Saturday, August 06, 2016

Theresa May's Magnificent Words

Our new Prime Minister Theresa May said some Magnificent Words as she entered No 10 Downing Street. 
...We will make Britain a country that works not for a privileged few but for every one of us'
Words that could have been sourced from the book The Free Lunch - Fairness with Freedom which in a similar vein, deals with how to start to overturn the 'Lottery Principle' of life where 'The poor create the rich'.  The problem with Magnificent Words at Number 10 is they raise expectations and then scepticism, given the meagre achievements of governments. But let us leave Mrs May's Magnificent Words still bright, shining and untested and wish her the very best. We all look forward to her chancellor's first budget for signs that this time it will be different.         

As an illustration as to how the current arrangements of our society work for the few and not the many, at a recent public planning enquiry in Winchester, developers awaited expectantly whilst a planning Inspector assessed objections to that part of the local plan relating to the small town of Alresford.  Winchester City Council has taken some years to formulate this plan after much public consultation.  Whatever the outcome of Inspector Nigel Payne's deliberations, soon the green light will be given to a landowner/developer or two, to cash in on a huge uplift of land values. For example a green field of agricultural land with a value of merely around £700 per house-plot size, will zoom to a value of perhaps £200,000 per house-plot after the local authority grants planning permission for housing.  Our 'democratic' system massively favour landowners over those needing the land to have a home. The movement in wealth is from the many to the few: 'The poor create the rich'. What about that Mrs May?

An example of a more egalitarian outcome sought at the same hearing was about public car parking. A car park is needed alongside two adjacent sites owned by different landowners. Which one would release the land for this? Might both? Someone said land for car parking has little value, because car parking by local councils is not an economic service. Quite wrong. This article from The Times in 2015 shows  that for English local authorities over £0.6 BN of revenue was raised through car parking. So a local authority which has control over land planning use, can restrict city parking and can force drivers to pay to park creates a clear money-spinner for themselves and their tax payers. What is happening is that they use their democratically given monopoly power and, as rentiers being leaseholders or owners of land, are using it for the common good above the break-even cost of parking. This will help cap other taxes and can also reduce pollution if park and ride schemes are used.

Another issue mentioned at the hearing was the use of a part of development sites for 'affordable housing' - to be rented by, or part-sold to low income earners. Some of the uplifted land value of a whole development is clawed back through using a portion of the site's land (at a low cost to a not-for-profit housing association) solely for rented or part-owned homes. An enlightened device favouring some of the disadvantaged. 

On one scheme on a previously developed (brownfield) site in a particular Winchester city site the developer had declared he cannot afford to release land for such homes in his new development. 'The sums don't add up!' But a competent developer would have known of their liability to provide the public benefit through land at lower than market housing value to make affordable housing possible. Development obligations such as these have been around since at least 1990 with planning regulation for developer contributions such as 'section 106' and now the Community Infrastructure Levy. Perhaps a developer overpaid for land at some stage so the sums now don't work. But should the public benefit suffer because an unwise commercial decision may have been made by a developer at the top of a market price bubble? If such a case is accepted it opens the possibility of a high price false 'sale' to an associated firm to establish non-viability due to a high base cost. 

This scare story about non-viability of affordable homes was raised as a possibility for a large greenfield site in Alresford. But the planning officer reported that the landowner/developer  for that site is happy that the site development is viable with all costs covered for new trunk road works, affordable housing, et al. A large greenfield site with no development history is less likely to have had run of different owners who might have overpaid at some stage. Or perhaps the developer is being sensible about the huge gains still available and doesn't want the jinx the magic of the expected planning consent.   

So the Winchester inspection will eventually result in one or two very pleased (wealthier) landowner/developers, through the public gift of planning permission. Albeit with help for some housing-poor.  Not forgetting we too who have been buying our homes for decades, whilst not gaining quite that 200+ times wealth multiple from these brand new developments, also benefit a growing equity nest egg through this long standing public gift of planning consent - and for us, tax free. 

The unfairness of the institutional skewing as above, of so called 'market capitalism' to the benefit of the few is developed as a theme in Guy Standing's book:  The Corruption of Capitalism: Why rentiers thrive and work does not pay 'he reveals how global capitalism is rigged in favour of rentiers to the detriment of all of us, especially the precariat. A plutocracy and elite enriches itself, not through production of goods and services, but through ownership of assets, … '. Read the extract provided.

Another book, by Fred Harrison, As Evil Does gives evidence (p.64) that academic research is blocked by government to prevent solutions that would overcome such failings of our society. Such as land value taxation. He refers to an article by Nicholas Stern about his 'Report on the reform of the tax system', in the FT 6 Aug 2014 'Fairer Fixes for the public purse lost in a chancellor's drawer'.   

Have you seen Sir Nicholas's report yet Mrs May? Could be a good way to fulfil those Magnificent Words.

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