Our Word is Our Weapon

Back in early December, the publication of the annual British Social Attitudes
Survey (BSAS) was the cause of plenty of press discussion, much of which took the view that the survey revealed a ‘hardening’ of attitudes towards the poor, as Thatcher’s children became Thatcher’s adults and narrowed the definition of the deserving cause.

The survey did indeed show that people were more likely to want welfare spending increased for children but reduced for lone parents and the unemployed (entirely contradictory views, as David Walker pointed out).

But why didn’t anybody make the rather obvious connection between changing social attitudes and the changing reality of society? Research published the day before the BSAS by the Joseph Rowntree Foundation and the New Policy Institute shows that income poverty has fallen significantly since Labour came to power and is now back down to levels last seen in the early 1980s. The main factor behind reduced poverty is the big decrease in unemployment under Labour. But Labour have also given welfare a major boost: “Out-of-work benefits to both working-age families with dependent children and to pensioners have risen by around 30 per cent in real terms since 1998, faster than earnings”. After six years of Labour government, it’s clear that “Blair’s children” (Brown’s, really) are significantly less likely to grow up in a poor, workless household than the generation before them.

So, if people don’t want to see increases in spending on the poor and unemployed, isn’t it possible that it’s because spending has been increasing in these areas for several years, and because it is having the desired effect of reducing poverty? Or is that crediting the British public with more intelligence than the press would like?

Even if that is the explanation, though, it’s not a case for complacency. Poverty in the UK is falling, but there’s still 12.5 million people in homes below the income poverty line, and according to the JRF and NPI, the indications are that Britain is only now moving off the very bottom of the EU poverty league, leaving behind Portugal, Spain, Greece, Italy and Ireland (Incidentally, and yes I know this is a massive generalisation, it’s interesting that Mediterraenean and Anglo-Saxon societies - and I include Ireland in the latter - seem to feature higher poverty than in Scandinavian, Germanic or French societies).

Labour’s battle to fulfil its pledge to eradicate child poverty by 2020 is only beginning, and the the hard part will be reaching the people still marginalised after six years of growth and job creation. Inner London, for example, is still a big pocket of poverty, unemployment and remarkable inequality, calling out for radical structural intervention of the kind Labour has previously shown little taste for. The electorate will need convincing that a little less poverty is still far too much. Stealth redistribution won’t be enough - Labour needs to start banging the drum about ending poverty, convincing people that the long-term benefits for everyone will in the end outweigh any short-term pain.

According to this Garticle, Roy Irwin of the Audit Commission thinks it unlikely “that every local authority will meet the decent homes standard by 2010″. Shocking stuff, and the Guardian wasted no time in pasting the headline “Pledge on council homes ‘will be missed’” over Irwin’s quote, conveniently glossing over his added comment that “It will need extra funds”, which he did not deny would be forthcoming. Fact is, the target is to get all social sector homes above the standard by 2010, which gives us by reckoning at least several years. If it looks like the target’s going to be missed, the Government will probably put more money in so that it won’t. This may, as Irwin pointed out, require allowing councils greater choice in how to deliver the target: greater than choosing the lessar evil of stock transfer, PFI and ALMO, that is.

Kate Barker’s review of housing supply and the UK economy was published last week. It’s an excellent document, and has been welcomed by most sides of the housing debate, barring conservationists, local authority planners and the Government, who have yet to react at all as far as I can see. Basically Barker lays out an irrefutable case for greatly increasing the supply of new housing in the Uk, especially social housing, as it would benefit not only the homeless and first time buyers but the economy as a whole, by increasing labour mobility and reducing economic volatility.

Anyone with an interest in housing or even economics in general could do worse than reading the whole report or even just the summary. Here’s a sample of the reaction:

• BBC News online: ‘UK home supply way below demand’;
• BBC News online Q&A on the review;
• Guardian review of press reaction;
• Well-put reaction in Guardian comment section from head of Royal Institute of Chartered Surveyors;
• Reaction from the Chartered Institute of Housing

News reaches us of what seems like a fairly mutton-headed decision in Shanghai to ban bicycles from all major roads in the city. This does not seem particularly bright in a city of 20 million people, 9 million bicycles (with a million new ones added last year) and only 200,000 private cars, but I suppose the efficient, clean and cheap-to-run bicycle doesn’t fit with China’s efforts to prove that it can over-consume with the best of them.

Nice Garticle (try and keep up: that’s short for Guardian article. Duh) here on the topic by Isabel Hilton

Recently, I accused the UK government of showing no willingness to implement safeguards preventing abuse for the purposes of market speculation of the right of council tenants to buy their house at a discount. Turns out my timing was impeccable: Deppity Prime Minister John Prescott had just announced that properties scheduled for demolition will be exempt from the Right to Buy, and that councils will have first refusal on buying back any house put up for re-sale within 10 years of purchase under the RTB. Nice.

The UK’s House of Commons International Development Committee has just published its report ‘Trade and Development at the WTO: Learning the lessons of Cancun to revive a genuine development round’, after taking written and oral evidence from all sides of the debate including Government ministers and EU Trade Commissioner Pascal Lamy. Some of the main conclusions:

• “Without agreement on agriculture,there will be no development round.The developed world failed to offer sufficiently radical or quick reforms of its agricultural policies.The EU ’s failure on agriculture was an own goal resulting from a lack of coherence between its policies on trade,development and agriculture.The developed world must accept that if its agricultural policies harm developing countries —and trade-distorting domestic support and export subsidies clearly do —then,they must be changed”
.
• “If a genuine development round is to be revived,then all four Singapore Issues —with the possible exception of Trade Facilitation -must be removed from the agenda,and there must be a commitment to meet the concerns of the cotton producers”
.
• “Political leadership is needed now to revive a genuine development round.The EU ’ s re-engagement is welcome,but it needs to go further on agriculture,and it should stop pursuing agreements on the Singapore Issues whilst the priorities of developing countries are addressed.The UK must continue to play its part,encouraging the EU in its support for multilateralism,pushing the EU further and faster on agricultural reform,and re-iterating that the Singapore Issues are not a developmental priority”.

For a long time now I’ve been wanting to post an article on housing policy in the UK, basically arguing that the government needs to significantly increase its funding for new social housing if it is going to meet its target on eliminating child poverty, and for its broader agenda of choice, opportunity etc. Now it looks like some policy changes in this direction may be about to take place, so I need to get my oar in fast.

On Wednesday Gordon Brown will be making his Pre-Budget Report, alongside which will be published a review of housing supply carried out for the Treasury by the economist Kate Barker. This review was commissioned by Brown after the Treasury’s decided to postpone Euro entry largely because of fears over how the chronically unstable housing market would cope with interest rates set by the European Central Bank.

Anyway, today the Financial Times, gazing into its crystal ball, reports that Barker’s review “makes the case for higher spending on social housing to address the im-balances in the supply of affordable accommodation”. If this is the case, and IF the government actually changes its policy along the lines suggested, it could be a milestone in Labour’s development.

So far, Blair and Brown’s government have stuck closely to the Thatcherite model of housing policy: treat it as a market commodity rather than a public good partly provided by a public service, favour homeowners rather than first-time buyers and the homeless, and privatise social housing every chance you get. Unsurprisingly, the end result has been a serious housing crisis, with damaging spillovers into every other area of social policy. In particular, Labour’s housing policy is in danger of turning London into a severely polarised city where a wealthy, mobile few live it up on the backs of the cheap labour of a huge, impoverished underclass. Specifically, Labour’s continuing adherence to Tory housing policies has led to:
-Ever-rising house prices (see chart of London prices below), creating great wealth for property owners, investors and speculators and great misery for anyone trying to buy their first home or even just rent one (rents in the private and even the social sectors are considerably higher in London than outside);

-An inexorable rise in the numbers of homeless people being put up by local authorities (at great expense to the public and to local services) in temporary accommodation, often overcrowded or of low quality. In summer 1997 there were over 23,000 households living in temporary accommodation in London; today (December 2003) there are at least 62,000. Families can be stuck in this limbo for well over a year, shunted around from hostel to hostel, unable to put down roots, find a job or keep a place in school;
-Entrenched poverty in the areas of greatest housing need. Half the children in Inner London live in poverty, a far higher proportion than any other region in England. Yet London is also the wealthiest and most expensive part of the country, where most of the increase in employment in the last decade has been in jobs requiring university degrees.

These problems have grown disastrously large because Labour have only recently begun to realise that adopting Tory policies towards housing might not be the brightest idea. They’ve even gone further in some respects: they’ve encouraged the privatisation of council housing, forcing councils to sell their stock to housing associations or repair them using the dreaded Private Finance Initiative because there’s no other way to raise the money needed for repairs after years of neglect. Recently, the government has also allowed more money to go to councils who transfer management of their stock to Arm’s Length Management Organisations, but the suspicions of those who fear that this is just a roundabout route towards privatisation may well turn out to be well-grounded.

At every turn, Labour have favoured home-ownership and home-owners, even when it involves subsidising market speculation, as in the case of the Right to Buy, which allows council tenants to buy their homes for knock-down prices and sell them off for a healthy profit, all at the expense of the public purse. The RTB is half-way towards being a good policy, but Labour have shown no willingness to create the necessary safeguards to prevent abuses of this kind. The net result is a serious erosion of the stock of social housing - in London, two social rented homes are sold at discounts under the RTB for every new one built or acquired - and less scope for existing council tenants to transfer or for homeless people to get new homes. A further knock-on consequence is that council tenants and the homeless find themselves trapped where they are, labour mobility is constrained, and unemployment and poverty remain stubbornly high.

The homelessness figures only tell one side of the story. Far more people live in overcrowded conditions in London, because young people in growing families are finding that they have no chance of getting a home of their own. Census data shows that while overcrowding has decreased outside London since 1991, it has risen by over 23% in the capital in the same period. Overcrowding disproportionately affects council tenants and ethnic minorities. In some parts of London over half the households are overcrowded. This is not just bad news for the children who have to endure sharing a bedroom with a parent or six siblings, or the grandparents who sleep on a bed in the kitchen: it’s bad news for the whole city, because there is a remarkably strong correlation between overcrowding and the incidence of tuberculosis, a disease that is making a strong comeback in London.

Perhaps because Labour doesn’t believe that housing has anything to do with public services, it insists on applying to the issue misguided principles which it quite rightly won’t let near health or education. For one thing they still don’t dare to privatise the NHS or the education system. For another thing, the provision of every one of the most vital public goods is organised for the benefit of those who need it most, with housing, where the government devotes most of its efforts to pleasing the people who need it least, the obvious exception.

The agenda in housing policy is set by homeowners, and the hundreds of thousands who live - just - in inadequate, unsafe and overcrowded conditions are mostly kept out of the picture. It is partly to do with weight of numbers; there are far more homeowners than homeless. But it’s primarily about class. There are no homeless newspaper editors, for one thing. And those who own their own place tend to be middle-class - typical Labour voters. People who sleep rough or in temporary accomodation or in a council flat are much more likely to be poor and less likely to vote - typical political non-entities.

Housing provision represents one of the great tests of a fair society: in today’s Britain, do we all have the same opportunity of a decent home, regardless of our class or ethnicity or our readership of the Daily Mail? We do not, and Labour is failing the test. As long as it continues to fail this test, it will fail to deliver its most cherished goals. There will be no eradication of poverty, there will be no equality of opportunity for all, and there will be no choice - no choice for the people stuck in the purgatory of homelessness or overcrowding; no choice for the council tenants who want to decide where to live or who manages their homes; and, eventually, no choice for the Labour government but to abandon Thatcherism and develop a decent policy agenda.

As I said at the beginning, Labour is finally showing signs of coming to its senses on housing. They have introduced a target to get families with children out of bed and breakfast hotels, the worst type of temporary accommodation, by March 2004 (but any other type of TA, and other types of household in B&B, is apparently fine). They have increased (slightly) investment in new housing, but mostly for ‘key workers’ such as teachers and nurses and mostly dependent on the private sector. And they have put money into refurbishing council housing, on the condition that it stops being council housing. So even if they’re taking away with one hand, at least they’re giving with the other.

John Quiggin says that state governments in Australia may be going off public-private partnerships (sometimes called private finance initiatives in the UK), and suggests more in hope than in expectation that “there will be some flow of ideas back to the UK leading, perhaps, to a scaling down of the PFI there. This would mark a big step for the Blair government away from “The Third Way” and towards a modernised social democracy”.

I think it’s unlikely. Blair’s got no reverse gear, remember (no matter how disastrous the initial decision), and Gordon Brown is as mysteriously enchanted with PPP and PFI as ever. The ‘economic stability’ chapter of Labour’s Big Conversation starter document gushes about PFI, and even claims that “the decision to use PFI is taken on value for money grounds alone”. This is simply untrue. For one thing, the value for money grounds of PFI are debateable, and highly contingent on the various assumptions used in public sector comparator calculations, especially the discount rate, which was recently changed from 6% to 3.5%, instantly making many previously signed deals less ‘good value’. Secondly, PFI is often an explicitly political choice, as it is in social housing, where ministers have tried to blackmail local authorities into trying PFI by making it one of the few ways to unlock extra funding to improve tenants’ housing. Of the pilot schemes undertaken, only two have actually been signed off, and even then only after horrendously complex and drawn-out planning, bidding and negotiation processes, in one case costing the local authority �1 million before a single nail was hammered or window replaced.

Following my earlier post looking at McKinsey’s analysis of the costs and benefits of offshoring, there’s a good article on the same subject in today’s Financial Times. It’s worth quoting in full:

Jobs drain turns into source of opportunity
By Jonathan Moules and Mark Nicholson
Published: December 3 2003 4:00 | Last Updated: December 3 2003 4:00

When Ross Perot warned of a “giant sucking sound as jobs go south” during the 1992 presidential campaign he was voicing a widespread fear in the US that the North American Free Trade Area would destroy American jobs.

But his words could have come from the lips of those in the UK today who fear the damaging effects of the movement of jobs from Britain to the Indian subcontinent and south-east Asia.

Mr Perot was wrong, many US business groups now claim, since Nafta created many more jobs in the US than it lost to Mexico, its poorer neighbour.

And there is growing evidence that the opponents of offshore outsourcing and offshoring, where companies send operations abroad but retain ownership control, will find their dire predictions of a UK jobs exodus are equally overblown.

First, the benefits of offshore outsourcing and offshoring have been shown to be far greater for the country that is moving work abroad than the cost of doing so. A report by the McKinsey Global Institute in August found that for every dollar a US company invests abroad, it creates $1.45-$1.47 (84-85p), of which $1.12-$1.14 returns to the US.

Many UK manufacturers which started moving work offshore long before the current spate of service industry cases claim that going to south-east Asia enabled them to keep their headquarters in Britain. Some companies have even begun pulling work back from the other side of the world.

Trumeter, which has made measurement equipment in the north-west since 1937, has outsourced its manufacturing functions to south-east Asia for many years. Another 40 jobs are set to go from the company’s headquarters in Radcliffe, on the edge of Manchester, as processes move to Malaysia.

However, Trumeter is also about to bring back to Radcliffe an assembly line operation that employs 67 people in Thailand by automating much of the process.

Peter Weidenbaum, executive chairman, says the move will create six to nine jobs In Radcliffe, where 100 people are employed, but will save him a third of the cost of the labour-intensive Thai operation. “We have got to concentrate on industries that are not labour-intensive because as soon as we start to compete on labour we are up against the lower-cost suppliers in the Far East,” Mr Weidenbaum says.

Anne-Marie Forsyth, chief executive of the Call Centre Association, the UK trade body, says it remains unproven whether companies can relocate “customer-facing” services overseas.

“The service part of outsourcing is still very much on trial,” she says. She points out that while there are 800,000 people working in call centres in the UK, in India there are only 6,000-8,000 “UK-facing” call centre jobs as opposed to back-office or processing jobs that have been moved offshore.

“It’s very much a test,” she says. “The question is at what stage are we going to see businesses have the confidence to put front-end customer contact in places like India? That’s going to be the driver. Some of the players who’ve tried it have already taken their services back.”

Phil Taylor of the University of Stirling and Peter Bain of Strathclyde University argue in a report that while some Scottish call centre jobs, mostly in financial services, would be affected over the next two years, there were strong factors that could keep call centre operators in the UK.

“Powerful forces are driving outsourcing but equally there are countervailing factors inhibiting the migration of services overseas,” they argue. Moreover, they add that Scotland’s call centre industry continues to grow and could sustain further growth.

Call centres employ 56,000 people in Scotland, or 2.3 per cent of the workforce, and the sector added 10,000 new jobs between 2000-2003, according to the study.

The number of call centres in Scotland also grew during the period of the research, from 220 to 290, and 92 of those approached by the authors said they expected to add more jobs by 2006.

Nigel Roxburgh, secretary of the National Association of Outsourcers, says that offshore business is a trend that will not go away. However, he notes that it will drive up wages in countries that import jobs, such as India, as it has already done in countries such as Hong Kong, which were the offshore outsourcing centres of the previous generation. This will make the relative merits of going offshore less attractive for UK business.

Not that this should make UK businesses and government complacent, Mr Roxburgh says.

“The NOA is sympathetic to the people who are being made redundant,” he says. “It believes that there should be government action to ensure that people are not discomfited by the change. But in the long term, offshore outsourcing should be better for everyone.”