to mark its 50th anniversary. If you flick through Nick Hedges’ photos now, you could be forgiven for thinking they depict some kind of uniform, northern industrial bleakness at of the time. But you’d be wrong.



Shelter and the slums: capturing bleak Britain 50 years ago



The overcrowding, dirt and abject poverty in those images shocked people because they were exceptional. Two decades of post-war social housebuilding, plus a pro-active welfare state, had done a lot to suppress poverty. Places like Navigation Street were rare by the late sixties.

Shelter was born because people realised dwindling number of classic slum streets were not the only problem: there was widespread hidden homelessness expressed through overcrowding. The private rented sector was utterly insecure and housing costs were devouring the incomes of the poor.

Skip forward 50 years and we too have rising homelessness – 54,000 families in England last year, up 36% since the financial crisis began. Housing charities record rising overcrowding, precarious tenancies, predatory landlords and unaffordable rents. The difference is it’s not only the poor who suffer.

The shared student house has been reincarnated as the shared young professional’s house, with some even forced to share rooms. According to Crisis, there are 3.5m households containing a “concealed” adult or couple in England.

Meanwhile apartments too small to live in are being built across southern England: their occupants will have jobs once considered middle class. Precarious tenancies, outlawed during the housing reform movement of the 1960s, have created a “complain and you’re out” culture.

If you wanted to photograph the modern housing problem you’d go to the coffee shops where young people perch over laptops, late into the night, rather than endure their overcrowded flat. You would photograph the sofa-surfers; the migrants forced to live in converted garages; the families packing their bags as rent hikes and benefit cuts in the private rented sector force them to move to the periphery of towns and cities, or throw themselves at the local council for help.

The root of this problem is not one of policy – though the row over social housing and housing supply will probably shape this parliament – the deeper problem is the financialisation of home ownership.

At one point, rising home ownership solved many of the problems identified the 1960s. The predictably steady rise in house prices over time, like predictable inflation, created an escalator for the working class. If you combined that with vigorous social housebuilding, as practised by both Labour and Conservative councils in the 1970s, you created affordability at both ends of the scale.

If you then dramatically slash the supply of social housing, through right-to-buy and reduced council building, you create a permanent imbalance that turns home ownership into a form of asset investment.



‘Pay to stay’ trap will force working families out of council homes



What you get then is boom and bust. And the only way to cure the bust is for the government to greet every collapse in market prices with effective state subsidies for home ownership. This, in turn, induces a speculative frenzy of one way bets – on development, on buy to let, on off-plan investment buying from abroad.

To economists who study financial frenzy, the British housing market has followed the classic curve: the certainty of rising prices and short supply draws more and more people into the market, knowing a crash cannot wipe them out – because when confronted with falling house prices, governments have used taxpayers’ money and micromanagement of the banks to halt a spiral of repossessions and falling prices.

We don’t know what Britain would look like if the same levels of explicit subsidy and implicit preference had been pumped into the social rented sector. All we know is that the current situation is not tenable.

But we can ask ourselves the following questions:

First: how much space are people entitled to live in? The market sets no limits; even such formal rules as they still exist (they are being weakened) are flouted by the young salariat.

Second: what is the optimal balance between the private, social and state-owned rented housing and the owner-occupied sector? This cannot be hard to fathom since many cities in the 1980s and early 1990s achieved housing markets that “cleared” in economic terms: in Leicester in the 1980s I had no problem finding a secure private tenancy; no problem getting the council to hound my landlord to maintain it properly; very little problem moving from there to a housing association flat; very little problem transferring, as a key worker, from there to a council flat in London. Yes, London.

Third, what do we mean by “affordable”– when it comes to either rents or prices on state-specified newbuild homes? Under both Labour, Coalition and the Conservatives the concept of affordability has become delinked from incomes and attached to a percentage of the market rate. The same state that decided nobody should be repossessed during the 2008-11 housing slump could decide that nobody has to pay more than a fixed percentage of their incomes on housing costs.

Maybe we need to start with principles: that everyone has a right to a home; that every person has a right to a minimum amount of space in that home; and that those who claim the right to own houses nobody lives in should pay a hefty, disincentivising penalty.

Yes, that’s an infringement of the market – but housing in Britain has never been a free market: it is being created and re-created through regulation and deregulation – on benefits, on affordability, on building standards, on right to buy. The point is to shape the market towards smart outcomes.

This NHS crisis is not economic. It's political

Aditya Chakrabortty in The Guardian


As the health services endures its biggest squeeze, talk of it being unviable is wide of the mark. We cannot afford to do without it

 

Patients wait for spaces in A&E at Royal Stoke university hospital in Stoke-on-Trent. A&E waiting time targets have been watered down in recent years. Photograph: Alicia Canter for the Guardian


How many times have you read that the NHS is bust? No need for answers on a postcard: I can tell you.

Over 2015, the number of national newspaper headlines featuring “NHS” alongside the words bust, deficit, meltdown or financial crisis came to a grand total of 80. Call this the NHS panic index – a measure of public anxiety over the viability of our health service. Using a database of all national newspapers, our librarians added up the number of such headlines for each year. The index shows that panic over the sustainability of our healthcare isn’t just on the rise ­– it has begun to soar.


During the whole of 2009, just two pieces appeared warning of financial crisis in the NHS. By 2012 that had nudged up a bit, to 12. Then came liftoff: the bust headlines more than doubled to 30 in 2013, before nearly tripling to 82 in 2014. Newspapers such as this one now regularly carry warnings that our entire system of healthcare could go bankrupt – unless, that is, radical change ­are made. For David Prior, the then chair of the health watchdog the Care Quality Commission - and now health minister, that means giving more of the system to private companies.

This means that the press and political classes are now discussing a theoretical impossibility. Think about it for a moment, and you realise the NHS can’t go broke. It’s not an endowment with a set pot of cash, but a giant service with a yearly budget. Unlike a business, it doesn’t need to raise money from sales – as taxpayers and voters, we have the final say over how much funding it gets. This panic isn’t economic at all, but politically created.

The balance to be struck with the NHS, as with all public services, is between how much cash we sink into it and how much we expect in return. Give the NHS less money, get less healthcare. Give it more, and the opposite happens. As Rowena Crawford at the Institute for Fiscal Studies says: “Financial stability just requires that healthcare demand and expectations are constrained to match the available funding.”

And that right there is the rub. Because the NHS is enduring the sharpest and most prolonged spending squeeze in its history – even while the government pretends no such thing is happening and the public expect the same service. Our health service is where all the paradoxes of austerity come home to roost.

This may seem an odd thing to say. Isn’t the NHS one of the very few parts of the public realm to be sheltered from this decade’s cuts? Didn’t David Cameron promise before the last general election to “protect the NHS budget and continue to invest more”?

  David Cameron addresses the Tory conference in October 2014. Photograph: Facundo Arrizabalaga/EPA

The figures suggest otherwise. True, the NHS is seeing a rise in its funding. Between 2010 and 2014, health spending went up 0.8% each year, adjusting for inflation. A plus sign in front, granted, but a teeny-tiny one – since its creation in 1948, the health service has never had it so bad. Over this decade as a whole, that allocation will amount to 1.2% a year, which is way down on the average 3.7% that health spending grew each year between 1949 and 1979. And, coming after the 6.7% extra that Gordon Brown was shovelling in annually by the time of the banking crash, it feels like a recession.

So on the one hand, you have a healthcare system that can cause even the most secular of Brits to get religion, that can drive Telegraph-reading colonels to channel their inner Nye Bevan – hell, that even beats Justin Bieber to a Christmas No 1. And on the other you have a Tory prime minister who wants to cut public spending but knows that harming the NHS will be electoral poison.

Put the two together and what do you get? A dangerous muddle of overspending, frontline service cuts and political self-denial.

Cameron pretends the NHS isn’t on austerity rations and expects it to do the same work to pretty much the same targets. The various parts of the NHS try to do just that with a budget smaller than they need, with the result that they begin missing targets and making cuts even while breaking their budgets.

Take the A&E waiting times. Under Labour, the old rule was that 98% of patients must be seen within four hours. Soon after Cameron moved into Downing Street in 2010, the target was watered down to 95% of patients – even so it is now routinely missed. The number of patients stuck on trolleys in A&E, while staff try to find them beds is now at levels that “no civilised society should tolerate”, according to the Royal College of Emergency Medicine .

Even while falling short, arm after arm of the NHS is now in the red: 95% of hospital and other acute care providers in England plunged into deficit in the first half of the financial year starting in April, joining 80% of ambulance providers and 46% of those in mental health.

Demoralised staff can resign, go on an agency book, pick their shifts and earn more

You might treat all this as argument for NHS staff to be more productive. Except that, as John Appleby of the King’s Fund thinktank argues, they are. He calculates that, had NHS activity only gone up in line with government money, between 2010 and 2015 it would have treated 3.7 million fewer outpatients and 4.5 million fewer A&E patients than actually got seen.

This is productivity as doing more with less, which is almost always unsustainable. A real increase in productivity would come from doing things differently. There’s certainly scope to do that – by doing more phone consultations with GPs, perhaps, or upgrading technology. One joke among NHS professionals runs that, in all of China, there’s but one factory left still making fax machines, and that its only client is the NHS. But this sort of change is never going to come in an organisation now in a frenzy of cost-cutting.

One example of NHS austerity’s screwy logic is its sudden reliance on expensive agency staff. This, says Anita Charlesworth of the Health Foundation charity, is a direct result of staff pay freezes and overwork: “If you’re a permanent member of staff and you’ve had no pay rise and you’re demoralised and disengaged you can resign from the NHS, you can go on an agency book, you can pick your shifts, you can pick your wards and you earn more.”

The result is that agency staff costs are rising at over 25% a year.


Meanwhile, NHS England pretends it can cap hospital deficits for the year at £2.2bn – even though in the first six months alone that had already hit £1.6bn . Some of Britain’s biggest and most renowned hospitals are now actively planning on ending the year in the red. And Appleby points out that everything from patient time with doctors and nurses to repairs of your local hospital’s roof is being sacrificed in order to do the same work with less money.

“I can see another Jennifer’s ear coming,” Appleby says, referring to the five-year-old with glue ear who waited a year for a simple operation and ended up being used by Neil Kinnock to attack John Major on health spending. “Only this time it probably won’t be something as innocuous as glue ear. It might be a child who dies of cancer because their medical care has been so drastically cut.”

As societies get richer and older, they spend more on healthcare. Compared with nearly everyone else in western Europe, the UK spends much less of its national income on health. By the end of this decade, we will be even further behind. Meanwhile, pundits will continue to claim the entire system is unaffordably expensive, even while the public still want and need doctors and nurses, their medicines and operations.

This is the paradox of austerity: pretending that you can scrap and scrimp on the services and institutions that make you a civilised country, without making your country less civilised.

When economists ignore the human factor, we all pay the price

Timothy Garton Ash in The Guardian

Economics is not a hard science, and mathematical models won’t explain why people behave as they do. A much broader perspective is needed.

 

Adair Turner argued that ‘the dominant strain of academic economics and of policy-making orthodoxy’ failed to see the crisis coming. Photograph: Bloomberg via Getty Images



The Guardian recently asked nine economists whether we’re heading for another global financial crash and they gave many different answers. Yet still we turn to economists as if they were physicists, armed with scientific predictions about the behaviour of the body economic. We consumers of economics, and economists themselves, need to be more realistic about what economics can do. More modesty on both the supply and the demand side of economics will produce better results.

Following the great crash that began nearly a decade ago, there has been some soul-searching about what economics got wrong. Probably the self-criticism should have been more far-reaching, both in academia and banking, but it’s there if you look for it. In particular, the economic thinkers loosely clustered around George Soros’s Institute for New Economic Thinking (Inet) have produced a telling account of what went wrong.

Adair Turner, who saw top-level decision-making as head of Britain’s Financial Services Authority and now chairs Inet, gives a measured, cogent version of the critique in his book Between Debt and the Devil. Yes, leading academic economists did challenge the mathematical models of market perfection and, yes, financial markets may have followed oversimplistic versions of those models. Nonetheless, Turner argues, “the dominant strain of academic economics and of policy-making orthodoxy” failed to see the crisis coming, and actually contributed to it.
The key flaws were the efficient market hypothesis and the rational expectations hypothesis: economists too often assumed that market actors not only behave rationally but do so according to the same mental models deployed by economists. (Soros himself has spent a half century trying to expose this fallacy.) Modern big-picture economics (macroeconomics) also “largely ignored the operations of the financial system and in particular the role of banks”.

Market fundamentalism understood itself as the diametric opposite of the communist command economy, but in fact made the same cardinal mistake: to believe that a rational model could encompass, predict and optimise the dynamic complexity of collective human behaviour. As Roman Frydman and Michael Goldberg write: “Like a socialist planner, the economist thus believes that he can accomplish great feats, because he supposes that he has finally uncovered the fully determined mechanism which drives market outcomes.”

Large parts of academic economics fell prey to what has been called physics envy, by analogy with the Freudian notion of penis envy. Like some other areas of social science, it aspired to the status, certainty and predictability of physics. I have long thought that this hubris was fed by the fact that economics, alone among the social sciences, has a Nobel prize. Strictly speaking, it is only the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, endowed by the Swedish central bank and first awarded in 1969, not one of the original Nobel prizes. But everyone calls it the Nobel prize. Moreover, politicians and decision-makers listen to economists in ways that they don’t, for example, listen to political scientists of the rational choice school that dominates many American university departments. This may partly be because a politician who practised rational choice politics would soon be kicked out of office, whereas the public has had to pick up the bill for those who practised rational choice economics. 

This does not mean we should not pay attention to economists, nor that economics is unworthy of a Nobel prize. It just means it’s not a hard science like physics. Done properly, it takes account of culture, history, geography, institutions, individual and group psychology. John Stuart Mill said: “A man is not likely to be a good economist if he is nothing else,” and John Maynard Keynesobserved that an economist should be “mathematician, historian, statesman and philosopher in some degree”.

In another remarkable formulation, Keynes wrote: “Economics is essentially a moral science.” Indeed, one could argue that the Nobel prize for economics belongs somewhere midway between those for physics, literature and peace.Economics is, at best, a multidimensional, evidence-based craft, alert to all the influences on human behaviour, at once ambitious in scope and modest in its claims for what we can ever predict in human affairs.

What should follow from this revised, new-old understanding of the character and place of economics? I don’t know enough about university economics courses to say whether they need to adapt, but I was struck by a manifesto published a couple of years ago by economics students at Manchester University. This advocated an approach “that begins with economic phenomena and then gives students a toolkit to evaluate how well different perspectives can explain it”, rather than mathematical models based on unrealistic assumptions. (A colleague of mine claims to have heard a fierce argument between two economists in the common room of Nuffield College, Oxford, which culminated in one exclaiming to the other: “All right, assume immortality!”)

If economics is like other disciplines, it probably changes more slowly than it should, because of the strong inertial effect of older faculty personally invested in a certain way of doing the subject. Then there’s the conduct of major players, be they ministers, central bankers or business leaders. I recently read a splendidly robust lecture by the veteran investor Charlie Munger, Warren Buffett’s partner in Berkshire Hathaway, delivered in 2003, well before the crash. “Berkshire’s whole record has been achieved without paying one ounce of attention to the efficient market theory in its hard form,” he said, adding that the results of that efficient market doctrine in corporate finance “became even sillier than they were in the economics”.

Munger’s sage advice was to restore economics’ proper multidisciplinary character, not overweighting what can be counted against the unquantifiable, nor yielding to the craving for false precision, nor privileging theoretical macroeconomics over the real-life microeconomics that helped guide Berkshire’s long-term investment decisions.

We ordinary punters should learn the same lesson. We should ask of our economists, as of our doctors, only what they can deliver. There is a scientific component to medicine, larger than that in economics, but medical studies themselves indicate how much our health depends on other factors, especially psychological ones, and how much is still unknown. Economists are like doctors, only less so.

Defending the Diaspora

Picture shows Indian nationals stranded in Yemen being evacuated from Djibouti on board an Indian Air Force aircraft.

Nitin Pai in The Hindu


New Delhi ought to review the risks to its diaspora populations and create the capacity to act in their interests should the need arise — without offending foreign governments, of course.

Many people involved in the massive evacuation of Indian expatriates from Kuwait in 1990 are disappointed at the mischaracterisation of the role of the politicians, diplomats and airline officials in Airlift, a new Hindi film based on that incident. While film-makers have dramatic licence to set fiction against facts, diplomats are rightly upset that the story of the biggest ever air evacuation in history, carried out by a resource-strapped government in the throes of political and economic crises, has deliberately painted foreign service officers in negative light.

K.P. Fabian, who headed the Gulf desk at the Ministry of External Affairs (MEA) during that episode, is quoted in this newspaper as saying “young people who are watching this film are getting a wrong impression of their history”. Nirupama Rao, former Foreign Secretary, criticised the production of falling short on its research. Even the MEA’s official spokesperson stepped in to set the record straight. It is unfortunate that the producers felt the need to reinforce popular prejudices of uncaring bureaucrats in that one area where that prejudice could not be more wrong.

Whatever you might think of the Indian government, when it comes to expatriate citizens in conflict zones, our diplomats go to great extents to ensure their safety. The airlift from Kuwait is only the biggest and the most famous one — more recently Indian diplomats and armed forces coordinated mass evacuations from Lebanon (in 2006), Libya (2011) and Yemen (2015). This is a job our diplomats, armed forces and airline officials do well, and it is unfair and self-defeating to cast them in poor light.

The damage, however, is done. But the public interest arising from the movie and the debate over the accuracy of its portrayal of the government’s role is a good opportunity to focus on the issue of diaspora security.Indians around the world

According to government figures, as of January 2015, there were 11 million Non-Resident Indians (NRIs) and 17 million Persons of Indian Origin (PIOs) around the world. The largest populations were in the Gulf, the United States, United Kingdom, Southeast Asia and Nepal. On the thin end, there were seven Indians in North Korea, two in Nauru and one in Micronesia.

Until the turn of the century, the government’s relationship with overseas Indians has been twofold. Indian citizens (NRIs) were treated differently from ethnic Indians holding other citizenships. While the government concerned itself with the former, the latter were encouraged to be loyal and upstanding citizens of their respective countries.

In the recently released Netaji Files, in 1960, Prithi Singh, India’s envoy to Malaya, reminds headquarters that “our own expressed policy has been to encourage persons of Indian origin, domiciled abroad, to absorb themselves into the life of these countries and I feel that any step which we might take which helps them to maintain rigidly their emotional and/or communal links with India, actually prevents them from giving their whole-hearted loyalty to the countries of their adoption”.

This policy has served India and overseas Indians well. If the Indian diaspora is highly successful and integrated into the societies around the world, it is in part due to the fact that the loyalties of persons of Indian origin are beyond doubt. They might retain Indian customs and faith, but they bat for the interests of the country they are citizens of.

Courting the diaspora

The longstanding policy began to shift in the 1990s, with India looking East and West initially due to economic adversity and subsequently due to opportunity. The Atal Bihari Vajpayee government put the courtship on a formal footing with a high-level committee recommending the long-term visas under a PIO Card Scheme, a grand conference and recognition in the form of awards. The United Progressive Alliance government constituted an entire ministry for overseas Indians which, wisely, the Narendra Modi government has recently decided to merge back into the MEA.

No Prime Minister has gone so far out to court overseas Indians as Narendra Modi. Reaching out to the humble construction worker, the middle-class professional and the wealthy elite has galvanised the emotional links NRIs have with their home country. Mr. Modi has reinforced the growing feeling among NRIs since the turn of the century that India is a great country to be from.

Mr. Modi’s highly publicised engagement of overseas Indians changes the tenor of the government’s old policy to downplay their emotional links to India. It is for the Prime Minister to decide what the new policy should be. What we should recognise is that change comes with risks that need to be managed.

First, to the extent that New Delhi is seen to engage NRIs and protect their interests in foreign countries, foreign governments will not consider it an intrusion in their politics. However, if New Delhi begins to speak out on behalf of ethnic Indians who are not Indian citizens, then the interventions are likely to encounter resistance. In 2007, Malaysian politicians reacted viciously when Indian politicians made comments critical of Kuala Lumpur’s strong-arm tactics against its Indian minorities.

The modern world is constructed on the Westphalian model, where sovereign states relinquished their right to intercede on behalf of their religious and ethnic kin in other sovereign states. To violate this norm risks inviting any number of foreign interventions into our own domestic affairs.

Second, the reputation that PIOs have cultivated over several decades for being loyal citizens of the countries they live in can come under a shadow. In many parts of the non-Western world, countries are still reconciling with their nationhood and identity.

Any suspicion, even at the margin, of PIOs having multiple loyalties can be detrimental to their interests. Notice how the Singapore government insisted that only NRIs attend Mr. Modi’s public event, demarcating the line between its own citizens of Indian ethnicity and expatriates with Indian citizenship. 

Airlifts of the future

Finally, the airlifts and naval evacuations of the future might be more complex in a context where there is a conflation of NRIs, PIO card-holders and other ethnic Indians with foreign citizenships. During crises when time and resources are tight, who should Indian diplomats prioritise? Will they have moral grounds to put non-citizens on a lower priority than citizens? If they do, what impact will it have on the Indian government’s reputation and the expectations it has created? New Delhi ought to review the political and security risks to its diaspora populations and create the capacity to act in their interests should the need arise.

It is unclear if India’s overstretched diplomatic corps has been tasked with paying greater attention to multilateral arrangements, institutions and agreements that pertain to diaspora-related interventions.

Similarly, the external intelligence establishment needs to be reoriented towards gathering and analysing information relating to the threats that diaspora populations might face. The conceptual move from defending the homeland to defending the diaspora needs a concomitant retooling of government machinery.

Diaspora security will require more naval ships, wider patrolling, foreign berthing and outposts. Military heavy lifting capacity apart, it will also require policy measures, like for instance, licence conditions in civil aviation requiring private airlines to put their aircraft and crew at the government’s disposal during emergencies.

The commitments that India makes require the state to have the capacity to redeem them. If we widen the scope of our commitments, we must invest in the capacity to carry out the airlifts of the future.