Taking control of the economic debate: Why Labour should commit to a mass house building programme and a living wage

Labour should challenge the Tories to match pledges on house building and the living wage. We will see then if they really are on the side of those who want to work hard and 'get on'.

Matthew Whittley is a recent graduate, Labour party member and works as a researcher for a Midlands-based housing association

Despite Osborne failing on every conceivable measure of economic competence, Labour still lags behind the Tories in the polls on the economy. To start restoring trust, Labour needs to take control of the economic debate.

For too long the Labour Party has been on the back foot. One area where Labour could gain ground on the economy is the ballooning housing benefit bill, currently costing the taxpayer £24 billion a year. A commitment to reduce this would demonstrate that Labour is serious about tackling the deficit.

Despite the coalition’s attempts to cut it, the bill is forecast to increase over the coming years. As has become clear, the housing benefit bill cannot be meaningfully reduced without tackling the root causes – high rents and low wages – something the Tories haven’t even begun to attempt. Two things are required: a mass house building programme and the introduction of a living wage.

Investing in new homes is both economically sensible and socially necessary. We are in the midst of nothing short of a housing crisis. Home ownership is in decline and out of reach for the vast majority of young people without access to a bank of mum and dad; it would take 22 years for someone on an average low to middle income to save for a deposit.

This wouldn’t be so much of a problem if there was social housing, but thanks to Thatcher’s Right to Buy scheme (which has facilitated the sale of 1.8 million homes to date), as well as successive governments failing to replace them, there are now 1.8 million households on the waiting lists.

That leaves private renting as the option of last resort. But research by Shelter has shown that two thirds of private renters are struggling to keep a roof over their heads as rents continue to soar while wages remain flat.

The coalition government, whose 2010 Comprehensive Spending Review slashed capital funding for new homes by 60 per cent, has presided over the lowest levels of house building since the 1920s. In doing so they have demonstrated a reckless complacency and clearly haven’t grasped the scale the crisis.

Labour should make a manifesto commitment to build 1.5 million homes over a five year parliament. That may sound a lot, but this is what we need just to keep pace with demand. Around 220,000 new households are forming annually, but last year only 115,620 homes were built.

We also need to ensure that work really does pay, which can only be achieved by legislating for a living wage, not by slashing benefits. The case for a living wage is compelling. A living wage – £8.55 per hour in London and £7.45 for the rest of the UK – is what the Centre for Research in Social Policy has calculated to be the minimum required to meet basic living costs, yet a fifth of workers don’t receive it.

Over 90 per cent of recent housing benefit claimants are in work.  The National Housing Federation has estimated that by 2015 1.2 million working people will be reliant on housing benefit to stay in their homes. The Institute for Fiscal Studies projected a saving to the Treasury (in higher income tax receipts and lower benefit and tax credit spending) of £6 billion if all private sector employers increased wages to a living wage, not to mention the boost it would provide to consumer spending.

Low wages and high rents are not only costing tenants, but taxpayers too. The state is subsidising landlords who charge extortionate rents and employers who fail to pay enough to cover basic living costs. This is absurd. With the General Election only two years away, Labour should add flesh to the bones of the one nation theme by committing to a mass house building programme and a living wage.

Investing in housing would help kick-start economic growth and boosting supply would bring rents under control. A living wage would put money into people’s pockets, helping to stimulate local economies and reducing the burden on the taxpayer in the process. Moreover, it would show that Labour has answers to the housing and living standards crises, while at the same time sending the message that Labour understands the importance of deficit reduction.

Last month, a ComRes poll found that 58 per ent think the coalition’s economic strategy has failed and that it will be ‘time for a change’ in 2015. There couldn’t be a better time for Ed Miliband to outline an alternative.

The spiralling housing benefit bill presents an opportunity for Labour to show that borrowing for investment can stimulate growth and reduce the deficit in the long-term; an opportunity to show that social justice can be combined with economic efficiency; and an opportunity to start making up ground in the economic debate.

Labour should challenge the Tories to match pledges on house building and the living wage. We will see then if they really are on the side of those who want to work hard and ‘get on’.

22 Responses to “Taking control of the economic debate: Why Labour should commit to a mass house building programme and a living wage”

  1. Hippy chick

    Answer me this. If Labour couldn’t do anything about this when it was in power for 13 years, why would anyone believe that it can do so now?

  2. OldLb

    How about not taxing people who earn less than the living wage?

    Ah yes, you want their money to spend on yourself.

  3. OldLb

    Mass housing building kickstarts an economy.

    Lets see, do we have some evidence?

    Spain – massive house building – must be booming right?

    Ireland – massive house building – must be booming right?

    Next you will be suggesting high speed rail lines all over the country like Spain. They are booming aren’t they?

  4. OldLb

    If you want more houses, get rid of the illegal migrants and the migrants who don’t pay their way. It’s cheaper.

  5. JC

    How about relaxing the planning system. If more houses are built (in the private sector), then purchase prices will go down. With lower prices comes lower rents. Both problems solved. social housing should be built as well, but not exclusively.

  6. blarg1987

    The big difference was that in Spain and Ireland supply exceeded demand, and speculation kept the asset prices so high, which has now caused their property price collapses.

    The idea of say a new generation of council houses for people in employment will kick start the building trade, it would also bring down the cost of living and heating meaning people will have more disposable income, This will encourage businesses and trade to be set up growing the economy and increasing tax revenues so over a period of time sorting out the long term financial problem.

  7. LB

    So why not control the demand?

    1. Creates lots of jobs for those not working?
    2. It’s democratically what the electorate want.
    3. It makes financial sense. ie. We don’t subsidize people to come and live in the UK
    4. Drives up wages.
    5. Gets people off welfare even if you have to push them.
    6. Doesn’t consume land.

    Of course you could always bankrupt landlords who’ve kicked people out of properties and left them empty. That would be a start.

    So congratulations too on pointing out the aim is more tax. Getting more money off people. However, it doesn’t work does it?

    The overspend is 30%, ignoring the debts. How much growth do you need to close that gap?

  8. LB

    Cheaper to control the demand. Stop low skilled migration to the UK.

  9. blarg1987

    Well if you have more transactions you are bound to get more money recycled through the tax system.

    Debt can be reduced through long term aims, like the one I proposed and since your a genius you obviously know the detbs you keep implying have been built up over several decades so logically the solutions will take several decades to bring balance which I am sure you would have to agree with?

  10. LB

    So back the basics. The plan is to take more money from people.

    Where your arguments is completely barmy is that you refuse to consider how much debt the state has run up.

    You’re view is that if you get more tax, the debt must come down. It doesn’t. It may increase a tad more slowly. It can still go up.

    e.g Increase your income by 1,000 pounds from 10,000 to 11,000. Must reduce your debt in your world. Not if the debts increase by 20,000 pounds.

    What you are in denial about is the level of debt. Either complete ignorance, which I doubt, since I’ve given you plently of links so you can check for yourself, or its deliberate. For example, you could make your living off other people’s labours as part of the state, and want others to borrow so you can get your cash in.

  11. blarg1987

    I think you should re read before you reply with your comment.

    I did not say that at all, What I said and implying is that through restructure you can bring debt down and it will take time.

    Your logic is that the majority of private companies are useleess then? As many of them have had very large debt obligations and through restructure and some borrowing turned around to be very profitable.

    Goverment can be run the same way, the only difference is that it will take a longer period of time.

    For evidence look at world war 2, the country borrowed huge amounts of money after the war and through that period debt slowly fell as the money was used to invest and so we paid the money back.

    I think that you are in denial about is that you complain about all this debt yet blame the left when a large chunk of the debt was caused by the right.

  12. LB

    Your logic is that the majority of private companies are useleess then? As many of them have had very large debt obligations and through restructure and some borrowing turned around to be very profitable.

    =======

    No. Lots make profits. Very few have debts > assets. Hence they don’t even need rescuing.

    Now, lets look at running the government the same way.

    Assets that can be sold – a few billions. To whom are you going to sell the nuclear subs to? The hospitals too? .. There aren’t realisable assets.

    So that leaves the debts. 7,000 bn. Your restructuring, what does it mean in practice. It’s the same as companies going bust. The creditors lose what is owed to them.

    So civil servants, lose their pensions. State pension goes. etc.

    Next, there is the cutting costs that are needed in restructuring. Care to tell us what cuts get made as part of the restructuring.

    Now some was caused by the right. Some by the left.

    However, 2005, the debt as round about the 2 trillion mark. By the time Labour left office it was 7 trillion. Some of that 2 trillion was down to the Tories, but also lots was down to Labour. Even at 50:50, then 6 put of the 7 trillion is Labour’s. That’s if you want to play that blame game.

    However, I blame Westminster in general. They all have been running a Ponzi scam. Victims, the hard working members of the UK.

    I notice you don’t do numbers. Still no numbers. Are you an arts grad?

  13. blarg1987

    So where does the extra 5 trillion magically appear from in 5 years you keep dsaying the majority of it is pensions but the pension population does not increase 200 fold in that period of time.

    Many companies have had debts and turned around to be very succesful which was the point I was making but you failed to acknowledge.

    Well reform can mean simple thins such as brining things back in house saving £3 billion a year annually on contract tenders, add to that the follow on costs (contract management, charges etc) you could easily rack that up to eb a hell of alot more.

    Reforming tax laws would help plug part of the gap also plus goverment leading in direction will generate growth.

    Also scrapping PFI and going back to goverment borrowing directly to build will shore up our contrys finaances.

  14. LB

    ONS (office of national statistics). Numbers. I’ll remind you of the link.

    http://www.ons.gov.uk/ons/dcp171766_263808.pdf

    Do you have any evidence that the pensions debt isn’t well above 5 trillion (as off now, the ONS figures are two years old)

    I have acknowledged they can be turned around. The mechanisms are

    1) cutting costs

    So what costs are you going to cut in the state spending.

    2) Increasing income

    So who gets taxed more.

    3). Defaulting on debts.

    e.g Go bankrupt, get bought out for less than the debt and restart.

    Which creditors get hit?

    So PFI is split into two parts – capital and spending. Are you saying the government is going to steal the hospitals back from the owners, and refuse to pay compensation? ie. Default. According to you they aren’t bankrupt so the holders of PFI debt just call in the balliffs.

    Or do you mean no more PFI contracts from now on.

    Just who is lending? Since the banking crisis, no one is lending to the state. QE = deficit since banking crisis. The state is lending itself money to stay afloat.

  15. Cole

    Here we go again with LB’s brilliant and original solutions. He should really start a think tank.

  16. blarg1987

    So you are admititng the debts can be easily turned around then?

    If it is as much as you keep preaching that happened in 5 years, alot can be reversed.

    PFI contracts were cooked books as many civil servents and ministers who signed those contracts had vested interests in said companies.

    Simplist solution is to challange the contract on the grounds of fraud and refuse payments many PFI companies and loaded with debt so they will default so goverment gets alot of the services back for peanuts.

    As a I said in earlier posts debt consolidation will help bring it down also and long term planning goverment looksat 5 year cycles rather then whole life costs which will change tendering and provide lower prices.

    I accept there will also have to be tax rises also.

    However you have not said how the pension debt can baloon by 3 trillion in 5 years either you were not truthful about what debt was drawn up pre 2005 or your figures are wrong.

  17. LB

    Yes. By saying to everyone in the UK, in particular civil servants you aren’t getting a pension. For those expecting a state pension, you won’t get welfare either.

    PFI is peanuts in comparison to the true detb.

    As for the pension debts, not my figures, the governments. If you want to do something about that, here is the ONS contact details, give them a ring and say they are lying.

    http://www.ons.gov.uk/ons/site-information/information/contact-us/index.html

    In part they are. The current figure of 5,300 bn is an underestimate.

    1. Assumptions of increases in life expectancy

    2. Rectangularisation of the mortality curve.

    3. Assumptions they hold assets. The biggest joke of it all, because they don’t.

    4. Assumptions that the assets (AA corporate bonds) never default.

    The last two are the bggies in manipulating the figures down.

    However, since you know the figures to be wrong, it means you know what the number is? You don’t. You’re just making it up, which is another form of lying isn’t it.

    Just like those in the PFI industry, you want other people’s money, you don’t give a shit they will be destitute as a result, so long as you get your cut.

    So which part of that con are you making a living from? You don’t say. Like you don’t put up numbers.

    You don’t say in the ‘restructuring’ who doesn’t get paid. Who loses out on the spending side. Restructuring means cuts. Name the cuts.

  18. LB

    Levy (2012) explains that the last official figure for the state pension schemes’ obligations was produced by the Government Actuary’s Department (GAD), as at 31 March 2005, at £1.347 trillion,

    and

    In summary, the estimates in the new supplementary table indicate a total Government pension obligation, at the end of December 2010, of £5.01 trillion

    http://www.ons.gov.uk/ons/dcp171766_263808.pdf

    Where do you get your numbers from to dispute them? So easy for you to post a link to show that you aren’t making it up.

    My betting is that you’re a civil servant, and the thought that you are going to lose hundreds of thousands of pounds of pensions is too much to bear.

    The cost of 5,000 pounds of pensions, is 152,000 pounds. If you’re a decent whack in the public sector you are going to lose vast amounts of cash.

    After all, given the choice between a hospital for the masses or paying you lots of cash, you are going to loses. Illegal yes, immoral? No.

  19. blarg1987

    If i am a civil servant you work for a far right think tank, paid for by multi nationals to rubbish everything, which of course is not true.

    Notice the report gives the full value as what you state but it does say it takes into account pay as you go systems as well whcih people have not contributed to and may not necesarilly get when they retire.

  20. LB

    Not at all. You’ve looked at it the standard left wing, if you point out problems you must be scum attitude.

    The debts are as they are. The lowballed ONS estimate is massive. You have to add on the borrowing and other debts too in order to get an accurate figure.

    That debt is too large to be paid.

    Where you are right, is that means restructuring, and in the case of the state that means.

    1. Screwing people with taxes
    2. Screwing people with cuts
    3. Screwing people by not paying debts.

    You’ve pretty much admitted that is what restuctucturing means in the private sector.

    I’m asking, and you’re dodging, what that equates to the state sector.

    Who gets screwed and for how much.

    No doubt you will come back, we need growth. However as the overspend is 28%, and growth of the order of 1-2% at most, its not going to work when spending is going up at over 2% (rising in real terms).

    End result, is that those who need help the most get screwed.

    Those that trusted the state for their pension (well they had no choice in most cases), get to be destitute.

    Even migration doesn’t solve it. If you get in migrants who don’t pay a lot of taxes, they consume more than they pay in tax, and so they can’t pay anyone’s pension.

  21. blarg1987

    No I point out problems I do not say or apply people are scum as i hope you do not?

    When an argument resorts to attacks on the individual then the ideas, the argument is usually lost.

  22. LB

    Since when does pointing out an ad Hominien attack become an ad Hominien attack?

    You’re losing the argument because you won’t put any numbers to the problem, and as such delude yourself.

    I’ve put up plenty of numbers and authoritative sources such as the ONS. In the case of the losses for a 26K a year worker for the welfare state (a loss of 475,000 pounds), I’ve posted the numbers for you to check.

    So far you haven’t come up with a single number to say, no, you are wrong, this is the correct number.

    The conclusion has to be that in the absence of any data, you’re making it up. A personal attack, yes, but justified by the evidence.

    You can defeat that attack by posting the data. Good luck in trying to find some.

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