Clegg's policy to take money from pensions to pay for mortgages is madness

It's housing market madness, writes the IEA's Philip Booth

It is difficult to think of a policy that is as ill-conceived on so many levels as the coalition's announcement on Sunday to allow parents to guarantee their children's mortgages.

Housing is unaffordable today not because buyers are unable to secure yet more credit against the value of their house but because supply is constrained. Not long ago, the average house would have changed hands for three-to-four times average earnings; today, the vast majority of buyers have to pay five-to-seven times average earnings. If you pump more finance into a supply-constrained system, there can be only one result - yet higher prices.

Views differ on the causes of the financial crash and how to deal with the problems that the economy faces today, but one reaction of the government has been to bind banks up in ever-more regulation. Whether that is right or wrong, it is a deliberate policy decision in order to ensure that banks do not fail at the expense of the taxpayer in the future. This has made banks more risk averse. The response by the government has then been to directly take on the risks that the banks have refused, through schemes such as funding for lending or the proposed business bank. This is a bizarre policy. Banks are constrained in their own business models in order to prevent them failing at the expense of the taxpayer and, instead, the taxpayer is now taking on the risks directly.

Clegg's proposal to guarantee mortgages with pensions is another such instance of incoherent policy. In addition to the regulation of bank's capital discouraging banks from risky lending, the FSA is increasingly trying to rein in the provision of mortgage finance at high earnings multiples or high loan-to-value ratios. The government's new proposal seems to work precisely in the opposite direction. Clegg seems to be reasoning that, if everybody can secure their debts on everybody else's assets, then everything will be okay. Is that not the logic that gave us the financial crash in the first place?

Even in terms of the practical details, Clegg's plan seems crazy. Any pensioner who has already reached the age at which they can take their pension is entitled to secure their children's lending on any lump sum they choose to keep as an asset. As such, this proposal is only relevant to future pensioners. If a potential pensioner secures their child's mortgage on a lump sum which legislation prevents them from accessing until at least age 55 what will happen if the child defaults on the mortgage?

Presumably, either the lump sum will have to be taken early - which will cause havoc in terms of the relationship between the lump sum and the rest of the fund which is strictly controlled to prevent tax avoidance - or some complicated contingent loan arrangement will have to be set up. This will all require reams of legislation.

Clegg might also want to ask how many prospective pensioners are so well pensioned that they would be happy to put their pension pot at risk in this way. And, in turn, how many of those prospective pensioners would not, in any case, have a house against which they (or their children) could secure an additional loan for their children if they were so minded?

This is a completely crazy policy which actually works against many of the other things that the government is doing (in some cases probably wrongly) to try to create a more stable financial sector. Parents with assets should have no trouble securing loans for their children if they wish to do so. If banks and parents wish to freely enter an arrangement whereby a pension lump sum is taken into account when negotiating a loan, then so be it - but let's not have the government specially encourage it. The fact that policy proposals in the housing finance area are becoming more and more bizarre ought to focus people's attention on the real problem - the affordability of housing. We cannot make housing more affordable unless supply can respond to demand. Some readers may object to the policy consequences of liberalising development restrictions. However, we should be clear about the housing affordability consequences of not doing so.

Mortgages are advertised in a Halifax window. Photograph: Getty Images

Philip Booth is Editorial and Programme Director at the Institute of Economic Affairs.

 

Photo: Getty
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It's time for police to admit their mistakes

Forces are not doing enough to protect the most vulnerable from harm.

Already this summer, four people have died after contact with the police. At least three of them were black men who died following police restraint. Last Saturday, 20-year-old Rashan Charles lost his life after being pinned to the floor of a convenience store, and restrained by an officer and another person in plain clothes.

These deaths aren’t included in the latest annual report from the Independent Police Complaints Commission (IPCC), which covers the year ending 31 March 2017. But the deaths of Rashan, Edir Frederico da Costa, Darren Cumberbatch, and a 16-year-old boy, who died in a crash during a police pursuit, recall those who have lost their lives during or following police contact in the months preceding them: Mzee Mohammed, Dalian Atkinson, Mohammed Yassar Yaqub.

Between 1 April 2016 and 31 March 2017, there were 32 road traffic fatalities involving police, an increase from the previous year and the highest since 2008-09. In the same period, there were 55 fatalities from "apparent suicides following police custody". Six people died from "police shootings", the highest since 2007/08. Fourteen people died "in or following police custody", and there were 124 "other deaths following police contact" independently investigated by the IPCC. 

"Deaths in or following police custody" is not as high compared to other categories, however deaths that happen while a person is being arrested or taken into detention are some of the most controversial. That there was no reduction in the number who died in or following police custody, compared to the previous year, suggest past mistakes are being repeated and systemic failures persist.

Over half of the 14 deaths were of people with schizophrenia, depression or self-harming or suicidal tendencies. Similarly, two thirds of the 124 who died following other police contact had mental health issues.

The most common reason for this other type of police contact was related to the safety or wellbeing of those who lost their lives. Twenty-six people died from the police responding to their health, injuries, intoxication, or a "general" incident, while 23 people died from the police responding to a concern about their self-harm, risk of suicide, or mental state. Of these 23 people, 35 per cent were black and minority ethnic (BME).

The individual stories show an even more disturbing picture than the raw numbers. Officers often encounter people with mental health conditions, yet treat them as criminals. In the case of Mzee Mohammed, he remained in handcuffs even when he finally received medical care. The police should be called as a last resort to deal with someone having a mental health crisis, but in many cases of deaths in custody, evidence shows they take it upon themselves to intervene.

In 2014, Staffordshire police handcuffed and detained Darren Lyons, who had a history of mental illness and alcohol dependency, instead of getting him medical help. An inquest heard he died after being left half-naked on a cell floor, covered in his own faeces. Similarly in 2012, Thomas Orchard was left lying unresponsive, after being put in restraints and having an emergency response belt wrapped around his face.

Although the police do not have the expertise of mental health workers, they are trained in using force proportionately, reasonably and when necessary. Members of the public experiencing a mental health episode have complex needs and it can be hard to understand the condition they are suffering from to provide appropriate assistance. This is a challenge for police officers, however using force can exacerbate a situation and even lead to death. In 2016, Dalian Atkinson, at the time suffering a mental health crisis, died after being Tasered and physically restrained by West Mercia officers.

The charity Inquest reports that the majority of its police-related cases in recent years “have involved the death of vulnerable individuals in some form of mental health crisis”. Its analysis in November 2016 of deaths in police custody since 1990 suggested that the “use of force/restraint is more likely to be a feature of the circumstances of BME deaths in police custody” and “the proportion of BME deaths in custody where mental health-related issues are a feature is nearly two times greater than it is in white deaths in custody”.  

Earlier this year, an inquest jury criticised the Metropolitan Police for excessive, unreasonable, unnecessary and disproportionate restraint on Olaseni Lewis, a 23-year-old black man, who died in 2010 at a psychiatric hospital.

Deborah Coles, director of Inquest, drew attention to the fact that the “evidence heard at this inquest begs the question of how racial stereotyping informed Seni’s brutal treatment”. Met officers, instead of attending to Seni’s welfare, left him once he was unresponsive after prolonged restraint, because they believed that he may have been "faking it". This disregard of a black life recalls the institutionally racist death of Roger Sylvester in 1999.

Seni’s case was pivotal in leading to the independent review into deaths in police custody, conducted by Dame Elish Angiolini QC. The publication has been postponed, on many occasions. The delay follows a common experience bereaved families constantly have with the police, the IPCC and the Crown Prosecution Service in their struggle for justice.

Despite deaths related to Tasers, spit hoods and firearms, the police have recently called for increases in such equipment and weapons. The Police Federation say they are necessary to protect the protectors. But the protectors are not protecting everyone.

The figures and individual stories show that some officers are threats to vulnerable people, in particular those with mental health issues and from ethnic minorities. Forces have failed to implement recommendations, while the CPS has failed to prosecute unprofessional and abusive police officers. "The officers involved in the restraint have not been able or willing to offer any word of condolence or regret in their evidence,” Seni’s parents responded after the inquest into their son’s death.

To prevent more needless lost lives, the police must first take responsibility and admit their mistakes.

Carson Cole Arthur is policy and communications co-ordinator at the campaign group StopWatch. He is writing in a personal capacity