That’s the lesson I took from Tanya Gold’s bracingly unsentimental portrait of Cornwall for UnHerd. It is, she says, a “lovely but hard” place – the two qualities existing side-by-side, but experienced in differing proportions depending on whether you’re there for a holiday or to make a living.

Further reading

Why the Cornish must accept the tourists

By Tanya Gold

But what happens when the tourists don’t leave, but move in? Answer: house prices go up, even while local wages remain low. Property markets in some Cornish communities have been utterly distorted. According to The Economist, “at the last count, a quarter of the dwellings in St Ives were second homes or holiday lets”.

Gold says that fatalism is in the Cornish character. But if that’s true, then the people of St Ives are going against type:

“Locals worry that the town is becoming a playground for rich Londoners… So in May 2016 locals decided to do something about it, voting in a referendum to introduce a ‘principal-residence policy’, which stops newly built houses in the town from being used as second homes. The thinking went that by stopping holidaymakers from snapping up new-builds, housing would become more affordable to people who live in St Ives all year round.”

Three years on, has the policy worked? Yes, is the short answer:

“…official statistics suggest that excluding second-home buyers from the new-build market has removed a big source of demand. The price of new homes in the town is 13% below what it might have been if the previous growth rate had continued.”

We’re also told that “other Cornish towns have introduced their own versions of the policy”. However, there is a complication – the level of house building in St Ives has, apparently, “slumped”. The Economist describes this as an “unwelcome side effect”, suggesting that the outcome was both harmful and unintended.

Here’s an alternative interpretation: in some situations, deliberately slowing down the pace of development may be just what’s needed.

Obviously, this runs counter to the conventional wisdom – which rests on two fundamental assumptions: firstly, that the only way to solve the housing crisis is to build more houses; and, secondly, that property prices are a function of supply. Look more closely, however, and we can see that the first assumption is wrong and the second incomplete.

The housing crisis is first and foremost a crisis of affordability. The basic problem is that homes are too expensive, not that there too few of them. The basic solution, therefore, is to make them cheaper – or at least hold prices steady so that wages and savings can catch up.

Ah, but wouldn’t building more houses increase supply and therefore bring down prices? Not necessarily. Prices are a function of both supply and demand. If demand runs ahead of supply, then it doesn’t matter how much you build – prices will still go up. Because supply is physical (requiring bricks and mortar, workers and equipment) and demand is financial (requiring only the electronic transfer funds from one bank account to another) the latter always has the potential to outstrip the former. Never forget: money flows faster than concrete.

Further reading

Sun, sea, sand – and shooting up

By James Bloodworth

That’s why you see property markets overheating even during construction booms – or, rather, especially during construction booms. That’s because supply has a tendency to generate its own demand. In the context of housing, a building boom is its own best advert. It provides visible evidence of a thriving economy – and thus attracts further investor interest, which bankrolls more construction and so on and so forth.

It’s a process best served by the most noticeable kinds of development. Visibility may come from the architectural form of the buildings (the flashier the better) or the concentration of activity in certain hotspots or the already established prestige of certain locations. A measure of controversy also helps – there being no such thing as bad publicity.

Demand can be further enhanced by selling a development as a generic investment product – and not necessarily as a primary residence requiring a full time commitment by the purchaser. Hence the attraction to investors (and thus developers) of holiday homes, time shares, buy-to-let flats and so on.

When some or all of these factors align in a particular place it can be impossible to satisfy demand. Prices therefore keep rising – attracting even more speculative attention and making life ever more expensive for local people.

In these circumstances, it is entirely rational for the community to do what St Ives did and use the law to selectively curb demand – in this case by freezing out the second homers. By disrupting the circular relationship between development and speculation, prices have a chance to subside back to affordable levels.

The Economist, being a liberal publication, plainly doesn’t approve. And, to be fair, place-specific restrictions on second home ownership, buy-to-let landlords and other unwanted categories of demand do represent a barrier to the free movement of people and capital.

However, the right to free movement is not absolute. All liberals would uphold the right of individuals to restrict access to their own private property; and most liberals, apart from the ultras, believe that nations (or groups of nations like the EU) should be able to control their own borders.

And if such rights are justifiably exercised at the level of the individual and the nation, then why shouldn’t they also apply at the intermediate level – that of the community?

Further reading

Control mass immigration? Europe can’t even control mass tourism

By Peter Franklin

Should modernist architects be involved in the rebuilding of Notre Dame? Yes, absolutely they should… they’d make fantastic gargoyles. After all, no one does ugly better.

If you walk through a city – almost any city – and fix your eyes on the nastiest building in your field of vision, it’s almost certainly in the modernist style. The most beautiful building, on the other hand, probably isn’t – more likely it’s some gutsy survivor from an early age.

Further reading

The violation of Salisbury, my ancient, gentle home

By Tom Holland

A word of warning, though: if you wish to maintain your cultural respectability, it is absolutely essential that you don’t say any of this out loud. If you must make a point about the deficiencies of the contemporary urban environment, then make sure that you blame the planners or motorists or just about anyone but the architects. After all, you wouldn’t want to end up like Sir Roger Scruton, would you?

The code of silence of the haute bourgeoisie has served the professions well, and the architects most of all. It’s why our politicians are so reluctant to talk about beauty – and why, when they occasionally do, they quickly lose their nerve. What the worship of ugliness can’t do, however, is make beautiful buildings disappear or stop the rest of us from gathering in their awesome presence. When our untutored eyes behold the greatness of Notre Dame and then flick to, say, the Pompidou Centre, the combined might of the cultural establishment cannot stop us from drawing the obvious conclusion.

Any other profession would be embarrassed to be overshadowed by the accomplishments of their forebears. Imagine if medical treatments had been more effective a hundred years ago? Today’s doctors would be mortified. Or what if the computers and mobile phones of the previous decade were considered to be faster and more fashionable than today’s gadgets? The alpha-geeks would blow a fuse.

Today’s architects, however, have to endure the general public’s enduring love – indeed, reverence – for buildings built centuries and sometimes millennia before the modern age. And it’s not as if this appreciation of old architecture is limited to its historical value. People will pay tens of thousands of pounds extra to live in a Victorian or Georgian house as opposed to contemporary dwelling. If Le Corbusier was right and a house really is just “a machine for living in”, then it seems that the architects of old built better machines than their 21st-century counterparts.

*

That’s not to deny the very real advances in construction technology. Thanks to modern materials and computer assisted design, we can throw up buildings to unprecedented heights, with remarkable speed and in just about any shape that can be imagined – from the top-heavy mass of London’s Walkie Talkie to the pencil-thin towers now exalting the rich above Manhattan.

We can build just about anything we want and we’ve got much more money to do it with than in any other era of human history. Therefore this should be a golden age for modern architecture – but it’s not. Indeed, many within the profession believe that architects are being squeezed out of the design and development process (for instance, see here, here and here).

Ironically, they’ve become victims of the technology that made modernism possible in the first place. With the right software a developer can rustle up a workable, structurally sound blueprint for a major project without the need for an architect. The building or buildings may be supremely bland, but for a volume builder that’s a plus – by standardising the ‘design’ every aspect of the development, from finance to the planning process to the supply of building materials, can be streamlined and costs cut to the bone.

The result is a variation on the modernist style that I’ve seen described as ‘spreadsheet architecture’. I’m not sure who came up with the label, but it’s an apt one. For a start, the monotonous grid-like form of the buildings do look as if they’ve been designed on a spreadsheet application like Excel. The rows and columns might be resized or offset, but there’s not much else to break-up the monotony.

Further reading

The false promise of the vertical city

By Peter Franklin

You may have discerned I’m not the biggest fan of 20th-century architecture. Yet the other day I found myself staring at a piece of 1960’s brutalism with something like nostalgia. It was a hideous building, undistinguished even by modernist standards; but the squat concrete edifice still had a presence, bearing the mark of an intelligent, if misguided, designer. Spreadsheet architecture, on the other hand, looks exactly what you’d expect a computer to produce. Just type in a few parameters and off it goes: a plan for the maximum amount of rentable floor space with a minimum of thought for anything else you might want a building to be. Spreadsheet architecture clearly cares only about the bottom line – and if that can be done without paying an architect, so much the better.

*

The core architectural modernist principle is “form follows function” – a phrase coined by Louis Sullivan, the so-called ‘father of the skyscraper’. When form does follow function as opposed to precedent, architects are free to break with tradition in the pursuit of other priorities.

Though presented as rational and progressive, this approach is in fact divisive and self-centred. Precedent and tradition are things shared across a community, but function is not. There is a literal and metaphorical difference in perspective between those on the inside of the building looking out and those on the outside looking towards it. The insiders are those least affected by the impact that the building has on everyone else. Functionalism – and its implicit disregard for beauty, balance and harmony – discounts the outsiders’ perspective.

Further reading

Ruskin's modern message

By Melanie McDonagh

Spreadsheet architecture is the ultimate expression of this mindset – and perfectly suited to the speculative development of our cities. As the primary function of all such development is to make money, its form must follow suit. It conforms to the needs of its most powerful users, i.e. investors who may never actually see the building with their own eyes. The radical uniformity of the design is just what a globalised property market demands – a fungible asset that is basically the same wherever one builds it.

*

We’ve been conditioned not to resist or to imagine anything better: the architect knows best, we’re told; aesthetic judgements of the general public count for nothing. However, with the rise of spreadsheet architecture the issue has become disintermediated. The licensed taste-makers have been pushed aside and the clash of interests between the developer and the host community made plain for all to see. It’s time for the community to take back control. Local people must be equipped and empowered to set out a positive vision for the growth and development of their neighbourhoods – as opposed to exercising limited powers to block the worst proposals.

It can be done. The power of the developers can be systematically resisted. It already has been done with respect to conservation of culturally significant buildings and neighbourhoods. We’ve declared whole swathes of our cities off limits to the cold, commercial logic of the developers. Through the listed building system and conservation areas, we’ve decided that in many locations the old is more valuable than the new no matter how profitable it might be to redevelop it. Our ancestors would be amazed, because with a few exceptions – sacred buildings, monuments and the like – they happily tore down their old buildings confident that the new ones would be better. That we have lost this faith in the modern age is the most damning indictment of its architecture there could be.

Further reading

Why we must suppress technological progress

By Peter Franklin

But having defied the dragon of modernism to protect the best of the past, we need to do the same to achieve the best possible future. If developers aren’t allowed to wreck our historic neighbourhoods, then why should their short-term, selfish interests prevail in those locations where a city has the chance to reinvent itself? The opportunity for placemaking, to create streets, to bequeath the best of us to generations we’ll never meet, is simply too precious to waste on spreadsheet architecture.

I’m in favour of restriction. The biggest problem with the British economy – and with Western capitalism in general – is not too little freedom, but too much. Too much, that is, for those who make it their business to increase their share of existing wealth without creating any. This is what economists call rent-seeking (which includes, but isn’t limited to, what tenants pay to their landlords).

Rent-seekers are able to extract value from others because of the monopoly rights that the state gives them over a particular resource – be it land, intellectual property, permission to pollute, political power or something else. Rent-seeking is therefore a result of government policy. Unsurprisingly, governments find themselves relentlessly lobbied by those with a vested interest in maintaining the unjust, opportunity-sapping status quo.

Further reading

What the Tories need in their next leader

By Graeme Archer

Taking on those vested interests requires courage and determination. But that’s why a government – especially one that believes in the opportunity to create rather than extract wealth – should be judged on the quality of its enemies.

Here are ten enemies that the Cameron and May governments should have made, but didn’t:

1. Land owners

Conservatives believe in the right to private property. And so they should. But that right shouldn’t include the uplift in value created when land becomes ripe for development.

The price of farmland can shoot up from less than £10,000 to more than £1,000,000 an acre just because of a planning decision. The act of merely owning the land has contributed precisely nothing to this added value – and yet landowners are able to claim the lion’s share of it.

This injustice, which Winston Churchill condemned back in 1909, lies at the heart of the housing crisis – a crisis which is destroying the Conservative ideal of a property-owning democracy and therefore popular support for conservatism among younger people.

If the Government did something about legal barriers that prevent it from acquiring land at agricultural-use value to build new housing, then a whole range of opportunities could open up. Instead, it continues to side with a few lucky farmers rather than millions of aspiring home owners.

2. The big developers

Of course, if we built more houses, the law of supply and demand would mean lower prices and reduced profits for those lucky landowners, right?

Wrong – and so is the idea that the planning system is mostly to blame for the dearth of new homes. In fact, there’s a huge backlog of unused planning permissions – leading to accusations that the big developers are “land banking”; ie, manipulating the development of the land they hold to control prices.

Of course, that can’t be possibly be true, because the Government has commissioned an investigation – the Letwin Review – which has been taken as evidence that developers don’t land bank. However, the Independent Review of Build Out Rates, Draft Analysis, June 2018, also says this:

“The fundamental driver of build out rates once detailed planning permission is granted for large sites appears to be the ‘absorption rate’ – the rate at which newly constructed homes can be sold into (or are believed by the house builder to be able to be sold successfully into) the local market without materially disturbing the market price.”

Deliberately restricting supply in order to stop prices from falling? How is that not manipulating the market?

It’s plainly obvious what’s going on. The Government must stop hiding behind jargon like “absorption rates” and take land supply out of the developers’ control.

3. Nimbys and cowboys

The planning system isn’t entirely free from blame. A particular problem is the designation of green belts around urban areas. Preventing sprawl is a worthy objective, but choking the growth of prosperous cities such as Oxford and Cambridge is not. Model developments like Poundbury in Dorchester, show that we can build beautifully designed extensions to towns and cities that enhance local life instead of harming it.

However, instead of negotiating a grand bargain on sustainable urban development, the Government has failed to confront the green belt fundamentalists, while turning a blind eye to ugly, piecemeal development in unprotected areas – the worst of both worlds.

4. The bankers

In August 2011, riots erupted across urban England. But what happened next was just as remarkable: a shock-and-awe demonstration of the power of CCTV. Rioters were systematically identified by the police (with public help), shamed by the media and harshly punished by the courts. So much for the anonymity of the mob.

Now compare all that to the UK government reaction to the financial crisis. No shock-and-awe for the bankers. There have been a few prosecutions in relation to specific scams such as the Libor-rigging scandal. Oh, and someone had their knighthood cancelled. But that’s about it.

It would seem that recklessly crashing the global economy is an almost crime-free activity.

Further reading

Ten years on from the crash, the most important banking reform has still not been enacted

By Liam Halligan

5. The beneficiaries of QE

Of course, that’s not to say that the financiers weren’t targeted by the state. Indeed, they were singled out… for a massive programme of assistance.

There were the immediate bailouts of failing banks, but also a much longer period of Quantitative Easing or QE. Though presented as a general tonic for ailing economies, QE has the specific effect of inflating the value of financial assets and therefore rebuilding the bankers’ balance sheets (and boosting the investment portfolios of the wealthy).

The mechanics of the policy also generates a cascade of transactions on which fees can be charged – another nice little earner for those lucky enough to benefit.

Even if we accept the argument that governments had no choice but to resort to QE, it remains a profound injustice that the sector responsible for the original crisis has profited so handsomely from the emergency treatment.

But don’t expect any meaningful process of ‘financial truth and reconciliation’. The brain-aching complexity of QE is precisely what allows governments to get away with not having untangled it.

6. The nuclear industry

When the Conservative Government came to power in 2010 one of its first moves was to slash subsidies for renewable power. Quite right too – the leading renewable technologies were considered capable of delivering more for less, and that’s exactly what they’ve achieved. Despite self-serving predictions that the industry would shrivel without generous subsidies, it has thrived – cutting costs and expanding capacity.

No such market discipline for the nuclear sector, however. Hinkley Point C – the first new nuclear power station to begin construction since the 1980s – is to receive a guaranteed and very expensive price for its electricity over 35 years. So assuming it’s up and running by 2025, we’ll still be paying for its overpriced electricity in 2060.

By the way, the nuclear tech we’re getting for this money – the European Pressurised Reactor – is  dogged by a history of engineering problems and cost overruns.

How on earth did we end-up with this radioactive lemon? Well, it was the first – and, so far, only – opportunity to guarantee a future for Britain’s nuclear industry (even if most of the kit is imported from the French).

No industry and no technology should be owed a living – and certainly not one with nuclear’s record of failure.

7. The rail industry

Speaking of enormously expensive things that don’t turn up on time, let’s talk about our trains.

The Train Operating Companies (TOCs) aren’t best-loved by British public. But this year, with the biggest timetable changes for at least a decade, was the chance for a reset. It was really important then that the whole thing went smoothly.

It was a disaster – with services in the North and South East of England descending into chaos.

The regulator’s report into the fiasco found that the TOCs, Network Rail, the Department for Transport and indeed the regulator all made mistakes – but also that it was unclear as to who was responsible for what.

The obvious conclusion is that the structure of the industry is unsustainable. Of course, if no one has ultimate responsibility then no one can be held ultimately accountable (right up to the Secretary of State for Transport) – which suits all concerned. Except the passengers, of course.

Further reading

Can we reform our rancid political debate?

By Douglas Murray

8. Air polluters

At least most trains are electric these days, which means they don’t belch out the airborne pollutants linked to 40,000 premature deaths in the UK every year and billions of pounds’ worth of damage.

The disastrous decision to encourage the use of diesel engines in Europe can be blamed primarily on the German government and the Volkswagen emissions scandal. However, the British government has repeatedly failed to take the action necessary to clean up the air in our worst-affected cities – or say, in sufficient detail, how it plans to fulfil its legal responsibility to do so.

The long-term solution is to switch to electric vehicles, but we also need a short-term solution. The difficulty isn’t that we don’t know what to do (ie, dis-incentivise the use of polluting vehicles in vulnerable urban areas); it’s that it wouldn’t be popular with motorists.

The most powerful vested interests are the ones composed of millions of people. The trouble is that also leaves millions of people breathing polluted air – but that’s OK because a lot of those are children and they can’t vote.

9. The carpetbaggers of London

On to another kind of grubbiness. How is the Government getting on with its repeated promises to do something about the foreign money laundered through London’s property market?

Very slowly, is the answer. Almost 100,000 properties in the UK are owned by offshore companies. To its credit, the Government is forcing these publicly to register their “beneficial owners” – though not until 2021. Better late than never, but one has to wonder how so much information about so many properties is going to be verified.

Of course, this would be a much smaller problem if the ownership of high-end property in the UK weren’t so lightly taxed (and therefore ridiculously attractive). One would assume that most foreign investment in London real estate is legitimate; but one has to ask: who benefits?

Certainly not the ordinary working people and productive enterprises priced out of their own capital. And not those who pay heavy taxes on the fruits of their labour because their government won’t shift the burden on to idle wealth.

London and other British cities should be fully open to genuine entrepreneurs and innovators from around the world. But we don’t need more speculators; we’ve got quite enough of our own.

Further reading

What's killing the Conservatives?

By James Kirkup

10. Government itself

Let’s conclude with the vested interest closest to home – the machinery of government and the wider political system. The Conservatives came to power promising a revolution in the way that we’re governed. The 2010 Conservative manifesto was entitled Invitation to Join the Government of Britain and promised a “Big Society” in place of a “Big State”.

There have been some reforms – most notably a significant devolution of power to cities. But, on the whole, the status quo remains intact. Parliament, Government and the Civil Service all work in much the same way as they did in 2010. Even the most straightforward reforms, like a modest reduction in the number of MPs from 650 to 600, have yet to be delivered. 

Others have been scrapped – such as the introduction of “extended ministerial offices“. These were a tiny move to towards reducing the dependency of Cabinet ministers on the civil service – and on Downing Street. Of course, even that proved too much of a threat to the established order.

And thus a sclerotic system of government struggles on – unable and unwilling to confront its own vested interests, let alone anyone else’s.

But what if the City does shrink? Would that be a disaster for the UK? Not everyone thinks so – indeed, as ‘Schumpeter’ points out in The Economist, the notion that Britain’s financial sector is too big is “gathering momentum.”

Further reading

Nomi Prins: The central banking heist has put the world at risk

By Liam Halligan

The article focuses on a book by a “former contributor to The Economist,” Nicholas Shaxson. Despite this connection, the anonymous author of the article mostly disagrees with him.

Of course, there’s little doubt that the sector is an elephant in the room of the UK economy:

“Financial firms from around the world are drawn to the British capital; the assets in the country’s financial system are ten times its GDP.”

However, for the rest of the country, this isn’t always a happy living arrangement:

“Many Britons suspect that the City succeeds at everyone else’s expense. That view is decades old, but the financial crisis of 2007-08 intensified it greatly. The crisis brought the economy to its knees; the state spent £140bn ($220bn) bailing out banks.”

While inner London is disproportionately rich – other parts of the country are disproportionately poor – with 2016 EU figures showing that the UK has six of the poorest ten regions in Northern Europe.

It is suspected that London, and especially London’s financial sector, is sucking talent, investment and opportunity out of the rest of the country:

“Mr Shaxson provocatively compares Britain’s situation to that of Angola, a country where oil makes up over 95% of exports. Oil should bring widespread prosperity to Angola, but it does not. Brainy Angolans flock to the oilfields rather than to the civil service or health care. Floods of foreign capital raise the value of the currency, making non-oil industries uncompetitive.”

Schumpeter disputes the comparison – and clearly there are differences between a dominant sector centred around the extraction of a single natural resource and one that offers deep expertise across of a wide range of specialised services. However, there is a significant concession to Shaxson’s argument:

“…the City does encourage foreign investment in British firms and property. That pushes up both wages and rents in London, and probably the pound too, making it harder for other, price-sensitive export industries to thrive.”

Schumpeter also notes that “relative to its economy, Britain sees 50% more mergers and acquisitions than America”.

As, I’ve written about before, an influx of foreign capital for speculative purposes generates juicy fees for middlemen and money handlers, but little in the way of genuinely productive activity. Furthermore, if it’s a net influx then it will push up the value of the currency and widen the current account deficit.

Further reading

And finally: the good news from flyover county

By Peter Franklin

The new British disease – i.e. a debt-ridden, low-productivity economy prone to asset bubbles and extremes of inequality – is the natural consequence.

But if that’s the problem, what’s the solution? Certainly not one achieved with a blunt instrument. Seeking to shrink the financial sector without distinguishing between speculative and productive investment (and the expertise that enables the latter) would risk doing more harm than good.

The real answer can be seen from the sheet glass windows of the city’s statement architecture. Look down and you can see it: the river Thames.

Had it been left to its own devices, London’s great river would be wide and shallow – spreading out to where it wasn’t wanted or needed. It would also flood on a regular basis, causing catastrophic damage. But over the centuries, the Thames has been tamed. Bridges have been built; the river embanked; and a great barrier put in place to hold back the tidal surges.

As with water, so with money. We needn’t reduce the volume of finance flowing through London, but we must do more to direct it – or at least direct it away from where it does no good. Speculation, especially in land, must be discouraged – with the tax and regulatory framework favouring productive investment instead.

Speculative investment is lazy investment – requiring no great knowledge or expertise. A country does not require a sophisticated financial sector to suffer property booms. asset bubbles and Ponzi schemes. It just needs more money than sense.

Therefore, constraining finance from following its own worst instincts need not sap its energy. A properly regulated financial sector, like an soundly embanked river, would flow faster and deeper than it did before.

Further reading

Ten vested interests the Tories failed to tackle

By Peter Franklin

I’m in favour of restriction. The biggest problem with the British economy – and with Western capitalism in general – is not too little freedom, but too much. Too much, that is, for those who make it their business to increase their share of existing wealth without creating any. This is what economists call rent-seeking (which includes, but isn’t limited to, what tenants pay to their landlords).

Rent-seekers are able to extract value from others because of the monopoly rights that the state gives them over a particular resource – be it land, intellectual property, permission to pollute, political power or something else. Rent-seeking is therefore a result of government policy. Unsurprisingly, governments find themselves relentlessly lobbied by those with a vested interest in maintaining the unjust, opportunity-sapping status quo.

Further reading

What the Tories need in their next leader

By Graeme Archer

Taking on those vested interests requires courage and determination. But that’s why a government – especially one that believes in the opportunity to create rather than extract wealth – should be judged on the quality of its enemies.

Here are ten enemies that the Cameron and May governments should have made, but didn’t:

1. Land owners

Conservatives believe in the right to private property. And so they should. But that right shouldn’t include the uplift in value created when land becomes ripe for development.

The price of farmland can shoot up from less than £10,000 to more than £1,000,000 an acre just because of a planning decision. The act of merely owning the land has contributed precisely nothing to this added value – and yet landowners are able to claim the lion’s share of it.

This injustice, which Winston Churchill condemned back in 1909, lies at the heart of the housing crisis – a crisis which is destroying the Conservative ideal of a property-owning democracy and therefore popular support for conservatism among younger people.

If the Government did something about legal barriers that prevent it from acquiring land at agricultural-use value to build new housing, then a whole range of opportunities could open up. Instead, it continues to side with a few lucky farmers rather than millions of aspiring home owners.

2. The big developers

Of course, if we built more houses, the law of supply and demand would mean lower prices and reduced profits for those lucky landowners, right?

Wrong – and so is the idea that the planning system is mostly to blame for the dearth of new homes. In fact, there’s a huge backlog of unused planning permissions – leading to accusations that the big developers are “land banking”; ie, manipulating the development of the land they hold to control prices.

Of course, that can’t be possibly be true, because the Government has commissioned an investigation – the Letwin Review – which has been taken as evidence that developers don’t land bank. However, the Independent Review of Build Out Rates, Draft Analysis, June 2018, also says this:

“The fundamental driver of build out rates once detailed planning permission is granted for large sites appears to be the ‘absorption rate’ – the rate at which newly constructed homes can be sold into (or are believed by the house builder to be able to be sold successfully into) the local market without materially disturbing the market price.”

Deliberately restricting supply in order to stop prices from falling? How is that not manipulating the market?

It’s plainly obvious what’s going on. The Government must stop hiding behind jargon like “absorption rates” and take land supply out of the developers’ control.

3. Nimbys and cowboys

The planning system isn’t entirely free from blame. A particular problem is the designation of green belts around urban areas. Preventing sprawl is a worthy objective, but choking the growth of prosperous cities such as Oxford and Cambridge is not. Model developments like Poundbury in Dorchester, show that we can build beautifully designed extensions to towns and cities that enhance local life instead of harming it.

However, instead of negotiating a grand bargain on sustainable urban development, the Government has failed to confront the green belt fundamentalists, while turning a blind eye to ugly, piecemeal development in unprotected areas – the worst of both worlds.

4. The bankers

In August 2011, riots erupted across urban England. But what happened next was just as remarkable: a shock-and-awe demonstration of the power of CCTV. Rioters were systematically identified by the police (with public help), shamed by the media and harshly punished by the courts. So much for the anonymity of the mob.

Now compare all that to the UK government reaction to the financial crisis. No shock-and-awe for the bankers. There have been a few prosecutions in relation to specific scams such as the Libor-rigging scandal. Oh, and someone had their knighthood cancelled. But that’s about it.

It would seem that recklessly crashing the global economy is an almost crime-free activity.

Further reading

Ten years on from the crash, the most important banking reform has still not been enacted

By Liam Halligan

5. The beneficiaries of QE

Of course, that’s not to say that the financiers weren’t targeted by the state. Indeed, they were singled out… for a massive programme of assistance.

There were the immediate bailouts of failing banks, but also a much longer period of Quantitative Easing or QE. Though presented as a general tonic for ailing economies, QE has the specific effect of inflating the value of financial assets and therefore rebuilding the bankers’ balance sheets (and boosting the investment portfolios of the wealthy).

The mechanics of the policy also generates a cascade of transactions on which fees can be charged – another nice little earner for those lucky enough to benefit.

Even if we accept the argument that governments had no choice but to resort to QE, it remains a profound injustice that the sector responsible for the original crisis has profited so handsomely from the emergency treatment.

But don’t expect any meaningful process of ‘financial truth and reconciliation’. The brain-aching complexity of QE is precisely what allows governments to get away with not having untangled it.

6. The nuclear industry

When the Conservative Government came to power in 2010 one of its first moves was to slash subsidies for renewable power. Quite right too – the leading renewable technologies were considered capable of delivering more for less, and that’s exactly what they’ve achieved. Despite self-serving predictions that the industry would shrivel without generous subsidies, it has thrived – cutting costs and expanding capacity.

No such market discipline for the nuclear sector, however. Hinkley Point C – the first new nuclear power station to begin construction since the 1980s – is to receive a guaranteed and very expensive price for its electricity over 35 years. So assuming it’s up and running by 2025, we’ll still be paying for its overpriced electricity in 2060.

By the way, the nuclear tech we’re getting for this money – the European Pressurised Reactor – is  dogged by a history of engineering problems and cost overruns.

How on earth did we end-up with this radioactive lemon? Well, it was the first – and, so far, only – opportunity to guarantee a future for Britain’s nuclear industry (even if most of the kit is imported from the French).

No industry and no technology should be owed a living – and certainly not one with nuclear’s record of failure.

7. The rail industry

Speaking of enormously expensive things that don’t turn up on time, let’s talk about our trains.

The Train Operating Companies (TOCs) aren’t best-loved by British public. But this year, with the biggest timetable changes for at least a decade, was the chance for a reset. It was really important then that the whole thing went smoothly.

It was a disaster – with services in the North and South East of England descending into chaos.

The regulator’s report into the fiasco found that the TOCs, Network Rail, the Department for Transport and indeed the regulator all made mistakes – but also that it was unclear as to who was responsible for what.

The obvious conclusion is that the structure of the industry is unsustainable. Of course, if no one has ultimate responsibility then no one can be held ultimately accountable (right up to the Secretary of State for Transport) – which suits all concerned. Except the passengers, of course.

Further reading

Can we reform our rancid political debate?

By Douglas Murray

8. Air polluters

At least most trains are electric these days, which means they don’t belch out the airborne pollutants linked to 40,000 premature deaths in the UK every year and billions of pounds’ worth of damage.

The disastrous decision to encourage the use of diesel engines in Europe can be blamed primarily on the German government and the Volkswagen emissions scandal. However, the British government has repeatedly failed to take the action necessary to clean up the air in our worst-affected cities – or say, in sufficient detail, how it plans to fulfil its legal responsibility to do so.

The long-term solution is to switch to electric vehicles, but we also need a short-term solution. The difficulty isn’t that we don’t know what to do (ie, dis-incentivise the use of polluting vehicles in vulnerable urban areas); it’s that it wouldn’t be popular with motorists.

The most powerful vested interests are the ones composed of millions of people. The trouble is that also leaves millions of people breathing polluted air – but that’s OK because a lot of those are children and they can’t vote.

9. The carpetbaggers of London

On to another kind of grubbiness. How is the Government getting on with its repeated promises to do something about the foreign money laundered through London’s property market?

Very slowly, is the answer. Almost 100,000 properties in the UK are owned by offshore companies. To its credit, the Government is forcing these publicly to register their “beneficial owners” – though not until 2021. Better late than never, but one has to wonder how so much information about so many properties is going to be verified.

Of course, this would be a much smaller problem if the ownership of high-end property in the UK weren’t so lightly taxed (and therefore ridiculously attractive). One would assume that most foreign investment in London real estate is legitimate; but one has to ask: who benefits?

Certainly not the ordinary working people and productive enterprises priced out of their own capital. And not those who pay heavy taxes on the fruits of their labour because their government won’t shift the burden on to idle wealth.

London and other British cities should be fully open to genuine entrepreneurs and innovators from around the world. But we don’t need more speculators; we’ve got quite enough of our own.

Further reading

What's killing the Conservatives?

By James Kirkup

10. Government itself

Let’s conclude with the vested interest closest to home – the machinery of government and the wider political system. The Conservatives came to power promising a revolution in the way that we’re governed. The 2010 Conservative manifesto was entitled Invitation to Join the Government of Britain and promised a “Big Society” in place of a “Big State”.

There have been some reforms – most notably a significant devolution of power to cities. But, on the whole, the status quo remains intact. Parliament, Government and the Civil Service all work in much the same way as they did in 2010. Even the most straightforward reforms, like a modest reduction in the number of MPs from 650 to 600, have yet to be delivered. 

Others have been scrapped – such as the introduction of “extended ministerial offices“. These were a tiny move to towards reducing the dependency of Cabinet ministers on the civil service – and on Downing Street. Of course, even that proved too much of a threat to the established order.

And thus a sclerotic system of government struggles on – unable and unwilling to confront its own vested interests, let alone anyone else’s.

For instance, if housing units in global cities like London and New York are purchased not as homes, but as investment opportunities for absentee owners might that not be pushing up prices at the expense of people who just want a place of their own in the communities where they live and work?

In the New York Times, Emily Badger investigates the impact of foreign money on local housing markets:

“…the true extent of the phenomenon is maddeningly hard to measure. So are its broader economic effects. Local governments have barely attempted to track the cash influx. And each of these global cities has become attractive to investors partly because housing in them is scarce, making claims of insufficient supply and excessive demand all the more difficult to untangle.”

Nevertheless, there’s no doubting that the inflow of capital is on a massive scale:

“New data this week from the National Association of Realtors estimates that foreigners, led by the Chinese, invested $153 billion in housing in the United States in the year that ended in March, up a remarkable 49 percent from the previous year. Nonresident foreigners were responsible for half that total.

“That is the largest sum since the organization began tracking foreign investment in 2009, and those purchases amounted to 10 percent of the dollar value of all existing-home sales in the United States last year. Nearly half of that money went into just three states: California, Florida and Texas.”

Badger notes that local grievances are with “foreign money, not foreigners.” Indeed, it is the openness of the cities in question that makes them such attractive destinations for investment.

Of course, in speaking of ‘investment’ one has to qualify the word. When a city seeks to attract investment it isn’t primarily concerned with the financial return to the investor, but rather the associated boost to the growth, productivity and diversity of the local economy. Investment (or, rather, speculation) in property that already exists – and which already has a use – does not achieve any of these benefits. If foreign investors were buying into the city so that they could live and work there, that would be different. But when homes are left empty or rented out to a re-proletarianised ex-middle class, there is clear disbenefit.

This is a self-compounding problem. The further that prices and rents are pushed up, the more attractive a property market becomes to speculators – and in a globalised economy, the pool of potential investors is more of an ocean.

Emily Badger’s article is unusual in that it concludes with what just might be the solution:

“Rhys Kesselman, [a] professor at Simon Fraser University, has proposed an intriguing alternative: a property surtax tilted toward high-end homes that would be deductible against the owner’s income tax. Local residents paying income taxes would effectively owe no surtax. Out-of-town investors, foreign or domestic, who don’t work in the local economy would be hardest hit (with some concessions for resident retirees).

“The elegance of that idea is that it doesn’t require local governments to figure out who is foreign and who is not, or which homes are vacant and which are occupied. And it recognizes that the real problem isn’t foreigners; it’s speculation in the housing market…”

There’s an idea for Brexit Britain: open to the entrepreneurs of the world, but not the carpetbaggers.