Wednesday 16 October 2013

The art of not devouring our children

I remember, years ago, maybe even as many as 20 years, I happened uto come across a copy of the Green Party’s newspaper.  I was interested in party newspapers at the time because I had just accidentally become editor of Liberal Democrat News.

The Greens' equivalent included an article on the front page explaining that the party was in the midst of a financial crisis, and they were therefore making their fund-raising department redundant.

It was a wonderful example of how politicians of all kinds (and not just politicians either) get fatally muddled between short and medium term objectives.

It didn’t matter that this was, at the time, a very small political party. They still got muddled.

The same muddle feeds into decisions like closing community support schemes for mental health, and then wondering why demand for beds starts to increase, and all the other failures to prevent that bedevil public services in the UK.

I thought of all this, reading Nick Clegg’s very sensible comments about green energy yesterday. It ought not to need saying, but of course reducing funding for green energy now will leave us that much more dependent on foreign fossil fuels in the future.  Unfortunately, it does need saying.

For some reason, the government is reviewing its green levies on the grounds that we need to bring down people’s rapidly rising bills. If that was the only reason for the rising bills, they might have a point – but they are not.

Like the Green Party’s fundraising department, making the fund-raisers redundant would cut costs for a while – but then multiply the problems.

Energy bills is Exhibit A. They are rising partly because the supply market is a semi-monopoly, very hard to break into, and partly because of our continuing dependence on fossil fuels which are increasingly expensive.  Of course, it is partly also investment to try and make us more independent in the future - and to bring down bills then.

Cutting the green levy would mean slightly cheaper bills now, but only at the cost of increasing them in the future, for our children.

But Exhibit B is more discouraging. This time, the Lib Dem side of the coalition stays silent.

As David Cameron and Ed Balls both seem to agree, everyone should have the right to own their own home. But instead of hammering out a policy package that might bring house prices down in the southern half of England and the other hotspots, the Treasury puts in place the Help to Buy scheme.

Most economists seem to agree this will raise house prices in the medium-term, though not always for the same reasons.  Prices are now rising at 0.5 per cent a month, which all adds up...

The point is that, if you make mortgages more affordable, by extending mortgage terms or calculating income in new ways, or by subsidising the deposit – but still fail to do anything to bring down the prices – then they will rise.  Of course they will: it is a classic example of inflation - houses will always be too scarce, so more money will always make prices rise.

There used to be a policy mechanism to keep them low, but they abolished the Corset in 1980, and I tell the strange story in my book Broke: Who killed the middle classes?.

So yes, Cameron and Balls are right. People should be helped onto the property ladder – but not at the expense of their children, who will be condemned to a life of dependence on the whims of landlords, paying exorbitant rents because these are linked to property prices too.

There has been comment from the direction of the Treasury that we are not in fact in the middle of a house price bubble.  This may be true compared to 2006 (it may not too), but we are still in a gigantic and ultimately ruinous house price bubble that has lasted three decades.

If average UK house prices rise in the next 30 years as they did in the last 30 years – thanks to Help to Buy and whatever follows it – then the average home will cost £1.2m.  A disaster for our children.

A disaster for governments too, because they will have to keep on subsidising deposits to keep up with the rises.

For some reason, as well as getting muddled about short and medium term objectives, politicians seem to get confused by anything that stretches back beyond the previous government's term of office.  If there isn't someone to blame, perhaps, it isn't a problem.

It is easy to be rhetorical about this, and wring hands in despair.  But the system encourages short-termism.  We've known that for years.  But when it seems likely to solve my problems temporarily at the expense of my childrens' lives later, I start to get cross.

So will other parents.  This isn't a technical issue, it is an issue about looking after our children's futures.

No comments: