The Coalition’s Social Policy Record 2010-2015

Posted on January 27, 2015 by dnmufc

This paper summarises nine detailed reports assessing the social policies of the
UK Coalition government elected in 2010. What did the Coalition set out to
achieve? How much was spent and saved? What policies were enacted and with
what effect?
– The Coalition made ‘tackling our record debts’ its most urgent task. However, it also aimed to
deliver radical reforms to achieve ‘a stronger society, a smaller state and responsibility in the
hands of every citizen’.
– Rapid and far reaching reforms were enacted: re-structuring the NHS; expanding the number of
Academies; starting to introduce Universal Credit; pension reforms; widening non-state provision,
increasing local autonomy and reducing eligibility for services and benefits.
– The Coalition’s decisions to offer relative protection to schools, pensions and the NHS meant that
its austerity programme was more limited overall than its rhetoric suggested, and was
concentrated in particular policy areas. Total public spending fell by 2.6 per cent between
2009/10 and 2014/15. However, “non-protected” services were cut by around one-third.
– Although the Coalition stressed the importance of the “foundation years”, real spending per child
on early education, childcare and Sure Start services fell by a quarter between 2009-10 and
2012-13 and tax-benefit reforms hit families with children under five harder than any other
household type. Provision for adult social care users fell 7 per cent per year during the Coalition
period to 2013/14.
– Despite a promise that the better-off would carry the burden of austerity, changes to direct taxes,
benefits and tax credits affected poorer groups most. After initial protection ended, estimates
suggest that poverty increased to 2014/15 and will get worse in the next five years.
– It is too early to assess the full effect of the Coalition’s structural reforms (such as changes to the
school system). Whoever is elected in May 2015 will face many continuing issues including child
poverty, unaffordable housing, pressure on the NHS and social care from an ageing population, a
regionally unbalanced economy, low wages and insufficient affordable childcare. The ‘cold climate’ for social policy – very high public sector debt and a high deficit – also remains.

The Coalition’s Inheritance

The Conservative – Liberal Democrat Coalition that took power in May 2010 inherited a particularly tough fiscal climate. By the end of 2009/10 net public sector debt had reached £956.4bn (62 per cent of GDP), while the current budget deficit stood at £103.9bn (6.9 per cent of GDP). These figures were very high for the UK by recent standards and reflected the impact of the global financial crisis that affected most major world economies in similar ways. Strategic choices had to be made: should public spending be maintained in a Keynesian move to support economic growth, or cut in order to pay down the debt quickly? Should efforts to balance the public finances focus on tax increases or spending reductions? Who should bear the burden of these efforts?
On the issues that are the principal concern of our enquiry – social outcomes, poverty and inequality – the Coalition inherited a better situation than its predecessor. Labour’s social policy programmes had delivered expanded public services. Socio-economic gaps in access to services had decreased. Economic and social outcomes, such as pupil achievements and child poverty, had also generally improved, while differences between the most and least deprived social groups narrowed.

But a lot remained to be done. Child and pensioner poverty had fallen, but overall income inequality had not. There were still large social class gaps in health, early childhood development, school achievement, university participation, and neighbourhood living conditions. An ageing population made the funding of health, social care and pensions increasingly challenging. Other pressures included rising unemployment, concerns about the quality of care, and a chronic under-supply of housing.
What were the Coalition’s aims and goals?

The incoming Government declared that its most urgent task was to tackle the country’s debts. But it also insisted that fairness would lie at the heart of its decisions “so that those most in need are most protected”. The better-off would be expected to: “pay more than the poorest, not just in terms of cash, but as a proportion of income as well”.
Beyond deficit reduction, the Coalition set a further goal of improving social mobility and creating a
society where “…everyone, regardless of background, has the chance to rise as high as their talents and ambition allow them”. Reforms to ‘welfare’, taxation and education were promised, with devolution of decision-making powers from central to local government and communities. Defining its core values as “freedom, fairness and responsibility”, the Coalition pledged to deliver “radical reforming government, a stronger society, a smaller state and power and responsibility in the hands of every citizen”.
What did the Coalition do?

Cut public spending, rather than raising taxes

A fundamental decision announced in the Coalition’s first, “emergency” Budget was to target deficit reduction through spending cuts (77 per cent) much more than tax increases (23 per cent). On the taxation side of its strategy, the Coalition raised the VAT rate from 17.5 to 20 per cent, and increased Capital Gains Tax for higher rate taxpayers. Yet room was also made for sizeable tax cuts – including raising the Income Tax personal allowance from £6,475 to more than £10,000. Corporation Tax was cut, and, from 2013/14, the Income Tax rate for people earning over £150,000 was reduced from 50 per cent (recently introduced by Labour) to 45 per cent.

Gave relative protection to the NHS and schools, but made deep cuts to other budgets

The Government chose to maintain spending in some policy areas and implement deeper cuts
elsewhere. Budgets for the NHS and schools, accounting for more than a quarter of total departmental expenditure, were relatively protected. Spending on health grew in real terms by 2.7 per cent between 2009/10 and 2013/14: a real increase although a smaller growth rate than in previous years and much lower than the increase in need (for example as measured by the increasing elderly population). Schools expenditure fell by less than one per cent up to 2012/13 (the latest data available). A Pupil Premium, paid to support pupils from low-income families, helped maintain school budgets and also directed money towards those in more disadvantaged contexts.
Although funding for schools and 16 to 19 year-old learners was protected, the budget for adult skills training was reduced by 26 per cent between 2009/10 and 2013/14. Higher education spending was also cut – by 44 per cent in the short-term – as government grants for teaching were replaced with student tuition fees and loans.
The biggest losers among ‘non-protected’ services were those provided by local councils. Between 2009/10 and 2014/15, local government funding in England fell by an estimated 33 per cent. Within particular service areas, spending on children aged under five fell 21 per cent between 2009-10 and 2012-13, with falls of 11 per cent for early education and 32 per cent for Sure Start. These reductions coincided with a 6 per cent increase in the number of under-fives. Spending on housing and community amenities, which includes funding to build social housing, fell by 35 per cent between 2009/10 and 2013/14. All the main central government funding streams for neighbourhood renewal were removed. Budgets for residential homes and other adult social care community services were cut by 7 per cent between 2009/10 and 2013/14, while the population aged 65 and over grew by 10 per cent.
Uprated pensions, while reducing other social security budgets

Pensions were protected from Coalition commitments to curtail spending on social security. A ‘triple lock’ was put in place requiring them to be uprated each year by earnings growth, price inflation or 2.5 per cent, whichever was highest. In contrast, cuts were made elsewhere by restricting eligibility for tax credits and working-age benefits and imposing new conditions on claimants. Benefits were made less generous by a change to the inflation index used for annual adjustments and by below-inflation increases from 2012-13, as well as cuts for particular groups.
Restructured the welfare state
Alongside spending cuts, the Coalition embarked on an extensive restructuring of welfare state
institutions. In education, it vastly extended Labour’s programme of directly-funded Academies, and enabled ‘Free Schools’ to be set up by groups of parents, charities or other institutions. Higher education regulations were changed to allow new providers to offer degree qualifications. In the NHS, government introduced major reforms emphasising competition, decentralisation, a range of provider types (public, private and third sector) and outcomes. Delivery of a new, consolidated Work Programme, helping jobseekers to gain employment, was contracted-out on a ‘payment-by-results’ basis. Social housing providers were encouraged to seek more private funding for new homes, charge rents closer to market levels, and move away from ‘tenancies for life’.

‘Localism’ provided another key theme. Government regional offices and regeneration programmes, were abolished in favour of local decision-making. Local government finance was reformed to provide more incentives for economic development. In addition, two elements of the social security system – the Social Fund and Council Tax Benefit – were devolved to local authorities, both with reduced budgets. New rights were also conferred on community groups. Local government assumed new responsibilities and powers in the context of public health and the public health budget was devolved. However, with the exception of public health, the expansion of local powers and responsibilities took place at a time when budget cuts gave local authorities less capacity to make use of them.
The Coalition also shifted the boundaries of welfare provision, in many cases moving away from
‘progressive universalism’ towards greater targeting. Eligibility was restricted for some benefits and services. Extra conditions were imposed, particularly for out-of-work benefits, along with tougher penalties for not meeting them. In some areas, financial responsibility underwent a wholesale shift from the state to the individual; for example, by trebling university student tuition fees in England and by introducing adult learning loans. In social care there were moves in both directions: on the one hand tighter eligibility criteria for receipt of social care services shifted responsibility towards individuals and their carers; on the other hand the Care Act 2014 introduced a lifetime cap on the total long-term care costs individuals would in future be required to pay.

Embarked on reforms to the content and design of services

In some policy areas the Coalition’s reforms went deeper into the content and design of services, living up to its promise of sweeping changes. These changes are described in detail in the papers that underpin this summary report. For example, the school curriculum and examination system in England were overhauled, justified on the grounds of making them more rigorous, and a new system of teacher training was introduced. In adult skills training, the Coalition instituted changes to the length and quality of apprenticeships, designed to bring England closer to European systems. One of the most ambitious reforms was a complete overhaul of working-age benefits and tax credits, bringing most of them into a single system, Universal Credit (UC), designed to incentivise work and get rid of complicated overlaps in means-tests and taxation. While many people support the principles behind UC, it proved challenging to implement, and there are remaining concerns about its design and the capacity of the IT system to cope with the number of monthly changes in circumstances which will be required. Just 18,000 people were receiving it late 2014, against an original target of 2 million.
What were the results?

Cuts in many services and increasing pressure on others

‘Unprotected’ services have been substantially reduced. In adult social care, where spending was cut despite a growing elderly population, there was a falling caseload (down 25 per cent from 2009/10 to 2013/14) (Figure 1) and ‘intensified’ focus on supporting those with the greatest needs. Housing policies made little impact on the supply of new homes. Between 2010 and 2013 an average of 139,000 new homes per year were completed, compared with 190,000 under Labour. There were 17 per cent fewer adult learners as course funding was curtailed, and loans introduced. Centrally funded neighbourhood renewal activity was drastically reduced, while economic regeneration programmes performed well below expectations in terms of business and job creation. Despite Government endorsements for voluntary activity and a ‘Big Society’, Third Sector budgets also fell, with cuts estimated between 50 and 100 per cent in some deprived neighbourhoods.

Falling number of people receiving community-based, residential or nursing care
services through local authorities, (England).

In early years services, the number of Sure Start children’s centres fell from 3,631 in April 2010 to 3,019 in June 2014, although survey data showed that many of those remaining expected to maintain, or even expand, the services they provided, in part by making them more targeted. There was also new early education provision for 2-year olds and the number of health visitors and Family Nurse Partnership provision for teenage parents expanded.
‘Protected’ areas have been less hard hit. In education, the Coalition kept school funding resources broadly stable. In England, the number of schools increased, pupil-teacher ratios were maintained, and while the average class size increased in primary schools, it fell in secondary schools. Although there were more 16-19 year learners, the proportion not in education, training or employment fell. Health services were protected relative to other areas but pressures on access and quality began to emerge as increases in demand outstripped increases in spending. The proportion of cancer patients seen within 62 days declined and fewer hospitals met their Accident and Emergency waiting-time targets. Public satisfaction with the NHS, measured by the British Social Attitudes Survey, fell from 70 per cent in 2010 to 60 per cent in 2013. Among employment services, the new Work Programme proved cheaper, though no more effective, than its predecessors.
Tax and benefit changes benefited richer groups more, while contributing nothing to deficit
reduction

Despite the Coalition’s insistence that “those with the broadest shoulders should bear the greatest
burden”, the poor bore the brunt of its changes to direct taxes, tax credits and benefits from May 2010 to 2014-15. Up to 2014/15, the poorest twentieth lost nearly 3 per cent of their incomes on average from these changes (not allowing for VAT and other indirect taxes) and people in the next five-twentieths of the income distribution lost almost 2 per cent. With the notable exception of the topmost twentieth, those in the top half of the distribution were net gainers from the changes. Perhaps surprisingly, overall the ‘welfare’ cuts and more generous tax allowances balanced each other out, contributing nothing to deficit reduction.

The combined impact of direct tax and cash transfers was mostly regressive, moving
incomes from poorer households to those that were better off.

Early protection for the poor, but increasing poverty later

As a result of decisions made under Labour and initially continued, benefits rose in line with inflation during the Coalition’s first two years at a time when real earnings fell during the recession. The result was that poverty measured in relation to median incomes (before housing costs) fell until 2012-13. Income inequality also fell during election year 2010-11 and held steady up to 2012-13 at its lowest level for a quarter of a century. However, figures measuring poverty against a fixed income threshold show an increase over the same period – the more so when housing costs are taken into account.
These latest official figures pre-date most of the Coalition’s welfare reforms coming fully into effect.
Modelling analysis by the Institute for Fiscal Studies suggests there will already have been a sharp rise in relative poverty (and in poverty against a fixed line) between 2012/13 and 2014/15 for children and for working-age non-parents, and then a further rise to 2020/21, with the relative child poverty rate reaching 21 per cent, up 3.5 percentage points from 2012/13. Qualitative evidence suggests growing hardship since 2013 among households affected by a combination of falling real wages, rising fuel and food costs, changes to benefit rules, and sanctions.
Pensioners were protected, children less so

As far as taxes and benefits (including pensions) are concerned, pensioners continued to be relatively favoured. As a share of national income, transfers to pensioners had increased under Labour from 5.4 per cent of GDP in 1996-97 to 6.6 per cent in 2009-10. This was also the proportion in 2014-15, although a peak of 6.9 per cent was reached in 2012-13. However, pensioners with care needs were affected by cuts to adult social care.

Meanwhile the cost of working-age benefits not related to having children fell from 3.4 per cent in
2009/10 to 3.1 per cent in 2014/15, and spending related to children from 2.8 per cent to 2.3 per cent of GDP by 2014-15. Concerns about future social mobility might be raised as young children in low-income families were affected by cuts to spending on services, as well as by reductions in benefits for the underfives. On the other hand, poorer school age children received additional help through the Pupil Premium. Fears that the abolition of the Education Maintenance Allowance and the rise in university tuition fees would widen socio-economic gaps in further and higher education participation have not been borne out to date. In fact the proportion of young people not in education, employment and training fell for the first time in a decade in 2013, and increasing numbers of disadvantaged young people applied to university.
Too early to tell for many social and economic outcomes

Most data indicating changes in outcomes are only available until 2012 or 2013, making it impossible to assess the full impact of Coalition policies. The data available to date show that progress in many areas continued in the new government’s early years, but much of this must be considered the legacy of the previous government, since many policies were not fully implemented in the period covered. An exception is education, where, up until 2013, attainment continued to improve and socio-economic gaps to narrow, although no immediate accelerating effect of the Pupil Premium was evident. Early indications are that these gaps may widen when 2014 results are released, since poor pupils have tended to rely more on the vocational qualifications that now carry less value in school league tables.
The overall picture is that there has been little significant change, as yet, in many of the key indicators of social progress and equity. Health inequalities remain deeply entrenched. There is no evidence of closing socio-economic gaps in child development. Gaps in worklessness and poverty between the poorest neighbourhoods and others reduced as the economy recovered, but not quite back to their preeconomic-crisis levels. The Coalition did preside over positive trends in employment, which rose to a new peak in summer 2014, higher than before the crisis. But wages fell and much of the increase was in self-employment and part time working. Some indicators were less positive. Unmet needs for care among the elderly increased. Housing became increasingly unaffordable and homelessness increased.
Still high levels of debt and deficit, and further cuts to come
The protection of health, schools and pensions from major spending cuts meant that even with
reductions of around a third in some other services, the scope for budget savings was limited. Overall, the effect of all the Coalition’s measures in the current parliament has been to cut public spending by 2.6 per cent in real terms, from £674bn in 2009/10 to £656bn in 2014/15 (at 2009/10 prices). As GDP grew, this brought spending down from a peak of 47.1 per cent of GDP in 2009/10 to 43.7 per cent in 2014/15.
The current budget deficit was reduced from 5.9 to 3.5 per cent of GDP. However, public sector net debt rose to 80 per cent of GDP by 2014/15. Current plans to address this are predicted to reduce public spending overall to 38.2 per cent of GDP by 2018/19. Day-to-day spending on public services (excluding benefits and debt repayments) is predicted to fall to its smallest share of national income at least since 1948.

Conclusions

There is no doubt that the Coalition Government formed in 2010 faced a very tough fiscal climate and ongoing social policy challenges. Its response was to seek to reduce the deficit quickly. It also decided to achieve most of its fiscal rebalancing through public spending cuts rather than increased taxes, and to protect the NHS, schools and pensions – all very big areas of public spending – from major cuts. And it implemented some expensive commitments, notably increasing the income tax personal allowance to £10,000 and a more generous system for uprating state pensions.
These decisions meant that while the overall reduction in public expenditure has been less than three per cent, very substantial cuts were made in unprotected areas, largely in local services. In the tax and benefits system, pensions were protected and benefits to lower income families were reduced, while there were tax reductions for some better off households. Despite the aim that the better-off should contribute a greater share of income than the poor, the reverse was the case across most of the income distribution. Poverty rates measured against a fixed threshold rose to 2012/13 (the latest official data) and are predicted to rise further, and there are signs of increasing material deprivation and hardship arising from a combination of rising costs of living, reductions in the value of benefits and eligibility and short-term benefit sanctions. Meanwhile, the ‘protected’ NHS has experienced real average annual expenditure growth rates that have been positive but exceptionally low, while adult social care services have been cut.

Although current public attention rests on ‘the cuts’, the Coalition’s large-scale reforms designed to
reduce the size of the state, stimulate private and voluntary provision and increase personal
responsibility may ultimately prove its biggest legacy. It is too soon to establish their effects on social and economic outcomes. Whoever is elected in 2015 faces a welfare state in flux, with fundamental changes to the NHS, schools, and benefits still underway. At the same time, many problems that the Coalition inherited remain. Increasing need for health and social care, unaffordable housing, a regionally unbalanced economy, and continuing labour market inequalities all remain to be tackled, as do child poverty, insufficient high quality affordable childcare, a weak system of apprenticeships for young people and relatively ineffective mechanisms for helping workless people back into work. The next Government, like the Coalition, will need to address these issues in the context of high public sector net debt and a current budget deficit, and with many of the most straightforward cuts already made. The climate for social policy and those most affected by it will remain cold for the foreseeable future.

Further information

The full version of this paper The Coalition’s Social Policy Record: Policy Spending and Outcomes 2010-2015, is available at http://sticerd.lse.ac.uk/dps/case/spcc/RR04.pdf. It is a summary of nine detailed accounts of changes under the Coalition in all the topics mentioned in this paper: cash transfers, health, adult social care, housing, employment, the under fives, schools, further and higher education and area regeneration. Readers wanting further details are advised to go to the individual papers which can be found at http://sticerd.lse.ac.uk/case/_new/research/Social_Policy_in_a_Cold_Climate.asp. All the papers are part of
CASE’s research programme Social Policy in a Cold Climate (SPCC), funded by the Joseph Rowntree Foundation, the Nuffield Foundation, and Trust for London. The views expressed are those of the authors and not necessarily those of the funders.

Ruth Lupton, with Tania Burchardt, Amanda Fitzgerald, John Hills, Abigail McKnight,
Polina Obolenskaya, Kitty Stewart, Stephanie Thomson, Rebecca Tunstall and Polly
Vizard

The Coalition’s Record on Adult Social Care: Policy, Spending and Outcomes 2010-2015

Posted on January 27, 2015 by dnmufc

Approaching 1.3 million older people and younger disabled and mentally ill adults
use social care services in England, and 3.2 million are cared for informally, by their
families and friends. How did the Coalition respond to long-term pressures that are
putting care services and carers under growing stress?

– The Government legislated to make more people with modest wealth eligible for publicly funded
support, by raising the capital threshold used as a means test from £23,250 to £118,000 (from
2016) and introducing a lifetime cap on care costs. However, this cannot be expected to have much
impact on continued under-funding for social care as a whole.
– Public spending on social care has failed to keep pace since the mid-2000s with demand for
services from growing numbers of older people. Spending cuts imposed by the Coalition intensified
the pressure on social services from 2010 onwards.
– Overall spending is projected to have fallen by 13.4 per cent over the Government’s five years in
office. Already by 2013/14, 17.4 per cent less was being spent on services for older people. By
contrast, the number of people aged 65 and over increased by 10.1 per cent over the same
period, including an 8.6 per cent increase in the population aged 85 or over.
– The number of people receiving publicly-commissioned adult social care services fell by one quarter
between 2009/10 and 2013/14 from 1.7 million to below 1.3 million. Care at home and other
community-based services were hit especially hard, resulting in an average 8 per cent reduction in
the number of users each year.
– The number of people with learning disabilities using community-based services grew slightly, but
all other client groups experienced cuts. The number of service users among working-age adults
with mental health problems dropped by 37 per cent and the number of physically disabled users
aged 65 or over fell by 32 per cent.
– Local services were increasingly targeted on adults assessed as having the most complex needs.
The proportion of social care clients being supported for five or fewer hours a week declined from
37 per cent to 28 per cent between 2009/10 and 2013/14. The proportion receiving care for more
than ten hours a week increased from 34 per cent to 45 per cent. At the same time, nearly three quarters
of councils now arrange some social care visits as short as 15 minutes.
– Monitoring of care services based on users’ perceptions suggests some quality of life outcomes
have improved. Nevertheless, statistics on the abuse of vulnerable adults show 37,685
substantiated cases in 2013/14, while Care Quality Commission inspections revealed serious
concerns about the quality of care in a fifth of nursing homes and a tenth of residential care
homes.

http://sticerd.lse.ac.uk/case/_new/news/year.asp?yyyy=2015#772

The Coalition’s Record on Health: Policy, Spending and Outcomes 2010-2015

Posted on January 27, 2015 by dnmufc

David Cameron promised in 2010 to “cut the deficit, not the NHS”. But how have the Coalition’s policies – including health reforms which are widely viewed as going beyond election commitments – impacted on health?

– While the Coalition has ‘protected’ health relative to other expenditure areas, growth in real health spending has been exceptionally low by the standards of previous governments. Average annual growth rates have lagged behind the rates that are deemed necessary to maintain and extend NHS care in response to increasing need and demand.
– Forecasts warn of an NHS ‘funding gap’ as wide as £30bn by 2020/21 unless the growing pressures on services are offset by productivity gains and funding increases during the next Parliament.
– Major health reforms emphasising decentralization, competition and outcomes have been implemented. These have transformed the policy landscape for the commissioning, management and provision of health services in England. The overall framework for political responsibility and accountability for health services in England has also changed.
– Minimum care standards, inspection and quality regulation have been revised and strengthened following the Mid-Staffordshire NHS Foundation Trust Public Inquiry.
– Key indicators point to increasing pressure on healthcare access and quality. These include indicators on patient access to GPs, accident and emergency services and cancer care. Public satisfaction with the NHS is considerably lower than a peak reached in 2010.
– The UK’s ranking on OECD “international league tables” remained disappointing for some health outcomes including female life expectancy and infant mortality.
– Suicide and mental health problems remained more prevalent following the 2007 economic crisis.
– Health inequalities remained deeply entrenched. The difference in average life expectancy between men living in the poorest and most prosperous areas of England is nine years, and six years for women.

http://sticerd.lse.ac.uk/case/_new/news/year.asp?yyyy=2015#772

The Chancellor’s 2014 Autumn Statement: Missed targets and missed opportunities

Posted on December 4, 2014 by dnmufc

George Osborne’s Autumn Statement was a reminder of the government’s missed targets and missed opportunities, writes John Van Reenen. The Chancellor’s promise to eliminate the structural deficit has failed spectacularly and the UK economy is barely above its pre-crisis level, a major cause of which was the the decision to launch a premature austerity programme in 2010. Crucially, Osborne’s plans fall short in addressing Britain’s chronic problem of low productivity.

There are things to like in the Autumn Statement. The reforms to end the “cliffs” in stamp duty and make it more graduated tax are welcome, but even better would have been to replace stamp duty entirely with a tax on land values. Rather than taxing people who move, tax the unmoveable wealth that they have. And if you have to raise taxes, few will feel sympathetic with multinationals who will find it harder to avoid taxes or banks who won’t be able to offset their accumulated losses against future taxes.

But the economic elephant in the room is what has happened to productivity. GDP per hour is over 15 per cent below where we would have expected on long-term pre-2008 trends. This is why wages are so low and the deficit remains high. There is nothing serious in the Chancellor’s plans to tackle this pressing issue.

Missed Fiscal Targets

In 2010 George Osborne pledged to eliminate the structural deficit by the end of this Parliament – the 2014/15 financial year. This has spectacularly failed to happen with forecasts of government borrowing rising to £91 billion this year and no expectation of balancing the books before 2018/19. And don’t hold your fiscal breath on it happening even by then.

So what went wrong? Less income taxes have come in than expected in the last year, partly because of the increase in personal allowances, but mainly because of low pay. It’s a stunning fact that real earnings have fallen by over 8 per cent since 2008. Many jobs have been created, but they have generally poorly paid. Low wages, low taxes.

Harpo Marxist Economics

The fundamental problem is that growth has been pretty lousy under the Chancellor’s rule. Don’t be fooled by the 3 per cent headline GDP growth rate. The size of the economy is barely larger than it was on the eve of the crisis representing the worst recovery in over a century. Our faster growth this year is like a “Harpo Marx” effect. The story goes that when Harpo was asked why he was banging his head against a wall. He responded “because it feels so good when I stop.” Similarly, it is unsurprising to have strong growth when you’ve been pushed so far underwater. The real surprise is why it took so long.

A major cause of low growth was the Chancellor’s decision to launch a premature austerity programme in 2010 which choked off the nascent recovery. Austerity eased somewhat since 2012/13, but even the OBR estimates that this knocked off a percentage point off growth per year in 2010/11 and 2011/12. The Eurozone crisis also played a part, as EU leaders administer the same fiscal medicine as Dr. Osborne with similarly disappointing results. Southern European countries can at least say they have no choice if they wish to keep the Euro, but there is no excuse for Northern EU countries like Germany to insist in balancing their own budgets in the face of serious deflationary risks.

Attempting even more severe austerity to meet the 2010 targets – as some on the right have argued – would have been an even more serious error. Like the government’s policy to reduce net migration to under 100,000, it is better to fail at imposing a silly policy than to cause terrible harm in trying to meet it.

But what to do about the productivity elephant?

As analysed by the LSE Growth Commission, Britain has a chronic problem of low productivity rooted in the failure make long-term investments. We argued that we could address this though radical supply side changes in the way we support innovation, and educate, tax and finance our citizens.

A major way of reducing public spending after 2010 was to slash public investment. With low interest rates, under-utilised resources and falling private investment, this was the exact opposite of standard economic advice. The outcome was widely predicted – rather than building, we dug ourselves into a deeper economic hole.

Some of this infrastructure destruction has been reversed, but the Chancellor plans again to accelerate public spending cuts to pay for tax cuts after the election. Since public investment creates capital that can be used in the long-term, it should not be lumped in with current spending like civil service salaries. But for purposes of creating an absolute budget surplus it has been and so, once again, will be ripe for the chop. The Liberal Democrats and Labour rightly want to keep capital investment separate. Let’s hope, if re-elected, this will be one more target that the government misses.

About the Author

John van Reenen is Professor of Economics at the LSE and Director of the Centre for Economic Performance. He tweets from @JohnVanReenen

http://blogs.lse.ac.uk/politicsandpolicy/the-chancellors-2014-autumn-statement-missed-targets-and-missed-opportunities/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BritishPoliticsAndPolicyAtLse+%28British+politics+and+policy+at+LSE%29

Hey UKIP, this is awkward – Daily Mirror

Posted on November 13, 2014 by dnmufc

Posted by Mike Sivier Reblogged from http://voxpoliticalonline.com/2014/11/09/hey-ukip-this-is-awkward-daily-mirror/

Vox Political has tried to resist this, but the graph is just too significant to ignore. From the Daily Mirror:

New research has shown recent immigrants have made a net contribution of £25bn to the UK over the last ten years.

That means immigrants who have arrived in the country since 2000 have paid more in taxes than they have received in benefits and services.

Over the same period the native UK population used £617bn more in services and benefits than they paid in taxes.

A lot of it is down to age. When we look at adult populations, which this study did, immigrants are likely to be younger – which means they have more of their working lives ahead of them. The native population, on the other hand, contains far many more retired people, who use much more than they pay in.

In 2011, the last year for which the study had data, the average age of someone born in the UK was 40. The average age of an immigrant from Europe was 34 and from elsewhere 32.

The UK-born population is also more likely to claim benefits and social housing, according to the study.

Immigrants from the European Economic Area make the strongest contributions, including those from the ‘A10′ countries which joined the EU in 2004 – for example Poland, Latvia, Lithuania.

An immigrant is much more likely to have a degree than someone born in the UK. The difference is even more stark if you look only at recent immigrants – 62% of immigrants from non-A10 EU countries (e.g. France, Italy) have a degree.

Far fewer immigrants are under-educated. This year in the UK around half of the population over 23 left school before 17. Only 1 in 5 immigrants from Europe has similarly low education, and 1 in 4 from outside Europe.

The study suggests that the cost of all immigrants was a loss to the UK of £113bn between 1995 and 2011, although that’s somewhat mitigated by the estimated £35bn saving made through their being educated abroad.

A recent Ipsos Mori poll found we think there are twice as many immigrants as there actually are – 24%, when the reality is 13%. This is a pattern of error repeated across the world.

Unemployment rate could be twice as high as figures claim

Posted on November 13, 2014 by dnmufc

Reblogged from http://voxpoliticalonline.com/2014/11/12/unemployment-rate-could-be-twice-as-high-as-figures-claim/

12 Wednesday Nov 2014

Posted by Mike Sivier

The Office for National Statistics has put out new figures on the number of people in work – and it’s more than last month. Hooray!

But, as ever, the devil’s in the detail and – as usual – the small print is annoyingly devoid of the detail we need. Boo!

We are told that figures for September showed employment continued to rise (by 112,000 since the April-June period) and unemployment continued to fall (by 115,000 people). There appear to be 3,000 people for whom these figures don’t account. Interesting…

(Perhaps they’re now on Universal Credit – as those figures aren’t counted in these figures, meaning the current way of calculating these statistics is misleading from the start.)

Pay rates – excluding bonuses – was 1.3 per cent higher than at this time last year. This was being trumpeted as a huge success, as pay has risen about the Consumer Price Index (CPI) calculation of inflation, which stood at 1.2 per cent in September. What a shame the more accurate (which is why the government doesn’t use it) Retail Price Index (RPI) calculation of inflation stood at 2.3 per cent, well above in increase in pay rates.

Let’s all take a moment to remind ourselves of where those wages are going, too. Tom Pride, over at Pride’s Purge, has a little graphic for it, which is stolen and reproduced below:

So all those bankers, directors and MPs are taking all the cash, leaving the rest of us with – what? This article suggests that, when you take out all the variations – like bonuses, wages for people who do real jobs (unlike bankers, directors and MPs) increased by just 0.6 per cent in the past year. That’s from the Bank of England.

If employment has increased – and there’s no reason to say it hasn’t – we can also conclude that the reason employers are more willing to take people on is that they can pay peanuts for them and rely on the government to top them up with in-work benefits. It seems likely that the work was always there but employers weren’t going to take anybody on if it meant increasing the wages bill and reducing the amount of profit available to them. Now that zero-hours contracts are available, along with part-time schemes that deny people pensions and holiday pay, it’s a different matter.

Of course the trade unions are in no position to stand up for workers’ rights – they have been stripped of any influence over the past 35 years of neoliberal, free-market rule.

The number of people who were self-employed increased by a staggering 186,000, to reach 3.25 million, while people working as self-employed part-time increased by 93,000 to reach 1.27 million. That’s 4.52 million – almost one-sixth of the total number of people in work. If you think that’s great, you haven’t been paying attention. Remember this article, warning that the increase was due to older people staying in work? And what about the catastrophic collapse in self-employed earnings we discovered at the same time?

How many of these are people who have been persuaded to claim tax credits as self-employed people, rather than jump through the increasingly-difficult hoops set out for them if they claimed Jobseekers’ Allowance – and do they know they’ll have to pay all the money back when their deception is discovered?

The number of people in part-time employment has also increased, by 28,000 to reach 6.82 million. Are we to take it that this means under-employment has increased again?

Public sector employment has fallen again. If you want to know why the government keeps messing you around, there’s your answer. There aren’t enough people to do the job. This month’s statistics show 11,000 fewer public sector employees than in March, and 282,000 fewer than this time last year.

Unemployment is said to have dropped – but remember, this is not counting people who have been sanctioned. A recent study by Professor David Stuckler of Oxford University suggests as many as half a million people could have been sanctioned off-benefit in order to massage the figures, meaning that the total listed – 931,700 – is probably wrong. Remember also that Universal Credit claimants aren’t counted, nor are those on government work schemes – another 123,000 people.

This means the actual unemployment rate is likely to be double the number provided by the official statistics.

And what about people on ESA/DLA/PIP?

It’s said that the numbers don’t lie.

What a shame that can’t be said about the people manipulating them.

Scottish politics has turned upside down since the independence referendum

Posted on November 13, 2014 by dnmufc

Events in Scotland illustrate how a political situation can change very quickly. Paradoxically, the real winner of the 2014 independence referendum was the SNP, who have seen a surge in membership, while Labour and the other unionist parties are floundering. Thomas Lundberg looks at the aftermath of the referendum and the puzzling situation of winners turning into losers.

People outside Scotland could be forgiven for being puzzled about recent events ‘north of the border’. After all, didn’t the Unionist cause triumph in September’s Scottish independence referendum? Since then, the Scottish National Party (SNP) and Scottish Green Party, both supporters of Scottish independence, have more than tripled their membership. The SNP has surged in the opinion polls, endangering Scottish Labour at next May’s Westminster election. Events in Scotland illustrate the importance of multilevel governance and party systems, as well as how a political situation can change very quickly.

While nearly 45 per cent of Scottish voters said ‘Yes’ to independence, the break-up of the United Kingdom was prevented by the 55 per cent who voted ‘No’. Only hours after this result was reached, Prime Minister David Cameron moved the proverbial tanks onto the Labour Party’s lawn, saying that any significant increase in the devolution of power to Scotland would require a change in voting practices so that MPs at Westminster from the 59 Scottish constituencies would no longer be able to vote on bills deemed as affecting only England. Labour Party leader Ed Miliband rejected the linkage of enhanced Scottish devolution to what is sometimes labelled ‘English Votes for English Laws’ (EVEL), proposing instead a convention to examine Britain’s constitution more broadly. Both politicians have been criticised for evading the so-called ‘vow’ to grant Scotland greater autonomy, a promise that might have persuaded some voters not to vote for independence in the expectation of having ‘the best of both worlds’, whatever that means.

It is unlikely that the Smith Commission, an all-party group investigating routes to greater autonomy, will propose significantly enhanced devolution of power to Scotland unless the May 2015 Westminster election yields a hung parliament. The Conservatives, while supporting more radical tax proposals than Labour, are probably concerned about the prospect of too much decentralisation and how that might harm the centre, while Labour worries about the potential for undermining the British welfare state and the prospect of curtailing the voting rights of MPs from outside England. The SNP, however, will seek to gain as much extra power for the Scottish Parliament as possible, trying to satisfy both independence supporters and those who want ‘devo max’, the devolution of all domestic matters (basically home rule). Recent opinion polling reveals that the SNP is so far ahead of its traditional rival, Scottish Labour, that the latter would be nearly wiped out at Westminster. Such an outcome in May would have implications beyond Scotland – it would probably deny Labour a majority, keeping David Cameron in Downing Street if he can do some kind of deal with the smaller parties that might hold the balance of power.

Labour’s problems in Scotland result from both the sudden resignation of its Scottish leader, Johann Lamont, and from the perception, held by many of its traditional supporters, that the party betrayed working-class Scotland in the independence referendum campaign, doing the Tories’ dirty work. Class was one of the biggest demographic dividing lines in the referendum, with poorer people more likely to support independence than the affluent, who would have more to lose if things went wrong. The likely replacement for Lamont, Jim Murphy, may have a higher profile, but he also comes with a lot of Blairite baggage, such as his support for invading Iraq and for maintaining Trident, the nuclear deterrent based in Scotland. Such right-wing positions, as well as the fact that he is currently a Westminster MP, may put him at a disadvantage against the SNP, soon to be led by Alex Salmond’s deputy, Nicola Sturgeon.

Governing since 2007, the SNP has managed to become a highly successful catch-all party, appealing both to independence supporters and to those who prefer greater Scottish autonomy within the Union, to all social class backgrounds and age groups, and to both women and men. While it has business-friendly policies that include cutting corporation tax, the SNP has managed to compete successfully against Scottish Labour, using its left-wing image and grass-roots campaigning to steal supposedly safe constituencies in Labour heartland areas. Despite its significant decline, Scottish Labour remains the SNP’s bitter rival, while the Scottish Conservative and Unionist Party now struggles to make an impact in polling and the Scottish Liberal Democrats scarcely register at all, with the latest Holyrood poll putting both Tories and Lib Dems behind the Scottish Greens in the regional vote part (the one usually cast for a party list) of the two-vote system. Despite the use of the mixed-member proportional electoral system for Scottish Parliament elections, the effective number of parliamentary parties in the body has dropped from a high of 4.2 after the 2003 election to 2.6 in 2011, suggesting that we should not give too much credit to the impact of the electoral system on the party system.

Perhaps paradoxically, the real winner of the 2014 independence referendum was the SNP. The party has emerged energised, larger, and better connected to the public. It now stands head and shoulders above its Unionist competitors. While the SNP finds itself in an enviable position, it must avoid complacency. The party began its ascent in 2007 by being seen as potentially more competent than Labour, and its performance running a minority government was rewarded in 2011 with a majority of seats; academic research has shown that public support for independence (typically among only about a third of the electorate in recent years) explains only a portion of the SNP’s support. Sturgeon must be careful to maintain her party’s image for competent management of Scotland’s affairs while appealing to the broad majority of Scots (even those who rejected independence) as their advocate when it comes to dealing with the UK government and the likelihood of further spending cuts after the 2015 election.

The big increase in the SNP’s membership following the referendum could pose challenges to the party’s leadership. The recent membership surge from some 25,000 to over 80,000 in the weeks following the referendum could make the party more difficult to govern. Many of the new members (perhaps alienated Scottish Labour members or voters) are likely to hold left-wing views and this could put pressure on what has been a remarkable effort to keep the party unified. Those disappointed or unimpressed with the SNP, however, could instead look to civil society, which has also been jolted by the referendum. The Yes Scotland campaign evolved into a social movement, with a range of organisations working together; aside from political parties, groups like Women for Independence, Business for Scotland, and the Radical Independence Campaign represented a wide spectrum of the public, and the movement included prominent individuals not associated with any party.

The aftermath of Scotland’s independence referendum resembles an upside down political situation: losers turned into winners and members of the public – including many from modest backgrounds – refusing to go ‘back into their boxes’. The supposed winners – the Unionist parties and privileged classes – must be just as puzzled as those living outside Scotland.

About the Author

Thomas LundbergThomas Lundberg is Lecturer in Politics at the University of Glasgow.

http://blogs.lse.ac.uk/politicsandpolicy/scottish-politics-turned-upside-down/

The idea that there is a welfare-dependent underclass is wrong

Posted on November 13, 2014 by dnmufc

A new book by John Hills explores key issues in the current debate about ‘welfare’ and the welfare state. The debate contrasts a stagnant group of people benefiting from it all with the rest who pay in and get nothing back – ‘skivers’ against ‘strivers’. John explains how, because people’s lives and circumstances change, most of us get back something at least close to what we pay in over our lives towards the welfare state.

Twenty-five years ago Granada television and my colleague in LSE’s social policy department, Julian Le Grand, came up with a novel way of presenting the effects of social policy. Instead of graphs, tables and talk, they used a TV game show between two families – the Ackroyds, from Salford in Greater Manchester, and the Osbornes, from Alderley Edge in Cheshire – to illustrate who got what out of the welfare state of the time. Which of these stereotypical working-class and middle-class families were the true ‘Spongers’ of the show’s title, most ‘dependent on government’ in current formulations, if one could look over their whole lives?

As it happens, the longer-living, university-educated, opera-loving middle-class Osbornes turned out to be the winners, getting more than the working-class Ackroyds. A follow-up programme which I helped with, Beat the Taxman, two years later looked at which family had done best as a share of income out of the tax reforms of the Thatcher years. Perhaps less surprisingly, the Osbornes won that one too.

What was special about these families was that, in the words of the game show host Nicholas Parsons, “we’ve invented them”. A quarter of a century later I’ve gone back to those families and their (newly invented) children and grandchildren to explore key issues in the current debate about ‘welfare’ and the welfare state.

Good times bad times [FC]In my new book, Good Times, Bad Times: The welfare myth of them and us, I present the results of research over the last decade or more in LSE’s Centre for Analysis of Social Exclusion (CASE) and elsewhere using large datasets, our own surveys, government statistics, and the results of computer simulations.

But the continuing lives of the Osbornes and the Ackroyds may bring home some of its key points. There are Gary and Denise Ackroyd, whose incomes vary widely from month to month as his hours as a van driver change and her work in a school only brings in pay only in term-time, contrasting with the stable and predictable incomes of people like young civil servant Charlotte Osborne (and of many academics).

Over the 2000s, the circumstances of the Osborne parents, Stephen and Henrietta changed a lot, particularly after Stephen’s heart attacks and decision to down-shift his accountancy work, but they still remained in the top 2 per cent of the income distribution. By contrast, the changes in the size of their family and the effects of Jim Ackroyd losing his job in 2006 meant that he and his wife Tracy bounced around the income distribution – close to being in the poorest tenth in two years, but just above the middle by the time they were empty nesters in 2010.

The book also looks at the life chances of the newest grandchildren, George Ackroyd and Edward Osborne, born at the same time in July last year. If we knew nothing about them apart from where they were born, we would already expect Edward to live nearly four years longer. And although some of the educational gaps have closed in the last decade, the chances are that Edward will be doing better at school from the very start, leave with better qualifications, go to a better university, earn much more and build up a far higher level of wealth. There’s nothing predetermined about that, and George Ackroyd might buck the trend – it’s just that he starts with the odds against him.

And looking at the recent past, the poorest of the families, lone mother Michelle Ackroyd, working 16 hours a week on a low wage, turns out to have lost 6 per cent of her income from tax credit and benefit cuts and austerity tax rises since May 2010. By contrast the most affluent of the families – Stephen Osborne with £97,000 per year earnings and his wife with £9,000 from her part-time teaching, plus significant investment income – have lost slightly less in weekly cash than Michelle, and only 0.7 per cent of their income.

Twenty-five years on, more than ever, the debate around ‘welfare’ contrasts a stagnant group of people benefiting from it all, while the rest pay in and get nothing back – ‘skivers’ against ‘strivers’; dishonest scroungers against honest taxpayers; families where three generations have never worked against hard-working families; people with their curtains still drawn mid-morning against alarm-clock Britain; ‘Benefits Street’ against the rest of the country; undeserving and deserving; them against us. We are always in work, pay our taxes and get nothing from the state. They are a welfare-dependent underclass, pay nothing to the taxman, and get everything from the state.

But we don’t need made-up examples to know that arid picture of unchanging lives is wrong. We know from our own experiences, those of our families – and from TV soap operas and nearly every novel – that people’s lives and circumstances change, and what we get out and put in changes over our lives.

It remains true that people starting advantaged remain much more likely than others to end up advantaged, and those who start poorer are more likely to end up poorer. But there is considerable variation and uncertainty around such average differences in life trajectories. This does not just include the long-term changes over the life cycle that we all go through, but also other variations and changes, from at one end the rapid variations many people experience in circumstances and need for support from week to week to, at the other end, the factors that affect the life chances of our children and our grandchildren.

As a result of all this variation in circumstances over our lives, most of us get back something at least close to what we pay in towards the welfare state. When we pay in more than we get out, we are helping our parents, our children, ourselves at another time – and ourselves as we might have been if life had not turned out quite so well for us. In that sense, we are all – or nearly all – in it together.

Good Times, Bad Times: The welfare myth of them and us is published by Policy Press. For further information, follow this link: Good times, bad times

About the Author

John HillsJohn Hills is Professor of Social Policy and Director of the Centre for Analysis of Social Exclusion (CASE) at the London School of Economics.

http://blogs.lse.ac.uk/politicsandpolicy/the-welfare-states-surprising-winners/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+BritishPoliticsAndPolicyAtLse+%28British+politics+and+policy+at+LSE%29

This is how the ‘annual tax statement’ SHOULD have appeared!

Posted on November 6, 2014 by dnmufc

05 Wednesday Nov 2014

Posted by Mike Sivier http://voxpoliticalonline.com/2014/11/05/this-is-how-the-annual-tax-statement-should-have-appeared/

We all owe a debt of thanks to Richard Murphy, over at Tax Research UK. He has broken down the information in George Osborne’s misleading ‘annual tax statement’ into its component parts and then put a new version together, under categories that more accurately describe the spending concerned.

Then he turned the information into a handy pie chart – similar to Osborne’s but with one major change:

This version is accurate.

Here it is:

Let’s just compare it with Osborne’s…

Big difference!

The most interesting to Vox Political is the perception gap between Mr Murphy’s calculation of the total proportion of tax spent on unemployment benefits – 0.67 per cent – and Osborne’s ‘Welfare’ heading, which constitutes 24 per cent of spending.

Talk to most people about ‘Welfare’ and they’ll think you mean unemployment benefits – so the Osborne chart will make them think that government spending on the unemployed is no less than 16 times as much as is in fact the case.

When a government minister exaggerates the facts by that much, he might as well come out and admit that he’s lying to the people.

Mr Murphy wrote: “This is the statement George Osborne would not want you to see because it makes clear that subsidies, allowances and reliefs extend right across the UK economy. And they do not, by any means, appear to go to those who necessarily need them most. The view he has presented on this issue has been partial, to say the least, and frankly deeply misleading at best.”

He wrote: “Add together the cost of subsidies to banks, the subsidy to pensions and the subsidy to savings (call them together the subsidy to the City of London) and they cost £103.4bn a year – more than the cost of education in the UK.

“It’s also no wonder house prices are so distorted when the implicit tax subsidy for home ownership is £12.6 billion a year.”

He also pointed out that unemployment benefits cost only half the amount used to subsidise personal savings and investments.

For full details of Mr Murphy’s calculations, visit his article on the Tax Research UK site.

Mr Murphy tweeted yesterday: “Almost every commentator now agrees that Osborne is going to spend a fortune sending out tax statements that are wrong. Why not cancel now?”

He won’t unless he’s forced to; he has a political agenda to follow.

That is why Vox Political launched a petition to achieve just that.

If you haven’t already, please visit the petition on the Change.org website, sign it, and share it with your friends.

While you’re at it, feel free to share the infographic, created to support the petition:

ztaxleaflets

Please also read yesterday’s Vox Political article on Osborne’s ‘annual tax summaries’, if you haven’t already.

Austerity not so welcome when it hits the rich

Posted on November 6, 2014 by dnmufc

by stevehilditch http://wp.me/p1a6W6-TP

Labour has run into a little local difficulty with its Mansion Tax proposal. Perhaps the biggest problem is that, although the proposal is very popular amongst the general public, many of the people affected by it have easy access to the media – notably journalists themselves, so-called ‘celebrities’, and other powerful people. There are also large clusters of them in some inner London marginal Labour seats. So they can raise a stink in a few hours while it took months of extremely hard slog by a lot of people to get some coverage for the abomination known as the bedroom tax, which hit much poorer people much harder.

The latest ‘celebrity’ to get acres of coverage was the unutterably unfunny Griff Rhys Jones, who said he would leave the country if it is introduced. ‘Goodbye’ was the common Twitter response. This man made much of his money from the BBC at our expense and, although it appears he has carried out major improvement works to his home, its value (assessed at £7m by Zoopla) has risen with the tide of the property market rather than through his own efforts. The media has been full of the notion that people owning very valuable properties do so because of their ‘hard work’ and ‘prudence’ rather than a taxpayer-subsidised and economically damaging inflation which has given them a windfall. And, unlike most people, Rhys Jones always has the option of living on his yacht.

Property taxation is in a mess. The exemption of primary residences from capital gains tax – the only major class of asset to be exempt – costs the Treasury an estimated £10bn a year and is the key ‘subsidy’ to home owners. Council tax stops rising on homes worth £320,000 and more, they are all banded together. It is not progressive, which creates the extraordinary outcome that tenants living in ordinary homes pay as much council tax as a Russian oligarch living in a £20m home in Chelsea. Not only is this unfair but the system as a whole feeds rather than manages house price inflation.

Mansion Tax is one effort to tackle extreme housing wealth inequality. It is aimed at tackling wealth that is largely unearned and, so far, untaxed. It is one way of demonstrating that we are ‘all in this together’ and the money will go towards saving the most popular British institution of them all, the NHS.

Labour has thought through how it might operate in practice to avoid some of the pitfalls that have been identified. The threshold will rise in line with the general increase in value of such properties so more and more properties should not become subject to the tax. It will be a banded system rather than depending on valuation of each individual property, making it easier to administer. Home owners who are asset-rich but cash-poor (incomes up to £42k) will be able to defer the charge until the property is sold. Paul Dimoldenberg, the Leader of the Labour Group on Westminster Council, has revealed that there are only 61 H-band council tax payers in the borough who currently receive Council Tax Benefit, so the size of the problem seems manageable and is significantly less than some of the scare stories.

Ed Balls has already made it clear that the tax will be applied progressively. Owners of properties worth £2-£3 million will pay around £3,000 a year but it will rise above that, so the biggest burden will be shouldered by those owning the most valuable properties. It seems that the rate for £2m-£3m properties will be close to what people would have to pay if the other alternative – adding extra bands to the Council Tax – were adopted instead.

My own preference would be for a more thorough-going reform of property and land taxation, as I have argued on Red Brick before. I would prefer to see a more progressive Council Tax regime with more bands, with the additional income being netted off the grant received by councils from central government (so the benefit could be applied nationally).

The argument that the Mansion Tax is unfair on London has been widely repeated. But I agree with Paul Wheeler on this point: ‘Yes the mansion tax is a ‘tax on London’ but only to the extent that Corporation Tax on Banks is a tax on London because that’s where the money is’. Labour should not resile from the principle that the owners of the greatest wealth and the most valuable properties should pay more tax. There is still room for debate about how it should be applied. For example, the £2m threshold could be re-set by apply the proposed inflation-link retrospectively. Mansion Tax was first mooted at £2m about 4-5 years ago. It could be raised to take account of inflation since, taking a significant number of the ‘just £2m’ properties out of the scope of the tax. This would reduce the initial tax take but I think it would be seen as fair and would take some of the sting out of the political debate.

Whilst of course welcoming the extra money for the NHS that will come from the Tax, I must admit to some disappointment that, as a property tax, it will not be reapplied to boost housing capital spending. Previous commitments to boost housing grant for affordable homes – a share of the 4G bandwidth sale and a share of the bankers bonus tax – have quietly disappeared. Labour’s only specific commitment to raising housing grant is to give housing higher priority within existing capital programmes. That just doesn’t seem robust enough to meet the party’s commitment to build 200,000 homes a year by 2020.